AAR CORP. (NYSE: AIR) today reported fourth quarter Fiscal Year
2020 consolidated sales of $416.5 million and a loss from
continuing operations of $15.0 million, or $0.43 per diluted
share. Fourth quarter results included pretax charges of
$27.9 million related to restructuring actions and exiting
underperforming product lines and contracts. For the fourth
quarter of the prior year, the Company reported sales of $562.7
million and income from continuing operations of $26.6 million, or
$0.76 per diluted share. Our adjusted diluted earnings per
share from continuing operations were $0.26 in the current quarter
compared to $0.68 in the fourth quarter of the prior year.
Consolidated fourth quarter sales decreased 26%
from the prior year period due to the impact of COVID-19 and the
unprecedented grounding of the world’s commercial fleet.
Sales were also impacted by $7.5 million from restructuring actions
related to our exit from certain commercial programs. Sales
to government and defense customers in the Aviation Services
segment continued to grow and were up 8% over the prior year
quarter. Sales to government and defense customers
represented 47% of our consolidated sales in the current quarter
compared to 35% in the prior year quarter.
In response to the historic reduction in
passenger travel resulting from COVID-19, we executed numerous
cost reduction actions to better align our expenses with revenue.
We also took several additional actions to improve our operating
efficiencies with a goal towards improving our margins for the long
term. These actions include facility consolidation, exit of
unprofitable product lines as well as exiting or
restructuring underperforming commercial programs contracts.
These actions resulted in predominantly non-cash impairment and
other charges of $27.9 million.
“Further in keeping with our long-term strategy
to focus on aviation services and subsequent to quarter close, we
entered into an agreement to sell our Composites manufacturing
business. We expect to recognize an impairment charge of
approximately $20 million in the first quarter of Fiscal Year 2021
in connection with the transaction. The sale, which we expect to
close in the first half of Fiscal Year 2021, will improve margins
as the Composites manufacturing business was unprofitable in Fiscal
Year 2020.
“As we entered our fourth quarter we were on
pace for a record sales year. However, our fourth quarter results
were significantly affected by the impact of COVID-19. We took
early action to mitigate this impact by reducing both our fixed and
variable cost structure. We also drove continued strong performance
in our government activities and placed an even greater emphasis on
the commercial cargo market,” said John M. Holmes, President and
Chief Executive Officer of AAR CORP.
During the fourth quarter, we announced a sole
source firm-fixed-price $125 million contract from the U.S. Air
Force to produce and repair 463L cargo pallets. This is a
five-year contract which will begin contributing to our results in
the first quarter of Fiscal Year 2021. We also announced the
formation of a joint venture with Sumitomo Corporation to provide
aviation aftermarket supply chain solutions to Japanese defense and
global commercial markets. This joint venture is an extension
of our successful, long-standing relationship with Sumitomo serving
as a distributor for OEM factory-new parts to Japanese defense
customers.
Subsequent to the fourth quarter, we announced
an extension and expansion of our exclusive worldwide aftermarket
distribution agreement with Unison Industries covering their
electrical components, sensors, and systems for aircraft and
industrial uses. This agreement is valued at more than $1
billion over the 11-year term and validates the robust value
proposition that our distribution team provides to OEMs in the
aviation aftermarket.
Also, on July 20, 2020, we announced that
certain of our subsidiaries expect to receive $57.2
million from the U.S. Treasury Department through the Payroll
Support Program under the Coronavirus Aid, Relief, and
Economic Security (CARES) Act. This support will enable us to
maintain our current skilled workforce in our U.S. airframe and
landing gear maintenance, repair and overhaul operations and allow
us to continue to provide exceptional service to our
customers.
Gross profit margin in the current quarter was 8.7% compared to
16.8% in the prior year quarter due primarily to the impact of
COVID-19 and our restructuring actions. Selling, general and
administrative expenses decreased by $16.0 million from $63.3
million to $47.3 million reflecting cost reduction actions.
Net interest expense for the quarter was $2.6 million compared
to $2.1 million in the prior year quarter as we maintained higher
cash reserves during the quarter. Cash flow used in operating
activities from continuing operations was $18.6 million during the
current quarter driven by timing of customer collections and vendor
payments.
