AerSale Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

BUSINESS SEGMENTS

BUSINESS SEGMENTS

12 Months Ended

Dec. 31, 2021

NOTE P - 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, we report our 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

●

TechOps - 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 TechOps 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, we engage in research and development activities. Periodically, our TechOps division will engage 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. Gross Profit 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 is as follows (in thousands):


	Year ended December 31,
	2021		2020		2019
Revenues
Asset Management Solutions
Aircraft	$	87,461	$	53,639	$	98,736
Engine		144,549		45,072		123,088
	$	232,010	$	98,711	$	221,824
TechOps
MRO services	$	99,899	$	103,899	$	69,389
Product sales		8,528		6,328		12,988
		108,427		110,227		82,377
Total	$	340,437	$	208,938	$	304,201


	Year Ended December 31,
	2021		2020		2019
Gross profit
Asset Management Solutions
Aircraft	$	30,157	$	11,914	$	27,592
Engine		59,389		17,383		40,113
	$	89,546	$	29,297	$	67,705
TechOps
MRO services	$	28,133	$	21,883	$	11,125
Product sales		1,713		1,609		6,219
		29,846		23,492		17,344
Total		119,392		52,789		85,049


	2021		2020
Total Assets
Asset Management Solutions	$	370,378	$	277,016
TechOps		112,742		108,622
Corporate		4,365		3,491
	$	487,485	$	389,129


	2021		2020		2019

Total Depreciation and Amortization Expense
Asset Management Solutions	$	10,163	$	21,210	$	28,579
TechOps		2,506		2,600		1,301
Corporate		329		413		201
	$	12,998	$	24,223	$	30,081
Total Capital Expenditures
Asset Management Solutions	$	2,383	$	5,128	$	36,479
TechOps		1,224		1,965		1,500
Corporate		284		172		149
	$	3,891	$	7,265	$	38,128

The following table reconciles segment gross profit to net income from continuing operations for the years ended December 31, (in thousands):


	Year Ended December 31,
	2021		2020		2019
Segment gross profit	$	119,392	$	52,789	$	85,049
Selling, general and administrative expenses		(77,498)		(55,635)		(59,814)
Payroll support program proceeds		14,768		12,693		-
Transaction costs		-		1,436		(3,177)
Interest expense, net		(980)		(1,645)		(3,006)
Other income, net		458		494		611
Unrealized loss on investment		(5,421)		-		-
Change in fair value of warrant liability		(2,945)		(388)		-
Income tax expense		(11,659)		(1,650)		(4,164)
Net income	$	36,115	$	8,094	$	15,499

The following table presents revenues based on the customers’ geographic location and long-lived assets located in the United States, our country of domicile, for the years ended December 31, (in thousands):


Revenues	2021		2020		2019
Domestic	$	133,911	$	92,837	$	105,083
Foreign		206,526		116,101		199,118
Total revenues	$	340,437	$	208,938	$	304,201


Long-lived assets	2021		2020
Domestic	$	102,452	$	108,796
Foreign		24,360		34,111
Total long-lived assets	$	126,812	$	142,907

As of December 31, 2021, the Company had one customer from which revenues generated exceeded 10% of total sales. Total sales to this customer amounted to $46.2 million, which was included in the Asset Management Solutions segment. No such concentrations existed for the year ended December 31, 2020.

Intersegment sales includes 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 contribution made by the supplying business segment. All intersegment transactions have been eliminated upon consolidation. Intersegment revenue is as follows (in thousands):


	Year ended December 31,
	2021		2020		2019
Asset Management Solutions	$	6,822	$	3,346	$	334
TechOps		21,932		1,650		2,015
Total intersegment revenues	$	28,754	$	4,996	$	2,349

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

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