Good afternoon ladies and gentlemen and welcome to AAR’s Fiscal 2014 Third Quarter Earnings Call. Before we begin, I'd like to remind you that the comments made during the call may include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 as noted in our news release and the Risk Factors section of the Company's Form 10-K for the fiscal year ended May 31, 2013. In providing forward-looking statements, the company assumes no obligation to provide updates to reflect future circumstances or anticipated or unanticipated events. At this time, I'd like to turn the call over to AAR’s Chairman and Chief Executive Officer, David Storch.

Thank you, sir and good afternoon. Thank you for joining us today to discuss our third quarter fiscal 2014 performance. With me in Chicago are Tim Romenesko and John Fortson and few other senior folks here at the company. On today’s call I would like to start by discussing our third quarter results and then providing with an explanation about actions we are taking to counter the revenue decline we experience and how we are positioning our company for future growth. Let me begin with Aviation Services; in the Aviation Services segment, sales were down 10% from last year to $368 million as mentioned in our press release our MRO operations had difficult quarter, sales were down $24.3 million in that sub-segment within our Aviation Services Group. Sales in the airframe maintenance facility were lower by approximately $5 million as we conclude several large 757 maintenance programs. In this call, I will give you a sense of our billable hours of 1.1 million as opposed to 1.3 million in the prior year. Sales in our engineering services unit where we completed a sizeable engineering service program were down by $10 million. We have engineering service work, but not of the same size or stock as we had last year with the program we completed and you may recall that this is the business from time-to-time we win contracts and there are times where we have a low-end activity. Our Landing Gear and Component Repair revenues were down $9.4 million due to the repair cycle declined for Landing Gear and just lower input from component. That address the weakness in MRO activity in this quadrant position of the business for the future, we have narrowed the focus of our leadership team to try to improve performance. In this regard, we had…

Thanks David. I would like to refer everyone to our press release for general financial information for this quarter and use this time to hold on some specific actions we are taking to rightsize and manage our costs and capital structures in this environment. I will be available after the call to answer any questions you may have. The impact of the revenue decline in earnings was reduced by aggressive cost management and operational efficiencies, particularly at Airlift where we experience significant revenue decline, but had higher operating margins, and as David mentioned had a net effect of income from this business to be flat year-over-year. Selling, general and administrative expenses as a percentage of sales were 9.6% for the third quarter compared to 8.0% for last year. However last year included a onetime benefit of $9 million from an acquisition adjustment. If you adjust for this, our SG&A for this quarter was approximately $5 million lower or about 10%. We will continue to make adjustments to our cost structure where appropriate to reflect these lower sales levels. We are in the process reviewing all sources of spend cross the company about strategic and non-strategic defined cost savings. We will complete our reviews our healthcare insurance as well as freight and travel. We are now focused on other non-strategic spinning areas. As result of this quarter, we identified and taken actions that should result in approximately $4 million a year savings. This does include the elimination of certain positions and the restructuring of some functions including IT as well as other non-personal relative reductions. As communicated in our press release, given the actual third quarter results in our expectations for the fourth quarter we are adjusting both our revenue and diluted earnings per share guidance for fiscal year 2014. For the full year we are reducing our revenue guidance by $100 million to a range of $2 billion to $2.05 billion and diluted earnings per share in the range of $79 to $82 per share. Thanks for your attention, and operator, we are now ready to take your questions.

Yes sir. (Operator Instructions) Our first question comes from Larry Solow of CJS Securities. Your line is open.

Good afternoon, it’s actually Arnie Ursaner backing up Larry on the call. So I have a couple of quick questions for you. First on the financial side, you mentioned, last year you had an earn-out reduction or reversal if you will, was there any reversal this year in the SG&A line?

No, that was kind of one-off related to a transaction we did overseas, but we haven’t done a similar type of adjustment this year.

Okay, what’s your tax rate view for Q4?

We did have this one-time adjustment that we talked about in the press release, but our effective tax rate is going to remain at 34.5% going forward.

Okay. And obviously one of the positives and negatives ignored given the quarter is the fact that you signed on a huge number of very significant, very positive contracts. Can you speak about the working capital and overall investments the company will have to make to realize the benefit of some of these very attractive long-term plans?

Yes, so we have actually already started on the unnamed customer, we have obviously made investments and then we’ve made some investments in advance for the Sabena transaction. When you look at this quarter, we actually did invest pretty heavily on our growth both for our sort of traditional transaction business, but also these programs to give you an idea, the order of magnitude and as you probably know, this doesn’t really run through our CapEx line, but we spend about $27 million between the two between parts and engines over the course of this quarter. So we are going to have to continue to make some investments, but we are going to sequence through them. We think these things give us the right returns going forward.

