AAR Announces Fourth Quarter & Fiscal Year 2018 Results
- Fourth quarter sales of $474 million, up 5% from $451 million in Q4 FY2017
- Fourth quarter diluted earnings per share from continuing operations of $0.52 compared to $0.48 in Q4 FY2017; on an adjusted basis, $0.54 in Q4 FY2018 compared to $0.49 in Q4 FY2017
- Full year sales of $1.75 billion, up 10% from $1.59 billion in FY2017
- Full year diluted earnings per share from continuing operations of $2.11 compared to $1.51 in FY2017; on an adjusted basis, $1.79 in FY2018 compared to $1.53 in FY2017
WOOD DALE, Ill., July 10, 2018 /PRNewswire/ -- AAR CORP. (NYSE: AIR) today reported fourth quarter Fiscal Year 2018 consolidated sales of $473.5 million and income from continuing operations of $18.1 million, or $0.52 per diluted share. For the fourth quarter of the prior year, the Company reported sales of $450.5 million and income from continuing operations of $16.3 million, or $0.48 per diluted share. Our adjusted diluted earnings per share from continuing operations was $0.54 in the current quarter compared to $0.49 in the fourth quarter of the prior year.
Consolidated sales increased $23.0 million or 5.1% from the prior year period reflecting continued growth in Aviation Services from our industry-leading integrated supply chain solutions and parts supply activities. This growth was offset by the wind-down of the KC-10 CLS Program, which had $4.5 million in sales in the current quarter compared to $18.3 million in the prior year quarter.
"We are very pleased with the fourth quarter and full year results as well as the progress we made on our long-term strategic growth plan. We drove strong results across all of our businesses, captured multiple new long-term contract awards and made investments to further strengthen the AAR value proposition," said John M. Holmes, President and Chief Executive Officer of AAR CORP.
In June 2018, we successfully completed the transition and ramp-up of the INL/A Worldwide Aviation Support Services (WASS) program. We now have full operational capability at all WASS program locations which include Afghanistan, Iraq, Panama, Peru and Patrick Air Force Base as well as support locations in Brevard County, Florida. In the fourth quarter, WASS contributed $14.1 million of sales and July will be the first month at the full run rate.
Consolidated gross profit margins increased to 17.9% in the current quarter from 17.3% in the prior year quarter driven by strong Aviation Services sales volumes. Fourth quarter sales to commercial customers represented 74.1% of consolidated sales, compared to 76.2% of consolidated sales in the fourth quarter of last year. Sales to government and defense customers represented 25.9% of consolidated sales compared to 23.8% in the prior year's quarter.
Selling, general and administrative expenses as a percentage of sales were 13.1% for the quarter, compared to 12.1% last year. During the quarter, we incurred approximately $2.5 million of severance and other restructuring costs.
Net interest expense from continuing operations for the quarter was $2.2 million compared to $1.5 million last year. Also during the quarter, the Company paid cash dividends of $2.6 million, or $0.075 per share. Average diluted share count for the quarter was 34.6 million compared to 34.3 million in the fourth quarter last year. Cash flow from operating activities from continuing operations was $40.2 million in the current quarter which included an $8.9 million benefit from the accounts receivable financing program.
Fiscal Year 2018 Results
Full Fiscal Year 2018 consolidated sales were $1.75 billion, an increase of 10.1% over Fiscal Year 2017. Aviation Services sales grew by 9.0% as a result of continued strong growth in our parts supply activities and new contract awards for our integrated solutions operations supporting both commercial and government customers. Expeditionary Services sales increased 22.8% in Fiscal Year 2018 reflecting the ramp-up of the WASS program.
Full Fiscal Year 2018 income from continuing operations was $73.7 million, or $2.11 per diluted share. On an adjusted basis, Fiscal Year 2018 income from continuing operations was $62.7 million, or $1.79 per diluted share. In Fiscal Year 2017, income from continuing operations was $52.0 million, or $1.51 per share. On an adjusted basis, Fiscal Year 2017 income from continuing operations was $52.5 million, or $1.53 per diluted share.
