AAR CORP. WOOD DALE, Ill., March 30, 2015 /PRNewswire/ -- 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 2015 income 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.
About AAR
AAR is a global aerospace and defense company that employs more than 5,000 people in over 20 countries. Based in Wood Dale, Illinois, AAR supports commercial, government and defense 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 airlift operations; mobility systems; and command and control centers in support of military and humanitarian missions. More 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, 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.
--------------------------------------
AAR CORP. and Subsidiaries
Consolidated Statements of
Income Three Months Ended Nine Months Ended
(In millions except per share
data -unaudited)
February 28, February 28,
---
2015 2014 2015 2014
---- ---- ---- ----
Sales $380.1 $399.8 $1,178.5 $1,288.5
Cost and expenses:
Cost of sales 330.0 333.6 998.8 1,073.1
Selling, general and
administrative 41.7 37.7 120.3 120.3
Earnings from aircraft joint
ventures 0.6 0.6 1.8 2.5
--- --- --- ---
Operating income 9.0 29.1 61.2 97.6
Interest expense 6.4 7.1 19.4 21.9
Interest income - 0.3 0.2 0.9
--- --- --- ---
Income from continuing
operations before income tax
expense 2.6 22.3 42.0 76.6
Income tax expense 0.7 5.4 14.4 24.3
--- --- ---- ----
Income from continuing
operations attributable to
AAR 1.9 16.9 27.6 52.3
Income (Loss) from
discontinued operations
attributable to AAR (36.4) 1.0 (32.5) 3.5
----- --- ----- ---
Net income attributable to
AAR ($34.5) $17.9 ($4.9) $55.8
====== ===== ===== =====
Earnings per share - Basic ($0.89) $0.45 ($0.14) $1.41
====== ===== ====== =====
Earnings per share - Diluted ($0.89) $0.45 ($0.15) $1.40
====== ===== ====== =====
Share Data:
Average shares outstanding -
Basic 38.7 38.6 38.7 38.6
Average shares outstanding -
Diluted 39.2 39.1 39.2 39.1
AAR CORP. and Subsidiaries
--------------------------
Consolidated Balance Sheet Highlights February 28, 2015 May 31, 2014
(In millions except per share data)
----------------------------------
Cash and cash equivalents $67.0 $89.2
Current assets 1,494.9 1,116.9
Current liabilities (excluding debt accounts) 346.9 332.4
Net property, plant and equipment 247.4 314.9
Total assets 2,133.8 2,199.5
Total debt 643.3 634.0
Stockholders' equity 941.8 1,000.7
Book value per share $23.66 $25.27
Shares outstanding 39.8 39.6
Sales By Business
Segment Three Months Ended Nine Months Ended
(In millions -
unaudited) February 28, February 28,
-------------- ------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Aviation Services $318.4 $289.7 $955.9 $923.5
Expeditionary
Services 61.7 110.1 222.6 365.0
---- ----- ----- -----
$380.1 $399.8 $1,178.5 $1,288.5
====== ====== ======== ========
Three Months Ended
February 28,
Gross Profit by Business Segment Nine Months Ended
(In millions - unaudited) February 28,
------------------------ ------------------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Aviation Services $50.7 $38.3 $152.8 $125.5
Expeditionary
Services (0.6) 27.9 26.9 89.9
---- ---- ---- ----
$50.1 $66.2 $179.7 $215.4
===== ===== ====== ======
Diluted Earnings Per Three Months Ended
Share Calculation February 28, Nine Months Ended
(In millions except per share data -
unaudited) February 28,
------------------------------------ ------------------------------------ ------------
2015 2014 2015 2014
---- ---- ---- ----
Net income
attributable to
continuing
operations $1.9 $16.9 $27.6 $52.3
Less: Income
attributable to
participating shares (0.1) (0.4) (0.6) (1.2)
---- ---- ---- ----
Income from continuing
operations attributable to
common shareholders
1.8 16.5 27.0 51.1
Income (Loss) from
discontinuing operations
attributable to common
shareholders
(36.4) 1.0 (32.5) 3.5
===== === ===== ===
Net income for
diluted EPS
calculation ($34.6) $17.5 ($5.5) $54.6
====== ===== ===== =====
Diluted shares
outstanding 39.2 39.1 39.2 39.1
Diluted earnings per
share ($0.89) $0.45 ($0.15) $1.40
====== ===== ====== =====
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SOURCE AAR CORP.
