AAR Corp (AIR) 2014 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to AAR's FY14 third-quarter earnings call.

Before we begin, I'd like to remind you that the comments made during the call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, as noted in our news release and the risk factor section of the Company's Form 10-K for the fiscal year ended May 31, 2013. In providing forward-looking statements, the Company assumes no obligation to provide updates to reflect future circumstances or anticipated or unanticipated events.

At this time, I'd like to turn the call over to AAR's Chairman and Chief Executive Officer, David Storch.

Thank you, sir. Good afternoon. Thank you for joining us today to discuss our third-quarter FY14 performance.

With me in Chicago are Tim Romenesko and John Fortson, and a few other senior folks here at the Company. On today's call, I would like to start by discussing our third-quarter results, and then provide you with an explanation about actions we are taking to counter the revenue decline we experienced, and how we are positioning our Company for future growth.

Let me begin with Aviation Services. In the Aviation Services segment, sales were down 10% from last year to $368 million. As mentioned in our press release, our MRO operations had a difficult quarter, sales were down $24.3 million in that subsegment within our Aviation Services group.

Sales in the Airframe Maintenance facilities were lower by approximately $5 million, as we conclude several large 757, 767 maintenance programs. In this quarter, to give you a sense, our billable hours were 1.1 million as opposed to 1.3 million in the prior year.

Sales in our engineering services unit, where we completed a sizable engineering service program, were down by $10 million. We have engineering service work but not of the same size or scope as we had last year with the program we completed. And you may recall that this is a business that, from time to time, we win contracts, and there are times where we have a lull in activity. Our landing gear and component repair revenues were down $9.4 million due to the repair cycle decline for landing gear and just lower inputs from components.

To address the weakness in MRO activity in this quarter and to position the Business for the future, we have narrowed the focus of our leadership team to drive improved performance. In this regard, we had Dany Kleiman, who runs MRO, performing other functions at the Company; we've moved him back to MRO only, and put a little bit more sales emphasis around him so that we can recapture some business.

We are actively pursuing entry into E-Jet aftermarket support. We believe that's an aircraft that is selling well in the United States, and we have -- we line up well; it is a good fit for the Company. We have the airframe, landing gear, and component repair capability. We have good product knowledge. And as you can see from one of the awards that we announced today, we've had some success supporting that platform.

We also plan to expand our world-class landing gear repair and overall capability into ancillary product lines, including actuation, wheels, and brakes. You've heard us discuss before, the landing gear repair cycle is about a 10-year cycle. We're still suffering from the lack of new aircraft sales into the market back in the 2003, 2004 time period, but, as you recall, the market has got a little bit firmer in the 2004, 2005, 2006 time period, which should bode well again for our landing gear business. We have not lost any contracts. We have one contract we just -- the existing customer base requirement is softer today than it would be at another point in time in that repair cycle.

In our commercial supply chain operations, sales were down by 2% as we restructured a current and existing contract. This was a time-and-material contract that we shifted over to a power-by-the-hour. Although the sales from that program are down, as we report sales, the income contribution from that program is relatively flat. So, you have roughly $10 million to $12 million left of sales, but roughly the same earnings contribution.

We do believe that this Business had been somewhat negatively impacted by weather conditions in the period. We didn't talk about that really in the earnings release, because it is very hard for us to quantify. But in the two months in January and February, there were 74,500 flights that were canceled. And of course, the parts business is tied very much to take-offs and landings. And of course, the airline cash flow is impacted in a way that, if they can defer certain maintenance events and they can defer certain acquisitions of inventory, as we've seen in the past, they will do so. Just to give you a sense of the change in parts business -- on a sequential basis, our revenues were down $7 million from second quarter in our commercial parts business.

Now, the temporary setback that we've experienced, we believe we've countered-balanced by the strong momentum in signing new contracts, as indicated in the earnings release. During and after quarter end, we announced several new distribution supply agreements with blue-chip customers. And I will try to provide a little additional color for why these contracts are important to the Company that you would not have seen in the earnings release.

So, if you look at the Sabena acquisition, it puts our supply-chain group into the position to offer true rotable inventory pooling support to customers in the European, Middle East, and Africa region. And when I say true rotable inventory pooling support, we have -- our inventory management programs today have been more designed around individual customers, and providing inventory to that customer. This will be our first venture, if you will, into pooling, where the inventory is available for multiple aircraft operators flying the same platform.

