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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended March 31, 2003

or

For the transition period from                                      to                                     

Commission File No. 1-12235

Triumph Group, Inc.

(Exact name of registrant as specified in its charter)

1550 Liberty Ridge, Suite 100, Wayne, Pennsylvania 19087
(Address of principal executive offices, including zip code)

Registrant's telephone number, including area code: (610) 251-1000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

        Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý        No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes ý        No o

        The number of outstanding shares of the Registrant's Common Stock, par value $.001 per share, on May 30, 2003 was 15,844,064.

        As of September 30, 2002, the aggregate market value of the shares of Common Stock held by non-affiliates of the Registrant was approximately $383,396,692. Such aggregate market value was computed by reference to the closing price of the Common Stock as reported on the New York Stock Exchange on September 30, 2002. For purposes of making this calculation only, the Registrant has defined affiliates as including all directors, executive officers and beneficial owners of more than ten percent of the Common Stock.

Documents Incorporated by Reference

        Portions of the following document are incorporated herein by reference:

        Proxy Statement of Triumph Group, Inc. in connection with our 2003 Annual Meeting of Stockholders is incorporated in part in Part III hereof, as specified herein.

Table of Contents

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PART I

Item 1. Business

        This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to our future operations and prospects, including statements that are based on current projections and expectations about the markets in which we operate, and management's beliefs concerning future performance and capital requirements based upon current available information. Actual results could differ materially from management's current expectations and additional capital may be required and additional capital, if required, may not be available on reasonable terms, if at all, at the times and in the amounts as may be needed by us. In addition to these factors and others described elsewhere in this report, among other factors that could cause actual results to differ materially are competitive factors relating to the aerospace industry, dependence of some of our businesses on key customers, requirements of capital, product liabilities in excess of insurance, uncertainties relating to the integration of acquired businesses, general economic conditions affecting our business segment, including technological developments, limited availability of raw materials or skilled personnel and changes in governmental regulation and oversight and the continuing impact of the September 11, 2001 attacks and international hostilities. For a more detailed discussion of these and other factors affecting us, see the Risk Factors described in Item 1 of this Annual Report on Form 10-K. We do not undertake any obligation to revise these forward-looking statements to reflect future events.

General

        We design, engineer, manufacture, repair, overhaul and distribute aircraft components, such as mechanical and electromechanical control systems, aircraft and engine accessories, structural components, APUs, avionics and aircraft instruments. We serve a broad spectrum of the aerospace industry, including commercial and regional airlines, air cargo carriers, as well as original equipment manufacturers, commonly referred to as OEMs, of commercial, regional, business and military aircraft and components, and manufacturers and operators of industrial gas turbine engines.

Products and Services

        We offer a variety of products and services to the aerospace industry which were previously offered through five groups. As of April 1, 2003, we have consolidated the five groups into three groups as follows:

        Our Aerospace Systems Group services the full spectrum of aerospace customers, which include airlines, air cargo carriers, domestic and foreign militaries, aerospace OEMs and the top-tier manufacturers who supply them. This group performs complex manufacturing, machining and forming processes for a full range of structural components, as well as complete assemblies and subassemblies such as:

•

Wing spars and stringers



•

Stretch-formed leading edges and fuselage skins



•

Floor beams



•

Landing gear components and assemblies



•

Composite floor panels, environmental control system ducting and non-structural composite flight deck components

        This group also utilizes its expanded capabilities to design, engineer and build complete mechanical, electromechanical and hydraulic systems, while continuing to broaden the scope of detailed parts and assemblies that we supply to the aerospace aftermarket. Many of our designs are proprietary

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and customers typically return to us for repair and overhaul of these systems. The systems that we design, engineer, build and repair include:

•

Main engine gear box assemblies



•

Cockpit control levers



•

Control system valve bodies



•

Landing gear actuation systems



•

Primary and secondary flight control systems



•

Heat exchangers

        Our Components Group services a diverse group of customers which includes airlines, air cargo carriers, aerospace and industrial gas turbine OEMs and the top-tier manufacturers who supply them. This group performs advanced manufacturing and fabrication and processing functions to deliver precision detail parts and complete component assemblies primarily for turbine engines. This group also repairs and overhauls industrial gas turbine components, primarily for utility operators and applies high temperature coatings for both internal and external customers. The components that we manufacture, process, repair and overhaul include:

•

Stators



•

Blades and vanes



•

Combustors



•

Transition ducts

        Our Aftermarket Services Group primarily services airline and air cargo carrier customers. This group operates the world's largest independent APU repair and overhaul business and endeavors to be the vendor of choice for instrument and component repair and overhaul to our customers as they continue to consolidate vendors. We will also continue to develop Federal Aviation Administration, commonly referred to as the FAA, approved Designated Engineering Representative, commonly referred to as DER, and Special Federal Aviation Regulation 36, commonly referred to as SFAR 36, proprietary repair procedures for the components we repair and overhaul. Our aftermarket services group repairs and overhauls various instruments and components including:

•

Cockpit instrumentation



•

Remote sensors



•

APUs



•

Constant speed drives

Proprietary Rights

        We benefit from our proprietary rights relating to designs, engineering, manufacturing processes and repair and overhaul procedures. For some products, our unique manufacturing capabilities are required by the customer's specifications or designs, thereby necessitating reliance on us for the production of such specially designed products. We also hold two SFAR 36 certifications that permit us to develop proprietary repair procedures to be used in some repair and overhaul processes.

Raw Materials and Replacement Parts

        We purchase raw materials, primarily consisting of extrusions, forgings, castings, sheets and shapes, from various vendors. We also purchase replacement parts which are utilized in our various repair and overhaul operations.

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Operating Locations

        We operate through several operating locations. The following chart describes the operations, customer base and certain other information with respect to our operating locations at April 1, 2003, except with respect to Triumph Thermal Systems, Inc., which includes the operations of our recent acquisition of certain assets of Parker Hannifin Corporation's United Aircraft Products division:

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6

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(1)

Designates FAA-certified repair station.

(2)

Designates that two locations are FAA-certified repair stations.

(3)

DG Industries, Inc., Triumph Precision, Inc. and Special Processes of Arizona, Inc. were merged with and into Stolpher-Fabralloy Co. Thereafter, Stolper-Fabralloy Co. changed its name to Triumph Components-Arizona, Inc.

(4)

Special Processes of Arizona, which is now a business unit of Triumph Components-Arizona, Inc., is a FAA-certified repair station.

(5)

Designates SFAR 36 certification.

(6)

TriWestern Metals Co. was formed by merging Great Western Steel Co. into Triumph Industries Co.

(7)

Discontinued operations.

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Metals Processing and Distribution

        Effective as of March 31, 2003, we designated our metals group as a discontinued operation in connection with a realignment of our operating structure. The metals group produced and distributed blanked and slitted cold-rolled steel, which can be electrogalvanized or coated. In addition, we operated a business engaged in the erection of structural frameworks for buildings and bridges.

