Document


 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
 
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
Date of report (Date of earliest event reported): January 31, 2019
 
 
 Wesco Aircraft Holdings, Inc.
(Exact name of registrant as specified in its charter)
DELAWARE
 
001-35253
 
20-5441563
(State or Other Jurisdiction
of Incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
 
24911 Avenue Stanford
Valencia, California 91355
(Address of Principal Executive Offices) (Zip Code)
 
Registrant’s telephone number, including area code: (661) 775-7200
  
(Former Name or Former Address, if Changed Since Last Report)
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o                 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o                 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 

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Item 2.02            Results of Operations and Financial Condition.
 
On January 31, 2019, Wesco Aircraft Holdings, Inc. (the “Company”) announced its financial results for the fiscal quarter ended December 31, 2018. The full text of the press release issued by the Company in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K. Following the publication of this earnings release, the Company is scheduled to host an earnings call at 2:00 pm (PST) or 5:00 pm (EST) on January 31, 2019 to discuss its financial results for the fiscal quarter ended December 31, 2018. The investor presentation materials used for the call are attached as Exhibit 99.2 hereto.
 
On January 31, 2019, the Company posted the materials attached as Exhibits 99.1 and 99.2 on its website (www.wescoair.com).

The information in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2) is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
 
Item 9.01            Financial Statements and Exhibits.
 
(d)              Exhibits.
 
Exhibit
Number
 
Description
 
 
 
99.1
 
 
 
 
99.2
 



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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
WESCO AIRCRAFT HOLDINGS, INC.
 
 
 
 
 
 
 
Date:
January 31, 2019
By:
/s/ Kerry A. Shiba
 
 
 
Kerry A. Shiba
Executive Vice President and Chief Financial Officer


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Exhibit



                                                                                                                                                                                                                                                                                                                    
Exhibit 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12666778&doc=19

Wesco Aircraft Holdings Reports
Fiscal 2019 First Quarter Results

VALENCIA, Calif., January 31, 2019 - Wesco Aircraft Holdings, Inc. (NYSE: WAIR), the world's leading independent distributor and provider of comprehensive supply chain management services to the global aerospace industry, today announced results for its fiscal 2019 first quarter ended December 31, 2018.
Fiscal 2019 First Quarter Highlights
Net sales of $395.3 million, up 8.9 percent
Net income of $6.3 million, or $0.06 per diluted share
Adjusted net income(1) of $16.6 million, or $0.17 per diluted share
Adjusted earnings before interest, taxes, depreciation and amortization(1) (EBITDA) of $37.4 million, or 9.5 percent of net sales
Todd Renehan, chief executive officer, commented, “Fiscal 2019 first quarter results reflect solid top-line growth in all products and services and ongoing execution of our Wesco 2020 initiatives. Our Americas business, which represented 81 percent of total net sales, performed very well in the first quarter, with strong sales growth and improved operating margin. This was partially offset by one-time costs of $8 million supporting Wesco 2020 execution and weaker results in our EMEA business. Based upon our strong execution in the Americas, I’m confident in our ability to address the challenges in EMEA and improve its profit generation by the end of the year.”
The company’s Americas segment reported net sales growth of 11 percent. Operating income in the Americas increased 15 percent, reflecting higher gross profit, partially offset by an increase in expenses to support growth and Wesco 2020 execution. The EMEA segment reported a net sales decline of 4 percent. Operating income in EMEA decreased $2.7 million, or 52 percent, due to a

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decline in sales and gross profit, which reflects lower pricing on certain contract renewals, volume discounts earned and less volume at some customers.
Renehan continued, “As anticipated, we consumed cash from operating activities in the fiscal 2019 first quarter to support our growing business, which included direct support of a large multiyear customer contract renewal that was completed at the end of the first quarter. Excluding this investment, inventory growth was lower than in the first quarter of last year. We continue to expect that improvements in inventory management will drive an increase in cash from operations in fiscal 2019 compared to fiscal 2018.”
Renehan added, “We’re executing Wesco 2020 initiatives at an aggressive pace, consolidating single-use warehouse facilities into multi-commodity distribution centers, closing sales offices and reducing headcount further. As expected, Wesco 2020 benefits to the bottom line were minimal in the first quarter as execution timing for key elements of our initiatives are scheduled for later in the year. We expect benefits to increase as we progress through the year. We continue to believe Wesco 2020 will generate annualized pre-tax benefits of at least $30 million, with full realization during fiscal 2020. Although temporary operating cost support for the execution of Wesco 2020 will continue to precede benefits, we are confident that these temporary costs will decline significantly by the end of the year.”
Fiscal 2019 First Quarter Consolidated Results
Net sales of $395.3 million in the fiscal 2019 first quarter were $32.2 million, or 8.9 percent higher than the same period last year, reflecting continued focus and execution. Long-term contracts were higher, primarily due to higher chemical pass-through revenue and related service fees, while hardware volume increased at a lesser pace. Ad-hoc sales increased, primarily due to higher ordering by key customers.
Gross profit was $98.3 million in the first quarter of fiscal 2019, compared with $94.4 million in the fiscal 2018 first quarter. The increase in gross profit compared to the same period last year was primarily due to higher sales volume, partially offset by a decline in gross margin. The lower gross margin primarily reflects the dilutive effect of chemical pass-through revenue, as well as higher freight costs, volume discounts earned and excess and obsolete inventory related charges.
Selling, general and administrative (SG&A) expenses totaled $76.3 million in the fiscal 2019 first quarter, compared with $69.9 million in the same period last year. Higher SG&A expenses primarily

