AOG Investors OPS Portal PAARTSSM Store
X Facebook Instagram Linkedin YouTube Threads

Press release

March 18, 2008

AAR Reports Record Third Quarter Results

  • Record quarterly sales of $376.6 million; 39% sales growth
  • Double-digit sales growth in all four segments
  • Record quarterly net income of $20.1 million; 32% net income growth
  • Record quarterly earnings per diluted share of $0.47
  • Generated $22 million of cash flow from operations

WOOD DALE, Ill., /PRNewswire-FirstCall/ -- AAR (NYSE: AIR) today reported fiscal 2008 third quarter net sales of $376.6 million and income from continuing operations of $20.3 million, or $0.47 per diluted share. Sales grew a robust 39% from $271.0 million in the same period last year, and income from continuing operations increased 31% from $15.5 million in the third quarter of the prior year. Organic sales growth was 25% in the third quarter. For the nine months ended February 29, 2008, net sales grew 31% to $993.2 million, and income from continuing operations increased 28% to $53.4 million, or $1.25 per diluted share.

"This was an exceptional quarter as we produced record sales and earnings, completed the acquisition of SUMMA Technology, generated $22 million of cash flow from operations and raised $250 million of new capital through a convertible note offering," said David P. Storch, Chairman and Chief Executive Officer of AAR CORP. "We continue to see opportunities in the markets we serve, as customers seek ways to operate more efficiently and lower their costs in response to an uncertain operating environment. We are monitoring economic conditions, including rising fuel costs and tightening credit markets, for both risks and opportunities that may affect our business."

Strong performance in the third quarter produced the following results in each of the Company's four operating segments:

    Aviation Supply Chain -- Sales grew 11.5% to $151.2 million for the
    quarter.  Gross profit increased 22% to $36.3 million, resulting in a
    gross profit margin of 24.0%.  Growth in this segment was fueled by steady
    demand and throughput from investments made in recent quarters.

    Maintenance, Repair and Overhaul -- Sales increased 43% to $74.8 million
    in the third quarter.  Gross profit increased 53% to $11.1 million,
    resulting in a gross profit margin of 14.9%.  Strong performance and
    operational gains have contributed to increased market share.  Subsequent
    to the end of the third quarter, the Company completed the acquisition of
    Avborne Heavy Maintenance, Inc.  The acquisition adds 226,000 square feet
    of modern hangar space at Miami International Airport and 467 aviation
    maintenance technicians (AMTs), increasing AAR's hangar space by 22% and
    bringing the total number of AMTs at AAR to more than 2,000 worldwide.

    Structures and Systems -- Sales grew 75% to $110.5 million for the
    quarter, and gross profit increased by 84% to $16.4 million, resulting in
    a gross profit margin of 14.8%.  While the acquisitions of SUMMA
    Technology, Inc. and Brown International contributed the majority of the
    growth, organic growth was an impressive 17% for the quarter as the
    Company continued to experience strength in its mobility systems business.
    On December 3, 2007, the Company completed the acquisition of SUMMA
    Technology, Inc., a leading provider of high-end sub-systems, precision
    machining and engineering services that serves defense, general aviation
    and commercial markets.

    Aircraft Sales and Leasing -- Operating income, which includes earnings
    from aircraft joint ventures, increased $3.1 million in the third quarter
    due principally to the sale of two aircraft from the Company's wholly-
    owned portfolio.  During the quarter, the Company's aircraft position
    declined by two to 37, with 29 aircraft held in joint ventures and eight
    in the Company's wholly-owned portfolio.

Sales to commercial customers increased 30%, and sales to defense customers grew 57%, year-over-year. For the third quarter, defense sales represented 39% of consolidated sales, up from 34% a year earlier. Consolidated gross profit margin was 18.7% for the third quarter compared to 17.4% last year. Selling, general and administrative expenses declined as a percentage of sales to 9.0% from 9.1% in the prior year. Operating margin was 10.1% in the third quarter versus 9.4% last year. Net interest expense increased $3.9 million year-over-year principally due to increased average borrowings and lower interest income. The Company generated $22 million of cash flow from operations during the third quarter.