Sales and Marketing

        While each of our operating locations independently conducts sales and marketing efforts directed at their respective customers, where appropriate, they collaborate with our other operating locations for cross-marketing efforts. Each sales force and the respective officers of the operating locations are responsible for obtaining new customers and maintaining relationships with existing customers. Sales efforts are conducted primarily by in-house personnel and independent regional manufacturers' representatives. Generally, manufacturers' representatives receive a commission on sales and the in-house sales personnel receive a base salary plus commission. Engaging independent sales representatives at the local level facilitates responsiveness to each customer's changing needs and current trends in each marketplace in which we operate.

        We continually look for opportunities to leverage our growing capabilities. The presidents of our operating locations meet regularly to discuss ways to improve sales by providing more complex, higher level assemblies. The management of each of our operating locations also maintains close business relationships with many customers, thereby furthering the sales and marketing efforts of their businesses.

        A significant portion of our government and defense contracts are awarded on a competitive bidding basis. We generally do not bid or act as the primary contractor, but will typically bid and contract as a subcontractor on contracts on a fixed fee basis. We generally sell to our other customers on a fixed fee, negotiated contract or purchase order basis.

Backlog

        We have a number of long-term agreements with several of our customers. These agreements generally describe the terms under which the customer may issue purchase orders to buy our products and services during the term of the agreement. These terms typically include a list of the parts or services customers may purchase, initial pricing for these products and services, anticipated quantities to be purchased by the customer and, to the extent known, delivery dates. Backlog only includes amounts for which we have actual purchase orders with firm delivery dates or contract requirements within the next 24 months, primarily for our OEM customer base. Purchase orders issued by our aftermarket customers are usually completed within a short period of time. As a result, our backlog data relates primarily to the OEM customers. The backlog information set forth below does not include the sales that we expect to generate from long-term agreements associated with long-term aircraft production programs but for which we do not have actual purchase orders with firm delivery dates or for which contract requirements extend beyond the next 24 months.

        As of March 31, 2003 and March 31, 2002, our continuing operations had outstanding purchase orders representing an aggregate invoice price of approximately $475 million and $368 million, respectively. As of March 31, 2003 and March 31, 2002, our discontinued operations had outstanding purchase orders representing an aggregate invoice price of approximately $8 million and $10 million, respectively. We believe that purchase orders totaling approximately $150 million will not be shipped by March 31, 2004.

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United States and Foreign Operations

        Our revenues from our continuing operations to customers in the United States for fiscal years 2003, 2002 and 2001 were approximately $443 million, $433 million and $385 million, respectively. Our revenues from our continuing operations to customers in all foreign countries, including, but not limited to Canada and the European Union, for fiscal years 2003, 2002 and 2001 were approximately $122 million, $132 million and $115 million, respectively. Our revenues from our discontinued operations to customers in the United States for fiscal years 2003, 2002 and 2001 were approximately $42 million, $47 million and $59 million, respectively. Our revenues from discontinued operations to customers in all foreign countries were not significant for fiscal years 2003, 2002 and 2001.

        As of March 31, 2003, 2002 and 2001, our long-lived assets for our continuing operations located in the United States were approximately $512 million, $459 million and $413 million, respectively. As of March 31, 2003, 2002 and 2001, our long-lived assets for our continuing operations located in the European Union were approximately $9 million, $9 million and $9 million, respectively. As of March 31 2003, 2002 and 2001, our discontinued operations did not have any assets classified as long-lived.

Competition

        We compete primarily with OEMs and the top-tier manufacturers that supply them, some of which are divisions or subsidiaries of OEMs and other large companies, in the manufacture of aircraft and industrial gas turbine components and subassemblies. OEMs are increasingly focusing on assembly activities while outsourcing more manufacturing and repair to third parties.

        Competition for the repair and overhaul of aviation components comes from three primary sources, some with greater financial and other resources than us: OEMs, major commercial airlines and other independent repair and overhaul companies. Some major commercial airlines continue to own and operate their own service centers, while others have begun to sell their repair and overhaul services to other aircraft operators. The repair and overhaul services provided by domestic airlines are primarily for their own aircraft, although these airlines may perform a limited amount of repair and overhaul services for third parties. Foreign airlines that provide repair and overhaul services typically provide these services not only for their own aircraft but for other airlines as well. OEMs also maintain service centers which provide repair and overhaul services for the components they manufacture. Other independent service organizations also compete for the repair and overhaul business of other users of aircraft components.

        Similarly, competition for the repair and overhaul of industrial gas turbine components comes primarily from OEMs and a small number of other independent repair and overhaul companies.

        Participants in the aerospace and industrial gas turbine industries compete primarily on the basis of breadth of technical capabilities, volume capacity, quality, turnaround time and cost.

Government Regulation and Industry Oversight

        The aerospace industry is highly regulated in the United States by the FAA and in other countries by similar agencies. We must be certified by the FAA and, in some cases, by individual OEMs, in order to engineer and service parts and components used in specific aircraft models. If material authorizations or approvals were revoked or suspended, our operations would be adversely affected. New and more stringent government regulations may be adopted, or industry oversight heightened, in the future and these new regulations, if enacted, or any industry oversight, if heightened, may have an adverse impact on us.

        We must also satisfy the requirements of our customers, including OEMs, that are subject to FAA regulations, and provide these customers with products and services that comply with the government regulations applicable to aircraft components used in commercial flight operations. The FAA regulates

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commercial flight operations and requires that aircraft components meet its stringent standards. In addition, the FAA requires that various maintenance routines be performed on aircraft components, and we currently satisfy these maintenance standards in our repair and overhaul services. Several of our operating locations are FAA-approved repair stations.

        Generally, the FAA is granting licenses only for the manufacture or repair of a specific aircraft component, rather than the broader licenses that have been granted in the past. The FAA licensing process may be costly and time-consuming. In order to obtain an FAA license, an applicant must satisfy all applicable regulations of the FAA governing repair stations. These regulations require that an applicant have experienced personnel, inspection systems, suitable facilities and equipment. In addition, the applicant must demonstrate a need for the license. Because an applicant must procure manufacturing and repair manuals from third parties relating to a particular aircraft component in order to obtain a license with respect to this component, the application process may involve substantial cost.

        The license approval processes for the Joint Aviation Authority, which regulates this industry in the European Union, and other comparable foreign regulatory authorities are similarly stringent, involving potentially lengthy audits.

        Our operations are also subject to a variety of worker and community safety laws. The Occupational Safety and Health Act of 1970, commonly referred to as OSHA, mandates general requirements for safe workplaces for all employees. In addition, OSHA provides special procedures and measures for the handling of hazardous and toxic substances. Specific safety standards have been promulgated for workplaces engaged in the treatment, disposal or storage of hazardous waste. We believe that our operations are in material compliance with OSHA's health and safety requirements.

