Wesco Aircraft Holdings, Inc. (NYSE:WAIR), a leading provider
of comprehensive supply chain management services to the global
aerospace industry, today announced results for its fiscal 2016
first quarter.
Fiscal 2016 First Quarter Highlights
- Net sales of $359.8 million, down four percent
- Net sales excluding currency effects of $366.1 million, down
two percent
- Net income of $20.6 million, or $0.21 per diluted share
- Adjusted net income of $24.2 million, or $0.25 per diluted
share
- Adjusted EBITDA of $45.6 million, or 12.7 percent of net
sales
Dave Castagnola, president and chief executive
officer, said, “Fiscal 2016 first quarter results reflect progress
in all areas of our business. Sales in the quarter were adversely
impacted by the conclusion in fiscal 2015 of a large commercial
contract that was previously disclosed, as well as currency
movements. Excluding these items, sales were approximately three
percent higher than the first quarter of last year due to growth in
contract revenue. Sales activities continue to advance; we have
renewed long-term contracts with increased business, and more
opportunities are in the pipeline. While these wins are primarily
expected to benefit fiscal 2017 and 2018, they also are a key part
of our sales growth strategy in fiscal 2016.
"Actions taken under our cost reduction plan
yielded a significant reduction in selling, general and
administrative expenses in the fiscal 2016 first quarter compared
to the same period last year. We are delivering on our plan to take
out costs, while driving productivity improvements throughout the
company. Our site and supply consolidation activities are on
schedule; we have closed or consolidated 12 facilities, with more
planned this year as we reposition the company for efficiency and
growth, and to better serve our customers. In addition, we continue
to make headway with activities designed to improve inventory
management and cash flow, while better aligning our future
investments with the needs of our customers.”
Fiscal 2016 First Quarter
Results
Net sales in the fiscal 2016 first quarter were
$359.8 million, compared to $373.7 million in the prior-year first
quarter. Net sales excluding the impact of currency movements
decreased two percent in the fiscal 2016 first quarter, primarily
due to sales of approximately $19 million in the fiscal 2015 first
quarter under a large commercial hardware contract that ended on
March 31, 2015, as previously disclosed. Excluding the impact
of this contract and currency, sales were approximately three
percent higher in the fiscal 2016 first quarter due to growth in
several commercial and military contracts.
Adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) in the fiscal 2016 first
quarter were $45.6 million, compared with $48.8 million in the same
period last year. The decline was primarily due to a decrease in
gross profit, partially offset by a reduction in selling, general
and administrative expenses (SG&A).
Gross profit was nine percent lower in the first
quarter of fiscal 2016, compared to the same period last year,
principally due to the impact of the large commercial contract
discussed above and foreign currency movements.
SG&A in the fiscal 2016 first quarter
decreased 11 percent compared to the same period last year,
primarily due to lower personnel and related expenses resulting
from the company's cost reduction plan. SG&A as a percent of
sales was 16.5 percent in the first quarter compared to 17.8
percent in the same period last year.
Adjusted EBITDA was 12.7 percent of net sales in
the fiscal 2016 first quarter, compared to 13.1 percent in the same
period last year.
Adjusted diluted earnings per share of $0.25 in
the first quarter of fiscal 2016 was consistent with the same
period last year. Adjusted diluted earnings per share were impacted
by the same items discussed above in adjusted EBITDA, offset by
lower income tax and interest expense. The company's effective tax
rate in the first quarter of fiscal 2016 was reduced by a favorable
mix of taxable income across jurisdictions and discrete tax items.
Interest expense was lower as a result of debt repayments over the
past year.
Free cash flow was $9.5 million in the fiscal
2016 first quarter, compared with $10.0 million in the same period
last year.
Fiscal 2016 Outlook
Castagnola added, "We continue to expect the
underlying business to achieve above-market expansion through
focused sales activities, offsetting declines previously disclosed
to yield low single-digit net sales growth in fiscal 2016. We
remain on track to achieve cost savings of $25 million to $30
million, which we expect to be the primary driver of our EBITDA
margin improvement target of approximately 100 basis points in
fiscal 2016. We also continue to expect free cash flow to exceed
100 percent of net income."
