EX-99.1 3 j2815_ex99d1.htm EX-99.1

Exhibit 99.1

 

NEWS

For immediate release

 

Contact:

Timothy J. Romenesko

 

Vice President, Chief Financial Officer

 

(630) 227-2090

 

e-mail address:  tromenesko@aarcorp.com

 

web address:  www.aarcorp.com

 

AAR REPORTS FOURTH QUARTER AND FISCAL YEAR 2003 RESULTS

 

WOOD DALE, ILLINOIS (July 3, 2003) – AAR ( NYSE: AIR ) today reported net sales of $145.1 million, a net loss of $7.5 million, or $0.24 per share, and cash flow from operations of $22.8 million (including $8.5 million resulting from the new accounts receivable securitization program)  for the fourth quarter ended May 31, 2003.  Fourth quarter results include a $3.4 million after–tax impairment charge related to a reduction in the carrying value of certain engines and parts and $0.4 million in after-tax severance costs relating to the European MRO operations.  Excluding the impairment charge and the severance, the net loss was $0.12 per share.  For the fourth quarter of the previous fiscal year, the Company reported net sales of $147.4 million and a net loss of $2.7 million, or $0.08 per share.

 

For the fiscal year ended May 31, 2003, the Company reported net sales of $606.3 million and a net loss of $12.4 million, or $0.39 per share, compared to net sales of $638.7 million and a net loss of $58.9 million, or $2.08 per share, for the prior fiscal year.  Excluding impairment and special charges and severance, the net loss for the 2003 fiscal year was $8.6 million, or $0.27 per share, compared to $7.2 million, or $0.26 per share, for the prior fiscal year.

 

“Demand for the products and services we provide to our airline customers was negatively impacted as our 4th quarter coincided with the war in Iraq and the outbreak of SARS which together dramatically reduced commercial air traffic, as evidenced by a 9.1% decline from the prior year in available seat miles during the month of May” said AAR President and CEO David P. Storch. “I am very pleased with our success in generating significant cash flow from operations as well as free cash flow in this most difficult period.  Since 9/11 we had been experiencing steady revenue growth and earnings improvement.  While this progress has been disrupted and airline industry conditions remain difficult, we believe that we are  positioned to benefit as the industry seeks lower cost maintenance and supply solutions and as industry conditions improve.  We remain committed to maintaining our low cost structure and generating cash” Storch continued.

 

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

 

 

Sales supporting U.S. Military deployment activities remained strong and increased from prior year levels, although lower than the record level achieved during the third quarter.  Demand for advisory services continues to increase as aircraft owners seek assistance in protecting and remarketing aviation assets.  “While we continue to see strength in our airframe maintenance operations, our other MRO businesses were negatively impacted by industry conditions.  In response to the current environment, we have taken cost reduction actions which resulted in the aforementioned severance charges” said Storch.

 

During the fourth quarter, the Company completed a number of financing transactions to improve its liquidity position, including a new $35 million accounts receivable securitization facility with LaSalle Bank and a $30 million revolving credit facility with Merrill Lynch Capital.  Additionally, the Company repaid all of its expiring bank lines during the quarter.  The Company also announced the repurchase of $10 million and the exchange for new notes of $16.9 million of the 1993 7 ¼ % Notes due October 15, 2003.  The $16.9 million of new notes bear interest at 8% per annum and are due ratably over 3 years commencing October 15, 2004.  The balance outstanding on the Company’s 1993 Notes is now $22.6 million.  The Company also announced the July 1, 2003 completion of an $11 million financing secured by a mortgage on its Wood Dale, Illinois facility.

 

AAR (NYSE: AIR) is the leading provider of aftermarket support to the worldwide aviation/aerospace industry. Products and services include customized inventory management and logistics programs, encompassing supply, repair and manufacture of spare parts and systems. Headquartered in Wood Dale, Illinois, AAR serves commercial and government aircraft fleet operators and independent service customers throughout the world. Further information can be found at www.aarcorp.com.

 

AAR will hold its quarterly conference call at 10:30 AM (CDT) on July 3, 2003. The conference call can be accessed via dial-in (1-719-457-2617; conference 460863). A replay of the call will be available (1-719-457-0820; conference code 460863) until 12 AM on July 9, 2003.

 

# # #

 

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 7, entitled “Factors Which May Affect Future Results”, included in the Company’s May 31, 2002 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.

 

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AAR and Subsidiaries

 

Comparative Statement of Operations

 

 

 

Three Months Ended
May 31,

 

Twelve Months Ended
May 31,

 

(In thousands except per share data)

 

2003

 

2002

 

2003

 

2002

 

Sales

 

$

145,129

 

$

147,382

 

$

606,337

 

$

638,721

 

Cost of sales

 

133,291

 

126,793

 

529,279

 

624,873

 

Gross profit

 

11,838

 

20,589

 

77,058

 

13,848

 

Gross profit margin

 

8.2

%

14.0

%

12.7

%

2.2

%

SG&A

 

19,605

 

21,195

 

78,845

 

95,137

 

Operating loss

 

(7,767

)

(606

)

(1,787

)

(81,289

)

Interest expense

 

4,986

 

