WOOD DALE, Ill., March 20, 2018 /PRNewswire/ -- AAR CORP.
(NYSE: AIR) today reported third quarter Fiscal Year 2018
consolidated sales of $456.3 million
and income from continuing operations of $31.3 million, or $0.90 per diluted share. For the third
quarter of the prior year, the Company reported sales of
$407.2 million and income from
continuing operations of $14.4
million, or $0.42 per diluted
share. The current period results include a tax benefit of
$13.0 million, or $0.38 per diluted share, to reflect the estimated
re-measurement impact of the U.S. Tax Cuts and Job Act on our
deferred tax liabilities. Our adjusted diluted earnings per
share from continuing operations was $0.49 in the current quarter compared to
$0.42 in the third quarter of the
prior year. We have decided to pursue the sale of our
contractor-owned, contractor-operated (COCO) business formerly
included in our Expeditionary Services segment. As a result,
the COCO business has been reported as discontinued operations for
all periods presented.
Sales in Aviation Services increased 11.4% in the quarter over
the prior year representing a continuing trend of double-digit year
over year growth. The strong sales growth in our
industry-leading integrated supply chain solutions and parts supply
activities has more than offset the impact from the wind-down of
the KC-10 CLS Program which declined to $3.6
million in sales in the current quarter from $24.3 million in the prior year quarter.
Sales in Expeditionary Services increased $5.5 million or 22.5% from the prior year period
primarily reflecting the continued recovery in sales volumes for
our mobility products business.
"Our strategy of driving sales growth across all of our
connected businesses through our best-in-class aviation services is
on track," said David P. Storch,
Chairman and Chief Executive Officer of AAR CORP. Storch
continued, "Our differentiated capabilities provide us the basis to
continue on our existing growth trajectory as we progress through
our long-term transformation."
"We continued our success with another strong quarter of results
led by our parts supply and programs activities," said John M. Holmes, President and Chief Operating
Officer of AAR CORP. Holmes continued, "We expect this
momentum to continue as market demand for our services remains
strong and as we ramp-up on new contract awards including the DoS
INL/A Worldwide Aviation Support Services (INL/A WASS) program and
the USAF Landing Gear PBL program."
Consolidated gross profit margins increased to 17.0% in the
current quarter from 16.3% in the prior year quarter driven by
increased sales. Third quarter sales to commercial customers
represented 76.9% of consolidated sales, compared to 74.2% of
consolidated sales in the third quarter of last year. Sales
to government and defense customers represented 23.1% of
consolidated sales compared to 25.8% in the prior year's
quarter.
Selling, general and administrative expenses as a percentage of
sales were 11.7% for the quarter, compared to 10.6% last year.
During the quarter, we incurred approximately $1.1 million of severance costs in connection
with an early retirement program. In addition, we continued
to experience legal costs associated with the defense of our INL/A
WASS contract.
Net interest expense from continuing operations for the quarter
was $2.2 million compared to
$1.3 million last year. Also
during the quarter, the Company paid cash dividends of $2.5 million, or $0.075 per share, and repurchased 201,536 shares
at an average price of $38.99.
Average diluted share count for the quarter was 34.5 million
compared to 34.2 million in the third quarter last year.
As a result of winning the INL/A WASS contract and ramping up
our services during the transition period, we have repositioned our
key resources to focus on this program into our government-owned,
contractor-operated (GOCO) business and have decided to pursue the
sale of our COCO business. The COCO business has been
reported as discontinued operations for all periods
presented. We have recognized a goodwill impairment charge of
$9.8 million within discontinued
operations related to the COCO business.
Holmes continued, "Our decision to shift our focus and essential
resources to the GOCO business is designed to deliver superior
service to our government customers. This shift is also
important to delivering world class service to the DoS on the
recently commenced INL/A WASS program. We expect to be fully
operational on the INL/A WASS program in May at which point the
program will be a contributor to earnings."
Net debt at February 28, 2018 was
$172.3 million compared to
$159.1 million at February 28, 2017. During the quarter, we
entered into an accounts receivable financing program to provide
additional financial flexibility and availability. This
financing program is off-balance sheet with the receivables sold
eliminated from our balance sheet. We incurred $0.4 in one-time fees and expenses to establish
the financing program.
Cash flow from operating activities from continuing operations
was $50.3 million during the current
quarter compared to a use of cash of $18.3
million in the prior year quarter. The new accounts
receivable financing program contributed $52.3 million to the current quarter's operating
cash flows.
