AAR Corp. (NYSE:AIR) Q1 2021 Earnings Conference Call - Final Transcript

Sep 24, 2020 • 04:45 pm ET

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AAR Corp. (NYSE:AIR) Q1 2021 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good afternoon, ladies and gentlemen, and welcome to AAR's Fiscal 2021 First Quarter Earnings Call. We are joined today by John Holmes, President and Chief Executive Officer; and Sean Gillen, Chief Financial Officer.

Before we begin, I would like to remind you that the comments made during the call may include forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, as noted in the company's news release and the Risk Factors section of the company's Form 10-K for the fiscal year ended May 31, 2020. In providing the forward-looking statements, the company assumes no obligation to provide updates to reflect future circumstances or anticipated or unanticipated events.

At this time, I would like to turn the call over to AAR's President and CEO, John Holmes.

Executive
John M. Holmes

Great. Thank you very much and good afternoon, everyone. I appreciate you joining us today to discuss our first quarter fiscal year 2021 results.

Before reviewing the quarter, I would like to express my continued gratitude to AAR's employees. The majority of our people have continued to come to work every day throughout the pandemic to ensure AAR's uninterrupted support of its customers, and I'm grateful for their dedication and commitment, and proud of our team's ability to continue to navigate a truly unprecedented decline in commercial passenger flying.

Turning to the results. Our sales for the quarter decreased 26% from $542 million to $401 million and our adjusted diluted earnings per share from continuing operations decreased 70% from $0.57 per share to $0.17 per share.

Our total sales to commercial customers decreased 48% from the prior year, while sales to government and defense customers increased 10%, reflecting new contract awards and significant shipments out of our Mobility business against the previously announced $125 million Cargo Pallets contract. For the quarter, sales to government and defense customers were 56% of the total.

In response to the current environment, we have taken a number of actions to align our costs with the lower levels of demand. But we've also gone further to position the company for improved margins as demand recovers. Over the last three years, we have consolidated -- three quarters, we have consolidated three facilities, a permanent reduction to our fixed and variable costs, and exited or restructured several underperforming contracts.

We have also taken steps to focus on our core aviation services offering by completing the divestitures of our Airlift and Composites businesses. All of these actions have simplified our portfolio, improved efficiency in our operations and set us up to drive higher returns on capital.

In addition to this progress, we continue to win new business during the quarter. We announced a three-year contract with the Royal Netherlands Air Force to repair F-16 jet fuel starters. We also announced two new contracts won by our Airinmar subsidiary, which provides component repair cycle management and aircraft warranty solutions. We were selected by both Frontier Airlines and Air Methods, the world's largest civilian helicopter operator to provide a full suite of