- Record fourth quarter sales of $657
million, up 19% over the prior year
- Fourth quarter GAAP diluted earnings per share from continuing
operations of $0.26, compared to
$0.66 in Q4 FY2023
- Record fourth quarter adjusted diluted earnings per share from
continuing operations of $0.88, up 6%
from $0.83 in Q4 FY2023
- Fourth quarter cash flow provided by operating activities from
continuing operations of $25
million
- Record full year sales of $2.3
billion, up 17% over the prior year
- Full year GAAP diluted earnings per share from continuing
operations of $1.29, compared to
$2.52 in FY2023; record adjusted
earnings of $3.33 in FY2024, up 16%
from $2.86 in FY2023
WOOD
DALE, Ill., July 18,
2024 /PRNewswire/ -- AAR CORP. (NYSE: AIR), a
leading provider of aviation services to commercial and government
operators, MROs, and OEMs, today reported fourth quarter
fiscal year 2024 consolidated sales of $656.5 million and income from continuing
operations of $9.1 million, or
$0.26 per diluted share. For the
fourth quarter of the prior year, the Company reported sales of
$553.3 million and income from
continuing operations of $23.2
million, or $0.66 per diluted
share. Our adjusted diluted earnings per share from continuing
operations in the fourth quarter of fiscal year 2024 were
$0.88, compared to $0.83 in the fourth quarter of the prior
year.
Consolidated fourth quarter sales increased 19% over the prior
year quarter. Our consolidated sales to commercial customers
increased 20% over the prior year quarter, primarily due to the
acquisition of the Product Support business and strong demand for
our new parts distribution activities. Our sales to
government customers increased 15% primarily due to increased order
volume for our new parts distribution activities and improved
performance across our government program activities. Sales to
commercial customers were 70% of consolidated sales, compared to
69% in the prior year quarter.
"We delivered another record quarter driven
by both record performance in our new parts distribution activities
and the Triumph Product Support acquisition, which exceeded our
expectations during the period. We also continued to drive growth
in our heavy maintenance hangars out of our existing
footprint. In addition to this record performance in our
commercial business, we saw double-digit growth in our government
business," said John M. Holmes,
Chairman, President and Chief Executive Officer of AAR CORP.
Gross profit margin decreased from 19.5% in the prior year
quarter to 19.4% in the current quarter, primarily due to a
commercial programs PBH agreement that was terminated during the
quarter. This was partially offset by the favorable margin
contribution from the recently acquired Product Support
business.
Selling, general, and administrative expenses were $94.8 million in the current quarter, which
included $17.5 million related
to acquisition and amortization expenses and $4.8 million related to investigation costs.
Operating margins were 5.0% in the current quarter, compared to
6.6% in the prior year quarter. Adjusted operating margin increased
from 7.8% in the prior year quarter to 9.3% in the current year
quarter. Sequentially, our adjusted operating margin increased from
8.3% to 9.3%. The improved adjusted margins are primarily
driven by the favorable contribution from the recently acquired
Product Support business.
During and subsequent to the quarter, we announced multiple new
contract awards, including:
- New multi-year distribution agreement with Triumph to supply
its actuation product line to commercial airlines
and MROs
- Multi-year contract extension and expansion with Sumitomo
Precision Products to distribute its V2500 starter and valve
components
- Expansion of our agreement with OTTO Engineering to distribute
electromechanical switches, grips, and joysticks to the commercial
and defense markets
Net interest expense for the quarter was $18.7 million, compared to $4.7 million last year. Average diluted share
count increased from 34.8 million shares in the prior year quarter
to 35.4 million shares in the current year quarter. We did not
repurchase any shares during the quarter as a result of deploying
capital towards the acquisition of the Product Support business and
other attractive investment opportunities. We have $52.5 million remaining on our $150 million share repurchase program. From a
capital deployment perspective, we are prioritizing debt repayment
but will evaluate share repurchases along with other attractive
investment opportunities to deploy our capital.
Cash flow provided by operating activities from
continuing operations was $24.5
million during the current quarter. As of May 31, 2024, our net debt was $911.2 million and our net leverage, pro forma
for the last twelve months adjusted EBITDA of the Product Support
business, was 3.30x.
