AIR
#Yes, so we have historically had very strong margins in the Expeditionary segment, so that's going to be volume paced.
So as the volume picks up we'll start seeing margin throughput from that business.
So right now in both businesses, in Expeditionary you're at the bottom point of the historical result cycle, if you will.
In terms of the MRO and supply chain, I would anticipate that we'll see better margins throughout the year.
So the supply chain margins will improve as volumes grow as will the MROs.
And the MRO, the move out of Hot Springs saves us about a $1.5 million a year in ---+ or adds $1.5 million a year to the margin, the gross margin for that section of our business.
Well, the one-time charge from that is what $1 million.
$1 million.
$1 million from the shutdown of Hot Springs.
I believe that for the most part, I can't think of any other charges that we see coming at us.
We will be selling some Airlift aircraft.
The net effect though of the sale of the aircraft is about say somewhere between $18 million and $22 million of sales will probably be neutral.
We wouldn't expect losses, if anything we might have slight gains from those sales.
So we don't expect any other noise other than <UNK> referred to the tail to the Darwin ---+ I'm sorry, for the Telair transaction of up to $35 million and that would be a positive impact.
That $18 million to $22 million, <UNK>, includes inventory that's associated with some of those aircraft down there.
Yes, so <UNK> this is <UNK> <UNK>.
So we really see the revenue ramp later in the fiscal year when the larger programs kick in.
In the early part of the fiscal year, we'll be incurring costs associated with the start up of the Falklands program and that includes taking on the new aircraft, it includes the pilot training, the building up the maintenance capability.
So those costs are fairly significant and will mute some of the positive impact of the new aircraft that we're bringing on board.
But once we get into ---+ once we get the Falklands contract ramping and we get the cumulative effect of the other aircraft coming on, we'll be ---+ that business will be generating decent returns and will be back to not exactly where it was before but approaching its peak performance.
Sure.
This is <UNK> <UNK> responsible for the Aviation Services group.
But at Lake Charles we're still in a hiring phase there.
We went through quite a ramp up period in FY15.
We expect to get to at least a breakeven operation there in FY16.
We've got some significant programs starting with Delta Airlines that'll be ramping up in the Fall and so we're looking forward to the positive impact there out of Lake Charles.
And Hot Springs, the consolidation actually will be done by the end of this month and we'll have exited ---+ so the main customer that was in Rockford was Air Wisconsin, they're transitioning to Oklahoma City.
And then by the end of August we'll have exited the operations in Hot Springs.
Can you repeat that please, we weren't able to hear you.
So we don't comment on the individual necessarily, but suffice it to say the growth in supply chain was strong ---+ was very strong.
Yes, new programs and you may recall I would say about a year ago we entered an agreement with Eaton and we started taking delivery of the inventory for Eaton and we started making sales from ---+ in supporting the Eaton product during this period.
And program activity was strong and across the board we had strength in the supply chain businesses, as we did in the MRO business.
At 17% organic growth in this period if you check around the horn there's very few companies growing at that rate in our industry.
Yes, look I think our SG&A is going to revert into the 9% to 10% range where it should do a little better than we have historically, but I think for modeling I would assume that.
Thanks.
Well, Stan, I like how you always get right to the key elements.
You've been very consistent with that over the years, so listen we're going to keep our options open, Stan.
Obviously in the period just ended we spent $150 million on share repurchases.
I believe we are seeing a good deal flow and opportunity.
So we'll probably have probably I would say a very balanced approach between returning capital and opportunistically investing.
I mean the leverage, I joined the Company, we had leverage ratio of 40% debt to total capitalization and we've really never been below 30% since I've been at the Company and here we are today at 11%.
So we have a lot of flexibility and we're going to hopefully make some intelligent moves here.
We have a three-year plan that gets us up to our 10% objective.
Right.
But it's real, and we have to win some business and yes, but we feel we can get there.
By the way we've lowered our corporate expense by $8.2 million in the quarter.
So going forward, our corporate expense will be as I said lowered by $8.2 million.
Yes, thanks.
The way to think about the MRO is probably the hours of maintenance and the cumulative man hours.
And that number has been a little bit down.
And give or take it around the $5 million level.
And so it's one of the reasons why we took the action we did with Hot Springs to reduce some of our footprint and get more productivity out of our remaining footprint.
So we're also trying to find the lowest cost solution.
One of the reasons why we moved into Lake Charles was it gave us a lot of capacity at a low expense.
Now we got to make sure we can, as <UNK> <UNK> indicated, make sure we can get the workforce in place to make that business hum.
Just where the aircraft are in the repair cycle as well as capacity in North America.
Not really.
I think the average age, the fleet age I think has been ---+ my again using my historical knowledge, I don't think there's been more than a one year average age variation over the last 25 years.
If the average age is and don't quote me exactly, if it's 12.9 years or 13.2 or 12.7, it really doesn't play a factor here.
We haven't really seen much of that.
Well, we're looking at double-digit sales growth and we're looking at double-digit earnings growth from those businesses.
No, we're looking for improvement in MRO as well, so we're looking for improvement or growth I should say in both.
MRO is not earning at peak levels right now, so we have had higher earning levels at MRO than we are currently experiencing.
70%.
Yes, so we are ---+ we have exited certain product lines that we viewed non-productive and we are seeing an uptick in the cycle.
We expect that to kick in more so as the fiscal year moves forward, so think of it as a 10-year cycle.
So if you look at deliveries out of factories 10 years back, they were starting to pick up in the 2005 time period.
And so we should start seeing 2005, 2006, we should start seeing improvement in that operation.
No, I think it's all connected.
My sense is that there are clearly operational needs that the customer has, customer being USTRANSCOM for the most part.
So it's just there are delays in funding and appropriations I believe that have had some impact.
So yes I don't think anything specific to AAR that you wouldn't be seeing in other government contracting environments.
Thank you very much for your participation today and I look forward to our next call in September.
Have a nice afternoon.
Bye-bye.
