AAR Corp. (NYSE:AIR) Q4 2019 Earnings Conference Call Transcript

Jul 10, 2019 • 04:45 pm ET

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AAR Corp. (NYSE:AIR) Q4 2019 Earnings Conference Call Transcript

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Q & A
Operator
Operator

Thank you, sir. (Operator Instructions) Our first question comes from the line of Rob Spingarn of Credit Suisse. Your line is open.

Analyst
Robert Spingarn

Good afternoon, everybody.

Executive
John M. Holmes

Hey, Rob, how are you?

Analyst
Robert Spingarn

I'm good. Thanks. And nice numbers from you guys. I wanted to ask you John to talk a little bit more about some of the strength in the quarter, particularly Expeditionary; it sounds like programs coming online. And is that sort of a one or two quarter event when it moderates? And then if you could then extrapolate into next year and maybe a little bit further color on the relative business lines, sounds like MRO's low-single digit growth and other things are above that 5% rate.

Executive
John M. Holmes

Yes, sure. Just on the quarter, thanks. We're really happy with the way the year ended, very strong results from the businesses across the Company. As it relates to Expeditionary Services, we've announced a few wins in the mobility business throughout the year, and we're starting to perform on those wins and produce and ship our products. So we saw the benefit of that in Q4 and on ensuing quarters we expect to see additional benefit as we ship off against those wins.

Thinking about the year ahead, MRO as I mentioned, we expect a partial recovery. We're encouraged by the results that we're seeing both in terms of the labor attraction and retention as a result of the initiatives that we implemented throughout the year. And we also feel good about the loading in the hangars heading into this year as well. And you're right. I mean as you think about the growth rate at the midpoint of 5%, certain businesses are above that, certain businesses are below that. But that represents our best view of the blended rate from where we sit today.

Analyst
Robert Spingarn

John, before you go further, how do we factor India into this MRO outlook?

Executive
John M. Holmes

Yes. Our India JV, I think we indicated last quarter that we expected construction to be complete this calendar year. Based on what we know right now, we still look for that. We're working to finalize the agreement with the customer. And once all that's done, we'll be able to give more color on how that will play into the results.

Analyst
Robert Spingarn

Is there any revenue from that joint venture in the guide?

Executive
John M. Holmes

No. We're not anticipating any.

Analyst
Robert Spingarn

Okay. Just with regard to the EPS guidance, is the 10.5% SG&A maybe a little higher than you originally expected. Is there anything there maybe tied to this legal situation with or it might have been closer to 10%?

Executive
John M. Holmes

Yes. It is a little higher than we anticipated. As it relates to the matter that Sean mentioned in the 8-K, we haven't factored in cost there. Although we did see some cost that came through in the fourth quarter. The 10.5% is really based on investments that we're making around sales resources to promote the continued growth, particularly in the parts businesses. And then we are adding some