This business will be -- is currently headquartered in Brussels, and will continue to be headquartered in Brussels. We've opened up a new warehouse, and we'll be operational on this business on or about April 1. And we believe this will give us the scope and the scale and the infrastructure that will allow us to compete effectively in these markets. And these markets are dominated by Lufthansa, Air France, and some of the other major airline players. And we are hoping that by being an independent provider that that'll be a point of differentiation that will allow us to capture more business and grow this particular piece of our Business.

We talked about this US airline win, where it has been requested that we not disclose the name of the airline. But this new line of business for the supply chain group is offering consumable and expendable support. And we believe by doing this successfully for this airline that there will be other airlines who will express interest, which has actually been the case. So, since we've announced this agreement, we've received multiple requests to design expendable support programs for other customers in North America and in Asia.

The Eaton win builds on our success with Unison, and establishes AAR as a clear alternative for OEMs as they look to access more diversified channels to market. So, AAR's access to demand through its power-by-the-hour agreements, MRO network, and expendable support offering gets OEMs excited and gets them closer to the point of demand. So, they are looking to -- as they look to streamline their marketing initiatives, in the case of Eaton and in the case of Unison, they decided to reduce the number of vendors that they've worked with, and they've chosen AAR as a preferred distribution source for their products.

Our strategic initiatives with various OEMs -- I will name a few: Honeywell, Thales, Liebherr, Rockwell, Technofan -- allow us, where they stand behind us on the power-by-the-hour agreements, allow us to, we believe, gives us what we consider to be a superior option to the large airline MRO power-by-the-hour support offerings. And we've had some success in some of the programs we've talked about before by doing this. And we have ramped up our efforts to capture foreign military sales opportunities in terms of programs and material distribution, particularly given the slowdown in US defense spending, and we should have some wins that we can announce shortly.

As for our Airlift businesses, as expected, sales were down, and in the period they were down $13 million. Since our last call in December, we have the following updates. The de-scoping of the rotary wing positions for the contract that expired on November 30 has proceeded as planned, and we are expecting the remaining three contract positions to be completed by the end of April.

We are currently not flying any aircraft under the new US AFRICOM contract due to a protest that was filed by the incumbent operator. And we are expecting a decision coming out of the GAO shortly, and hopefully we'll be able to begin work on that contract soon.

No task orders have been received to date for the new NATO 18 contract announced in December, and you might recall that we have four aircraft that we have more or less designated for that contract. We are in the process of streamlining our fleet, as we've discussed before, reducing the number of aircraft types that we offer the market. In that regard, we'll be selling off nine different aircraft that will no longer be required for our long-range plan for this Business.

So, from today's perspective, we expect to end our FY14 with a total of 23 aircraft positions. This is a difference from the previously communicated number of 29, which we mentioned in our December call, and it purely relates to the four delayed NATO 18 task orders, and the delayed ramp-up in Africa associated with that protest where we were the winning bidder, and we are just waiting for the protest to clear and we are hoping it clears favorably -- clears in our favor.

I should continue by saying that we do see good prospects for our airlift services globally. We are actively engaged on diversifying operations away from Afghanistan, and managing through the extensive proposal and bid activity. More specifically, we are pursuing SOCOM and AFRICOM opportunities. We're looking to leverage our success in VERTREP, and that's a Navy contract and DoD expertise to expand into search and rescue missions. We are pursuing expansion opportunities through the Fly America Act. We're looking to expand our product offerings into GOCO opportunities, this is government supply aircraft, and currently all of our businesses with aircraft that we provide, the government does have contracts where they have assets and they look for contractors like us to provide the lift without providing the actual equipment. Then, continuing with our fleet optimization to achieve the greatest operating profit potential.

So, as we look at the quarter that has ended, although our revenues were down by $13 million, the profit contribution from this Business was relatively flat. So, there was virtually no degradation in earnings contribution from the Business, even though they had less contract positions and less revenue.

That pretty much concludes my discussion around Aviation Services.

Let me move over to Technology Products. In this segment, sales were down 4.8% to $107 million. Even though we had sales growth in our cargo systems and container business where we had a sales increase of $4 million, this was offset by mobility products where we had good visibility, we knew that it would be a soft period, sales were down $6 million in that period. And as we mentioned in the earnings release, we did renew and sign some new contracts for the mobility business, and we do expect fourth-quarter revenues to be higher for that Business than third-quarter revenues were.

