EX-99.1 2 a09-18299_1ex99d1.htm EX-99.1

Exhibit 99.1

 

NEWS

For immediate release

 

Contact:

Richard J. Poulton

 

Vice President, Chief Financial Officer

 

(630) 227-2075

 

E-mail address: rpoulton@aarcorp.com

 

 

AAR REPORTS FOURTH QUARTER AND FISCAL 2009 RESULTS

 

 

 

·      Fourth quarter diluted earnings per share of $0.49 compared to $0.52 last year

·      Fourth quarter cash flow from operations of $72 million

·      Record annual sales of $1,424 million and diluted earnings per share from continuing operations of $1.92

·      $77 million reduction in net debt outstanding during fiscal 2009

 

WOOD DALE, ILLINOIS (July 14, 2009) — AAR (NYSE: AIR) today reported fiscal year 2009 fourth quarter consolidated sales of $371.7 million and income from continuing operations of $20.5 million, or $0.49 diluted earnings per share.  Sales decreased 5% from $391.7 million reported in the fourth quarter of last year, and diluted earnings per share from continuing operations decreased 6%. Fourth quarter results include a $10.1 million impairment charge related to inventory acquired before September 11, 2001 and a $1.4 million loss on the sale of marketable securities.  Results for the fourth quarter of fiscal year 2009 also include a $10.0 million gain on the early extinguishment of debt.

 

Fourth quarter sales to defense customers increased 7% over the prior year and represented 44% of total sales.  The increase in sales to defense customers was principally attributable to higher shipments of mobility systems products and growth at the Company’s defense logistics business. Sales to commercial customers declined 13% due to lower demand for the Company’s products and services as a result of pressure from lower passenger and freight traffic combined with airline inventory de-stocking.

 

For the Company’s fiscal year 2009, sales were $1,424.0 million, an increase of 3% over the prior year and income from continuing operations increased 6% to $80.6 million, or $1.92 per diluted share.

 

 “In the midst of a deep global recession and disrupted credit markets, AAR achieved record annual sales, earnings and operating cash flow and significantly reduced its debt obligations, while making strategic investments in the Company’s growth prospects,” said David P. Storch, Chairman

 

One AAR Place · 1100 N. Wood Dale Road · Wood Dale, Illinois 60191 USA · 1-630-227-2000 Fax 1-630-227-2101

 



 

and Chief Executive Officer of AAR CORP. “Our results have demonstrated that our strategy for diversification within the aerospace and defense markets has allowed us to manage through these challenging times.  Our fiscal year sales performance was primarily driven by strong sales to defense customers and the full year impact of acquisitions made during fiscal year 2008.  This performance allowed us to further strengthen our balance sheet and provides capacity for making additional strategic investments as we enter our new fiscal year.”

 

 Following are the highlights for each segment:

 

Aviation Supply Chain — Sales declined 13% to $145.6 million and gross profit decreased 17% to $34.8 million over last year’s fourth quarter, resulting in a gross profit margin of 23.9%, before consideration of the impairment charge.  The sales decline was due to lower overall sales to commercial customers reflecting reduced inventory provisioning and fewer maintenance activities as a result of capacity reductions.  Sales in the fourth quarter benefited from a new supply chain services program for a North American regional airline.  Sales at the Company’s defense logistics business increased 7.1% during the fourth quarter.

 

During the fourth quarter, the Company recorded a $10.1 million pre-tax impairment charge on inventory and engines that had been acquired prior to September 11, 2001.  The impairment charge was triggered by a reduction in sales activity related to those assets and weak conditions in the commercial aviation industry.  Taking into consideration the impairment charge, gross profit was $24.7 million and the gross profit margin was 16.9%.

 

Maintenance, Repair and Overhaul — Sales increased 2% to $96.3 million and gross profit declined 2% to $14.7 million over last year’s fourth quarter, resulting in a gross profit margin of 15.2%. Compared to the third quarter of fiscal year 2009, sales increased $19.3 million or 25%, reflecting improved performance at the Company’s landing gear business and at the Company’s aircraft maintenance center in Miami, Florida.  For the fifth consecutive year, AAR was recognized by the Federal Aviation Administration (FAA) for excellence in training and received the Diamond Certificate of Excellence at each of its FAA-certified repair stations. This award is the highest honor in the FAA’s Aviation Maintenance Technician (AMT) Awards Program.

 

Structures and Systems — Sales increased 3% to $126.1 million and gross profit increased 9% to $20.1 million over last year’s fourth quarter, resulting in a gross profit margin of 15.9%.  The increase in sales was attributed to strong demand for the Company’s mobility products for its defense customers.  The Company experienced lower shipments of composite structures and precision machined parts supporting commercial customers.  The improvement in gross profit margin reflected increased sales of higher margin products to defense customers.

