UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 4, 2016
Wesco Aircraft Holdings, Inc.
(Exact name of registrant as specified in its charter)
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DELAWARE | | 001-35253 | | 20-5441563 |
(State or Other Jurisdiction of Incorporation) | | (Commission File Number) | | (IRS Employer Identification No.) |
24911 Avenue Stanford
Valencia, California 91355
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (661) 775-7200
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On February 4, 2016, Wesco Aircraft Holdings, Inc. (the “Company”) announced its financial results for the fiscal quarter ended December 31, 2015. The full text of the press release issued by the Company in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K. Following the publication of this earnings release, the Company is scheduled to host an earnings call at 2:00 pm (PST) or 5:00 pm (EST) on February 4, 2016 to discuss its financial results for the fiscal quarter ended December 31, 2015. The investor presentation materials used for the call are attached as Exhibit 99.2 hereto.
On February 4, 2016, the Company posted the materials attached as Exhibits 99.1 and 99.2 on its website (www.wescoair.com).
The information in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2) is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit Number | | Description |
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99.1 | | Press Release, issued by the Company on February 4, 2016 |
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99.2 | | Investor Presentation Materials for the Earnings Conference Call |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | WESCO AIRCRAFT HOLDINGS, INC. |
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Date: | February 4, 2016 | By: | /s/ Richard J. Weller |
| | | Richard J. Weller Executive Vice President and Chief Financial Officer |
EXHIBIT INDEX
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Exhibit Number | | Description |
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99.1 Press Release, issued by the Company on February 4, 2016
99.2 Investor Presentation Materials for the Earnings Conference Call
Exhibit 99.1
Wesco Aircraft Holdings Reports
Fiscal 2016 First Quarter Results
VALENCIA, Calif., February 4, 2016 — 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.
###
Contact Information:
Jeff Misakian
Vice President, Investor Relations
661-362-6847
Jeff.Misakian@wescoair.com
Exhibits:
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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)
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| | | | | | | |
| 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 |
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| | | |
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)
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| | | | | | | |
| 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 |
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Long-term assets | 880,364 |
| | 883,632 |
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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 |
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Long-term debt, less current portion | 944,312 |
| | 952,906 |
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Deferred tax liabilities, non-current | 32,272 |
| | 30,693 |
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Other liabilities | 5,961 |
| | 6,980 |
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Total long-term liabilities | 984,133 |
| | 992,403 |
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Total liabilities | 1,195,446 |
| | 1,203,400 |
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Total stockholders’ equity | 834,312 |
| | 817,573 |
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Total liabilities and stockholders’ equity | $ | 2,029,758 |
| | $ | 2,020,973 |
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Exhibit 3
Wesco Aircraft Holdings, Inc.
Consolidated Statements of Cash Flows (UNAUDITED)
(In thousands)
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| 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 |
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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)
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| | | | | | | |
| 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 |
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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)
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| | | | | | | | | | | | | |
| Three Months Ended | | | | |
| December 31, 2015 | | December 31, 2014 | | Increase (Decrease) | | Percent Change |
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)% |
Q1 2016 EARNINGS CALL PRESENTATION February 4, 2016 Dave Castagnola President and Chief Executive Officer Rick Weller Executive Vice President and Chief Financial Officer