Holmes continued, "This was our 13th consecutive
quarter of adjusted operating margin improvement, which was
supported by both organic growth and our acquisition of the Product
Support business. Margin expansion remains a top priority for our
team and we expect continued incremental margin improvement.
Additionally, we reduced our net leverage by approximately 0.3x in
just one quarter since the closing of the Product Support
acquisition."
Fiscal year 2024 results
Full fiscal year 2024 consolidated sales were $2.3 billion, an increase of 17% from fiscal year
2023 with growth resulting from our Parts Supply offerings and
increased volumes in our commercial programs activities.
Operating margins were 5.6% for the full year,
compared to 6.7% in fiscal year 2023. Adjusted operating margin
increased from 7.5% in fiscal year 2023 to 8.3% in fiscal year
2024, which reflects only one quarter of ownership of the higher
margin Product Support business.
Full fiscal year 2024 income from continuing operations was
$46.3 million, or $1.29 per diluted share. In fiscal year 2023,
income from continuing operations was $89.8
million, or $2.52 per share.
Our adjusted diluted earnings per share from continuing operations
was $3.33 in the current year,
compared to $2.86 last year,
reflecting the impact of our improved operating efficiency on
higher sales volumes.
Sales to commercial customers were 71% of consolidated sales,
compared to 67% in the prior year. Cash flow provided by operating
activities from continuing operations was $43.8 million in fiscal year 2024. Excluding our
accounts receivable financing program, our cash flow provided by
operating activities from continuing operations was $42.9 million in fiscal year 2024.
Holmes concluded, "We made tremendous progress in
fiscal 2024 executing on the strategic vision and targets that we
outlined at our Investor Day last year. We continued to extend our
leadership position in Parts Supply, broke ground on airframe
maintenance expansions that will add 15% more capacity to our
hangar network, integrated Trax, acquired Product Support, and
increased our margins. We believe demand will remain robust as the
life and high utilization of current generation aircraft continue
to extend, which we expect will lead to another year of sales and
earnings growth as we leverage our stronger market position."
Conference call
information
On Thursday, July 18, 2024, at
4:00 p.m. Central time, AAR will hold
a conference call to discuss the results. A listen-only webcast and
slides can be accessed at
https://edge.media-server.com/mmc/p/8qeyvfs4. Participants may join
via phone by registering at
https://register.vevent.com/register/BI385873ce93e94b7289ac86adcc0a0acb.
Once registered, participants will receive a dial-in number and a
unique PIN that will allow them to access the call. The slides are
also available on AAR's website at
https://www.aarcorp.com/globalassets/8.-investor-relations/presentations/aar-f4q24-investor-deck.pdf.
A replay of the conference call will be available for on-demand
listening shortly after the completion of the call at the webcast
link and will remain available for approximately one year.
About AAR
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 four operating
segments: Parts Supply, Repair & Engineering, Integrated
Solutions, and Expeditionary Services. Additional information can
be found at aarcorp.com.
Contact: Dylan Wolin – Vice President, Strategic
& Corporate Development and Treasurer | +1-630-227-2017 |
dylan.wolin@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, which reflect
management's expectations about future conditions, including, but
not limited to, continued demand in the commercial aviation market,
the life and utilization of current generation aircraft,
anticipated activities and benefits under extended, expanded and
new services, supply and distribution agreements, opportunities for
capital deployment and margin improvement, earnings performance,
contributions from our recent acquisitions, the expansion of
capacity in our hangars, and expectations for our USM and parts
supply businesses.
