- First quarter sales of
$401 million , down 26% from the prior year reflecting the impact of COVID-19 - First quarter GAAP diluted loss per share from continuing operations of
$(0.40) - Adjusted diluted earnings per share from continuing operations of
$0.17 , which exclude the impact of the Composites sale and other items
Consolidated first quarter sales decreased 26% from the prior year quarter. Our consolidated sales to commercial customers decreased 48% from the prior year quarter due to the continued impact of COVID-19. Our consolidated sales to government customers increased 10% as a result of strong performance on existing government program contracts as well as shipments against the recently awarded
Sales to government and defense customers were 56% of consolidated sales compared to 38% in the prior year’s quarter reflecting growth from recent government contract awards and the continued impact of COVID-19 on commercial volumes.
“Over the last three quarters, we have taken multiple actions to execute on our strategic plan to focus and improve on our core aviation services offering. We have divested certain non-core businesses, consolidated our facility footprint, and exited or restructured several underperforming contracts. We have also taken steps to permanently reduce our fixed and variable costs. We believe all of these actions have positioned us for improved operating margins as demand recovers in the commercial aviation business,” said
Gross profit margins decreased to 12.1% in the current quarter from 15.1% in the prior year quarter due primarily to the reduced commercial volumes. Expeditionary Services profitability increased significantly to 10.8% from 5.4% as execution on the
During the quarter, we were awarded a new three-year contract from the
Selling, general and administrative expenses decreased to
Net interest expense for the quarter was
Cash flow provided by operating activities from continuing operations was
Holmes concluded, “While the environment for the airline industry remains uncertain, we are focused on managing working capital and are pleased with our ability to generate positive cash flow in the quarter. We were also able to make certain investments to support our long-term growth. We are encouraged by the stability we have recently seen in our commercial business and the continued growth in our government business. Additionally, as the commercial aviation market recovers, we expect airlines will be even more focused on cost savings, which aligns with our lower cost services offering. Our strong industry position and our financial strength allow us to benefit from these opportunities and deliver for our customers.”
Conference Call Information
AAR will hold its quarterly conference call at
About AAR
AAR is a global aerospace and defense aftermarket solutions company with operations in over 20 countries. Headquartered in the
Contact:
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, which reflect management’s expectations about future conditions, including but not limited to, (i) the continued strong performance on existing government program contracts, as well as shipments against the recently awarded 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,depending on a variety of factors, including: (i) factors that adversely affect the commercial aviation industry; (ii) the impact of the COVID-19 pandemic on air travel, worldwide commercial activity and our and our customers’ ability to source parts and components; (iii) a reduction in the level of sales to the branches, agencies and departments of the For a discussion of these and other risks and uncertainties, refer to “Risk Factors” in our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. 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. |
Consolidated Statements of Operations (In millions except per share data - unaudited) | Three Months Ended | |||||||
2020 | 2019 | |||||||
Sales | $400.8 | |||||||
Cost and expenses: | ||||||||
Cost of sales | 352.2 | 459.9 | ||||||
Provision for doubtful accounts | –– | 0.7 | ||||||
Selling, general and administrative | 45.3 | 58.1 | ||||||
Loss from joint ventures | (0.1 | ) | –– | |||||
Operating income | 3.2 | 22.8 | ||||||
Loss on sale of business | (19.5 | ) | –– | |||||
Interest expense, net | (1.6 | ) | (2.1 | ) | ||||
Other income (expense), net | 0.2 | (0.2 | ) | |||||
Income (Loss) from continuing operations before income taxes | (17.7 | ) | 20.5 | |||||
Income tax expense (benefit) | (3.8 | ) | 3.4 | |||||
Income (Loss) from continuing operations | (13.9 | ) | 17.1 | |||||
Loss from discontinued operations | (0.6 | ) | (12.7 | ) | ||||
Net income (loss) | $(14.5 | ) | ||||||
Earnings (Loss) per share – Basic | ||||||||
Earnings (Loss) from continuing operations | $(0.40 | ) | ||||||
Earnings (Loss) from discontinued operations | (0.02 | ) | (0.37 | ) | ||||
Earnings (Loss) per share – Basic | $(0.42 | ) | ||||||
Earnings (Loss) per share – Diluted | ||||||||
Earnings (Loss) from continuing operations | $(0.40 | ) | ||||||
Earnings (Loss) from discontinued operations | (0.02 | ) | (0.36 | ) | ||||
Earnings (Loss) per share – Diluted | $(0.42 | ) | ||||||
