(Source: PRNewswire-FirstCall)
WOOD DALE, Ill., July 14 /PRNewswire-FirstCall/ -- AAR today reported fiscal year 2009 fourth quarter consolidated sales of $371.7 million and income from continuing operations of $20.5 million, or $0.49 diluted earnings per share. Sales decreased 5% from $391.7 million reported in the fourth quarter of last year, and diluted earnings per share from continuing operations decreased 6%. Fourth quarter results include a $10.1 million impairment charge related to inventory acquired before September 11, 2001 and a $1.4 million loss on the sale of marketable securities. Results for the fourth quarter of fiscal year 2009 also include a $10.0 million gain on the early extinguishment of debt.
Fourth quarter sales to defense customers increased 7% over the prior year and represented 44% of total sales. The increase in sales to defense customers was principally attributable to higher shipments of mobility systems products and growth at the Company's defense logistics business. Sales to commercial customers declined 13% due to lower demand for the Company's products and services as a result of pressure from lower passenger and freight traffic combined with airline inventory de-stocking.
For the Company's fiscal year 2009, sales were $1,424.0 million, an increase of 3% over the prior year and income from continuing operations increased 6% to $80.6 million, or $1.92 per diluted share.
"In the midst of a deep global recession and disrupted credit markets, AAR achieved record annual sales, earnings and operating cash flow and significantly reduced its debt obligations, while making strategic investments in the Company's growth prospects," said David P. Storch, Chairman and Chief Executive Officer of AAR CORP. "Our results have demonstrated that our strategy for diversification within the aerospace and defense markets has allowed us to manage through these challenging times. Our fiscal year sales performance was primarily driven by strong sales to defense customers and the full year impact of acquisitions made during fiscal year 2008. This performance allowed us to further strengthen our balance sheet and provides capacity for making additional strategic investments as we enter our new fiscal year."
Following are the highlights for each segment: Aviation Supply Chain - Sales declined 13% to $145.6 million and gross profit decreased 17% to $34.8 million over last year's fourth quarter, resulting in a gross profit margin of 23.9%, before consideration of the impairment charge. The sales decline was due to lower overall sales to commercial customers reflecting reduced inventory provisioning and fewer maintenance activities as a result of capacity reductions. Sales in the fourth quarter benefited from a new supply chain services program for a North American regional airline. Sales at the Company's defense logistics business increased 7.1% during the fourth quarter. During the fourth quarter, the Company recorded a $10.1 million pre-tax impairment charge on inventory and engines that had been acquired prior to September 11, 2001. The impairment charge was triggered by a reduction in sales activity related to those assets and weak conditions in the commercial aviation industry. Taking into consideration the impairment charge, gross profit was $24.7 million and the gross profit margin was 16.9%. Maintenance, Repair and Overhaul - Sales increased 2% to $96.3 million and gross profit declined 2% to $14.7 million over last year's fourth quarter, resulting in a gross profit margin of 15.2%. Compared to the third quarter of fiscal year 2009, sales increased $19.3 million or 25%, reflecting improved performance at the Company's landing gear business and at the Company's aircraft maintenance center in Miami, Florida. For the fifth consecutive year, AAR was recognized by the Federal Aviation Administration (FAA) for excellence in training and received the Diamond Certificate of Excellence at each of its FAA-certified repair stations. This award is the highest honor in the FAA's Aviation Maintenance Technician (AMT) Awards Program. Structures and Systems - Sales increased 3% to $126.1 million and gross profit increased 9% to $20.1 million over last year's fourth quarter, resulting in a gross profit margin of 15.9%. The increase in sales was attributed to strong demand for the Company's mobility products for its defense customers. The Company experienced lower shipments of composite structures and precision machined parts supporting commercial customers. The improvement in gross profit margin reflected increased sales of higher margin products to defense customers. Aircraft Sales and Leasing - During the fourth quarter, the Company reduced its aircraft portfolio by one to 32 aircraft, with 26 aircraft held in joint ventures and 6 held in the Company's wholly-owned portfolio. At May 31, 2009 there was one aircraft not under lease which was subsequently leased to an international carrier in July 2009. During fiscal year 2009, the Company reduced its total aircraft portfolio by five aircraft and reduced its net investment in aircraft from $97.5 million to $74.4 million.
Consolidated gross profit margin was 16.4% for the fourth quarter compared to 19.6% last year. Excluding the impairment charge of $10.1 million, the gross profit margin for the fourth quarter was 19.1%. Selling, general and administrative costs declined to 9.6% of sales from 10.2% in same quarter in fiscal year 2008. The year-end backlog increased 6% over the prior year to $493 million.
During the fourth quarter of 2009, the Company generated $72 million of cash flow from operations and ended the year with approximately $113 million cash on hand. Also during the fourth quarter, the Company retired $35.5 million of its convertible notes for $24.8 million, equating to a 9% yield to maturity.