|
|
|
Forward-looking
statements often address our expected future operating and
financial performance and financial condition, or sustainability
targets, goals, commitments, and other business plans, and often
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 the beliefs of Company management, as well
as assumptions and estimates based on information available to the
Company as of the dates such assumptions and estimates are
made, 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) adverse events and negative publicity in the aviation
industry; (iii) a reduction in sales to the U.S. government and its
contractors; (iv) cost overruns and losses on fixed-price
contracts; (v) nonperformance by subcontractors or suppliers; (vi)
a reduction in outsourcing of maintenance activity by airlines;
(vii) a shortage of skilled personnel or work stoppages; (viii)
competition from other companies; (ix) financial, operational and
legal risks arising as a result of operating internationally; (x)
inability to integrate acquisitions effectively and execute
operational and financial plans related to the acquisitions; (xi)
failure to realize the anticipated benefits of acquisitions; (xii)
circumstances associated with divestitures; (xiii) inability to
recover costs due to fluctuations in market values for aviation
products and equipment; (xiv) cyber or other security threats or
disruptions; (xv) a need to make significant capital expenditures
to keep pace with technological developments in our industry; (xvi)
restrictions on use of intellectual property and tooling important
to our business; (xvii) inability to fully execute our stock
repurchase program and return capital to stockholders; (xviii)
limitations on our ability to access the debt and equity capital
markets or to draw down funds under loan agreements; (xix)
non-compliance with restrictive and financial covenants contained
in our debt and loan agreements; (xx) changes in or non-compliance
with laws and regulations related to federal contractors, the
aviation industry, international operations, safety, and
environmental matters, and the costs of complying with such laws
and regulations; and (xxi) exposure to product liability and
property claims that may be in excess of our liability insurance
coverage. Should one or more of those risks or uncertainties
materialize adversely, or should underlying assumptions or
estimates prove incorrect, actual results may vary materially from
those described. Those events and uncertainties are difficult
or impossible to predict accurately and many are beyond our
control.
|
|
|
For a discussion of
these and other risks and uncertainties, refer to our Annual Report
on Form 10-K, Part I, "Item 1A, Risk Factors" and our other
filings from time to time with the U.S Securities and Exchange
Commission. These events and uncertainties are difficult or
impossible to predict accurately and many are beyond the Company's
control. The risks described in these reports are not the
only risks we face, as additional risks and uncertainties are not
currently known or foreseeable or impossible to predict accurately
or risks that are beyond the Company's control or deemed immaterial
may materially adversely affect our business, financial condition
or results of operations in future periods. We assume 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.
|
|
AAR CORP. and
subsidiaries
|
|
|
|
|
|
|
|
|
|
Condensed
consolidated statements of
income
(In millions except
per share data - unaudited)
|
Three months
ended
May
31,
|
|
Year
ended
May
31,
|
|
2024
|
2023
|
|
2024
|
2023
|
|
|
|
|
|
Sales
|
$
656.5
|
|
$ 553.3
|
|
$
2,318.9
|
|
$ 1,990.5
|
|
Cost of
sales
|
529.2
|
|
445.2
|
|
1,876.6
|
|
1,620.4
|
|
Gross
profit
|
127.3
|
|
108.1
|
|
442.3
|
|
370.1
|
|
Provision for credit
losses
|
0.2
|
|
0.8
|
|
0.7
|
|
2.6
|
|
Selling, general and
administrative