So, our management focus in this segment is the continued ramp of the A400M program, execution of our successful cargo strategy for Telair and Nordisk, expansion of our mobility products offering through continued innovation, continue to come up with lighter-weight solutions and capture new customers as we begin this period with the British. Deepening the growth of the engineering solutions work with OEMs, and continue to improve the performance of our precision machining operations.

I might, at this stage, before I turn the call over to John, just add that historically our businesses, we've experienced rotation in our performance around customer requirements and shifting markets. And as we sit here today, we see near-term demand for Airlift and certain MRO services decline, but we do see an increase in supply chain activity as indicated by some of the deals that we've just recently mentioned. So, if I look back in time, if I look at the first decade of this century, we had a fairly robust aircraft sales and leasing activity contributing sales and earnings to the Company, and when the financial crisis of 2008 hit, that business more or less suffered, and we've managed our way largely out of that activity, and our mobility business picked up. And shortly after mobility went down, we had good growth at Telair and Airlift. Now, Airlift is down, and we're looking for contribution from our supply chain.

So, I think this is a historical kind of perspective for the Company. This quarter, I think we got caught a little short. We didn't see -- we knew the contracts that were coming off, but we were hoping to get new contracts to come in, as we have in the past, that would replace those. But I just might add that I'm very proud, aside from the disappointment on the sales side, at least on the earning side we were able to keep that relatively respectable.

So, with that, thank you for your attention. I'd like to turn it over to John to provide some additional financial color.

Thanks, David. I'd like to refer everyone to our press release for general financial information for this quarter, and use this time to hone in on some specific actions we are taking to right-size and manage our cost and capital structures in this environment. I will be available after the call to answer any questions you may have.

The impact of the revenue decline in earnings was reduced by aggressive cost management and operational efficiencies, particularly at Airlift where we experienced significant revenue decline but had higher operating margins, and as David mentioned, had the net effect of income from this business to be flat year over year. Selling, general, and administrative expenses as a percentage of sales were 9.6% for the third quarter, compared to 8% for last year; however, last year included a one-time benefit of $9 million from an acquisition adjustment. If you adjust for this, our SG&A for this quarter was approximately $5 million lower, or about 10%.

We will continue to make adjustments to our cost structure where appropriate to reflect these lower sales levels. We are in the process of reviewing all sources of spend across the Company, both strategic and non-strategic, to find cost savings. We have completed reviews of our healthcare and insurance spend, as well as freight and travel. We are now focused on other non-strategic spending areas.

As a result of work this quarter, we have identified and taken actions that should result in an approximate $4 million a year of savings. This has included the elimination of certain positions, and the restructuring of some functions, including IT, as well as other non-personnel-related reductions.

As communicated in our press release, given the actual third-quarter results and our expectations for the fourth quarter, we are adjusting both our revenue and diluted-earnings-per-share guidance for FY14. For the full year, we are reducing our revenue guidance by $100 million to a range of $2 billion to $2.05 billion, and diluted earnings per share in the range of $1.79 to $1.82 per share.

Thanks for your attention. And operator, we are now ready to take your questions.

(Operator Instructions)

Our first question comes from Larry Solow of CJS Securities.

It's actually Arnie Ursaner backing up Larry on the call, so I have a couple of quick questions for you. First on the financial side, you mentioned last year had an earnout reduction or a reversal, if you will; was there any reversal this year in the SG&A line?

No. That was a one-off related to a transaction we did overseas, but we haven't done a similar type of adjustment this year.

Okay, what's your tax rate view for Q4?

We did have this one-time adjustment that we talked about in the press release, but our effective tax rate is going to remain at 34.5% going forward.

Okay. Obviously one of the positives that may get ignored given the quarter is the fact that you signed on a huge number of very significant, very positive contracts. Can you speak about the working capital and overall investments the Company will have to make to realize the benefit of some of these very attractive long-term plans?

Yes, so we've actually already started, Arnie. The unnamed customer, we've obviously made investments and then we've made some investments in advance for the Sabena transaction. When you look at this quarter, we actually did invest pretty heavily in our growth, both for our sort of traditional transaction business, but also these programs. And to give you an idea of the order of magnitude, and as you probably know this doesn't really run through our CapEx line, but we spent about $27 million between the two, between parts and engines over the course of this quarter. We are going to have to continue to make some investments, but we're going to sequence through and we think these things give us the right returns going forward.

Thank you, I will jump back in queue. Thanks.

Thank you. (Operator Instructions)

Our next question comes from Julie Yates of Credit Suisse. Your line is open.