Wesco Aircraft Private & Proprietary Visit www.wescoair.com Disclaimer 2 Wesco Aircraft - Investor Relations This presentation contains forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning Wesco Aircraft Holdings, Inc. (“Wesco Aircraft “ or the “Company”). 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, you can identify forward-looking statements by words such as “achieve,” “aim,” “anticipate,” “expect,” “future,” “grow,” “improve,” “increase,” “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, you 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. You should carefully consider the foregoing factors and the other risks and uncertainties that affect the Company’s business, including those described in the Company’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 presentation (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. The Company utilizes and discusses Adjusted EBITDA, Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Net Sales Excluding Currency Effects, Adjusted Selling, General and Administrative Expenses and Free Cash Flow, which are non-GAAP measures its management uses to evaluate its business, because the Company believes they assist investors and analysts in comparing its performance across reporting periods on a consistent basis by excluding items that the Company does not believe are indicative of its core operating performance. The Company believes these metrics are used in the financial community, and the Company presents these metrics to enhance investors’ understanding of its operating performance. You 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 EPS, Adjusted Diluted EPS, Net Sales Excluding Currency Effects, Adjusted Selling, General and Administrative Expenses 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 the Appendix for a reconciliation of Adjusted EBITDA, Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Net Sales Excluding Currency Effects and Adjusted Selling, General and Administrative Expenses to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Wesco Aircraft Private & Proprietary Visit www.wescoair.com 1Q16 Summary 3 Wesco Aircraft - Investor Relations $373.7 $359.8 Q1 2015 Q1 2016 $48.8 $45.6 Q1 2015 Q1 2016 $0.25 $0.25 Q1 2015 Q1 2016 Focused Execution Driving Incremental Earnings Leverage * See appendix for reconciliation and information regarding non-GAAP measures. Net Sales ($M) Adjusted Diluted EPS* Adjusted EBITDA ($M)*
Improved underlying sales momentum/pipeline Materials management and demand planning progressing Focus on cost reduction and productivity improvement Site and supply consolidation on schedule Enhancements in facility structure and flow 4 Highlights Wesco Aircraft - Investor Relations Wesco Aircraft Private & Proprietary Visit www.wescoair.com Progress Across Business Functions Positioned Well in Expanding Markets
Strategic customer accounts recording wins Pipeline expanding, opportunities at various stages Key part of fiscal 2016 growth strategy Primary benefit expected in fiscal 2017/2018 Regional sales – supporting ad hoc and LTA opportunities MRO – increased focus, strong upside potential 5 Sales Highlights Wesco Aircraft - Investor Relations Wesco Aircraft Private & Proprietary Visit www.wescoair.com Service Offering Demonstrates Value Proposition Sales Momentum Improving
Working to align inventory to demand Item categorization – linking deliveries to period of supply Standardization and focused procurement metrics Demand planning improvements Strategic sourcing initiatives underway 6 Materials Management Wesco Aircraft - Investor Relations Wesco Aircraft Private & Proprietary Visit www.wescoair.com Improve Material Acquisition and Working Capital Efficiency Materials Management Progressing
Cost reduction actions drive significantly lower SG&A Site and supply consolidation progressing on schedule – Closed/consolidated 12 facilities to-date – Facility structure enhancements Productivity improvements across functions 7 Cost and Efficiency Improvements Wesco Aircraft - Investor Relations Wesco Aircraft Private & Proprietary Visit www.wescoair.com Delivering Cost Savings Commitment Performance Metrics to Drive Success
Net sales decline of 4% Net sales excluding FX down 2%* due to end of large commercial contract ($19M) in FY15 Rest of portfolio up ~3% Growth in long-term commercial and military contracts Ad hoc/contract split consistent year/year Wesco Aircraft Private & Proprietary Visit www.wescoair.com 1Q16 Financial Results 8 Wesco Aircraft - Investor Relations $373.7 $359.8 Q1 2015 Q1 2016 Net Sales ($M) * See appendix for reconciliation and information regarding non-GAAP measures.
Wesco Aircraft Private & Proprietary Visit www.wescoair.com 1Q16 Financial Results Adjusted EBITDA margin 40 bps lower Large commercial contract and FX Partially offset by lower SG&A Gross margin down 140 bps Contract margin expansion partially offsets large contract and FX above SG&A as percent of sales 130 bps lower Primarily people-related costs Adjusted diluted EPS flat Adjusted EBITDA decline, offset by Lower interest and tax expense 9 Wesco Aircraft - Investor Relations $0.25 $0.25 Q1 2015 Q1 2016 Adjusted Diluted EPS* $48.8 $45.6 Q1 2015 Q1 2016 Adjusted EBITDA ($M)* * See appendix for reconciliation and information regarding non-GAAP measures. ** As a percent of net sales 13.1%** 12.7%**
Wesco Aircraft Private & Proprietary Visit www.wescoair.com 1Q16 Segments: North America 10 Net sales down 3%, primarily due to large contract ($15M) Rest of segment up ~2% Adjusted EBITDA margin down 130 bps Net sales impact Partially offset by lower SG&A Wesco Aircraft - Investor Relations * See appendix for reconciliation and information regarding non-GAAP measures. ** As a percent of net sales. $295.7 $287.0 Q1 2015 Q1 2016 Net Sales ($M) $39.9 $35.1 Q1 2015 Q1 2016 Adjusted EBITDA ($M)* 13.5%** 12.2%**
Adjusted EBITDA ($M)* $8.9 $10.5 Q1 2015 Q1 2016 11.4%** 14.5%** Net Sales ($M) $78.0 $72.9 Q1 2015 Q1 2016 Wesco Aircraft Private & Proprietary Visit www.wescoair.com 1Q16 Segments: Rest of World 11 Net sales down 7% Large contract ($4M) ~6 points Currency ~8 points Rest of portfolio up ~7% Adjusted EBITDA margin up 310 bps Improving underlying sales Lower SG&A Wesco Aircraft - Investor Relations * See appendix for reconciliation and information regarding non-GAAP measures. ** As a percent of net sales.
