- Record third quarter sales of $567
million, up 9% over the prior year
- Third quarter GAAP diluted earnings per share from continuing
operations of $0.39, compared to
$0.62 in Q3 FY2023
- Record third quarter adjusted diluted earnings per share from
continuing operations of $0.85, up
13% from $0.75 in Q3 FY2023
- Third quarter cash flow provided by operating activities from
continuing operations of $20
million
- Closed on the acquisition of Triumph Group's Product Support
business for $725 million
WOOD
DALE, Ill., March 21,
2024 /PRNewswire/ -- AAR CORP. (NYSE:
AIR), a leading provider of aviation services to commercial
and government operators, MROs, and OEMs, today reported third
quarter fiscal year 2024 consolidated sales of $567.3 million and income from continuing
operations of $14.0 million, or
$0.39 per diluted share. For the
third quarter of the prior year, the Company reported sales of
$521.1 million and income from
continuing operations of $21.8
million, or $0.62 per diluted
share. Our adjusted diluted earnings per share from continuing
operations in the third quarter of fiscal year 2024 were
$0.85, compared to $0.75 in the third quarter of the prior year.
Consolidated third quarter sales increased
9% over the prior year quarter. Our consolidated sales to
commercial customers increased 18% over the prior year quarter,
primarily due to strong demand for our Parts Supply offerings, MRO
services, and increased volumes in our commercial programs
activities while our sales to government customers decreased
7%. Sales to commercial customers were 70% of
consolidated sales, compared to 65% in the prior year
quarter.
On March 1,
2024, we completed the acquisition of Triumph Group's
Product Support business for $725
million, which was financed using the proceeds from our
issuance of $550 million of 6.75%
Senior Notes due 2029 and borrowings from our Amended Revolving
Credit Facility, which was upsized from $620
million to $825
million. The acquisition of the Product Support
business scales our repair capabilities, expands our footprint in
the Asia-Pacific region and adds
more than 700 talented team members.
"During the quarter, we drove 18% sales
growth in our commercial business capitalizing on the continued
strong demand for both our parts supply activities and MRO
services. We expect commercial demand to remain elevated as the
life and high utilization of current generation aircraft continue
to extend," said John M. Holmes,
Chairman, President and Chief Executive Officer of AAR
CORP.
Gross profit margin increased from 18.1% in
the prior year quarter to 19.4% in the current quarter, primarily
due to the favorable impact of our operating efficiency on
increased sales volumes.
Selling, general, and administrative
expenses were $77.0 million in the
current quarter, which included $12.2
million related to acquisition and amortization expenses and
$2.0 million related to investigation
costs.
Operating margins were 5.8% in the current
quarter, compared to 6.5% in the prior year quarter. Adjusted
operating margin increased from 7.6% in the prior year quarter to
8.3% in the current year quarter, primarily as a result of the
growth in commercial sales. Sequentially, our adjusted operating
margin increased from 8.1% to 8.3%, driven by improved
profitability in our Parts Supply and Repair & Engineering
segments.
During and subsequent to the quarter, we
announced multiple new contract awards, including:
- Multi-year contract extension and expansion for
flight-hour component support services with ASL
Airlines
- Agreements with Singapore Airlines and Archer Aviation to
provide Trax's software solutions
- New multi-year distribution agreement with Ontic to
supply a strategic selection of military products to the U.S.
government
- Multi-year extension with Philippine
Airlines for Airinmar's full suite of support services covering
both aircraft warranty and value engineering
- Multi-year agreement with Cebu Pacific to supply
CFM56-5B engine surplus
material
Holmes continued, "We have expanded our
operating margins every quarter for the last three years and our
adjusted operating margins are now 50% higher than they were before
COVID. We are especially proud to have made this progress in an
inflationary environment where labor costs, in particular, have
been rising. We believe as we grow our business and integrate the
Product Support acquisition, our margins will continue to
expand."