Share Data: | ||||||||
Weighted average shares outstanding – Basic | 34.9 | 34.7 | ||||||
Weighted average shares outstanding – Diluted | 35.0 | 35.0 | ||||||
Consolidated Balance Sheets (In millions) | 2020 | 2020 | ||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ 107.7 | |||||||
Restricted cash | 6.4 | 20.0 | ||||||
Accounts receivable, net | 166.7 | 171.9 | ||||||
Contract assets | 45.2 | 49.3 | ||||||
Inventories, net | 597.7 | 623.1 | ||||||
Rotable assets and equipment on or available for lease | 66.9 | 69.6 | ||||||
Assets of discontinued operations | 22.0 | 22.9 | ||||||
Other current assets | 61.6 | 77.2 | ||||||
Total current assets | 1,074.2 | 1,438.7 | ||||||
Property, plant, and equipment, net | 127.0 | 135.7 | ||||||
Operating lease right-of-use assets, net | 85.8 | 89.7 | ||||||
123.1 | 121.7 | |||||||
Rotable assets supporting long-term programs | 201.9 | 211.7 | ||||||
Other non-current assets | 101.8 | 81.5 | ||||||
Total assets | $ 1,713.8 | |||||||
LIABILITIES AND EQUITY | ||||||||
Accounts payable and accrued liabilities | $ 365.6 | |||||||
Liabilities of discontinued operations | 28.7 | 29.9 | ||||||
Total current liabilities | 394.3 | 383.1 | ||||||
Long-term debt | 255.1 | 600.0 | ||||||
Operating lease liabilities | 68.0 | 70.9 | ||||||
Other liabilities and deferred income | 105.8 | 122.4 | ||||||
Total liabilities | 823.2 | 1,176.4 | ||||||
Equity | 890.6 | 902.6 | ||||||
Total liabilities and equity | $ 1,713.8 | |||||||
Consolidated Statements of Cash Flows (In millions – unaudited) | Three Months Ended | |||||||
2020 | 2019 | |||||||
Cash flows provided by (used in) operating activities: | ||||||||
Net income (loss) | $ (14.5 | ) | ||||||
Less: Loss from discontinued operations | 0.6 | 12.7 | ||||||
Income (Loss) from continuing operations | (13.9 | ) | 17.1 | |||||
Adjustments to reconcile income from continuing operations to net cash used in operating activities | ||||||||
Depreciation and intangible amortization | 9.0 | 10.8 | ||||||
Stock-based compensation | 2.7 | 4.3 | ||||||
Provision for doubtful accounts | –– | 0.7 | ||||||
Loss on sale of business | 19.5 | –– | ||||||
Customer contract termination costs | 2.2 | –– | ||||||
Impairment charges | 5.8 | –– | ||||||
Changes in certain assets and liabilities: | ||||||||
Accounts receivable | 2.7 | (0.6 | ) | |||||
Inventories | 18.8 | (30.0 | ) | |||||
Rotable assets supporting long-term programs | 1.0 | (13.8 | ) | |||||
Accounts payable and accrued liabilities | (25.1 | ) | 5.0 | |||||
Payroll Support Program deferred credit | 40.8 | –– | ||||||
Deferred revenue on long-term programs | (17.9 | ) | (16.2 | ) | ||||
Other | (5.8 | ) | (7.4 | ) | ||||
Net cash provided by (used in) operating activities – continuing operations | 39.8 | (30.1 | ) | |||||
Net cash used in operating activities – discontinued operations | (0.9 | ) | (2.3 | ) | ||||
Net cash provided by (used in) operating activities | 38.9 | (32.4 | ) | |||||
Cash flows used in investing activities: | ||||||||
Property, plant and equipment expenditures | (3.3 | ) | (4.5 | ) | ||||
Other | 1.6 | 1.0 | ||||||
Net cash used in investing activities – continuing operations | (1.7 | ) | (3.5 | ) | ||||
Cash flows provided from (used in) financing activities: | ||||||||
Proceeds (Repayments) from borrowings, net | (346.3 | ) | 60.0 | |||||
Cash dividends | (0.1 | ) | (2.9 | ) | ||||
Other | (1.5 | ) | (4.3 | ) | ||||
Net cash provided from (used in) financing activities – continuing operations | (347.9 | ) | 52.8 | |||||
Effect of exchange rate changes on cash | 0.1 | –– | ||||||
Increase (Decrease) in cash and cash equivalents | (310.6 | ) | 16.9 | |||||
Cash, cash equivalents, and restricted cash at beginning of period | 424.7 | 41.1 | ||||||
Cash, cash equivalents, and restricted cash at end of period | $ 114.1 | |||||||
Sales By Business Segment (In millions - unaudited) | Three Months Ended | |||||||
2020 | 2019 | |||||||
Aviation Services | $363.6 | $511.8 | ||||||
Expeditionary Services | 37.2 | 29.7 | ||||||
$400.8 | $541.5 |
Gross Profit by Business Segment (In millions- unaudited) | Three Months Ended | |||||||
2020 | 2019 | |||||||
Aviation Services | $44.6 | $80.0 | ||||||
Expeditionary Services | 4.0 | 1.6 | ||||||
$48.6 | $81.6 | |||||||
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 business divestitures, workforce actions, subsidies 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 (a) (In millions - unaudited) | Three Months Ended | |||||||
2020 | 2019 | |||||||
Income (Loss) from continuing operations | $(13.9 | ) | ||||||
Investigation and remediation compliance costs | 1.0 | 2.4 | ||||||
Loss on sale of business | 14.8 | –– | ||||||
Rotable asset impairment charges | 4.4 | –– | ||||||
Customer contract termination costs | 1.8 | –– | ||||||
Customer bankruptcy charges | 0.1 | –– | ||||||
Government workforce subsidies | (8.4 | ) | –– | |||||
Facility consolidation and repositioning costs | 1.5 | –– | ||||||
Severance and furlough costs | 4.5 | 0.5 | ||||||
Strategic financing evaluation costs | 0.2 | –– | ||||||
Adjusted income from continuing operations | $6.0 |
(a) All adjustments are presented net of applicable income taxes.
