Good afternoon, ladies and gentlemen, and welcome to AAR's Fiscal Year 2017 First Quarter Earnings Call. We are joined today by David Storch, Chairman, President and Chief Executive Officer; and Tim Romenesko, Vice Chairman and Chief Financial Officer; and John Holmes, Chief Operating Officer of Aviation Services. Before we begin, I'd like to remind you that 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, 2016. 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, President and Chief Executive Officer, David Storch.

Good afternoon and thank you for joining us today to discuss our fiscal year first quarter results. As you can see, overall, we had a very good quarter as diluted earnings per share from continuing operations increased 38% from $0.21 last year to $0.29 in the current period. During the first quarter, we ramped up recently awarded programs on our Aviation Services segment and we continue to win significant new business from both our commercial and government customers. And if I may, I'm just going to highlight a few examples of some of our wins in the period. We won contracts from both Enter Air and flydubai to provide power-by-the-hour component inventory management and repair services for more than 70 737 series aircraft. The latter agreement represents a significant expansion of AAR's commercial footprint in the Middle East and brings our total number of aircraft under management to over 1,200. We also signed an agreement with Asiana Airlines to provide landing gear repair services at our Miami Landing Gear facility. Further, we won a contract from CommutAir, which operates on behalf of the United Airlines as part of the United Express, to provide component repair and supply chain services for their fleet of 40 Embraer ERJ 145 aircraft. Our airlift business was awarded 2 additional rotary-wing positions in Afghanistan, and in addition the Military Sealift Command extended our 4 positions providing vertical replenishment services in the Indian Ocean and Western Pacific. These awards bring our total contract positions to 21 aircraft as of the end of the quarter. And of course, most significantly, our airlift business also was awarded the Global Aviation Support Services contract for the Department of State air wing, otherwise known as the INL/A program. Our airlift will be responsible for operating, maintaining and provisioning a current fleet of 140 airplanes and helicopters operating around the world. The potential duration of this contract is 11 years, including a 6-month phase-in. The incumbent contractor filed a protest on September 11, and we expect a decision on the protest no later than December 21. At this point, I want to thank you for your attention, and I'll turn the call over to Tim.

Thanks, David. I'll discuss our first quarter financial performance in a bit more detail. As David indicated, we had a good first quarter. Sales in the quarter were $404.8 million, up 4.7% versus the prior year. Aviation Services sales increased $18.8 million, or 6% year-over-year, while Expeditionary Services segment reported a slight decrease in sales, although up from Q4. Gross profit increased year-over-year for both segments. The gross profit margin in Aviation Services was 16% with a mix of products and services responsible for the increase. In the Expeditionary Services' segment, the gross profit margin was 11.5, reflecting improved profitability in Mobility products. Our SG&A expenses as a percentage of sales were 11.1% for the first quarter, compared to 10.3% last year. The SG&A expense run rate is about in line with our expectations, and we expect that the SG&A as a percentage of sales will decline closer to our target of 10% as sales increased over the balance of the fiscal year. Now looking at interest expense for the quarter, it was $1.3 million compared to $1.9 million last year, and that's primarily as a result of the retirement of our remaining convertible notes during fiscal 2016. Our diluted earnings per share from continuing operations for the first quarter was $0.29 compared to $0.21 in the prior year, and that's a 38% increase in EPS, as David had mentioned. Now taking a look at cash for a moment, we used $0.5 million of cash from operations for the quarter. In the prior year first quarter, we used $64.4 million. Our capital expenditures in the quarter were $9.4 million and depreciation and amortization was $14.9 million. During the period, during the quarter, we paid dividends of $2.6 million and we also repurchased approximately 619,000 shares of our stock in the open market for a price of $14.8 million. And that leaves us, as of August 31, with $67.9 million available under our Board-authorized share repurchase program. Our net debt decreased $7.1 million and we ended with $143.7 million of net debt. And our net debt-to-capital ratio is low at 14%. Our composites manufacturing business has continued to perform well, and as a result, we decided to retain it within our Expeditionary Services segment. And we've reclassified this into continuing operations for all the periods presented. So finally - so at this point, we are sticking to our guidance of $1.30 to $1.40. And we feel good about the quarter that just ended and we feel good about our outlook, but we're going to stick to our guidance at this point. So thanks for your interest. And I'll turn the call back over to David.

