Aar Corp. · NYSE:AIR
Aar — Investor Presentation (August 2018)
28 slides from Aar's investor presentation, Aug 21, 2018
Slide 1: Our Mission
To be the best at designing and delivering technical, operational and financial solutions to enhance the efficiency and competitiveness of our commercial aviation and government customers Our Mission
Slide 2: Established Player Serving the Global Aviation Services Market
Established Player Serving the Global Aviation Services Market Leading provider of Aviation Services to commercial and defense/government markets NYSE: AIR ~$2B revenue Over 60 years as a market leader in aviation support Over 6,000 employees in over 20 countries Close-to-the-customer business model
Slide 3: Commitment to Strong Shareholder Returns
Commitment to Strong Shareholder Returns 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 avai
Slide 4: Company Overview
Aerial Transport Passengers & cargo Fleet management & operations GOCO Aviation Services Expeditionary Services Airframe Landing gear systems Components Engineering MRO SERVICES Trading OEM aftermarket solutions PARTS SUPPLY Commercial & government Flight hour programs Performance-based logistics (P
Slide 5: Connected Businesses Strategy
Parts Supply Inventory pooling with programs Transactional data collection Strategic relationship with OEMs MRO Strategic relationship with airlines Build technical repair knowledge and data collection Support integrated solutions with component repair Generates parts requirements Integrated Program
Slide 6: AAR Global Presence
AAR Global Presence Strategically Located in Close Proximity to Key Customers Customers in over 100 Countries Over 60 Locations around the world
Slide 7: Strong Industry Relationships
Strong Industry Relationships
Slide 8: Aviation Services Parts Trading and Distribution
Largest trading company providing airframe and engine assets to airlines, MROs, component repair facilities, leasing companies and other parts providers Aviation Services Parts Trading and Distribution 80+ COUNTRIES PARTS SUPPLY (TRADING) Largest independent aviation distributor, serving as a commer
Slide 9: Aviation Services Integrated Solutions
Largest independent and third largest power-by-the-hour (PBH) component repair, inventory pool access and logistics management provider in the world. Aviation Services Integrated Solutions (IS) 1,500 AIRCRAFT 41 AIRLINES 250,000 REPAIR TRANSACTIONS 24 COUNTRIES IS - COMMERCIAL Provide third party lo
Slide 10: Aviation Services MRO
Aviation Services MRO Narrow & wide body 200,000 SF hangar ROCKFORD Narrow & wide body 226,000 SF in three hangars MIAMI OKLAHOMA CITY Regional & narrow body 300,000 SF Narrow & Wide body 143,000 SF hangar Narrow & wide body 1.1 Million SF INDIANAPOLIS Airframe Maintenance Facilities #1 MRO of the A
Slide 11: Expeditionary Services: GOCO, Mobility & Composites
Support INL/WASS for US Department of State Expeditionary Services GOCO, Mobility & Composites 5 LOCATIONS GOCO Total Solution Provider; designs, manufactures, integrates and services a variety of products to support military and disaster relief operations 4 LOCATIONS 6 IDIQ CONTRACTS MOBILITY CAPIT
Slide 12: Key Market Dynamics
Key Market Dynamics Fleet growth in Asia and Middle East outpacing growth in North America and Europe U.S. defense budget growth Aerospace OEMs entering aviation aftermarket as service integrators Increased data creation and digital solution demand driving technology companies to transform the indus
Slide 13: Commercial Market: MRO Market and Fleet Growth by Region
14 MRO Market ($B) Fleet Size and Growth by Region Source: Oliver Wyman Commercial Market Growth ’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 Increasingly younger fleets Enhanced data acquisition capabilities from new equipme
Slide 14: U.S. Defense Spending
15 U.S. Defense Spending U.S. Defense Budget ($B) Budget rebound continuing Geopolitical tensions remain high Proposed FY19 budget reflects power competition with China and Russia Emphasis on maintaining technological advantage Budgets in place and seeing near term spending increases $530 $495 $496
Slide 15: AAR's Strategic Imperatives
Execute through focus on customer satisfaction and cost leadership Pursue connected businesses that reinforce collective growth prospects Leverage data and digital to deliver better customer-focused solutions Expand margins through intellectual property Increase our global footprint into emerging ma
Slide 16: FY18 Financial Highlights
FY18 Financial Highlights Revenues were $1,748M compared to $1,591M in prior year Up $158M or 10% from the prior year AS revenues were $1,619M, up $134M or 9% over the prior year - Wind down of KC-10 contract resulted in a decrease in sales of $82M to $29M from $111M ES revenues were $129M, up $24M
Slide 17: FY18 Income Statement Highlights
FY18 Income Statement Highlights *Reconciliations of Non-GAAP Financial Measures are included in the Appendix.
