Wesco Aircraft Holdings, Inc. (NYSE:WAIR), one of the world's
leading distributors and providers of comprehensive supply chain
management services to the global aerospace industry, today
announced results for its fiscal 2018 first quarter ended December
31, 2017.
Fiscal 2018 First Quarter Highlights
- Net sales of $363.1 million, up 7.0 percent
- Net loss of $0.4 million, including additional tax expense of
$9.1 million from enactment of the Tax Cuts and Jobs Act of
2017
- Adjusted net income(1) of $14.5 million, or $0.15 per diluted
share
- Adjusted earnings before interest, taxes, depreciation and
amortization(1) (EBITDA) of $35.0 million, or 9.6 percent of net
sales
Todd Renehan, chief executive officer, said,
“Results in the fiscal 2018 first quarter reflect improved sales
and operating performance, consistent with the recovery in leading
indicators that began in the fourth quarter of fiscal 2017. The
increase in sales compared to the first quarter of last year was
primarily due to new business and higher volumes on hardware and
chemical contracts, and to a lesser extent, better ad-hoc sales
performance. Expenses reflect investments made in the second half
of fiscal 2017 and consulting costs incurred in the first quarter
of fiscal 2018 to support improvement initiatives. While our fiscal
2018 first quarter results are promising, more work is needed to
sustain and further improve our performance to-date.
“The comprehensive business assessment that we
initiated in the first quarter is progressing well. We’re very
encouraged with the assessment’s findings, which reinforce our
belief that significant opportunities exist to reduce costs and
enhance margins. We are digging deeper into the next level of
details to further validate our view of the scope, impact and
timing of improvement plan initiatives, while at the same time
initiating projects in several key areas. We plan to provide
details of these broader initiatives and their expected financial
impact in our fiscal 2018 second quarter earnings
announcement.”
Fiscal 2018 First Quarter
Results
Net sales of $363.1 million in the fiscal 2018
first quarter were 7.0 percent higher than the same period last
year, primarily due to an increase in long-term contracts and
growth in ad-hoc sales. The increase in contract sales primarily
reflects new business revenue and higher hardware and chemical
content. Ad-hoc sales growth was primarily due to improved service
performance and growth at key customers.
Gross profit was $94.4 million in the first
quarter of fiscal 2018, compared with $89.5 million in the fiscal
2017 first quarter. Gross margin was 26.0 percent in the fiscal
2018 first quarter, compared with 26.4 percent in the same period
last year. The lower gross margin primarily reflects a decline in
chemical margins and a slightly negative impact from mix.
Selling, general and administrative (SG&A)
expenses totaled $69.9 million in the fiscal 2018 first quarter
compared with $63.2 million in the same period last year. The
increase in SG&A expenses was primarily due to investments made
in the second half of fiscal 2017 to stabilize the business and
support growth, as well as higher consulting costs in the fiscal
2018 first quarter associated with the company’s improvement
initiatives. SG&A expense as a percentage of net sales was 19.2
percent in the fiscal 2018 first quarter, compared with 18.6
percent in the same period last year.
Income from operations totaled $24.6 million, or
6.8 percent of net sales, in the fiscal 2018 first quarter,
compared with $26.3 million, or 7.7 percent of net sales, in the
same period last year. The decline in operating income reflects
higher SG&A expenses, partially offset by an increase in gross
profit.
The company's effective tax rate in the first
quarter of fiscal 2018 includes additional tax expense of $9.1
million associated with the enactment of the Tax Cuts and Jobs Act
in the period. Excluding this expense, the company’s effective tax
rate in fiscal 2018 is expected to be approximately 28-29
percent.
Net loss was $0.4 million in the fiscal 2018
first quarter, essentially break-even on a per-share basis. This
compares with net income of $13.1 million, or $0.13 per diluted
share, in the same period last year. Adjusted net income(1) was
$14.5 million, or $0.15 per diluted share, compared with $18.5
million, or $0.19 per diluted share, in the same period last
year.
Adjusted EBITDA(1) in the fiscal 2018 first
quarter was $35.0 million, compared with $34.3 million in the same
period last year. Adjusted EBITDA margin(1) was 9.6 percent,
compared with 10.1 percent in the same period last year.
Net cash used in operating activities totaled
$29.9 million in the fiscal 2018 first quarter compared with $28.1
million in the same period last year. Free cash flow was negative
$31.2 million in the fiscal 2018 first quarter, compared with
negative free cash flow of $29.4 million in the same period last
year.