Thank you, Tim. So as you can see, first quarter 2017 was a nice improvement. We saw a nice improvement over the prior year. Our Aviation Services segment continued to exhibit strong growth, and our Expeditionary Services segment improved from recent performance levels. Once again, we ended the quarter in excellent financial position, giving us not just stability and flexibility, but also capacity to go ahead and look to take advantage of market opportunities as they present themselves. We will continue to make investments in our industry-leading operations as we move into fiscal year 2017, and I'm excited about our future prospects. At this time, I'll turn the call back over to the operator to open up the lines for any questions you may have.

[Operator Instructions] And our first question or comment comes from the line of Larry Solow. Your line is now open.

Great thanks. Good afternoon. I was wondering if you could just maybe just on the Aviation Services side, it looks like supply chain is doing really well, big growth there, obviously adding more contracts and whatnot. Aftermarket, anything changing there? Anything in your - in the trading business? And then perhaps a better look just on the MRO side and what's going on there, would be great.

Well, MRO had, as I think we signaled in the past, MRO's results this quarter are the softest historically for the year. And they didn't disappoint in that regard this year. It was soft again. To give you a sense of positions we had, on average, let's call it, in the middle of August, we had about 33 positions. When I say positions, I mean, aircraft and the hangars for maintenance. And now, we're running at 44 or mid-40s, I should - 40, 40-ish right now, September, and then we go up to 44 in November. So it will start ramping again as the year progresses. The supply chain business, as you say, Larry, is strong. We're seeing many opportunities. John Holmes is not with us here today in Chicago because he's out visiting with customers trying to drum up some additional business and actually meeting with a customer in our New York facility today. So yes, we're expecting, we're hopeful that we can announce a contract after October 1 that we were working out for quite some time. That's a pretty good size. And I would say around the horn, the supply chain businesses are strong. Aviation, the MRO has gone through its typical, cyclical experience and strengthening. And we're feeling pretty good about where we are today.

Okay. So the MRO is more seasonality than anything else. And how about just Lake Charles? I know there's been some headwinds there. Can you maybe just give…?

Yes, we've been diminishing our footprint there. We're keeping it open for now for some light paint work type work. As we've discussed before, we - the State of Illinois has constructed a facility for us in Rockford that we're kind of pivoting towards. And hopefully, we'll be generating some revenue and income coming out of that facility in the not-too-distant future. We'll keep you up to speed on that.

Got it. And just switching gears real quick on the Expeditionary side, it's I realize just sort of the, rather small numbers, and if you go back 3 years ago, gross profit was leagues higher, but a pretty nice improvement from the sort of low single digits to $8 million this quarter. And you said that was mostly on the Mobility side. I thought, I figured airlift also improved a little bit from the ramp in the Falkland Islands and…

Yes. Yes, the airlift has improved a little bit...

And how about mobility? What's sort of your thoughts there?

Well, our thoughts are that we're seeing signs of life in both businesses. So we are seeing the inquiry level get stronger, and we're not overcommitting at this point. So, let's see what happens. I mean, as you know, the world environment is unsettled as ever and it's just a question of how much more action will - the U.S. will see outside in these different theaters, and that will be a good proxy for how our businesses do.

Okay. And then just on the INL contract, I don't know what you can or can't say. Thoughts on potential margin being at least accretive to your current margins or maybe just on timing, assuming the ramping starts up in the early calendar 2017, would that first 6 months be dilutive? Or would that - how would that ramp sort of play out on a high level, David.

Why don't we hold off from making comments on the contract, it's in the protest period. And I think we'll talk about it once it emerges out of protest.

That sounds great. Thanks David, appreciate it.

Yeah, thank you.

Alright. And our next question or comment comes from the line of Kevin Ciabattoni with KeyBanc Capital Markets. Your line is now open.

Hi good afternoon. Thanks for taking my questions guys, nice quarter.

Sure, thanks.

On the SG&A, obviously, it's a little bit high in the quarter, 11% of revenue. In the press release, you guys talked about some new business development efforts that drove that. Just wondering if there's any more color you can give on those whether there's specific areas or programs you can discuss.

Yes, so we've expanded our program selling capability, and I think what you're seeing here in some of these announcements is a reflection of their efforts. And we have a team of folks who joined us last year, and they're a wonderful team. They complement our organization in a very positive way. And we're very hopeful that we'll continue to benefit from their efforts. Also, first quarter is always a little softer for us because of MRO sales. But we anticipate - our goal is always to be below 10% and our goal is to get down to that level before the fiscal year is out.

