AAR Reports Third Quarter Fiscal Year 2011 Results

-- Third quarter sales of $451 million, up 50% year-over-year

-- Diluted earnings per share from continuing operations of $0.45, up 61% year-over-year

-- Commercial market sales growth of 44%

-- Third quarter cash flow from operations of $30.1 million

Mar 15, 2011, 17:00 ET from AAR

WOOD DALE, Ill., March 15, 2011 /PRNewswire/ -- AAR (NYSE: AIR) today reported third quarter fiscal year 2011 consolidated sales of $451.0 million and income from continuing operations of $18.3 million, or $0.45 per diluted share. For the third quarter of the prior fiscal year, the Company reported sales of $300.8 million and income from continuing operations of $10.5 million, or $0.28 per diluted share. Prior year third quarter results included a $0.10 per diluted share unfavorable impact from a customer bankruptcy.

Sales to commercial customers increased 44% compared with the third quarter of fiscal year 2010, and included 53% sales growth in the Maintenance, Repair and Overhaul segment and 39% sales growth in the Aviation Supply Chain segment. The robust sales growth to the commercial market was due to improved conditions for the airlines and the Company’s success in winning new business.

Sales to government and defense customers increased 56% year-over-year due to sales at the Company’s Airlift business, which was acquired in the fourth quarter of the last fiscal year, and growth in program business at the Company’s defense logistics business.

“We are pleased to report another quarter of solid sales and earnings growth. We had exceptional organic sales growth to commercial customers, far outpacing the overall growth rate in the airline market. We are executing on our strategy of becoming more integral to our customers’ operations by providing more technical expertise and engineering content. This strategy has enabled us to deepen our current customer relationships and to capture new customers,“ said David P. Storch, Chairman and Chief Executive Officer of AAR CORP.

Commenting on performance in the government and defense markets, Storch continued, “Our defense logistics business experienced solid growth during the period and we again had a meaningful contribution from AAR Airlift.  Our mobility products business continues to exhibit strength, albeit at levels below the prior year. Even as defense budgets are under pressure, we currently believe our businesses are well positioned in areas that will continue to receive strong funding support.”

The consolidated gross profit margin in the third quarter was 17.2%, and selling, general and administrative expenses as a percentage of sales were 9.4%. SG&A expenses included $2.2 million of unusual expenses, principally related to the relocation of AAR Airlift. The Company expects to incur approximately $2.0 million of additional AAR Airlift relocation expenses in the fourth quarter as the move is finalized. The consolidated operating margin was 7.8% of sales, and was unfavorably impacted by 50 basis points as a result of the above expenses.

Net interest expense increased $1.2 million year-over-year, principally due to increased borrowings to support AAR Airlift, and to a lesser extent, to non-cash interest expense on the Company’s outstanding convertible notes. The Company generated $30.1 million in cash flow from operations during the third quarter. Capital expenditures were $22.4 million, of which $17 million was to support recent contract awards at AAR Airlift.

As previously announced, during the third quarter, the Company concluded that it will exit its Amsterdam component repair facility, and is evaluating a number of strategic alternatives. Operating results for this unit are now being reported as a discontinued operation.

AAR is a leading provider of products and value-added services to the worldwide aerospace and government and defense industries.  With facilities and sales locations around the world, AAR uses its close-to-the-customer business model to serve aviation and government and defense customers through four operating segments: Aviation Supply Chain; Government and Defense Services; Maintenance, Repair and Overhaul; and Structures and Systems. More information can be found at www.aarcorp.com.

AAR will hold its quarterly conference call at 7:30 a.m. CDT on March 16, 2011. The conference call can be accessed by calling 866-804-3547 from inside the U.S. or 703-639-1328 from outside the U.S.  A replay of the call will be available by calling 888-266-2081 from inside the U.S. or 703-925-2533 from outside the U.S. (access code 1517813) from 11:30 a.m. CDT on March 16, 2011 until 11:59 p.m. CDT on March 23, 2011.

Named One of the Most Trustworthy Companies by Forbes.

This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are based on beliefs of Company management, as well as assumptions and estimates based on information currently available to the Company, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, including those factors discussed under Item 1A, entitled “Risk Factors”, included in the Company’s May 31, 2010 Form 10-K. Should one or more of these risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described.  These events and uncertainties are difficult or impossible to predict accurately and many are beyond the Company’s control.  The Company assumes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. For additional information, see the comments included in AAR’s filings with the Securities and Exchange Commission.