Good evening.

Hi, Julie.

Hi. So this is the second quarter where you guys have lowered EPS guidance, about 14% below where you started the year excluding the tax benefit. So as you're preparing to give guidance in July for FY15, what are you doing differently and how should we think about the level of visibility that you have and the confidence around FY15?

Well, I think first of all, let's get through FY14. And I think that we are trying to share with you that we are positioning ourselves with some of these new contract wins to give us a little bit more dependable revenue base, if you will. This is unusual period for us because historically we've been able to replace business.

I'm not sure and I'm trying to I guess get a handle around the impact that the weather may have had in terms of disrupting some of our operations, because it was a little bit unusual in terms of not being able to win certain new business in an ad hoc nature that we typically would have won. So I believe we have fairly good visibility. Clearly we are disappointed here in terms of this quarter's results, but I think that as we come into July, we should have pretty good visibility.

And then David last quarter I think you said that mobility products had reached a steady state, it looks like it has continued to be a bit soft here.

No, this is purely compared to prior year, and they'll have a pretty decent forth, they should have a very decent fourth quarter.

Okay. Then I recall last quarter you did talk about some of the weakness for the second half for the free cash flow as you invested in some of these programs. But this is obviously the weakest it has been in eight quarters; you've had a really good performance. How should we think about cash flow in the fourth quarter end even from when there are indications you can give on next year?

We are going to have some cash going out on the balance of the Sabena deal, so I think as we ramp in some of these new contracts, there will be some cash going out.

As I look out into next year, assuming purely from the standpoint of our existing customer, our existing business base, I would expect our free cash to exceed our after-tax income, so I would expect to be over that 100% number that we have experienced for the last eight quarters as you mentioned. So I think we should be generating some pretty good cash flows next year.

Okay, and then last one, any update on Lake Charles?

Yes, Lake Charles has been inactive of late. We completed the contracts that were there when we took on the business, and now we are bidding work. But as we sit here today, we haven't had any success yet.

But I think everybody has to be just a little bit patient only because we just got the FAA's certification in September, and we are trying to figure out how to go ahead and entice people there in a way that we can still make a buck on it. So be a little patient.

Look back on Indianapolis, the first couple years of our Indianapolis adventure; we were mostly vacant, eventually we got some business and we've been able to grow from there. So we still believe that we are positioned well there. We just need a little bit more time to break into some accounts.

Great, thank you.

Yes.

Our next question comes from Tyler Hojo of Sidoti and Company. Your line is open.

Yes, good evening. I want to ask you first about the Mesa contract that was announced, or the Mesa letter of intent I should call it I guess, does the $27 million in working capital investment that was already made, does that include Mesa as well?

No, it does not.

Okay, when does that start to hit, because I think --

We will start making investment in that this quarter.

Okay.

Then we will have -- there will be a ramp in investment over the next two year period as the fleet -- as the E-Js start coming into the fleet.

Okay, but even with investment you still think free cash flow in fiscal '15 is going to exceed that income? Is that correct?

Yes.

Alright, thanks for that clarification. And then in regards to the I think the $200 million contract value that you cited for Mesa, how should we think about that ramping over the next 10, 12 years?

I believe they get to the 30 aircraft in three years if I'm not mistaken. So once you get to that point that should stay relatively constant. So as the aircraft come into the fleet, the revenue kicks in. But once you get to year three, the aircraft will be starting to require their C checks as well.

So I would say probably get to full ramp by year five would be my guess. Because by then you will have the -- aircraft would have been in service, all the aircraft would've been in service and all the aircraft would've been through at least one C check.

Okay, great. Thanks for that. And then just in regards to the restructuring initiatives that were called out, I believe the number $4 million was thrown out in terms of the savings. Is there any expense associated with these restructuring initiatives that's included in the Q4 guidance?

There will be some and it is in the guidance. So obviously there will be some severance related for some people that will be departing the firm. And that's probably the bulk of it. But it is in the guidance.

Okay. Can you call it out or just not really sure?

I'd rather not.

Tyler if I may, let me go back to the question on Mesa for a second, and the current agreement that Mesa has with United Express is for 30 aircrafts. I believe Mesa is optimistic that as they perform and United Express looks to grow their ERJ fleet, that they will get more aircraft under their contracts. So there might be follow-on work there as well. Just kind of file that away if you don't mind.