Conference Call Information
Wesco Aircraft will hold a conference call to
discuss its fiscal 2016 first quarter results at 2:00 p.m. PST
(5:00 p.m. EST) today, February 4, 2016. The
conference call can be accessed by dialing 888-771-4371 (domestic)
or 847-585-4405 (international) and entering passcode 41684709.
The conference call will be simultaneously
broadcast on Wesco Aircraft’s Investor Relations website
(http://ir.wescoair.com).
Following the live webcast, a replay will be
available on the company’s website for one year. A telephonic
replay also will be available approximately two hours after the
conference call and may be accessed by dialing 888-843-7419
(domestic) or 630-652-3042 (international) and entering passcode
41684709. The telephonic replay will be available until
February 11, 2016 at 11:59 p.m. PST.
About Wesco Aircraft
Wesco Aircraft is one of the world’s largest
distributors and providers of comprehensive supply chain management
services to the global aerospace industry. The company’s services
range from traditional distribution to the management of supplier
relationships, quality assurance, kitting, just-in-time delivery
and point-of-use inventory management. The company believes it
offers one of the world’s broadest portfolios of aerospace
products, including chemical, electrical and C-class hardware and
comprised of more than 570,000 active SKUs.
To learn more about Wesco Aircraft, visit our
website at www.wescoair.com. Follow Wesco Aircraft on LinkedIn at
https://www.linkedin.com/company/wesco-aircraft-corp.
Non-GAAP Financial
Information
Adjusted EBITDA represents net income before:
(i) income tax provision, (ii) net interest expense,
(iii) depreciation and amortization and (iv) unusual or
non-recurring items.
Adjusted net income represents net income
before: (i) amortization of intangible assets,
(ii) amortization or write-off of deferred financing costs and
original issue discount, (iii) unusual or non-recurring items
and (iv) the tax effect of items (i) through
(iii) above calculated using an estimated effective tax
rate.
Adjusted basic earnings per share represents
basic earnings per share calculated using adjusted net income as
opposed to net income.
Adjusted diluted earnings per share represents
diluted earnings per share calculated using adjusted net income as
opposed to net income.
Net sales excluding currency effects represent
net sales for the fiscal 2016 first quarter translated at fiscal
2015 first quarter exchange rates.
Free cash flow represents cash from operations
less purchases of property and equipment.
Wesco Aircraft utilizes and discusses adjusted
EBITDA, adjusted net income, adjusted basic earnings per share,
adjusted diluted earnings per share, net sales excluding currency
effects and free cash flow, which are non-GAAP measures management
uses to evaluate the company’s business, because it believe these
measures assist investors and analysts in comparing the company’s
performance across reporting periods on a consistent basis by
excluding items that management does not believe are indicative of
core operating performance. Wesco Aircraft believes these metrics
are used in the financial community, and the company presents these
metrics to enhance understanding of its operating performance.
Readers should not consider adjusted EBITDA and adjusted net income
as alternatives to net income, determined in accordance with GAAP,
as an indicator of operating performance. Adjusted EBITDA, adjusted
net income, adjusted basic earnings per share, adjusted diluted
earnings per share, net sales excluding currency effects and free
cash flow are not measurements of financial performance under GAAP,
and these metrics may not be comparable to similarly titled
measures of other companies. See Exhibits 4 and 5 for
reconciliations of adjusted EBITDA, adjusted net income, adjusted
basic earnings per share, adjusted diluted earnings per share and
net sales excluding currency effects to the most directly
comparable financial measures calculated and presented in
accordance with GAAP.
Forward Looking Statements
This press release contains forward-looking
statements (including within the meaning of the Private Securities
Litigation Reform Act of 1995) concerning Wesco Aircraft
Holdings, Inc. These statements may discuss goals,
intentions and expectations as to future plans, trends, events,
results of operations or financial condition, or otherwise, based
on current beliefs of management, as well as assumptions made by,
and information currently available to, management. In some
cases, readers can identify forward-looking statements by the use
of forward-looking terms such as "achieve," “expect,” "future,"
"grow," "improve," “increase,” “outlook,” “plan,” “target,” “will,”
or similar words, phrases or expressions. These
forward-looking statements are subject to various risks and
uncertainties, many of which are outside the company’s
control. Therefore, the reader should not place undue reliance
on such statements.
