AAR Reports Record Second Quarter Results
- Record quarterly sales of $310.6 million (up 27% from prior year)
- Record quarterly income from continuing operations of $17.9 million
- Operating margin improves to 10.1%
- $0.42 earnings from continuing operations per diluted share
WOOD DALE, Ill., /PRNewswire-FirstCall/ -- AAR (NYSE: AIR) today reported fiscal 2008 second quarter net sales of $310.6 million and income from continuing operations of $17.9 million, or $0.42 per diluted share. Sales grew 27% from $244.3 million last year, and income from continuing operations increased 28% from $14.0 million in the prior year. For the six months ended November 30, 2007, net sales grew 27% to $616.6 million, and income from continuing operations increased 26% to $33.1 million, or $0.78 per diluted share.
"The principal markets we serve-commercial aviation and defense-continued to expand, despite the turbulence in the global credit markets, uncertainty in the U.S. economy and continued pressure from high fuel prices. The demand from airlines for outsourced technical services and additional aircraft lift is strong, as are the opportunities to support the U.S. Department of Defense and its allies," said David P. Storch, Chairman and Chief Executive Officer of AAR CORP. "During the quarter the AAR team made excellent progress penetrating and growing our presence in these markets. We experienced significant sales growth and margin improvement in our MRO business; continued strength in Aviation Supply Chain; steady progress in our Structures and Systems business; and solid growth in our Aircraft Sales and Leasing business."
Sales and earnings growth in the second quarter was driven by higher sales across all four segments, effective sourcing and merchandising, solid execution and progress with margin improvement initiatives. Sales to commercial customers increased 29%, and sales to defense customers grew 24%, year-over-year.
Consolidated gross profit margin was 19.4% for the second quarter compared to 18.8% last year. The Company achieved an operating margin of 10.1% in the second quarter versus 9.7% last year. Net interest expense increased $0.6 million year-over-year principally due to increased borrowings related to investments in the Aviation Supply Chain and Aircraft Sales & Leasing segments.
The Company purchased 272,000 shares of AAR CORP. stock on the open market through the first six months of fiscal 2008 pursuant to its Board of Directors share repurchase authorization at an average acquisition price of $29.98.
As announced on December 3, 2007, the Company completed the acquisition of Summa Technology, Inc., a leading provider of high-end sub-systems and precision machining, fabrication, welding and engineering services located in Huntsville, Alabama. "We are very excited to add the extensive capabilities of Summa and its management team to our Company," said Storch. "Summa has great momentum and is performing well, and we look forward to creating even more opportunities as we integrate it with our other businesses."
AAR is a leading provider of products and value-added services to the worldwide aerospace and defense industry. With facilities and sales locations around the world, AAR uses its close-to-the-customer business model to serve aviation and defense customers through four operating segments: Aviation Supply Chain; Maintenance, Repair and Overhaul; Structures and Systems and Aircraft Sales and Leasing. More information can be found at http://www.aarcorp.com.
AAR will hold its quarterly conference call at 7:30 a.m. CST on December 19, 2007. The conference call can be accessed by calling 866-814-1918 from inside the U.S. or 703-639-1362 from outside the U.S. A replay of the call will be available by calling 888-266-2081 from inside the U.S. or 703-925-2533 from outside the U.S. (access code 1177120) from 11:30 a.m. CST on December 19, 2007 until 11:59 p.m. CST on December 26, 2007.