|
94.8
|
|
70.8
|
|
312.2
|
|
230.4
|
|
Earnings (Loss) from
joint ventures
|
0.3
|
|
(0.2)
|
|
(0.2)
|
|
(3.2)
|
|
Operating
income
|
32.6
|
|
36.3
|
|
129.2
|
|
133.9
|
|
Pension settlement
charge
|
––
|
|
––
|
|
(26.7)
|
|
––
|
|
Losses related to
sale and exit of business
|
(0.2)
|
|
(0.2)
|
|
(2.8)
|
|
(0.7)
|
|
Interest expense,
net
|
(18.7)
|
|
(4.7)
|
|
(41.0)
|
|
(11.2)
|
|
Other expense,
net
|
(0.1)
|
|
(1.2)
|
|
(0.4)
|
|
(0.8)
|
|
Income from
continuing operations before income tax expense
|
13.6
|
|
30.2
|
|
58.3
|
|
121.2
|
|
Income tax
expense
|
4.5
|
|
7.0
|
|
12.0
|
|
31.4
|
|
Income from
continuing operations
|
9.1
|
|
23.2
|
|
46.3
|
|
89.8
|
|
Income from
discontinued operations
|
––
|
|
––
|
|
––
|
|
0.4
|
|
Net
income
|
$ 9.1
|
|
$ 23.2
|
|
$
46.3
|
|
$ 90.2
|
|
|
|
|
|
|
|
|
|
Earnings per share –
Basic:
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations
|
$
0.26
|
|
$ 0.67
|
|
$
1.30
|
|
$ 2.55
|
|
Earnings from
discontinued operations
|
––
|
|
––
|
|
––
|
|
0.01
|
|
Earnings per share –
Basic
|
$
0.26
|
|
$ 0.67
|
|
$
1.30
|
|
$ 2.56
|
|
|
|
|
|
|
|
|
|
Earnings per share –
Diluted:
|
|
|
|
|
|
|
|
|
Earnings from continuing
operations
|
$
0.26
|
|
$0.66
|
|
$
1.29
|
|
$ 2.52
|
|
Earnings from
discontinued operations
|
––
|
|
––
|
|
––
|
|
0.01
|
|
Earnings per share –
Diluted
|
$
0.26
|
|
$0.66
|
|
$
1.29
|
|
$ 2.53
|
|
|
|
|
|
|
|
|
|
Share
data:
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
35.1
|
|
34.4
|
|
35.1
|
|
34.7
|
|
Weighted average
shares outstanding – Diluted
|
35.4
|
|
34.8
|
|
35.4
|
|
35.1
|
|
|
AAR CORP. and
subsidiaries
|
|
|
|
|
|
| Condensed consolidated balance sheets
(In
millions)
|
May
31,
2024
|
|
May
31,
2023
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
Cash and cash
equivalents
|
$
85.8
|
|
$ 68.4
|
|
Restricted
cash
|
10.3
|
|
13.4
|
|
Accounts receivable,
net
|
287.2
|
|
241.3
|
|
Contract
assets
|
123.2
|
|
86.9
|
|
Inventories,
net
|
733.1
|
|
574.1
|
|
Rotable assets and
equipment on or available for lease
|
81.5
|
|
50.6
|
|
Assets of
discontinued operations
|
9.9
|
|
13.5
|
|
Other current
assets
|
58.6
|
|
49.7
|
|
Total current
assets
|
1,389.6
|
|
1,097.9
|
|
Property, plant, and
equipment, net
|
171.7
|
|
126.1
|
|
Goodwill and
intangible assets, net
|
790.2
|
|
239.5
|
|
Rotable assets
supporting long-term programs
|
166.3
|
|
178.1
|
|
Operating lease
right-of-use assets, net
|
96.6
|
|
63.7
|
|
Other non-current
assets
|
155.6
|
|
127.8
|
|
Total
assets
|
$
2,770.0
|
|
$ 1,833.1
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Accounts payable and
accrued liabilities
|
$
457.3
|
|
$ 338.1
|
|
Liabilities of
discontinued operations
|
9.6
|
|
13.4
|
|
Total current
liabilities
|
466.9
|
|
351.5
|
|
Long-term
debt
|
985.4
|
|
269.7
|
|
Operating lease
liabilities
|
80.3
|
|
48.2
|
|
Other liabilities
and deferred revenue
|
47.6
|
|
64.6
|
|
Total
liabilities
|
1,580.2
|
|
734.0
|
|
Equity
|
1,189.8
|
|
1,099.1
|
|
Total liabilities and
equity
|
$
2,770.0
|
|
$ 1,833.1
|
|
|
|
|
|
AAR CORP. and
subsidiaries
|
|
|
|
|
|
Condensed
consolidated statements of cash flows
(In millions –
unaudited)
|
Three months
ended
May
31,
|
|
Year
ended
May
31,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
Cash flows provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Net
income
|
$ 9.1
|
|
$ 23.2
|
|
$
46.3
|
|
$ 90.2
|
|
Income
from discontinued operations
|
––
|
|
––
|
|
––
|
|
(0.4)
|
|
Income from
continuing operations
|
9.1
|
|
23.2
|
|
46.3
|
|
89.8
|
|
Adjustments
to reconcile income from continuing operations to
net
cash provided by (used
in) operating activities
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
15.3
|
|
7.7
|
|
41.2
|
|
27.9
|
|
Stock-based compensation expense
|
3.8
|
|
3.1
|
|
15.3
|
|
13.5
|
|
Pension settlement charge
|
––
|
|
––
|
|
26.7
|
|
––
|
|
Changes in certain assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