Factors that could cause actual results to
differ materially from those in the forward-looking statements
include: general economic and industry conditions; conditions in
the credit markets; changes in military spending; risks unique to
suppliers of equipment and services to the U.S. government; risks
associated with the company’s long-term, fixed-price agreements
that have no guarantee of future sales volumes; risks associated
with the loss of significant customers, a material reduction in
purchase orders by significant customers or the delay, scaling back
or elimination of significant programs on which the company relies;
the company’s ability to effectively compete in its industry; the
company’s ability to effectively manage its inventory; the
company’s ability to fully integrate the acquired business of Haas
and realize anticipated benefits of the combined operations; risks
relating to unanticipated costs of integration; the company’s
suppliers’ ability to provide it with the products the company
sells in a timely manner, in adequate quantities and/or at a
reasonable cost; the company’s ability to maintain effective
information technology systems; the company’s ability to retain key
personnel; risks associated with the company’s international
operations, including exposure to foreign currency movements; risks
associated with assumptions the company makes in connection with
its critical accounting estimates (including goodwill) and legal
proceedings; the company’s dependence on third-party package
delivery companies; fuel price risks; the company’s ability to
establish and maintain effective internal control over financial
reporting; fluctuations in the company’s financial results from
period-to-period; environmental risks; risks related to the
handling, transportation and storage of chemical products; risks
related to the aerospace industry and the regulation thereof; risks
related to the company’s indebtedness; and other risks and
uncertainties.
The foregoing list of factors is not
exhaustive. The reader should carefully consider the foregoing
factors and the other risks and uncertainties that affect the
company’s business, including those described in Wesco Aircraft’s
Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K and other
documents filed from time to time with the Securities and Exchange
Commission. All forward-looking statements included in this
news release (including information included or incorporated by
reference herein) are based upon information available to the
company as of the date hereof, and the company undertakes no
obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Exhibits:
Exhibit 1: |
Consolidated Statements of
Income (Unaudited) |
Exhibit 2: |
Condensed Consolidated
Balance Sheets (Unaudited) |
Exhibit 3: |
Consolidated Statements of
Cash Flows (Unaudited) |
Exhibit 4: |
Non-GAAP Financial
Information (Unaudited) |
Exhibit 5: |
Non-GAAP Financial
Information – Net Sales excluding Currency Effects (Unaudited) |
|
|
Exhibit 1
|
Wesco Aircraft
Holdings, Inc. |
Consolidated
Statements of Income (UNAUDITED) |
(In thousands, except
share data) |
|
|
Three Months Ended |
|
December 31, 2015 |
|
December 31, 2014 |
Net sales |
$ |
359,843 |
|
|
$ |
373,696 |
|
Cost of sales |
263,214 |
|
|
267,772 |
|
Gross profit |
96,629 |
|
|
105,924 |
|
Selling, general and
administrative expenses |
59,545 |
|
|
66,633 |
|
Income from operations |
37,084 |
|
|
39,291 |
|
Interest expense, net |
(8,997 |
) |
|
(9,373 |
) |
Other income, net |
901 |
|
|
248 |
|
Income before income taxes |
28,988 |
|
|
30,166 |
|
Provision for income
taxes |
(8,379 |
) |
|
(10,436 |
) |
Net income |
$ |
20,609 |
|
|
$ |
19,730 |
|
Net income per share: |
|
|
|
Basic |
$ |
0.21 |
|
|
$ |
0.20 |
|
Diluted |
$ |
0.21 |
|
|
$ |
0.20 |
|
Weighted average shares
outstanding: |
|
|
|
Basic |
97,217,924 |
|
|
96,863,629 |
|
Diluted |
97,939,423 |
|
|
97,710,296 |
|
|
|
|
|
In fiscal 2015, the company revised its
presentation of certain personnel costs associated with service
contracts to correctly reflect them as cost of sales rather than
selling, general and administrative expenses. These personnel costs
totaled $5.9 million for the three months ended December 31,
2014. The reclassification had no impact on income from operations,
net income or EBITDA for the three months ended December 31,
2014.
