AAR REPORTS THIRD QUARTER FISCAL YEAR 2015 RESULTS
March 30, 2015
Commences $325 million 7.25% High Yield Note redemption after close of Telair Cargo Group sale
Completes amendment of $500 million revolving credit facility
WOOD DALE, ILLINOIS (March 30, 2015) — AAR (NYSE: AIR) today reported third quarter fiscal year 2015 consolidated sales of $380.1 million and net loss of $34.5 million or $0.89 per diluted share after discontinuing operations of Telair Cargo Group and Precision Systems Manufacturing. For the third quarter of the prior fiscal year, the Company reported sales of $399.8 million and net income of $17.9 million or $0.45 per diluted share.
Third quarter fiscal year 2015income from continuing operations was $1.9 million, or $0.05 per diluted share, compared to $16.9 million net income, or $0.43 per diluted share in the prior year period.
Third quarter results included a $46.4 million pre-tax impairment charge for the write down of the Precision Systems Manufacturing business to the expected sales value, a $4.7 million pre-tax impairment charge to reduce the carrying value of aircraft for sale by the Company’s airlift business, and $2.5 million of severance due to downsizing and costs related to a large government proposal.
“In the Aviation Services segment, we continue to have very strong results as we experienced sales growth of nearly 10.0% and profitability growth of over 30.0%,” said David P. Storch, Chairman and Chief Executive Officer of AAR CORP. “In the Expeditionary Services segment, the slower pace of replacing flying positions after the drawdown in Afghanistan had a more negative financial impact on our airlift business than we anticipated and, although we are encouraged by recent contract wins with the UK Ministry of Defense and the UN, as well as overall proposal activity, the transition back to acceptable returns will take longer than expected to materialize.”
Sales in the Aviation Services segment increased 9.9% to $318.4 million partially due to growth in new distribution programs, and sales in Expeditionary Services were $61.7 million, a decline of 44.0% in comparison to the prior period quarter sales of $110.1 million due to the decline at airlift.
Third quarter sales to commercial customers represented 64.6% of consolidated sales, compared to 57.1% of consolidated sales in the third quarter of last year, while sales to government and defense customers represented the balance.
Consolidated gross profit margin was 13.2% for the third quarter compared to 16.6% last year. Aviation Services segment gross profit margin was 15.9%, up from 13.2% in the prior year period as we benefited from scale, and Expeditionary Services gross profit margin of negative 1.0% was down from 25.3% in the prior year period due to results from airlift operations.
In the third quarter, the Company used $22.0 million in cash flow from operations as it continues to invest in assets to support the growth of its Aviation Services segment. Further, AAR had capital expenditures of $6.6 million, $5.4 million of which is for continuing operations. The Company paid cash dividends of $3.0 million in the quarter. Net interest expense for the quarter from continuing operations was $6.4 million compared to $6.8 million in the third quarter of last year.
Storch concluded, “With the close of the Telair Cargo Group sale and our plan to sell Precision Systems Manufacturing, we will use our fortified capital base to grow our remaining industry-leading businesses and return capital to shareholders. AAR is executing on the commitments we made at the beginning of the year, and I am continuing to task our leadership team to analyze all of their product lines, programs and investments to maximize returns.”
Conference Call Information
AAR will hold its quarterly conference call at 10:30 a.m. CST on March 30, 2015. 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 888-266-2081 from inside the U.S. or 703-925-2533 from outside the U.S. (access code 1623126). The replay will be available from 8:15 p.m. CST on March 30, 2015, until 11:59 p.m. CST on April 07, 2015.
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; and Maintenance, Repair and Overhaul (MRO) Services. AAR’s Expeditionary Services include Mobility Systems operations. Additional information can be found at www.aarcorp.com.
Media contact: Daniela Pietsch, Vice President Corporate Marketing & Communications, at firstname.lastname@example.org or +1 630-227-5100.
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,statements regarding the agreement to establish The Module Factory,AAR’s estimate that it will manage the teardown, repair, marketing and sales of spare parts of FTAI’s CFM56 engine pool totaling over 200 engines and growing, AAR’s ability to leverage its extensive USM capabilities to offer CFM56 serviceable engine material to the global commercial aviation aftermarket, that the partnership positions AAR well to service the growing demand for USM on a leading engine platform as customers increasingly prioritize more cost-efficient solutions, and the belief that serviceable engine products, combined with FTAI’s proprietary products and partnerships, completes its unique suite of CFM56 aftermarket offerings aimed at delivering the lowest cost per cycle solution to airline customers. 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, 2014. 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.