Sales to commercial customers in Fiscal Year 2018 represented 75.5% of consolidated sales as compared to 72.4% in Fiscal Year 2017, with sales to government and defense customers representing the balance in each year.
Net interest expense for Fiscal Year 2018 was $7.9 million compared to $5.2 million last year. During the year, the Company paid cash dividends of $10.3 million, or $0.30 per share, and repurchased approximately 344,000 shares for $13.1 million.
Net debt at May 31, 2018 was $147.8 million compared to $145.9 million at May 31, 2017. Cash flow from operating activities from continuing operations was $55.8 million in the current year which included a $61.2 million benefit from the accounts receivable financing program.
Outlook
The Company is reaffirming Fiscal Year 2019 guidance of 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.
Holmes continued, "We enter Fiscal Year 2019 with strong momentum and we are focused on executing on our recent contract awards. The demand for our Aviation Services businesses remains very strong and we have a healthy pipeline of opportunities in both the government and commercial markets. For these reasons and as a result of the investments we made in Fiscal Year 2018, we are well positioned and I am excited about the year ahead."
Conference Call Information
AAR will hold its quarterly conference call at 3:45 p.m. CT on July 10, 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 2784894). The replay will be available from 7:15 p.m. CST on July 10, 2018, until 10:59 p.m. CST on July 17, 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 fleet management and operations of customer-owned aircraft; 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 Three Months Ended Twelve Months Ended
(In millions except
per share data -
unaudited) May 31, May 31,
-------------------
2018 2017 2018 2017
---- ---- ---- ----
Sales $473.5 $450.5 $1,748.3 $1,590.8
Cost and expenses:
Cost of sales 388.8 372.6 1,453.7 1,327.4
Selling, general and
administrative 61.9 54.5 208.6 181.1
Operating income 22.8 23.4 86.0 82.3
Interest expense, net (2.2) (1.5) (7.9) (5.2)
Other expense (0.4) - (0.9) -
Income from continuing
operations before
income tax expense 20.2 21.9 77.2 77.1
Income tax expense 2.1 5.6 3.5 25.1
--- --- --- ----
Income from continuing
operations 18.1 16.3 73.7 52.0
Income (Loss) from
discontinued
operations (6.1) 4.9 (58.1) 4.5
---- --- ----- ---
Net income $12.0 $21.2 $15.6 $56.5
===== ===== ===== =====
Earnings per share -
basic:
Continuing operations $0.53 $0.48 $2.14 $1.53
Discontinued
operations (0.18) 0.14 (1.70) 0.13
----- ---- ----- ----
Earnings per share -
Basic $0.35 $0.62 $0.44 $1.66
===== ===== ===== =====
Earnings per share -
diluted:
Continuing operations $0.52 $0.48 $2.11 $1.51
Discontinued
operations (0.18) 0.14 (1.70) 0.13
----- ---- ----- ----
Earnings per share -
Diluted $0.34 $0.62 $0.41 $1.64
===== ===== ===== =====
Share Data:
Average shares
outstanding - Basic 34.0 33.8 34.2 33.9
Average shares
outstanding - Diluted 34.6 34.3 34.6 34.3
AAR CORP. and Subsidiaries
Consolidated Balance Sheet Highlights May 31, May 31,
(In millions except per share data - unaudited) 2018 2017
---------------------------------------------- ---- ----
Cash and cash equivalents $31.1 $10.3
Current assets 942.7 888.4
Current liabilities (excluding debt accounts) 333.3 334.9
Property, plant and equipment, net 133.2 117.2
Total assets 1,524.7 1,504.1
Total debt 178.9 156.2
Stockholders' equity 936.3 914.2
Book value per share $26.98 $26.58
Shares outstanding 34.7 34.4