Storch continued, "We are affirming our guidance for fiscal 2019
which we previously announced at our Investor Day in January.
This guidance included sales in the range of $2.1 to $2.2
billion, diluted earnings per share from continuing
operations in the range of $2.50 to
$2.80, and adjusted EBITDA in the
range of $180 to $190 million."
Conference Call Information
AAR will hold its quarterly conference call at 3:45 p.m. CT on March 20,
2018. 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 46019253). The replay will be
available from 7:15 p.m. CT on
March 20, 2018, until 10:59 p.m. CT on March 27,
2018.
About AAR
AAR is a global aftermarket solutions company that employs more
than 5,500 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 mobility
systems; command and control centers in support of military and
humanitarian missions; and composite manufacturing operations.
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, 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 Income (In
millions except per share data - unaudited)
|
Three Months
Ended February
28,
|
|
Nine Months
Ended February
28,
|
|
|
2018
|
2017
|
|
2018
|
2017
|
|
|
|
|
|
|
Sales
|
$456.3
|
|
$407.2
|
|
$1,274.8
|
|
$1,140.3
|
|
Cost and
expenses:
|
|
|
|
|
|
|
|
|
Cost of
sales
|
378.7
|
|
340.7
|
|
1,064.9
|
|
954.8
|
|
Selling, general and
administrative
|
53.4
|
|
43.1
|
|
146.7
|
|
126.6
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
24.2
|
|
23.4
|
|
63.2
|
|
58.9
|
|
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
(2.2)
|
|
(1.3)
|
|
(5.7)
|
|
(3.7)
|
|
Other
expense
|
(0.5)
|
|
-
|
|
(0.5)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations before income tax expense
(benefit)
|
21.5
|
|
22.1
|
|
57.0
|
|
55.2
|
|
Income tax expense
(benefit)
|
(9.8)
|
|
7.7
|
|
1.4
|
|
19.5
|
|
Income from
continuing operations
|
31.3
|
|
14.4
|
|
55.6
|
|
35.7
|
|
Loss from
discontinued operations
|
(15.8)
|
|
(0.7)
|
|
(52.0)
|
|
(0.4)
|
|
Net
income
|
$15.5
|
|
$13.7
|
|
$3.6
|
|
$35.3
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
– basic:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$0.91
|
|
$0.43
|
|
$1.62
|
|
$1.05
|
|
Discontinued
operations
|
(0.46)
|
|
(0.02)
|
|
(1.52)
|
|
(0.01)
|
|
Earnings per share –
Basic
|
$0.45
|
|
$0.41
|
|
$0.10
|
|
$1.04
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
– diluted:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$0.90
|
|
$0.42
|
|
$1.60
|
|
$1.04
|
|
Discontinued
operations
|
(0.46)
|
|
(0.02)
|
|
(1.52)
|
|
(0.01)
|
|
Earnings per share –
Diluted
|
$0.44
|
|
$0.40
|
|
$0.08
|
|
$1.03
|
|
|
|
|
|
|
|
|
|
|
Share
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average shares
outstanding – Basic
|
34.0
|
|
33.7
|
|
34.1
|
|
33.9
|
|
Average shares
outstanding – Diluted
|
34.5
|
|
34.2
|
|
34.5
|
|
34.3
|
|
|
|
|
|
|
|
|
|
|
|
|
AAR CORP. and
Subsidiaries
|
|
|
|
Consolidated
Balance Sheet Highlights
(In millions
except per share data)
|
|
|
February
28, 2018
|
May
31, 2017
|
|
|
|
|
(Unaudited)
|
|
|
Cash and cash
equivalents
|
|
|
$
23.9
|
$10.3
|
|
Current
assets
|
|
|
933.6
|
888.4
|
|
Current
liabilities (excluding debt accounts)
|
|
|
326.5
|
334.9
|
|
Net property,
plant and equipment
|
|
|
135.3
|
117.2
|
|
Total
assets
|
|
|
1,512.2
|
1,504.1
|
|
Total
debt
|
|
|
196.2
|
156.2
|
|
Stockholders'
equity
|
|
|
915.2