4,323

 

19,539

 

19,798

 

Interest income

 

787

 

517

 

1,836

 

2,858

 

Pretax loss

 

(11,966

)

(4,412

)

(19,490

)

(98,229

)

Benefit from income taxes

 

(4,447

)

(1,761

)

(7,080

)

(39,290

)

Net loss

 

(7,519

)

(2,651

)

(12,410

)

(58,939

)

Loss per share-Basic

 

($0.24

)

($0.08

)

($0.39

)

($2.08

)

Loss per share-Diluted

 

($0.24

)

($0.08

)

($0.39

)

($2.08

)

Average shares outstanding-Basic

 

31,850

 

31,865

 

31,852

 

28,282

 

Average shares outstanding-Diluted

 

31,850

 

31,865

 

31,852

 

28,282

 

 

Balance Sheet Highlights

 

(In thousands except per share data)

 

May 31,
2003

 

May 31,
2002

 

Cash and cash equivalents

 

$

29,154

 

$

34,522

 

Current assets

 

396,412

 

436,656

 

Current maturities of recourse long-term debt

 

24,000

 

394

 

Current maturities of non-recourse LTD*

 

32,527

 

—

 

Current liabilities (excluding current maturities)

 

147,048

 

150,070

 

Working capital

 

192,837

 

286,192

 

Net property, plant and equipment

 

94,029

 

102,591

 

Total assets

 

686,621

 

710,199

 

Bank lines & notes payable

 

35,729

 

42,131

 

Recourse long-term debt

 

164,658

 

217,699

 

Stockholders’ equity

 

294,988

 

310,235

 

Book value per share

 

$

9.26

 

$

9.73

 

Shares outstanding

 

31,850

 

31,870

 

 

*      On June 20, 2002 the Company purchased the equity interest in an aircraft joint venture from its partner for nominal consideration as disclosed in the Company’s May 31, 2002 Form 10-K. As a result, the book value of the aircraft and the associated non-recourse debt were recorded on the Company’s consolidated balance sheet. The debt is currently being serviced by the underlying aircraft lease.

 

Sales By Business Segment

 

 

 

Three Months Ended
May 31,

 

Twelve Months Ended
May 31,

 

(In thousands)

 

2003

 

2002

 

2003

 

2002

 

Inventory & Logistic Services

 

$

55,880

 

$

61,895

 

$

246,031

 

$

258,067

 

Maintenance, Repair & Overhaul

 

53,856

 

54,494

 

205,666

 

216,727

 

Manufacturing

 

28,638

 

25,177

 

119,871

 

99,558

 

Aircraft & Engine Sales & Leasing

 

6,755

 

5,816

 

34,769

 

64,369

 

 

 

$

145,129

 

$

147,382

 

$

606,337

 

$

638,721

 

 

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Note:

 

Pursuant to SEC Regulation G, the Company has included the following reconciliation of financial measures reported on the basis of Generally Accepted Accounting Principles (“GAAP”) to comparable financial measures reported on a non-GAAP basis.  The Company believes that the reported non-GAAP financial results are more representative of the Company’s true operating performance as they exclude certain items.

 

 

 

Three Months Ended
May 31,

 

 

 

 

 

 

 

Loss Per Share

 

(In thousands, except per share data)

 

2003

 

2002

 

2003

 

2002

 

GAAP net loss

 

$

(7,519

)

$

(2,651

)

$

(0.24

)

$

(0.08

)

After-tax effect of:

 

 

 

 

 

 

 

 

 

Impairment charges

 

3,414

 

—

 

0.11

 

—

 

Severance costs

 

402

 

—

 

0.01

 

—

 

Adjusted net loss

 

$

(3,703

)

$

(2,651

)

$

(0.12

)

$

(0.08

)

 

 

 

Twelve Months Ended
May 31,

 

 

 

 

 

 

 

Loss Per Share

 

 

 

2003

 

2002

 

2003

 

2002

 

GAAP net loss

 

$

(12,410

)

$

(58,939

)

$

(0.39

)

$

(2.08

)

After-tax effect of:

 

 

 

 

 

 

 

 

 

Impairment charges

 

3,414

 

45,630

 

0.11

 

1.61

 

Special charges

 

—

 

6,070

 

—

 

0.21

 

Severance costs

 

402

 

—

 

0.01

 

—

 

Adjusted net loss

 

$

(8,594

)

$

(7,239

)

$

(0.27

)

$

(0.26

)

 

Free cash flow is defined as GAAP operating cash flow less capital expenditures for property, plant and equipment.  The Company believes free cash flow provides investors with important information on cash available for shareholders and debt payment after making capital investments required to support ongoing business activities.

 

 

 

Three Months Ended
May 31,

 

Twelve Months Ended 
May 31,

 

(In thousands)

 

2003

 

2002

 

2003

 

2002

 

GAAP operating cash flow

 

$

22,845

 

$

(17,777

)

$

34,733

 

$

(33,904

)

Less: Capital expenditures

 

(2,013

)

(3,664

)

(9,930

)

(12,112

)

Free cash flow

 

$

20,832

 

$

(21,441

)

$

24,803

 

$

(46,016

)

 

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