Form 8-K Wesco Aircraft Holdings, For: Feb 08
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): February 8, 2018
Wesco Aircraft Holdings, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE | 001-35253 | 20-5441563 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
24911 Avenue Stanford
Valencia, California 91355
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (661) 775-7200
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
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Item 2.02 Results of Operations and Financial Condition.
On February 8, 2018, Wesco Aircraft Holdings, Inc. (the “Company”) announced its financial results for the fiscal quarter ended December 31, 2017. The full text of the press release issued by the Company in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K. Following the publication of this earnings release, the Company is scheduled to host an earnings call at 2:00 pm (PST) or 5:00 pm (EST) on February 8, 2018 to discuss its financial results for the fiscal quarter ended December 31, 2017. The investor presentation materials used for the call are attached as Exhibit 99.2 hereto.
On February 8, 2018, the Company posted the materials attached as Exhibits 99.1 and 99.2 on its website (www.wescoair.com).
The information in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2) is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number | Description | |
99.1 | ||
99.2 | ||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
WESCO AIRCRAFT HOLDINGS, INC. | |||
Date: | February 8, 2018 | By: | /s/ Kerry A. Shiba |
Kerry A. Shiba Executive Vice President and Chief Financial Officer | |||
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Exhibit 99.1
Wesco Aircraft Holdings Reports
Fiscal 2018 First Quarter Results
-- Business Assessment Validating Scope, Impact and Timing of Key Initiatives --
VALENCIA, Calif., February 8, 2018 - 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
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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.
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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
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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
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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.
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Contact Information:
Jeff Misakian
Vice President, Investor Relations
661-362-6847
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Wesco Aircraft Holdings, Inc.
Consolidated Statements of (Loss) Income (UNAUDITED)
(In thousands, except share data)
Three Months Ended December 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 | |||||
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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 | |||
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Wesco Aircraft Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (UNAUDITED)
(In thousands)
Three Months Ended December 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 | |||
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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 Ended December 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.
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Wesco Aircraft Holdings, Inc.
Non-GAAP Financial Information - EBITDA and Adjusted EBITDA (UNAUDITED)
(Dollars in thousands)
Three Months Ended December 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. |
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Wesco Aircraft Holdings, Inc.
Non-GAAP Financial Information - Free Cash Flow (UNAUDITED)
(Dollars in thousands)
Three Months Ended December 31, | Increase (Decrease) | Percent Change | ||||||||||||
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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Q1 2018 EARNINGS CALL PRESENTATION
February 8, 2018
Todd Renehan
Chief Executive Officer
Kerry Shiba
Executive Vice President and Chief Financial Officer
Information in this presentation should be read in conjunction
with Wesco Aircraft’s earnings press release and tables for the
fiscal 2018 first quarter.
Wesco Aircraft Proprietary
Visit www.wescoair.com
Disclaimer
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Wesco Aircraft – Investor Relations
This presentation contains forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning Wesco Aircraft Holdings, Inc. (“Wesco Aircraft” or the “Company”). 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, you can identify forward-looking statements by the use of forward-looking terms such as “achieve,” “address,” “assess,” “assume,” “believe,” “broaden,”
“continue,” “design,” “develop,” “deliver,” “drive,” “enhance,” “estimate,” “expand,” “execute,” “expect,” “focus,” “future,” “goal,” “grow,” “impact,” “improve,” “increase,” “initiate,” “opportunity,” “optimize,” “outlook,”
“plan,” “proceed,” “reduce,” “sustain,” “target,” “to be,” “trend,” “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, you 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. You should carefully consider the foregoing factors and the other risks and uncertainties that affect the Company’s business, including those described in the Company’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
presentation (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.
The Company utilizes and discusses Adjusted Net Income, Adjusted Basic Earnings Per Share (EPS), Adjusted Diluted EPS, Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Adjusted EBITDA
Margin and Free Cash Flow, which are non-GAAP measures its management uses to evaluate its business, because the Company believes these measures assist investors and analysts in comparing its 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. The Company believes these metrics are used in the financial
community, and the Company presents these metrics to enhance understanding of its operating performance. You 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 EPS, Adjusted Diluted EPS, 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 Appendix for reconciliations of Adjusted Net Income, Adjusted Basic EPS,
Adjusted Diluted EPS, Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Wesco Aircraft Proprietary
Visit www.wescoair.com
Overview
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Wesco Aircraft – Investor Relations
Encouraging Q1 results – net sales and income from operations improved from Q4 2017
Net loss due to new tax legislation; adjusted net income* improved sequentially
Improvement plan initiatives leading to better operating and financial performance
Progress is encouraging, but more work is needed to sustain improved performance
Business assessment validating scope, impact and timing of plan initiatives in key areas
* See appendix for reconciliation and information regarding non-GAAP measures.
