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AAR Reports Record Quarterly Earnings
- 121% growth in income from continuing operations for the fourth quarter;
89% for the year
- Fourth quarter sales growth of 21%; annual sales growth of 20%
- Record net income of $12.9 million for the fourth quarter
- Cash flow from operations of $22 million for the fourth quarter
July 12
AAR CORP. (NYSE:AIR) today reported fourth quarter net sales of $253.5 million and ncomefrom continuing operations of $12.9 million or $0.31 per diluted share. For the fourth quarter of last year, the Company reported net sales of $209.9 million and income from continuing operations of $5.8 million or $0.17 per diluted share. Sales from new supply chain programs, the ramp up of operations at the Company's Indianapolis maintenance facility and continued strong demand for specialized mobility products were the primary drivers of the 21% year-over- year sales growth for the quarter as the Company capitalized on the trends of MRO outsourcing and value-added supply chain management solutions. Income from continuing operations increased 121% in the fourth quarter due mainly to higher volumes, improved margins and operational efficiencies.
For the fiscal year ended May 31, 2006, the Company reported net sales of $897.3 million and income from continuing operations of $35.2 million or $0.94 per diluted share. In the prior year, net sales were $747.8 million, and income from continuing operations was $18.6 million or $0.55 per diluted share. The same drivers that fueled the growth in the fourth quarter contributed to the 20% sales growth and 89% growth in income from
continuing operations for the year.
"Fiscal 2006 was an excellent year for AAR," said David P. Storch, Chairman, President and Chief Executive Officer of AAR CORP. "During the year we launched several significant new programs, raised $150 million in capital to fund future growth and reported solid financial results, including the record net income achieved in the fourth quarter. We strengthened the balance sheet and our overall financial position throughout the year, increasing stockholders' equity by 34% to $423 million and finishing the year with $205 million of cash and amounts available from our credit lines. I believe the Company has successfully completed its transition from recovery to health."
Following are highlights for each segment:
-- Aviation Supply Chain -- Sales increased 12% for the quarter and
18% for the year compared to the same periods a year ago. New
programs with Mesa Air Group and the United Kingdom Ministry of
Defence, as well as overall robust demand for the Company's parts
supply products and repair services, translated into strong sales and
margin gains.
-- Maintenance, Repair and Overhaul -- Sales increased 57% for the
quarter and 63% for the year compared to the same periods a year ago.
The addition of sales from AAR's Indianapolis-based heavy maintenance
operation was the major driver for the sales growth. Volumes were
also higher at the Company's aircraft maintenance operation in
Oklahoma City and landing gear repair operation in Miami.
-- Structures and Systems -- Sales increased 19% for the quarter and
20% for the year compared to the same periods a year ago. All
businesses within this segment experienced growth in sales for the
year, with the majority of the growth from continued high levels of
demand for specialized mobility products. Margin pressure related to
product mix within this segment continued in the fourth quarter, while
overall performance in this segment remained strong.
-- Aircraft Sales and Leasing -- Operating income for this segment
increased significantly in the fourth quarter and for the year versus
the same periods last year. One aircraft was added to a joint venture
during the fourth quarter, bringing the total number of aircraft held
in joint ventures to 16 at May 31, 2006. The Company also owns
7 aircraft outside of joint ventures.
Sales to defense and commercial customers grew significantly during fiscal 2006. Growth in defense sales was 25% for the fourth quarter and 24% for the year. Growth in commercial sales was 21% for the quarter and 19% for the year.
The gross profit margin was 18.9% in the fourth quarter, up from 16.7% in the fourth quarter of last year. For the year, the gross profit margin was 18.3% versus 16.2% in the prior year. Selling, general and administrative costs increased for the quarter and the year as part of the Company's growth strategy, but decreased as a percentage of sales. In addition, improved performance in the aircraft joint ventures drove higher profits reflected in equity in earnings of joint ventures. The operating profit margin reached 8.0% in the fourth quarter and 7.2% for the year. Operating profit margins for the same periods last year were 4.3% and 4.5%, respectively.