Net interest expense for the quarter was
$11.3 million, compared to
$3.5 million last year. Net interest
expense in the current period included $6.1
million related to bridge financing costs for the
acquisition of the Product Support business. Average diluted
share count increased from 34.6 million shares in the prior year
quarter to 35.2 million shares in the current year quarter. We
repurchased 0.1 million shares for $5.1
million during the current year quarter and 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
$20.4 million during the current
quarter. As of February 29, 2024, our
net debt was $207.8 million and our
net leverage was 0.95x.
Holmes concluded, "I am
exceptionally proud of the results our team continues to deliver,
and we expect the acquisition of the Product Support business to
accelerate our growth trajectory. We will leverage our
leadership positions in used serviceable material (USM), new parts
distribution, airframe MRO and now, with Product Support, component
repair services to drive even greater value for our customers and
shareholders. Additionally, we will maintain our focus on
cash generation and portfolio optimization to ensure we maintain a
strong balance sheet to enable both organic and inorganic
investments."
Conference call
information
On Thursday, March
21, 2024, at 3:45 p.m. Central
time, AAR will hold a conference call to discuss the
results. The conference call can be accessed by registering
at
https://register.vevent.com/register/BIdf08c4f6d49042bebbb16a2c5934bf64.
Once registered, participants will receive a dial-in number
and a unique PIN that will allow them to access the
call.
A replay of the conference call will be
available for on-demand listening shortly after the completion of
the call at
https://edge.media-server.com/mmc/p/rab3gbzx 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 future financial condition, future results of
operations, future cash flows, expected activities and benefits
under services, supply and distribution agreements, our ability to
continue to deploy capital to fund further growth and margin
expansion, and the acquisition of the Product Support business (the
"Triumph Group Product Support business") of Triumph Group, Inc., a
Delaware corporation ("Triumph Group").
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) the impact of
pandemics and other disease outbreaks, such as COVID-19, and
similar public health threats 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 U.S. government and their
contractors; (iv) cost overruns and losses on fixed-price
contracts; (v) nonperformance by subcontractors or suppliers; (vi)
changes in or non-compliance with laws and regulations that may
affect certain of our aviation and government and defense related
activities that are subject to licensing, certification and other
regulatory requirements imposed by the FAA, the U.S. State
Department and other regulatory agencies, both domestic and
foreign; (vii) a reduction in outsourcing of maintenance activity
by airlines; (viii) a shortage of the skilled personnel on whom we
depend to operate our business, or work stoppages; (ix) competition
from other companies, including original equipment manufacturers,
some of which have greater financial resources than we do; (x)
financial and operational risks arising as a result of operating