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reflect one-time costs associated with the company’s Wesco 2020 initiatives totaling $8 million, compared with $2 million in the same period last year.
SG&A expenses were 19.3 percent of net sales in the fiscal 2019 first quarter, compared with 19.2 percent in the same period last year. Excluding special items, SG&A expenses as a percent of net sales declined by approximately 130 basis points year-over-year.
Income from operations totaled $22.1 million, or 5.6 percent of net sales, in the fiscal 2019 first quarter. This compares with income from operations of $24.6 million, or 6.8 percent of net sales, in the same period last year. The decrease in income from operations reflects the increase in SG&A expenses, partially offset by higher gross profit.
Net income was $6.3 million, or $0.06 per diluted share, in the fiscal 2019 first quarter. This compares with a net loss of $0.4 million, or essentially break-even on a per-share basis, in the same period last year. The net loss in last year’s first quarter primarily reflects additional tax expense of $9.1 million associated with the enactment of the Tax Cuts and Jobs Act in the period.
Adjusted net income(1) in the fiscal 2019 first quarter was $16.6 million, or $0.17 per diluted share, compared with $14.5 million, or $0.15 per diluted share, in the same period last year.
Adjusted EBITDA(1) in the fiscal 2019 first quarter was $37.4 million, compared with $35.0 million in the same period last year. Adjusted EBITDA margin(1) was 9.5 percent, compared with 9.6 percent in the same period last year.
Adjustments to arrive at adjusted net income(1) and adjusted EBITDA(1) include special items, among other things. In the first quarter of fiscal 2019, special items consisted primarily of consulting fees of $4.4 million and other costs of $3.9 million associated with the company’s Wesco 2020 initiative. In the first quarter of fiscal 2018, special items consisted primarily of consulting fees of $1.6 million associated with Wesco 2020, as well as litigation and related fees of $1.1 million.
Net cash used in operating activities totaled $32.4 million in the fiscal 2019 first quarter, compared with $29.9 million in the same period last year. This decrease reflects year-over-year differences in accounts receivable and accounts payable that were primarily due to the timing of collections and payments, respectively.
Free cash flow(1) was a negative $34.7 million in the fiscal 2019 first quarter, compared with a negative $31.2 million in the same period last year.

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Fiscal 2019 Outlook
The company continues to expect net sales in fiscal 2019 to increase at a mid-single-digit percentage pace compared to fiscal 2018. In addition, higher sales volume, Wesco 2020 benefits and expense leverage are expected to drive a high-single-digit percentage increase in adjusted EBITDA .
Conference Call Information
Wesco Aircraft will hold a conference call to discuss its fiscal 2019 first quarter results at 2:00 p.m. PST (5:00 p.m. EST) today, January 31, 2019. The conference call can be accessed by dialing 866-763-0010 (domestic) or 703-871-3797 (international) and entering passcode 7261786.
The conference call will be simultaneously broadcast on Wesco Aircraft’s Investor Relations website (http://ir.wescoair.com).
Following the live webcast, a replay will be available on the company’s website for one year. A telephonic replay also will be available approximately two hours after the conference call and may be accessed by dialing 855-859-2056 (domestic) or 404-537-3406 (international) and entering passcode 7261786. The telephonic replay will be available until February 7, 2019 at 11:59 p.m. EST.
About Wesco Aircraft
Wesco Aircraft is the world’s leading independent distributor and provider of comprehensive supply chain management services to the global aerospace industry. The company’s services range from traditional distribution to the management of supplier relationships, quality assurance, kitting, just-in-time delivery, chemical management services, third-party logistics or fourth-party logistics and point-of-use inventory management. The company believes it offers one of the world’s broadest portfolios of aerospace products, including C-class hardware, chemicals and electronic components and comprised of more than 563,000 active SKUs.
To learn more about Wesco Aircraft, visit our website at www.wescoair.com. Follow Wesco Aircraft on LinkedIn at https://www.linkedin.com/company/wesco-aircraft-corp.
Footnotes
(1) Non-GAAP financial measure - see the tables following this press release for reconciliations of GAAP to non-GAAP results.

