Aar Corp. · NYSE:AIR
Aar — Investor Presentation (November 2018)
18 slides from Aar's investor presentation, Nov 8, 2018
Slide 1: Leading Independent Provider of Innovative Solutions to the Aviation Aftermarket
Leading Independent Provider of Innovative Solutions to the Aviation Aftermarket NYSE: AIR $1.8B revenue Over 60 years as a market leader in aviation support Approximately 6,000 employees in over 20 countries Close-to-the-customer business model Aviation Aftermarket Expert Since 1955
Slide 2: Our Solutions
Aviation Services Expeditionary Services PARTS SUPPLY Serviceable and OEM factory-new parts Parts sale, exchange, loan and lease Engine solutions Aircraft sales and leasing OEM Solutions Consumables and expendables aggregator Online PAARTSTM Store Our Solutions Airframe Landing gear systems Componen
Slide 3: Connected Business Strategy
Parts Supply Inventory pooling with programs Transactional data collection Strategic relationship with OEMs MRO & Expeditionary Services Strategic relationship with airlines Build technical repair knowledge and data collection Support integrated solutions with component repair Develop parts for inte
Slide 4: Strong Industry Relationships
Airlines Cargo Airlines Regional Airlines OEMs Government Strong Industry Relationships
Slide 5: Navigated Through Five Major Industry Cycles
Arab Oil Embargo Fuel Crisis Conflicts in Iran Economic Downturn Gulf War September 11 Attacks “Great Recession” 10% CAGR Sales ($B) Sale of Telair Cargo Group Navigated Through Five Major Industry Cycles After Each Down Cycle, AAR Has Emerged as a Stronger Company - 0.5 1.0 1.5 2.0 2.5 1970 1971 19
Slide 6: Global Expertise
Global Expertise North America HQ & warehouse near O’Hare Airport; MRO Services network with component repair; manufacturing services UK Integrated Solutions office in Gatwick with international support team Europe Component repair in Amsterdam. Warehouse network includes Brussels & Hannover serving
Slide 7: Commercial Market
Commercial Market MRO Market ($B) Fleet Size and Growth by Region Source: Oliver Wyman ’18 – ’23 CAGR ’23 – ’28 CAGR 2.4% 3.3% 4.8% 4.3% 1.9% 6.5% 4.2% 3.3% Fleet growing fastest in Asia, particularly China and India; additional infrastructure will be needed North America and Europe remain largest m
Slide 8: U.S. Defense Spending
U.S. Defense Spending U.S. Defense Budget ($B) U.S. defense budget rebound continuing Geopolitical tensions remain high FY19 budget reflects power competition with China and Russia Emphasis on maintaining technological advantage Budgets in place and seeing near term spending increases $530 $496 $496
Slide 9: Financial Highlights
Continued growth projected in revenue and earnings Leadership position in value-added Aviation Services markets Long-term favorable aftermarket growth trends Diverse global base of commercial and government customers Strong balance sheet with substantial available liquidity Strong growth in commerci
Slide 10: Q1 FY19 Income Statement Highlights
Q1 FY19 Income Statement Highlights Revenue growth of 17.2% driven by parts supply and government programs partially offset by KC10 and MRO decline Gross profit margin decrease due to slower airframe maintenance activity Operating profit growth of 31% from $17.1M to $22.4M SG&A costs improved as % o
Slide 11: Long-Term Financial Goals
Organic sales growth of 5%-10% Earnings per share growth of 10%-12% SG&A as % of sales to 10% or less 15% - 20% pretax ROIC on capital on new deals Year-over-year improvement in ROIC Working capital turnover of 3.5x – 4x Substantial availability & conservative leverage Long-Term Financial Goals
Slide 12: Financial Overview
Financial Overview ADJUSTED EBITDA* ($ Millions) ADJUSTED EPS* ($ Millions) REVENUE Continue to experience strong sales in our parts supply and programs activities while heavy maintenance remains slower Q2 FY19 sequential sales and earnings growth expected to be mid to high single digits Affirming F
Slide 13: Financial Overview
Financial Overview REVENUE ADJUSTED EBITDA* ADJUSTED EPS* ($ itions) joe) $250. eee (S1iions) oo 0. + 1006 Sis00 siz Maat) 51908 sia72 $179 | i | I | FTA FYIGA. = FYIOF TA Friea Frio FYiTa FIBA FvIoF + Continue to experience strong sales in our parts supply and programs activities while heavy mainte
Slide 14: Q&A
Q&A BAAR ~ err
Slide 15: Non-GAAP Financial Measures
Adjusted diluted earnings per share from continuing operations and adjusted EBITDA 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
Slide 16: Non-GAAP Financial Measures: Adjusted Diluted EPS
$ in millions Non-GAAP Financial Measures Adjusted diluted earnings per share from continuing operations Q1 FY19 Q1 FY18 FY18 FY17 Diluted earnings per share from continuing operations $ 0.54 $ 0.32 $ 2.11 $ 1.51 Deferred tax re-measurement from the Tax Cuts and Jobs Act - - (0.41) - Severance and r
Slide 17: Non-GAAP Financial Measures: Adjusted EBITDA
$ in millions Non-GAAP Financial Measures Adjusted EBITDA FY18 FY17 In millions Net Income $ 15.6 $ 56.5 Loss (Income) from discontinued operations 58.1 (4.5) Income tax expense 3.5 25.1 Other expense 0.9 - Interest expense, net 7.9 5.2 Depreciation and intangible amortization 40.5 35.7 Early retire
Slide 18: Non-GAAP Financial Measures: Adjusted EBITDA
Non-GAAP Fi ial Measures sted EBITD: Fvig Fv17 inmillons Net Income $ 156 $ 565 Loss (Income) from discontinued operations 581 (45) Income tax expense 35 254 Other expense 09 5 Interest expense, net 79 52 Depreciation and intangible amortization 405 35.7 Early retirement and severance charges 4s 08