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AAR Corp. Reports Operating Results (10-Q)

December 21, 2012 | About:
10qk

10qk

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AAR Corp. (AIR) filed Quarterly Report for the period ended 2012-11-30.

Aar Corporation has a market cap of $642.2 million; its shares were traded at around $18.06 with a P/E ratio of 8.6 and P/S ratio of 0.3. The dividend yield of Aar Corporation stocks is 2%. Aar Corporation had an annual average earning growth of 7.1% over the past 5 years.

Highlight of Business Operations:

interest payment affects earnings. The impact of the interest rate swap and interest cap agreement on the condensed consolidated statement of income for the three-month periods ended November 30, 2012 and 2011 was zero and an unrealized loss of $0.2 million, respectively. The impact of the interest rate swap and interest cap agreement on the condensed consolidated statement of income for the six-month periods ended November 30, 2012 and 2011 was an unrealized loss of $0.4 million and $2.7 million, respectively. The unrealized losses were recorded in accumulated other comprehensive income (loss). We expect minimal gain or loss to be reclassified into earnings within the next 12 months.

Consolidated sales for the second quarter ended November 30, 2012 increased $30.8 million or 6.4% compared to the prior year period. Sales to commercial customers increased 28.3% compared to the prior year due to sales from the newly acquired businesses, Telair and Nordisk. In addition, we had strong organic growth at our airframe maintenance centers, parts supply and engineering services businesses. Sales to government and defense customers decreased 15.4% compared to the prior year. We had very strong sales growth in our Airlift business, however, overall sales to government and defense customers declined due to expected lower logistics programs activity and lower volumes at our mobility products business.

Selling, general and administrative expenses increased $6.2 million or 13.9% due to the inclusion of the three acquired companies, partially offset by acquisition expenses that were in the prior year. Operating income increased $3.5 million or 10.2% compared with the prior year primarily due to the increase in sales and the gross profit margin. Net interest expense increased $3.0 million or 40.0% compared to the prior year primarily due to the $175.0 million 7.25% Senior Notes issued in January 2012 to fund the fiscal 2012 acquisitions. Our effective income tax rate was approximately 34.5% for both fiscal year second quarters.

Consolidated sales for the six months ended November 30, 2012 increased $95.8 million or 9.9% compared to the prior year period. Sales to commercial customers increased 26.5% compared to the prior year due to sales from the newly acquired businesses, Telair and Nordisk. In addition, we had strong organic growth at our airframe maintenance centers, parts supply and engineering services businesses. Sales to government and defense customers decreased 7.3% compared to the prior year. We had strong sales growth in our Airlift business, however, overall sales to government and defense customers declined due to lower logistics programs activity and expected lower volumes at our mobility products business.

Selling, general and administrative expenses increased $16.4 million or 18.7% due to the inclusion of the three acquired companies. Operating income increased $9.1 million or 13.6% compared with the prior year primarily due to the increase in sales and improved gross profit. Net interest expense increased $5.8 million or 38.9% compared to the prior year primarily due to the 7.25% Senior Notes issued in January 2012 to fund the recent acquisitions. Our effective income tax rate was approximately 34.5% for the first six months of both years.

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