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Non-GAAP Financial Information
Adjusted net income represents net income (loss) before: (i) amortization of intangible assets, (ii) amortization or write-off of deferred issuance costs, (iii) special items and (iv) the tax effect of items (i) through (iii) above calculated using an estimated effective tax rate.
Adjusted basic earnings per share represents basic earnings per share calculated using adjusted net income as opposed to net income (loss).
Adjusted diluted earnings per share represents diluted earnings per share calculated using adjusted net income as opposed to net income (loss).
Adjusted EBITDA represents net income (loss) before: (i) income tax provision, (ii) net interest expense, (iii) depreciation and amortization and (iv) special items.
Adjusted EBITDA margin represents adjusted EBITDA divided by net sales.
Free cash flow represents net cash used in operating activities less purchases of property and equipment.
Wesco Aircraft utilizes and discusses adjusted net income, adjusted basic earnings per share, adjusted diluted earnings per share, adjusted EBITDA, adjusted EBITDA margin and free cash flow, which are non-GAAP measures management uses to evaluate the company’s business, because it believes these measures assist investors and analysts in comparing the company’s performance across reporting periods on a consistent basis by excluding items that management does not believe are indicative of the company’s core operating performance. Wesco Aircraft believes these metrics are used in the financial community, and the company presents these metrics to enhance understanding of its operating performance. Readers should not consider adjusted EBITDA and adjusted net income as alternatives to net income (loss), determined in accordance with GAAP, as an indicator of operating performance. Adjusted net income, adjusted basic earnings per share, adjusted diluted earnings per share, adjusted EBITDA, adjusted EBITDA margin and free cash flow are not measurements of financial performance under GAAP, and these metrics may not be comparable to similarly titled measures of other companies. See the tables following this press release for reconciliations of adjusted net income, adjusted basic earnings per share, adjusted diluted earnings per share, adjusted EBITDA, adjusted EBITDA margin and free cash flow to the most directly comparable financial measures calculated and presented in accordance with GAAP.

5


Forward-Looking Statements
This press release contains forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning Wesco Aircraft Holdings, Inc. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of management, as well as assumptions made by, and information currently available to, management. In some cases, readers can identify forward-looking statements by the use of forward-looking terms such as “address,” “ability,” “anticipate,” “believe,” “continue,” “drive,” “execute,” “expect,” “grow,” “improve,” “increase,” “initiative,” “lead,” “outlook,” “will” or similar words, phrases or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the company’s control. Therefore, the reader should not place undue reliance on such statements.
Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: general economic and industry conditions; conditions in the credit markets; changes in military spending; risks unique to suppliers of equipment and services to the U.S. government; risks associated with the loss of significant customers, a material reduction in purchase orders by significant customers, or the delay, scaling back or elimination of significant programs on which the company relies; the company’s ability to effectively compete in its industry; risks associated with the company’s long-term, fixed-price agreements that have no guarantee of future sales volumes; the company’s ability to effectively manage its inventory; the company’s suppliers’ ability to provide it with the products the company sells in a timely manner, in adequate quantities and/or at a reasonable cost, while also meeting the company’s customers’ quality standards; the company’s ability to maintain effective information technology systems and effectively implement its new warehouse management system; the company’s ability to successfully execute and realize the expected financial benefits from its “Wesco 2020” initiative; the company’s ability to retain key personnel; risks associated with the company’s international operations, including exposure to foreign currency movements; changes in trade policies; risks associated with assumptions the company makes in connection with its critical accounting estimates (including goodwill, excess and obsolete inventory and valuation allowance of the company’s deferred tax assets) and legal proceedings; changes in U.S. income tax law; the company’s dependence on third-party package delivery companies; fuel price risks; fluctuations in the company’s financial results from period-to-period; environmental risks; risks related to the handling, transportation and

6


storage of chemical products; risks related to the aerospace industry and the regulation thereof; risks related to the company’s indebtedness; and other risks and uncertainties.
The foregoing list of factors is not exhaustive. The reader should carefully consider the foregoing factors and the other risks and uncertainties that affect the company’s business, including those described in Wesco Aircraft’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other documents filed from time to time with the Securities and Exchange Commission. All forward-looking statements included in this news release (including information included or incorporated by reference herein) are based upon information available to the company as of the date hereof, and the company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

