WOOD DALE, Jul 21, 2020 (GLOBE NEWSWIRE via COMTEX) -- -- Fourth quarter sales of $416.5 million, down 26% from $562.7 million in Q4 FY2019 reflecting the impact of COVID-19
-- Full year sales of $2.07 billion, up 1% from $2.05 billion in FY2019
-- Fourth quarter GAAP and adjusted diluted earnings (loss) per share from continuing operations of $(0.43) and $0.26, respectively
-- Executed multiple actions to align costs with demand and position the company for the future
AAR CORP. /zigman2/quotes/204455808/composite AIR -2.19% today reported fourth quarter Fiscal Year 2020 consolidated sales of $416.5 million and a loss from continuing operations of $15.0 million, or $0.43 per diluted share. Fourth quarter results included pretax charges of $27.9 million related to restructuring actions and exiting underperforming product lines and contracts. For the fourth quarter of the prior year, the Company reported sales of $562.7 million and income from continuing operations of $26.6 million, or $0.76 per diluted share. Our adjusted diluted earnings per share from continuing operations were $0.26 in the current quarter compared to $0.68 in the fourth quarter of the prior year.
Consolidated fourth quarter sales decreased 26% from the prior year period due to the impact of COVID-19 and the unprecedented grounding of the world's commercial fleet. Sales were also impacted by $7.5 million from restructuring actions related to our exit from certain commercial programs. Sales to government and defense customers in the Aviation Services segment continued to grow and were up 8% over the prior year quarter. Sales to government and defense customers represented 47% of our consolidated sales in the current quarter compared to 35% in the prior year quarter.
In response to the historic reduction in passenger travel resulting from COVID-19, we executed numerous cost reduction actions to better align our expenses with revenue. We also took several additional actions to improve our operating efficiencies with a goal towards improving our margins for the long term. These actions include facility consolidation, exit of unprofitable product lines as well as exiting or restructuring underperforming commercial programs contracts. These actions resulted in predominantly non-cash impairment and other charges of $27.9 million.
"Further in keeping with our long-term strategy to focus on aviation services and subsequent to quarter close, we entered into an agreement to sell our Composites manufacturing business. We expect to recognize an impairment charge of approximately $20 million in the first quarter of Fiscal Year 2021 in connection with the transaction. The sale, which we expect to close in the first half of Fiscal Year 2021, will improve margins as the Composites manufacturing business was unprofitable in Fiscal Year 2020.
"As we entered our fourth quarter we were on pace for a record sales year. However, our fourth quarter results were significantly affected by the impact of COVID-19. We took early action to mitigate this impact by reducing both our fixed and variable cost structure. We also drove continued strong performance in our government activities and placed an even greater emphasis on the commercial cargo market," said John M. Holmes, President and Chief Executive Officer of AAR CORP.
During the fourth quarter, we announced a sole source firm-fixed-price $125 million contract from the U.S. Air Force to produce and repair 463L cargo pallets. This is a five-year contract which will begin contributing to our results in the first quarter of Fiscal Year 2021. We also announced the formation of a joint venture with Sumitomo Corporation to provide aviation aftermarket supply chain solutions to Japanese defense and global commercial markets. This joint venture is an extension of our successful, long-standing relationship with Sumitomo serving as a distributor for OEM factory-new parts to Japanese defense customers.
Subsequent to the fourth quarter, we announced an extension and expansion of our exclusive worldwide aftermarket distribution agreement with Unison Industries covering their electrical components, sensors, and systems for aircraft and industrial uses. This agreement is valued at more than $1 billion over the 11-year term and validates the robust value proposition that our distribution team provides to OEMs in the aviation aftermarket.
Also, on July 20, 2020, we announced that certain of our subsidiaries expect to receive $57.2 million from the U.S. Treasury Department through the Payroll Support Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This support will enable us to maintain our current skilled workforce in our U.S. airframe and landing gear maintenance, repair and overhaul operations and allow us to continue to provide exceptional service to our customers.
Gross profit margin in the current quarter was 8.7% compared to 16.8% in the prior year quarter due primarily to the impact of COVID-19 and our restructuring actions. Selling, general and administrative expenses decreased by $16.0 million from $63.3 million to $47.3 million reflecting cost reduction actions.
Net interest expense for the quarter was $2.6 million compared to $2.1 million in the prior year quarter as we maintained higher cash reserves during the quarter. Cash flow used in operating activities from continuing operations was $18.6 million during the current quarter driven by timing of customer collections and vendor payments.
Fiscal Year 2020 Results
Full Fiscal Year 2020 consolidated sales were $2.07 billion, an increase of 1.0% over Fiscal Year 2019. Aviation Services sales grew by 2.3% with successful execution of recent contract awards in our government and defense activities driving exceptional growth of 20.2% in these end markets which was largely offset by the decrease in commercial airline volumes in the fourth quarter due to COVID-19. Expeditionary Services sales decreased 17.8% in Fiscal Year 2020 as delayed contract awards, including the previously discussed cargo pallet contract at our Mobility operation, significantly impacted results in Fiscal Year 2020.
Full Fiscal Year 2020 income from continuing operations was $24.8 million, or $0.71 per diluted share. In Fiscal Year 2019, income from continuing operations was $84.1 million, or $2.40 per share. Our adjusted diluted earnings per share from continuing operations was $2.15 in the current year compared to $2.44 last year reflecting the significance of the fourth quarter impact of COVID-19.
Sales to government and defense customers were 38% of consolidated sales compared to 33% in the prior year reflecting growth from the WASS program and other government programs. Sales to commercial customers represented 62% of consolidated sales compared to 67% last year.
Net debt at May 31, 2020 was $197.3 million compared to $121.6 million at May 31, 2019. Our net leverage was 1.3x at May 31, 2020 compared to 0.7x at May 31, 2019. Cash flow from operating activities from continuing operations was a use of cash of $19.1 million in Fiscal Year 2020 compared to cash provided from operations of $60.5 million in Fiscal Year 2019. Our accounts receivable financing program was a use of cash of $11.9 million in Fiscal Year 2020 compared to a benefit of $14.5 million in the prior year.
Holmes concluded, "During this time of uncertainty in the commercial passenger airline industry, we are experiencing growth in our government and defense activities and are capitalizing on opportunities in the commercial cargo market. Our balance sheet remains strong and we have taken numerous actions to not only successfully navigate the current downturn but to emerge as an even stronger Company with a better margin profile."
Given the continued macro uncertainty from the impact of COVID-19, we will not be providing financial guidance for Fiscal Year 2021 at this time.
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