Fiscal Year 2020 Results
Full Fiscal Year 2020 consolidated sales were
$2.07 billion, an increase of 1.0% over Fiscal Year 2019.
Aviation Services sales grew by 2.3% with successful execution of
recent contract awards in our government and defense activities
driving exceptional growth of 20.2% in these end markets which
was largely offset by the decrease in commercial airline volumes in
the fourth quarter due to COVID-19. Expeditionary Services
sales decreased 17.8% in Fiscal Year 2020 as delayed contract
awards, including the previously discussed cargo pallet contract at
our Mobility operation, significantly impacted results in Fiscal
Year 2020.
Full Fiscal Year 2020 income from continuing
operations was $24.8 million, or $0.71 per diluted share. In
Fiscal Year 2019, income from continuing operations was $84.1
million, or $2.40 per share. Our adjusted diluted earnings
per share from continuing operations was $2.15 in the current year
compared to $2.44 last year reflecting the significance of the
fourth quarter impact of COVID-19.
Sales to government and defense customers were
38% of consolidated sales compared to 33% in the prior year
reflecting growth from the WASS program and other government
programs. Sales to commercial customers represented 62% of
consolidated sales compared to 67% last year.
Net debt at May 31, 2020 was $197.3 million
compared to $121.6 million at May 31, 2019. Our net leverage was
1.3x at May 31, 2020 compared to 0.7x at May 31, 2019. Cash flow
from operating activities from continuing operations was a use of
cash of $19.1 million in Fiscal Year 2020 compared to cash provided
from operations of $60.5 million in Fiscal Year 2019. Our accounts
receivable financing program was a use of cash of $11.9 million in
Fiscal Year 2020 compared to a benefit of $14.5 million in the
prior year.
Holmes concluded, “During this time of
uncertainty in the commercial passenger airline industry, we are
experiencing growth in our government and defense activities and
are capitalizing on opportunities in the commercial cargo market.
Our balance sheet remains strong and we have taken numerous actions
to not only successfully navigate the current downturn but to
emerge as an even stronger Company with a better margin
profile.”
Outlook
Given the continued macro uncertainty from the
impact of COVID-19, we will not be providing financial guidance for
Fiscal Year 2021 at this time.
Conference Call
Information
AAR will hold its quarterly conference call at
3:45 p.m. CDT on July 21, 2020. The conference call can be accessed
by calling 833-983-1515 from inside the U.S. or +1-956-394-3030
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
+1-404-537-3406 from outside the U.S. (access code 9866865). The
replay will be available from 7:15 p.m. CT on July 21, 2020 until
10:59 p.m. CT on July 27, 2020.
About AAR
AAR is a global aerospace and defense
aftermarket solutions company with operations in over 20 countries.
Headquartered in the Chicago area, AAR supports commercial and
government customers through two operating segments: Aviation
Services and Expeditionary Services. AAR’s Aviation Services
include parts supply; OEM solutions; integrated solutions;
maintenance, repair, overhaul; and engineering. AAR’s Expeditionary
Services include mobility systems and composite manufacturing
operations. Additional information can be found at
www.aarcorp.com.