 

Aircraft Sales and Leasing — During the fourth quarter, the Company reduced its aircraft portfolio by one to 32 aircraft, with 26 aircraft held in joint ventures and 6 held in the Company’s wholly-owned portfolio.  At May 31, 2009 there was one aircraft not under lease which was subsequently leased to an international carrier in July 2009.  During fiscal year 2009, the Company reduced its total aircraft portfolio by five aircraft and reduced its net investment in aircraft from $97.5 million to $74.4 million.

 

Consolidated gross profit margin was 16.4% for the fourth quarter compared to 19.6% last year.  Excluding the impairment charge of $10.1 million, the gross profit margin for the fourth quarter

 

2



 

was 19.1%.  Selling, general and administrative costs declined to 9.6% of sales from 10.2% in same quarter in fiscal year 2008.  The year-end backlog increased 6% over the prior year to $493 million.

 

During the fourth quarter of 2009, the Company generated $72 million of cash flow from operations and ended the year with approximately $113 million cash on hand.  Also during the fourth quarter, the Company retired $35.5 million of its convertible notes for $24.8 million, equating to a 9% yield to maturity. After taking into consideration unamortized debt issuance costs, the Company recorded a $10.0 million pre-tax gain on settlement of the notes and eliminated 170,000 shares from its diluted earnings per share calculation.  In addition, the Company reduced the amount outstanding on its revolving credit facility by $25 million.

 

Storch continued, “As we look ahead, we expect commercial markets to remain challenging in the short-term due to weak economic conditions while our backlog supports continued strength in our defense business.  Longer-term, we are optimistic about the fundamentals for commercial, government and defense markets.  We have made targeted investments to improve our competitive position and to capture market share and we remain focused on flawless execution while continuing to keep our cost structure lean.”

 

Subsequent Event

 

In June 2009, the Company announced it had entered into a joint venture to expand the Company’s participation in the government and defense markets.  The new business, AAR Global Solutions, LLC, combines the capabilities of AAR with the experience of a seasoned government contracting team, led by Steve Cannon, former Chief Executive Officer of DynCorp International, and other strategic partners including Johnson Global Services, LLC, an affiliate of Magic Johnson Enterprises, and Zaccanelli Investment Partners.

 

In commenting on the new joint venture, Storch stated, “The parties are committed to providing high-quality solutions to our U.S. Government and international customers by bringing discipline and solid business practices to meet the unique needs and stringent requirements of this customer base. Our partners contribute an international presence and reputation to our efforts as we build this new company.”

 

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 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 www.aarcorp.com.

 

3



 

AAR will hold its quarterly conference call at 7:30 a.m. CDT on July 15, 2009. The conference call can be accessed by calling 866-793-1299 from inside the U.S. or 703-639-1306 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 1370009) from 11:30 a.m. CDT on July 15, 2009 until 11:59 p.m. CDT on July 22, 2009.

 

# # #

 

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, 2008 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.

 

4



 

AAR CORP. and Subsidiaries

 

Consolidated Statements of Operations

(In thousands except per share data)

 

 

 

Three Months Ended
May 31,

 

Twelve Months Ended
May 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

371,708

 

$

391,686

 

$

1,423,976

 

$

1,384,919

 

Cost and expenses:

 

 

 

 

 

 

 

 

 

Cost of sales

 

300,565

 

314,809

 

1,151,228

 

1,120,847

 

Cost of sales — impairment charges

 

10,100

 

 

31,133

 

 

Selling, general and administrative

 

35,637

 

39,892

 

147,219

 

135,502

 

 

 

 

 

 

 

 

 

 

 

Earnings from aircraft joint ventures

 

1,283

 

1,295

 

8,496

 

5,948

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

26,689

 

38,280

 

102,892

 

134,518

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on extinguishment of debt

 

9,999

 

422

 

35,316

 

(205

)

 

 

 

 

 

 

 

 

 

 

Interest expense

 

4,278

 

4,892

 

18,371

 

20,578

 

Interest income

 

295

 

548

 

1465

 

1,821

 

Gain (loss) on sale of investments

 

(1,393

)

35

 

(1,393

)

532

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income taxes

 

31,312

 

34,393

 

119,909

 

116,088

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

10,819

 

12,076

 

39,309

 

40,343

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

20,493

 

22,317

 

80,600

 

75,745

 

 

 

 

 

 

 

 

 

 

 

Discontinued operations:

 

 

 

 

 

 

 

 

 

Operating loss, net of tax

 

 

(276

)

(546

)

(601

)

Loss on disposal, net of tax

 

 

 

(1,403

)

 

Net income

 

$

20,493

 

$

22,041

 

