Slide 1: Forward-Looking Statements
Forward-Looking Statements This presentation includes certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on beliefs of Company management, as w
Slide 2: Agenda
Agenda Company Overview David P. Storch – Chairman, President and Chief Executive Officer Aviation Services John M. Holmes – Chief Operating Officer, Aviation Services Airlift Steven B. Harrison – President, AAR Airlift Group Financial Update Timothy J. Romenesko – Vice Chairman & Chief Financial Of
Slide 3: David P. Storch
DAVID P. STORCH Chairman, President and Chief Executive Officer Chairman of AAR CORP (2005-Current) Chief Executive Officer (1996-Current) President and Chief Operating Officer (1989-1996) President of AAR Trading Group (1987-1989) Education: BA from Ithaca College Company Overview 4
Slide 4: Company Overview - David P. Storch
Company Overview DAVID P. STORCH Chairman, President and Chief Executive Officer + Chairman of AAR CORP (2005-Current) + Chief Executive Officer (1996-Current) + President and Chief Operating Officer (1989-1996) + President of AAR Trading Group (1987-1989) + Education: = BA from Ithaca College
Slide 5: Our Values
6 Our Values
Slide 6: AAR Transformation
AAR Transformation Focus on being an industry-leading Aviation Services company Monetize Cargo to fund growth (net proceeds of approximately $600 million after tax) Optimize Core Portfolio Achieve financial flexibility Net Debt to EBITDA multiple improved from 3.2x to 1.3x Debt to equity reduced fro
Slide 7: Established Player Serving the Global Aviation Services Market
Established Player Serving the Global Aviation Services Market Leading provider of Aviation Services and Expeditionary Services to commercial and defense/government markets NYSE: AIR $1.7B revenue stream Over 60 years as a market leader in aftermarket aviation support Over 4,800 employees in over 20
Slide 8: Company Overview
Company Overview Supply Chain ~67% of segment Aviation Services (~85% of sales) Airlift ~67% of segment Mobility ~33% of segment Expeditionary Services (~15% of sales) Fixed and Rotary Wing Flight Operations, Maintenance, Logistics Passengers, Cargo, Combi Short Takeoff and Landing Search and Rescue
Slide 9: Aviation Services Supply Chain
Aviation Services Supply Chain Buying, selling, exchanging, and leasing overhauled airframe and engine parts > 1 million parts stocked Aircraft and engine end-of-life solutions Inventory consignments Technical services including inspections and work scoping for repairs Parts Trading Sales and market
Slide 10: Aviation Services MRO
Aviation Services MRO 11 Oklahoma City Miami Indianapolis Duluth Lake Charles Airframe Maintenance Facilities 850 aircraft maintained, repaired or overhauled > 5 million Man hours #1 MRO of the Americas Rockford
Slide 11: Expeditionary Services
Expeditionary Services Airlift Mobility Rotary & fixed wing flight operations Austere environments Search & rescue Personnel, cargo, combi, and external cargo capable Day, night, & all-weather operations Shelter systems – Transportable by air, land and sea and patented for rapid on- and off-loading
Slide 12: AAR Global Presence
Customers in over 100 Countries Over 60 Locations around the world AAR Global Presence 13
Slide 13: Strong Industry Relationships
Strong Industry Relationships (Representative List) Airlines Cargo Airlines OEMs Governments 14 Regional Airlines
Slide 14: Navigated Through Five Major Industry Cycles
Navigated Through Five Major Industry Cycles 15 Arab Oil Embargo Fuel Crisis Conflicts in Iran Economic Downturn Gulf War September 11 Attacks “Great Recession” 10% CAGR Sales ($B) After Each Down Cycle, AAR Has Emerged as a Stronger Company Sale of Telair Cargo Group - 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1
Slide 15: John M. Holmes
JOHN M. HOLMES Chief Operating Officer, Aviation Services (15 years with AAR CORP) Chief Operating Officer, Aviation Service (2015-Current) Group Vice President, Aviation Supply Chain (2012-2015) General Manager AAR Allen Asset Management (2003-2012) Director of Mergers and Acquisitions (2001-2003)
Slide 16: Aviation Services MRO Facilities
