July 13, 2010
AAR Reports Fourth Quarter and Fiscal Year 2010 Results
- Fourth quarter sales of $372 million and diluted earnings per share of $0.29
- Fourth quarter cash flow from operations of $59 million; fiscal year 2010 cash flow from operations of $153 million
- Acquisition of Aviation Worldwide Services (AWS) closed; integration efforts on track
WOOD DALE, Ill., /PRNewswire via COMTEX/ --AAR (NYSE: AIR) today reported fiscal year 2010 fourth quarter consolidated sales of $372.3 million and net income attributable to AAR of $11.2 million, or $0.29 diluted earnings per share. For the fourth quarter of last fiscal year, the Company reported sales of $371.7 million and net income attributable to AAR of $14.2 million, or $0.36 diluted earnings per share.
Consolidated gross profit margin was 17.9% for the fourth quarter compared to 16.4% last year. Selling, general and administrative costs increased $7.2 million, to $42.8 million. The increase was primarily attributable to the acquisition of AWS, including $1.1 million of acquisition related expenses. During the fourth quarter of 2010, the Company generated $59 million of cash flow from operations.
In the fourth quarter of fiscal year 2010, the Company formed the Government and Defense Services segment. This new segment includes the results of AWS, Defense Systems and Logistics (previously reported in the Aviation Supply Chain segment) and Integrated Technologies (formerly known as AAR Brown International and previously reported in the Structures and Systems segment). Prior year information has been revised to conform to the new segment presentation.
Following are the fourth quarter highlights for each segment:
Aviation Supply Chain - Sales declined 9% to $103.3 million and gross profit decreased 6% to $17.1 million compared to last year's fourth quarter, resulting in a gross profit margin of 16.6%. The year-over-year sales decline was primarily due to lower engine parts sales to commercial customers. Sequentially, sales increased 14.9% over the third quarter primarily due to increased demand for airframe parts support.
Government and Defense Services - Sales increased 82% to $80.5 million and gross profit increased 83% to $16.9 million over last year's fourth quarter, resulting in a gross profit margin of 21.0%. The sales increase was driven by revenue from AWS and the KC-10 program, which became operational in February 2010.
The integration of AWS is on track and its operating performance is meeting the Company's expectations. During June and July 2010, AWS began providing additional airlift support deploying both fixed and rotary-wing aircraft under two separate new awards.
Maintenance, Repair and Overhaul - Sales declined 18% to $79.7 million and gross profit declined 26% to $10.6 million compared to last year's fourth quarter, resulting in a gross profit margin of 13.3%. During the fourth quarter, the Company performed on several previously announced contract wins, which helped mitigate soft conditions in the MRO market. The Company expects year-over-year sales growth in the MRO segment beginning in the second quarter of fiscal 2011.
Structures and Systems - Sales declined 7% to $108.9 million while gross profit increased 15% to $22.1 million over last year's fourth quarter, resulting in a gross profit margin of 20.3%. Although the Company experienced a decline in sales at its mobility products business, the year-over-year margin improvement is due principally to a combination of favorable product mix and improved operating efficiencies within that business unit.
Full Year Highlights
For the Company's fiscal year 2010, sales were $1,352.2 million, a decline of 5% versus the prior year, and net income attributable to AAR was $44.6 million, or $1.16 per diluted share.
Commenting on fiscal year 2010 performance, David P. Storch, Chairman and Chief Executive Officer of AAR CORP. stated, "While the pace of the recovery in the commercial markets was not as brisk as expected, we remained focused on capturing new business, delivering quality and cost effective solutions, maintaining a lean cost structure, and generating cash. I am pleased with our new business wins during the year, including the KC-10 performance-based logistics program valued at $600 million over nine years; contracts providing mobility products valued at $300 million over five years; long-term programs to manufacture composite products for the Bombardier C-series and Sikorsky S-92 platforms, together valued in excess of $100 million; several multi-year airframe maintenance contracts and one engineering services contract, together valued in excess of $125 million; a $45 million Airbus narrow-body landing gear program over five years; and a new Airbus inventory management program for Gulf Air valued at $20 million over three years."
Storch continued, "During fiscal year 2010, we generated $153 million of cash from operations. Our balance sheet remains strong and we have substantial liquidity to seize additional opportunities in our markets."
Storch continued, "We are in the integration phase of the AWS acquisition and I am very pleased with our progress to date. Management has been focused on execution and improving the operational and financial performance of the business. We have owned AWS since April 7, 2010, and since closing have successfully won new business and see additional opportunity to provide vital supplemental airlift support to a broader customer base."