Okay. Thanks David. On the composites business, obviously bringing that back in under Mobility. Can you just remind us, was said that under Mobility previously, or was that within the Aviation business?

Yes. No, no, no, before, we had a manufacturing group of businesses, and it was - that's where it was. And when we sold off the businesses and we kind of restructured the manufacturing, we basically just stopped and looked to exit both the composites business and the metals business. We ultimately wound down the metals business, but the composite business, which we were trying to sell, we weren't able to get prices that we're happy with, so we thought it was best, from the customers' perspective, our people - for our people, et cetera, to go ahead and try to revitalize the business, which - and we've had some success in that regard. So, the business, based on how we see the markets unfolding, the leadership team at Mobility is a very capable leadership team, as you know. And they were eager to take on some added responsibility and they now have this operation as part of their business.

Can you may be touch on what maybe specific end markets are seeing or are driving that revitalization that you mentioned? Are there specific markets you can point to where you're starting to see some traction there?

We've had success in the past and continue to have success serving some of the regional manufacturers. We've had some success on interiors for certain specialized aircraft. That business continues to be strong. So, I mean, we're looking at opportunities to support the Boeings of the world and the folks who support Boeing, as well some of the regional carriers that are out there as well. So, it's kind of like a niche-like business. We have some activity in the flat-panel world. And I don't know, Tim, is there anything else to add?

No, that's pretty good. We're supporting some of the helicopter manufacturers. But that piece of the business has been doing pretty well.

Is that - is it mostly commercial or mostly military or a good mix of the 2?

It's both, but it's - both, but it's mostly commercial.

Okay. And then last one for me. I know last quarter you guys mentioned that the engineering services business had a pretty nice quarter. I don't think you specifically called it out this quarter, but maybe just some color on what you're seeing there. I know - I think that tends to be a bit of a leading indicator for kind of the broader overhaul market, so maybe just some color on the engineering business.

Yes, I think the engineering business has had a couple of wins. We had one out of Africa, actually. The business is doing okay. It's got some opportunities that they're looking at. But at this point in time, it's not a needle mover either way.

[Operator Instructions] And our next question or comment comes from the line of Stan Mann with Mann Family Investors. Your line is now open.

Congratulations, a really good quarter.

Thanks Stan.

David, I have a question on priority use of cash as you generate. Would you say your emphasis is on buyback or acquisition? Or can you give us any color on what you think you'd utilize for in a priority basis?

Yes. The first priority is to use our capital to grow our business, strengthen our franchise and improve the depth of product that we offer to our customers. So that would be our prime - that would be our first priority. Short of being able to increase the business in that fashion, we - and let me make that into a part A and Part B. Part A of that is external deal, let's say acquisitions. Part B is funding existing capability. In the quarter just ended for instance, we spent a fair amount of money funding inventory programs for our strategic customers. Then, next, I'd say, share repurchase would be next. And of course, the Board, every quarter, reviews our dividend, our dividend policy, and that's always discussed as well.

Can you comment on whether you are close to or see viable deals, accretive deals, in what you're looking at now?

We're seeing deals that are interesting. We're not seeing anything that is compelling necessarily, but we are seeing stuff out there. There's a fair amount of stuff that we're looking at. As you know, we're being very selective and disciplined, but I would say the deal flow on the acquisition side is moderate, light to moderate in a general sense.

Okay. Last question is you've got - you've almost won the State Department contract for their fleet. So, if you look - let's assume we get that, do you see that as being accretive from a get-go? Or maybe you can't comment because of the challenge?

Yes, Stan, so first of all, we were awarded the contract.

Yes.

So we have a contract. The contract is under a protest - under the protest. We're issued a stay order by the customer or a stop order. So, we are not working. We are no longer working on that contract, but we do have a contract. In terms of the profitability or impact on company's results, we prefer not to discuss that at this stage.

Okay. But it is a good contract for the company?

Well, I prefer not to discuss it. I think it's a contract that - it's a program that we have a high level of confidence that - or well we know that we can deliver in a way that's superior to anything that the customer's accustomed to. And that's all I would say.

Okay. But in quantity, in dollar volume, you can't comment, potential dollar volume contribution?

I think the State Department put up a release, which indicated the potential value up to $10 billion.

That’s pretty good. Okay, thank you very much. Good job.

Okay, thank you.

And I'm showing no further questions or comments at this time.

Okay. Well, once again, thank you for your participation. And I wish everybody a very good day. Take care.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a wonderful day.