Thank you. I will jump back in queue. Thanks.

Thank you (Operator Instructions) Our next question comes from Julie Yates of Credit Suisse. Your line is open.

Good evening.

Hi Julie.

Hi Julie.

Hi, so this is the second quarter really guys have lowered EPS guidance about 14% below where you started the year excluding the tax benefit. So as you are preparing to give guidance in July for FY 2015, what are you doing differently and how should we think about the level of visibility that you have and the confidence around FY 2015?

Well, I think first of all, I will get through FY 2014 and I think that we are trying to share with you that we are positioning ourselves with some of these new contract wins to give us a little bit more dependable revenue base if you will. This is an unusual period for us, because historically we have been able to replace business. I am not sure and I am trying to, I guess get a handle around the impact that the weather may have had in terms of disrupting some of our operations, because it was a little bit unusual in terms of not being able to win certain new businesses and that didn’t happen should we typically would have won. So I believe we have a fairly good visibility, fairly we’re disappointed here in terms of this quarter’s result, but yes, I think that as we come into July, we should have pretty good visibility.

Okay. And then David, last quarter I think you said that mobility products have reached kind of a steady state, it looks like it’s going to continue to be a bit soft here?

No, this is purely compared to prior year and that they should have a very decent fourth quarter.

Okay. And then I recall last quarter you did talk about some of the weakness for the second half for the cash flow as you’ve invested in some of these programs…

Right.

But this is obviously the weakest it’s been in eight quarters, you had a really good performance.

Right.

How should we think about cash flow in the fourth quarter and even any preliminary indications you can give on next year?

We’re going to have some cash going out on the bounce of the Sabena deal. So I think as we ramp in some of these new contracts, there will be some cash going out. As I look out into next year assuming surely from standpoint of our existing customer, our existing business phase, I’d expect our free cash to exceed our after-tax income. I expect to be over that 100% number that we’ve experienced in the last eight quarters as you mentioned. So I think we should be generating some pretty good cash flow next year.

Okay. And then last one from me, any update on Lake Charles?

Yes, Lake Charles has been inactive of late. We completed the contracts that were there when we took on the business and now we are bidding work, but as we sit here today, we haven’t had any success here, but I think everyday has to be just a little bit patient only because we just got the EASA certification in September and we’re trying to figure out how to go ahead and tie [ph] people there in a way that we can still make a buck on it. So, be a little patient, look back on the Indianapolis now the first couple of years of our Indianapolis adventure, in our mostly even vacant eventually we got some business and we’ve been able to grow from there. So, we still believe that we are positioned well there we just need a little bit more time to break into some accounts.

All right, thank you.

Yes.

Thank you. Our next question comes from Tyler Hojo of Sidoti & Company. Your line is open.

Yes, good evening. I want to ask you first about the NATO contract that was announced or the NATO weather of intent I should call it I guess, does the $27 million in working capital investment that was already NATO, does that include NATO as well?

No, it does not.

Okay, when does that start to hit?

We’ll start making investment in that this quarter.

Okay.

And then we’ll have, there will be a ramp in investment over the next two-year period as the EJs start coming into the fleet.

Okay, but even with that investment, do you think still think free cash flow in fiscal 2015 is going to exceed net income, is that correct?

Yes, yes.

Okay. All right, thanks for that clarification. And then, in regards to I think the $200 million contract value that you cited for me, how should we think about that ramping over the next 10, 12years?

So I believe they get to the 30 aircrafts in three years if I’m not mistaken and so once we get to that point that should stay relatively constant. So, as the aircraft commence the fleet, the revenues kicks in, but once we get to the year three, the aircraft will be starting to require their C check as well. So, I would say probably will get to full ramp by year five would be my guess.

Okay.

And you’ll have the, aircraft would have been in service, all the aircrafts would have been in service and all the aircrafts would have been through at least one C check.

Okay, great. Thanks for that. And then, just some regards to the restructuring initiatives that were called out I believe the number of $4 million was drawn out in terms of the savings. Is there any expense associated with these restructuring initiatives that’s included in the Q4 guidance?

There will be some and it is in the guidance, so obviously there will be some severance related to some people that will be departing the firm, but that’s part of the bulk of it, but it’s in the guidance.

Okay. Can you call it out or just not going to?

I’m rather not, but…

Okay.

Tyler if I may, let me go back to the question on Mesa for second and – the current agreement that Mesa has with the United Express is for 30 aircraft. I believe Mesa is optimistic as they perform and United Express grow their ERG fleet that though get more aircraft under their contracts. And so there might be a follow-on work there as well just kind of far that away if you don’t mind.