Storch concluded, "The focus of the Company remains squarely on capturing new business, solid execution, cost control, and maintaining a strong balance sheet. For fiscal 2011, we expect to benefit from the investments we have made in support of our defense and government customers and from the recovery in the commercial markets."
AAR is a leading provider of products and value-added services to the worldwide aerospace and government/defense industry. With facilities and sales locations around the world, AAR uses its close-to-the-customer business model to serve aviation and government/defense customers through four operating segments: Aviation Supply Chain; Government and Defense Services; Maintenance, Repair and Overhaul; and Structures and Systems. More information can be found at www.aarcorp.com.
AAR will hold its quarterly conference call at 7:30 a.m. CDT on July 14, 2010. The conference call can be accessed by calling 866-219-5269 from inside the U.S. or 703-639-1121 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 1465420) from 10:30 a.m. CDT on July 14, 2010 until 11:59 p.m. CDT on July 21, 2010.
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, 2009 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 update 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 Three Months Ended
-------------------------- May 31,
(In thousands except per share
data)
2010 2009
---- ----
Sales $372,337 $371,708
Cost and expenses:
Cost of sales 305,626 300,565
Cost of sales - impairment
charges --- 10,100
Selling, general and
administrative 42,844 35,637
Earnings (loss) from aircraft
joint ventures (38) 1,283
--- -----
Operating income 23,829 26,689
Gain (loss) on extinguishment of
debt (20) 3,309
Interest expense 7,288 7,306
Interest income 193 295
Gain (loss) on sale of
investments 726 (1,393)
--- ------
Income from continuing operations
before income taxes 17,440 21,594
Income tax expense 6,374 7,418
----- -----
Income from continuing operations 11,066 14,176
Discontinued operations, net of
tax --- ---
--- ---
Net income attributable to AAR
and noncontrolling interest
11,066 14,176
Loss attributable to
noncontrolling interest 134 ---
--- ---
Net income attributable to AAR $11,200 $14,176
======= =======
Earnings per share - Basic:
Earnings from continuing
operations $0.29 $0.37
Loss from discontinued operations --- ---
--- ---
Earnings per share - Basic $0.29 $0.37
===== =====
Earnings per share - Diluted:
Earnings from continuing
operations $0.29 $0.36
Loss from discontinued operations --- ---
--- ---
Earnings per share - Diluted $0.29 $0.36
===== =====
Share Data:
Average shares outstanding -
Basic 38,268 38,030
Average shares outstanding -
Diluted 43,278 42,516
============================ ====== ======
Consolidated Statements of
Operations Twelve Months Ended
-------------------------- May 31,
(In thousands except per share
data)
2010 2009
---- ----
Sales $1,352,151 $1,423,976
Cost and expenses:
Cost of sales 1,108,632 1,151,228
Cost of sales - impairment
charges --- 31,133
Selling, general and
administrative 153,299 147,219
Earnings (loss) from aircraft
joint ventures 112 8,496
--- -----
Operating income 90,332 102,892
Gain (loss) on extinguishment of
debt 893 14,701
Interest expense 26,832 31,416
Interest income 945 1,465
Gain (loss) on sale of
investments (1,150) (1,393)
------ ------
Income from continuing operations
before income taxes 64,188 86,249
Income tax expense 20,986 27,528
------ ------
Income from continuing operations 43,202 58,721
Discontinued operations, net of
tax --- (1,949)
--- ------
Net income attributable to AAR
and noncontrolling interest
43,202 56,772
Loss attributable to
noncontrolling interest 1,426 ---
----- ---
Net income attributable to AAR $44,628 $56,772
======= =======
Earnings per share - Basic:
Earnings from continuing
operations $1.17 $1.54
Loss from discontinued operations --- (0.05)
--- -----
Earnings per share - Basic $1.17 $1.49
===== =====
Earnings per share - Diluted:
Earnings from continuing
operations $1.16 $1.50
Loss from discontinued operations --- (0.05)
--- -----
Earnings per share - Diluted $1.16 $1.45
===== =====
Share Data:
Average shares outstanding -
Basic 38,182 38,059
Average shares outstanding -
Diluted 43,091 42,809
