WOOD DALE, Ill., Dec. 21, 2017 /PRNewswire/ -- AAR CORP.
(NYSE: AIR) today reported second quarter Fiscal Year 2018
consolidated sales of $449.7 million,
representing a $25.9 million or 6%
increase year over year. This increase was driven by strong
sales growth in the Aviation Services segment, which increased 13%
from $346.7 million to $391.6 million.
The Company reported a net loss of ($22.6) million, or ($0.66) per diluted share, as it recognized
non-cash asset impairment and related charges of $54.2 million in its Expeditionary Services
segment due to the completion of certain customer contracts, as
well as industry trends affecting the value of certain rotary- and
fixed-wing aircraft and support parts. Excluding these
non-cash charges, adjusted net income was $12.1 million, or $0.35 per diluted share. Operating results
for the affected business within our Expeditionary Services segment
unfavorably impacted our consolidated results by ($0.03) per diluted share in the current quarter,
excluding these non-cash charges.
Our operating results included robust performance in Aviation
Services, which contributed $66.0
million of gross profit, up $10.0
million or 18% over the prior year. We experienced
profitability gains across all of our Aviation Services businesses
including programs, MRO services, trading and distribution.
Gross profit margins at Aviation Services increased from 16% in the
prior year quarter to 17% in the current year as increased sales
volume improved profitability within the segment.
"Our Aviation Services segment continues to experience
double-digit growth as we deliver on our industry-leading
services. We are executing on our strategy to expand our
comprehensive portfolio of aviation services, including supply
chain and maintenance solutions, to the global commercial and
government markets," said John M.
Holmes, President and Chief Operating Officer of AAR CORP.
Holmes continued, "I'm exceptionally pleased with our sales
growth to commercial customers of 20% as we benefited from the
successful ramp of our recent program wins, growth in parts supply
and expansion of our MRO network."
During the quarter, the Company announced the receipt of its
first task order from the U.S. Department of State and the
commencement of work under the transition phase of the INL/A
Worldwide Aviation Support Services (INL/A WASS) contract.
These activities followed the October 31,
2017 decision by the U.S. Court of Federal Claims upholding
the Department of State's September 1,
2016 award of the contract.
David P. Storch, Chairman and
Chief Executive Officer of AAR CORP. said, "Overall, in the second
quarter, we continued to execute on our focused long-term strategy
to be the best independent integrated aviation service provider in
the world. We invested in supply chain activities to increase
market share, expand our customer base, and enlarge our geographic
footprint. Also in the period, we invested in growing our MRO
business with the recent acquisition of two facilities in
Canada."
"We are very excited to begin work on the INL/A WASS contract."
Storch continued, "Our decades of experience in fleet operation,
maintenance, logistics and integrated information technology will
greatly benefit this critical national security program of the
Department of State. This contract is an important step
for our Expeditionary Services segment as we reposition our
resources to focus on a government-owned, contractor-operated
services (GOCO) model."
Storch continued, "We are confident that our investments in our
Aviation Services supply chain, logistics, and MRO activities,
together with the strategic win within our Expeditionary Services
segment, will further drive growth and position the Company for a
strong future."
Second quarter sales to commercial customers represented 71% of
consolidated sales compared to 64% of consolidated sales in the
second quarter of last year. Sales to government and defense
customers represented 29% of consolidated sales compared to 36% in
the prior year's quarter resulting from the completion of certain
expeditionary airlift services contracts and the wind-down of the
KC-10 CLS Program.
Selling, general and administrative expenses in the second
quarter included $3.6 million in
Expeditionary Services from the impairment charges and legal costs
associated with the defense of our INL/A WASS contract award.
Net interest expense for the quarter was $1.9 million compared to $1.1 million last year due to both higher
borrowings and higher interest rates. During the quarter, we
generated $11.4 million of cash in
continuing operations and paid cash dividends of $2.6 million, or $0.075 per share.
The Company will provide preliminary guidance for Fiscal Year
2019 at its Investor Day scheduled for January 11, 2018.
Conference Call Information
AAR will hold its quarterly conference call at 3:45 p.m. CT on December
21, 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 be available by
calling 855-859-2056 from inside the U.S. or 404-537-3406 from
outside the U.S. (access code 46019252). The replay will be
available from 8:15 p.m. CT on
December 21, 2017, until 11:59 p.m. CT on December
26, 2017.
