AAR Reports Third Quarter Fiscal Year 2017 Results

WOOD DALE, Ill., March 21, 2017 /PRNewswire/ -- AAR CORP. (NYSE: AIR) today reported third quarter Fiscal Year 2017 consolidated sales of $446.7 million and income from continuing operations of $13.1 million, or $0.38 per diluted share.  For the third quarter of the prior fiscal year, the Company reported sales of $412.1 million and income from continuing operations of $9.9 million, or $0.29 per diluted share. 

Sales in Aviation Services increased 9.6% in the quarter reflecting continued strong performance for the Company's industry leading supply chain management solutions.  Sales in Expeditionary Services also increased 1.6% as volumes continue to recover in the mobility business.

The Company announced significant new business wins in the quarter including the award of a comprehensive supply chain management and component repair agreement with Allegiant Air covering their fleet of A320 aircraft and an agreement to provide landing gear overhaul and exchange services for SkyWest's fleet of Bombardier CRJ aircraft.  Our services on these new awards began in the third quarter.  Subsequent to the end of the quarter, we signed a five year agreement with India's largest airline, Interglobe Aviation Limited (IndiGo), to provide landing gear overhaul services on up to 49 full ship sets of A320 landing gear.

Third quarter sales to commercial customers represented 68.1% of consolidated sales, compared to 60.6% of consolidated sales in the third quarter of last year.  Sales to government and defense customers represented 31.9% of consolidated sales compared to 39.4% in the prior year's quarter.

Selling, general and administrative expenses as a percentage of sales were 10.6% for the quarter, compared to 10.5% last year. During the quarter, we incurred approximately $1.4 million in legal fees related to our defense of the INL/A Aviation Support Services Contract (the "INL/A Contract") awarded by the U.S. Department of State ("DoS") on September 1, 2016 and protested by the incumbent.  The U.S. Government Accountability Office reaffirmed the award on December 23, 2016, and the incumbent filed a second protest with the U.S. Court of Federal Claims ("COFC") on December 28, 2016.  We are an intervenor in the COFC case and expect a decision from the COFC on the incumbent's protest no later than August 2017.

Net interest expense from continuing operations for the quarter was $1.4 million compared to $1.6 million last year.  Also during the quarter, the Company paid cash dividends of $2.5 million, or $0.075 per share.  Average diluted share count for the quarter was 34.2 million compared to 34.4 million in the third quarter last year.

Net debt at February 28, 2017 was $162.7 million compared to $145.3 million at February 29, 2016.  The net debt increase during the quarter was primarily for investments in assets to support our recently announced long term flight hour program awards.

"We are very pleased with our progress during the quarter as we continue to use our strong financial position to support our customers," said David P. Storch, Chairman, President, and Chief Executive Officer of AAR CORP.  "We are investing in inventory and systems infrastructure as we provide cost effective long term supply chain solutions for our customers."

Conference Call Information
AAR will hold its quarterly conference call at 3:45 p.m. CDT on March 21, 2017. The conference call can be accessed by calling 866-802-4322 from inside the U.S. or 703-639-1319 from outside the U.S.  A replay of the conference call will also be available by calling 855-859-2056 from inside the U.S. or 404-537-3406 from outside the U.S. (access code 8291068). The replay will be available from 7:15 p.m. CDT on March 21, 2017, until 10:59 p.m. CDT on March 28, 2017.

About AAR
AAR is a global aftermarket solutions company that employs more than 4,500 people in over 20 countries. Based in Wood Dale, Illinois, AAR supports commercial aviation and government customers through two operating segments: Aviation Services and Expeditionary Services. AAR's Aviation Services include inventory management; parts supply; OEM parts distribution; aircraft maintenance, repair and overhaul; and component repair. AAR's Expeditionary Services include airlift operations; mobility systems; and command and control centers in support of military and humanitarian missions. Additional information can be found at www.aarcorp.com.

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 Form 10-K for the fiscal year ended May 31, 2016. 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.