In February, 2008, the Company raised $250 million in capital through a private placement of convertible notes. The notes were issued in two tranches, consisting of $137.5 million aggregate principal amount of 1.625% convertible senior notes due 2014 and $112.5 million aggregate principal amount of 2.25% convertible senior notes due 2016. The Company used $29.6 million of the net proceeds to fund the net cost of convertible note hedge and warrant transactions which are intended to reduce potential dilution to the Company's common stock upon potential future conversion of the notes. Additional details are included in earlier press releases.

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. CDT on March 19, 2008. The conference call can be accessed by calling 866-802-4355 from inside the U.S. or 703-639-1323 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 1212263) from 10:30 a.m. CDT on March 19, 2008 until 11:59 p.m. CDT on March 26, 2008.

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 per share data)

                                Three Months Ended         Nine Months Ended
                                  February 29/28,            February 29/28,
                                 2008          2007        2008       2007
                                    (Unaudited)               (Unaudited)

    Sales                     $ 376,626     $ 270,978   $ 993,233  $ 755,492
    Cost and expenses:
      Cost of sales             306,321       223,703     806,038    619,291
      Cost of sales --
       impairment charges           ---           ---         ---      7,652
      Selling, general
       and administrative        34,007        24,770      95,610     76,509

    Gain on sale of product line    ---           ---         ---      5,358
    Earnings from
     aircraft joint ventures      1,668         2,983       4,653      9,785

    Operating income             37,966        25,488      96,238     67,183

    Gain/(loss) on
     extinguishment of debt        (627)          ---        (627)     2,927

    Interest expense              6,322         3,568      15,686     12,970
    Interest income and other       184         1,293       1,770      3,932

    Income from continuing
     operations before
     income taxes                31,201        23,213      81,695     61,072

    Income tax expense           10,916         7,694      28,267     19,342

    Income from continuing
     operations                  20,285        15,519      53,428     41,730

    Discontinued operations:
      Operating loss,
       net of tax                   190           258         325        917

    Net income                 $ 20,095      $ 15,261    $ 53,103   $ 40,813

    Earnings per share -- Basic:
      Earnings from continuing
       operations                $ 0.54        $ 0.43      $ 1.44     $ 1.15
      Loss from discontinued
       operations                   ---         (0.01)        ---      (0.03)
      Earnings per share --
       Basic                     $ 0.54        $ 0.42      $ 1.44     $ 1.12

    Earnings per share -- Diluted
      Earnings from continuing
       operations                $ 0.47        $ 0.37      $ 1.25     $ 1.00
      Loss from discontinued
       operations                   ---         (0.01)        ---      (0.02)
      Earnings per share --
       Diluted                   $ 0.47        $ 0.36      $ 1.25     $ 0.98

    Share Data:

    Average shares
      outstanding -- Basic       37,228        36,534      36,991     36,285
    Average shares
      outstanding -- Diluted     43,819        43,496      43,757     43,092



    Consolidated Balance Sheet Highlights
    (In thousands except per share data)
                                           February 29,          May 31,
                                               2008               2007
                                            (Unaudited)  (Derived from audited
                                                         financial statements)

    Cash and cash equivalents               $ 119,157           $ 83,317
    Current assets                            803,894            645,721
    Current liabilities (excluding
     debt accounts)                           202,051            182,261
    Net property, plant and equipment         109,720             88,187
    Total assets                            1,333,454          1,067,633
    Total recourse debt                       473,558            284,229
    Total non-recourse obligations             52,543             43,627
    Stockholders' equity                      564,494            494,243
    Book value per share                      $ 14.57            $ 13.10
    Shares outstanding                         38,738             37,729



    Sales By Business Segment
    (In thousands -- unaudited)
                                  Three Months Ended      Nine Months Ended
                                    February 29/28,         February 29/28,
                                  2008          2007        2008       2007

    Aviation Supply Chain     $ 151,227     $ 135,687   $ 438,719  $ 397,107
    Maintenance, Repair &
      Overhaul                   74,765        52,265     206,091    146,337
    Structures and Systems      110,452        62,992     266,733    183,872
    Aircraft Sales and Leasing   40,182        20,034      81,690     28,176
                              $ 376,626     $ 270,978   $ 993,233  $ 755,492



    Gross Profit By Business Segment
    (In thousands - unaudited)
                                  Three Months Ended      Nine Months Ended
                                    February 29/28,         February 29/28,
                                  2008          2007       2008        2007