Fiscal 2018 Outlook
The company continues to target a low
single-digit percentage increase in net sales year-over-year in
fiscal 2018, as well as a low double-digit percentage increase in
adjusted EBITDA year-over-year in fiscal 2018. The company also
continues to expect that it will end the fiscal year at an adjusted
EBITDA margin run-rate of more than 10 percent.
Conference Call Information
Wesco Aircraft will hold a conference call to
discuss its fiscal 2018 first quarter results at 2:00 p.m. PST
(5:00 p.m. EST) today, February 8, 2018. The conference
call can be accessed by dialing 866-763-0010 (domestic) or
703-871-3797 (international) and entering passcode 3079308.
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 855-859-2056
(domestic) or 404-537-3406 (international) and entering passcode
3079308. The telephonic replay will be available until
February 15, 2018 at 11:59 p.m. EST.
About Wesco Aircraft
Wesco Aircraft is one of the world’s leading
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,
chemical management services, third-party logistics or fourth-party
logistics and point-of-use inventory management. The company
believes it offers one of the world’s broadest portfolios of
aerospace products, including C-class hardware, chemical and
electrical and comprised of more than 565,000 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.
Footnotes
(1) Non-GAAP financial measure – see the tables
following this press release for reconciliations of GAAP to
non-GAAP results.
Non-GAAP Financial
Information
Adjusted net income represents net (loss) income
before: (i) amortization of intangible assets,
(ii) amortization or write-off of deferred issuance costs,
(iii) special items and (iv) the tax effect of items
(i) through (iii) above calculated using an estimated
effective tax rate.
Adjusted basic earnings per share represent
basic earnings per share calculated using adjusted net income as
opposed to net income.
Adjusted diluted earnings per share represent
diluted earnings per share calculated using adjusted net income as
opposed to net income.
Adjusted EBITDA represents net (loss) income
before: (i) income tax (benefit) provision, (ii) net interest
expense, (iii) depreciation and amortization and (iv) special
items.
Adjusted EBITDA margin represents adjusted
EBITDA divided by net sales.
Free cash flow represents net cash (used in)
provided by operating activities less purchases of property and
equipment.
Wesco Aircraft utilizes and discusses adjusted
net income, adjusted basic earnings per share, adjusted diluted
earnings per share, adjusted EBITDA, adjusted EBITDA margin and
free cash flow, which are non-GAAP measures management uses to
evaluate the company’s business, because it believes 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
the company’s 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 (loss) income,
determined in accordance with GAAP, as an indicator of operating
performance. Adjusted net income, adjusted basic earnings per
share, adjusted diluted earnings per share, adjusted EBITDA,
adjusted EBITDA margin 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
tables following this press release for reconciliations of adjusted
net income, adjusted basic earnings per share, adjusted diluted
earnings per share, adjusted EBITDA, adjusted EBITDA margin and
free cash flow 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 “believe,” “continue,” “enhance,”
“expect,” “impact,” “improve,” “increase,” “indicator,”
“initiative,” “outlook,” “plan,” “progress,” “reduce,” “sustain,”
“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 these forward-looking statements include,
but are not limited to, the following: 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
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, excess and
obsolete inventory and valuation allowance of the company’s
deferred tax assets) and legal proceedings; changes in U.S. tax