internationally; (xi) inability to integrate acquisitions
effectively and execute our operational and financial plan related
to the acquisitions, including the acquisitions of Trax USA Corp.
("Trax") and the Triumph Group Product Support business; (xii)
failure to realize the anticipated benefits of the acquisitions of
Trax and the Triumph Group Product Support business; (xiii)
inability to recover our costs due to fluctuations in market values
for aviation products and equipment caused by various factors,
including reductions in air travel, airline bankruptcies,
consolidations and fleet reductions; (xiv) asset impairment charges
we may be required to recognize to reflect the non-recoverability
of our assets or lowered expectations regarding businesses we have
acquired; (xv) threats to our systems technology from equipment
failures, cyber or other security threats or other disruptions;
(xvi) a need to make significant capital expenditures to keep pace
with technological developments in our industry; (xvii) a need to
reduce the carrying value of our assets; (xviii) inability to fully
execute our stock repurchase program and return capital to our
stockholders; (xix) restrictions on paying, or failure to maintain
or pay dividends; (xx) limitations on our ability to access the
debt and equity capital markets or to draw down funds under loan
agreements; (xxi) non-compliance with restrictive and financial
covenants contained in certain of our loan agreements; (xxii)
non-compliance with laws and regulations relating to the formation,
administration and performance of our U.S. government contracts;
(xxiii) exposure to product liability and property claims that may
be in excess of our liability insurance coverage; (xxiv) the impact
of adverse incidents involving, or adverse publicity concerning,
our business or the aviation industry generally, which could harm
our reputation and results of operations; (xxv) decreased demand
for our services due to mandatory groundings of aircraft; (xxvi)
impacts from stakeholder and market focus on environmental, social
and governance matters; and (xxvii) the costs of compliance, and
liability for non-compliance, with environmental regulations,
including future requirements regarding climate change and
environmental, social and governance matters. 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
February
29/28,
|
|
Nine months
ended
February
29/28,
|
|
2024
|
2023
|
|
2024
|
2023
|
|
|
|
|
Sales
|
$
567.3
|
|
$ 521.1
|
|
$
1,662.4
|
|
$ 1,437.2
|
Cost of
sales
|
457.0
|
|
426.8
|
|
1,347.4
|
|
1,175.2
|
Gross
profit
|
110.3
|
|
94.3
|
|
315.0
|
|
262.0
|
Provision for credit
losses
|
0.1
|
|
1.9
|
|
0.5
|
|
1.8
|
Selling, general and
administrative
|
77.0
|
|
56.7
|
|
217.4
|
|
159.6
|
Loss from joint
ventures
|
(0.2)
|
|
(1.7)
|
|
(0.5)
|
|
(3.0)
|
Operating
income
|
33.0
|
|
34.0
|
|
96.6
|
|
97.6
|
Pension settlement
charge
|
––
|
|
––
|
|
(26.7)
|
|
––
|
Losses related to
sale and exit of business
|
(1.0)
|
|
(0.4)
|
|
(2.6)
|
|
(0.5)
|
Interest expense,
net
|
(11.3)
|
|
(3.5)
|
|
(22.3)
|
|
(6.5)
|
Other income
(expense), net
|
(0.2)
|
|
(0.3)
|
|
(0.3)
|
|
0.4
|
Income from
continuing operations before
income tax expense
|
20.5
|
|
29.8
|
|
44.7
|
|
91.0
|
Income tax
expense
|
6.5
|
|
8.0
|
|
7.5
|
|
24.4
|
Income from
continuing operations
|
14.0
|
|
21.8
|
|
37.2
|
|
66.6
|
Income from