Contact: Dylan Wolin – Vice President,
Strategic & Corporate Development and Treasurer | (630)
227-2017 | dylan.wolin@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, including but not limited to, our actions to reduce
costs and improve operating efficiencies and their anticipated
impact on our results, the availability of potential aid to the
broader aviation industry, in particular our expectation to receive
$57.2 million in financial aid under the CARES Act, our ability to
maintain our current skilled workforce to continue to provide
exceptional service to our customers, our ability to mitigate the
impact of COVID-19, our ability to drive continued strong
performance in our government activities and place an even greater
emphasis on the commercial cargo market, the expectation that the
sale of the Composites manufacturing business will improve margins,
the expectation that the five-year U.S. Air Force contract to
produce and repair 463L cargo pallets will contribute to our
results in the first quarter of Fiscal Year 2021, the expectation
that the Sumitomo joint venture will extend our successful,
long-standing relationship with Sumitomo serving as a distributor
for OEM factory-new parts to Japanese defense customers, the
expectation that the Unison Industries agreement will be valued at
more than $1 billion over the 11-year term, the continued growth in
our government, and defense activities and capitalizing on
opportunities in the commercial cargo market, our ability to
successfully navigate the current downturn and emerge an even
stronger company with a better profit margin. Forward-looking
statements may also be identified because they contain words such
as ‘‘anticipate,’’ ‘‘believe,’’ ‘‘continue,’’ ‘‘could,’’
‘‘estimate,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘likely,’’ ‘‘may,’’
‘‘might,’’ ‘‘plan,’’ ‘‘potential,’’ ‘‘predict,’’ ‘‘project,’’
‘‘seek,’’ ‘‘should,’’ ‘‘target,’’ ‘‘will,’’ ‘‘would,’’ or similar
expressions and the negatives of those terms. 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, 2019, as well
as the risks presented by COVID-19, which are more particularly
described in the Company’s Form 10-Q for the fiscal quarter ended
February 29, 2020. 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 May 31, |
|
Twelve Months Ended May 31, |
|
|
2020 |
2019 |
|
|
|
2020 |
2019 |
|
|
|
|
|
Sales |
$ |
416.5 |
|
|
$ |
562.7 |
|
|
$ |
2,072.0 |
|
|
$ |
2,051.8 |
|
Cost and
expenses: |
|
|
|
|
|
|
|
Cost of
sales |
|
380.1 |
|
|
|
467.9 |
|
|
|
1,802.8 |
|
|
|
1,722.0 |
|
Provision for
doubtful accounts |
|
2.1 |
|
|
|
2.1 |
|
|
|
5.4 |
|
|
|
15.8 |
|
Selling, general
and administrative |
|
47.3 |
|
|
|
63.3 |
|
|
|
220.6 |
|
|
|
215.4 |
|
Loss from joint
ventures |
|
(1.9 |
) |
|
|
(0.1 |
) |
|
|
(1.9 |
) |
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
Operating income
(loss) |
|
(14.9 |
) |
|
|
29.3 |
|
|
|
41.3 |
|
|
|
98.3 |
|
|
|
|
|
|
|
|
|
Interest expense,
net |
|
(2.6 |
) |
|
|
(2.1 |
) |
|
|
(8.8 |
) |