Wesco Aircraft Private & Proprietary Visit www.wescoair.com Financial Summary 12 * Cash provided by operating activities less purchases of property & equipment Wesco Aircraft - Investor Relations (Dollars in Millions) Dec 31, 2015 Sept 30, 2015 Dec 31, 2014 At period end: Cash and cash equivalents $85.7 $82.9 $99.7 Net inventory 723.6 701.5 800.9 Total debt 947.9 952.9 1,087.7 Total stockholders’ equity 834.3 817.6 1,002.9 Quarter ended: Free cash flow* 9.5 52.4 10.0 Adjusted net income 24.2 26.5 24.6 Cash flow conversion 39% 198% 41%
13 Fiscal 2016 Outlook Wesco Aircraft - Investor Relations Wesco Aircraft Private & Proprietary Visit www.wescoair.com Net sales percentage growth Low Single-Digit Underlying growth Stronger second-half expected Above Market SG&A reduction $25-30M Reduction in headcount, sites and spend $10M from non-recurring items Adjusted EBITDA margin improvement ~100 bps Primarily through SG&A reductions Free cash flow conversion >100% Primary usage to pay down debt Other items Interest expense Capital expenditures Effective tax rate $35-40M $10-15M 32-33% On Track to Achieve Fiscal 2016 Goals
Improving sales momentum Materials management progress Cost reductions delivered Performance-based culture Balance short-term execution with long-term strategic planning Concluding Remarks 14 Wesco Aircraft Private & Proprietary Visit www.wescoair.com Building on a Strong Foundation
APPENDIX 15
Wesco Aircraft Private & Proprietary Visit www.wescoair.com Non-GAAP Financial Information 16 Wesco Aircraft - Investor Relations ‘‘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 assumed effective tax rate. “Adjusted Basic EPS” represents Basic EPS calculated using Adjusted Net Income as opposed to Net Income. “Adjusted Diluted EPS” represents Diluted EPS calculated using Adjusted Net Income as opposed to Net Income. “Net Sales Excluding Currency Effects” represents net sales for the fiscal 2016 first quarter translated at fiscal 2015 first quarter exchange rates. “Adjusted Selling, General and Administrative Expenses” represents Selling, General and Administrative expenses less (i) restructuring and other costs and (ii) amortization of intangible assets. “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 EPS, Adjusted Diluted EPS, Net Sales Excluding Currency Effects, Adjusted Selling, General and Administrative Expenses and Free Cash Flow, which are non-GAAP measures our management uses to evaluate our business, because we believe they assist investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. We believe these metrics are used in the financial community, and we present these metrics to enhance investors’ understanding of our operating performance. You 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 EPS, Adjusted Diluted EPS, Net Sales Excluding Currency Effects, Adjusted Selling, General and Administrative Expenses 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 following slides for a reconciliation of Adjusted EBITDA, Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Net Sales Excluding Currency Effects and Adjusted Selling, General and Administrative Expenses to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Non-GAAP Financial Information 17 Wesco Aircraft - Investor Relations Wesco Aircraft Private & Proprietary Visit www.wescoair.com 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
Non-GAAP Financial Information 18 Wesco Aircraft - Investor Relations Wesco Aircraft Private & Proprietary Visit www.wescoair.com December 31, 2015 December 31, 2014 Increase / (Decrease) Percent Change Consolidated 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% Rest of World Net sales $72,883 $77,971 ($5,088) -6.5% Currency effects 6,257 - 6,257 Net sales excluding currency effects $79,140 $77,971 $1,169 1.5% Wesco Aircraft Holdings, Inc. Non-GAAP Financial Information (UNAUDITED) (In thousands) Three Months Ended
Non-GAAP Financial Information 19 Wesco Aircraft - Investor Relations Wesco Aircraft Private & Proprietary Visit www.wescoair.com December 31, 2015 December 31, 2014 Consolidated 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 44,983 46,121 Unusual or non-recurring items 629 2,694 Adjusted EBITDA $45,612 $48,815 North America EBITDA & Adjusted EBITDA Net income $14,276 $15,197 Provision for income taxes 6,412 8,508 Interest expense, net 7,799 8,041 Depreciation and amortization 5,953 5,492 EBITDA 34,441 37,238 Unusual or non-recurring items 629 2,649 Adjusted EBITDA $35,070 $39,887 Rest of World EBITDA & Adjusted EBITDA Net income $6,333 $4,533 Provision for income taxes 1,967 1,928 Interest expense, net 1,198 1,332 Depreciation and amortization 1,044 1,090 EBITDA 10,542 8,882 Unusual or non-recurring items - 45 Adjusted EBITDA $10,542 $8,927 Wesco Aircraft Holdings, Inc. Non-GAAP Financial Information (UNAUDITED) (In thousands) Three Months Ended
Non-GAAP Financial Information 20 Wesco Aircraft - Investor Relations Wesco Aircraft Private & Proprietary Visit www.wescoair.com December 31, December 31, 2015 2014 Net sales $359,843 $373,696 Adjusted selling, general and administrative expenses (SG&A) As reported $59,545 $66,633 Amortization of intangible assets (3,963) (4,008) Unusual or non-recurring items (629) (2,694) As adjusted $54,953 $59,931 Adjusted SG&A as a percent of net sales 15.3% 16.0% Wesco Aircraft Holdings, Inc. Non-GAAP Financial Information (UNAUDITED) (In thousands) Three Months Ended
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