AAR Reports First Quarter 2018 Results

WOOD DALE, Ill., Sept. 19, 2017 /PRNewswire/ -- AAR CORP. (NYSE: AIR) today reported first quarter Fiscal Year 2018 consolidated sales of $439.2 million and net income of $10.6 million, or $0.31 per diluted share.  For the first quarter of the prior fiscal year, the Company reported sales of $404.8 million and net income of $9.5 million, or $0.28 per diluted share.  Last year's first quarter results included a gain of $2.6 million from the sale of a product line.  During the first quarter of Fiscal Year 2018, we recognized a tax benefit of $1.2 million related to incremental tax benefits from stock compensation.

"Our Aviation Services segment delivered strong results once again as sales in the first quarter grew 11.0% from last year to $371.3 million, contributing to improved profitability. I am very pleased with our performance as we continue to execute on our strategy to expand our aviation services globally across the commercial and government markets," said David P. Storch, Chairman and Chief Executive Officer of AAR CORP. Sales growth in our industry-leading integrated supply chain solutions, MRO services, and aircraft and parts supply activities more than offset the impact from the wind-down of the KC-10 CLS Program, which contributed $26.9 million less than prior year's sales. 

During the quarter, we announced new contract awards that expand our comprehensive suite of services to newer generation aircraft.  We signed our first Airbus NEO customer to a new long-term component support agreement with Hawaiian Airlines which is expected to start in November 2017.  We also signed our first Boeing 737 MAX program with flydubai to provide comprehensive flight-hour component support for 100 aircraft which is expected to start in October 2017.

Subsequent to the end of quarter, we agreed to acquire two MRO businesses in Quebec and Ontario, Canada from Premier Aviation and announced a new long-term contract with Air Canada for airframe maintenance on their narrow-body and regional fleet including A319, A320, A321, and E-190 aircraft.  These airframe maintenance services will be performed in the newly acquired Canadian facilities.  Storch continued, "We are very pleased to have entered into this new long-term partnership with Air Canada as we continue to expand our airframe maintenance capabilities in North America."

During the quarter, Aviation Services received a Notice to Proceed on the 15-year, $900 million Landing Gear Performance-Based Logistics One program with the US Air Force previously announced.  For this program, we are providing total supply chain management, including inventory logistics and repair services to support Air Force requisitions received for all C-130, KC-135 and E-3 landing gear parts.

Our Expeditionary Services segment experienced a sales decline of $2.3 million.

First quarter sales to commercial customers represented 70.4% of consolidated sales compared to 61.5% of consolidated sales in the first quarter of last year.  Sales to government and defense customers represented 29.6% of consolidated sales compared to 38.5% in the prior year's quarter.

Selling, general and administrative expenses as a percentage of sales were 10.9% for the quarter, compared to 11.1% last year.

Net interest expense for the quarter was $1.7 million compared to $1.3 million last year due to higher borrowings.  During the quarter, we consumed $20.6 million of cash in operations, paid cash dividends of $2.6 million, or $0.075 per share, and repurchased 142,600 shares for $5.2 million. 

Conference Call Information                                                          
AAR will hold its quarterly conference call at 3:45 p.m. CDT on September 19, 2017. 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 46019250). The replay will be available from 7:15 p.m. CST on September 19, 2017 until 10:59 p.m. CST on September 26, 2017.

About AAR
AAR is a global aftermarket solutions company that employs more than 4,500  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 airlift operations; mobility systems; and command and control centers in support of military and humanitarian missions. 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.