|
|
(8.5 |
) |
Other expense,
net |
|
(1.5 |
) |
|
|
(0.4 |
) |
|
|
(2.1 |
) |
|
|
(0.8 |
) |
|
|
|
|
|
|
|
|
Income (Loss) from
continuing operations before income tax expense
(benefit) |
|
(19.0 |
) |
|
|
26.8 |
|
|
|
30.4 |
|
|
|
89.0 |
|
Income tax expense
(benefit) |
|
(4.0 |
) |
|
|
0.2 |
|
|
|
5.6 |
|
|
|
4.9 |
|
Income (Loss) from
continuing operations |
|
(15.0 |
) |
|
|
26.6 |
|
|
|
24.8 |
|
|
|
84.1 |
|
Loss from discontinued
operations |
|
(1.5 |
) |
|
|
(3.8 |
) |
|
|
(20.4 |
) |
|
|
(76.6 |
) |
Net income
(loss) |
$ |
(16.5 |
) |
|
$ |
22.8 |
|
|
$ |
4.4 |
|
|
$ |
7.5 |
|
|
|
|
|
|
|
|
|
Earnings (Loss) per share
– Basic: |
|
|
|
|
|
|
|
Earnings (Loss)
from continuing operations |
$ |
(0.43 |
) |
|
$ |
0.77 |
|
|
$ |
0.71 |
|
|
$ |
2.42 |
|
Loss from
discontinued operations |
|
(0.04 |
) |
|
|
(0.11 |
) |
|
|
(0.59 |
) |
|
|
(2.22 |
) |
Earnings (Loss)
per share – Basic |
$ |
(0.47 |
) |
|
$ |
0.66 |
|
|
$ |
0.12 |
|
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
Earnings (Loss) per share
– Diluted: |
|
|
|
|
|
|
|
Earnings (Loss)
from continuing operations |
$ |
(0.43 |
) |
|
$ |
0.76 |
|
|
$ |
0.71 |
|
|
$ |
2.40 |
|
Loss from
discontinued operations |
|
(0.04 |
) |
|
|
(0.11 |
) |
|
|
(0.58 |
) |
|
|
(2.19 |
) |
Earnings (Loss)
per share – Diluted |
$ |
(0.47 |
) |
|
$ |
0.65 |
|
|
$ |
0.13 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
Share Data: |
|
|
|
|
|
|
|
Weighted average shares
outstanding – Basic |
|
34.7 |
|
|
|
34.3 |
|
|
|
34.8 |
|
|
|
34.5 |
|
Weighted average shares
outstanding – Diluted |
|
34.7 |
|
|
|
34.6 |
|
|
|
35.0 |
|
|
|
34.9 |
|
|
|
AAR CORP. and Subsidiaries
Consolidated
Balance Sheets (In millions) |
May 31,2020 |
|
May 31,2019 |
|
(unaudited) |
|
|
ASSETS |
|
|
|
Cash and cash
equivalents |
$ |
404.7 |
|
$ |
21.3 |
Restricted
cash |
|
20.0 |
|
|
19.8 |
Accounts receivable,
net |
|
171.9 |
|
|
197.8 |
Contract
assets |
|
49.3 |
|
|
59.2 |
Inventories,
net |
|
623.1 |
|
|
523.7 |
Rotable assets and
equipment on or available for lease |
|
69.6 |
|
|
65.3 |
Assets of discontinued
operations |
|
22.9 |
|
|
29.2 |
Other current
assets |
|
77.2 |
|
|
36.2 |
Total current
assets |
|
1,438.7 |
|
|
952.5 |
Property, plant, and
equipment, net |
|
135.7 |
|
|
132.8 |
Operating lease
right-of-use assets, net |
|
89.7 |
|
|
–– |
Goodwill and intangible
assets, net |
|
121.7 |
|
|
138.4 |
Rotable assets supporting
long-term programs |
|
211.7 |
|
|
216.0 |
Other non-current
assets |
|
81.5 |
|
|
77.5 |
Total
assets |
$ |
2,079.0 |
|
$ |
1,517.2 |
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Accounts payable and
accrued liabilities |
$ |
353.2 |
|
$ |
328.3 |
Liabilities of
discontinued operations |
|
29.9 |
|
|
29.2 |
Total current
liabilities |
|
383.1 |
|
|
357.5 |
Long-term
debt |
|
600.0 |
|
|
141.7 |
Operating lease
liabilities |
|
70.9 |
|
|
–– |
Other liabilities and
deferred income |
|
122.4 |
|
|
112.1 |
Total
liabilities |
|
1,176.4 |
|
|
611.3 |
Equity |
|
902.6 |
|
|
905.9 |
Total liabilities
