AAR (AIR) Q4 2012 earnings summary

Executive summary

• FY2012 sales rose 14.4% to $2,064,998 thousand, while net income attributable to AAR was $67,723 thousand versus $69,826 thousand in FY2011; diluted EPS was $1.65 versus $1.73.

• Commercial sales grew 32.4%, led by organic growth in Aviation Supply Chain and MRO and contributions from Telair, Nordisk, and Airinmar; government and defense sales declined 1.9%.

• FY2013 guidance called for sales of $2.1–$2.2 billion and diluted EPS of $1.55–$1.65, with commercial aviation expected to remain strong.

Financial highlights

• Sales increased $259,886 thousand, or 14.4%, YoY; gross profit rose to $318,557 thousand from $307,056 thousand.

• Operating income declined to $130,702 thousand from $133,628 thousand; net income attributable to AAR was $67,723 thousand, down from $69,826 thousand.

• Cash flow from operations was $94,217 thousand; investing activities used $390,225 thousand, including $298,087 thousand for acquisitions and $91,218 thousand in capital expenditures.

• FY2012 included a $9,500 thousand pre-tax KC10 contract charge and $3,700 thousand of restructuring and impairment costs; tax benefits reduced income tax expense by $3,300 thousand and $3,976 thousand.

Outlook and guidance

• FY2013 consolidated sales guidance was $2.1–$2.2 billion and diluted EPS guidance was $1.55–$1.65.

• Commercial aviation results were expected to remain strong and increase YoY, including a full-year contribution from Telair and Nordisk.

• Airlift results were expected to improve following actions to increase aircraft availability and reduce costs; mobility products and defense systems logistics were expected to decline YoY.