law; the company’s dependence on third-party package delivery
companies; fuel price risks; 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 MisakianVice
President, Investor
Relations661-362-6847Jeff.Misakian@wescoair.com
|
Wesco Aircraft
Holdings, Inc. |
Consolidated Statements of (Loss) Income
(UNAUDITED) |
(In thousands, except share data) |
|
|
|
Three Months EndedDecember
31, |
|
2017 |
|
2016 |
Net sales |
$ |
363,091 |
|
|
$ |
339,371 |
|
Cost of sales |
268,667 |
|
|
249,914 |
|
Gross
profit |
94,424 |
|
|
89,457 |
|
Selling, general and
administrative expenses |
69,852 |
|
|
63,201 |
|
Income
from operations |
24,572 |
|
|
26,256 |
|
Interest expense,
net |
(11,838 |
) |
|
(11,073 |
) |
Other income, net |
260 |
|
|
288 |
|
Income
before income taxes |
12,994 |
|
|
15,471 |
|
Provision for income
taxes |
(13,368 |
) |
|
(2,364 |
) |
Net
(loss) income |
$ |
(374 |
) |
|
$ |
13,107 |
|
|
|
|
|
Net (loss) income per
share: |
|
|
|
Basic |
$ |
(0.00 |
) |
|
$ |
0.13 |
|
Diluted |
$ |
(0.00 |
) |
|
$ |
0.13 |
|
Weighted average shares
outstanding: |
|
|
|
Basic |
99,096,914 |
|
|
98,319,926 |
|
Diluted |
99,096,914 |
|
|
98,821,794 |
|
|
|
|
|
|
|
|
Wesco Aircraft
Holdings, Inc. |
Condensed Consolidated Balance Sheets
(UNAUDITED) |
(In thousands) |
|
|
|
|
|
December 31, 2017 |
|
September 30, 2017 |
Assets |
|
|
|
Cash and
cash equivalents |
$ |
41,948 |
|
|
$ |
61,625 |
|
Accounts
receivable, net |
253,602 |
|
|
256,301 |
|
Inventories |
856,253 |
|
|
827,870 |
|
Prepaid
expenses and other current assets |
16,542 |
|
|
13,733 |
|
Income
taxes receivable |
3,057 |
|
|
3,617 |
|
Total
current assets |
1,171,402 |
|
|
1,163,146 |
|
Long-term
assets |
586,884 |
|
|
590,961 |
|
Total
assets |
$ |
1,758,286 |
|
|
$ |
1,754,107 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
Accounts
payable |
$ |
161,684 |
|
|
$ |
184,273 |
|
Accrued
expenses and other current liabilities |
33,896 |
|
|
35,329 |
|
Income
taxes payable |
5,614 |
|
|
3,290 |
|
Capital
lease obligations, current portion |
3,153 |
|
|
2,952 |
|
Short-term borrowings and current portion of long-term debt |
94,000 |
|
|
75,000 |
|
Total
current liabilities |
298,347 |
|
|
300,844 |
|
Capital
lease obligations, less current portion |
2,950 |
|
|
2,013 |
|
Long-term
debt, less current portion |
783,673 |
|
|
788,838 |
|
Deferred
income taxes |
3,797 |
|
|
3,197 |
|
Other
liabilities |
17,109 |
|
|
9,484 |
|
Total
liabilities |
1,105,876 |
|
|
1,104,376 |
|
Total
stockholders’ equity |
652,410 |
|
|
649,731 |
|
Total
liabilities and stockholders’ equity |
$ |
1,758,286 |
|
|
$ |
1,754,107 |
|
|
|
|
|
|
|
|
|
|
Wesco Aircraft
Holdings, Inc. |
Condensed Consolidated Statements of Cash Flows
(UNAUDITED) |
(In thousands) |
|
|
|
Three Months EndedDecember
31, |
|
2017 |
|
2016 |
Cash flows from
operating activities |
|
|
|
Net
(loss) income |
$ |
(374 |
) |
|
$ |
13,107 |
|
Adjustments to reconcile net income to net cash used in operating
activities |
|
|
|
Depreciation and amortization |
7,256 |
|
|
6,729 |
|
Amortization of deferred debt issuance costs |
1,508 |
|
|
3,202 |
|
Stock-based compensation expense |
1,815 |
|
|
2,690 |
|
Inventory
provision |
4,443 |
|
|
2,166 |
|
Deferred
income taxes |
593 |
|
|
491 |
|
Other
non-cash items |
59 |
|
|
(681 |
) |
Subtotal |
15,300 |
|
|
27,704 |
|
Changes
in assets and liabilities |
|
|
|
Accounts
receivable |
2,020 |
|
|
(2,159 |
) |
Inventories |
(32,960 |
) |
|
(44,335 |
) |
Other
current and long-term assets |
(2,492 |
) |
|
(7,667 |
) |
Accounts
payable |
(22,315 |
) |
|
(8,334 |
) |
Other
current and long-term liabilities |
10,567 |
|
|
6,705 |
|
Net cash
used in operating activities |
(29,880 |
) |
|
(28,086 |
) |
Cash flows from
investing activities |
|
|
|
Purchase
of property and equipment |
(1,335 |
) |
|
(1,316 |
) |
Net cash
used in investing activities |
(1,335 |
) |
|
(1,316 |
) |
Cash flows from
financing activities |
|
|
|
Proceeds
from short-term borrowings |
46,000 |
|
|
25,000 |