Aviation Services MRO Narrow & Wide body 200,000 SF hangar ROCKFORD Narrow & Wide body 226,000 SF in three hangars Full airframe paint capabilities MIAMI OKLAHOMA CITY Regional & Narrow body 300,000 SF Full airframe paint capabilities Regional & Narrow body 80,000 SF DULUTH Dedicated paint facility
Slide 17: Aviation Services Trading & Distribution
Highly transactional business where airframe and engine assets are acquired, refurbished and sold to airlines, MROs, component repair facilities, leasing companies and other parts providers Aviation Services Trading & Distribution 80+ COUNTIRES TRADING Largest independent aftermarket solutions provi
Slide 18: Aviation Services Integrated Program Solutions
Provide power by the hour (PBH) component repair and logistics management Aviation Services Integrated Program Solutions 1,300 AIRCRAFT 41 AIRLINES 250,000 REPAIR TRANSACTIONS 24 COUNTRIES COMMERCIAL Provide third party logistics, supply chain performance based logistics and contractor logistics sup
Slide 19: Aviation Services Strategy
Aviation Services Strategy Parts Supply Inventory pooling with programs Transactional data collection Strategic relationship with OEMs MRO Strategic relationship with airlines Build technical repair knowledge and data collection Support integrated solutions with component repair Generates parts requ
Slide 20: Aviation Services MRO Strategy & Focus
1MRO approach: World-class quality, performance and safety throughout our facility network and across our portfolio of services Footprint rationalization: Realigning our facility footprint to maximize return on capital and meet customers’ emerging needs Anchor tenants: Major baseload, long term cust
Slide 21: Aviation Services Trading Strategy & Focus
Opportunistic purchasing: Utilize market reach to make inventory buys from OEMs, airlines and other brokers Inventory alignment: Synchronize airframe stocking positions with PBH programs portfolio Exchange program expansion: Leverage Trading and Program rotable asset pools through enhanced exchange
Slide 22: Aviation Services Distribution Strategy & Focus
Leverage independent & multiple channels to market Large, deep, exclusive relationships with OEM partners Develop deep technical knowledge to drive sales growth and displace competitive product Globally scaled commercial and defense sales capabilities Global stocking locations (Asia, Middle East, Eu
Slide 23: Integrated Solutions Commercial Strategy & Focus
Aggressive International Expansion: Position assets and talent to increase international market share Enhance Customer Experience: Digital solutions to enhance customer experience and connect to customer operations Data: Utilize data collected from growing supported fleet to improve cost and develop
Slide 24: Integrated Program Solutions Commercial Case Studies
Integrated Program Solutions Commercial Case Studies Current Program covers over 140 Airbus & Boeing aircraft including new A320 aircraft additions Dedicated Engineering Support & Reliability Monitoring Program All AOG requirements satisfied within 4 hours Repair (TAT) & warranty management supporte
Slide 25: Integrated Program Solutions Government Strategy & Focus
Make the move from subcontractor to prime contractor Focus on performance based logistics (PBL) and contractor logistics services (CLS) opportunities Significant pipeline due to a bow wave of US Defense opportunities created by sequestration Leverage subcontract experience, cost structure and key re
Slide 26: Integrated Program Solutions Government Case Studies
Integrated Program Solutions Government Case Studies Prime Contractor for 15 aircraft globally All AOG requirements satisfied within 24 hours On-site support across 5 operational sites Supply Chain Management and Depot Maintenance Providing real time on-line visibility and access to program data, me
Slide 27: Aviation Services Historical Financial Summary
Aviation Services Historical Financial Summary (in millions) FY14 FY15 FY16 $1,231 $1,316 $1,425 FY14 FY15 * FY16 $173 $187 $230 REVENUE GROSS PROFIT 28 * FY15 gross profit excludes asset impairment charges of $43M. Reported gross profit in FY15 was $144M.
