AAR Reports First Quarter Fiscal Year 2013 Results and Updates Full Year Guidance

• First quarter sales of $550.5 million, up 13% year-over-year
• Diluted earnings per share of $0.45
• Cash flow from operations of $33 million

WOOD DALE, ILLINOIS — AAR (NYSE: AIR) today reported first quarter fiscal year 2013 consolidated sales of $550.5 million and net income of $18.2 million, or $0.45 per diluted share. For the first quarter of the prior fiscal year, the Company reported sales of $485.5 million and net income of $16.6 million, or $0.41 per diluted share. Last year’s first quarter sales included $33.3 million from the sale of two aircraft from the Company’s aircraft portfolio. There were no aircraft sales in the first quarter of the current fiscal year.

For the first quarter, sales to commercial customers represented 57% of consolidated sales. Excluding the aircraft sales above, commercial sales increased 43% over the prior year’s first quarter and grew 13% on an organic basis driven by market share gains in the Company’s commercial aviation services businesses. The balance of the sales growth was from the fiscal 2012 acquisitions. Sales to government and defense customers represented 43% of consolidated sales and increased 1% from the first quarter of last year.

“Our first quarter results were strong, highlighted by market share gains in commercial aviation services, results from our recent acquisitions and improved performance at our airlift operation,” said David P. Storch, Chairman and Chief Executive Officer of AAR CORP.

Consolidated gross profit margin was 16.4% for the first quarter compared to 15.6% last year. Margins improved over the prior year in the Structures and Systems segment primarily due to improved product mix resulting from the acquisitions. The MRO segment’s margins improved due to increased billable hours and operational efficiencies. The Aviation Supply Chain and Government and Defense Services segments reported margin declines due to product mix and lower margins on government programs.

Selling, general and administrative expenses as a percentage of sales were 9.7% for the first quarter compared to 8.9% last year which benefited from the aircraft sales. Interest expense increased $3.1 million primarily due to the 7.25% Senior Notes issued in January 2012 to fund the recent acquisitions.

During the quarter, the Company generated $33 million in cash flow from operations and had capital expenditures of $11 million. The Company purchased 475,000 of its shares on the open market under its share repurchase program for $6.1 million (average acquisition price of $12.84 per share) and declared and paid dividends of $3.0 million. The Company also repurchased $13 million face value of its convertible bonds at an effective yield to maturity of 4%. The convertible bond repurchases reduced the fully diluted share count by 258,000 shares in the first quarter.

Storch concluded, “Based on the results of the first quarter and our current view of the markets we serve, we are updating our annual guidance to a range of $1.60 to $1.70 from our previous guidance of $1.55 to $1.65.”

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