AAR CORP. and Subsidiaries

Consolidated Statements of Operations

(In thousands except per share data - unaudited)

Three Months Ended

February 28,

Nine Months Ended

February 28,

2011

2010

2011

2010

Sales

$451,031

$300,845

$1,295,946

$951,607

Cost and expenses:

    Cost of sales

373,258

242,629

1,074,494

778,002

    Selling, general and administrative

42,527

34,091

124,643

105,121

Earnings from aircraft joint ventures

56

56

2,613

150

Operating income

35,302

24,181

99,422

68,634

Gain on extinguishment of debt

---

---

97

913

Interest expense

7,595

6,523

22,607

19,541

Interest income

62

146

298

752

Loss on investment

---

1,876

---

1,876

Income from continuing operations before income taxes

27,769

15,928

77,210

48,882

Income tax expense

9,465

5,381

26,769

15,360

Income from continuing operations

18,304

10,547

50,441

33,522

Discontinued operations, net of tax

(386)

(762)

(2,035)

(1,386)

Net income attributable to AAR and noncontrolling interest

17,918

9,785

48,406

32,136

Loss attributable to noncontrolling interest

---

127

---

1,292

Net income attributable to AAR

$17,918

$9,912

$48,406

$33,428

Earnings per share – Basic

    Earnings from continuing operations

$ 0.48

$ 0.28

$ 1.32

$ 0.91

    Loss from discontinued operations

(0.01)

(0.02)

(0.06)

(0.03)

    Earnings per share – Basic

$ 0.47

$ 0.26

$ 1.26

$ 0.88

Earnings per share – Diluted

    Earnings from continuing operations

$ 0.45

$ 0.28

$ 1.26

$ 0.90

    Loss from discontinued operations

(0.01)

(0.02)

(0.05)

(0.03)

    Earnings per share – Diluted

$ 0.44

$ 0.26

$ 1.21

$ 0.87

Average shares outstanding – Basic

38,361

38,217

38,341

38,154

Average shares outstanding – Diluted

43,713

43,108

43,458

42,921

Consolidated Balance Sheet Highlights

(In thousands except per share data)

February 28,

2011

May 31,

2010

(Unaudited)

Cash and cash equivalents

$ 54,716

$ 79,370

Current assets

927,839

863,429

Current liabilities (excluding debt accounts)

303,190

224,717

Net property, plant and equipment

318,857

224,866

Total assets

1,655,991

1,501,042

Total recourse debt

429,485

419,732

Total non-recourse obligations

16,713

17,292

Stockholders' equity

804,596

746,350

Book value per share

$ 20.25

$ 18.90

Shares outstanding

39,739

39,484

Sales By Business Segment

(In thousands - unaudited)

Three Months Ended

February 28,

Nine Months Ended

February 28,

2011

2010

2011

2010

Aviation Supply Chain

$ 112,962

$ 81,129

$ 324,552

$ 274,480

Government and Defense Services

147,329

38,362

411,065

114,434

Maintenance, Repair & Overhaul

108,037

70,657

283,897

221,679

Structures and Systems

82,703

110,697

276,432

341,014

$ 451,031

$ 300,845

$ 1,295,946

$ 951,607

Gross Profit By Business Segment

(In thousands - unaudited)

Three Months Ended

February 28,

Nine Months Ended

February 28,

2011

2010

2011

2010

Aviation Supply Chain

$ 19,778

$ 14,866

$ 58,358

$ 50,187

Government and Defense Services

25,665

9,205

72,816

25,360

Maintenance, Repair & Overhaul

17,137

8,483

39,534

27,599

Structures and Systems

15,193

25,662

50,744

70,459

$ 77,773

$ 58,216

$ 221,452

$ 173,605

Diluted Earnings Per Share Calculation

(In thousands except per share data - unaudited)

Three Months Ended

February 28,

Nine Months Ended

February 28,

2011

 2010

2011

   2010

Income from continuing operations attributable to AAR

$18,304

$10,674

$ 50,441

$ 34,814

Add: After-tax interest on convertible debt

1,415

1,328

4,178

3,924

Net income for diluted EPS calculation

$ 19,719

$ 12,002

$ 54,619

$ 38,738

Diluted shares outstanding

43,713

43,108

43,458

42,921

Diluted earnings per share from continuing operations

$ 0.45

$ 0.28

$ 1.26

$ 0.90

SOURCE AAR



RELATED LINKS

http://www.aarcorp.com