AAR Reports Third Quarter Fiscal Year 2018 Results
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
Sales in Expeditionary Services increased
"Our strategy of driving sales growth across all of our connected businesses through our best-in-class aviation services is on track," said
"We continued our success with another strong quarter of results led by our parts supply and programs activities," said
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
Net interest expense from continuing operations for the quarter was
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
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
Cash flow from operating activities from continuing operations was
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
Conference Call Information
AAR will hold its quarterly conference call at
About AAR
AAR is a global aftermarket solutions company that employs more than 5,500 people in over 20 countries. Based in
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 |
Three Months Ended |
Nine Months Ended |
||||||||
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, |
May 31, |
|||
(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 |
Nine Months Ended |
|||
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 |
Nine Months Ended |
|||
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 |
February 28, |
February 28, |
||
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 |
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 (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 |
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 |
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SOURCE
Jason Secore, Vice President, Treasurer | (630) 227-2075 | jason.secore@aarcorp.com