    Aviation Supply Chain      $ 36,330      $ 29,862   $ 103,264    $82,013
    Maintenance, Repair &
     Overhaul                    11,114         7,260      29,075     20,564
    Structures and Systems       16,402         8,921      36,307     25,162
    Aircraft Sales and Leasing    6,459         1,232      18,549        810
                               $ 70,305      $ 47,275   $ 187,195  $ 128,549


    Note:  Gross Profit for the Nine Months Ended February 28, 2007 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       Nine Months Ended
                                    February 29/28,         February 29/28,
                                  2008          2007        2008       2007
                                     (Unaudited)               (Unaudited)

    Net income as reported     $ 20,095      $ 15,261    $ 53,103   $ 40,813
    Add: After-tax interest
     on convertible debt            466           491       1,449      1,474
    Net income for diluted
     EPS calculation           $ 20,561      $ 15,752    $ 54,552   $ 42,287

    Diluted shares outstanding   43,819        43,496      43,757     43,092

    Diluted earnings per share   $ 0.47        $ 0.36      $ 1.25     $ 0.98


    Note:  Pursuant to SEC Regulation G, the Company has included the
    following reconciliations of financial measures reported on a non-GAAP
    basis to comparable financial measures reported on the basis of Generally
    Accepted Accounting Principles ("GAAP").  The Company believes that the
    adjusted sales growth for the three months ended February 29, 2008 is more
    representative of the Company's and the Structures and Systems segment's
    organic sales growth as it excludes sales related to acquisitions.



    AAR CORP.
    (In thousands)                                Three Months Ended
                                                    February 29/28,
                                                 2008            2007

    Sales as reported                       $ 376,626       $ 270,978
    Less: sales from acquisitions              37,760             ---
    Adjusted sales                          $ 338,866       $ 270,978

    Sales growth as reported                      39%

    Organic sales growth                          25%



    Structures and Systems segment
    (In thousands)                               Three Months Ended
                                                   February 29/28,
                                                2008            2007

    Sales as reported                       $ 110,452        $ 62,992
    Less: sales from acquisitions              36,542             ---
    Adjusted sales                           $ 73,910        $ 62,992

    Sales growth as reported                      75%

    Organic sales growth                          17%



CONTACT:
Richard J. Poulton, Vice President, Chief Financial Officer of AAR
+1-630-227-2075
rpoulton@aarcorp.com

Related news

See all SeeAll

Press release

May 29, 2024

AAR named to Newsweek’s America’s Greatest Workplaces for Diversity 2024

Wood Dale, Illinois — AAR CORP. (NYSE: AIR), a leading provider of aviation services to commercial and government operators, MROs, and OEMs, announced today that it has been recognized as one of America’s Greatest Workplaces for Diversity 2024 by Newsweek and Plant-A Insights Group.

AAR Doing It Right logo

Press release

May 23, 2024

AAR to participate in the Stifel Cross Sector Insight Conference on June 5, 2024

Wood Dale, Illinois — AAR CORP. (NYSE: AIR), a leading provider of aviation services to commercial and government operators, MROs, and OEMs, will participate in Stifel’s 2024 Cross Sector Insight Conference.

AAR Doing It Right logo

Press release

May 02, 2024

AAR to participate in the Bank of America Transportation, Airlines and Industrials Conference on May 16, 2024

Wood Dale, Illinois — AAR CORP. (NYSE: AIR), a leading provider of aviation services to commercial and government operators, MROs, and OEMs, will participate in Bank of America’s 2024 Transportation, Airlines and Industrials Conference.

AOG Investors OPS Portal PAARTSSM Store
logo

Our products

Airframe parts Engine solutions Distribution Mobility Systems AOG Contact nowContact
logo

Our services

Repair & Engineering

Airframe MRO Landing Gear Overhaul Component Services Wheels and Brakes Engineering Services

Integrated Solutions

Flight-hour support Consumables and Expendables Airinmar® Trax(SM)

Additional services

Sourcing, purchasing, and remarketing ASTRO Government contract vehicles
logo

About

Our CompanyOur Company

Locations Certifications Digital innovation

Doing It Right®Doing It Right®

Environmental, social, and governance Ethics and compliance

LeadershipLeadership

logo

Careers

US job openings Amsterdam job openings Thailand job openings Trois Rivières - Canada job openings United Kingdom job openings Windsor - Canada job openings
Employee experience Diversity, equity, and inclusion Military veterans EAGLE Pathway Program
logo

Newsroom

News Media resources
2023 Annual Report 2023 ESG Summary Report