WOOD DALE, Ill., July 11, 2017 /PRNewswire/ -- AAR CORP.
(NYSE: AIR) today reported fourth quarter Fiscal Year 2017
consolidated sales of $492.3 million
and income from continuing operations of $15.1 million, or $0.44 per diluted share. Fourth quarter
results from continuing operations included a $2.2 million, or $0.06 per diluted share, reduction in income tax
expense related to the recognition of previously reserved income
tax benefits. Fourth quarter results also included
approximately $4.1 million of
expenses related to significantly higher legal and other costs
associated with defending the INL/A contract award,
personnel-related costs, and other strategic actions. For the
fourth quarter of the prior fiscal year, the Company reported sales
of $468.6 million and income from
continuing operations of $11.8
million, or $0.34 per diluted
share.
Sales in Aviation Services increased 5.2% in the quarter over
last year, reflecting strong performance for our industry-leading
integrated supply chain solutions and our aircraft and parts supply
activities. Growth in those businesses more than offset the
impact of the wind-down of the KC-10 CLS Program and one of our
airframe maintenance facilities, which collectively contributed
$32.8 million to the prior year's
sales. Expeditionary Services experienced sales growth of
4.1% as increased volumes continue to drive a recovery in our
mobility business; however, these levels are still significantly
below historical levels of performance for this business.
The Company recently announced significant new business wins,
including the award of a $909 million
fixed-price contract from the U.S. Air Force for the Landing Gear
Performance-Based Logistics One program. Performance is on
hold pending resolution of a protest filed by a competitor.
We will provide total supply chain management, including
purchasing, remanufacturing, distribution and inventory control to
support Air Force requisitions received for all C-130, KC-135 and
E-3 landing gear parts. We also announced the award of a
multi-year component support contract with ASL Group, a growing
European-based scheduled and charter carrier, covering
approximately 100 passenger and cargo aircraft.
"The broad market acceptance of the AAR brand as an industry
leading provider of maintenance and supply chain solutions to
operators around the globe, the growing global commercial aircraft
fleet, and the increasing trend to outsource non-core functions by
commercial and government customers all set the stage for a
positive outlook for our business as we enter our Fiscal Year
2018", said David P. Storch,
Chairman and Chief Executive Officer of AAR CORP. Storch
continued, "While the macro trends and the Company's position are
favorable, our consolidated results continue to be negatively
impacted by weakness in our Airlift business."
Fourth quarter sales to commercial customers represented 70.5%
of consolidated sales compared to 63.9% of consolidated sales in
the fourth quarter of last year. Sales to government and
defense customers represented 29.5% of consolidated sales compared
to 36.1% in the prior year's quarter.
Selling, general and administrative expenses as a percentage of
sales were 11.8% for the quarter, compared to 10.0% last year
largely due to costs related to our defense of the INL/A contract
award, higher personnel-related costs and expenses from other
strategic actions.
Net interest expense for the quarter was $1.5 million compared to $1.1 million last year. During the quarter,
the Company paid cash dividends of $2.5
million, or $0.075 per share,
and repurchased approximately 96,000 shares for $3.2 million.
Net debt at May 31, 2017 increased
to $149.0 million compared to
$118.9 million at May 31, 2016. This increase in net debt was
utilized for investments in inventory and rotable assets to support
new contract awards in our integrated supply chain solutions
business as well as for the share repurchases and dividends.
Storch continued, "We expect to continue to make investments in
assets to support our customers, pursue strategic acquisitions to
complement and expand our capabilities and return capital to our
shareholders through dividends and share repurchases."
Commenting on near-term opportunities, Storch continued, "We are
pleased with the new contracts awarded for our industry-leading
integrated supply chain solutions. We are now supporting over
1,400 aircraft for our customers. Our execution on these
contract awards has been a significant contributor to our revenue
growth over the past year. The size of our supported fleet,
our entry into new aircraft platforms such as the B777, and our
geographic expansion into India,
New Zealand and other countries
position us to be our customers' leading choice for component
support and other solutions."
Fiscal Year 2017 Results
Full Fiscal Year 2017 consolidated sales were $1.77 billion, an increase of 4.0% over Fiscal
Year 2016. Aviation Services sales grew by 4.2% as a result
of a recovery in our aircraft and parts supply activities and the
new contract awards for integrated supply chain solutions.
Expeditionary Services sales increased 3.0% in Fiscal Year 2017
from increased volumes in our mobility business.