12.0
|
|
8.3
|
|
(5.3)
|
|
(18.1)
|
|
Contract
assets
|
(17.6)
|
|
4.8
|
|
(17.1)
|
|
(13.7)
|
|
Inventories
|
6.9
|
|
(3.4)
|
|
(90.4)
|
|
(23.6)
|
|
Rotable assets and
equipment on or available for short-term
lease
|
12.6
|
|
1.1
|
|
(11.2)
|
|
3.0
|
|
Prepaid expenses
and other current
assets
|
(9.2)
|
|
0.2
|
|
(20.5)
|
|
(8.6)
|
|
Rotable assets
supporting long-term programs
|
9.4
|
|
(6.1)
|
|
2.5
|
|
(19.3)
|
|
Accounts payable
and accrued liabilities
|
(17.2)
|
|
6.7
|
|
76.3
|
|
(6.4)
|
|
Deferred revenue on
long-term programs
|
10.0
|
|
(6.2)
|
|
(3.6)
|
|
(4.0)
|
|
Other
|
(10.6)
|
|
5.9
|
|
(16.4)
|
|
(16.7)
|
|
Net cash
provided by operating activities – continuing
operations
|
24.5
|
|
45.3
|
|
43.8
|
|
23.8
|
|
Net cash used
in operating activities – discontinued operations
|
––
|
|
(0.1)
|
|
(0.2)
|
|
(0.5)
|
|
Net cash
provided by operating activities
|
24.5
|
|
45.2
|
|
43.6
|
|
23.3
|
|
|
|
|
|
|
|
|
|
Cash flows used in
investing activities:
|
|
|
|
|
|
|
|
|
Property,
plant, and equipment
expenditures
|
(7.5)
|
|
(7.0)
|
|
(29.7)
|
|
(29.5)
|
|
Acquisitions,
net of cash acquired
|
(722.9)
|
|
(103.3)
|
|
(722.9)
|
|
(103.3)
|
|
Other
|
(1.3)
|
|
(0.4)
|
|
(5.9)
|
|
(5.2)
|
|
Net cash used in
investing activities
|
(731.7)
|
|
(110.7)
|
|
(758.5)
|
|
(138.0)
|
|
|
|
|
|
|
|
|
|
Cash flows provided
by financing activities:
|
|
|
|
|
|
|
|
|
Short-term
borrowings on Revolving Credit Facility,
net
|
170.0
|
|
84.0
|
|
175.0
|
|
172.0
|
|
Proceeds from
long-term borrowings
|
550.0
|
|
––
|
|
550.0
|
|
––
|
|
Financing
costs
|
(9.5)
|
|
––
|
|
(10.3)
|
|
(1.9)
|
|
Purchase of
treasury
stock
|
––
|
|
––
|
|
(5.1)
|
|
(50.1)
|
|
Stock
compensation
activity
|
9.2
|
|
9.2
|
|
19.6
|
|
17.7
|
|
Net cash provided by
financing activities
|
719.7
|
|
93.2
|
|
729.2
|
|
137.7
|
|
Effect of exchange
rate changes on
cash
|
––
|
|
––
|
|
––
|
|
(0.1)
|
|
Increase in cash and
cash
equivalents
|
12.5
|
|
27.7
|
|
14.3
|
|
22.9
|
|
Cash, cash
equivalents, and restricted cash at beginning of
period
|
83.6
|
|
54.1
|
|
81.8
|
|
58.9
|
|
Cash, cash
equivalents, and restricted cash at end of
period
|
$
96.1
|
|
$ 81.8
|
|
$
96.1
|
|
$ 81.8
|
|
|
AAR CORP. and
subsidiaries
|
|
|
|
|
|
|
|
|
|
Third-party sales by segment
(In millions -
unaudited)
|
Three months
ended
May
31,
|
|
Year
ended
May
31,
|
|
2024
|
2023
|
|
2024
|
2023
|
|
Parts
Supply
|
$
260.3
|
$ 238.6
|
|
$
967.0
|
$ 818.4
|
|
Repair &
Engineering
|
216.4
|
143.0
|
|
640.1
|
533.4
|
|
Integrated
Solutions
|
163.5
|
148.3
|
|
641.9
|
546.9
|
|
Expeditionary
Services
|
16.3
|
23.4
|
|
69.9
|
91.8
|
|
$
656.5
|
$ 553.3
|
|
$
2,318.9
|
$ 1,990.5
|
|
|
|
|
|
Operating income by segment
(In millions-
unaudited)
|
Three months
ended
May
31,
|
|
Year
ended
May
31,
|
|
2024
|
2023
|
|
2024
|
2023
|
|
Parts
Supply
|
$
35.2
|
$ 29.0
|
|
$
109.8
|
$ 93.7
|
|
Repair &
Engineering
|
20.6
|
9.5
|
|
52.5
|
35.3
|
|
Integrated
Solutions
|
1.2
|
8.1
|
|
23.9
|
30.5
|
|
Expeditionary
Services
|
0.4
|
1.5
|
|
3.5
|
7.7
|
|
57.4
|
48.1
|
|
189.7
|
167.2
|
|
Corporate and
other
|
(24.8)
|
(11.8)
|
|
(60.5)
|
(33.3)
|
|
$
32.6
|
$ 36.3
|
|
$
129.2
|
$ 133.9
|
|
Adjusted income from continuing operations, adjusted diluted
earnings per share from continuing operations, adjusted operating
margin, adjusted cash provided by (used in) operating activities,
adjusted EBITDA, net debt, net debt to adjusted EBITDA (net
leverage), and net debt to pro forma adjusted EBITDA (net pro forma
leverage) 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 core
operating performance, cash flows and leverage unaffected by the
impact of certain items that management does not believe are
indicative of our ongoing and core operating activities. 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 and leverage 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.
