AAR Corporation (AIR: 17.37 -0.54 -3.02%) posted in-line results for the fourth quarter and fiscal 2010.Quarterly Details
During the quarter, AAR Corp. recorded a 21.9% decrease in net income to $11.1 million from $14.2 million in the year-ago quarter. Earnings per share (EPS) were 29 cents, 7 cents below the reported EPS in the same quarter of the previous year and a penny below the Zacks Consensus Estimate of 30 cents. The decline is attributable to the increase in operating cost during the quarter.
Sales were $372.3 million, marginally up from $371.7 million in the fourth quarter of fiscal 2009. Sales to defense and government customers represented an 82.0% growth year over year and reached $80.5 million from $44.2 million in the same period of 2009.
This huge growth stems from the supply chain services and logistics support contract for USAF’s KC-10 fleet in February 2010 and the acquisition of Aviation Worldwide Services (AWS). USAF’s KC-10 fleet business became fully operational in the fourth quarter.
AWS is a leading provider of expeditionary airlift services and aircraft modifications for the U.S. and other governments.
Sales in the Aviation Supply Chain segment declined 9.0% to $103.3 million due to the decline in demand for parts support in comparison with the year-ago level.
Sales in the Maintenance, Repair, and Overhaul segment also skipped 18.0% to $79.7 million. Reduced maintenance requirements across the industry caused by fleet reductions and lower discretionary maintenance spending were the major reason behind the decline.
Sales in the Structures and Systems segment decreased 7% to $108.9 million due to weaker sales of cargo systems and composite structure products.
Cost of sales and Selling, General and Administrative expense (SG&A) as a percentage of revenues stretched by 120 bps and 190 bps, respectively. During the quarter, AAR Corp. incurred expenses of $1.1 million related to the acquisition of AWS.
Annual Details
During fiscal 2010, net income and EPS declined to $43.2 million and $1.16 from $58.7 million and $1.45, respectively in fiscal 2009. Sales also slipped to $1,352.2 million from $1,424.0 million in the previous year.
Cost of sales and SG&A expense as a percentage of revenues grew by 120 bps and 100 bps, respectively.During 2010, the company generated $153 million of cash from operations and ended the period with $79.4 million of cash and cash equivalents compared to $112.5 million at the end of fiscal year 2009.
| Analysts' Targets | |
| UBS Securities | $20 |
| Neutral | |
| Wednesday, June 16, 2010 | |
| Argus Research | $29 |
| Buy | |
| Thursday, June 10, 2010 | |
| JMP Securities LLC | $30 |
| Buy | |
| Tuesday, April 13, 201 | |
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