AAR Corp (NYSE:AIR), a leading provider of aviation services to commercial and government operators, MROs, and OEMs, stock fell 6.72% (As on December 22, 11:13:48 AM UTC-4, Source: Google Finance) after the company posted mixed result for the second quarter of FY 24. The company has also entered into a definitive agreement with Triumph Group to purchase Triumph Product Support for $725 million in cash. As part of the transaction, AAR expects to receive estimated tax benefits with a present value of approximately $80 million. Including the estimated tax benefits, the effective purchase price multiple is expected to be 11.7x FY2024 EBITDA and 9.9x including estimated run-rate synergies of $10 million. AAR’s acquisition of Triumph Product Support is supported by a fully committed bridge facility. AAR intends for permanent financing to include a mix of debt and equity to maintain a strong balance sheet to support future growth. AAR will target pro forma net leverage to be approximately 3.0x at closing, inclusive of a potential equity issuance subject to market conditions. After closing, we expect strong combined free cash flow to enable further deleveraging. The transaction is expected to close in the first quarter of the 2024 calendar year, subject to customary closing conditions, including receipt of certain regulatory approvals.

Moreover, the consolidated sales to commercial customers increased 24% over the prior year quarter, primarily due to strong demand for our new and used parts offerings, while our consolidated sales to government customers increased 1%. Sales to commercial customers were 71% of consolidated sales, compared to 66% in the prior year quarter. Adjusted gross profit margin increased from 18.8% in the prior year quarter to 19.0% in the current quarter, primarily due to the favorable impact of the operating efficiency on increased sales volumes.

AIR in the second quarter of FY 24 has reported the adjusted earnings per share of 81 cents, beating the analysts’ estimates for the adjusted earnings per share of 80 cents. The company had reported the adjusted revenue growth of 16 percent to $545.4 million in the second quarter of FY 24, missing the analysts’ estimates for revenue by $13.15 million. Adjusted operating margin increased from 7.6% in the prior year quarter to 8.1% in the current year quarter, primarily as a result of the growth in commercial sales. As of November 30, 2023, the net debt was $211.9 million and the net leverage was 1.01x.