Procurement
Inventory Management
Greater Efficiency
Reduce Costs
Customer Service
On-Time Delivery
Profitable Growth
Improve Margins
FOCUS
Improvement Plan Update
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Wesco Aircraft – Investor Relations
Wesco Aircraft Proprietary
Visit www.wescoair.com
Wesco Aircraft Proprietary
Visit www.wescoair.com
Improvement Plan Update
5
Wesco Aircraft – Investor Relations
Solid growth in Q1 sales – increases in hardware and chemicals
Average daily sales continued to improve – both contract and ad-hoc sales higher
Continued awards for new business and renewal of long-term contracts
Invested in inventory to provide more parts for ad-hoc sales and support contracts
More SKUs on long-term agreements; developing more sophisticated inventory management tools
Maintained on-time delivery and efficiency metrics at high rates
Process improvements expanded to additional sites; increased commodities at certain sites
Managed expenses tightly; more work needed to drive greater efficiencies
Focused on optimizing cost structure through initiatives
Improvement Process Timeline
Information is Wesco Aircraft Proprietary and Confidential 6
Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q2 2017 Q4 2018
VALIDATING SCOPE, IMPACT AND TIMING OF
KEY INITIATIVES; PROJECT EXECUTION
LEADERSHIP CHANGE
NEW FOUNDATION
EXECUTE NEAR-TERM ACTIONS;
DEVELOP MEDIUM-TERM INITIATIVES
BROADER
BUSINESS REVIEW
NEW ORGANIZATIONAL
DESIGN
EXECUTE IMPROVEMENT PLAN
DEVELOP
IMPROVEMENT PLAN
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Business Assessment Update
7
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Comprehensive review of business designed to identify areas of further improvement
Findings reinforce belief that significant opportunities exist to reduce costs and enhance margins
Taking action to streamline, improve process, optimize footprint, enhance pricing and sourcing
Approach consistent with desire to be closer to customers and empower employees
Execution of near-term actions underway; continuing to assess more complex initiatives
More information to be provided with Q2 2018 results
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Net Sales Summary
8
Wesco Aircraft – Investor Relations
$339.4
$361.6 $363.1
Q1 2017 Q4 2017 Q1 2018
Net Sales
($M) Net sales increase of $24M (+7%) year/year
Long-term contract sales increase of $22M (+8%) due to:
High-single-digit growth in chemical products
Mid-single-digit growth in hardware contracts
Chemical and hardware contract growth reflects new
business and higher volume on existing contracts
Ad-hoc sales increase of $2M – improved performance and
growth at key customers driving higher ordering
(Dollars in Millions, Except Per Share Data) Q1 2017 Q4 2017 Q1 2018
Net sales $339.4 $361.6 $363.1
Income from operations $26.3 $20.0 $24.6
Operating margin 7.7% 5.5% 6.8%
Net income (loss) $13.1 $(38.3) $(0.4)
Diluted earnings (loss) per share $0.13 $(0.39) $ (0.00)
Adjusted net income* $18.5 $8.4 $14.5
Adjusted diluted earnings per share* $0.19 $0.08 $0.15
Adjusted EBITDA* $34.3 $30.4 $35.0
Adjusted EBITDA margin* 10.1% 8.4% 9.6%
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Financial Summary
9
Wesco Aircraft – Investor Relations
First Quarter Commentary
Operating margin lower year/year due to higher SG&A and lower gross
margin; sequential improvement from higher gross margin
Gross margin lower year/year primarily due to sales mix changes and
shifts within chemical portfolio; hardware margins stable
Sequential increase in gross margin primarily due to claims provision
and inventory adjustments in Q4 2017; product margins stable
SG&A higher year/year reflecting investments made in 2H 2017 to
stabilize business and support growth, consulting costs in Q1 2018
associated with improvement initiatives
Higher sequential SG&A primarily due to consulting costs
Income tax expense includes estimated impact of $9.1M from Tax Cuts
and Jobs Act
Effective tax rate for fiscal 2018 estimated to be 28-29%
* See appendix for reconciliation and information regarding non-GAAP measures.