Environmental Matters

        Our business, operations and facilities are subject to numerous stringent federal, state, local and foreign environmental laws and regulation by government agencies, including the Environmental Protection Agency, commonly referred to as the EPA. Among other matters, these regulatory authorities impose requirements that regulate the emission, discharge, generation, management, transportation and disposal of hazardous materials, pollutants and contaminants, govern public and private response actions to hazardous or regulated substances which may be or have been released to the environment, and require us to obtain and maintain licenses and permits in connection with our operations. This extensive regulatory framework imposes significant compliance burdens and risks on us. Although management believes that our operations and our facilities are in material compliance with these laws and regulations, future changes in these laws, regulations or interpretations thereof or the nature of our operations may require us to make significant additional capital expenditures to ensure compliance in the future.

        Certain of our facilities have been or are currently the subject of environmental remediation activities, the cost of which is subject to indemnification provided by IKON Office Solutions pursuant to the acquisition by us of these facilities from IKON Office Solutions. One of these facilities is connected with a site included on the National Priorities List of Superfund sites maintained by the EPA. Another of these facilities is located on a site included in the EPA's database of potential Superfund sites. IKON Office Solutions' indemnification covers us for losses we might suffer in connection with liabilities and obligations arising under environmental, health and safety laws with respect to operations or use of those facilities prior to their acquisition by us. Some other facilities acquired and operated by us or one of our subsidiaries, including a leased facility located on an EPA National Priorities List site, were under active investigation for environmental contamination by federal or state agencies when acquired, and at least in some cases, continue to be under investigation. We are indemnified by prior owners or operators and/or present owners of the facilities for liabilities which we

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incur as a result of these investigations and the environmental contamination found which pre-dates our acquisition of these facilities, subject to certain limitations. We also maintain a pollution liability policy that provides coverage for material liabilities associated with the clean-up of on-site pollution conditions, as well as defense and indemnity for certain third party suits (including Superfund liabilities at third party sites), in each case, to the extent not otherwise indemnified. This policy applies to all of our manufacturing and assembly operations worldwide. However, if we were required to pay the expenses related to environmental liabilities for which neither indemnification nor insurance coverage is available, these expenses could have a material adverse effect on us.

Employees

        As of March 31, 2003, for our continuing operations we employed 3,770 persons, of whom 341 were management employees, 110 were sales and marketing personnel, 366 were technical personnel, 452 were administrative personnel and 2,501 were production workers. As of March 31, 2003, for our discontinued operations we employed 107 persons, of whom 6 were management employees, 16 were sales and marketing personnel, 5 were technical personnel, 12 were administrative personnel and 68 were production workers.

        Several of our subsidiaries are parties to collective bargaining agreements with labor unions. Under those agreements, for our continuing operations, we currently employ approximately 587 full-time employees. Currently, approximately 16% of our permanent employees for our continuing operations, are represented by labor unions and approximately 20% of net sales are derived from the facilities at which at least some employees are unionized. Approximately 50% of the employees of our discontinued operations are represented by labor unions. One of our subsidiaries is currently negotiating a collective bargaining agreement that expired on February 28, 2001. No work stoppage is expected at this location. Our inability to negotiate acceptable contracts with this union could result in strikes by the affected workers and increased operating costs as a result of higher wages or benefits paid to union members. If the unionized workers were to engage in a strike or other work stoppage, or other employees were to become unionized, we could experience a significant disruption of our operations and higher ongoing labor costs, which could have an adverse effect on our business and results of operations.

        We have not experienced any material labor-related work stoppage and consider our relations with our employees to be good.

Risk Factors

        Statements in this Annual Report on Form 10-K, including those concerning our expectations regarding the effect of industry trends on us, competitive advantages, strategies, future sales, gross profits, capital expenditures, selling, general and administrative expenses, and cash requirements, include forward-looking statements. Actual results may vary materially from these expectations. Factors which could cause actual results to differ from expectations include competition, dependence on a key customer, dependence on the aviation industry, requirements of capital, product liabilities in excess of insurance, integration of acquired businesses, government regulation, technological developments and obsolete inventory. For a description of these and additional risks, see the discussion below. Our results of operations may be adversely affected by one or more of these factors.

        Factors that have an adverse impact on the aerospace industry may adversely affect our results of operations.    A substantial percentage of our gross profit and operating income was derived from commercial aviation for fiscal year 2003. Our operations are focused on designing, engineering and manufacturing aircraft components on new aircraft, selling spare parts and performing repair and overhaul services on existing aircraft and aircraft components. Therefore, our business is directly affected by economic factors and other trends that affect our customers in the aerospace industry, including a possible decrease in outsourcing by aircraft operators and OEMs or projected market

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growth that may not materialize or be sustainable. When these economic and other factors adversely affect the aerospace industry, they tend to reduce the overall customer demand for our products and services, which decreases our operating income. Economic and other factors that might affect the aerospace industry may have an adverse impact on our results of operations.

        As a result of the decrease in commercial air travel market caused by the general economic slowdown, the terrorist attacks of September 11, 2001 and resulting international hostilities and other factors, the demand for certain commercial aerospace products and services has been reduced. This lower demand has had a negative impact on our business and results of operations. The negative impact of Sudden Acute Respiratory Syndrome, or SARS, along with the already prolonged outlook for the commercial air travel downcycle, have led many industry analysts to defer their forecast for a turnaround in large commercial OEM deliveries until 2006 at the earliest. The current lack of recovery in air travel also impacts the supplier base, as MRO work remains curtailed and cash strapped airlines are only performing retrofits absolutely necessary for safety reasons. These or other events may lead to further declines in the worldwide aerospace industry that could further adversely affect our business and financial condition.

        Competitive pressures may adversely affect us.    We have numerous competitors in the aerospace services industry. We compete primarily with OEMs and the top-tier manufacturers that supply them, some of which are divisions or subsidiaries of OEMs and other large companies that manufacture aircraft components and subassemblies. Competition for the repair and overhaul of aviation components comes from three primary sources: OEMs, major commercial airlines and other independent repair and overhaul companies. Some of our competitors have substantially greater financial and other resources than us. Competitive pressures may materially adversely affect our operating revenues and, in turn, our business and financial condition.

        We may need to expend significant capital to keep pace with technological developments in our industry.    The aerospace industry is constantly undergoing development and change and it is likely that new products, equipment and methods of repair and overhaul service will be introduced in the future. In order to keep pace with any new developments, we may need to expend significant capital to purchase new equipment and machines or to train our employees in the new methods of production and service. We may not be successful in developing new products and these capital expenditures may have a material adverse effect on us.

