AAR (AIR) Q4 2003 earnings summary

Executive summary

• FY03 sales were $606,337, down 5.1% YoY; net loss was $12,410, or $0.39/share, including $5,360 of impairment charges.

• Manufacturing growth and higher U.S. government sales partly offset weak commercial aviation demand; Q4 demand also softened amid the Iraq war and SARS.

Financial highlights

• Gross profit before impairment charges was $82,418, down from $89,748 in FY02; reported gross profit was $77,058 versus $13,848.

• Operating loss was $1,787, versus an $81,289 loss in FY02; interest expense was $19,539 and net loss was $12,410.

• FY03 operating cash flow was $34,733; investing activities used $6,684 and financing activities used $33,350.

• SG&A fell $6,192, or 7.3%, YoY, primarily from lower personnel costs and reduced discretionary spending.

Outlook and guidance

• Firm backlog reached $102,700 at May 31, 2003, up from $93,400 YoY; approximately $99,100 was expected to be filled within 12 months.

• Backlog growth reflected increased orders in Maintenance, Repair and Overhaul; Manufacturing; and Inventory and Logistic Services.

• Future results remained exposed to airline demand, customer credit, aviation asset values, financing access, and government funding and contract awards.