discontinued operations
|
––
|
|
––
|
|
––
|
|
0.4
|
Net
income
|
$
14.0
|
|
$ 21.8
|
|
$
37.2
|
|
$ 67.0
|
|
|
|
|
|
|
|
|
Earnings per share –
Basic:
|
|
|
|
|
|
|
|
Earnings from continuing
operations
|
$
0.40
|
|
$ 0.63
|
|
$
1.05
|
|
$ 1.90
|
Earnings from
discontinued operations
|
––
|
|
––
|
|
––
|
|
0.01
|
Earnings per share –
Basic
|
$
0.40
|
|
$ 0.63
|
|
$
1.05
|
|
$ 1.91
|
|
|
|
|
|
|
|
|
Earnings per share –
Diluted:
|
|
|
|
|
|
|
|
Earnings from continuing
operations
|
$
0.39
|
|
$0.62
|
|
$
1.04
|
|
$ 1.87
|
Earnings from
discontinued operations
|
––
|
|
––
|
|
––
|
|
0.01
|
Earnings per share –
Diluted
|
$
0.39
|
|
$0.62
|
|
$
1.04
|
|
$ 1.88
|
|
|
|
|
|
|
|
|
Share
data:
|
|
|
|
|
|
|
|
Weighted average
shares outstanding – Basic
|
34.8
|
|
34.1
|
|
34.9
|
|
34.6
|
Weighted average
shares outstanding – Diluted
|
35.2
|
|
34.6
|
|
35.3
|
|
35.0
|
|
|
|
|
|
|
|
|
|
AAR CORP. and
subsidiaries
|
|
|
Condensed consolidated balance
sheets
(In
millions)
|
February
29,
2024
|
|
May
31,
2023
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
69.2
|
|
$ 68.4
|
Restricted
cash
|
14.4
|
|
13.4
|
Accounts receivable,
net
|
257.1
|
|
241.3
|
Contract
assets
|
86.5
|
|
86.9
|
Inventories,
net
|
671.5
|
|
574.1
|
Rotable assets and
equipment on or available for lease
|
74.5
|
|
50.6
|
Assets of
discontinued operations
|
10.8
|
|
13.5
|
Other current
assets
|
56.0
|
|
49.7
|
Total current
assets
|
1,240.0
|
|
1,097.9
|
Property, plant, and
equipment, net
|
134.1
|
|
126.1
|
Goodwill and
intangible assets, net
|
240.5
|
|
239.5
|
Rotable assets
supporting long-term programs
|
177.9
|
|
178.1
|
Operating lease
right-of-use assets, net
|
89.5
|
|
63.7
|
Other non-current
assets
|
139.8
|
|
127.8
|
Total
assets
|
$
2,021.8
|
|
$ 1,833.1
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Accounts payable and
accrued liabilities
|
$
417.7
|
|
$ 338.1
|
Liabilities of
discontinued operations
|
10.5
|
|
13.4
|
Total current
liabilities
|
428.2
|
|
351.5
|
Long-term
debt
|
274.7
|
|
269.7
|
Operating lease
liabilities
|
73.0
|
|
48.2
|
Other liabilities
and deferred revenue
|
77.9
|
|
64.6
|
Total
liabilities
|
853.8
|
|
734.0
|
Equity
|
1,168.0
|
|
1,099.1
|
Total liabilities and
equity
|
$
2,021.8
|
|
$ 1,833.1
|
AAR CORP. and
subsidiaries
|
|
Condensed consolidated statements of cash
flows
(In millions –
unaudited)
|
Three months
ended
February
29/28,
|
|
Nine
months ended
February
29/28,
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Cash flows provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
Net
income
|
$
14.0
|
|
$ 21.8
|
|
$
37.2
|
|
$ 67.0
|
Income
from discontinued operations
|
––
|
|
––
|
|
––
|
|
(0.4)
|
Income from
continuing operations
|
14.0
|
|
21.8
|
|
37.2
|
|
66.6
|
Adjustments
to reconcile income from continuing operations to
net
cash provided by (used
in) operating activities
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
8.8
|
|
6.9
|
|
25.9
|
|
20.2
|
Stock-based compensation expense
|
3.6
|
|
3.5
|
|
11.5
|
|
10.4
|
Pension settlement charge
|
––
|
|
––
|
|
26.7
|
|
––
|
Provision for credit
losses
|
0.1
|
|
1.9
|
|
0.5
|
|
1.8
|
Changes in certain assets and liabilities:
|
|
|
|
|
|
|
|
Accounts
receivable
|
(11.0)
|
|
(14.4)
|
|
(17.3)
|
|
(26.4)
|
Contract
assets
|
12.9
|
|
(9.2)
|
|
0.5
|
|
(18.5)
|
Inventories
|
(25.8)
|
|
24.6
|
|
(97.3)
|
|
(20.2)
|
Rotable assets and