        We may incur significant expenses to comply with new or more stringent governmental regulation.    The aerospace industry is highly regulated in the United States by the FAA and in other countries by similar agencies. We must be certified by the FAA and, in some cases, by individual OEMs in order to engineer and service parts and components used in specific aircraft models. If any of our material authorizations or approvals were revoked or suspended, our operations would be adversely affected. New or more stringent governmental regulations may be adopted, or industry oversight heightened in the future, and we may incur significant expenses to comply with any new regulations or any heightened industry oversight.

        The loss of our key customer could have a material adverse effect on us.    For the year ended March 31, 2003, The Boeing Company, or Boeing, represented approximately 16% of net sales. For fiscal 2002, Boeing represented approximately 15% of net sales. The loss of this customer could have a material adverse impact on us. In addition, some of our operating locations have significant customers, the loss of whom could have an adverse effect on those businesses.

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        We may be unable to successfully achieve "tier one" supplier status with OEMs, and we may be required to risk our capital to achieve "tier one" supplier status.    Many OEMs are moving toward developing strategic partnerships with their larger suppliers, frequently called "tier one" suppliers. Each tier one supplier provides an array of integrated services including purchasing, warehousing and assembly for OEM customers. We have been designated as a tier one supplier by some OEMs and are striving to achieve tier one status with other OEMs. In order to maintain or achieve tier one status, we may need to expand our existing capacities or capabilities, and there is no assurance that we will be able to do so.

        Many new aircraft programs require that major suppliers become risk-sharing partners, meaning that the cost of design, development and engineering work associated with the development of the aircraft is born by the supplier, usually in exchange for a long-term agreement to supply critical parts once the aircraft is in production. In the event that the aircraft fails to reach the production stage, inadequate number of units are produced, or actual sales otherwise do not meet projections, we may incur significant costs without any corresponding revenues. For example, in fiscal year 2002, approximately $5 million of design and development costs previously incurred and capitalized in connection with the development of a new cargo aircraft were expensed after the program was abandoned. We do not currently have any other material development programs with incurred and capitalized expenses.

        We may not realize our anticipated return on capital commitments made to expand our capabilities.    From time to time, we make significant capital expenditures to implement new processes and to increase both efficiency and capacity. Some of these projects require additional training for our employees and not all projects may be implemented as anticipated. If any of these projects do not achieve the anticipated increase in efficiency or capacity, our returns on these capital expenditures may not be as expected.

        Our expansion into international markets may increase credit and other risks.    As we pursue customers in Asia, South America and other less developed aerospace markets throughout the world, our inability to ensure the credit worthiness of our customers in these areas could adversely impact our overall profitability. In addition, these business opportunities may entail additional currency risks, different legal and regulatory requirements and political considerations not associated with domestic markets.

        We may need additional financing for acquisitions and capital expenditures and additional financing may not be available on terms acceptable to us.    A key element of our strategy has been, and continues to be, internal growth supplemented by growth through the acquisition of additional companies and product lines engaged in the aerospace industry. In order to grow internally, we may need to make significant capital expenditures and may need additional capital to do so. Our ability to grow is dependent upon, and may be limited by, among other things, availability under our revolving credit facility and by particular restrictions contained in our revolving credit facility and our other financing arrangements. In that case, additional funding sources may be needed, and we may not be able to obtain the additional capital necessary to pursue our internal growth and acquisition strategy or, if we can obtain additional financing, the additional financing may not be on financial terms that are satisfactory to us.

        Cancellations, reductions or delays in customer orders may adversely affect our results of operations.    Our overall operating results are affected by many factors, including the timing of orders from large customers and the timing of expenditures to manufacture parts and purchase inventory in anticipation of future sales of products and services. A large portion of our operating expenses are relatively fixed. Because several of our operating locations typically do not obtain long-term purchase orders or commitments from our customers, they must anticipate the future volume of orders based upon the historic purchasing patterns of customers and upon our discussions with customers as to their

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anticipated future requirements. These historic patterns may be disrupted by many factors, including changing economic conditions, inventory adjustments, or work stoppages or labor disruptions at our customers. Cancellations, reductions or delays in orders by a customer or group of customers could have a material adverse effect on our business, financial condition and results of operations.

        Our acquisition strategy exposes us to risks, including the risk that we may not be able to successfully integrate acquired businesses.    We have a consistent strategy to grow, in part, by the acquisition of additional businesses in the aerospace or power generation industries and are continuously evaluating various acquisition opportunities. Our ability to grow by acquisition is dependent upon, among other factors, the availability of suitable acquisition candidates. Growth by acquisition involves risks that could adversely affect our operating results, including difficulties in integrating the operations and personnel of acquired companies, the potential amortization of acquired intangible assets, the potential impairment of goodwill and the potential loss of key employees of acquired companies. We may not be able to consummate acquisitions on satisfactory terms or, if any acquisitions are consummated, satisfactorily integrate these acquired businesses.

        We may not be successful in further expanding our activities in the industrial gas turbine market.    While our activities to date in the industrial gas turbine industry have primarily been limited to using conventional materials and processes, we anticipate expanding our industrial gas turbine activities into newer and more novel materials and processes, including more exotic alloys and coatings. Such expansion may require significant capital expenditures. In addition, several OEMs are already operating with such newer materials and processes and, in certain cases, hold proprietary technology and patents. While we believe that we will successfully expand our current industrial gas turbine operations, there can be no assurance that we will be able to do so.

        Any product liability claims in excess of insurance may adversely affect our financial condition.    Our operations expose us to potential liability for personal injury or death as a result of the failure of an aircraft component that has been serviced by us, the failure of an aircraft component designed or manufactured by us or the irregularity of metal products processed or distributed by us. While we believe that our liability insurance is adequate to protect us from these liabilities, our insurance may not cover all liabilities. Additionally, insurance coverage may not be available in the future at a cost acceptable to us. Any material liability not covered by insurance or for which third party indemnification is not available could have a material adverse effect on our financial condition.

        The lack of available skilled personnel may have an adverse effect on our operations.    From time to time, some of our operating locations have experienced difficulties in attracting and retaining skilled personnel to design, engineer, manufacture, repair and overhaul sophisticated aircraft components. Our ability to operate successfully could be jeopardized if we are unable to attract and retain a sufficient number of skilled personnel to conduct our business.

        Any exposure to environmental liabilities may adversely affect us.    Our business, operations and facilities are subject to numerous stringent federal, state, local and foreign environmental laws and regulations. Although management believes that our operations and facilities are in material compliance with such laws and regulations, future changes in these laws, regulations or interpretations thereof or the nature of our operations may require us to make significant additional capital expenditures to ensure compliance in the future. Some of our facilities have been or are currently the subject of environmental remediation activities, the cost of which is subject to indemnification provided by IKON Office Solutions. One of these facilities is connected with a site included in the National Priorities List of Superfund sites maintained by the EPA. Another of these facilities is located on a site included in the EPA's database of potential Superfund sites. The IKON Office Solutions' indemnification covers the cost of liabilities that arise from environmental conditions or activities existing at facilities prior to our acquisition from IKON Office Solutions in July 1993, including the costs and claims associated with the environmental remediation activities and liabilities discussed above.