Yes that will be great. Okay, may be one follow-on just in regards to Mesa, those of us that have followed the name for a long time remember the last Mesa contract and kind of how that was a bit painful back in 4 to 5 years ago or so. Is there anyway that you can protect yourself or is it just a function of – this is a better aircraft that’s more in demand.

I think that’s the way to look at it. I believe and this contract we negotiate not just with Mesa but also with United. And United fairly in better shape today than they were let’s say last quarter around, so. Yes, my belief is that you have brand new equipment, the 70 seaters as opposed to the 50 seaters and our view is that we should be protected on the asset. And that, time will tell of course.

Okay, great. And just one last one for me if I may, just in regards to the tech product segment, really nice margin improvement sequentially in the quarter. And I’m just kind of wondering how we should think about the movement in margin in that segment on a go-forward basis?

David mentioned that we’re expecting improvement that mobility in the fourth quarter and I think you should actually see more of the same as we go forward there.

Okay, great. That’s all I had. Thanks a lot.

Thank you. Our next question comes from Kevin Ciabattoni of KeyBanc Capital Markets. Your line is open.

Thanks, good afternoon, guys. First question, I guess on the NATO 18 contract, maybe some color on what might be holding up those initial task orders. I know you’d been modeling before this year. And then may be if you could talk about I have taken a number of kind of – what's the ramp for next year on that contract that you are kind of looking at, at this point?

Yes. The NATO 18 contract was released, we were advised which aircraft we are going to get and then with the political turmoil and the elections and our government’s inability to work with Cargo just put everything on hold. We are hopeful that with the new government coming into Afghanistan that we’ll start to see these aircrafts start to be activated, but I don’t know if that’s going to be in April or July or when so, it’s pretty tough to predict a ramp there and we haven’t really been successful to-date on predicting when we think we’ll kick in. In terms of next year, there is a series of opportunities some one we choosy and then one particular that’s very, very large and I think we last quarter, called it a game changer and that would be pick most of next fiscal year to work through, get awarded and start to some of the place in it and quite frankly we haven’t seen the final RP on that yet. So we’re looking to see some more aircraft come out of the portfolio as we go into fiscal 2015 and then start to put more aircraft in on these by winning some of these competitions that we’re getting today.

Great, thanks. You have had some nice wins in the supply chain business over the last few months, just wondering if you could talk about looking forward what the pipeline for that business looks like and maybe more specifically what you guys are seeing in terms of the potential for more of the programmatic wins which I know something you look to kind of ship that business towards?

These things are the way of kind of building off each other, so we’re hopeful that by securing, there have been programs for instance that that will lead to additional business in that field, they could be, not investing in this business for the last few years. So on talking with the people and the business unit, we have a sense that we can possibly win some additional business in that region. So I think what I am trying to signal in my commentary was as a result some of these wins, the airline expandable win, the Eaton win, the Sabena win that there will be more of this kind of activity in each of those streams coming forward.

Okay, thanks. The supply chain contract in the quarter that you restructured from Time and Material to Power-by-the-Hour, what was the driver there for changing the structure of that contract, was that coming from you, from the customers, just kind of wondering what that played out?

When we won that contract, you may recall there was an airline, there was a ex-airline maintenance base that was providing the maintenance and again this is one of those situations where we’re not supposed to be discussing who the airline is, by I will explain to you, you might be able to get to the conclusion, but basically the MRO disappointed the airline was when bankrupt and they had a design that were holding a fair amount of that airlines inventory. So there was no way to price power and they have been operating under power by our agreement, frequent price Power-by-the-Hour nor do they want us to, so we work on a Time and Material basis for year and so we project the Power-by-the-Hour agreement, so we could gain more knowledge and then negotiate Power-by-the-Hour agreement. So it was always intended to go Power-by-the-Hour, it was just a temporary experience to go Time and Material. So this is always planned in the process of going Power-by-the-Hour calls for, it drive the less revenue number, but the profitability is approximately the same.

Okay, that’s helpful on that. I will jump back in queue.

Thank you. Our next question comes from J.B. Groh of D.A. Davidson. Your question please.

Hey guys most of my questions have been answered. Can you may be lay out the timing in the cash flow bookings for that sale of the nine aircraft?

Yes, I mean look they are available for sale now I don’t know if we can give you a real prediction as to when we would expect this stock share to be sold, but some of them are back in the U.S., some of them are in transit back to the U.S. and then some of them are actually going to be moved to a location in the Middle East where we think we might have a better chance at marketing them. So we are pushing down hard to get something done this quarter, it’s not a uncertainty, but certainly over the next six months.

Could you give us may be the book value alone or?