That would be great. Maybe one follow-on just in regards to Mesa. Those of us that have followed the name for a long time remember the last Mesa contract and how that was a bit painful back in four or five years ago or so. Is there any way that you can protect yourself or is it just a function of this is a better aircraft that's more in demand?

I think that's a good way to look at it, I believe. And this contract we negotiated not just with Mesa but also with United, and United is clearly in better shape today than they were let's say last go around. Yes, my belief is that you have brand-new equipment. The 70 seaters as opposed to the 50 seaters, and our view is that we should be protected on the asset. Time will tell of course.

Okay, great, And just one last one for me if I may. Just in regards to the tech product segment. Really nice margin improvement sequentially in the quarter, and I'm just kind of wondering how we should think about the movement in margin in that segment on a go-forward basis?

Tyler, David mentioned that we are expecting improvement at mobility in the fourth quarter, and I think you should actually see more of the same as we go forward there.

Okay, great. That's all I had. Thanks a lot.

Our next question comes from Kevin Ciabattoni of KeyBanc Capital Markets. Your line is open.

Thanks, good afternoon guys. First question I guess on the NATO 18 contract, maybe some color around what might be holding up those initial task orders. I know you've been modeling for four this year. And then maybe if you can talk -- you don't have to give a number but what's the ramp for next year on that contract that you are looking at this point?

The NATO 18 contract was released, we were advised which aircraft we were going to get, and then with the political turmoil and the elections and our government's inability to work with Karzai, just put everything on hold. We are hopeful that with a new government coming in to Afghanistan that we will start to see these aircraft start to be activated. But I don't know if that's going to be in April or July or when, so it is pretty tough to predict a ramp there. And we haven't really been successful to date in predicting when these things will kick in.

In terms of next year, there's a series of opportunities. Some onesie-twosie and then one particular that's very, very large, and I think we last quarter called it a game changer, and that would take most of next fiscal year to work through, get awarded, and start to come into play. And quite frankly, we haven't even seen the final RFP on that yet. So we are looking to see some more aircraft come out of the portfolio as we go into fiscal '15 and then start to put more aircraft in in these by winning some of these competitions that we are bidding today.

Great, thanks. You guys had some nice wins in the supply chain business over the last few months. Just wondering if you could talk about looking forward what the pipeline for that business looks like? And maybe more specifically what you guys are seeing in terms of the potential for more of these programmatic wins, which I know is something you've looked to shift that business towards?

These things have a way of building off of each other, so we are hopeful that by securing this Sabena program for instance, that that will lead to additional business in that theater. They Sabena, have not been investing in this business the last few years, so I'm talking with the people in the business unit, we have a sense that we can possibly win some additional business in that region. So I think what I was try to signal in my commentary was as a result of some of these wins, the airline expendable win, the Eaton win, the Sabena win, that there will be more of this kind of activity in each one of those streams coming forward.

Okay, thanks. The supply chain contract in the quarter that you restructured from time and materials to power-by-the-hour. What was the driver there for changing the structure of that contract? Was it coming from you, from the customer? Just wondering how that played out.

We won that contract -- if you may recall there was an airline -- there was an ex-airline maintenance base that was providing the maintenance, and again this is one of those situations where we are not supposed to be discussing who the airline is. But I will explain it to you and you might be able to get to the conclusion.

But basically the MRO that was supplying the airline went bankrupt and they had at the time -- they were holding a fair amount of that airline's inventory. So there was no way the price -- and they had been operating under power-by-the-hour agreement. We couldn't price the power-by-the-hour nor did they want us to, so we worked on a time and material basis for a year until we could get the power-by-the-hour agreement, so we could gain more knowledge and then negotiate a power-by-the-hour agreement.

So it was always intended to go power-by-the-hour. It was just a temporary expedient to go time and material. So this was always planned; in the process of going power-by-the-hour, it calls for -- it drives a less revenue number, but the profitability is approximately the same.

Okay, thanks. That's helpful on that. I will jump back in queue.

Thank you. Our next question comes from JB Groh of DA Davidson. Your question please.

Hey, guys, most of my questions have been answered, can you maybe lay out the timing and the cash flow implications for that sale of the nine aircraft?

Yes, look, they are available for sale now. I don't know if we can give you a real prediction as to when we would expect this stuff to be sold, but some of them are back in the US, some of them are in transit back to the US, and then some of them are actually going to be moved to a location in the Middle East where we think we might have a better chance at marketing them. We are pushing hard to get something done this quarter. It is not a certainty, but certainly over the next six months.