Our non-GAAP financial measures reflect adjustments for certain
items including, but not limited to, the following:
- Investigation and remediation compliance costs comprised of
legal and professional fees related to addressing potential
violations of the U.S. Foreign Corrupt Practices Act, which we
self-reported to the U.S. Department of Justice and other
agencies.
- Expenses associated with recent acquisition activity including
professional fees for legal, due diligence, and other acquisition
activities, bridge financing fees, intangible asset amortization,
integration costs and compensation expense related to contingent
consideration and retention agreements.
- Pension settlement charges associated with the settlement and
termination of our frozen defined benefit pension plan.
- Legal judgments related to or impacted by the
Russian/Ukraine conflict.
- Contract termination/restructuring costs comprised of gains and
losses that are recognized at the time of modifying, terminating,
or restructuring certain customer and vendor contracts, including
forward loss provisions on long-term contracts.
- Losses related to the sale and exit from our Composites
manufacturing business, including legal fees for the performance
guarantee associated with the Composites' A220 aircraft
contract.
- Customer bankruptcy and credit charges (recoveries) reflecting
the impact of bankruptcies and other credit charges primarily
resulting from the significant impact of the COVID-19 pandemic on
the commercial aviation industry.
Adjusted EBITDA is income from continuing operations before
interest income (expense), other income (expense), income taxes,
depreciation and amortization, stock-based compensation, and items
of an unusual nature including but not limited to business
divestitures and acquisitions, workforce actions, COVID-related
subsidies and costs, investigation and remediation compliance
costs, equity investment gains and losses, pension settlement
charges, legal judgments, acquisition, integration and amortization
expenses from recent acquisition activity, and significant customer
events such as early terminations, contract restructurings, forward
loss provisions, 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
(In millions -
unaudited)
|
Three months
ended
May
31,
|
|
Year
ended
May
31,
|
|
2024
|
2023
|
|
2024
|
2023
|
|
Income from
continuing operations
|
$ 9.1
|
$ 23.2
|
|
$
46.3
|
$ 89.8
|
|
Acquisition,
integration and amortization expenses
|
18.6
|
5.1
|
|
42.8
|
7.0
|
|
Investigation and
remediation compliance costs
|
4.8
|
1.6
|
|
10.5
|
4.7
|
|
Contract
termination/restructuring costs and loss
provisions, net
|
4.8
|
––
|
|
4.8
|
2.0
|
|
Losses related to
sale and exit of business
|
0.2
|
0.2
|
|
2.8
|
0.7
|
|
Severance
charges
|
0.5
|
––
|
|
0.5
|
0.1
|
|
Russian bankruptcy
court judgment
|
––
|
––
|
|
11.2
|
1.8
|
|
Pension settlement
charge
|
––
|
––
|
|
26.7
|
––
|
|
Customer bankruptcy
and credit recoveries
|
––
|
––
|
|
––
|
1.5
|
|
Loss on equity
investments, net
|
––
|
1.0
|
|
––
|
0.1
|
|
Government
COVID-related subsidies
|
––
|
––
|
|
––
|
(1.6)
|
|
Costs (Reversals)
related to strategic projects
|
––
|
––
|
|
––
|
(0.2)
|
|
Tax effect on
adjustments (a)
|
(6.7)
|
(2.0)
|
|
(27.2)
|
(4.1)
|
|
Adjusted income from
continuing operations
|
$
31.3
|
$ 29.1
|
|
$
118.4
|
$ 101.8
|
|
|
|
(a)
|
Calculation uses
estimated statutory tax rates on non-GAAP adjustments except for
the tax effect of the pension settlement charge, which includes
income taxes previously recognized in accumulated other
comprehensive loss.