============================ ====== ======
Consolidated Balance Sheet
Highlights May 31, May 31,
-------------------------- ------- -------
(In thousands except per share
data) 2010 2009
---- ----
Cash and cash equivalents $79,370 $112,505
Current assets 863,429 851,312
Current liabilities (excluding
debt accounts) 224,717 190,818
Net property, plant and
equipment 224,866 125,048
Total assets 1,501,042 1,375,905
Total recourse debt 419,733 353,028
Total non-recourse obligations 17,292 38,781
Stockholders' equity 746,350 696,734
Book value per share $18.90 $17.92
Shares outstanding 39,484 38,884
Sales By Business
Segment Three Months Ended Twelve Months Ended
----------------- May 31, May 31,
(In thousands) ------- -------
2010 2009 2010 2009
- ---- - ----
Aviation Supply Chain $103,268 $114,053 $405,955 $468,085
Government and Defense
Services 80,510 44,190 194,944 174,391
Maintenance, Repair &
Overhaul 79,669 96,615 301,348 348,810
Structures and Systems 108,890 116,850 449,904 432,690
------- ------- ------- -------
$372,337 $371,708 $1,352,151 $1,423,976
======== ======== ========== ==========
Gross Profit by Business
Segment Three Months Ended Twelve Months Ended
------------------------ May 31, May 31,
(In thousands) ------- -------
2010 2009 2010 2009
- ---- - ----
Aviation Supply Chain $17,100 $18,246 $70,490 $84,243
Government and Defense
Services 16,944 9,267 42,304 39,507
Maintenance, Repair &
Overhaul 10,607 14,373 38,206 51,281
Structures and Systems 22,060 19,157 92,519 66,584
------ ------ ------ ------
$66,711 $61,043 $243,519 $241,615
======= ======= ======== ========
Diluted Earnings Per Share
Calculation Three Months Ended Twelve Months Ended
-------------------------- ------------------ -------------------
(In thousands except per
share data) May 31, May 31,
------- -------
2010 2009 2010 2009
---- ---- ---- ----
Net income as reported $11,200 $14,176 $44,628 $56,772
Add: After-tax interest on
convertible debt 1,349 1,321 5,274 5,428
Net income for diluted EPS
calculation $12,549 $15,497 $49,902 $62,200
======= ======= ======= =======
Diluted shares outstanding 43,278 42,516 43,091 42,809
Diluted earnings per share $0.29 $0.36 $1.16 $1.45
===== ===== ===== =====
The following information includes sales and gross profit by segment under the new reporting structure for each quarter in fiscal year 2010 and 2009.
Fiscal Year 2010
Sales by Business
Segment Q1 Q2 Q3 Q4 Full Year
--- --- --- --- ---------
Aviation Supply Chain $110,637 $102,159 $89,891 $103,268 $405,955
Government & Defense
Services 36,743 39,329 38,362 80,510 194,944
Maintenance, Repair &
Overhaul 79,217 71,805 70,657 79,669 301,348
Structures & Systems 114,926 115,391 110,697 108,890 449,904
------- ------- ------- ------- -------
$341,523 $328,684 $309,607 $372,337 $1,352,151
======== ======== ======== ======== ==========
Gross Profit by Business
Segment Q1 Q2 Q3 Q4 Full Year
--- --- --- --- ---------
Aviation Supply Chain $15,965 $21,850 $15,575 $17,100 $70,490
Government & Defense
Services 7,705 8,450 9,205 16,944 42,304
Maintenance, Repair &
Overhaul 10,539 8,577 8,483 10,607 38,206
Structures & Systems 19,814 24,983 25,662 22,060 92,519
------ ------ ------ ------ ------
$54,023 $63,860 $58,925 $66,711 $243,519
======= ======= ======= ======= ========
Fiscal Year 2009
Sales by Business
Segment Q1 Q2 Q3 Q4 Full Year
--- --- --- --- ---------
Aviation Supply Chain $126,296 $117,739 $109,997 $114,053 $468,085
Government & Defense
Services 43,856 46,822 39,523 44,190 174,391
Maintenance, Repair &
Overhaul 86,757 88,101 77,337 96,615 348,810
Structures & Systems 102,995 100,910 111,935 116,850 432,690
------- ------- ------- ------- -------
$359,904 $353,572 $338,792 $371,708 $1,423,976
======== ======== ======== ======== ==========
Gross Profit by Business
Segment Q1 Q2 Q3 Q4 Full Year
--- --- --- --- ---------
Aviation Supply Chain $29,582 $8,362 $28,053 $18,246 $84,243
Government & Defense
Services 9,612 11,129 9,499 9,267 39,507
Maintenance, Repair &
Overhaul 12,574 13,486 10,848 14,373 51,281
Structures & Systems 15,370 15,832 16,225 19,157 66,584
------ ------ ------ ------ ------
$67,138 $48,809 $64,625 $61,043 $241,615
======= ======= ======= ======= ========
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