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AIR's 4Q a Penny Short of Est.

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On July 17, 2012, AAR Corp. (AIR - Free Report) posted its fiscal fourth-quarter 2012 (ending May 31, 2012) financial results. The company reported earnings per share, excluding special items, of 45 cents, down 18.2% compared with 55 cents earned in the year-ago quarter. The results also lagged the Zacks Consensus Estimate of 46 cents. Including the one-time items, earnings came in at 32 cents.

In the fiscal year 2012, earnings per share, including special items, were $1.65, down compared with $1.73 in the previous year.


In the fiscal fourth quarter of 2012, consolidated sales were $563.3 million, up 15.5% year over year. Sales were primarily driven by strong results within the Aviation Supply Chain, Maintenance, Repair & Overhaul, and Structures and Systems segments. Moreover, businesses acquired in December 2011 including Telair International GmbH (Telair) and Nordisk Aviation Products, AS (Nordisk), generated strong sales revenue during the quarter.

Revenue from the Aviation Supply Chain business (25.5% of total revenue) was $143.7 million, up 20.5% year over year. Government and Defense Services revenue (22.5%) of approximately $126.6 million decreased 21.0% from the year-ago quarter.

Maintenance, Repair and Overhaul (MRO) segment, which accounted for roughly 22.0% of total revenue, generated $125.1 million, up 13.9% year over year. Structures and Systems revenue was $168.0 million (29.8% of total revenue), up 70.4% year over year.

In the fiscal year 2012, total revenue generated was $2,065.0 million, up 14.4% year over year.


Cost of sales in the fiscal fourth quarter spiked 20.8% year over year to $482.3 million. The company's operating margin plummeted to 4.9% in the reported quarter from 7.7% in the year-ago comparable quarter.

Selling, general and administrative expense was $50.5 million, down from $52.5 million in the year-ago quarter.

Balance Sheet/Cash Flow

Exiting the fiscal fourth quarter of 2012, AAR Corp's cash and cash equivalents were approximately $67.7 million, up compared with $59.3 million in the previous quarter. Net property, plant and equipment were $382.9 million, up from $357.1 million in the sequentially preceding quarter.

Cash flow from operations in the fourth quarter was $76 million. The company's Board of Directors declared $0.075 per share cash dividend to be paid on August 9, to shareholders of record as on July 27, 2012.


For fiscal year 2013, management anticipates sales to be within $2.1-$2.2 billion on the back of continued strength in the commercial business. Earnings are expected to range within $1.55-$1.65 and tax rate to be roughly within 34.0%-35.0%.

Based in Wood Dale, Illinois, AAR Corp. provides various products and services to the aviation and defense industries worldwide. The company operates in four segments: Aviation Supply Chain; Maintenance, Repair, and Overhaul; Structures and Systems; and Government & Defense Services. The company competes directly with its peers such as Goodrich Corp , Boeing Co (BA - Free Report) , Lockheed Martin Corporation (LMT - Free Report) .

Currently, AIR has a Zacks #5 Rank, which translates into a short-term (1-3 months) Strong Sell rating.

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