|
|
Adjusted diluted earnings per share from continuing
operations
(unaudited)
|
Three months
ended
May
31,
|
|
Year
ended
May
31,
|
|
2024
|
2023
|
|
2024
|
2023
|
|
Diluted earnings per
share from continuing operations
|
$
0.26
|
$ 0.66
|
|
$
1.29
|
$ 2.52
|
|
Acquisition,
integration and amortization expenses
|
0.52
|
0.15
|
|
1.21
|
0.21
|
|
Investigation and
remediation compliance costs
|
0.14
|
0.04
|
|
0.29
|
0.13
|
|
Contract
termination/restructuring costs and loss provisions,
net
|
0.14
|
––
|
|
0.14
|
0.06
|
|
Losses related to
sale and exit of business
|
0.01
|
0.01
|
|
0.07
|
0.02
|
|
Severance
charges
|
0.01
|
––
|
|
0.01
|
––
|
|
Russian bankruptcy
court judgment
|
––
|
––
|
|
0.32
|
0.05
|
|
Pension settlement
charge
|
––
|
––
|
|
0.76
|
––
|
|
Customer bankruptcy
and credit recoveries
|
––
|
––
|
|
––
|
0.04
|
|
Loss on equity
investments, net
|
––
|
0.03
|
|
––
|
0.01
|
|
Government
COVID-related subsidies
|
––
|
––
|
|
––
|
(0.05)
|
|
Tax effect on
adjustments (a)
|
(0.20)
|
(0.06)
|
|
(0.76)
|
(0.13)
|
|
Adjusted diluted
earnings per share from continuing operations
|
$
0.88
|
$ 0.83
|
|
$
3.33
|
$ 2.86
|
|
|
|
(a)
|
Calculation uses
estimated statutory tax rates on non-GAAP adjustments except for
the tax effect of the pension settlement charge, which includes
income taxes previously recognized in accumulated other
comprehensive loss.
|
|
Adjusted operating margin
(In millions -
unaudited)
|
Three months
ended
|
|
Year
ended
|
|
May 31,
2024
|
February
29, 2024
|
May 31,
2023
|
|
May 31,
2024
|
May 31,
2023
|
|
Sales
|
$
656.5
|
$ 567.3
|
$ 553.3
|
|
$
2,318.9
|
$ 1,990.5
|
|
Contract
termination/restructuring costs
|
2.3
|
––
|
––
|
|
2.3
|
0.1
|
|
Adjusted
sales
|
$
658.8
|
$ 567.3
|
$ 553.3
|
|
$
2,321.2
|
$ 1,990.6
|
|
|
|
|
|
|
|
|
Operating
income
|
$
32.6
|
$ 33.0
|
$36.3
|
|
$
129.2
|
$ 133.9
|
|
Acquisition,
integration and amortization
expenses
|
18.6
|
12.2
|
5.1
|
|
36.7
|
7.0
|
|
Investigation and
remediation costs
|
4.8
|
2.0
|
1.6
|
|
10.5
|
4.7
|
|
Contract
termination/restructuring costs and
loss
provisions, net
|
4.8
|
––
|
––
|
|
4.8
|
2.0
|
|
Severance
charges
|
0.5
|
––
|
––
|
|
0.5
|
0.1
|
|
Russian bankruptcy
court judgment
|
––
|
––
|
––
|
|
11.2
|
1.8
|
|
Customer bankruptcy
and credit charges
|
––
|
––
|
––
|
|
––
|
1.5
|
|
Government
COVID-related subsidies
|
––
|
––
|
––
|
|
––
|
(1.6)
|
|
Costs related to
strategic projects
|
––
|
––
|
––
|
|
––
|
(0.2)
|
|
Adjusted operating
income
|
$
61.3
|
$ 47.2
|
$ 43.0
|
|
$
192.9
|
$ 149.2
|
|
|
|
|
|
|
|
|
Adjusted operating
margin
|
9.3 %
|
8.3 %
|
7.8 %
|
|
8.3 %
|
7.5 %
|
|
Adjusted cash provided by operating activities
from
continuing operations