###
Contact Information:
Jeff Misakian
Vice President, Investor Relations
661-362-6847
Jeff.Misakian@wescoair.com




7


Wesco Aircraft Holdings, Inc.
Consolidated Statements of Income (Loss)
(UNAUDITED)
(In thousands, except share data)
 
 
Three Months Ended 
 December 31,
 
2018
 
2017
Net sales
$
395,311

 
$
363,091

Cost of sales
296,969

 
268,667

Gross profit
98,342

 
94,424

Selling, general and administrative expenses
76,263

 
69,852

Income from operations
22,079

 
24,572

Interest expense, net
(12,914
)
 
(11,838
)
Other (expense) income, net
(217
)
 
260

Income before income taxes
8,948

 
12,994

Provision for income taxes
(2,655
)
 
(13,368
)
Net income (loss)
$
6,293

 
$
(374
)
 
 
 
 
Net income (loss) per share:
 
 
 
Basic
$
0.06

 
$

Diluted
$
0.06

 
$

Weighted average shares outstanding:
 
 
 
Basic
99,485,989

 
99,096,914

Diluted
99,904,111

 
99,096,914

 


 

8


Wesco Aircraft Holdings, Inc.
Condensed Consolidated Balance Sheets (UNAUDITED)
(In thousands)
 
 
December 31,
2018
 
September 30,
2018
Assets
 

 
 

Cash and cash equivalents
$
25,181

 
$
46,222

Accounts receivable, net
296,756

 
283,775

Inventories
912,679

 
884,212

Prepaid expenses and other current assets
19,322

 
15,291

Income taxes receivable
2,798

 
2,017

Total current assets
1,256,736

 
1,231,517

Long-term assets
556,340

 
557,959

Total assets
$
1,813,076

 
$
1,789,476

Liabilities and Stockholders’ Equity
 

 
 

Accounts payable
$
184,852

 
$
180,494

Accrued expenses and other current liabilities
37,465

 
42,767

Income taxes payable
3,719

 
2,295

Capital lease obligations, current portion
2,235

 
2,205

Short-term borrowings and current portion of long-term debt
94,000

 
74,000

Total current liabilities
322,271

 
301,761

Capital lease obligations, less current portion
2,050

 
2,329

Long-term debt, less current portion
767,755

 
771,777

Deferred income taxes
3,504

 
2,803

Other liabilities
19,174

 
18,337

Total liabilities
1,114,754

 
1,097,007

Total stockholders’ equity
698,322

 
692,469

Total liabilities and stockholders’ equity
$
1,813,076

 
$
1,789,476


9


 Wesco Aircraft Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (UNAUDITED)
(In thousands)

 
Three Months Ended 
 December 31,
 
2018
 
2017
Cash flows from operating activities
 
 
 
Net income (loss)
$
6,293

 
$
(374
)
Adjustments to reconcile net income (loss) to net cash used in operating activities
 
 
 
Depreciation and amortization
7,098

 
7,256

Amortization of deferred debt issuance costs
1,304

 
1,508

Stock-based compensation expense
2,944

 
1,815

Inventory provision
5,045

 
4,443

Deferred income taxes
(12
)
 
593

Other non-cash items
(232
)
 
59

Subtotal
22,440

 
15,300

Changes in assets and liabilities
 
 
 
Accounts receivable
(13,858
)
 
2,020

Inventories
(33,575
)
 
(32,960
)
Other current and long-term assets
(7,365
)
 
(2,492
)
Accounts payable
4,348

 
(22,315
)
Other current and long-term liabilities
(4,437
)
 
10,567

Net cash used in operating activities
(32,447
)
 
(29,880
)
Cash flows from investing activities
 

 
 

Purchase of property and equipment
(2,240
)
 
(1,335
)
Net cash used in investing activities
(2,240
)
 
(1,335
)
Cash flows from financing activities
 

 
 

Proceeds from short-term borrowings
30,000

 
46,000

Repayment of short-term borrowings
(10,000
)
 
(27,000
)
Repayment of borrowings and capital lease obligations
(5,755
)
 
(5,547
)
Debt issuance costs

 
(1,900
)
Net cash paid for activities related to stock-based incentive plans
(416
)
 
(26
)
Net cash provided by financing activities
13,829

 
11,527

Effect of foreign currency exchange rate on cash and cash equivalents
(183
)
 
11

Net decrease in cash and cash equivalents
(21,041
)
 
(19,677
)
Cash and cash equivalents, beginning of period
46,222

 
61,625

Cash and cash equivalents, end of period
$
25,181

 
$
41,948





10


Wesco Aircraft Holdings, Inc.
Non-GAAP Financial Information - Adjusted Net Income and
Adjusted Earnings Per Share (UNAUDITED)
(Dollars in thousands, except share data)