The Company generated operating cash flow of $22 million and reduced its net interest expense by $0.5 million in the fourth quarter. Large investments in working capital during the first three quarters of fiscal 2006 resulted in an operating cash outflow of $40 million for the year. These investments fueled significant growth for the Company and are currently earning solid returns as reflected in the operating results.
Storch continued, "The Company is in a great position to execute its growth strategy and provide commercial and defense customers with new and innovative solutions to meet their maintenance, supply and logistics requirements. During the year, we strengthened our capital structure, made numerous investments and aligned our capabilities to high-growth markets."
Significant Events in Fiscal 2006
Commercial Aviation Market
-- Selected to provide end-to-end supply chain solution for Mesa Air
Group CRJ 200/700/900 and ERJ 145 regional jets
-- Selected by BAE Systems and ATR to provide component support for
regional aircraft
-- Signed agreements with China Airlines, Shanghai Airlines and China
Eastern Airlines (Yunnan) for landing gear maintenance, repair and
overhaul
Defense Services Market
-- Selected to support United Kingdom's Royal Air Force E-3D AWACS
program
-- Signed an agreement to provide cargo systems for the Airbus A400M
military transport aircraft
-- Awarded a contract to provide pallets for the U.S. Air Force
Financial
-- Issued $150 million of 1.75% convertible senior notes due in 2026
-- Acquired $50.6 million of the 2.875% convertible senior notes due
2024, or approximately 76% of the previously outstanding principal
amount, in exchange for 2.72 million newly issue shares of common
stock
-- Retired $7.2 million of the 6.875% senior notes due in December 2007
Other
-- Completed certification milestones for Malaysian joint venture, AAR
Landing Gear Services Sdn. Bhd.
-- Received special recognition from the FAA for earning their Diamond
Certificate of Excellence for training for the second consecutive year
AAR is a leading provider of products and value-added services to the worldwide aviation/aerospace industry. With facilities and sales locations around the world, AAR uses its close-to-the-customer business model to serve airline 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 .
SOURCE AAR CORP.
- 121% growth in income from continuing operations for the fourth quarter;
89% for the year
- Fourth quarter sales growth of 21%; annual sales growth of 20%
- Record net income of $12.9 million for the fourth quarter
- Cash flow from operations of $22 million for the fourth quarter
July 12
AAR CORP. (NYSE:AIR) today reported fourth quarter net sales of $253.5 million and ncomefrom continuing operations of $12.9 million or $0.31 per diluted share. For the fourth quarter of last year, the Company reported net sales of $209.9 million and income from continuing operations of $5.8 million or $0.17 per diluted share. Sales from new supply chain programs, the ramp up of operations at the Company's Indianapolis maintenance facility and continued strong demand for specialized mobility products were the primary drivers of the 21% year-over- year sales growth for the quarter as the Company capitalized on the trends of MRO outsourcing and value-added supply chain management solutions. Income from continuing operations increased 121% in the fourth quarter due mainly to higher volumes, improved margins and operational efficiencies.
For the fiscal year ended May 31, 2006, the Company reported net sales of $897.3 million and income from continuing operations of $35.2 million or $0.94 per diluted share. In the prior year, net sales were $747.8 million, and income from continuing operations was $18.6 million or $0.55 per diluted share. The same drivers that fueled the growth in the fourth quarter contributed to the 20% sales growth and 89% growth in income from
continuing operations for the year.
"Fiscal 2006 was an excellent year for AAR," said David P. Storch, Chairman, President and Chief Executive Officer of AAR CORP. "During the year we launched several significant new programs, raised $150 million in capital to fund future growth and reported solid financial results, including the record net income achieved in the fourth quarter. We strengthened the balance sheet and our overall financial position throughout the year, increasing stockholders' equity by 34% to $423 million and finishing the year with $205 million of cash and amounts available from our credit lines. I believe the Company has successfully completed its transition from recovery to health."