Sales By Business Three Months Twelve Months
Segment Ended Ended
(In millions -
unaudited) May 31, May 31,
-------------- ------- -------
2018 2017 2018 2017
---- ---- ---- ----
Aviation Services $429.6 $421.3 $1,618.9 $1,485.4
Expeditionary
Services 43.9 29.2 129.4 105.4
---- ---- ----- -----
$473.5 $450.5 $1,748.3 $1,590.8
====== ====== ======== ========
Gross Profit by Three Months Twelve Months
Business Segment Ended Ended
(In millions -
unaudited) May 31, May 31,
-------------- ------- -------
2018 2017 2018 2017
---- ---- ---- ----
Aviation Services $76.4 $73.4 $271.9 $246.0
Expeditionary
Services 8.3 4.5 22.7 17.4
--- --- ---- ----
$84.7 $77.9 $294.6 $263.4
===== ===== ====== ======
Adjusted income from continuing operations, adjusted diluted earnings per share from continuing operations, adjusted selling, general, and administrative expenses, 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 from continuing operations before interest expense, interest income, income taxes, 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 May 31, 2018 May 31, 2017
(In millions- unaudited)
-----------------------
Total debt $178.9 $156.2
Less: Cash and cash equivalents (31.1) (10.3)
----- -----
Net debt $147.8 $145.9
====== ======
Adjusted Income
from Continuing
Operations Three Months Ended Twelve Months Ended
(In millions -
unaudited) May 31, May 31,
-------------- ------- -------
2018 2017 2018 2017
---- ---- ---- ----
Income from
continuing
operations $18.1 $16.3 $73.7 $52.0
Deferred tax re-
measurement from
the Tax Cuts and
Jobs Act (1.1) - (14.1) -
Severance and
restructuring
charges, net of
tax 1.8 0.1 3.1 0.5
--- --- --- ---
Adjusted income
from continuing
operations $18.8 $16.4 $62.7 $52.5
===== ===== ===== =====
Adjusted Diluted
Earnings per
Share from
Continuing
Operations Three Months Ended Twelve Months Ended
(In millions -
unaudited) May 31, May 31,
-------------- ------- -------
2018 2017 2018 2017
---- ---- ---- ----
Diluted earnings
per share from
continuing
operations $0.52 $0.48 $2.11 $1.51
Deferred tax re-
measurement from
the Tax Cuts and
Jobs Act (0.03) - (0.41) -
Severance and
restructuring
charges, net of
tax 0.05 0.01 0.09 0.02
---- ---- ---- ----
Adjusted diluted
earnings per
share from
continuing
operations $0.54 $0.49 $1.79 $1.53
===== ===== ===== =====
Adjusted Selling,
General and
Administrative
Expenses Three Months Ended Twelve Months Ended
(In millions -
unaudited) May 31, May 31,
-------------- ------- -------
2018 2017 2018 2017
---- ---- ---- ----
Selling, general
and
administrative
expenses $61.9 $54.5 $208.6 $181.1
Severance and
restructuring
charges (2.5) (0.2) (4.4) (0.8)
Stock-based
compensation (6.6) (3.4) (15.3) (11.0)
---- ---- ----- -----
Adjusted selling,
general and
administrative
expenses $52.8 $50.9 $188.9 $169.3
===== ===== ====== ======
Adjusted EBITDA Three Months Ended Twelve Months Ended
(In millions -
unaudited) May 31, May 31,
-------------- ------- -------
2018 2017 2018 2017
---- ---- ---- ----
Net income $12.0 $21.2 $15.6 $56.5
(Income) Loss
from
discontinued
operations 6.1 (4.9) 58.1 (4.5)
Income tax
expense 2.1 5.6 3.5 25.1
Other expense 0.4 - 0.9 -
Interest expense,
net 2.2 1.5 7.9 5.2
Depreciation and
intangible
amortization 9.1 9.5 40.5 35.7
Severance and
restructuring
charges 2.6 0.2 4.5 0.8
Gain on asset
disposal - - - (2.6)
Stock-based
compensation 6.6 3.4 15.3 11.0
--- --- ---- ----
Adjusted EBITDA $41.1 $36.5 $146.3 $127.2
===== ===== ====== ======
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SOURCE AAR CORP.