 
Three Months Ended 
 December 31,
 
2018
 
2017
Adjusted Net Income
 
 
 
Net income (loss)
$
6,293

 
$
(374
)
Amortization of intangible assets
3,733

 
3,714

Amortization of deferred debt issuance costs
1,304

 
1,508

Special items (1)
8,485

 
2,914

Adjustments for tax effect (2)
(3,264
)
 
6,696

Adjusted net income
$
16,551

 
$
14,458

 
 
 
 
Adjusted Earnings Per Share
 

 
 

Weighted-average number of basic shares outstanding
99,485,989

 
99,096,914

Adjusted net income per basic share
$
0.17

 
$
0.15

 
 
 
 
Adjusted Diluted Earnings Per Share
 

 
 

Weighted-average number of diluted shares outstanding
99,904,111

 
99,096,914

Adjusted net income per diluted share
$
0.17

 
$
0.15


(1)
Special items in the first quarter of fiscal 2019 consisted primarily of consulting fees of $4.4 million and other costs of $3.9 million associated with the company’s Wesco 2020 initiative. Special items in the first quarter of fiscal 2018 consisted of consulting fees associated with the company’s improvement activities of $1.6 million, settlement of litigation and related fees of $1.1 million and other expenses of $0.2 million.    
(2)
The adjustment for tax effect in the first quarter of fiscal 2018 included an estimated $9.1 million tax provision on foreign earnings as transition tax under the Tax Cuts and Jobs Act.

 

11


Wesco Aircraft Holdings, Inc.
Non-GAAP Financial Information - EBITDA and Adjusted EBITDA (UNAUDITED)
(Dollars in thousands)
 
Three Months Ended 
 December 31,
 
2018
 
2017
 
 
 
 
EBITDA and Adjusted EBITDA
 
 
 
Net income (loss)
$
6,293

 
$
(374
)
Provision for income taxes
2,655

 
13,368

Interest expense, net
12,914

 
11,838

Depreciation and amortization
7,098

 
7,256

EBITDA
28,960

 
32,088

Special items (1)
8,485

 
2,914

Adjusted EBITDA
$
37,445

 
$
35,002

 
 
 
 
Adjusted EBITDA margin
9.5
%
 
9.6
%

(1)
Special items in the first quarter of fiscal 2019 consisted primarily of consulting fees of $4.4 million and other costs of $3.9 million associated with the company’s Wesco 2020 initiative. Special items in the first quarter of fiscal 2018 consisted of consulting fee associated with the company's improvement activities of $1.6 million, settlement of litigation and related fees of $1.1 million and other expenses of $0.2 million.
    



 
 
 
 
 
 
 
 
 








12



 Wesco Aircraft Holdings, Inc.
Non-GAAP Financial Information - Free Cash Flow (UNAUDITED)
(Dollars in thousands)
 
 
 
 
 
 
 
 
Three Months Ended 
 December 31,
 
Increase 
(Decrease)
 
2018
 
2017
 
 
 

 
 

 
 

Net cash used in operating activities
$
(32,447
)
 
$
(29,880
)
 
$
(2,567
)
Purchase of property and equipment
(2,240
)
 
(1,335
)
 
(905
)
Free cash flow
$
(34,687
)
 
$
(31,215
)
 
$
(3,472
)
 
 
 
 
 
 


     






















13
exhibit992wair
Q1 2019 EARNINGS CALL PRESENTATION January 31, 2019 Todd Renehan Chief Executive Officer Kerry Shiba Executive Vice President and Chief Financial Officer Information in this presentation should be read in conjunction with Wesco Aircraft’s earnings press release and tables for the fiscal 2019 first quarter.