|
914.2
|
|
Book value per
share
|
|
|
$26.45
|
$26.58
|
|
Shares
outstanding
|
|
|
34.6
|
34.4
|
|
|
|
|
|
Sales By Business
Segment
(In millions -
unaudited)
|
Three Months
Ended February
28,
|
Nine Months
Ended February
28,
|
|
|
2018
|
2017
|
2018
|
2017
|
|
Aviation
Services
|
$
426.4
|
$ 382.8
|
$
1,189.3
|
$ 1,064.1
|
|
Expeditionary
Services
|
29.9
|
24.4
|
85.5
|
76.2
|
|
|
$ 456.3
|
$
407.2
|
$ 1,274.8
|
$
1,140.3
|
|
|
|
|
|
Gross Profit by
Business Segment
(In millions -
unaudited)
|
Three Months
Ended February
28,
|
Nine Months
Ended February
28,
|
|
|
2018
|
2017
|
2018
|
2017
|
|
Aviation
Services
|
$
71.7
|
$ 63.2
|
$
195.5
|
$ 172.6
|
|
Expeditionary
Services
|
5.9
|
3.3
|
14.4
|
12.9
|
|
|
$ 77.6
|
$
66.5
|
$ 209.9
|
$
185.5
|
|
|
|
Adjusted income from continuing operations, adjusted diluted
earnings per share from continuing operations, 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 severance charges 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 other
items of an unusual nature including severance 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:
|
Net
Debt (In millions-
unaudited)
|
February 28,
2018
|
|
February 28,
2017
|
Total
debt
|
$196.2
|
|
$169.2
|
Less: Cash and
cash equivalents
|
(23.9)
|
|
(10.1)
|
Net
debt
|
$172.3
|
|
$159.1
|
|
|
Adjusted Income
from Continuing Operations (In millions - unaudited)
|
Three Months
Ended
February
28,
|
Nine Months
Ended
February
28,
|
|
2018
|
2017
|
2018
|
2017
|
Income from
continuing operations
|
$
31.3
|
$ 14.4
|
$
55.6
|
$35.7
|
Deferred tax
re-measurement from the Tax Cuts and Jobs Act
|
(13.0)
|
–
|
(13.0)
|
–
|
Impact of new
lower tax rate on first half pre-tax income
|
(1.8)
|
–
|
(1.8)
|
–
|
Early retirement
and severance charges, net of tax
|
0.8
|
(0.1)
|
1.3
|
0.4
|
Adjusted Income
from Continuing Operations
|
$ 17.3
|
$
14.3
|
$ 42.1
|
$
36.1
|
|
|
Adjusted Diluted
Earnings per Share from Continuing
Operations
(In millions -
unaudited)
|
Three Months
Ended
February
28,
|
Nine Months
Ended
February
28,
|
|
2018
|
2017
|
2018
|
2017
|
Diluted earnings
per share from continuing operations
|
$
0.90
|
$ 0.42
|
$
1.60
|
$1.04
|
Deferred tax
re-measurement from the Tax Cuts and Jobs Act
|
(0.38)
|
–
|
(0.38)
|
–
|
Impact of new
lower tax rate on first half pre-tax income
|
(0.05)
|
–
|
(0.05)
|
–
|
Early retirement
and severance charges, net of tax
|
0.02
|
–
|
0.04
|
0.01
|
Adjusted diluted
earnings per share from continuing operations
|
$ 0.49
|
$
0.42
|
$ 1.21
|
$
1.05
|
|
|
Adjusted
EBITDA (In millions -
unaudited)
|
Three Months
Ended
February
28,
|
Nine Months
Ended
February
28,
|
|
2018
|
2017
|
2018
|
2017
|
Net
income
|
$
15.5
|
$ 13.7
|
$
3.6
|
$ 35.3
|
Loss from
discontinued operations
|
15.8
|
0.7
|
52.0
|
0.4
|
Income tax expense
(benefit)
|
(9.8)
|
7.7
|
1.4
|
19.5
|
Other
expense
|
0.5
|
-
|
0.5
|
-
|
Interest expense,
net
|
2.2
|
1.3
|
5.7
|
3.7
|
Depreciation and
intangible amortization
|
10.6
|
9.1
|
31.4
|
26.2
|
Early retirement
and severance charges
|
1.1
|
0.1
|
1.9
|
0.6
|
Gain on asset
disposal
|
-
|
-
|
-
|
(2.6)
|
Stock-based
compensation
|
3.3
|
2.8
|
8.7
|
7.6
|
Adjusted
EBITDA
|
$ 39.2
|
$
35.4
|
$ 105.2
|
$
90.7
|
View original content with
multimedia:http://www.prnewswire.com/news-releases/aar-reports-third-quarter-fiscal-year-2018-results-300617072.html
SOURCE AAR CORP.