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Some other facilities acquired and operated by us or one of our subsidiaries, including a leased facility located on an EPA National Priorities List site, have been under active investigation for environmental contamination by federal or state agencies when acquired, and at least in some cases, continue to be under investigation or subject to remediation. We are indemnified by prior owners or operators and/or present owners of the facilities for liabilities which we incur as a result of these investigations and the environmental contamination found which pre-dates our acquisition of these facilities, subject to certain limitations. We also maintain a pollution liability policy that provides coverage for material liabilities associated with the clean-up of on-site pollution conditions, as well as defense and indemnity for certain third party suits (including Superfund liabilities at third party sites), in each case, to the extent not otherwise indemnified. This policy applies to all of our manufacturing and assembly operations worldwide. However, if we were required to pay the expenses related to environmental liabilities for which neither indemnification nor insurance coverage is available, these expenses could have a material adverse effect on us.

Available Information

        For more information about us, visit our website at www.triumphgroup.com. The contents of the website are not part of this Form 10-K. Our electronic filings with the Securities and Exchange Commission (including all Forms 10-K, 10-Q and 8-K, and any amendments to these reports) are available free of charge through our website immediately after we electronically file with or furnish them to the Securities and Exchange Commission.

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Item 2. Properties

        Our executive offices are located in Wayne, Pennsylvania, where we lease 8,380 square feet of space. In addition, as of April 1, 2003, we owned or leased the following facilities in which our operating locations are located, including the operating location purchased in connection with our recent acquisition of certain assets of Parker Hannifin Corporation's United Aircraft Products division:

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(1)

We currently lease this property, however, all operations at this location were discontinued as of March 31, 2003 in connection with the designation of our metals group as a discontinued operation.

(2)

We currently own this property, however, all operations at this location were discontinued as of March 31, 2003 in connection with the designation of our metals group as a discontinued operation.

        We believe that our properties are adequate to support our operations for the foreseeable future.

Item 3. Legal Proceedings

        We are not presently involved in any material legal proceedings outside of the ordinary course of business. We may in the future be named as a defendant in lawsuits involving product defects, breach of warranty or other actions relating to products that we manufacture or products that we distribute that are manufactured by others. We believe that our potential exposure is adequately covered by our aviation product and general liability insurance.

Item 4. Submission of Matters to a Vote of Security Holders

        None.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Range of Market Price

        Our Common Stock is traded on the New York Stock Exchange under the symbol "TGI." The following table sets forth the range of high and low prices for our Common Stock for the periods indicated:

        As of May 30, 2003, the reported closing price for our Common Stock was $31.51. As of May 30, 2003, there were approximately 38 holders of record of our Common Stock and we believe that our Common Stock was beneficially owned by approximately 2,600 persons.

Dividend Policy

        We have never declared or paid cash dividends on any class of our Common Stock and do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain our earnings, if any, and reinvest them in the development of our business. Certain of our debt arrangements, including our revolving credit facility prohibit us from paying dividends or making any distributions on our capital stock, except for the payment of stock dividends and redemptions of an employee's shares of capital stock upon termination of employment.

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Item 6. Selected Financial Data

        The following selected financial data should be read in conjunction with the Consolidated Financial Statements and related Notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included herein.

(1)

Results include the acquisitions of the Ozone Assets, the Aerocell Assets, Furst and the assets of The Boeing Company's Spokane Fabrication Operation from the date of each respective acquisition. See Note 3 to the Consolidated Financial Statements.

(2)

Results include the acquisition of EFS Aerospace, Inc. from the date of acquisition. See Note 3 to the Consolidated Financial Statements. Results also include the $5.0 million write-off of design and development costs related to a new aircraft program, which was deemed unlikely to go into production.

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(3)

Results include the acquisitions of ACR Industries, Inc., Chem-Fab Corporation, Airborne Nacelle Services, Inc. and the Anadite Assets from the date of each respective acquisition. See Note 3 to the Consolidated Financial Statements.

(4)

Results include the acquisitions of Ralee Engineering Company, Construction Brevitees d'Alfortville, Lee Aerospace, Inc. and Triumph Components-San Diego, Inc. from the date of each respective acquistion.

(5)

Results include the acquisitions of Nu-Tech Industries, Inc., DG Industries, Inc., DV Industries, Inc., Triumph Air Repair (Europe) Ltd., HTD Aerospace, Inc. and Triumph Precision, Inc. from the date of each respective acquisition.

(6)

Fiscal 2003 and fiscal 2002 exclude goodwill amortization due to the Company's adoption of Statement of Financial Accounting Standards No. 142 "Goodwill and Intangible Assets" ("SFAS No. 142"). Had the Company adopted SFAS No. 142 at the beginning of fiscal 1999, pre-tax and after-tax amortization of goodwill that would have been excluded from each of the fiscal years 2001 through 1999 are as follows: 2001: $7,125 and $5,292; 2000: $5,268 and $4,130 and 1999: $3,587 and $2,696.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

        (The following discussion should be read in conjunction with the Consolidated Financial Statements and notes thereto contained elsewhere herein.)

Industry Trends

        The events of the last two years as delineated below and their aftermath impacted both the OEM and the maintenance, repair and overhaul markets. The most direct impact from these events was an immediate reduction in commercial air travel. According to the Air Transport Association, commercial air travel for the month of September 2001, as measured by revenue passenger miles flown, was down approximately 43% from August 2001 and down approximately 31% compared to September 2000. This significant decline was followed by a slow, but steady, recovery, with revenue passenger miles down approximately 25% in October 2001 and down only approximately 8% in August 2002 when compared to prior year periods. Beginning in September 2002 and continuing through February 2003, revenue passenger miles were up each month compared to prior year periods. Although the combined effect of the recent Iraq conflict and the outbreak of Sudden Acute Respiratory Syndrome, or SARS, have again negatively impacted commercial air travel, we believe that overall trends should continue to improve. However, demand for air travel is affected by a number of factors, including the absolute level of general economic activity.

        The decline in demand for air travel has negatively impacted the operating performance and profitability of the worldwide airline industry. As a result, many airlines have reduced their fleet size by temporarily grounding or permanently retiring older and less cost-efficient aircraft. New aircraft orders have fallen and certain airlines have begun to delay or cancel scheduled deliveries of new aircraft. New commercial aircraft deliveries declined approximately 20% in 2002 versus 2001, based upon the most recent data provided by Boeing and Airbus. Notwithstanding this reduction, the actual 684 deliveries for 2002 represent the fifth highest number of deliveries in any of the prior ten years.