Full Fiscal Year 2017 income from continuing operations was
$50.2 million, or $1.45 per diluted share. Fiscal Year 2017
included a $2.2 million, or
$0.06 per diluted share, reduction in
income tax expense related to the recognition of previously
reserved income tax benefits. In Fiscal Year 2016, income
from continuing operations was $38.3
million, or $1.10 per
share. Income from discontinued operations was $6.3 million in Fiscal Year 2017, which included
a $6.7 million income tax benefit
related to the recognition of previously reserved income tax
benefits.
Sales to commercial customers in Fiscal Year 2017 represented
66.2% of consolidated sales as compared to 61.6% in Fiscal Year
2016, with sales to government and defense customers representing
the balance in each year.
Net interest expense for Fiscal Year 2017 was $5.3 million compared to $6.1 million last year. During the year, the
Company paid cash dividends of $10.2
million, or $0.30 per share,
and repurchased approximately 767,000 shares for $19.8 million.
Outlook
We expect to continue to employ a balanced capital allocation
strategy, leveraging the Company's strong balance sheet to support
both internal and external growth opportunities and to return
capital to shareholders. Since the fourth quarter of 2015, the
Company has returned $223 million of
capital to shareholders through share repurchases and
dividends. At yesterday's regularly scheduled Board of
Directors meeting, our Board authorized a new stock repurchase
program that provides for the repurchase of up to $250 million of the Company's stock. We
will continue to repurchase shares opportunistically depending on
market and industry conditions, macroeconomic factors, competing
internal capital requirements and other relevant
considerations.
We are successfully executing our business strategy to grow our
integrated supply chain and MRO businesses organically, while we
continue to look to supplement this growth through
acquisitions. We will remain disciplined in our approach to
acquisitions by seeking out opportunities that will enhance our
capabilities, expand our customer base or open up new markets for
our businesses.
Financial flexibility will continue to be a top priority in
order to take advantage of opportunities to drive growth and
enhance shareholder value.
Conference Call
Information
AAR will hold its quarterly conference call at 3:45 p.m. CDT on July 11,
2017. The conference call can be accessed by calling
866-802-4322 from inside the U.S. or 703-639-1319 from outside the
U.S. A replay of the conference call will also be available
by calling 855-859-2056 from inside the U.S. or 404-537-3406 from
outside the U.S. (access code 46019250). The replay will be
available from 7:15 p.m. CDT on
July 11, 2017, until 10:59 p.m. CDT on July 18,
2017.
About AAR
AAR is a global aftermarket solutions company that employs more
than 4,500 people in over 20 countries. Based in Wood Dale, Illinois, AAR supports commercial
aviation and government customers through two operating segments:
Aviation Services and Expeditionary Services. AAR's Aviation
Services include inventory management; parts supply; OEM parts
distribution; aircraft maintenance, repair and overhaul; and
component repair. AAR's Expeditionary Services include airlift
operations; mobility systems; and command and control centers in
support of military and humanitarian missions. Additional
information can be found at www.aarcorp.com.
This press release contains certain statements relating to
future results, which are forward-looking statements as that term
is defined in the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on beliefs
of Company management, as well as assumptions and estimates based
on information currently available to the Company, and are subject
to certain risks and uncertainties that could cause actual results
to differ materially from historical results or those anticipated,
including those factors discussed under Item 1A, entitled "Risk
Factors", included in the Company's Form 10-K for the fiscal year
ended May 31, 2016. Should one or
more of these risks or uncertainties materialize adversely, or
should underlying assumptions or estimates prove incorrect, actual
results may vary materially from those described. These
events and uncertainties are difficult or impossible to predict
accurately and many are beyond the Company's control. The
Company assumes no obligation to update any forward-looking
statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or
unanticipated events. For additional information, see the comments
included in AAR's filings with the Securities and Exchange
Commission.