At Period End (Dollars in Millions)
Dec 31,
2016
March 31,
2017
June 30,
2017
Sept 30,
2017
Dec 31,
2017
Cash and cash equivalents $51.2 $54.0 $57.1 $61.6 $41.9
Accounts receivable, net 247.3 266.7 264.0 256.3 253.6
Net inventory 751.7 774.4 802.7 827.9 856.3
Accounts payable 173.1 181.2 175.8 184.3 161.7
Total debt 843.2 855.3 861.1 863.8 877.7
Stockholders’ equity 889.7 916.0 687.8 649.7 652.4
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Balance Sheet Summary
10
Wesco Aircraft – Investor Relations
Quarter Ended (Dollars in Millions)
Dec 31,
2016
March 31,
2017
June 30,
2017
Sept 30,
2017
Dec 31,
2017
Net income (loss) $13.1 $17.4 $(229.6) $(38.3) $(0.4)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities
14.6
13.8
261.8
56.3
15.7
Changes in assets and liabilities (55.8) (36.9) (31.3) (12.1) (45.2)
Net cash (used in) provided by operating activities (28.1) (5.7) 0.9 5.9 (29.9)
Purchase of property and equipment (1.3) (2.9) (2.6) (2.1) (1.3)
Free cash flow (29.4) (8.6) (1.7) 3.8 (31.2)
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Cash Flow Summary
11
Wesco Aircraft – Investor Relations
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Fiscal 2018 Outlook
12
Wesco Aircraft – Investor Relations
Better execution – operational improvements delivering better financial results
More work needed to sustain and broaden improvement
Maintaining fiscal 2018 outlook – targeting year-over-year percentage increases in:
Net sales: low single-digit – primarily through new business ramp up and ad-hoc sales growth
Adjusted EBITDA: low double-digit – higher sales and gross margin, stable SG&A as a percent of sales
Still expect to end fiscal year at adjusted EBITDA margin run-rate of more than 10%
APPENDIX
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Non-GAAP Financial Information
14
Wesco Aircraft – Investor Relations
‘‘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 EPS” represents Basic EPS calculated using Adjusted Net Income as opposed to Net Income.
“Adjusted Diluted EPS” represents Diluted EPS 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.
The Company utilizes and discusses Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow, which are non-GAAP
measures its management uses to evaluate its business, because the Company believes these measures assist investors and analysts in comparing its 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. The Company believes these metrics
are used in the financial community, and the Company presents these metrics to enhance understanding of its operating performance. You 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 EPS,
Adjusted Diluted EPS, 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 following slides for reconciliations of Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Adjusted
EBITDA and Adjusted EBITDA Margin to the most directly comparable financial measures calculated and presented in accordance with GAAP.
Non-GAAP Financial Information
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Wesco Aircraft – Investor Relations
December 31, September 30, December 31,
2016 2017 2017
Net Sales 339,371$ 361,552$ 363,091$
Adjusted Net Income
Net income (loss) 13,107$ (38,287)$ (374)$
Amortization of intangible assets 3,721 3,753 3,714
Amortization of deferred financing costs 3,202 1,007 1,508
Special items (1) 1,015 2,788 2,914
Adjustments for tax effect (2) (2,547) 39,128 6,696
Adjusted net income 18,498$ 8,389$ 14,458$
Adjusted Basic Earnings Per Share
Weight-average number of basic share outstanding 98,319,926 98,906,379 99,096,914
Adjusted net incomer per basic share 0.19$ 0.08$ 0.15$
Adjusted Diluted Earnings Per Share
Weight-average number of diluted shares outstanding 98,821,794 98,906,379 99,096,914
Adjusted net income per diluted shares 0.19$ 0.08$ 0.15$
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 Ended
(2) The adjustments for tax effect in the fourth quarter of f iscal 2017 included $37.5 million tax provision for accumulated foreign
earnings and a $4.3 million tax provision for other discrete tax items. The adjustments for tax effect in the first quarter of f iscal 2018
included an estimated $9.1 million tax provision on foreign earnings as a transition tax under the Tax Cuts and Jobs Act.
(1) Special items in the first quarter of f iscal 2017 consisted of business realignment and other expenses of $1.0 million. Special items in
the fourth quarter of f iscal 2017 consisted of severance, business realignment and other expenses of $2.8 million. Special items in the
f irst quarter of f iscal 2018 consisted of consulting fees associated w ith the company’s improvement initiatives of $1.6 million,
settlement of litigation and related fees of $1.1 million and other expenses of $0.2 million.
Non-GAAP Financial Information
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Wesco Aircraft – Investor Relations
December 31, September 30, December 31,
2016 2017 2017
EBITDA and Adjusted EBITDA
Net income (loss) 13,107$ (38,287)$ (374)$
Provision for Income taxes 2,364 48,045 13,368
Interest expense, net 11,073 10,292 11,838
Depreciation and amortization 6,729 7,540 7,256
EBITDA 33,273 27,590 32,088
Special items (1) 1,015 2,788 2,914
Adjusted EBITDA 34,288$ 30,378$ 35,002$
Adjusted EBITDA margin 10.1% 8.4% 9.6%
(1)
Special items in the first quarter of fiscal 2017 consisted of business realignment and other expenses of $1.0
million. Special items in the fourth quarter of fiscal 2017 consisted of severance, business realignment and other
expenses of $2.8 million. Special items in the first quarter of fiscal 2018 consisted of consulting fees associated with
the company’s improvement initiatives of $1.6 million, settlement of litigation and related fees of $1.1 million and
other expenses of $0.2 million.
Wesco Aircraft Holdings, Inc.
Non-GAAP Financial Information - EBITDA and Adjusted EBITDA (UNAUDITED)
(Dollars In thousands)
Three Months Ended
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