        In addition to deferring new aircraft purchases, many airlines elected to defer certain optional maintenance and refurbishment activities in order to minimize total cash outlays in response to weaker air travel demand. A significant portion of maintenance, repair and overhaul activity required on commercial aircraft is mandated by government regulation that limits the total time or number of flights that may elapse between scheduled maintenance, repair and overhaul ("MRO") events. As a result, although short-term deferrals are possible, maintenance, repair and overhaul activity is ultimately required to continue to operate the aircraft in revenue-producing service. Therefore, over the intermediate and long term, trends in the maintenance, repair and overhaul market are closely related

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to the size and utilization level of the worldwide aircraft fleet, as reflected by the number of available seat miles, commonly referred to as ASMs, flown. According to the Airline Monitor, since 1969 worldwide ASMs have grown every year but 1991, 2001 and 2002.

        The negative effects of the events of September 11, 2001, SARS, the war in Iraq, along with the already prolonged outlook for the commercial air travel downcycle, have led to a reduced forecast for a turnaround in large commercial OEM deliveries until 2006 at the earliest. The current lack of a pick up in air travel also impacts the supplier base, as MRO work remains curtailed and, in order to preserve cash, airlines are only performing retrofits absolutely necessary for safety reasons. The trends have been somewhat offset by increased demand for new and replacement military equipment in support of stronger national defense and a renewed emphasis on homeland security. Followed by a period of budget decreases in the post-Cold War era, the U.S. defense budget, as appropriated by Congress, has continued to increase in recent years. Under the Bush administration, the U.S. defense budget has seen the first double digit increase since the early 1990's. The 2003 U.S. defense budget request totaled approximately $380 billion and the Bush administration has proposed increasing these spending levels to over $450 billion by 2007.

Fiscal year ended March 31, 2003 compared to fiscal year ended March 31, 2002

        Net sales.    Net sales remained virtually unchanged at $565.4 million for fiscal 2003 from the prior year period. A decline in net sales due to a decrease in commercial airframe build rates was offset by revenue increases from certain military programs, most significantly the C-17 and F-18 E/F programs, and from the positive impact from the acquisition of EFS Aerospace, Inc. ("EFS") in fiscal 2002 and from the acquisitions of certain assets of Ozone Industries, Inc. in April 2002; and substantially all of the assets of Aerocell Structures, Inc. in July 2002, Furst Aircraft and Instrument in August 2002, and The Boeing Company's Spokane Fabrication Operation in January 2003, (collectively, the "2003 Acquisitions.")

        Costs of products sold.    Costs of products sold increased by $12.9 million, or 3.3%, to $398.3 million for fiscal 2003 from $385.4 million for fiscal 2002. Costs of products sold increased as a percentage of sales primarily due to lower operating rates in relation to fixed costs, significant increases in healthcare costs and from the acquisition of EFS and the 2003 Acquisitions, partially mitigated by reductions in employee incentive payments and employee benefits. Included in the net increase in cost of goods sold is a $4.5 million gain recognized during fiscal 2003, related to the modification of employee benefit plans.

        Gross profit.    Gross profit decreased by $12.8 million, or 7.1%, to $167.1 million for fiscal 2003 from $180.0 million for fiscal 2002. This decrease was primarily due to the reasons discussed above. As a percentage of net sales, gross profit was 29.6% and 31.8% for fiscal 2003 and fiscal 2002, respectively.

        Selling, general and administrative expenses.    Selling, general and administrative expenses increased by $1.9 million, or 2.7%, to $72.1 million for fiscal 2003 from $70.3 million for fiscal 2002, due to increases in healthcare costs, liability insurance premiums, as well as the inclusion of EFS and the 2003 Acquisitions, partially offset by a reduction in employment costs which resulted from a reduction in headcount and reductions in employee incentive payments and employee benefits.

        Depreciation and amortization.    Depreciation and amortization increased by $3.8 million, or 18.7%, to $24.4 million for fiscal 2003 from $20.5 million for fiscal 2002, primarily due to an increase in depreciation as a result of capital expenditures made over the last twelve months and from the assets acquired in connection with the inclusion of EFS and the 2003 Acquisitions.

        Special Charge.    During the second quarter of fiscal 2002, we recorded a special charge totaling $5.0 million related to the write-off of design and development costs related to a new aircraft program, which we deemed unlikely to go into production.

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        Operating income.    Operating income decreased by $13.5 million, or 16.0%, to $70.6 million for fiscal 2003 from $84.1 million for the prior year period. The net decrease in operating income from the prior year period resulted from the decrease in gross profit, most notably from the decrease in commercial airframe build rates discussed above and an increase in depreciation and amortization expense, partially offset by the operating profits from the inclusion of EFS and the 2003 Acquisitions.

        Interest expense and other.    Interest expense and other decreased by $0.4 million, or 3.2%, to $12.4 million for fiscal 2003 from $12.8 million for the prior year period. This decrease was primarily due to lower interest rates, partially offset by increased borrowing resulting from the acquisition of EFS, the 2003 Acquisitions and our capital expenditure program.

        Income tax expense.    The effective tax rate was 35.5% for fiscal 2003 and 31.1% for fiscal 2002.

        Discontinued Operations.    In March 2003, the Company declared its Metals businesses ("Metals") to be discontinued operations and expects to sell these businesses in fiscal 2004. These businesses that comprise the discontinued operations manufacture, machine, process and distribute metal products to customers in the computer, container and office furniture industries, primarily within North America, as well as structural steel erection services. The Company has stated that it would retain Metals due to its positive cash flows that were used to fund the growth of its aviation businesses. However, the Company has decided to focus on its core capabilities in aviation and sell Metals. Loss from discontinued operations before income taxes was $1.3 million for fiscal 2003 compared with income from discontinued operations before income taxes of $0.5 million for fiscal 2002. The benefit for income taxes was $0.5 million in fiscal 2003 compared to a provision of $0.1 million in the prior year period.

Fiscal year ended March 31, 2002 compared to fiscal year ended March 31, 2001

        Net sales.    Net sales increased by $65.1 million, or 13.0%, to $565.3 million for fiscal 2002 from $500.2 million for the prior year period. This growth in revenue was due to our increased participation in the expanding regional jet market, namely the Canadair RJ programs, growth of participation in Airbus programs, primarily the A319, A320 and A321 programs and participation in certain military programs, most significantly the C-17 and F-18 programs. Revenue growth was also helped by the positive impact of license agreements and product lines obtained in fiscal 2001 and from the acquisition of EFS. Increases in certain Boeing program deliveries, namely the B737 new generation and B777, added to the growth of net sales in fiscal 2002 over the prior year period offset by declines in other programs, most notably the E-2C.

        Costs of products sold.    Costs of products sold increased by $53.5 million, or 16.1%, to $385.4 million for fiscal 2002 from $331.9 million for fiscal 2001. This increase was primarily due to the increase in sales and the acquisition of EFS.