AAR CORP. and Subsidiaries
Consolidated
Statements of Income
(In millions
except per share data - unaudited)
|
Three Months
Ended May
31,
|
|
Twelve Months
Ended May
31,
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
Sales
|
$492.3
|
|
$468.6
|
|
$1,767.6
|
|
$1,698.9
|
Cost and
expenses:
|
|
|
|
|
|
|
|
Cost of
sales
|
412.5
|
|
403.0
|
|
1,491.1
|
|
1,461.0
|
Selling, general and
administrative
|
58.2
|
|
47.0
|
|
196.7
|
|
173.2
|
|
|
|
|
|
|
|
|
Earnings (Loss)
from aircraft joint ventures
|
—
|
|
0.1
|
|
(0.2)
|
|
(0.3)
|
|
|
|
|
|
|
|
|
Operating
income
|
21.6
|
|
18.7
|
|
79.6
|
|
64.4
|
|
|
|
|
|
|
|
|
Loss on
extinguishment of debt
|
—
|
|
—
|
|
—
|
|
(0.4)
|
Interest
expense
|
(1.5)
|
|
(1.2)
|
|
(5.5)
|
|
(6.4)
|
Interest
income
|
—
|
|
0.1
|
|
0.2
|
|
0.3
|
|
|
|
|
|
|
|
|
Income from
continuing operations before income tax expense
|
20.1
|
|
17.6
|
|
74.3
|
|
57.9
|
Income tax
expense
|
5.0
|
|
5.8
|
|
24.1
|
|
19.6
|
Income from
continuing operations
|
15.1
|
|
11.8
|
|
50.2
|
|
38.3
|
Income from
discontinued operations
|
6.1
|
|
0.2
|
|
6.3
|
|
9.4
|
Net
income
|
$21.2
|
|
$12.0
|
|
$56.5
|
|
$47.7
|
|
|
|
|
|
|
|
|
Earnings per share
– basic:
|
|
|
|
|
|
|
|
Continuing
operations
|
$0.44
|
|
$0.35
|
|
$1.47
|
|
$1.10
|
Discontinued
operations
|
0.18
|
|
—
|
|
0.19
|
|
0.27
|
Earnings per share –
Basic
|
$0.62
|
|
$0.35
|
|
$1.66
|
|
$1.37
|
|
|
|
|
|
|
|
|
Earnings per share
– diluted:
|
|
|
|
|
|
|
|
Continuing
operations
|
$0.44
|
|
$0.34
|
|
$1.45
|
|
$1.10
|
Discontinued
operations
|
0.18
|
|
—
|
|
0.19
|
|
0.27
|
Earnings per share –
Diluted
|
$0.62
|
|
$0.34
|
|
$1.64
|
|
$1.37
|
|
|
|
|
|
|
|
|
Share
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding – Basic
|
33.8
|
|
34.0
|
|
33.9
|
|
34.4
|
Average shares
outstanding – Diluted
|
34.3
|
|
34.2
|
|
34.3
|
|
34.6
|
|
|
|
|
|
|
|
|
|
|
AAR CORP. and
Subsidiaries
|
|
Consolidated
Balance Sheet Highlights
(In millions
except per share data - unaudited)
|
May
31,
2017
|
May
31,
2016
|
|
|
|
Cash and cash
equivalents
|
$
10.3
|
$31.2
|
Current
assets
|
888.5
|
881.7
|
Current
liabilities (excluding debt accounts)
|
333.1
|
329.4
|
Net property,
plant and equipment
|
201.9
|
238.1
|
Total
assets
|
1,504.1
|
1,456.0
|
Total
debt
|
159.3
|
150.1
|
Stockholders'
equity
|
914.2
|
865.8
|
Book value per
share
|
$26.58
|
$25.10
|
Shares
outstanding
|
34.4
|
34.5
|
|
|
|
Sales By Business
Segment
(In millions -
unaudited)
|
Three Months
Ended
May
31,
|
Twelve Months
Ended
May
31,
|
|
2017
|
2016
|
2017
|
2016
|
Aviation
Services
|
$
421.3
|
$ 400.4
|
$
1,485.4
|
$ 1,425.0
|
Expeditionary
Services
|
71.0
|
68.2
|
282.2
|
273.9
|
|
$
492.3
|
$ 468.6
|
$
1,767.6
|
$ 1,698.9
|
|
|
|
Gross Profit by
Business Segment
(In millions -
unaudited)
|
Three Months
Ended
May
31,
|
Twelve Months
Ended
May
31,
|
|
2017
|
2016
|
2017
|
2016
|
Aviation
Services
|
$
73.4
|
$ 63.1
|
$
246.2
|
$ 229.8
|
Expeditionary
Services
|
6.4
|
2.5
|
30.3
|
8.1
|
|
$
79.8
|
$ 65.6
|
$
276.5
|
$ 237.9
|
|
Note: Pursuant to SEC Regulation G, the Company has
included the following reconciliation of financial measure reported
on a non-GAAP basis to compare financial measures reported on the
basis of Generally Accepted Accounting Principles ("GAAP").
The Company uses net debt to evaluate its financial position and
results and trends and believes it is useful for the reader of this
press release.
Net Debt
(In millions-
unaudited)
|
May 31,
2017
|
|
May 31,
2016
|
Total
debt
|
$159.3
|
|
$150.1
|
Less: Cash and
cash equivalents
|
(10.3)
|
|
(31.2)
|
Net
debt
|
$149.0
|
|
$118.9
|
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SOURCE AAR CORP.