and equity |
$ |
2,079.0 |
|
$ |
1,517.2 |
|
|
|
|
|
|
|
|
|
|
|
|
AAR CORP. and Subsidiaries
Consolidated
Statements of Cash Flows (In millions –
unaudited) |
Three Months EndedMay 31, |
|
Twelve Months EndedMay 31, |
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
Cash flows provided from
(used in) operating activities: |
|
|
|
|
|
|
|
Net income
(loss) |
$ |
(16.5 |
) |
|
$ |
22.8 |
|
|
$ |
4.4 |
|
|
$ |
7.5 |
|
Loss from
discontinued operations |
|
1.5 |
|
|
|
3.8 |
|
|
|
20.4 |
|
|
|
76.6 |
|
Income (Loss) from
continuing operations |
|
(15.0 |
) |
|
|
26.6 |
|
|
|
24.8 |
|
|
|
84.1 |
|
Adjustments to
reconcile income (loss) from continuing operations to net
cash provided from (used in) operating
activities |
|
|
|
|
|
|
|
Depreciation and
intangible amortization |
|
10.9 |
|
|
|
11.5 |
|
|
|
43.7 |
|
|
|
42.8 |
|
Stock-based
compensation |
|
(3.0 |
) |
|
|
4.7 |
|
|
|
7.3 |
|
|
|
13.5 |
|
Customer contract
termination and restructuring costs |
|
6.6 |
|
|
|
–– |
|
|
|
31.3 |
|
|
|
–– |
|
Impairment
charges |
|
8.1 |
|
|
|
–– |
|
|
|
8.1 |
|
|
|
–– |
|
Provision for
doubtful accounts |
|
2.1 |
|
|
|
2.1 |
|
|
|
5.4 |
|
|
|
15.8 |
|
Changes in certain
assets and liabilities: |
|
|
|
|
|
|
|
Accounts
receivable |
|
49.4 |
|
|
|
38.9 |
|
|
|
14.8 |
|
|
|
(34.4 |
) |
Contract
assets |
|
15.3 |
|
|
|
(4.5 |
) |
|
|
9.9 |
|
|
|
(9.7 |
) |
Inventories |
|
3.5 |
|
|
|
(9.1 |
) |
|
|
(94.5 |
) |
|
|
(80.9 |
) |
Rotable assets
supporting long-term programs |
|
1.6 |
|
|
|
(11.0 |
) |
|
|
(22.1 |
) |
|
|
(49.2 |
) |
Accounts payable
and accrued liabilities |
|
(92.9 |
) |
|
|
(10.1 |
) |
|
|
4.6 |
|
|
|
40.4 |
|
Deferred revenue
on long-term programs |
|
(15.7 |
) |
|
|
(7.5 |
) |
|
|
(14.6 |
) |
|
|
44.4 |
|
Other |
|
10.5 |
|
|
|
2.5 |
|
|
|
(37.8 |
) |
|
|
(6.3 |
) |
Net cash provided
from (used in) operating activities – continuing
operations |
|
(18.6 |
) |
|
|
44.1 |
|
|
|
(19.1 |
) |
|
|
60.5 |
|
Net cash provided
from (used in) operating activities – discontinued
operations |
|
(8.6 |
) |
|
|
(1.2 |
) |
|
|
(17.0 |
) |
|
|
6.9 |
|
Net cash provided
from (used in) operating activities |
|
(27.2 |
) |
|
|
42.9 |
|
|
|
(36.1 |
) |
|
|
67.4 |
|
|
|
|
|
|
|
|
|
Cash flows used in
investing activities: |
|
|
|
|
|
|
|
Property, plant
and equipment expenditures |
|
(5.3 |
) |
|
|
(5.1 |
) |
|
|
(23.6 |
) |
|
|
(17.4 |
) |
Other |
|
0.5 |
|
|
|
(0.1 |
) |
|
|
(1.2 |
) |
|
|
(1.1 |
) |
Net cash used in
investing activities – continuing operations |
|
(4.8 |
) |
|
|
(5.2 |
) |
|
|
(24.8 |
) |
|
|
(18.5 |
) |
Net cash used in
investing activities – discontinued operations |
|
–– |
|
|
|
–– |
|
|
|
–– |
|
|
|
(0.5 |
) |
Net cash used in
investing activities |
|
(4.8 |
) |
|
|
(5.2 |
) |
|
|
(24.8 |
) |
|
|
(19.0 |
) |
|
|
|
|
|
|
|
|
Cash flows provided from
(used in) financing activities: |
|
|
|
|
|
|
|
Proceeds from
(repayments on) borrowings, net |
|
394.5 |
|
|
|
(35.0 |
) |
|
|
459.5 |
|
|
|
(35.0 |
) |
Cash
dividends |
|
(2.6 |
) |
|
|
(2.6 |
) |
|
|