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 1A, entitled "Risk Factors", included in the Company's May 31, 2007 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 CORP. and Subsidiaries Consolidated Statements of Operations (In thousands except Three Months Ended Six Months Ended per share data) November 30, November 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) Sales $ 310,647 $ 244,272 $ 616,607 $ 484,514 Cost and expenses: Cost of sales 250,297 198,369 499,717 395,588 Cost of sales -- impairment charges --- --- --- 7,652 Selling, general and administrative 30,941 25,914 61,603 51,739 Gain on sale of product line --- --- --- 5,358 Earnings from aircraft joint ventures 1,965 3,761 2,985 6,802 Operating income 31,374 23,750 58,272 41,695 Gain on extinguishment of debt --- --- --- 2,927 Interest expense 5,026 4,736 9,364 9,402 Interest income and other 1,003 1,300 1,586 2,639 Income from continuing operations before income taxes 27,351 20,314 50,494 37,859 Income tax expense 9,463 6,332 17,351 11,648 Income from continuing operations 17,888 13,982 33,143 26,211 Discontinued operations: Operating loss, net of tax 33 214 135 659 Net income $ 17,855 $ 13,768 $ 33,008 $ 25,552 Share Data: Earnings per share -- Basic: Earnings from continuing operations $ 0.49 $ 0.39 $ 0.90 $ 0.73 Loss from discontinued operations --- (0.01) --- (0.02) Earnings per share -- Basic $ 0.49 $ 0.38 $ 0.90 $ 0.71 Earnings per share -- Diluted Earnings from continuing operations $ 0.42 $ 0.34 $ 0.78 $ 0.64 Loss from discontinued operations --- (0.01) --- (0.02) Earnings per share -- Diluted $ 0.42 $ 0.33 $ 0.78 $ 0.62 Average shares outstanding -- Basic 36,841 36,250 36,858 36,161 Average shares outstanding -- Diluted 43,732 43,145 43,770 42,969 Consolidated Balance Sheet Highlights (In thousands except per share data) November 30, May 31, 2007 2007 (Unaudited) (Derived from audited financial statements) Cash and cash equivalents $ 28,369 $ 83,317 Current assets 666,125 645,721 Current liabilities (excluding debt accounts) 179,169 182,261 Net property, plant and equipment 94,540 88,187 Total assets 1,137,290 1,067,633 Total recourse debt 284,128 284,229 Total non-recourse obligations 84,493 43,627 Stockholders' equity 530,327 494,243 Book value per share $ 14.06 $ 13.10 Shares outstanding 37,723 37,729 Sales By Business Segment (In thousands -- unaudited) Three Months Ended Six Months Ended November 30, November 30, 2007 2006 2007 2006 Aviation Supply Chain $ 144,784 $ 133,904 $ 287,492 $ 261,420 Maintenance, Repair & Overhaul 68,679 44,477 131,326 94,072 Structures and Systems 79,783 62,473 156,281 120,880 Aircraft Sales and Leasing 17,401 3,418 41,508 8,142 $ 310,647 $ 244,272 $ 616,607 $ 484,514 Gross Profit/(Loss) By Business Segment (In thousands -- unaudited) Three Months Ended Six Months Ended November 30, November 30, 2007 2006 2007 2006 Aviation Supply Chain $ 34,970 $ 29,896 $ 66,934 $ 52,151 Maintenance, Repair & Overhaul 9,921 6,147 17,961 13,304 Structures and Systems 10,784 8,891 19,905 16,241 Aircraft Sales and Leasing 4,675 969 12,090 (422) $ 60,350 $ 45,903 $ 116,890 $ 81,274 Note: Gross Profit for the Six Months Ended November 30, 2006 includes impairment charges of $4.8 million in Aviation Supply Chain and $2.9 million in Aircraft Sales & Leasing. Diluted Earnings Per Share Calculation (In thousands except per share data) Three Months Ended Six Months Ended November 30, November 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) Net income as reported $ 17,855 $ 13,768 $ 33,008 $ 25,552 Add: After-tax interest on convertible debt 491 491 983 983 Net income for diluted EPS calculation $ 18,346 $ 14,259 $ 33,991 $ 26,535 Diluted shares outstanding 43,732 43,145 43,770 42,969 Diluted earnings per share $ 0.42 $ 0.33 $ 0.78 $ 0.62
CONTACT: Richard J. Poulton, Vice President, Chief Financial Officer of AAR
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