Business Context and Reporting Period
This Form 8-K is a Regulation FD disclosure filed by AAR CORP. on December 21, 2017. The filing clarifies management's response to questions raised during the Fiscal 2018 second quarter earnings conference call regarding non-GAAP financial measures.
Key Financial Metrics
- Asset Impairment: A non-cash impairment of $54.2 million was recorded in the Expeditionary Services segment ($51.6 million in cost of sales; $2.6 million in SG&A).
- Reported Adjusted EPS: $0.35 per diluted share (excludes the $1.01 per share impact of the impairment).
- Further Adjusted EPS: $0.41 per diluted share (excludes impairment plus additional items totaling $0.06 per share).
Material Changes and Unusual Items
The filing details specific adjustments to the previously disclosed adjusted earnings per diluted share ($0.35) to arrive at a further adjusted figure of $0.41. The additional exclusions totaling $0.06 per share include:
- Expeditionary Services Results: $1.6 million ($0.03 per share) impact from the affected business within the segment.
- Legal Costs: $1.0 million ($0.02 per share) in SG&A expenses related to the defense of the INL/A WASS contract.
- Deal-Related Costs: $0.4 million ($0.01 per share) incurred during the quarter.
Guidance, Outlook, and Risks
The filing does not provide new forward-looking guidance or outlook. It serves solely to clarify the calculation of non-GAAP earnings metrics discussed during the earnings call. The filing highlights ongoing legal contingencies regarding the INL/A WASS contract defense.
Investor Verification Checklist
- Verify the reconciliation of non-GAAP adjusted EPS ($0.35) to GAAP reported EPS in the original earnings press release.
- Confirm the specific nature of the "affected business" within the Expeditionary Services segment contributing to the $1.6 million adjustment.
- Review the status and potential financial exposure of the INL/A WASS contract legal defense.
- Assess the impact of the $54.2 million non-cash impairment on the company's balance sheet and future depreciation schedules.