(10.7 |
) |
|
|
(10.5 |
) |
Purchase of
treasury stock |
|
–– |
|
|
|
(9.5 |
) |
|
|
(4.1 |
) |
|
|
(10.3 |
) |
Other |
|
–– |
|
|
|
0.2 |
|
|
|
(0.2 |
) |
|
|
8.5 |
|
Net cash provided from
(used in) financing activities – continuing
operations |
|
391.9 |
|
|
|
(46.9 |
) |
|
|
444.5 |
|
|
|
(47.3 |
) |
Net cash used in
financing activities – discontinued operations |
|
–– |
|
|
|
–– |
|
|
|
–– |
|
|
|
(1.4 |
) |
Net cash provided from
(used in) financing activities |
|
391.9 |
|
|
|
(46.9 |
) |
|
|
444.5 |
|
|
|
(48.7 |
) |
Effect of exchange rate
changes on cash |
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
–– |
|
|
|
(0.2 |
) |
Increase (Decrease) in
cash and cash equivalents |
|
359.8 |
|
|
|
(9.3 |
) |
|
|
383.6 |
|
|
|
(0.5 |
) |
Cash, cash equivalents,
and restricted cash at beginning of period |
|
64.9 |
|
|
|
50.4 |
|
|
|
41.1 |
|
|
|
41.6 |
|
Cash, cash equivalents,
and restricted cash at end of period |
$ |
424.7 |
|
|
$ |
41.1 |
|
|
$ |
424.7 |
|
|
$ |
41.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAR CORP. and Subsidiaries
Sales By Business Segment(In millions -
unaudited) |
Three Months EndedMay 31, |
|
Twelve Months EndedMay 31, |
|
|
2020 |
|
2019 |
|
|
2020 |
|
2019 |
Aviation Services |
$ |
390.1 |
$ |
522.0 |
|
$ |
1,964.2 |
$ |
1,920.6 |
Expeditionary Services |
|
26.4 |
|
40.7 |
|
|
107.8 |
|
131.2 |
|
$ |
416.5 |
$ |
562.7 |
|
$ |
2,072.0 |
$ |
2,051.8 |
Gross Profit by Business Segment(In millions-
unaudited) |
Three Months EndedMay 31, |
|
Twelve Months EndedMay 31, |
|
|
2020 |
|
2019 |
|
|
2020 |
|
2019 |
Aviation Services |
$ |
36.4 |
$ |
89.6 |
|
$ |
267.3 |
$ |
313.6 |
Expeditionary Services |
|
–– |
|
5.1 |
|
|
1.9 |
|
16.2 |
|
$ |
36.4 |
$ |
94.7 |
|
$ |
269.2 |
$ |
329.8 |
Adjusted income from
continuing operations, adjusted diluted earnings per share from
continuing operations, adjusted selling, general, and
administrative expenses, adjusted cash used in operating activities
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 illustrate our actual
operating performance unaffected by the impact of certain
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. These non-GAAP measures should be considered as a
supplement to, and not as a substitute for, or superior to, the
corresponding measures calculated in accordance with GAAP.
Adjusted EBITDA is income from continuing operations before
interest income (expense), other income (expense), income taxes,
depreciation and amortization, stock-based compensation and other
items of an unusual nature including but not limited to workforce
actions and costs, impairment charges, facility consolidation and
repositioning costs, investigation and remediation compliance
costs, and significant customer events such as early terminations,
contract restructurings, and bankruptcies.
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:
Adjusted Income from Continuing Operations(In
millions - unaudited) |
Three Months EndedMay 31, |
|
Twelve Months EndedMay 31, |
|
|
2020 |