Slide 18: FY18 Segment Results
FY18 Segment Results AVIATION SERVICES in millions FY18 FY17 Variance Sales $1,618.9 $1,485.4 $133.5 Gross Profit $271.9 $246.0 $25.9 % Margin 16.8% 16.6% 0.2% EXPEDITIONARY SERVICES in millions FY18 FY17 Variance Sales $129.4 $105.4 $24.0 Gross Profit $22.7 $17.4 $5.3 % Margin 17.5% 16.5% 1.0%
Slide 19: Balance Sheet Highlights
in millions 5/31/18 5/31/17 Variance Accounts Receivable, net $202.0 $234.5 ($32.5) Inventories, net $460.7 $433.4 $27.3 Assets Supporting LT Programs $183.4 $159.6 $23.8 Assets of Disc Ops $125.0 $219.4 ($94.4) Total Assets $1,524.7 $1,504.1 $20.6 Net Debt* $147.8 $145.9 $1.9 Total Liabilities $588
Slide 20: Financial Overview
Financial Overview ADJUSTED EBITDA* ($ Millions) ADJUSTED EPS* ($ Millions) REVENUE Experiencing strong sales in our parts supply businesses while the summer in heavy maintenance is slower than expected Q1 FY19 sales growth expected to be low double digits year over year FY19 Guidance = Sales of $2.
Slide 21: Financial Overview
Financial Overview REVENUE ADJUSTED EBITDA [ADJUSTED EPS* (sao) (swinens) 0.0. ry samo. pod = 2000 sus says sara s15908 3179 | | I ; fw pask rar ae Crs be? rama ra ase * Experiencing strong sales in our parts supply businesses while the summer in heavy maintenance is slower than expected * Q1FY19 sa
Slide 22: Appendix
Appendix
Slide 23: Non-GAAP financial measures explanation
Adjusted diluted earnings per share from continuing operations, adjusted selling, general and administrative expenses, adjusted EBITDA, and net debt 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
Slide 24: Non-GAAP Financial Measures
Non-GAAP Financial Measures Adjusted diluted earnings per share from continuing operations FY18 FY17
Slide 25: Non-GAAP Financial Measures
Non-GAAP Financial Measures $ in millions SIX MONTHS ENDED NOVEMBER 30, $ in millions 2017 2016 Expeditionary Services gross profit (loss) $ (38.4) $ 18.3 Impairment and other charges 51.6 - Expeditionary Services adjusted gross profit $ 13.2 $ 18.3 Consolidated gross profit (loss) $ 85.4 $ 127.7 Im
Slide 26: Adjusted EBITDA
Adjusted EBITDA $ in millions Adjusted EBITDA FY18 FY17 In millions Net Income $ 15.6 $ 56.5 Loss from discontinued operations 58.1 (4.5) Income tax expense (benefit) 3.5 25.1 Other expense 0.9 - Interest expense, net 7.9 5.2 Depreciation and intangible amortization 40.4 35.7 Early retirement and se
Slide 27: Non-GAAP Financial Measures: Net Debt
Non-GAAP Financial Measures $ in millions Net debt - $ in millions MAY 31, 2018 MAY 31, 2017 Total debt $ 178.9 $ 156.2 Less: Cash and cash equivalents (31.1) (10.3) Net debt $ 147.8 $ 145.9
Slide 28: Non-GAAP Financial Measures
Non-GAAP Financial Measures MAY 31, Net debt - $ in millions 2018 Total debt $ 178.9 $ Less: Cash and cash equivalents (31.1) Net debt $ 147.8 $ Siomons BAAR oor 2