About AAR
AAR is a global aftermarket solutions company that employs more
than 5,000 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. More 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, 2017. 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 Operations
(In millions
except per share data - unaudited)
|
Three Months
Ended
November
30,
|
|
Six Months
Ended
November
30,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
2017
|
|
|
2016
|
Sales
|
$449.7
|
|
$423.8
|
|
$888.9
|
|
$828.6
|
Cost and
expenses:
|
|
|
|
|
|
|
|
Cost of
sales
|
377.2
|
|
357.6
|
|
751.9
|
|
700.9
|
Cost of sales –
impairment and other
charges
|
51.6
|
|
-
|
|
51.6
|
|
-
|
Selling, general and
administrative
|
52.2
|
|
46.3
|
|
100.2
|
|
91.1
|
Selling, general
and administrative -
impairment
|
2.6
|
|
-
|
|
2.6
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
(33.9)
|
|
19.9
|
|
(17.4)
|
|
36.6
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(1.9)
|
|
(1.1)
|
|
(3.6)
|
|
(2.4)
|
|
|
|
|
|
|
|
|
Income (Loss) from
continuing operations before income tax expense
(benefit)
|
(35.8)
|
|
18.8
|
|
(21.0)
|
|
34.2
|
Income tax expense
(benefit)
|
(13.3)
|
|
6.7
|
|
(9.1)
|
|
12.2
|
Income (Loss) from
continuing operations
|
(22.5)
|
|
12.1
|
|
(11.9)
|
|
22.0
|
Loss from
discontinued operations
|
(0.1)
|
|
-
|
|
(0.1)
|
|
(0.4)
|
Net income
(loss)
|
$(22.6)
|
|
$12.1
|
|
$(12.0)
|
|
$21.6
|
|
|
|
|
|
|
|
|
Earnings (Loss)
per share – basic:
|
|
|
|
|
|
|
|
Continuing
operations
|
$(0.66)
|
|
$0.35
|
|
$(0.35)
|
|
$0.64
|
Discontinued
operations
|
-
|
|
-
|
|
-
|
|
(0.01)
|
Earnings (Loss) per share
– basic
|
$(0.66)
|
|
$0.35
|
|
$(0.35)
|
|
$0.63
|
|
|
|
|
|
|
|
|
Earnings (Loss)
per share – diluted:
|
|
|
|
|
|
|
|
Continuing
operations
|
$(0.66)
|
|
$0.35
|
|
$(0.35)
|
|
$0.64
|
Discontinued
operations
|
-
|
|
-
|
|
-
|
|
(0.01)
|
Earnings (Loss) per share
– diluted
|
$(0.66)
|
|
$0.35
|
|
$(0.35)
|
|
$0.63
|
|
|
|
|
|
|
|
|
Share
Data:
|
|
|
|
|
|
|
|
Average shares
outstanding – basic
|
34.0
|
|
33.7
|
|
34.1
|
|
33.9
|
Average shares
outstanding – diluted
|
34.0
|
|
34.1
|
|
34.1
|
|
34.2
|
|
|
|
|
|
|
|
|
Non-GAAP
Measures:
|
|
|
|
|
|
|
|
Adjusted net
income
|
$12.1
|
|
$12.1
|
|
$22.7
|
|
$21.6
|
Adjusted earnings per
share – diluted
|
0.35
|
|
0.35
|
|
0.66
|
|
0.63
|
|
|
|
|
|
|
|
|
|
|
AAR CORP. and
Subsidiaries
|
|
|
|
|
Consolidated
Balance Sheet Highlights
(In millions
except per share data)
|
November
30, 2017
|
May
31, 2017
|
|
(Unaudited)
|
|
Cash and cash
equivalents
|
$
27.1
|
$10.3
|
Current
assets
|
892.2
|
888.5
|
Current
liabilities (excluding debt accounts)
|
334.6
|
333.1
|
Net property,
plant and equipment
|
195.3
|
201.9
|
Total
assets
|
1,544.3
|
1,504.1
|
Total
debt
|
219.4
|
159.3
|
Stockholders'
equity
|
906.5
|
914.2
|
Book value per
share
|
$26.12
|
$26.58
|
Shares
outstanding
|
34.7
|
34.4
|
|
|
|
|
|
|
Sales By Business
Segment
(In millions -
unaudited)
|
Three Months
Ended November
30,
|
Six Months
Ended November
30,
|
|
2017
|
2016
|
2017
|
2016
|
Aviation
Services
|
$
391.6
|
$ 346.7
|
$
762.9
|
$ 681.3
|
Expeditionary
Services
|
58.1
|
77.1
|
126.0
|
147.3
|
|
$ 449.7
|
$
423.8
|
$ 888.9
|
$
828.6
|
|
|
|
|
|
|
Gross Profit
(Loss) by Business Segment
(In millions -
unaudited)
|
Three Months
Ended November
30,
|
Six Months
Ended November
30,
|
|
2017
|
2016
|
2017
|
2016
|
Aviation
Services
|
$
66.0
|
$ 56.0
|
$
123.8
|
$ 109.4
|
Expeditionary
Services
|
(45.1)
|
10.2
|
(38.4)
|
18.3
|
|
$ 20.9
|
$
66.2
|
$ 85.4
|
$
127.7
|
|
|
|
|
|
Non-GAAP Financial Measures
Adjusted net income, adjusted earnings per share – diluted,
adjusted EBITDA and net debt are "non-GAAP financial measures" as
defined in Regulation G of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). We believe these non-GAAP
financial measures are relevant and useful for investors as they
provide a better understanding of our actual operating performance
unaffected by the impact of impairments and other items. When
reviewed in conjunction with our GAAP results and the accompanying
reconciliations, we believe these non-GAAP financial measures
provide additional information that is useful to gain an
understanding of the factors and trends affecting our business and
provide a means by which to compare our operating performance
against that of other companies in the industries we compete.