Exhibit 2
|
Wesco Aircraft
Holdings, Inc. |
Condensed
Consolidated Balance Sheets (UNAUDITED) |
(In
thousands) |
|
|
December 31, 2015 |
|
September 30, 2015 |
Assets |
|
|
|
Cash and cash equivalents |
$ |
85,655 |
|
|
$ |
82,866 |
|
Accounts receivable, net |
238,099 |
|
|
253,348 |
|
Inventories |
723,607 |
|
|
701,535 |
|
Prepaid expenses and other current
assets |
12,711 |
|
|
10,004 |
|
Income taxes receivable |
138 |
|
|
187 |
|
Deferred tax assets, current |
89,184 |
|
|
89,401 |
|
Total current assets |
1,149,394 |
|
|
1,137,341 |
|
Long-term assets |
880,364 |
|
|
883,632 |
|
Total assets |
$ |
2,029,758 |
|
|
$ |
2,020,973 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
Accounts payable |
$ |
165,778 |
|
|
$ |
149,615 |
|
Accrued expenses and other current
liabilities |
29,883 |
|
|
38,896 |
|
Income taxes payable |
10,916 |
|
|
21,442 |
|
Capital lease obligations, current
portion |
1,142 |
|
|
1,044 |
|
Long-term debt, current
portion |
3,594 |
|
|
— |
|
Total current liabilities |
211,313 |
|
|
210,997 |
|
Capital lease obligations, less
current portion |
1,588 |
|
|
1,824 |
|
Long-term debt, less current
portion |
944,312 |
|
|
952,906 |
|
Deferred tax liabilities,
non-current |
32,272 |
|
|
30,693 |
|
Other liabilities |
5,961 |
|
|
6,980 |
|
Total long-term liabilities |
984,133 |
|
|
992,403 |
|
Total liabilities |
1,195,446 |
|
|
1,203,400 |
|
Total stockholders’ equity |
834,312 |
|
|
817,573 |
|
Total liabilities and stockholders’
equity |
$ |
2,029,758 |
|
|
$ |
2,020,973 |
|
|
Exhibit 3
|
Wesco Aircraft
Holdings, Inc. |
Consolidated
Statements of Cash Flows (UNAUDITED) |
(In
thousands) |
|
|
Three Months Ended |
|
December 31, 2015 |
|
December 31, 2014 |
Cash flows from
operating activities |
|
|
|
Net income |
$ |
20,609 |
|
|
$ |
19,730 |
|
Adjustments to reconcile net income
to net cash provided by (used in) operating activities |
|
|
|
Depreciation and amortization |
6,997 |
|
|
6,582 |
|
Deferred financing costs |
828 |
|
|
1,019 |
|
Bad debt and sales return
reserve |
374 |
|
|
1,027 |
|
Inventory reserves |
2,049 |
|
|
4,068 |
|
Stock-based compensation
expense |
2,194 |
|
|
2,210 |
|
Excess tax benefit related to
stock-based incentive plans |
(84 |
) |
|
(105 |
) |
Deferred income taxes |
1,731 |
|
|
40 |
|
Income from equity investment |
(300 |
) |
|
(152 |
) |
Other non-cash items |
(679 |
) |
|
(2,747 |
) |
Changes in assets and
liabilities |
|
|
|
Accounts receivable |
14,205 |
|
|
11,138 |
|
Inventories |
(26,549 |
) |
|
(50,982 |
) |
Prepaid expenses and other
assets |
(8,114 |
) |
|
(3,237 |
) |
Income taxes receivable |
49 |
|
|
4,304 |
|
Accounts payable |
16,311 |
|
|
18,241 |
|
Accrued expenses and other
liabilities |
(8,523 |
) |
|
214 |
|
Income taxes payable |
(10,434 |
) |
|
(33 |
) |
Net cash provided by operating
activities |
10,664 |
|
|
11,317 |
|
Cash flows from
investing activities |
|
|
|
Purchase of property and
equipment |
