Quarterly report pursuant to Section 13 or 15(d)

BUSINESS SEGMENTS

v3.21.2
BUSINESS SEGMENTS
6 Months Ended
Jun. 30, 2021
BUSINESS SEGMENTS  
BUSINESS SEGMENTS

NOTE L — BUSINESS SEGMENTS

Consistent with how our chief operating decision maker (Chairman and Chief Executive Officer) evaluates performance and utilizes gross profit as a profitability measure, the Company reports its activities in two business segments:

Asset Management Solutions — comprised of activities to extract value from strategic asset acquisitions through leasing, trading, or disassembling for product sales.
Tech Ops — comprised of MRO activities; and product sales of internally developed engineered solutions and other serviceable products.

The Asset Management Solutions segment provides short-term and long-term leasing solutions of aircraft and jet engines to passenger and cargo operators worldwide. Assets considered to be at or near the end of their useful lives, supplied by our leasing portfolio or acquisitions, are analyzed for return maximization to assess whether they will be traded as whole assets or disassembled and sold as individual spare parts and components.

The Tech Ops segment consists of aftermarket support and services businesses that provide maintenance support for aircraft and aircraft components, and sale of engineered solutions. Our MRO business also engages in longer term projects such as aircraft modifications, cargo conversions of wide-body aircraft, and aircraft storage. The segment also includes MRO of landing gear, thrust reversers, and other components. Cost of sales consists principally of the cost of product, direct labor, and overhead. Our engineered solutions revenues consist of sales of products internally developed as permitted by Supplemental Type Certificates issued by the FAA. These products are proprietary in nature and function as non-original equipment manufacturer solutions to airworthiness directives and other technical challenges for operators. In order to develop these products, the Company engages in research and development activities. Periodically, the Company’s Tech Ops segment engages in the repair and sale of used serviceable materials through their ability to overhaul existing inventory.

The accounting policies for the segments are the same as those described in Note B to our consolidated financial statements included in our annual report. Gross profit (loss) is calculated by subtracting cost of sales from sales. The assets and certain expenses related to corporate activities are not allocated to the segments. Our reportable segments are aligned principally around the differences in products and services. The segment reporting excludes the allocation of selling, general and administrative expenses, interest expense and income tax expense.

Selected financial information for each segment for the three and six months ended June 30, 2021 and 2020 is as follows (in thousands):

Three Months Ended June 30, 

Six Months Ended June 30, 

2021

    

2020

2021

    

2020

    

Revenues

 

 

Asset Management Solutions

 

 

Aircraft

$

24,269

$

10,602

$

34,721

$

24,840

Engine

 

36,030

 

10,249

 

54,830

 

26,842

 

60,299

 

20,851

 

89,551

 

51,682

Tech Ops

 

 

 

 

MRO services

 

29,380

 

24,355

 

56,433

 

47,677

Product sales

 

2,242

 

150

 

4,372

 

3,132

 

31,622

 

24,505

 

60,805

 

50,809

Total

$

91,921

$

45,356

$

150,356

$

102,491

Three Months Ended June 30, 

Six Months Ended June 30, 

2021

2020

2021

2020

Gross profit (loss)

 

 

 

 

Asset Management Solutions

 

 

 

 

Aircraft

$

5,178

$

(9,924)

$

9,641

$

(6,262)

Engine

 

13,921

 

1,017

 

23,045

 

9,122

 

19,099

 

(8,907)

 

32,686

 

2,860

Tech Ops

 

 

 

 

MRO services

 

11,048

 

6,793

 

16,074

 

9,137

Product sales

 

591

 

(14)

 

1,813

 

1,161

 

11,639

 

6,779

 

17,887

 

10,298

Total

$

30,738

$

(2,128)

$

50,573

$

13,158

The following table reconciles segment gross profit (loss) to net income (loss) for the three and six months ended June 30, 2021 and 2020 (in thousands):

    

Three Months Ended June 30, 

    

Six Months Ended June 30, 

2021

    

2020

2021

    

2020

    

Segment gross profit (loss)

$

30,738

$

(2,128)

$

50,573

$

13,158

Selling, general and administrative expenses

 

(16,966)

 

(14,036)

 

(30,276)

 

(27,237)

Payroll support program proceeds

 

8,405

 

6,346

 

14,768

 

6,346

Transaction costs

 

-

 

16

 

-

 

(215)

Interest expense, net

 

(251)

 

(504)

 

(509)

 

(1,040)

Other income, net

 

155

 

95

 

249

 

152

Change in fair value of warrant liability

(407)

-

(631)

-

Income tax (expense) benefit

 

(5,126)

 

2,273

 

(7,608)

 

1,957

Net income (loss)

$

16,548

$

(7,938)

$

26,566

$

(6,879)

Intersegment sales include amounts invoiced by a segment for work performed for another segment. Amounts are based on actual work performed or products sold and agreed-upon pricing which is intended to be reflective of the arm’s length value of the contribution made by the supplying business segment. All intersegment transactions have been eliminated upon consolidation. Intersegment revenue for the three and six months ended June 30, 2021 and 2020, is as follows (in thousands):

    

Three Months Ended June 30, 

    

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

    

Asset Management Solutions

$

536

$

832

$

1,983

$

1,102

Tech Ops

 

1,328

 

542

 

3,486

 

1,461

Total intersegment revenues

$

1,864

$

1,374

$

5,469

$

2,563