AAR Reports Sales and Earnings Growth in 2nd Quarter

-- EPS up 11% Year-Over-Year
-- Strong Operating Cash Flow
-- Increased Investment in New E-Commerce Strategy

WOOD DALE, Ill., /PRNewswire/ -- AAR CORP. announced today that for the Company's fiscal year 2000 second quarter ended November 30, 1999, net sales increased 8.4% to $248.1 million. After adjusting for the divestiture of the Company's industrial products manufacturing business, net sales increased 10.6%. Net income grew to a second quarter record $10.9 million, an 11.0% increase over last year, and diluted earnings per share increased 11.1% to $0.40 from $0.36 a year ago. It was the Company's 20th consecutive quarter of year-over-year earnings per share increases.

"AAR reported another quarter of sales and earnings growth and had strong operating cash flow. Our industry-leading size, financial strength and ability to help customers manage their logistics more efficiently continues to translate into consistent, solid results," AAR President and Chief Executive Officer David P. Storch said.

During the second quarter, AAR's Aircraft and Engine revenues grew 23.4% over the same quarter last year to $121.3 million, reflecting higher aircraft sales and leasing, engine sales and leasing and engine parts sales, notwithstanding lower engine inputs and reduced demand at certain inventory management sites.

Airframe and Accessories revenues were $96.5 million, unchanged from the prior year as increased revenues at the Company's aircraft maintenance and component repair facilities were offset by lower airframe parts sales.

Manufacturing revenues were $30.3 million, an increase of 3.1% over the prior year after adjusting for the impact from the Company's divestiture of its industrial products manufacturing business.

Gross profit margin during the second quarter was 18.4%, down from 18.7% last year but up from 18.0% during the first quarter. The margin improvement from the first quarter was due to higher margins at the Aircraft and Engine and Manufacturing businesses. SG&A as a percent of sales improved to 9.8% from 10.4% last year. Interest expense was $1.3 million higher in the quarter, due to increased average borrowings resulting from increased working capital, capital expenditures, and the repurchase of Company stock. While working capital turns were unchanged during the period, the Company generated more than $15 million of cash flow from operations in the quarter and continues to strive for more efficient utilization of working capital.

During the second quarter, AAR announced that it has formed a new business unit, AAR e-Business. The new unit will be responsible for working with the company's other business units to implement AAR's E-commerce strategy throughout the organization and bring it to market. John C. Mache was appointed President of AAR e-Business. He will relinquish his current Information Systems responsibilities to devote his full energy to E-commerce initiatives.

AAR also announced that it will detail its E-commerce strategy early next year. That strategy includes: a business-to-business site offering a customizable suite of Internet-based logistics services; a business-to-aviation consumer web site where general aviation customers can place credit-card orders; and other initiatives that are currently in progress.

"During the quarter we increased our investment in technology and people to support our E-commerce strategy. These investments resulted in higher costs in the second quarter. We will continue to invest in this area, as we are confident that the investment in E-commerce will pay off for AAR," said Storch.

AAR CORP. (NYSE: AIR) is the preeminent provider of products and value-added services to the worldwide aerospace/aviation industry. Products and services include proprietary inventory management and logistic support services, encompassing supply, repair and manufacture of spare parts and systems. Headquartered in Wood Dale, Illinois, AAR serves commercial and government aircraft fleet operators and independent service customers throughout the world.

This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on beliefs of Company management as well as assumptions and estimates based on information currently available to the Company, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, depending on a variety of factors, including: implementation of information technology systems, integration of acquisitions, marketplace competition, unidentified Year 2000 problems, economic and aviation/aerospace market stability and Company profitability. Should one or more of these risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described.

AAR CORP. and Subsidiaries Comparative Statement of Earnings
For the Three- and Six-Month Periods Ended November 30, 1999 and 1998

    (In thousands except 
      per share data)              Three Months             Six Months
                                   Ended Nov 30,           Ended Nov 30,
                                 1999       1998         1999        1998
                                   (Unaudited)             (Unaudited)
    Net sales                  $ 248,070  $ 228,798    $ 493,979  $ 444,696
    Gross profit                  45,728     42,740       89,918     83,789
    SG&A                          24,469     23,839       48,152     46,849
    Operating income              21,259     18,901       41,766     36,940
    Interest expense               5,961      4,611       11,773      8,873
    Interest income                  282        108          973        137
    Pretax income                 15,580     14,398       30,966     28,204
    Net income                    10,906     10,035       21,737     19,658
    Earnings Per Share-Basic      $ 0.40      $0.36       $ 0.80      $0.71
    Earnings Per Share-Diluted    $ 0.40      $0.36       $ 0.79      $0.70
    Average shares
     outstanding-Basic            27,199     27,570       27,296     27,642
    Average shares
     outstanding-Diluted          27,489     28,042       27,662     28,210


               AAR CORP. and Subsidiaries Balance Sheet Highlights

    (In thousands except
      per share data)               November 30,              May 31,
                                       1999                    1999
                                    (Unaudited)           (Derived from
                                                         audited financial
                                                             statements)
    Current assets                   $ 523,021              $ 508,186
    Current liabilities                180,436                173,586
    Working capital                    342,585                334,600
    Long-term debt                     180,715                180,939
    Stockholders' equity               339,088                326,035
    Book value per share                $12.48                $ 11.91
    Shares outstanding                  27,181                 27,381


                            Net Sales By Business Activity
    (In thousands)            Three Months Ended         Six Months Ended
                                 November 30,               November 30,
                              1999         1998          1999         1998
    Aircraft and Engines    $121,315     $98,271       $241,193     $188,338
    Airframe and Accessories  96,488      96,969        192,630      189,885
    Manufacturing             30,267      33,558*        60,156       66,473*
                            $248,070    $228,798        493,979     $444,696

    * includes results from industrial products division

SOURCE  AAR CORP.

    CONTACT:  Timothy Romenesko., Vice President, Chief Financial Officer of
    AAR CORP, 630-227-2090, e-mail, tromenesko@aarcorp.com