 
Disclaimer This presentation contains forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) concerning Wesco Aircraft Holdings, Inc. (“Wesco Aircraft” or the “Company”). These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of management, as well as assumptions made by, and information currently available to, management. In some cases, you can identify forward-looking statements by the use of forward-looking terms such as “ability,” “accelerate,” “address,” “anticipate,” “begin,” “believe,” “continue,” “deliver,” “drive,” “enable,” “ensure,” “estimate,” “execute,” “expect,” “forecast,” “future,” “grow,” “implement,” “improve,” “increase,” “initiate,” “initiative,” “invest,” “lead,” “maintain,” “on track,” “opportunity,” “outlook,” “plan,” “target,” “tracking,” “will” or similar words, phrases or expressions. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the Company’s control. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: general economic and industry conditions; conditions in the credit markets; changes in military spending; risks unique to suppliers of equipment and services to the U.S. government; risks associated with the loss of significant customers, a material reduction in purchase orders by significant customers, or the delay, scaling back or elimination of significant programs on which the Company relies; the Company’s ability to effectively compete in its industry; risks associated with the Company’s long-term, fixed-price agreements that have no guarantee of future sales volumes; the Company’s ability to effectively manage its inventory; the Company’s suppliers’ ability to provide it with the products the Company sells in a timely manner, in adequate quantities and/or at a reasonable cost, while also meeting the Company’s customers’ quality standards; the Company’s ability to maintain effective information technology systems and effectively implement its new warehouse management system; the Company’s ability to successfully execute and realize the expected financial benefits from its “Wesco 2020” initiative; the Company’s ability to retain key personnel; risks associated with the Company’s international operations, including exposure to foreign currency movements; changes in trade policies; risks associated with assumptions the Company makes in connection with its critical accounting estimates (including goodwill, excess and obsolete inventory and valuation allowance of the company’s deferred tax assets) and legal proceedings; changes in U.S. income tax law; the Company’s dependence on third-party package delivery companies; fuel price risks; fluctuations in the Company’s financial results from period-to-period; environmental risks; risks related to the handling, transportation and storage of chemical products; risks related to the aerospace industry and the regulation thereof; risks related to the Company’s indebtedness; and other risks and uncertainties. The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect the Company’s business, including those described in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other documents filed from time to time with the Securities and Exchange Commission. All forward-looking statements included in this presentation (including information included or incorporated by reference herein) are based upon information available to the Company as of the date hereof, and the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The Company utilizes and discusses Adjusted Net Income, Adjusted Basic Earnings Per Share (EPS), Adjusted Diluted EPS, Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), Adjusted EBITDA Margin and Free Cash Flow, which are non-GAAP measures its management uses to evaluate its business, because the Company believes these measures assist investors and analysts in comparing its performance across reporting periods on a consistent basis by excluding items that management does not believe are indicative of the Company’s core operating performance. The Company believes these metrics are used in the financial community, and the Company presents these metrics to enhance understanding of its operating performance. You should not consider Adjusted EBITDA and Adjusted Net Income as alternatives to Net (Loss) Income, determined in accordance with GAAP, as an indicator of operating performance. Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow are not measurements of financial performance under GAAP, and these metrics may not be comparable to similarly titled measures of other companies. See the Appendix for reconciliations of Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable financial measures calculated and presented in accordance with GAAP. Wesco Aircraft Proprietary Visit www.wescoair.com 2


 
Overview Q1 2019 Operating and Financial Results Q1 2019 Results Sales growth outpaced market – solid execution and demand for services $395M Net Sales Americas business performed well – strong sales growth, improved leverage 110 bps Gross Margin Decline* Challenges in EMEA – lower sales, decline in operating income $0.06 / $0.17 Diluted EPS / Adjusted Diluted EPS** Increasing focus on EMEA, using successful initiatives in Americas 10 bps Adjusted EBITDA Aggressive Wesco 2020 execution – benefits expected to increase during fiscal 2019 Margin** Decline* $32M Increase in operating and free cash flow expected in fiscal 2019 Net Cash Used in Operating Activities * Q1 2019 results compared to the same period in fiscal 2018 ** See appendix for reconciliation and information regarding non-GAAP measures Wesco Aircraft Proprietary Visit www.wescoair.com 3


 
Business Update Double-digit ad-hoc sales growth – capturing more business with existing customers Long-term contract increase – higher volumes with existing customers and new business Continuing to book new business and renew long-term contracts Higher expenses reflect Wesco 2020; investment in capabilities and sales growth SG&A as percent of sales significantly lower, excluding Wesco 2020 costs Continuing to improve inventory management processes, reducing future investment Wesco Aircraft Proprietary Visit www.wescoair.com 4


 
Wesco 2020 Update Aggressive Pace of Wesco 2020 Execution FOOTPRINT Executing footprint optimization – consolidating single-commodity facilities OPTIMIZATION ALIGN FACILITY Establishing new multi-commodity distribution centers in Americas and EMEA INVESTMENT ORGANIZATIONAL Streamlined administrative functions; consolidating sales offices STRUCTURE REFINE GLOBAL CENTERS Continuing to implement new processes; investing in capabilities OF EXCELLENCE New warehouse management system deployment on track AUTOMATION INVEST Upgrading inventory management systems BUSINESS TOOLS Wesco Aircraft Proprietary Visit www.wescoair.com 5


 
Net Sales Summary Net Sales Net sales increase of 9% year/year ($ in millions) Long-term contract increase of 7% due to: $406.8 $395.3 . Chemical volumes +10%; hardware +4% $363.1 . Chemicals primarily reflect pass-through revenue . Participation in military and business jet demand Ad-hoc increase of 16% – ability to service broad-based demand in healthy market Net sales 1% lower sequentially, excluding $6M in one-time sales in Q4 2018, reflecting seasonally lower demand Q1 2018 Q4 2018 Q1 2019 Wesco Aircraft Proprietary Visit www.wescoair.com 6