Can you give us maybe the book value of them?

The nine that we have for sell right now are on the books for about $18.8 million.

Okay. And the appraised value would be above or below that?

The expectation is to make a gain.

Okay, good. Thank you.

Our next question comes from John Hwang of Crescent Capital. Your question please.

Thanks for taking my questions. I think most of them were answered but I missed the early part. Could you give me color on what drove the increase in SG&A as a percent of sales? I think it went up by about 160 basis points.

Okay, so we talked about this a little bit, but to compare it on an apples-to-apples basis you have to make an adjustment to third quarter of last year's number because there was an acquisition adjustment made in that, so when you add back to last year's number that sort of $9 million that was a part of that, actually our SG&A fell by about $5 million.

Okay.

The acquisition (multiple speakers) was really a kind of a one-off related to that particular deal.

The most recent quarters SG&A figure is more in line?

Right.

And then in terms of your availability, liquidity under your revolver, what's the estimated figure right now?

We have lots of liquidity. At the quarter close we had close to $400 million available. That's prior to any incremental accordion draw or anything else.

Okay. So excluding the $150 million or so of cash, about $285 million under your revolver still available?

Right.

All right, that's all I have. The rest were answered. Thank you.

(Operator Instructions)

Our next question comes from Stan Mann of Mann Family. Your line is open.

Hi, gentlemen, I have four quick questions for David.

Go ahead, Stan.

Question one, any effect that you foresee in the near-term or part-time on the American Airline merger in affecting AIR?

We are making baby step progress and we keep working it.

Okay, so there's nothing specific or that we can expect?

Nothing that I see at this moment but we continue to work it.

Okay. Two, looking forward several years, how do you feel about topline growth? This quarter was weak, but what do you see looking down the road? How's your feel?

Assuming that the general economy were to grow at let's call it for argument say, 3%, I would expect our growth rate to be around 10%.

Okay, well that's a positive view. Very positive. Okay three, three is a little more complicated. You're moving into Europe with the Sabena deal. Is that correct?

I wouldn't say moving into Europe. We've been in Europe. I think we are kind of increasing our investment in Europe, yes.

Okay. Well frankly every other company that does international business, David, that I follow has a much lower tax rate and takes advantage of the geographic move for taxes. Your tax rate is inordinately high for a Corporation that has international exposure. So can I ask do you think we might get a base in Ireland or something that will give us the ability to drop our tax rate?

Let us play around with that and let us give some thought to that before we comment. And then get back to you on that. Because we didn't make that acquisition with that in mind, but clearly we have actually -- in aviation, we have a fair amount of folks who base in Dublin for that purpose. So let us kind of play around with that and see if that's an option for us. We haven't talked about it, we don't really know at this stage if that's meaningful for us.

Let me just add though that although the operation is headquartered in Brussels, keep in mind now also one of the motivations is to increase our Middle East and Africa business where fleet sizes are growing.

Rapidly.

Yes.

Okay. The tax question is legitimate and substantial, and I'm just saying there that you're legal, you're higher relative to anybody doing business internationally. And it is an interesting area for bottom line.

We will take that constructively and let us go to work on that, and then we will let you know, okay?

I have one last quick question. In any area of your business you do have liquidity, do you sense or are you working on or do you see the possibility of starting an acquisition program again? Which you delayed for a while.

We didn't delay it for any real reason. We have still been looking or thinking about acquisitions. We feel a lot more courageous today with a stronger balance sheet position and we do see some opportunities.

Obviously my preference is to grow organically, and I think in this quarter although we kind of didn't perform from a sales standpoint, we did perform from the standpoint of winning some new business contracts. So my preference would be organic growth and we will look to supplement that organic growth with what we consider to be appropriate acquisitions.

We do have a couple of -- one acquisition in particular, which will give us -- one acquisition candidate I should say, which should give us some additional possibilities for new revenue streams, and we are looking at that situation very closely today.

Okay. You've been very successful in opportunistic acquisitions, that's why I asked that question.

Thank you.

Anyway, thank you very much.

Thank you, sir.

Thank you. And as there appear to be no further questions in queue, I'd like to turn the call back over to Management for any closing remarks.

Thank you for your questions today. Appreciate your interest in our Company and let us get back to work. Thank you.

Thank you, sir. Thank you ladies and gentlemen for your participation. That does conclude AAR's fiscal 2014 third-quarter earnings call. You may disconnect your lines at this time. Have a great day.