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AAR Expects Sale of COCO Business This Fiscal Year

Company president and CEO John Holmes expects sale to be completed by next May.

Aviation services and MRO giant AAR expects to sell its Afghanistan war-related contractor-owned, contractor-operated (COCO) aviation services business by next May, CEO and President John Holmes said late Sept. 25.

“We've got a very active process going on right now with a number of parties to exit that business, and it's a big focus of ours to complete that soon,” Holmes said. The comments to financial analysts came during a teleconference about fiscal 2019 first-quarter results.

A sale of the business remains a priority as the operations continue to lead AAR to report a loss associated with the discontinued unit. In the quarter ended August, AAR recorded a revenue loss of $3.8 million loss and earnings per share loss of $0.11. That compared with a loss of $400,000, $0.01 the year before. For fiscal 2018, the company recorded a goodwill impairment charge of $9.8 million related to it.

The decision to sell was announced in March and was attributed to Holmes – who became chief executive this year, just the third since the company’s 1955 founding – repositioning assets away from COCO to government-owned, contractor-operated work; especially as AAR started delivering on a high-profile counter-drug worldwide aviation services contract for the State Department.

Net income for the recent first quarter was $15.1 million, versus $10.6 million a year ago. Diluted EPS were $0.43 against $0.31. Consolidated sales increased $68.4 million or 17.2% over the prior year period due to continued strength in trading, distribution and programs activities, as well as the successful launch of the State contract, which achieved full run-rate in July.

Sales to government and defense customers were 32.4% of consolidated sales compared to 23.3% in the prior year's quarter, reflecting growth from the State program and other government sales. “We are pleased with the sales growth in our government activities,” Holmes said. “We are also excited about our continued success in the commercial markets as evidenced by our recent wins with Air New Zealand and Air Malta.”

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