AAR Reports 2nd Quarter Fiscal Year 2003 Results
WOOD DALE, Ill., /PRNewswire-FirstCall/ -- AAR (NYSE: AIR) today reported net sales of $153.1 million and a net loss of $0.7 million or $0.02 per share for the second quarter ended November 30, 2002. For the second quarter of last fiscal year, the Company reported net sales of $144.9 million and a net loss of $2.8 million or $0.10 per share, before consideration of asset impairment and other special charges. After consideration of these charges, the net loss in the prior year period was $54.5 million or $2.03 per share.
Inventory & Logistic Services segment sales increased 16.7% over the prior year reflecting increased sales of aftermarket parts to airline customers and the U.S. Military, partially offset by lower new parts distribution sales. Manufacturing segment sales increased 15.0% over last year driven by continued strong demand for the Company's products that support the U.S. Military's mobility requirements and increased sales of composite products, partially offset by lower sales in the Company's cargo systems business unit. Sales in the Maintenance, Repair & Overhaul segment declined 5.0% from the prior year, however increased 11.6% over the first quarter of this fiscal year as the Company experienced higher demand for airframe maintenance and component repair services.
"Second quarter sales of manufactured products supporting the U.S. Military's mobility requirements increased 20% over the prior year as we benefited from strong demand for traditional product lines and the successful launch of new products. Backlog for these products nearly doubled over the last three months in support of the U.S. and its allies increasing mobilization needs. For the second quarter, total sales to the U.S. Military and certain of its contractors increased 21% over the prior year and reached 31% of consolidated sales compared with 27% in the year ago quarter," said AAR President and CEO David P. Storch.
The Company reported that it generated $4.3 million of cash from operations and ended the quarter with $39.3 million of cash on hand. The Company reduced its indirect, selling, general and administrative expenses by $1.7 million compared to the second quarter of last year and is on target to achieve annual cost savings of $12 million when compared to fiscal 2002. The Company completed the consolidation of its Chicago-based Inventory and Logistics Services warehouses and sold the vacated building during the second quarter with no significant impact to results.
Storch added, "We are encouraged by our results for the quarter. We achieved increased sales, improved gross margins, lowered expenses, narrowed our net loss, improved our cash position and reduced our borrowings. As the commercial airline industry moves forward, business and leisure travelers will demand lower fares which in turn will drive our airline customers to seek alternative low-cost solutions. AAR has made strategic investments in assets and capabilities while lowering our cost base. Even though we expect short-term contraction in the airline market, the positioning of AAR as a high-quality, low-cost provider of maintenance, spare parts supply, asset management and logistics services, will enable the Company to play a larger role in support of the airline industry's drive to lower costs. Additionally, as the U.S. Military enhances its readiness and sustainability, we expect continued improvement in our overall results the balance of our fiscal year."
Recent wins for the Company during the second quarter include:
Selected by Boeing to design and manufacture cargo barriers for its 767 Tanker program
Awarded a contract with the U.S. Air Force for the repair of certain components for F100 engines which power F-15 and F-16 aircraft
Received special recognition from Northrop Grumman for providing 100% on-time logistics support during Operation Enduring Freedom over Afghanistan
Signed an engine parts management program with an undisclosed customer
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 http://www.aarcorp.com .
AAR will hold its quarterly conference call at 10:30 AM (CST) on December 19, 2002. The conference call can be accessed via dial-in (1-719-457-2665; conference 788192). A replay of the call will be available (1-719-457-0820; conference code 788192) until 12 AM on December 26, 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 Three Months Ended Six Months Ended of Operations (In thousands except November 30, November 30, per share data) 2002 2001 2002 2001 (Unaudited) (Unaudited) Sales $ 153,051 $ 144,889 $ 304,216 $ 347,882 Cost of sales* 130,121 124,381 263,521 298,234 Gross profit* 22,930 20,508 40,695 49,648 Gross profit margin 15.0% 14.2% 13.4% 14.3% SG&A* 19,443 20,679 40,224 44,374 Impairment and other special charges --- 86,000 --- 86,000 Operating income (loss) 3,487 (86,171) 471 (80,726) Interest expense 4,883 5,426 9,750 10,970 Interest income 377 942 753 1,689 Pretax income (loss) (1,019) (90,655) (8,526) (90,007) Provision (benefit) for income taxes (356) (36,171) (2,984) (36,009) Net income (loss) (663) (54,484) (5,542) (53,998) Earnings (loss) per share-Basic ($0.02) ($2.03) ($0.17) ($2.01) Earnings (loss) per share-Diluted ($0.02) ($2.03) ($0.17) ($2.01) Average shares outstanding-Basic 31,844 26,877 31,855 26,911 Average shares outstanding-Diluted 31,844 26,877 31,855 26,911
Before consideration of impairment and other special charges recorded 11/30/2001
Balance Sheet Highlights November 30, May 31, (In thousands except per share data) 2002 2002 (Unaudited) (Derived from audited financial statements) Cash and cash equivalents $ 39,310 $ 34,522 Current assets 433,438 436,656 Net property, plant and equipment 96,000 102,591 Current liabilities 197,359 150,464 Working capital 236,079 286,192 Total assets 727,776 710,199 Bank lines & notes payable 40,630 42,131 Current maturities of LTD 51,142 394 Non-recourse long-term debt** 32,700 - Recourse long-term debt 162,568 217,699 Stockholders' equity 306,234 310,235 Book value per share $ 9.62 $ 9.73 Shares outstanding 31,843 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 Six Months Ended (In thousands - unaudited) November 30, November 30, 2002 2001 2002 2001 Inventory & Logistic Services $65,198 $55,882 $126,497 $137,068 Maintenance, Repair & Overhaul 52,388 55,151 99,314 111,838 Manufacturing 29,316 25,482 57,303 47,437 Aircraft & Engine Sales & Leasing 6,149 8,374 21,102 51,539 $153,051 $144,889 $304,216 $347,882
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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