|
|
2019 |
|
|
|
2020 |
|
|
2019 |
|
Income from continuing operations |
$ |
(15.0 |
) |
$ |
26.6 |
|
|
$ |
24.8 |
|
$ |
84.1 |
|
Investigation and remediation compliance costs, net of
tax |
|
1.4 |
|
|
1.8 |
|
|
|
7.7 |
|
|
2.8 |
|
Customer contract termination and restructuring costs, net
of tax |
|
5.2 |
|
|
–– |
|
|
|
24.0 |
|
|
–– |
|
Impairment charges related to exited product lines, net of
tax |
|
8.7 |
|
|
–– |
|
|
|
8.7 |
|
|
–– |
|
Facility consolidation and repositioning costs, net of
tax |
|
3.9 |
|
|
0.7 |
|
|
|
3.9 |
|
|
0.7 |
|
Severance, furlough and pension settlement charges, net of
tax |
|
5.1 |
|
|
0.1 |
|
|
|
6.7 |
|
|
0.3 |
|
Customer bankruptcy charges, net of tax |
|
1.3 |
|
|
–– |
|
|
|
1.3 |
|
|
9.6 |
|
Government workforce subsidies |
|
(2.2 |
) |
|
–– |
|
|
|
(2.2 |
) |
|
–– |
|
State income tax benefit |
|
–– |
|
|
(5.1 |
) |
|
|
–– |
|
|
(5.1 |
) |
Recognition of previously reserved income tax
benefits |
|
–– |
|
|
–– |
|
|
|
–– |
|
|
(6.5 |
) |
Strategic financing evaluation costs, net of
tax |
|
0.3 |
|
|
–– |
|
|
|
0.3 |
|
|
–– |
|
Adjusted income from continuing operations |
$ |
8.7 |
|
$ |
24.1 |
|
|
$ |
75.2 |
|
$ |
85.9 |
|
Adjusted Diluted Earnings per Share from
Continuing Operations(In
millions - unaudited) |
Three Months EndedMay 31, |
|
Twelve
Months EndedMay
31, |
|
|
2020 |
|
|
2019 |
|
|
|
2020 |
|
|
2019 |
|
Diluted earnings (loss) per share from continuing
operations |
$ |
(0.43 |
) |
$ |
0.76 |
|
|
$ |
0.71 |
|
$ |
2.40 |
|
Investigation and remediation compliance costs, net of
tax |
|
0.04 |
|
|
0.04 |
|
|
|
0.22 |
|
|
0.08 |
|
Customer contract termination and restructuring costs, net
of tax |
|
0.15 |
|
|
–– |
|
|
|
0.68 |
|
|
–– |
|
Impairment charges related to exited product lines, net of
tax |
|
0.25 |
|
|
–– |
|
|
|
0.25 |
|
|
–– |
|
Facility consolidation and repositioning costs, net of
tax |
|
0.11 |
|
|
0.02 |
|
|
|
0.11 |
|
|
0.02 |
|
Severance, furlough and pension settlement charges, net of
tax |
|
0.15 |
|
|
0.01 |
|
|
|
0.19 |
|
|
0.01 |
|
Customer bankruptcy charges, net of tax |
|
0.04 |
|
|
–– |
|
|
|
0.04 |
|
|
0.27 |
|
Government workforce subsidies |
|
(0.06 |
) |
|
–– |
|
|
|
(0.06 |
) |
|
–– |
|
State income tax benefit |
|
–– |
|
|
(0.15 |
) |
|
|
–– |
|
|
(0.15 |
) |
Recognition of previously reserved income tax
benefits |
|
–– |
|
|
–– |
|
|
|
–– |
|
|
(0.19 |
) |
Strategic financing evaluation costs, net of
tax |
|
0.01 |
|
|
–– |
|
|
|
0.01 |
|
|
–– |
|
Adjusted diluted earnings per share from continuing
operations |
$ |
0.26 |
|
$ |
0.68 |
|
|
$ |
2.15 |
|
$ |
2.44 |
|
Adjusted Selling, General and Administrative
Expenses(In millions - unaudited) |
Three Months EndedMay 31, |
|
Twelve
Months EndedMay
31, |
|
|
2020 |
|
|
2019 |
|
|
|
2020 |
|
|
2019 |
|
Selling, general and administrative expenses |
$ |
47.3 |
|
$ |
63.3 |
|
|
$ |
220.6 |
|
$ |
215.4 |
|
Investigation and remediation compliance
costs |
|
(1.8 |
) |
|
(1.2 |
) |
|
|
(9.7 |
) |
|
(3.5 |
) |
Severance and furlough costs |