(1,162 |
) |
|
(1,299 |
) |
Acquisition of business, net of
cash acquired |
— |
|
|
(250 |
) |
Net cash used in investing
activities |
(1,162 |
) |
|
(1,549 |
) |
Cash flows from
financing activities |
|
|
|
Repayment of long-term debt |
(5,000 |
) |
|
(15,000 |
) |
Repayment of capital lease
obligations |
(722 |
) |
|
(403 |
) |
Excess tax benefit related to
stock-based incentive plans |
84 |
|
|
105 |
|
Net proceeds from issuance of
common stock |
150 |
|
|
178 |
|
Net cash used in financing
activities |
(5,488 |
) |
|
(15,120 |
) |
Effect of foreign currency exchange
rate on cash and cash equivalents |
(1,225 |
) |
|
289 |
|
Net increase (decrease) in cash and
cash equivalents |
2,789 |
|
|
(5,063 |
) |
Cash and cash equivalents,
beginning of period |
82,866 |
|
|
104,775 |
|
Cash and cash equivalents, end of
period |
$ |
85,655 |
|
|
$ |
99,712 |
|
|
Exhibit 4
|
Wesco Aircraft
Holdings, Inc. |
Non-GAAP
Financial Information (UNAUDITED) |
(In thousands,
except share data) |
|
|
Three Months Ended |
|
December 31, 2015 |
|
December 31, 2014 |
EBITDA &
Adjusted EBITDA |
|
|
|
Net income |
$ |
20,609 |
|
|
$ |
19,730 |
|
Provision for income
taxes |
8,379 |
|
|
10,436 |
|
Interest expense, net |
8,997 |
|
|
9,373 |
|
Depreciation and
amortization |
6,997 |
|
|
6,582 |
|
EBITDA |
44,982 |
|
|
46,121 |
|
Unusual or non-recurring
items |
629 |
|
|
2,694 |
|
Adjusted
EBITDA |
$ |
45,611 |
|
|
$ |
48,815 |
|
|
|
|
|
Adjusted Net
Income |
|
|
|
Net income |
$ |
20,609 |
|
|
$ |
19,730 |
|
Amortization of intangible
assets |
3,963 |
|
|
4,008 |
|
Amortization of deferred
financing costs |
828 |
|
|
1,019 |
|
Unusual or non-recurring
items |
629 |
|
|
2,694 |
|
Adjustments for tax
effect |
(1,856 |
) |
|
(2,822 |
) |
Adjusted Net Income |
$ |
24,173 |
|
|
$ |
24,629 |
|
|
|
|
|
Adjusted Basic
Earnings Per Share |
|
|
|
Weighted-average number of
basic shares outstanding |
97,217,924 |
|
|
96,863,629 |
|
Adjusted Net Income Per
Basic Shares |
$ |
0.25 |
|
|
$ |
0.25 |
|
|
|
|
|
Adjusted Diluted
Earnings Per Share |
|
|
|
Weighted-average number of
diluted shares outstanding |
97,939,423 |
|
|
97,710,296 |
|
Adjusted Net Income Per
Diluted Shares |
$ |
0.25 |
|
|
$ |
0.25 |
|
|
|
|
|
|
|
|
|
Exhibit 5
|
Wesco Aircraft
Holdings, Inc. |
Non-GAAP
Financial Information - Net Sales excluding Currency Effects
(UNAUDITED) |
(Dollars in
thousands) |
|
|
Three Months Ended |
|
|
|
|
|
December 31, 2015 |
|
December 31, 2014 |
|
Increase(Decrease) |
|
PercentChange |
Net sales |
$ |
359,843 |
|
|
$ |
373,696 |
|
|
$ |
(13,853 |
) |
|
|
(3.7 |
)% |
Currency effects |
6,257 |
|
|
— |
|
|
6,257 |
|
|
|
Net sales excluding
currency effects |
$ |
366,100 |
|
|
$ |
373,696 |
|
|
$ |
(7,596 |
) |
|
|
(2.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact Information:
Jeff Misakian
Vice President, Investor Relations
661-362-6847
Jeff.Misakian@wescoair.com
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