http://www.morningstar.com/earnings/23356310-aar-corp-air-q3-2011.aspx

AAR Corp AIR
Q3 2011 Earnings Call Transcript

Transcript Call Date 03/16/2011

Operator: Good day, ladies and gentlemen, and welcome to the AAR Corporation Third Quarter Fiscal 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. As a reminder today's conference call is being recorded.

I'd now like to turn the conference over to your host Mr. Greg Dellinger. Please go ahead.

Greg Dellinger - Director of Recruiting: Thank you, Ally. Good morning, ladies and gentlemen and thank you for joining our third quarter fiscal year 2011 earnings conference call. Before we began, I would like to remind you that comments made this morning may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We ask that you refer to the disclaimer contained in our news release as well as the risk factor section of the Company's May 31, 2010 Form 10-K. Providing forward-looking statements the Company assumes no obligation to provide updates to reflect future circumstances or the occurrence of anticipated or unanticipated events.

Now at this time, I would like to turn the call over to our Chairman and Chief Executive Officer, David Storch.

David P. Storch - Chairman and CEO: Thank you Greg and thanks for waking us up this morning. Good morning everyone. Joining me today in this call are; Tim Romenesko, our President and Chief Operating Officer, and Rick Poulton, our Chief Financial Officer.

Yesterday afternoon, we announced our third quarter fiscal 2011 results. Sales were a record $451 million which represents a 50% increase compared to the prior year period. Income from continuing operations was $18.3 million or $0.45 per diluted share. Overall, I'm very pleased with our third quarter results which included 44% organic sales growth in our commercial business.

During the period, we saw robust activity in the commercial market as airlines restock their shares the level of maintenance spends accelerated and we captured market share. Over the last several weeks, there have been a series of global events, which has caused us to look closely at our near-term business prospects in the commercial market. Our direct sales activity customers in Japan is nominal, but the one-half of 1% are consolidated sales, although we are monitoring the indirect effects on our customers who do fly into that market.

We also are monitoring oil price volatility for any impact they may have on our airline customers. While we are paying close attention to these global trends, our order book remains very strong as does our committed workloads. Therefore, we remain upbeat with our commercial prospects.

Turning to our Government and Defense businesses, sales to this customer segment increased 56% compared to last year and represented 51% of total sales for the quarter, so we are achieving the balance that we have been attempting to achieve. The year-over-year sales increase was largely driven by the result of the AAR Airlift and growth in our defense supply chain business. We continue to see robust activity at our mobility products business, although at lower levels than the prior year.

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