|
(2.4 |
) |
|
(0.1 |
) |
|
|
(4.6 |
) |
|
(0.2 |
) |
Government workforce subsidies |
|
0.8 |
|
|
–– |
|
|
|
0.8 |
|
|
–– |
|
Strategic financing evaluation costs |
|
(0.4 |
) |
|
–– |
|
|
|
(0.4 |
) |
|
–– |
|
Stock-based compensation |
|
3.0 |
|
|
(4.7 |
) |
|
|
(7.3 |
) |
|
(13.5 |
) |
Adjusted selling, general and administrative
expenses |
$ |
46.5 |
|
$ |
57.3 |
|
|
$ |
199.4 |
|
$ |
198.2 |
|
Adjusted Cash Provided by (Used in) Operating Activities
from Continuing Operations(In
millions - unaudited) |
Three Months EndedMay 31, |
|
Twelve
Months EndedMay
31, |
|
|
2020 |
|
|
2019 |
|
|
|
2020 |
|
|
2019 |
|
Cash provided by (used in) operating activities
from continuing operations |
$ |
(18.6 |
) |
$ |
44.1 |
|
|
$ |
(19.1 |
) |
$ |
60.5 |
|
Amounts outstanding on accounts receivable financing
program: |
|
|
|
|
|
Beginning of period |
|
85.6 |
|
|
99.5 |
|
|
|
86.2 |
|
|
71.7 |
|
End of period |
|
(74.3 |
) |
|
(86.2 |
) |
|
|
(74.3 |
) |
|
(86.2 |
) |
Adjusted cash provided by (used in) operating
activities from continuing
operations |
$ |
(7.3 |
) |
$ |
57.4 |
|
|
$ |
(7.2 |
) |
$ |
46.0 |
|
Adjusted EBITDA(In millions - unaudited) |
Three Months EndedMay 31, |
Twelve
Months EndedMay
31, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
Net income (loss) |
$ |
(16.5 |
) |
$ |
22.8 |
|
$ |
4.4 |
|
$ |
7.5 |
Loss from discontinued operations |
|
1.5 |
|
|
3.8 |
|
|
20.4 |
|
|
76.6 |
Income tax expense (benefit) |
|
(4.0 |
) |
|
0.2 |
|
|
5.6 |
|
|
4.9 |
Other expense, net |
|
1.5 |
|
|
0.4 |
|
|
2.1 |
|
|
0.8 |
Interest expense, net |
|
2.6 |
|
|
2.1 |
|
|
8.8 |
|
|
8.5 |
Depreciation and intangible amortization |
|
10.9 |
|
|
11.5 |
|
|
43.7 |
|
|
42.8 |
Investigation and remediation costs |
|
1.8 |
|
|
1.2 |
|
|
10.1 |
|
|
3.5 |
Customer contract termination and restructuring
costs |
|
6.6 |
|
|
–– |
|
|
31.3 |
|
|
–– |
Impairment charges related to exited product
lines |
|
11.0 |
|
|
–– |
|
|
11.0 |
|
|
–– |
Facility consolidation and repositioning
costs |
|
4.9 |
|
|
0.9 |
|
|
4.9 |
|
|
0.9 |
Severance and furlough costs |
|
5.0 |
|
|
0.1 |
|
|
7.1 |
|
|
0.2 |
Customer bankruptcy charges |
|
1.6 |
|
|
–– |
|
|
1.6 |
|
|
12.4 |
Government workforce subsidies |
|
(2.8 |
) |
|
–– |
|
|
(2.8 |
) |
|
–– |
Strategic financing evaluation costs |
|
0.4 |
|
|
–– |
|
|
0.4 |
|
|
–– |
Stock-based compensation |
|
(3.0 |
) |
|
4.7 |
|
|
7.3 |
|
|
13.5 |
Adjusted EBITDA |
$ |
21.5 |
|
$ |
47.7 |
|
$ |
155.9 |
|
$ |
171.6 |
Net Debt(In millions- unaudited) |
May 31, 2020 |
|
May 31, 2019 |
Total debt |
$ |
602.0 |
|
|
$ |
142.9 |
|
Less: Cash and cash
equivalents |
|
(404.7 |
) |
|
|
(21.3 |
) |
Net debt |
$ |
197.3 |
|
|
$ |
121.6 |
|
Net Debt to Adjusted EBITDA(In millions -
unaudited) |
May 31, 2020 |
|
May 31, 2019 |
Adjusted EBITDA for the twelve months ended |
$ |
155.9 |
|
|
$ |
171.6 |
|
Net debt at period end |
|
197.3 |
|
|
|
121.6 |
|
Net debt to Adjusted EBITDA |
|
1.27 |
|
|
|
0.71 |
|
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