|
Repayment
of short-term borrowings |
(27,000 |
) |
|
(5,000 |
) |
Repayment
of borrowings and capital lease obligations |
(5,547 |
) |
|
(6,674 |
) |
Debt
issuance costs |
(1,900 |
) |
|
(10,462 |
) |
Net cash
(used for) from activities related to stock-based incentive
plans |
(26 |
) |
|
2,277 |
|
Net cash
provided by financing activities |
11,527 |
|
|
5,141 |
|
Effect of
foreign currency exchange rate on cash and cash equivalents |
11 |
|
|
(1,608 |
) |
Net
decrease in cash and cash equivalents |
(19,677 |
) |
|
(25,869 |
) |
Cash and
cash equivalents, beginning of period |
61,625 |
|
|
77,061 |
|
Cash and
cash equivalents, end of period |
$ |
41,948 |
|
|
$ |
51,192 |
|
|
|
|
|
|
|
|
|
|
Wesco Aircraft Holdings, Inc. |
Non-GAAP Financial Information - Adjusted Net
Income and |
Adjusted Earnings Per Share
(UNAUDITED) |
(Dollars in thousands, except share
data) |
|
|
|
Three Months EndedDecember
31, |
|
2017 |
|
2016 |
Net
Sales |
$ |
363,091 |
|
|
$ |
339,371 |
|
|
|
|
|
Adjusted Net
Income |
|
|
|
Net (loss) income |
$ |
(374 |
) |
|
$ |
13,107 |
|
Amortization of
intangible assets |
3,714 |
|
|
3,721 |
|
Amortization of
deferred debt issuance costs |
1,508 |
|
|
3,202 |
|
Special items (1) |
2,914 |
|
|
1,015 |
|
Adjustments for tax
effect (2) |
6,696 |
|
|
(2,547 |
) |
Adjusted net
income |
$ |
14,458 |
|
|
$ |
18,498 |
|
|
|
|
|
Adjusted
Earnings Per Share |
|
|
|
Weighted-average number
of basic shares outstanding |
99,096,914 |
|
|
98,319,926 |
|
Adjusted net income per
basic share |
$ |
0.15 |
|
|
$ |
0.19 |
|
|
|
|
|
Adjusted
Diluted Earnings Per Share |
|
|
|
Weighted-average number
of diluted shares outstanding |
99,096,914 |
|
|
98,821,794 |
|
Adjusted net income per
diluted share |
$ |
0.15 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
(1) Special items in the first quarter of fiscal 2018 consisted
of consulting fees associated with the company’s improvement
activities of $1.6 million, settlement of litigation and related
fees of $1.1 million and other expenses of $0.2 million. Special
items in the first quarter of fiscal 2017 consisted of business
realignment and other expenses of $1.0 million.
(2) The adjustments for tax effect in the first quarter of
fiscal 2018 included an estimated $9.1 million tax provision on
foreign earnings as a transition tax under the Tax Cuts and Jobs
Act.
|
Wesco Aircraft
Holdings, Inc. |
Non-GAAP Financial Information - EBITDA and
Adjusted EBITDA (UNAUDITED) |
(Dollars in thousands) |
|
|
|
Three Months EndedDecember
31, |
|
2017 |
|
2016 |
|
|
|
|
EBITDA &
Adjusted EBITDA |
|
|
|
Net (loss) income |
$ |
(374 |
) |
|
$ |
13,107 |
|
Provision for income
taxes |
13,368 |
|
|
2,364 |
|
Interest expense,
net |
11,838 |
|
|
11,073 |
|
Depreciation and
amortization |
7,256 |
|
|
6,729 |
|
EBITDA |
32,088 |
|
|
33,273 |
|
Special items (1) |
2,914 |
|
|
1,015 |
|
Adjusted EBITDA |
$ |
35,002 |
|
|
$ |
34,288 |
|
|
|
|
|
Adjusted EBITDA
margin |
9.6 |
% |
|
10.1 |
% |
|
|
|
|
|
|
(1) Special items in the first quarter of fiscal 2018 consisted
of consulting fees associated with the company’s improvement
activities of $1.6 million, settlement of litigation and related
fees of $1.1 million and other expenses of $0.2 million. Special
items in the first quarter of fiscal 2017 consisted of business
realignment and other expenses of $1.0 million.
|
Wesco Aircraft
Holdings, Inc. |
Non-GAAP Financial Information - Free Cash
Flow (UNAUDITED) |
(Dollars in thousands) |
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Increase(Decrease) |
|
PercentChange |
|
2017 |
|
2016 |
|
|
Free Cash
Flow |
|
|
|
|
|
|
|
Net cash used in
operating activities |
$ |
(29,880 |
) |
|
$ |
(28,086 |
) |
|
$ |
(1,794 |
) |
|
(6.4 |
)% |
Purchase of property
and equipment |
(1,335 |
) |
|
(1,316 |
) |
|
(19 |
) |
|
|
Free cash flow |
$ |
(31,215 |
) |
|
$ |
(29,402 |
) |
|
$ |
(1,813 |
) |
|
(6.2 |
)% |
|
|
|
|
|
|
|
|
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