 
Income Statement Summary (Dollars in Millions, Except Per Share Data) Q1 2018 Q4 2018 Q1 2019 First Quarter Commentary Net sales $363.1 $406.8 $395.3 Income from operations lower year/year; higher gross profit more than offset by increase in SG&A Income from operations $24.6 $22.4 $22.1 Gross profit increase due to higher sales volume, partially offset by Operating margin 6.8% 5.5% 5.6% lower gross margin Gross margin decline reflects an increase in pass-through revenue, as Net (loss) income $(0.4) $7.3 $6.3 well as higher volume discounts earned, E&O inventory related charges and freight costs Diluted (loss) earnings per share $(0.00) $0.07 $0.06 SG&A primarily reflects Wesco 2020 one-time costs of $8M Adjusted net income* $14.5 $18.2 $16.6 Interest expense year/year increase reflects higher interest rates Lower income tax expense primarily reflects $9M of additional tax Adjusteddiluted earnings per share* $0.15 $0.18 $0.17 expense associated with Tax Cuts and Jobs Act in Q1 2018 Adjusted EBITDA* $35.0 $36.7 $37.4 Effective tax rate for fiscal 2019 estimated to be 29-31% Adjusted EBITDA increase of 7% year/year Adjusted EBITDA margin* 9.6% 9.0% 9.5% * See appendix for reconciliation and information regarding non-GAAP measures Wesco Aircraft Proprietary Visit www.wescoair.com 7


 
Balance Sheet Summary Dec 31, March 31, June 30, Sept 30, Dec 31, At Period End 2017 2018 2018 2018 2018 ($ in millions) Cash and cash equivalents $41.9 $35.9 $45.6 $46.2 $25.2 Accounts receivable, net 253.6 287.1 302.1 283.8 296.8 Inventories 856.3 889.3 893.5 884.2 912.7 Accounts payable 161.7 194.1 192.9 180.5 184.9 Total debt 877.7 880.7 877.2 845.8 861.8 Stockholders’ equity 652.4 672.1 682.3 692.5 698.3 Wesco Aircraft Proprietary Visit www.wescoair.com 8


 
Cash Flow Summary Dec 31, March 31, June 30, Sept 30, Dec 31, Quarter Ended 2017 2018 2018 2018 2018 ($ in millions) Net (loss) income $(0.4) $15.0 $10.8 $7.3 $6.3 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities 15.7 11.8 16.3 25.9 16.1 Changes in assets and liabilities (45.2) (32.8) (10.3) 3.7 (54.8) Net cash (used in) provided by operating activities (29.9) (6.0) 16.8 36.9 (32.4) Purchase of property and equipment (1.3) (1.6) (1.1) (1.6) (2.3) Free cash flow (31.2) (7.6) 15.7 35.3 (34.7) Wesco Aircraft Proprietary Visit www.wescoair.com 9


 
Closing Remarks Strong performance in Americas; addressing challenges in EMEA Executing Wesco 2020 at accelerated pace – increased activity and investment Realized benefits expected to increase progressively in fiscal 2019; one-time costs lower by year-end Expecting Wesco 2020 run-rate benefits of at least $30M, with full realization during fiscal 2020 Fiscal 2019 sales and adjusted EBITDA growth targets unchanged Wesco Aircraft Proprietary Visit www.wescoair.com 10


 
APPENDIX


 
Non-GAAP Financial Information ‘‘Adjusted Net Income’’ represents Net (Loss) Income before: (i) amortization of intangible assets, (ii) amortization or write-off of deferred issuance costs, (iii) special items and (iv) the tax effect of items (i) through (iii) above calculated using an estimated effective tax rate. “Adjusted Basic EPS” represents Basic EPS calculated using Adjusted Net Income as opposed to Net (Loss) Income. “Adjusted Diluted EPS” represents Diluted EPS calculated using Adjusted Net Income as opposed to Net (Loss) Income. ‘‘Adjusted EBITDA’’ represents Net (Loss) Income before: (i) income tax provision, (ii) net interest expense, (iii) depreciation and amortization and (iv) special items; “Adjusted EBITDA Margin” represents Adjusted EBITDA divided by Net Sales. “Free Cash Flow” represents net cash (used in) provided by operating activities less purchases of property and equipment. The Company utilizes and discusses Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow, which are non-GAAP measures its management uses to evaluate its business, because the Company believes these measures assist investors and analysts in comparing its performance across reporting periods on a consistent basis by excluding items that management does not believe are indicative of the Company’s core operating performance. The Company believes these metrics are used in the financial community, and the Company presents these metrics to enhance understanding of its operating performance. You should not consider Adjusted EBITDA and Adjusted Net Income as alternatives to Net (Loss) Income, determined in accordance with GAAP, as an indicator of operating performance. Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow are not measurements of financial performance under GAAP, and these metrics may not be comparable to similarly titled measures of other companies. See the following slides for reconciliations of Adjusted Net Income, Adjusted Basic EPS, Adjusted Diluted EPS, Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable financial measures calculated and presented in accordance with GAAP. Wesco Aircraft Proprietary Visit www.wescoair.com 12


