AAR (AIR) Q4 2002 earnings summary

Executive summary

• FY02 sales declined 25.2% to $638.7m; net loss was $58.9m, primarily reflecting $75.9m of impairment charges and $10.1m of special charges.

• Sales fell in Inventory and Logistic Services, Maintenance, Repair and Overhaul, and Aircraft and Engine Sales and Leasing; Manufacturing sales increased 2.5%.

Financial highlights

• Gross profit before impairment charges was $89.7m versus $136.5m in FY01; operating loss was $81.3m versus operating income of $40.4m.

• Net loss was $58.9m, or diluted EPS of $(2.08), compared with net income of $18.5m, or $0.69 per diluted share, in FY01.

• SG&A and other expenses declined 11.5% to $85.0m; interest expense fell to $19.8m from $21.9m.

• Operating cash use was $33.3m; cash increased by $20.7m to $34.5m, supported by debt and equity issuance.

Outlook and guidance

• Firm backlog was $93.4m at May 31, 2002, up from $74.1m a year earlier; $91.6m was expected to be filled within 12 months, with $16.3m of additional unfunded government options.

• Management planned to review business lines and capacity as airline demand changed; airline restructuring and further capacity reductions were expected to pressure the industry.

• Funding for the receivables securitization program was set to end November 30, 2002; discussions with other financial institutions were underway.