        Gross profit.    Gross profit increased by $11.7 million, or 6.9%, to $180.0 million for fiscal 2002 from $168.3 million for fiscal 2001. This increase was primarily due to the reasons discussed above. As a percentage of net sales, gross profit was 31.8% and 33.6% for fiscal 2002 and fiscal 2001, respectively.

        Selling, general and administrative expenses.    Selling, general and administrative expenses increased by $6.3 million, or 9.8%, to $70.3 million for fiscal 2002 from $64.0 million for fiscal 2001, due to a general increase in expenses as well as the acquisition of EFS.

        Depreciation and amortization.    Depreciation and amortization decreased by $4.5 million, or 18.1%, to $20.5 million for fiscal 2002 from $25.1 million for fiscal 2001, primarily due to the adoption of Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 142 provides that goodwill and intangible assets with indefinite lives will not be amortized. In accordance with SFAS 142, we stopped amortizing goodwill effective April 1, 2001. Had SFAS 142 been effective April 1, 2000, depreciation and amortization would have increased $2.6 million, or 14.4% to $20.5 million for fiscal 2002 from $18.0 million for fiscal 2001. This increase

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was primarily due to an increase in amortization related to our purchase of certain licenses and a product line that we acquired at the end of the second quarter of fiscal 2001 and an increase in depreciation due to our capital expenditure program.

        Special Charge.    During the second quarter of fiscal 2002, we recorded a special charge totaling $5.0 million related to the write-off of design and development costs related to a new aircraft program, which we deemed unlikely to go into production.

        Operating income.    Operating income increased by $4.9 million, or 6.2%, to $84.1 million for fiscal 2002 from $79.2 million for the prior year period. Had SFAS 142 been effective April 1, 2000, operating income for fiscal 2001 would have been $86.3 million or $7.1 million more than reported.

        During fiscal 2002, we incurred approximately $3.4 million of amortization and royalty expenses related to our purchase of certain licenses and a product line which we acquired at the end of the second quarter of fiscal 2001 compared to approximately $1.8 million for the prior year period.

        Interest expense and other.    Interest expense and other decreased by $7.8 million, or 37.8%, to $12.8 million for fiscal 2002 from $20.5 million for the prior year period. This decrease was primarily due to lower interest rates and decreased debt levels from the follow-on public offering, which occurred in March and April of 2001.

        Income tax expense.    The effective tax rate was 31.1% for fiscal 2002 and 35.5% for fiscal 2001.

        Discontinued Operations.    Income from discontinued operations before income taxes was $0.5 million for fiscal 2002 compared to $2.2 million in the prior year period. The provision for income taxes was $0.1 million in fiscal 2003 compared to $0.8 million for fiscal 2001.

Liquidity and Capital Resources

        Our working capital needs are generally funded through cash flows from operations and borrowings under our credit arrangements. We generated approximately $65.0 million of cash flows from operating activities for the year ended March 31, 2003, used approximately $106.2 million in investing activities and raised approximately $42.1 million in financing activities for the year ended March 31, 2003.

        In December 2002, we issued two classes of Senior Notes: $80.0 million of Class A notes and $70.0 million of Class B notes. The Class A notes carry a fixed rate of interest of 6.06% and mature on December 2, 2012. The Class B notes carry a fixed rate of interest of 5.59% and mature in seven annual installments of $10.0 million starting on December 2, 2006 through December 2, 2012. The proceeds of the Senior Notes were used to pay down our revolving credit facility ("Credit Facility").

        In conjunction with the issuance of the Senior Notes, we amended our Credit Facility to reduce the credit limit from $350.0 million to $250.0 million, extend the expiration date thereof from June 13, 2004 to December 13, 2006 and amend certain terms and covenants. The Credit Facility bears interest at either LIBOR plus between 1.0% and 2.0% or the prime rate (or the Federal Funds rate plus 0.5% if greater) or an overnight interest rate at our option. The variation in the interest rate is based upon our ratio of total indebtedness to earnings before interest, taxes, depreciation and amortization. In addition, we are required to pay a commitment fee of between 0.2% and 0.4% on the unused portion of our Credit Facility. As of March 31, 2003, $211.0 million was available under our Credit Facility. On March 31, 2003, an aggregate amount of approximately $32.5 million was outstanding under the Credit Facility, $27.0 million of which was accruing interest at LIBOR plus applicable basis points totaling 2.65% per annum, and $5.5 million of which was accruing interest at the overnight rate of 2.84% per annum. Amounts repaid under our Credit Facility may be reborrowed.

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        On August 23, 2001, we entered into a loan agreement with the Illinois Development Finance Authority related to the Illinois Development Finance Authority Economic Development Bonds, series of 2001 (the "Bonds"). The proceeds of the Bonds of $7.5 million were used to fund the purchase of our TriWestern Metals subsidiary's new electro-galvanizing production line. The Bonds were due to mature on August 1, 2016 and were secured by the equipment. In November 2002, we retired all of the outstanding Bonds totaling $7.5 million, plus accrued interest. The retirement of the Bonds was funded by borrowings under our Credit Facility.

        In November 2002, we retired $11.2 million of subordinated promissory notes and $0.7 million of junior subordinated promissory notes, which were included in other debt. The retirement of the subordinated promissory notes and junior subordinated promissory notes were funded by borrowings under our Credit Facility.

        Capital expenditures were approximately $31.6 million for the year ended March 31, 2003, primarily for manufacturing machinery and equipment. We funded these expenditures through borrowings under our Credit Facility. We expect capital expenditures to be approximately $30.0 million for our fiscal year ending March 31, 2004. The expenditures are expected to be used mainly to expand capacity at several facilities.

        In April 2002, we acquired certain assets of Ozone Industries, Inc. In July 2002, we acquired substantially all of the assets of Aerocell Structures, Inc., located in Hot Springs, Arkansas, which is being operated by our subsidiary, Airborne Nacelle Services, Inc. In August 2002, we acquired substantially all of the assets of Furst Aircraft and Instrument, located in Teterboro, New Jersey, which is being operated by our subsidiary, Furst Aircraft, Inc. The total cash paid at these closings of approximately $25.8 million was funded by borrowings under our Credit Facility.

        In November 2002, we acquired the remaining four percent of the stock of our subsidiary, Triumph Controls, Inc. The cash purchase price paid at closing of $4.0 million was funded by borrowings under our Credit Facility.

        In January 2003, we acquired substantially all of the assets of The Boeing Company's Spokane Fabrication Operation, located in Spokane, Washington. The acquired business, which was renamed Triumph Composite Systems, Inc., adds new products and new capabilities to our portfolio of structural component products and services. Triumph Composite Systems is dedicated to the production of aircraft parts made of composite and thermoplastic materials. Primary products include floor panels, air control system ducts and nonstructural composite flight deck components. As part of the transaction, we have entered into an eight-year single-source supply agreement with The Boeing Company for the products currently produced by Triumph Composite Systems. The purchase price of approximately $42.2 million, which was paid in cash at closing for this acquisition, was funded by borrowings under our Credit Facility.