equipment on or available for short-term
lease
|
(19.3)
|
|
0.7
|
|
(23.8)
|
|
1.9
|
Prepaid expenses
and other current
assets
|
(1.1)
|
|
(8.7)
|
|
(11.3)
|
|
(8.8)
|
Rotable assets
supporting long-term programs
|
(2.9)
|
|
(5.1)
|
|
(6.9)
|
|
(13.2)
|
Accounts payable
and accrued liabilities
|
46.3
|
|
8.1
|
|
93.5
|
|
(13.1)
|
Deferred revenue on
long-term programs
|
(4.1)
|
|
(6.0)
|
|
(13.6)
|
|
2.2
|
Other
|
(1.1)
|
|
(6.7)
|
|
(6.3)
|
|
(24.4)
|
Net cash
provided by (used in) operating activities – continuing
operations
|
20.4
|
|
17.4
|
|
19.3
|
|
(21.5)
|
Net cash used
in operating activities – discontinued operations
|
––
|
|
––
|
|
(0.2)
|
|
(0.4)
|
Net cash
provided by (used in) operating activities
|
20.4
|
|
17.4
|
|
19.1
|
|
(21.9)
|
|
|
|
|
|
|
|
|
Cash flows used in
investing activities:
|
|
|
|
|
|
|
|
Property,
plant, and equipment
expenditures
|
(5.8)
|
|
(9.7)
|
|
(22.2)
|
|
(22.5)
|
Other
|
(0.7)
|
|
0.7
|
|
(4.6)
|
|
(4.8)
|
Net cash used in
investing activities
|
(6.5)
|
|
(9.0)
|
|
(26.8)
|
|
(27.3)
|
|
|
|
|
|
|
|
|
Cash flows provided
by (used in) financing activities:
|
|
|
|
|
|
|
|
Short-term
borrowings (repayments) on Revolving Credit Facility,
net
|
––
|
|
(10.0)
|
|
5.0
|
|
88.0
|
Purchase of
treasury
stock
|
(5.1)
|
|
––
|
|
(5.1)
|
|
(50.1)
|
Financing
costs
|
(0.8)
|
|
(1.9)
|
|
(0.8)
|
|
(1.9)
|
Other
|
0.1
|
|
6.4
|
|
10.4
|
|
8.5
|
Net cash provided by
(used in) financing activities
|
(5.8)
|
|
(5.5)
|
|
9.5
|
|
44.5
|
Effect of exchange
rate changes on
cash
|
––
|
|
––
|
|
––
|
|
(0.1)
|
Increase (Decrease)
in cash and cash
equivalents
|
8.1
|
|
2.9
|
|
1.8
|
|
(4.8)
|
Cash, cash
equivalents, and restricted cash at beginning of
period
|
75.5
|
|
51.2
|
|
81.8
|
|
58.9
|
Cash, cash
equivalents, and restricted cash at end of
period
|
$
83.6
|
|
$ 54.1
|
|
$
83.6
|
|
$ 54.1
|
AAR CORP. and
subsidiaries
|
|
|
Third-party sales by segment
(In millions -
unaudited)
|
Three months
ended
February
29/28,
|
|
Nine months
ended
February
29/28,
|
|
2024
|
2023
|
|
2024
|
2023
|
Parts
Supply
|
$
242.3
|
$ 227.6
|
|
$
706.7
|
$ 579.8
|
Repair &
Engineering
|
140.8
|
128.0
|
|
423.7
|
390.4
|
Integrated
Solutions
|
165.5
|
143.5
|
|
478.4
|
398.6
|
Expeditionary
Services
|
18.7
|
22.0
|
|
53.6
|
68.4
|
|
$
567.3
|
$ 521.1
|
|
$
1,662.4
|
$ 1,437.2
|
Operating income by segment
(In millions-
unaudited)
|
Three months
ended
February
29/28,
|
|
Nine months
ended
February
29/28,
|
|
2024
|
2023
|
|
2024
|
2023
|
Parts
Supply
|
$
31.1
|
$ 25.1
|
|
$
74.6
|
$ 64.7
|
Repair &
Engineering
|
11.5
|
9.8
|
|
31.9
|
25.8
|
Integrated
Solutions
|
8.6
|
7.0
|
|
22.7
|
22.4
|
Expeditionary
Services
|
0.9
|
1.9
|
|
3.1
|
6.2
|
|
52.1
|
43.8
|
|
132.3
|
119.1
|
Corporate and
other
|
(19.1)
|
(9.8)
|
|
(35.7)
|
(21.5)
|
|
$
33.0
|
$ 34.0
|
|
$
96.6
|
$ 97.6
|
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, and net debt to
adjusted EBITDA (net 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.
- 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.
- 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.
- 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.
- Expenses associated with recent acquisition activity including
professional fees for legal, due diligence, and other acquisition
activities, bridge financing fees, intangible asset amortization,
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.
