AAR Announces Third Quarter Results

WOOD DALE, Ill., /PRNewswire-FirstCall via COMTEX/ -- AAR (NYSE: AIR) today reported a modest sequential improvement in its third quarter results. Increased sales to military customers and reduced operating and interest expenses were offset by lower demand for the Company's products and services in support of its airline customers due largely to a reduction in air traffic. The Company announced a net loss of $2.3 million or $0.08 per share in the third quarter of fiscal 2002, which ended February 28, 2002.

Net sales for the quarter were $143.5 million compared to $200.1 million in the third quarter of last year as the commercial airline industry continued to be effected by the aftermath of September 11 and a relatively weak economy. As the third quarter progressed the Company saw buying activity increase from its airline customers as they began to replenish their inventories. The Company expects its results to continue to improve as the airlines add capacity and as the U.S. economy rebounds.

While consolidated sales were relatively flat compared with second quarter sales of $144.9 million, the Company's Inventory and Logistic Services segment experienced a sales increase of 6%, largely due to an increase in logistics and spares support for the U.S. Military and its contractors. In the Maintenance, Repair and Overhaul segment, sales were 9% below the second quarter principally due to a decline in maintenance demand resulting from reduced air traffic. Sales in the Manufacturing segment were 6% higher than the second quarter due to increased sales of products supporting U.S. Military tactical deployment requirements. Aircraft and Engine Sales and Leasing sales declined 16% due to the industry-wide lack of capital asset investment activity.

"The Company continues to take aggressive steps to reduce costs and maintain its solid financial position. We have reduced annual operating expenses by nearly $25 million and generated more than $10 million of cash from operations since September 1. In addition, we have lowered annual interest expense by more than $3.5 million," said AAR President and CEO David P. Storch. "In the month of February, the Company strengthened its capital structure with a common stock offering which raised $34.5 million. We believe the cash raised will provide us the financial flexibility we need to execute our business strategy."

"As the airline industry begins to recover from its current levels, we expect to see increased outsourcing opportunities for our products and services which have demonstrated value-added benefits to our airline customers," Storch continued. "Additionally, we are expecting to capitalize on trading opportunities generated by the market imbalances. We are expanding our presence as the logistics provider of choice for the U.S. Armed Forces and its major contractors and we expect to see growth in our business supporting the U.S. Military's mobilization needs."

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. Further information can be found at www.aarcorp.com.

AAR will hold its quarterly conference call at 10:30 AM (CST) on Wednesday, March 20, 2002. The conference call can be accessed via dial-in (1-719-457-2665; conference code 557107). A replay of the call will be available (1-719-457-0820; conference code 557107) until 12 AM on Tuesday, March 26, 2002.

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, including: the impact of the events of September 11, 2001 on the economy, the aviation/aerospace industry and the Company; general economic conditions; ability to acquire inventory at favorable prices; integration of acquisitions; marketplace competition; 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. These events and uncertainties are difficult or impossible to predict accurately and many are beyond the Company's control. The Company assumes no obligation to publicly release the result of any revisions that may be made to any forward- looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. For additional information, see the comments included in AAR's filings with the Securities and Exchange Commission.

                           AAR CORP. and Subsidiaries

    Comparative Statement of Earnings   Three Months Ended   Nine Months Ended
    (In thousands except                   February 28,         February 28,
    per share data)                      2002        2001      2002      2001
                                           (Unaudited)           (Unaudited)
    Sales                            $143,457    $200,055  $491,339  $632,580
    Pass through sales                     --          16        --    20,596
    Total sales                       143,457     200,071   491,339   653,176
    Cost of sales*                    123,946     164,325   422,180   547,678
    Gross profit*                      19,511      35,746    69,159   105,498
    SG&A*                              19,468      23,287    63,842    71,710
    Impairment and other
     special charges                       --          --    86,000        --
    Operating income (loss)                43      12,459   (80,683)   33,788
    Interest expense                    4,505       5,433    15,475    17,139
    Interest income                       652         450     2,341     1,201
    Pretax income (loss)               (3,810)      7,476   (93,817)   17,850
    Provision (benefit)
     for income taxes                  (1,520)      2,088   (37,529)    5,025
    Net income (loss)                  (2,290)      5,388   (56,288)   12,825
    Earnings (loss) per share-Basic    ($ .08)      $0.20   ($ 2.08)    $0.48
    Earnings (loss) per share-Diluted  ($ .08)      $0.20   ($ 2.08)    $0.48
    Average shares
     outstanding - Basic               27,409      26,941    27,075    26,904
    Average shares
     outstanding - Diluted             27,409      27,064    27,075    26,999

    *Before consideration of impairment and other special charges


    Balance Sheet Highlights                   February 28,            May 31,
    (In thousands except per share data)              2002               2001
                                                (Unaudited)     (Derived from
                                                                      audited
                                                                    financial
                                                                   statements)
    Cash and cash equivalents                   $   34,454          $  13,809
    Current assets                                 450,494            485,856
    Net property, plant and equipment              103,760            108,907
    Current liabilities                            129,670            125,392
    Working capital                                320,824            360,464
    Total assets                                   690,681            701,854
    Short-term debt                                 20,890             13,652
    Long-term debt                                 189,665            179,987
    Stockholders' equity                           314,832            340,212
    Book value per share                         $    9.88           $  12.63
    Shares outstanding                              31,859             26,937


    Sales By Business Segment           Three Months Ended   Nine Months Ended
    (In thousands)                         February 28,          February 28,
                                          2002      2001       2002      2001
                                          (Unaudited)             (Unaudited)
    Inventory & Logistic Services      $59,104   $84,208   $196,172  $282,177
    Maintenance, Repair & Overhaul      50,395    63,569    162,233   187,632
    Manufacturing                       26,944    27,301     74,381    73,762
    Aircraft & Engine Sales
     & Leasing                           7,014    24,977     58,553    89,009
                                      $143,457  $200,055   $491,339  $632,580
    Pass Through Sales                      --        16         --    20,596
                                      $143,457  $200,071   $491,339  $653,176

                    

SOURCE AAR CORP. 

CONTACT:

Timothy J. Romenesko,

Vice President, Chief Financial Officer of AAR,

1-630-227-2090,

or

tromenesko@aarcorp.com

URL: http://www.aarcorp.com

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