        In May 2003, we acquired certain assets of Parker Hannifin's United Aircraft Products Division for $15.0 million, which will be operated by our subsidiary Triumph Thermal Systems. This purchase was funded by borrowings under our Credit Facility.

        On December 15, 1998, we announced a program to repurchase up to 500,000 shares of our common stock. In March 2003, we repurchased a total of 10,000 shares at an average share price of $22.08. From the inception of the program through March 31, 2003, we have repurchased a total of 279,200 shares for a total purchase price of $6.9 million.

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        Our expected future cash flows for the next five years for long term debt, leases and other obligations are as follows:

(1)

Included in our balance sheet at March 31, 2003.

(2)

Includes interest component.

        We believe that cash generated by operations and borrowings under our Credit Facility will be sufficient to meet anticipated cash requirements for our current operations. However, we have a stated policy to grow through acquisition and are continuously evaluating various acquisition opportunities. As a result, we currently are pursuing the potential purchase of a number of candidates. In the event that more than one of these transactions are successfully consummated, the availability under our Credit Facility might be fully utilized and additional funding sources may be needed. There can be no assurance that such funding sources will be available to us on terms favorable to us, if at all.

Critical Accounting Policies

        Critical accounting policies are those accounting policies that can have a significant impact on the presentation of our financial condition and results of operations, and that require the use of complex and subjective estimates based upon past experience and management's judgment. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. Below are those policies applied in preparing our financial statements that management believes are the most dependent on the application of estimates and assumptions. For additional accounting policies, see Note 2 of "Notes to Consolidated Financial Statements."

Allowance for Doubtful Accounts

        Trade receivables are presented net of an allowance for doubtful accounts. In determining the appropriate allowance, we consider a combination of factors, such as industry trends, our customers' financial strength and credit standing, and payment and default history. The calculation of the required allowance requires a judgment as to the impact of these and other factors on the ultimate realization of our trade receivables.

Inventories

        Inventories are stated at the lower of cost or market using the average cost or specific identification methods and consist of finished goods available for sale. We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those anticipated, inventory adjustments may be required.

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Revenue Recognition

        We recognize revenues in accordance with invoice terms, generally when products are shipped or services are rendered. Our policy with respect to sales returns and allowances generally provides that the customer may not return products or be given allowances, except at our option. Accruals for sales returns, other allowances, and estimated warranty costs are provided at the time of shipment based upon past experience. If actual future sales returns, allowances and warranty amounts are higher than past experience, additional amounts may be required.

Goodwill and Intangible Assets

        Under Statement of Financial Accounting Standards No. 142, "Goodwill and Intangible Assets," ("SFAS No. 142") goodwill and intangible assets with indefinite lives are not amortized; rather, they are tested for impairment on at least an annual basis. Additionally, intangible assets with finite lives continue to be amortized over their useful lives.

        SFAS No. 142 requires a two-step impairment test for goodwill. The first step is to compare the carrying amount of the reporting unit's assets to the fair value of the reporting unit. If the fair value exceeds the carrying value, no further work is required and no impairment loss is recognized. If the carrying amount exceeds the fair value then the second step is required to be completed, which involves allocating the fair value of the reporting unit to each asset and liability, with the excess being implied goodwill. An impairment loss occurs if the amount of the recorded goodwill exceeds the implied goodwill. The determination of the fair value of our reporting units is based, among other things, on estimates of future operating performance of the reporting unit being valued. We are required to complete an impairment test for goodwill and record any resulting impairment losses annually. Changes in market conditions, among other factors, may have an impact on these estimates. We completed our required annual impairment test in the fourth quarter of fiscal 2003 and determined that there was no impairment.

Discontinued Operations

        We account for our metals businesses as discontinued operations because we plan to sell these businesses. Accounting treatment for discontinued operations involves segregation of the net assets and operating results of the discontinued operations for separate disclosure in the financial statements, rather than including the results within the other line-items of the financial statements. We have determined that the metals businesses meet the held-for-sale criteria of current accounting requirements as of March 31, 2003. Judgments and estimates were used in reaching this conclusion. A different interpretation of current accounting literature that concluded discontinued operation accounting did not apply would have a significant impact on the financial statements, increasing revenues, operating expenses, assets and liabilities, although shareholder's equity would remain the same.

Market Risk

        Our primary exposure to market risk consists of changes in interest rates on borrowings. An increase in interest rates would adversely affect our operating results and the cash flow available after debt service to fund operations and expansion. In addition, an increase in interest rates would adversely affect our ability to pay dividends on our common stock, if permitted to do so under certain of our debt arrangements, including our revolving credit facility. We manage exposure to interest rate fluctuations by optimizing the use of fixed and variable rate debt. The information below summarizes our market risks associated with debt obligations and should be read in conjunction with Note 6 of our consolidated financial statements included in this report.

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        The following table presents principal cash flows and the related interest rates. Fixed interest rates disclosed represent the weighted average rate as of March 31, 2003. Variable interest rates disclosed fluctuate with the LIBOR, federal funds rates and other weekly rates and represent the weighted average rate at March 31, 2003.

Expected Years of Maturity

Forward-Looking Statements

        This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 relating to our future operations and prospects, including statements that are based on current projections and expectations about the markets in which we operate, and management's beliefs concerning future performance and capital requirements based upon current available information. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. When used in this document, words like "may", "might", "will", "expect", "anticipate", "believe", "potential", and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from management's current expectations. For example, there can be no assurance that additional capital will not be required or that additional capital, if required, will be available on reasonable terms, if at all, at such times and in such amounts as may be needed by us. In addition to these factors, among other factors that could cause actual results to differ materially are uncertainties relating to the integration of acquired businesses, general economic conditions affecting our business segments, dependence of certain of our businesses on certain key customers as well as competitive factors relating to the aviation and metals industries. For a more detailed discussion of these and other factors affecting us, see the risk factors described in Item 1. Business.

Item 7a.    Quantitative and Qualitative Disclosures about Market Risk

        See discussion in Item 7.

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Item 8.    Financial Statements and Supplementary Data

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of Triumph Group, Inc.

        We have audited the accompanying consolidated balance sheets of Triumph Group, Inc. as of March 31, 2003 and 2002, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended March 31, 2003. Our audits also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Triumph Group, Inc. at March 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

Philadelphia, Pennsylvania
April 23, 2003

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TRIUMPH GROUP, INC.

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

See notes to consolidated financial statements.

30

TRIUMPH GROUP, INC.

Consolidated Statements Of Income

(In thousands, except per share data)

See notes to consolidated financial statements.

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TRIUMPH GROUP, INC.

Consolidated Statements of Stockholders' Equity

(Dollars in thousands)