AAR Reports Fourth Quarter and Fiscal Year 2003 Results
WOOD DALE, Ill., /PRNewswire-FirstCall/ -- AAR (NYSE: AIR) today reported net sales of $145.1 million, a net loss of $7.5 million, or $0.24 per share, and cash flow from operations of $22.8 million (including $8.5 million resulting from the new accounts receivable securitization program) for the fourth quarter ended May 31, 2003. Fourth quarter results include a $3.4 million after-tax impairment charge related to a reduction in the carrying value of certain engines and parts and $0.4 million in after-tax severance costs relating to the European MRO operations. Excluding the impairment charge and the severance, the net loss was $0.12 per share. For the fourth quarter of the previous fiscal year, the Company reported net sales of $147.4 million and a net loss of $2.7 million, or $0.08 per share.
For the fiscal year ended May 31, 2003, the Company reported net sales of $606.3 million and a net loss of $12.4 million, or $0.39 per share, compared to net sales of $638.7 million and a net loss of $58.9 million, or $2.08 per share, for the prior fiscal year. Excluding impairment and special charges and severance, the net loss for the 2003 fiscal year was $8.6 million, or $0.27 per share, compared to $7.2 million, or $0.26 per share, for the prior fiscal year.
"Demand for the products and services we provide to our airline customers was negatively impacted as our 4th quarter coincided with the war in Iraq and the outbreak of SARS which together dramatically reduced commercial air traffic, as evidenced by a 9.1% decline from the prior year in available seat miles during the month of May," said AAR President and CEO David P. Storch. "I am very pleased with our success in generating significant cash flow from operations as well as free cash flow in this most difficult period. Since 9/11 we had been experiencing steady revenue growth and earnings improvement. While this progress has been disrupted and airline industry conditions remain difficult, we believe that we are positioned to benefit as the industry seeks lower cost maintenance and supply solutions and as industry conditions improve. We remain committed to maintaining our low cost structure and generating cash," Storch continued.
Sales supporting U.S. Military deployment activities remained strong and increased from prior year levels, although lower than the record level achieved during the third quarter. Demand for advisory services continues to increase as aircraft owners seek assistance in protecting and remarketing aviation assets. "While we continue to see strength in our airframe maintenance operations, our other MRO businesses were negatively impacted by industry conditions. In response to the current environment, we have taken cost reduction actions which resulted in the aforementioned severance charges," said Storch.
During the fourth quarter, the Company completed a number of financing transactions to improve its liquidity position, including a new $35 million accounts receivable securitization facility with LaSalle Bank and a $30 million revolving credit facility with Merrill Lynch Capital. Additionally, the Company repaid all of its expiring bank lines during the quarter. The Company also announced the repurchase of $10 million and the exchange for new notes of $16.9 million of the 1993 7-1/4 % Notes due October 15, 2003. The $16.9 million of new notes bear interest at 8% per annum and are due ratably over 3 years commencing October 15, 2004. The balance outstanding on the Company's 1993 Notes is now $22.6 million. The Company also announced the July 1, 2003 completion of an $11 million financing secured by a mortgage on its Wood Dale, Illinois facility.
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 (CDT) on July 3, 2003. The conference call can be accessed via dial-in (1-719-457-2617; conference 460863). A replay of the call will be available (1-719-457-0820; conference code 460863) until 12 AM on July 9, 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, 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 Operations Three Months Twelve Months (In thousands except per share data) Ended Ended May 31, May 31, 2003 2002 2003 2002 Sales $145,129 $147,382 $606,337 $638,721 Cost of sales 133,291 126,793 529,279 624,873 Gross profit 11,838 20,589 77,058 13,848 Gross profit margin 8.2% 14.0% 12.7% 2.2% SG&A 19,605 21,195 78,845 95,137 Operating loss (7,767) (606) (1,787) (81,289) Interest expense 4,986 4,323 19,539 19,798 Interest income 787 517 1,836 2,858 Pretax loss (11,966) (4,412) (19,490) (98,229) Benefit from income taxes (4,447) (1,761) (7,080) (39,290) Net loss (7,519) (2,651) (12,410) (58,939) Loss per share-Basic ($0.24) ($0.08) ($0.39) ($2.08) Loss per share-Diluted ($0.24) ($0.08) ($0.39) ($2.08) Average shares outstanding-Basic 31,850 31,865 31,852 28,282 Average shares outstanding-Diluted 31,850 31,865 31,852 28,282 Balance Sheet Highlights May 31, May 31, (In thousands except per share data) 2003 2002 Cash and cash equivalents $ 29,154 $ 34,522 Current assets 396,412 436,656 Current maturities of recourse long-term debt 24,000 394 Current maturities of non-recourse LTD* 32,527 -- Current liabilities (excluding current maturities) 147,048 150,070 Working capital 192,837 286,192 Net property, plant and equipment 94,029 102,591 Total assets 686,621 710,199 Bank lines & notes payable 35,729 42,131 Recourse long-term debt 164,658 217,699 Stockholders' equity 294,988 310,235 Book value per share $ 9.26 $ 9.73 Shares outstanding 31,850 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 Twelve Months Ended (In thousands) May 31, May 31, 2003 2002 2003 2002 Inventory & Logistic Services $ 55,880 $ 61,895 $ 246,031 $ 258,067 Maintenance, Repair & Overhaul 53,856 54,494 205,666 216,727 Manufacturing 28,638 25,177 119,871 99,558 Aircraft & Engine Sales & Leasing 6,755 5,816 34,769 64,369 $145,129 $147,382 $ 606,337 $ 638,721 Note: Pursuant to SEC Regulation G, the Company has included the following reconciliation of financial measures reported on the basis of Generally Accepted Accounting Principles ("GAAP") to comparable financial measures reported on a non-GAAP basis. The Company believes that the reported non-GAAP financial results are more representative of the Company's true operating performance as they exclude certain items. (In thousands, except per share data) Three Months Ended May 31, Loss Per Share 2003 2002 2003 2002 GAAP net loss $(7,519) $(2,651) $(0.24) $(0.08) After-tax effect of: Impairment charges 3,414 -- 0.11 -- Severance costs 402 -- 0.01 -- Adjusted net loss $(3,703) $(2,651) $(0.12) $(0.08) Twelve Months Ended May 31, Loss Per Share 2003 2002 2003 2002 GAAP net loss $(12,410) $(58,939) $(0.39) $(2.08) After-tax effect of: Impairment charges 3,414 45,630 0.11 1.61 Special charges -- 6,070 -- 0.21 Severance costs 402 -- 0.01 -- Adjusted net loss $(8,594) $(7,239) $(0.27) $(0.26) Free cash flow is defined as GAAP operating cash flow less capital expenditures for property, plant and equipment. The Company believes free cash flow provides investors with important information on cash available for shareholders and debt payment after making capital investments required to support ongoing business activities. (In thousands) Three Months Ended Twelve Months Ended May 31, May 31, 2003 2002 2003 2002 GAAP operating cash flow $ 22,845 $(17,777) $ 34,733 $(33,904) Less: Capital expenditures (2,013) (3,664) (9,930) (12,112) Free cash flow $ 20,832 $(21,441) $ 24,803 $(46,016)
SOURCE AAR CORP.
CONTACT: Timothy J. Romenesko, Vice President, Chief Financial Officer of AAR, +1-630-227-2090, firstname.lastname@example.org
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