Adjusted Diluted Earnings per Share from Continuing Operations (a) (In millions - unaudited) | Three Months Ended | |||||||
2020 | 2019 | |||||||
Diluted earnings (loss) per share from continuing operations | $(0.40 | ) | ||||||
Investigation and remediation compliance costs | 0.03 | 0.07 | ||||||
Loss on sale of business | 0.42 | –– | ||||||
Rotable asset impairment charges | 0.13 | –– | ||||||
Customer contract termination costs | 0.05 | –– | ||||||
Government workforce subsidies | (0.24 | ) | –– | |||||
Facility consolidation and repositioning costs | 0.04 | –– | ||||||
Severance and furlough costs | 0.13 | 0.01 | ||||||
Strategic financing evaluation costs | 0.01 | –– | ||||||
Adjusted diluted earnings per share from continuing operations | $0.17 |
(a) All adjustments are presented net of applicable income taxes.
Adjusted Selling, General and Administrative Expenses (In millions - unaudited) | Three Months Ended | |||||||
2020 | 2019 | |||||||
Selling, general and administrative expenses | $45.3 | |||||||
Investigation and remediation compliance costs | (1.3 | ) | (2.8 | ) | ||||
Severance and furlough costs | (2.3 | ) | (0.8 | ) | ||||
Government workforce subsidies | 1.0 | –– | ||||||
Strategic financing evaluation costs | (0.3 | ) | –– | |||||
Stock-based compensation | (2.7 | ) | (4.3 | ) | ||||
Adjusted selling, general and administrative expenses | $39.7 |
Adjusted Cash Provided By (Used in) Operating Activities From Continuing Operations (In millions - unaudited) | Three Months Ended | |||||||
2020 | 2019 | |||||||
Cash provided by (used in) operating activities from continuing operations | $39.8 | $(30.1 | ) | |||||
Amounts outstanding on accounts receivable financing program: | ||||||||
Beginning of period | 74.3 | 86.2 | ||||||
End of period | (55.7 | ) | (86.2 | ) | ||||
Adjusted cash provided by (used in) operating activities from continuing operations | $58.4 | $(30.1 | ) |
Adjusted EBITDA (In millions - unaudited) | Three Months Ended | |||||||
2020 | 2019 | |||||||
Net income (loss) | $ (14.5 | ) | ||||||
Loss from discontinued operations | 0.6 | 12.7 | ||||||
Income tax expense (benefit) | (3.8 | ) | 3.4 | |||||
Other (income) expense, net | (0.2 | ) | 0.2 | |||||
Interest expense, net | 1.6 | 2.1 | ||||||
Depreciation and intangible amortization | 9.0 | 10.8 | ||||||
Investigation and remediation compliance costs | 1.3 | 3.1 | ||||||
Loss on sale of business | 19.5 | –– | ||||||
Rotable asset impairment charges | 5.8 | –– | ||||||
Customer contract termination costs | 2.2 | –– | ||||||
Customer bankruptcy charges | 0.2 | –– | ||||||
Government workforce subsidies | (11.1 | ) | –– | |||||
Facility consolidation and repositioning costs | 2.0 | –– | ||||||
Severance and furlough costs | 6.0 | 0.7 | ||||||
Strategic financing evaluation costs | 0.3 | –– | ||||||
Stock-based compensation | 2.7 | 4.3 | ||||||
Adjusted EBITDA | $21.6 |
Net Debt (In millions- unaudited) | 2020 | 2020 | ||||||
Total debt | $257.0 | |||||||
Less: Cash and cash equivalents | (107.7 | ) | (404.7 | ) | ||||
Net debt | $149.3 |
Net Debt to Adjusted EBITDA (In millions - unaudited) | ||||||||
Adjusted EBITDA for the year ended | $ 155.9 | |||||||
Less: Adjusted EBITDA for the three months ended | (41.7 | ) | ||||||
Plus: Adjusted EBITDA for the three months ended | 21.6 | |||||||
Adjusted EBITDA for the twelve months ended | 135.8 | |||||||
Net debt at | $ 149.3 | |||||||
Net debt to Adjusted EBITDA | 1.10 |
Source:
2020 GlobeNewswire, Inc., source