AAR Reports 4th Quarter and Fiscal Year 2001 Results
WOOD DALE, Ill., /PRNewswire/ -- AAR (NYSE: AIR) today reported sales, excluding pass through sales, of $221.1 million for the fourth quarter ended May 31, 2001 compared to $207.0 million a year ago. Diluted earnings per share was $0.21 for the fourth quarter compared to $0.09 in the fourth quarter of last year. Cash flow from operations was $44.2 million for the quarter compared to $4.4 million a year ago. For the full fiscal year 2001, the Company reported sales, excluding pass through sales, of $853.7 million and diluted earnings per share of $0.69.
Special items recorded in the fourth quarter included a pre-tax charge of $5.4 million to write-down certain inventories previously dedicated to support the GE inventory management programs, which terminated in December. The Company also recorded a $4.0 million reduction in income tax expense due to increased benefits from the Company's foreign sales corporation and a reduction in tax liabilities no longer required.
"We placed great emphasis this past year on developing new customer relationships, adding repair technology and winning new inventory and logistics programs," said President and CEO David P. Storch. "These initiatives together with cost reductions and lower interest expense allowed us to achieve our objective of sequential earnings per share improvement for each quarter of fiscal 2001 despite challenging industry conditions and the loss of our largest inventory management program."
"We are pleased with the cash flow generated from operations during the year which is the result of intensified sales efforts, improved accounts receivable performance and lower investment in inventory while still investing in newer technology products," continued Storch. "By year end, we eliminated our short-term bank debt and reduced our fiscal 2001 interest expense by $1.5 million."
Outlook for Fiscal Year 2002
Most leading economic indicators suggest that the world economy, and in particular the U.S. economy, is experiencing a slowdown. Profitability in the airline industry is lower due to the effect of this economic slowdown and higher fuel prices. Further, demand for older generation aircraft and engines is declining and major OEMs are aggressively expanding their position in the aviation aftermarket. Major airlines are seeking cost effective solutions for their maintenance and supply requirements while there is an emerging need to support the fast growing regional jet market. Additionally, the Company is seeing an increase in logistic program opportunities in support of the U.S. Government and their major contractors. In light of these external factors and the Company's forecast, fiscal 2002 sales are projected to be between $875 and $925 million. Diluted earnings per share is expected to be in the $0.90 to $1.00 range, representing an improvement of approximately 30% to 40% over fiscal 2001.
"AAR seamlessly integrates and delivers highly focused supply chain management through a wide range of products and services," said Storch. "Current airline industry conditions of declining profitability will lead airlines and maintenance organizations to take greater advantage of the value added cost savings alternatives provided by AAR, which has always been the basis of our product offerings. Our financial strength allows us to offer a broader range of products and services to our customers and make complementary, accretive acquisitions."
AAR Significant Events in Fiscal 2001
In September 2000, AAR acquired substantially all of the net assets of Hermetic Aircraft International Corp., a wholly-owned subsidiary of Honeywell International Inc. Hermetic, renamed AAR Hermetic, provides repair and distribution services to the North American aviation aftermarket on behalf of European aircraft component manufacturers.
AAR was awarded a ten-year service center agreement by Honeywell as an authorized repair center for the maintenance, repair and overhaul of Honeywell environmental control systems in certain markets, including Europe, Asia/Pacific, Africa and most of the Middle East.
AAR entered into several agreements in support of the U.S. military, including supply chain management services for the U.S. Air Force E-8 JSTARS program and leasing and maintenance of two training aircraft for the U.S. Navy TACAMO program.
AAR was awarded a number of new engine parts inventory management programs, including agreements with MTU Maintenance Canada, Delta Air Lines and Air France.
AAR entered into an agreement with Boeing to provide warranty management, rotable maintenance, inventory management and logistics handling in support of the new B717-200 aircraft.
AAR signed multi-year contracts to provide landing gear support to United Air Lines in support of its fleet of 50 Boeing 777 commercial aircraft and with SkyWest and Comair in support of their combined fleet of over 200 regional aircraft.