(In millions -
unaudited)
|
Three months
ended
May
31,
|
|
Year
ended
May
31,
|
|
2024
|
2023
|
|
2024
|
2023
|
|
Cash provided by
operating activities from
continuing
operations
|
$
24.5
|
$ 45.3
|
|
$
43.8
|
$
23.8
|
|
Amounts outstanding
on accounts receivable financing program:
|
|
|
|
|
|
|
Beginning of
period
|
13.7
|
16.3
|
|
12.8
|
15.0
|
|
End of
period
|
(13.7)
|
(12.8)
|
|
(13.7)
|
(12.8)
|
|
Adjusted cash
provided by operating activities from
continuing
operations
|
$
24.5
|
$ 48.8
|
|
$
42.9
|
$
26.0
|
|
Adjusted EBITDA
(In millions -
unaudited)
|
Three months
ended
May
31,
|
|
Year
ended
May
31,
|
|
2024
|
2023
|
|
2024
|
2023
|
|
Net
income
|
$ 9.1
|
$23.2
|
|
$
46.3
|
$ 90.2
|
|
Income from
discontinued operations
|
––
|
––
|
|
––
|
(0.4)
|
|
Income tax
expense
|
4.5
|
7.0
|
|
12.0
|
31.4
|
|
Other expense,
net
|
0.1
|
1.2
|
|
0.4
|
0.8
|
|
Interest expense,
net
|
18.7
|
4.7
|
|
41.0
|
11.2
|
|
Depreciation and
amortization
|
15.3
|
7.7
|
|
41.2
|
27.9
|
|
Acquisition and
integration expenses
|
14.6
|
4.3
|
|
29.7
|
6.2
|
|
Investigation and
remediation compliance costs
|
4.8
|
1.6
|
|
10.5
|
4.7
|
|
Losses related to
sale and exit of business
|
0.2
|
0.2
|
|
2.8
|
0.7
|
|
Contract
termination/restructuring costs and loss
provisions,
net
|
4.8
|
––
|
|
4.8
|
2.0
|
|
Severance
charges
|
0.5
|
––
|
|
0.5
|
0.1
|
|
Pension settlement
charge
|
––
|
––
|
|
26.7
|
––
|
|
Russian bankruptcy
court judgment
|
––
|
––
|
|
11.2
|
1.8
|
|
Government
COVID-related subsidies, net
|
––
|
––
|
|
––
|
(1.6)
|
|
Customer bankruptcy
and credit charges
|
––
|
––
|
|
––
|
1.5
|
|
Costs related to
strategic projects
|
––
|
––
|
|
––
|
(0.2)
|
|
Stock-based
compensation
|
3.8
|
3.1
|
|
15.3
|
13.5
|
|
Adjusted
EBITDA
|
$
76.4
|
$ 53.0
|
|
$
242.4
|
$ 189.8
|
|
Net debt
(In millions -
unaudited)
|
May 31,
2024
|
|
May 31,
2023
|
|
Total
debt
|
$997.0
|
|
$272.0
|
|
Less: Cash and cash
equivalents
|
(85.8)
|
|
(68.4)
|
|
Net
debt
|
$911.2
|
|
$203.6
|
|
Net debt to adjusted EBITDA
(In millions -
unaudited)
|
May 31,
2024
|
|
May 31,
2023
|
|
Adjusted EBITDA for
the year ended
|
$
242.4
|
|
$
189.8
|
|
Net debt at year
end
|
911.2
|
|
203.6
|
|
Net debt to Adjusted
EBITDA
|
3.76
|
|
1.07
|
|
Net debt to pro forma
adjusted EBITDA
(In millions - unaudited)
|
|
|
AAR CORP. adjusted EBITDA for the year ended May 31,
2024
|
$
242.4
|
|
Plus: Product Support adjusted EBITDA for the nine months ended February
29,
2024
|
33.5
|
|
Pro forma adjusted EBITDA for the year ended May 31,
2024
|
$
275.9
|
|
AAR CORP. net debt at May 31, 2024
|
$
911.2
|
|
Net debt to pro forma adjusted
EBITDA
|
3.30
|
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SOURCE AAR CORP.