| AAR Reports Second Quarter Fiscal Year 2004 Results
WOOD DALE, Ill., Dec 18, 2003 /PRNewswire-FirstCall via Comtex/ -- AAR (NYSE: AIR) today
reported a return to profitability with net sales of $159.5 million and net
income of $0.9 million or $.03 per share for the second quarter ended November
30, 2003. The Company generated $25.1 million of cash flow from operations
during the second quarter, driven primarily by improved working capital
management. For the first six months of the fiscal year, the Company
generated $34.2 million of cash flow from operations. For the second quarter
of last fiscal year, the Company reported net sales of $153.1 million and a
net loss of $0.7 million or $0.02 per share.
The Company's 4.2% year-over-year sales growth and improved profitability
reflect strength across a number of different businesses. In the Inventory &
Logistics Services segment, sales growth of 6.2% was driven primarily by
increased demand for logistics support services from government customers and
higher sales to airline customers. While new parts distribution sales were
lower, profitability in the distribution business improved as a result of a
more focused operating strategy for the business. Sales in the Maintenance,
Repair and Overhaul (MRO) segment were essentially flat compared with the
prior year as higher sales at the Company's airframe maintenance facility were
offset by continued softness in certain component repair operations.
Continued strong demand for manufactured products that support the U.S.
Military's mobility requirements and higher sales of cargo systems were the
primary drivers of an 8.5% increase in sales in the Manufacturing segment.
Sales to the U.S. and foreign governments and their contractors grew 22%
while sales to the commercial aviation market grew at a more modest 3%. Sales
to the general aviation market, which is serviced primarily by the
distribution business, declined consistent with the Company's strategy for
this business. Additionally, the Company experienced lower sales of products
to the Industrial market.
"We're pleased to report positive earnings for the first time since the
third quarter of fiscal 2003. The operating environment in the airline
industry continues to slowly improve and we made meaningful progress on many
of our financial goals during the second quarter. As we reported last week,
our order backlog has increased 44% since the beginning of our fiscal year and
18% since the end of the first quarter. Additionally, our operating profit is
up 61.4% versus the prior year as a result of the improvement to the top line
and a continued focus on controlling our expenses," said David P. Storch,
President and CEO of AAR. "During the quarter we experienced improvement in
several of our key efficiency measures. We improved our working capital
turnover to 3.2x from 2.5x in the prior year, and our selling, general and
administrative expenses as a percentage of sales declined 50 basis points from
the prior year."
Storch continued, "With the overall economy and conditions in the airline
industry slowly improving, we are well positioned to meet our airline and
government customers' demand for low-cost, value-added solutions which should
enable us to improve our operating performance in the future."
AAR (NYSE: AIR) is the leading provider of aftermarket support to the
worldwide aviation/aerospace industry. Products and services include
customized inventory management and logistics programs, encompassing supply,
repair and manufacture of spare parts and systems. Headquartered in Wood Dale,
Illinois, AAR serves commercial and government aircraft fleet operators and
independent service customers throughout the world. Further information can be
found at www.aarcorp.com .
AAR will hold its quarterly conference call at 10:30 AM (CST) on December
18, 2003. The conference call can be accessed via dial-in (1-719-457-2665;
conference code 776553). A replay of the call will be available
(1-719-457-0820; conference code 776553) until 12 AM (CST) on December 24,
2003.
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 7, entitled "Factors Which May Affect
Future Results," included in the Company's May 31, 2003 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 publicly release the result of any
revisions that may be made to 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
Comparative Statement of Operations
(In thousands except per share data)
Three Months Ended Six Months Ended
November 30, November 30,
2003 2002 2003 2002
(Unaudited) (Unaudited)
Sales $ 159,519 $ 153,051 $ 311,633 $ 304,216
Cost of sales 134,389 130,121 265,387 263,521
Gross profit 25,130 22,930 46,246 40,695
SG&A and other 19,502 19,443 39,150 40,224
Operating income 5,628 3,487 7,096 471
Interest expense 4,761 4,883 9,674 9,750
Interest income 541 377 916 753
Pretax income (loss) 1,408 (1,019) (1,662) (8,526)
Provision (benefit) for
income taxes 492 (356) (582) (2,984)
Net income (loss) 916 (663) (1,080) (5,542)
Earnings (loss) per share -
Basic $0.03 ($0.02) ($0.03) ($0.17)
Earnings (loss) per share -
Diluted $0.03 ($0.02) ($0.03) ($0.17)
Average shares outstanding -
Basic 31,979 31,844 31,915 31,855
Average shares outstanding -
Diluted 32,455 31,844 31,915 31,855
Balance Sheet Highlights
(In thousands except per share data)
November 30, May 31,
2003 2003
(Unaudited) (Derived from
audited
financial
statements)
Cash and cash equivalents $39,198 $29,154
Current assets 383,765 396,412
Current maturities of recourse LTD 5,908 24,000
Bank lines & notes payable 14,935 35,729
Current maturities of non-recourse LTD* 32,141 32,527
Current liabilities (excl debt, bank
lines and N/P) 118,315 111,319
Net property, plant and equipment 83,836 94,029
Total assets 666,178 686,621
Recourse long-term debt 167,499 164,658
Stockholders' equity 294,821 294,988
Book value per share $9.20 $9.26
Shares outstanding 32,045 31,850
* On June 20, 2002 the Company purchased the equity interest in an
aircraft joint venture from its partner for nominal consideration. As a
result, the book value of the aircraft and the associated non-recourse
debt are recorded on the Company's consolidated balance sheet. The debt
is serviced by the underlying aircraft lease.
Sales By Business Segment
(In thousands - unaudited)
Three Months Ended Six Months Ended
November 30, November 30,
2003 2002 2003 2002
Inventory & Logistic Services $ 69,257 $ 65,198 $ 130,994 $ 126,497
Maintenance, Repair &
Overhaul 53,000 52,388 106,425 99,314
Manufacturing 31,796 29,316 56,966 57,303
Aircraft & Engine Sales &
Leasing 5,466 6,149 17,248 21,102
$159,519 $153,051 $311,633 $304,216
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