$

78,651

 

$

75,144

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - Basic:

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

 

$

0.54

 

$

0.59

 

$

2.12

 

$

2.04

 

Loss from discontinued operations

 

 

(0.01

)

(0.05

)

(0.02

)

Earnings per share — Basic

 

$

0.54

 

$

0.58

 

$

2.07

 

$

2.02

 

 

 

 

 

 

 

 

 

 

 

Earnings per share — Diluted:

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

 

$

0.49

 

$

0.52

 

$

1.92

 

$

1.77

 

Loss from discontinued operations

 

 

 

(0.05

)

(0.01

)

Earnings per share — Diluted

 

$

0.49

 

$

0.52

 

$

1.87

 

$

1.76

 

 

 

 

 

 

 

 

 

 

 

Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average shares outstanding — Basic

 

38,030

 

37,832

 

38,059

 

37,194

 

Average shares outstanding — Diluted

 

42,516

 

43,553

 

42,809

 

43,745

 

 

5



 

Consolidated Balance Sheet Highlights

(In thousands except per share data)

 

 

 

May 31,
2009

 

May 31,
2008

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

112,505

 

$

109,391

 

Current assets

 

851,312

 

783,431

 

Current liabilities (excluding debt accounts)

 

190,818

 

195,505

 

Net property, plant and equipment

 

125,048

 

146,435

 

Total assets

 

1,377,511

 

1,362,010

 

Total recourse debt

 

417,803

 

479,544

 

Total non-recourse obligations

 

38,781

 

51,368

 

Stockholders’ equity

 

656,895

 

585,255

 

Book value per share

 

$

16.89

 

$

15.09

 

Shares outstanding

 

38,884

 

38,773

 

 

Sales By Business Segment

(In thousands)

 

 

 

Three Months Ended
May 31,

 

Twelve Months Ended
May 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

Aviation Supply Chain

 

$

145,632

 

$

167,771

 

$

583,965

 

$

606,490

 

Maintenance, Repair & Overhaul

 

96,298

 

94,780

 

346,996

 

300,871

 

Structures and Systems

 

126,117

 

122,695

 

477,631

 

389,428

 

Aircraft Sales and Leasing

 

3,661

 

6,440

 

15,384

 

88,130

 

 

 

$

371,708

 

$

391,686

 

$

1,423,976

 

$

1,384,919

 

 

Gross Profit (Loss) By Business Segment

(In thousands)

 

 

 

Three Months Ended
May 31,

 

Twelve Months Ended
May 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

Aviation Supply Chain

 

$

24,655

 

$

41,827

 

$

130,411

 

$

145,091

 

Maintenance, Repair & Overhaul

 

14,655

 

14,892

 

51,767

 

43,967

 

Structures and Systems

 

20,100

 

18,366

 

74,158

 

54,673

 

Aircraft Sales and Leasing

 

1,633

 

1,792

 

(14,721

)

20,341

 

 

 

$

61,043

 

$

76,877

 

$

241,615

 

$

264,072

 

 

Diluted Earnings Per Share Calculation

(In thousands except per share data)

 

 

 

Three Months Ended
May 31,

 

Twelve Months Ended
May 31,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Net income as reported

 

$

20,493

 

$

22,041

 

$

78,651

 

$

75,144

 

Add: After-tax interest on convertible debt

 

346

 

417

 

1,454

 

1,866

 

Net income for diluted EPS calculation

 

$

20,839

 

$

22,458

 

$

80,105

 

$

77,010

 

 

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

 

42,516

 

43,553

 

42,809

 

43,745

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

 

$

0.49

 

$

0.52

 

$

1.87

 

$

1.76

 

 

6



 

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 gross profit margin percentages for the three month period ended May 31, 2009 are more representative of the Company’s ongoing performance as it excludes the impairment charge

 

AAR CORP.   (Consolidated results)

(In thousands)

 

 

 

Three Months Ended

 

 

 

May 31, 2009

 

Gross profit margin as reported

 

$

61,043

 

Impairment charge

 

10,100

 

Gross profit margin adjusted for impairment charge

 

$

71,143

 

 

 

 

 

Gross profit margin % as reported

 

16.4

%

 

 

 

 

Gross profit margin % adjusted for impairment charge

 

19.1

%

 

Aviation Supply Chain Segment

(In thousands)

 

 

 

Three Months Ended

 

 

 

May 31, 2009

 

Gross profit margin as reported

 

$

24,655

 

Impairment charge

 

10,100

 

Gross profit margin adjusted for impairment charge

 

$

34,755

 

 

 

 

 

Gross profit margin % as reported

 

16.9

%

 

 

 

 

Gross profit margin % adjusted for impairment charge

 

23.9

%

 

7