Following are highlights for each segment:
-- Aviation Supply Chain -- Sales increased 12% for the quarter and
18% for the year compared to the same periods a year ago. New
programs with Mesa Air Group and the United Kingdom Ministry of
Defence, as well as overall robust demand for the Company's parts
supply products and repair services, translated into strong sales and
margin gains.
-- Maintenance, Repair and Overhaul -- Sales increased 57% for the
quarter and 63% for the year compared to the same periods a year ago.
The addition of sales from AAR's Indianapolis-based heavy maintenance
operation was the major driver for the sales growth. Volumes were
also higher at the Company's aircraft maintenance operation in
Oklahoma City and landing gear repair operation in Miami.
-- Structures and Systems -- Sales increased 19% for the quarter and
20% for the year compared to the same periods a year ago. All
businesses within this segment experienced growth in sales for the
year, with the majority of the growth from continued high levels of
demand for specialized mobility products. Margin pressure related to
product mix within this segment continued in the fourth quarter, while
overall performance in this segment remained strong.
-- Aircraft Sales and Leasing -- Operating income for this segment
increased significantly in the fourth quarter and for the year versus
the same periods last year. One aircraft was added to a joint venture
during the fourth quarter, bringing the total number of aircraft held
in joint ventures to 16 at May 31, 2006. The Company also owns
7 aircraft outside of joint ventures.
Sales to defense and commercial customers grew significantly during fiscal 2006. Growth in defense sales was 25% for the fourth quarter and 24% for the year. Growth in commercial sales was 21% for the quarter and 19% for the year.
The gross profit margin was 18.9% in the fourth quarter, up from 16.7% in the fourth quarter of last year. For the year, the gross profit margin was 18.3% versus 16.2% in the prior year. Selling, general and administrative costs increased for the quarter and the year as part of the Company's growth strategy, but decreased as a percentage of sales. In addition, improved performance in the aircraft joint ventures drove higher profits reflected in equity in earnings of joint ventures. The operating profit margin reached 8.0% in the fourth quarter and 7.2% for the year. Operating profit margins for the same periods last year were 4.3% and 4.5%, respectively.
The Company generated operating cash flow of $22 million and reduced its net interest expense by $0.5 million in the fourth quarter. Large investments in working capital during the first three quarters of fiscal 2006 resulted in an operating cash outflow of $40 million for the year. These investments fueled significant growth for the Company and are currently earning solid returns as reflected in the operating results.
Storch continued, "The Company is in a great position to execute its growth strategy and provide commercial and defense customers with new and innovative solutions to meet their maintenance, supply and logistics requirements. During the year, we strengthened our capital structure, made numerous investments and aligned our capabilities to high-growth markets."
Significant Events in Fiscal 2006
Commercial Aviation Market
-- Selected to provide end-to-end supply chain solution for Mesa Air
Group CRJ 200/700/900 and ERJ 145 regional jets
-- Selected by BAE Systems and ATR to provide component support for
regional aircraft
-- Signed agreements with China Airlines, Shanghai Airlines and China
Eastern Airlines (Yunnan) for landing gear maintenance, repair and
overhaul
Defense Services Market
-- Selected to support United Kingdom's Royal Air Force E-3D AWACS
program
-- Signed an agreement to provide cargo systems for the Airbus A400M
military transport aircraft
-- Awarded a contract to provide pallets for the U.S. Air Force
Financial
-- Issued $150 million of 1.75% convertible senior notes due in 2026
-- Acquired $50.6 million of the 2.875% convertible senior notes due
2024, or approximately 76% of the previously outstanding principal
amount, in exchange for 2.72 million newly issue shares of common
stock
-- Retired $7.2 million of the 6.875% senior notes due in December 2007
Other
-- Completed certification milestones for Malaysian joint venture, AAR
Landing Gear Services Sdn. Bhd.
-- Received special recognition from the FAA for earning their Diamond
Certificate of Excellence for training for the second consecutive year
AAR is a leading provider of products and value-added services to the worldwide aviation/aerospace industry. With facilities and sales locations around the world, AAR uses its close-to-the-customer business model to serve airline 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 .
SOURCE AAR CORP.