AAR (AIR) Q4 2004 earnings summary

Executive summary

• FY2004 sales rose 7.5% to $651,958 thousand; operating income was $18,778 thousand versus a $1,787 thousand loss, and net income was $3,504 thousand versus a $12,410 thousand loss.

• Growth was led by Manufacturing and stronger U.S. military and logistics demand; airline-industry recovery remained uneven.

Financial highlights

• Sales were $651,958 thousand, up 7.5%; gross profit was $100,707 thousand, up 30.7% YoY.

• Net income was $3,504 thousand; diluted EPS was $0.11, compared with a $12,410 thousand net loss and $(0.39) diluted EPS in FY2003.

• Operating income was $18,778 thousand; interest expense was $18,819 thousand, and the income tax benefit was $1,797 thousand.

• Cash from operations was $14,572 thousand; cash and cash equivalents ended FY2004 at $41,010 thousand.

Outlook and guidance

• FY2005 capital expenditures expected at $13,000–$15,000 thousand, focused on airframe maintenance and higher-margin manufacturing capabilities.

• Firm backlog was $162,400 thousand at May 31, 2004, versus $102,700 thousand a year earlier; $148,200 thousand expected to be filled within 12 months.

• Longer-term military deployment and program-management strategies, plus airline customers' greater use of third-party maintenance, were viewed as opportunities; timing and scale remained uncertain.