AAR Reports 1st Quarter Fiscal Year 2003 Results
WOOD DALE, Ill., /PRNewswire-FirstCall via COMTEX/ -- AAR (NYSE: AIR) today reported net sales of $151.2 million and a net loss of $4.9 million or $0.15 per share for the first quarter ended August 31, 2002.
Lower than anticipated sales and margins in the Inventory & Logistic Services and Maintenance, Repair & Overhaul segments reflect reduced demand from the Company's commercial airline customers due to their difficult environment. Net sales in the Manufacturing segment increased 27% over last year driven by continued strong demand for the Company's products that support the U.S. Military's tactical deployment needs. The Company expects continued growth in this market.
"Although sales and margins for our businesses supporting the commercial airline industry continue to experience pressure, I am pleased that we generated $4.8 million of cash flow from operations and $2.5 million in free cash flow during the quarter. We remain very focused on improving capital turns and generating cash," said AAR President and CEO David P. Storch. "In addition, during the first quarter we further reduced corporate, administrative and other overhead costs associated with under-performing business units and are on track to complete the consolidation and sale of two facilities by the end of the fiscal year. The annual savings from these actions exceed $8 million and we will begin to realize savings in the second quarter of the fiscal year."
"Our funded backlog is 13% higher than the beginning of the quarter and we are seeing increased deal flow," Storch continued. "Over the past year, we have enhanced the Company's competitive position by investing in our stronger businesses with newer technology assets and capabilities. We believe that the airlines will outsource more services as they continue to reduce their cost structure and focus on core competencies. This, in combination with strong military demand and a lower cost structure, will improve the Company's performance."
In early September the Company entered into the following agreements that should benefit this fiscal year:
- A 28-month agreement with Alaska Airlines to provide heavy airframe maintenance services for its fleet of MD-80 and B737 series aircraft.
- A five-year agreement with Midwest Express Airlines, Inc. to provide landing gear overhaul services for its fleet of DC-9 and MD-80 series aircraft.
- An agreement with IAI / Bedek Aviation Group to design and manufacture new 767-200 special freighter cargo loading systems for the Airborne Express freighter conversion program.
The Company also announced today that Mr. Storch would assume the additional role of Chief Operating Officer following the resignation of Joseph M. Gullion, who had been Executive Vice President and Chief Operating Officer since June 2001. Gullion resigned to accept an opportunity with a company outside the aviation industry.
Storch said, "We appreciate the contributions Joe made in his short tenure with the Company and wish him well in his future endeavors."
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 September 26, 2002. The conference call can be accessed via dial-in (1-719-457-2661; conference 627050). A replay of the call will be available (1-719-457-0820; conference code 627050) until 12 AM on October 2, 2002.
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, 2002 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 and Subsidiaries Comparative Statement of Earnings Three Months Ended (In thousands except per share data) August 31, 2002 2001 (Unaudited) Sales $151,165 $202,993 Cost of sales 133,400 173,853 Gross profit 17,765 29,140 SG&A 20,781 23,695 Operating income (loss) (3,016) 5,445 Interest expense 4,867 5,544 Interest income 376 747 Pretax income (loss) (7,507) 648 Provision (benefit) for income taxes (2,628) 162 Net income (loss) (4,879) 486 Earnings (loss) per share-Basic ($0.15) $0.02 Earnings (loss) per share-Diluted ($0.15) $0.02 Average shares outstanding-Basic 31,866 26,945 Average shares outstanding-Diluted 31,866 27,209 Balance Sheet Highlights August 31, May 31, (In thousands except per share data) 2002 2002 (Unaudited) (Derived from audited financial statements) Cash and cash equivalents $ 35,553 $ 34,522 Current assets 418,117 436,656 Net property, plant and equipment 101,259 102,591 Current liabilities 142,645 150,464 Working capital 275,472 286,192 Total assets 722,944 710,199 Short-term debt 41,989 42,525 Non-recourse debt* 33,108 - Long-term debt 213,714 217,699 Stockholders' equity 306,560 310,235 Book value per share $ 9.62 $ 9.73 Shares outstanding 31,865 31,870* On June 20, 2002 the Company purchased the equity interest in an aircraft joint venture from its partner for nominal consideration as disclosed in the Company's May 31, 2002 Form 10-K. As a result, the book value of the aircraft and the associated non-recourse debt were recorded on the Company's consolidated balance sheet. The debt is currently being serviced by the underlying aircraft lease.
Sales By Business Segment Three Months Ended (In thousands) August 31, 2002 2001 (Unaudited) Inventory & Logistic Services $61,299 $81,186 Maintenance, Repair & Overhaul 46,926 56,687 Manufacturing 27,987 21,955 Aircraft & Engine Sales & Leasing 14,953 43,165 $151,165 $202,993
SOURCE AAR CORP.
CONTACT: Timothy J. Romenesko, Vice President, Chief Financial Officer of AAR, +1-630-227-2090, email@example.com
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