Yes I mean the nine that we have for sale right now on the books for about $18.8 million.

Okay and the price value would be above or below that?

The expectation is to make a gain.

Okay, good. Okay thank you.

Thank you. Our next question comes from [indiscernible]. Your question please.

Hi guys.

Hi John.

Thanks for taking my questions, and most of them are answered. But so in at the early part what – could you give me a color on what drove the increase in SG&A as a percentage of sales that you went up by about 160 basis points?

Well, okay. So, we talked about this a little bit, but yes it’s compared it on an apples-to apples-base shares, you have to make an adjustments the third quarter of last year’s number because there was an acquisition adjustment made in that. So when you add back to last year’s number, that sort of $9 million was part of that actually are SG&A itself by about $5 million.

Okay.

Will provide and so adjustment numbers really a kind of one-off related.

Right.

That particular deal.

For the most recent quarters SG&A figure is more in line?

normalized.

Normalized okay?

Correct.

And then in terms of your availability, liquidity under your revolvers what’s the kind of estimated figure right now?

So we have lots of liquidity, its a quarter close, we’ve had close to $400 million available and that’s prior to any incremental [indiscernible] or anything else.

Okay. So excluding the $115 million or so cash about $285 million and your revolver still there that level.

Right.

Okay. Fine that’s all I had and the rest were answered. Thank you.

Thank you (Operator Instructions) Our next question comes from Stan Mann Stan Mann of Mann Family. Your line is open.

Hi gentlemen, I have four quick questions for David.

Yes go ahead Stan.

Question one, any effect that you foresee in the near-term or far-term on the American Airline merger been effecting there?

No I mean it’s kind of, we are making – there is a progress and we will keep working it.

Okay so there is nothing specific or that we can expect?

Nothing that I see at this moment, but we continue to work it.

Okay. Two, looking forward couple of several years how do you feel about top-line growth, I mean this quarter was weak, but what do you see looking down the road, I mean how is your feel?

So assuming that the general economy were to grow at like call it for argument sake 3%, I would expect our growth rate to be around 10%.

Okay, and what’s the positive view? very positive.

Yes.

Okay three, there is a little bit more complicated, you are moving into Europe with Sabena deal, that’s correct?

I won’t say moving into Europe, we have been in Europe, I think we’re kind of in a – kind of increasing our investments in Europe, yeah.

Okay, well thank the every other companies that does international business favor that I follow has a much lower tax rate and takes advantage of the geographic move for taxes. Your tax rate is inordinately high for a corporation that has international exposure. So, can I ask you think that we might get a base in Ireland or something that will give us the ability to drop our tax rate?

Let them kind of play around with that and let us give some thoughts to that, before we comment and then get back to you on that, because we didn’t make this acquisition with that mine, but clearly we have actually in the aviation where the fair amount of fall through based in Dublin for that purpose. So let us kind a play around and see if that’s an option for us. We have much thoughts about we don’t really know at this stage as that meaningful for us. Now let me, let me add to that, although the operations is headquartered in Brussels keep in mind now also one of the motivation is to increase our Middle East and Africa business where fleet sizes are grown.

Rapidly.

Yes, yes, yes.

But the tax question, the tax question is legitimate and substantial. And I want to be there your legal, your high relative to anybody doing business internationally. And of the interest in area for bottom line?

But we will take that constructively and let us do the work on that and then we’ll let you know, okay.

I have one last question, in any area of your business, did you have liquidity? Do you sense or are you working on or do you see the possibility of starting acquisition program again, which is kind of delayed for a while?

So, we didn’t delay it for any real reasonably, we’ve still been looking or thinking about acquisitions, we know feel a lot more courageous today with the stronger balance sheet position and we do see some opportunities obviously my preference is to grow organically and I think in this quarter although we kind of didn’t perform from sales standpoint we did perform from the standpoint of winning some new business contracts. So my preference would be organic growth and we will look to supplement that organic growth with what we considered to be appropriate acquisitions. We do have a couple of one acquisition in particular which will give us one acquisition [indiscernible] I should say, which should give us some additional possibilities for a new revenue stream and we are looking at that situation very closely to that.

Okay. You’ve been very successful in opportunistic acquisition that’s why I asked for a question.

Thank you.

But anyway, thank you very much.

Thank you, sir.

Thank you. And as they appear to be no further questions in the queue, I'd like to turn the call back over to management for any closing remarks.

Well, thank you for your question today. I appreciate your interest in our company and let us get back to work. Thank you.

Thank you, sir, thank you ladies and gentlemen for your participation. That does conclude AAR’s fiscal 2014 third quarter earnings call. You may disconnect your lines at this time. Have a great day.