 
Non-GAAP Financial Information Wesco Aircraft Holdings, Inc. Non-GAAP Financial Information - Adjusted Net Income and Adjusted Earnings Per Share (UNAUDITED) (Dollars in thousands, except share data) Three Months Ended December 31, September 30, December 31,   2017 2018 2018 Adjusted Net Income       Net (loss) income $ (374) $ 7,274 $ 6,293 Amortization of intangible assets 3,714 3,714 3,733 Amortization of deferred debt issuance costs 1,508 1,388 1,304 Special items (1) 2,914 7,362 8,485 Adjustments for tax effect (2) 6,696 (1,578) (3,264) Adjusted net income $ 14,458 $ 18,160 $ 16,551 Adjusted Basic Earnings Per Share Weight-average number of basic shares outstanding 99,096,914 99,214,233 99,485,989 Adjusted net income per basic share $ 0.15 $ 0.18 $ 0.17 Adjusted Diluted Earnings Per Share Weight-average number of diluted shares outstanding 99,096,914 99,922,457 99,904,111 Adjusted net income per diluted share $ 0.15 $ 0.18 $ 0.17 (1) Special items in the first quarter of fiscal 2018 consisted of consulting fees associated with the company's improvement activities of $1.6 million, settlement of litigation and related fees of $1.1 million and other expenses of $0.2 million. Special items in the fourth quarter of fiscal 2018 consisted primarily of consulting fees of $4.7 million and other costs of $2.3 million associated with the company's Wesco 2020 initiative. Special items in the first quarter of fiscal 2019 consisted primarily of consulting fees of $4.4 million and other costs of $3.9 million associated with the company’s Wesco 2020 initiative. (2) The adjustment for tax effect in the first quarter of fiscal 2018 included an estimated $9.1 million tax provision on foreign earnings as transition tax under the Tax Cuts and Jobs Act. The adjustment for tax effect in the fourth quarter of fiscal 2018 included a $1.9 million tax provision related to the adjustment of deferred tax assets and liabilities to reflect the reduction of the U.S. federal tax rate, a $0.8 million tax provision on foreign earnings as a transition tax and a $0.9 million tax benefit related to the release of a previously recorded deferred tax liability on unremitted foreign earnings, all of which were related to the Tax Cuts and Jobs Act. Wesco Aircraft Proprietary Visit www.wescoair.com 13


 
Non-GAAP Financial Information Wesco Aircraft Holdings, Inc. Non-GAAP Financial Information - EBITDA and Adjusted EBITDA (UNAUDITED) (Dollars In thousands) Three Months Ended December 31, September 30, December 31,   2017 2018 2018 Net Sales $ 363,091 $ 406,817 $ 395,311 EBITDA and Adjusted EBITDA Net (loss) income $ (374) $ 7,274 $ 6,293 Provision for income taxes 13,368 2,371 2,655 Interest expense, net 11,838 12,360 12,914 Depreciation and amortization 7,256 7,347 7,098 EBITDA 32,088 29,352 28,960 Special items (1) 2,914 7,362 8,485 Adjusted EBITDA $ 35,002 $ 36,714 $ 37,445 Adjusted EBITDA margin 9.6% 9.0% 9.5% (1) Special items in the first quarter of fiscal 2018 consisted of consulting fees associated with the company's improvement activities of $1.6 million, settlement of litigation and related fees of $1.1 million and other expenses of $0.2 million. Special items in the fourth quarter of fiscal 2018 consisted primarily of consulting fees of $4.7 million and other costs of $2.3 million associated with the company's Wesco 2020 initiative. Special items in the first quarter of fiscal 2019 consisted primarily of consulting fees of $4.4 million and other costs of $3.9 million associated with the company’s Wesco 2020 initiative. Wesco Aircraft Proprietary 14 Visit www.wescoair.com


 
THANK YOU FOR YOUR INTEREST IN WESCO AIRCRAFT For more information, please visit www.wescoair.com