Slide 28: Steven B. Harrison
STEVEN B. HARRISON President, AAR Airlift Group (5 Years with AAR CORP) President, AAR Airlift Group (2015-Current) Chief Commercial Officer (2012-2015) President and CEO of National Airlines Retired as Colonel after 22 years in U.S. Air Force Education: Masters Degree in Engineering Science; Politi
Slide 29: Airlift Group Operational Overview
Airlift Group Operational Overview Flight Operations Night Vision Systems Personnel Recovery Search & Rescue (SAR) Operations 30 Rotary Wing Short / Unimproved Take Off & Landing (STOL) Aeromedical Evacuation Precision Airdrop Fixed Wing Remote and Austere Turnkey Flight Operations
Slide 30: Airlift Group Global Footprint
Airlift Group Global Footprint United States Guam Philippines Afghanistan Central African Republic Niger Falkland Islands Democratic Republic of Congo Bahrain 31
Slide 31: Airlift Group Operational Overview: Regulated Marketplace
Airlift Group Operational Overview 32 HIGHLY REGULATED MARKETPLACE AIR CARRIER FAA Part 135 HELICOPTER EXTERNAL LOAD FAA Part 133 REPAIR STATION FAA Part 145 DoD APPROVED CARRIER DoD CARB UN APPROVED CARRIER UNPD
Slide 32: Airlift Group Outlook
Airlift Group Outlook MARKET FORCE AAR OPPORTUNITY 33 US & NATO commitments to Afghanistan Unstable international security environment (contingency, terrorism, narco-trafficking, ideological conflict) Strained DoD aviation resources Government budgetary austerity Existing presence in a core market T
Slide 33: Airlift Group Growth Strategy
Airlift Group Growth Strategy Leverage AAR (Airlift and Aviation Services) synergies and experience into Government Owned/Contractor Operated (GOCO) programs US Department of State (INL/A) Promote low cost expeditionary alternatives to organic Government assets UK Ministry of Defence (Falklands Sear
Slide 34: Airlift Group Growth: Expand and Complement Core Markets
Airlift Group Growth Expand and Complement Core Markets 35 COCO (Contractor Owned, Contactor Operated) GOCO (Government Owned, Contactor Operated) SAR (Search and Rescue) Part 135 Airline Operations Asset Heavy Foundational Capabilities Authorities Past Performance Aviation Services Traditional Mark
Slide 35: Timothy J. Romenesko
TIMOTHY J. ROMENESKO Vice Chairman & Chief Financial Officer (35 years with AAR CORP) Vice Chairman & Chief Operating Officer Expeditionary Services (2015-2016) President and Chief Operating Officer (2007-2015) Elected to AAR CORP Board of Directors in 2007 Vice President & Chief Financial Officer (
Slide 36: AAR Strong Financial Position
AAR Strong Financial Position Strong business fundamentals in Aviation Services INL/A award by Department of State in Airlift Improved outlook in Expeditionary Services Strong balance sheet to support internal and external opportunities 37
Slide 37: Balanced Capital Allocation
Balanced Capital Allocation Organic growth through investment in new programs and opportunities Future growth through strategic acquisitions Committed to returning capital to shareholders ($214M in dividends and share purchases since March 1, 2014) Organic Investment Acquisitions Return of Capital 3
Slide 38: 1Q FY2017 Segment Results
1Q FY2017 Segment Results Prior Year Variance in millions 1Q 2017 1Q 2016 Better / (Worse) Sales $334.6 $315.8 $18.8 Gross Profit $53.4 $49.9 $3.5 % Margin 16.0% 15.8% 0.2% Aviation Services Both Aviation Services and Expeditionary Services 1Q Gross Profit Exceeds Prior Year Prior Year Variance in m
Slide 39: Key Financial Goals
Key Financial Goals Organic sales growth of 5%-10% Earnings per share growth of 10%-12% SG&A as % of sales < 10% 20% operating return on capital on new deals Year-over-year improvement in ROIC Working capital turnover of 3.5x – 4x Leverage of 3.5x EBITDA 41
Slide 40: Summary
Summary Confirming FY17 guidance on sales and diluted EPS INL/A Award – Protest Resolution Continued strong momentum in Aviation Services, not withstanding loss of revenue with KC10 Improving outlook in Expeditionary Services Continued focus on cash generation and operational efficiency in millions
Slide 41: Closing Comments
David P. Storch Chairman, President and Chief Executive Officer Closing Comments 43
Slide 42: Total Share Price Appreciation of 21% Year to Date
Total Share Price Appreciation of 21% Year to Date Returned $214M to shareholders since March 1, 2014, through dividends and share repurchases Date AAR Stock Price December 31, 2015 $26.29 May 31, 2016 $24.41 $31.77 +21% YTD +30% FYTD Share Price Appreciation Notes: Market data as of October 18, 201
Slide 43: Share Price Outperformed Peers and S&P500
Share Price Outperformed Peers and S&P500 Source: IR Insight. (1) S&P Aerospace and Defense Select Industry Index (2) Market data as of October 18, 2016 Recent announcements have resulted in positive share price performance INL/A award on 9/1/2016 1Q earnings higher than expectations Announced new c
Slide 44: Share Price Outperformed Peers and S&P500
are Price Outperformed Peers and S&P500 Share Performance © Recent announcements have resulted in positive share price performance | L™ iS oe — INL/A award on 9/1/2016 | YTD — 1Qearnings higher than expectations AAR 40% 30% — Announced new contracts (Enter Air, flydubai, CommutAir) Peers 12% 2% S&P