In early June 2001, AAR completed a $75 million private placement of long-term debt. Proceeds will be used to supplement the Company's existing capital structure in anticipation of the November 2001 repayment of $65 million of 9.5% notes. After the repayment of the $65 million notes, interest expense will decrease $0.8 million annually.
AAR signed a three year agreement under which AAR Aircraft Component Services will become an authorized service center for the maintenance and repair of components installed on aircraft manufactured by Embraer.
AAR was awarded a contract with Bombardier Transportation to provide the design, engineering and manufacturing of the car bodies for the new monorail system in Las Vegas, Nevada, applying AAR's aerospace composites manufacturing expertise to other transportation applications.
AAR (NYSE: AIR) is the preeminent provider of products and value-added services to the worldwide aerospace/aviation industry. Products and services include proprietary inventory management and logistic support services, 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 10:00 AM (CST) on Thursday, June 28, 2001. The conference call can be accessed via dial-in (1-719-457-2692; conference code 762178). A replay of the call will be available (1-719-457-0820; conference code 762178) until 12 AM on Thursday, July 5, 2001.
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, depending on a variety of factors, including: general economic conditions, implementation of information technology systems, integration of acquisitions, marketplace competition, economic and aviation/aerospace market stability and Company profitability. 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.
AAR CORP. and Subsidiaries Comparative Statement of Earnings Three Months Ended Twelve Months Ended (In thousands except May 31, May 31, per share data) 2001 2000 2001 2000 (Unaudited) Sales $ 221,079 $ 206,988 $ 853,659 $ 957,525 Pass through sales -- 18,091 20,596 66,808 Total sales 221,079 225,079 874,255 1,024,333 Gross profit 30,969(2) 37,861 136,467(2) 172,853 SG&A 24,367 29,639(1) 96,077 102,195(1) Operating income 6,602 8,222 40,390 70,658 Interest expense 4,748 5,682 21,887 23,431 Interest income 516 370 1,717 2,299 Pretax income 2,370 2,910 20,220 49,526 Provision for income taxes (3,336)(3) 439 1,689(3) 14,363 Net income 5,706 2,471 18,531 35,163 Earnings Per Share-Basic $ 0.21 $0.09 $ 0.69 $1.30 Earnings Per Share-Diluted $ 0.21 $0.09 $ 0.69 $1.28 Average shares outstanding-Basic 26,940 26,877 26,913 27,103 Average shares outstanding-Diluted 27,028 27,114 26,985 27,415 (1) Includes $4.0 million 4th quarter fiscal 2000 charge to increase bad debt reserves (2) Includes $5.4 million 4th quarter fiscal 2001 charge to increase inventory reserves (3) Includes $4.0 million 4th quarter fiscal 2001 reduction in income tax expense Balance Sheet Highlights May 31, May 31, (In thousands except 2001 2000 per share data) Current assets $ 485,856 $ 511,267 Current liabilities 125,392 163,816 Working capital 360,464 347,451 Total assets 704,353 740,998 Long-term debt 179,987 180,447 Stockholders' equity 342,711 339,515 Book value per share $ 12.72 $ 12.64 Shares outstanding 26,937 26,865 Sales By Business Activity Three Months Ended Twelve Months Ended (In thousands) May 31, May 31, 2001 2000 2001 2000 Aircraft and Engines $ 90,856 $ 73,835 $ 337,192 $ 440,285 Airframe and Accessories 106,832 102,646 419,313 397,307 Manufacturing 23,391 30,507 97,154 119,933 $ 221,079 $ 206,988 $ 853,659 $ 957,525 Pass Through Sales -- 18,091 20,596 66,808 $ 221,079 $ 225,079 $ 874,255 $1,024,333
SOURCE AAR CORP.
CONTACT: Timothy J. Romenesko, Vice President, Chief Financial Officer of AAR Corp., 630-227-2090, or email@example.com
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