Adjusted EBITDA is income (loss) from continuing operations before
interest expense, interest income, income taxes (benefit),
depreciation and amortization, stock-based compensation and items
of a non-recurring nature including asset impairments and gains on
certain asset sales.
Pursuant to the requirements of Regulation G of the Exchange
Act, we are providing the following tables that reconcile the above
mentioned non-GAAP financial measures to the most directly
comparable GAAP financial measures:
AAR CORP. and
Subsidiaries
|
|
|
Net
Debt
(In millions-
unaudited)
|
|
|
|
|
|
|
|
|
|
November 30,
2017
|
|
May
31, 2017
|
Total
debt
|
|
|
|
|
|
|
|
|
|
$219.4
|
|
$159.3
|
Less: Cash and
cash equivalents
|
|
|
|
|
|
|
|
|
|
(27.1)
|
|
(10.3)
|
Net
debt
|
|
|
|
|
|
|
|
|
|
$192.3
|
|
$149.0
|
|
|
|
|
|
|
Adjusted Net
Income
(In millions -
unaudited)
|
Three Months
Ended
November
30,
|
Six Months
Ended
November
30,
|
|
2017
|
2016
|
2017
|
2016
|
Net income
(loss)
|
$
(22.6)
|
$ 12.1
|
$
(12.0)
|
$ 21.6
|
Impairment and
other charges, net of tax
|
34.7
|
–
|
34.7
|
–
|
Adjusted net
income
|
$
12.1
|
$ 12.1
|
$
22.7
|
$ 21.6
|
|
|
|
|
|
|
Adjusted Earnings
per Share - Diluted
(In millions -
unaudited)
|
Three Months
Ended
November
30,
|
Six Months
Ended
November
30,
|
|
2017
|
2016
|
2017
|
2016
|
Earnings per share
– diluted
|
$
(0.66)
|
$ 0.35
|
$
(0.35)
|
$ 0.63
|
Impairment and
other charges, net of tax
|
1.01
|
–
|
1.01
|
–
|
Adjusted earnings
per share – diluted
|
$
0.35
|
$ 0.35
|
$
0.66
|
$ 0.63
|
|
|
|
|
|
|
Adjusted
EBITDA
(In millions -
unaudited)
|
Three Months
Ended
November
30,
|
Six Months
Ended
November
30,
|
|
2017
|
2016
|
2017
|
2016
|
Income (Loss) from
continuing operations
|
$
(22.5)
|
$ 12.1
|
$
(11.9)
|
$ 22.0
|
Impairment and
other charges
|
54.2
|
-
|
54.2
|
-
|
Gain on asset
disposal
|
-
|
-
|
-
|
(2.6)
|
Depreciation and
intangible amortization
|
13.9
|
12.0
|
28.5
|
24.3
|
Stock-based
compensation
|
2.8
|
2.4
|
5.4
|
4.9
|
Interest expense,
net
|
1.9
|
1.1
|
3.6
|
2.4
|
Income tax expense
(benefit)
|
(13.3)
|
6.7
|
(9.1)
|
12.2
|
Adjusted
EBITDA
|
$
37.0
|
$ 34.3
|
$
70.7
|
$ 63.2
|
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SOURCE AAR CORP.