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Press release

March 20, 2001

AAR Reports Third Quarter Results

WOOD DALE, Ill., /PRNewswire/ -- AAR (NYSE: AIR) today reported net income of $5.4 million and diluted earnings per share of $0.20 for the third quarter of fiscal 2001, which ended February 28, 2001. Sales for the quarter, excluding pass through sales, were $200.1 million. This represented the third quarter of sequential net income and earnings per share improvement.

The sequential earnings improvement was principally driven by continued strength in the Company's component repair and overhaul businesses, higher margins, lower selling, general and administrative expenses and lower interest expense on lower average borrowings. Sales for the third quarter of fiscal 2001 were down slightly from the second quarter largely due to seasonality.

Sales and net income were down from prior year levels of $256.6 million and $11.0 million, respectively, due to continuing difficult industry conditions.

"During the third quarter, sales to the newer generation aircraft and engine markets, including sales to the relatively fast growing regional aircraft market, grew and represented a greater proportion of our total sales. We continue to invest in assets supporting new generation aircraft including engines, auxiliary power units, avionics and landing gear," said AAR President and CEO, David P. Storch.

"Additionally, we have recently received several contracts for comprehensive support programs. AAR is one of the few companies to offer customized inventory and logistics programs in support of the world's aircraft fleet," Storch continued. "The industry is heightening its focus on improving efficiencies within the supply chain. With AAR's combination of parts supply, logistics, repair and overhaul capabilities and financial strength, we are in an ideal position to take advantage of this trend."

Significant developments in the third quarter included the following:

  • AAR was awarded a two-year contract with MTU Maintenance Canada, an independent aircraft engine services provider, to provide a customized inventory supply and management program.

  • AAR was awarded contracts with Dyncorp and Lear Siegler for global repair and overhaul support of over 400 propellers installed on U.S. Army C-12 and U.S. Navy C-26 aircraft.

  • AAR was awarded a contract by United Parcel Service to design and manufacture the main deck cargo loading systems for their MD-11 freighters.

  • AAR was awarded a one-year engine parts support agreement by Air France.

  • AAR was awarded two contracts to train Egyptian Air Force personnel for maintenance of certain aircraft components.

  • AAR signed a three-year consignment agreement with Southwest Airlines under which AAR will be responsible for managing, marketing and selling certain spare airframe rotables and surplus avionics inventory.

AAR Corp. (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

AAR will hold its quarterly conference call at 10:00 AM (CST) on Tuesday, March 20, 2001. The conference call can be accessed via dial-in (1-719-457-2604; conference code 521655). A replay of the call will be available (1-719-457-0820; conference code 521655) until 12 AM on Tuesday, March 27, 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: 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.

                             AAR CORP. and Subsidiaries

    Comparative Statement
     of Earnings                      Three Months Ended     Nine Months Ended
    (In thousands except per share data)   Feb 28/29,            Feb 28/29,
                                         2001       2000       2001       2000
                                           (Unaudited)           (Unaudited)

    Sales                           $ 200,055  $ 256,558  $ 632,580  $ 750,537
    Pass through sales                     16     15,773     20,596     48,717
    Total sales                       200,071    272,331    653,176    799,254
    Gross profit                       35,746     45,074    105,498    134,992
    SG&A                               23,287     24,404     71,710     72,556
    Operating income                   12,459     20,670     33,788     62,436
    Interest expense                    5,433      5,979     17,139     17,749
    Interest income                       450        959      1,201      1,929
    Pretax income                       7,476     15,650     17,850     46,616
    Net income                          5,388     10,955     12,825     32,692
    Earnings Per Share-Basic           $ 0.20      $0.41     $ 0.48      $1.20
    Earnings Per Share-Diluted         $ 0.20      $0.40     $ 0.48      $1.19
    Average shares outstanding-Basic   26,941     26,942     26,904     27,178
    Average shares outstanding-Diluted 27,064     27,273     26,999     27,520

    Balance Sheet Highlights                   February 28,          May 31,
    (In thousands except per share data)           2001               2000
                                               (Unaudited)    (Derived from
                                                             audited financial

    Current assets                              $ 526,537          $ 511,267
    Current liabilities                           167,852            163,816
    Working capital                               358,685            347,451
    Total assets                                  754,718            740,998
    Long-term debt                                180,106            180,447
    Stockholders' equity                          344,865            339,515
    Book value per share                          $ 12.80            $ 12.64
    Shares outstanding                             26,945             26,865

    Sales By Business Activity        Three Months Ended     Nine Months Ended
    (In thousands)                      February 28/29,        February 28/29,
                                         2001       2000       2001       2000

    Aircraft and Engines             $ 71,651  $ 125,379  $ 246,336  $ 366,450
    Airframe and Accessories          101,102    101,908    312,481    294,661
    Manufacturing                      27,302     29,271     73,763     89,426
                                     $200,055   $256,558   $632,580   $750,537
    Pass Through Sales                     16     15,773     20,596     48,717
                                     $200,071   $272,331   $653,176   $799,254



CONTACT: Timothy J. Romenesko, Vice President, Chief Financial Officer of AAR Corp., 630-227-2090, or

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