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, impairment and exit charges, facility
consolidation and repositioning costs, investigation and
remediation compliance costs, equity investment gains and losses,
pension settlement charges, legal judgments, acquisition 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
February
29/28,
|
|
Nine
months
ended
February
29/28,
|
|
2024
|
2023
|
|
2024
|
2023
|
Income from
continuing operations
|
$
14.0
|
$ 21.8
|
|
$
37.2
|
$ 66.6
|
Acquisition and
amortization expenses
|
18.3
|
1.9
|
|
24.2
|
1.9
|
Investigation and
remediation compliance costs
|
2.0
|
1.2
|
|
5.7
|
3.1
|
Losses related to
sale and exit of business
|
1.0
|
0.4
|
|
2.6
|
0.5
|
Russian bankruptcy
court judgment
|
––
|
1.8
|
|
11.2
|
1.8
|
Pension settlement
charge
|
––
|
––
|
|
26.7
|
––
|
Contract
termination/restructuring costs and loss
provisions, net
|
––
|
––
|
|
––
|
2.0
|
Customer bankruptcy
and credit recoveries
|
––
|
1.8
|
|
––
|
1.5
|
Gains on equity
investments
|
––
|
––
|
|
––
|
(0.9)
|
Government
COVID-related subsidies
|
––
|
(0.9)
|
|
––
|
(1.6)
|
Costs (Reversals)
related to strategic projects
|
––
|
––
|
|
––
|
(0.2)
|
Severance
charges
|
––
|
––
|
|
––
|
0.1
|
Tax effect on
adjustments (a)
|
(5.0)
|
(1.6)
|
|
(20.5)
|
(2.1)
|
Adjusted income from
continuing operations
|
$
30.3
|
$ 26.4
|
|
$
87.1
|
$ 72.7
|
|
(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
February
29/28,
|
|
Nine
months
ended
February
29/28,
|
|
2024
|
2023
|
|
2024
|
2023
|
Diluted earnings per
share from continuing operations
|
$
0.39
|
$ 0.62
|
|
$
1.04
|
$ 1.88
|
Acquisition and
amortization expenses
|
0.52
|
0.06
|
|
0.69
|
0.06
|
Investigation and
remediation compliance costs
|
0.06
|
0.04
|
|
0.16
|
0.09
|
Losses related to
sale and exit of business
|
0.02
|
0.01
|
|
0.07
|
0.01
|
Russian bankruptcy
court judgment
|
––
|
0.05
|
|
0.32
|
0.05
|
Pension settlement
charge
|
––
|
––
|
|
0.76
|
––
|
Contract
termination/restructuring costs and loss provisions,
net
|
––
|
––
|
|
––
|
0.06
|
Customer bankruptcy
and credit recoveries
|
––
|
0.05
|
|
––
|
0.04
|
Gains on equity
investments
|
––
|
––
|
|
––
|
(0.02)
|
Government
COVID-related subsidies
|
––
|
(0.03)
|
|
––
|
(0.05)
|
Tax effect on
adjustments (a)
|
(0.14)
|
(0.05)
|
|
(0.58)
|
(0.07)
|
Adjusted diluted
earnings per share from continuing operations
|
$
0.85
|
$ 0.75
|
|
$
2.46
|
$ 2.05
|
|
(b)
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
|
|
February 29,
2024
|
November
30, 2023
|
February 28,
2023
|
Sales
|
$
567.3
|
$ 545.4
|
$ 521.1
|
|
|
|
|
Operating
income
|
$
33.0
|
$ 38.3
|
$34.0
|
Acquisition and
amortization expenses
|
12.2
|
3.1
|
1.9
|
Investigation and
remediation costs
|
2.0
|
2.6
|
1.2
|
Russian bankruptcy
court judgment
|
––
|
––
|
1.8
|
Customer bankruptcy
and credit recoveries
|
––
|
––
|
1.8
|
Government
COVID-related subsidies
|
––
|
––
|
(0.9)
|
Adjusted operating
income
|
$
47.2
|
$ 44.0
|
$ 39.8
|
|
|
|
|
Adjusted operating
margin
|
8.3 %
|
8.1 %
|
7.6 %
|
Adjusted cash provided by (used in) operating
activities from
continuing operations
(In millions -
unaudited)
|
Three
months
ended
February
29/28,
|
|
Nine
months
ended
February
29/28,
|
|
2024
|
2023
|
|
2024
|
2023
|
Cash provided by
(used in) operating activities from
continuing operations
|
$
20.4
|
$ 17.4
|
|
$
19.3
|
$ (21.5)
|
Amounts outstanding
on accounts receivable financing program:
|
|
|
|
|
|
Beginning of
period
|
13.7
|
16.1
|
|
12.8
|
15.0
|
End of
period
|
(13.7)
|
(16.3)
|
|
(13.7)
|
(16.3)
|
Adjusted cash
provided by (used in) operating activities from
continuing operations
|
$
20.4
|
$ 17.2
|
|
$
18.4
|
$ (22.8)
|
Adjusted EBITDA
(In millions -
unaudited)
|
Three
months
ended
February
29/28,
|
|
Nine
months
ended
February
29/28,
|
|
Year ended
May 31,
|
|
2024
|
2023
|
|
2024
|
2023
|
|
2023
|
Net
income
|
$14.0
|
$21.8
|
|
$
37.2
|
$ 67.0
|
|
$ 90.2
|
Income from
discontinued operations
|
––
|
––
|
|
––
|
(0.4)
|
|
(0.4)
|
Income tax
expense
|
6.5
|
8.0
|
|
7.5
|
24.4
|
|
31.4
|
Other expense
(income), net
|
0.2
|
0.3
|
|
0.3
|
(0.4)
|
|
0.8
|
Interest expense,
net
|
11.3
|
3.5
|
|
22.3
|
6.5
|
|
11.2
|
Depreciation and
amortization
|
8.8
|
6.9
|
|
25.9
|
20.2
|
|
27.9
|
Acquisition-related
expenses
|
11.2
|
1.9
|
|
15.1
|
1.9
|
|
6.2
|
Investigation and
remediation costs
|
2.0
|
1.2
|
|
5.7
|
3.1
|
|
4.7
|
Losses related to
sale and exit of business
|
1.0
|
0.4
|
|
2.6
|
0.5
|
|
0.7
|
Pension settlement
charge
|
––
|
––
|
|
26.7
|
––
|
|
––
|
Russian bankruptcy
court judgment
|
––
|
1.8
|
|
11.2
|
1.8
|
|
1.8
|
Customer bankruptcy
and credit charges
|
––
|
1.8
|
|
––
|
1.5
|
|
1.5
|
Government
COVID-related subsidies
|
––
|
(0.9)
|
|
––
|
(1.6)
|
|
(1.6)
|
Contract
termination/restructuring costs and loss
provisions, net
|
––
|
––
|
|
––
|
2.0
|
|
2.0
|
Costs (Reversals)
related to strategic projects
|
––
|
––
|
|
––
|
(0.2)
|
|
(0.2)
|
Severance
charges
|
––
|
––
|
|
––
|
0.1
|
|
0.1
|
Stock-based
compensation
|
3.6
|
3.5
|
|
11.5
|
10.4
|
|
13.5
|
Adjusted
EBITDA
|
$
58.6
|
$ 50.2
|
|
$
166.0
|
$ 136.8
|
|
$ 189.8
|
Net debt
(In millions -
unaudited)
|
February 29,
2024
|
|
February
28,
2023
|
Total
debt
|
$277.0
|
|
$188.0
|
Less: Cash and cash
equivalents
|
(69.2)
|
|
(52.7)
|
Net
debt
|
$207.8
|
|
$135.3
|
Net debt to adjusted EBITDA
(In millions -
unaudited)
|
|
Adjusted EBITDA for
the year ended May 31, 2023
|
$
189.8
|
Less: Adjusted
EBITDA for the nine months ended February 28, 2023
|
(136.8)
|
Plus: Adjusted
EBITDA for the nine months ended February 29, 2024
|
166.0
|
Adjusted EBITDA for
the twelve months ended February 29, 2024
|
$
219.0
|
Net debt at February
29, 2024
|
$
207.8
|
Net debt to Adjusted
EBITDA
|
0.95
|
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SOURCE AAR CORP.