Hawker Beechcraft Acquisition Company, LLC Reports First Quarter 2009 Financial Results

Hawker Beechcraft Acquisition Company, LLC (HBAC) reported lower net sales and an increased operating loss for the three months ending March 29, 2009, compared to the same period in 2008 as a result of fewer commercial aircraft deliveries and charges associated with work force reductions and used aircraft valuations. However, net income was higher during the first quarter of 2009 compared to the first quarter of 2008 as a result of gains realized on the previously disclosed repurchase of the Company’s debt securities.

Net sales for the three months ending March 29, 2009, were $537.6 million, a decrease of $38.9 million compared to the same period in 2008. Business and general aviation aircraft deliveries were impacted by the deterioration in the overall economy and totaled 57 for the quarter, compared to 72 for the first quarter of 2008. The Company delivered 15 business jet, 29 turboprop and 13 piston aircraft during the three months ending March 29, 2009. Additional detail regarding aircraft deliveries is included in the Appendix.

Operating loss for the three months ending March 29, 2009, was $41.2 million, compared to a loss of $1.5 million for the same period in 2008, and was impacted by the reduced business and general aircraft deliveries, as well as a $13.6 million charge to reflect the estimated severance costs related to the work force reductions announced during the quarter. During the first quarter of 2009, the Company also recorded a $25.3 million charge to reduce the carrying value of used aircraft inventory to reflect current market values. The first quarter of 2008 was impacted by an $18.4 million charge related to early production Hawker 4000 units.

Despite the increased operating loss, the Company recorded net after-tax income for the three months ending March 29, 2009, of $66.9 million, compared to a net after-tax loss of $31.3 million for the same period in 2008. During the first quarter of 2009, the Company recorded a $177.0 net gain on the repurchase, at a significant discount, of $222.0 million of its debt securities.

Operating cash flow consumed during the three months ending March 29, 2009, was $171.2 million, compared to $181.9 million for the same period of 2008, and was impacted by increased inventory levels associated with the reduced aircraft delivery volumes as well as reductions in customer deposits associated with a decline in new orders. Operating cash flow during the first quarter of 2008 was impacted by the ramp up in aircraft production rates at that time.

On March 29, 2009, the Company had $72.3 million in cash and cash equivalents and its revolving credit facility was undrawn. The Company believes that its cash on hand, anticipated cash from operations and available liquidity under its revolving credit facility will be sufficient to meet its cash requirements for the next 12 months.

Backlog was $7.3 billion on March 29, 2009, compared to $7.6 billion on December 31, 2008, and $6.8 billion on March 30, 2008. As a result of the general economic uncertainty, the Company continues to anticipate declining backlog in 2009.

On April 14, 2009, the Company notified its employees of likely further reductions in production volumes and in the size of its work force. The extent of the reductions is not yet quantified; however, the Company anticipates concluding its analysis of the necessary actions in the coming weeks.

Segment Results

Business and General Aviation Aircraft

The Business and General Aviation segment recorded sales of $376.5 million and an operating loss of $60.2 million for the three months ending March 29, 2009, compared to sales of $425.0 million and an operating loss of $24.5 million during the comparable period in 2008. The first quarter 2009 results were impacted by the reduced aircraft delivery volume, the charge recorded to reduce used aircraft values to current market value and a significant portion of the severance cost associated with work force reductions announced during the quarter. The Company also recorded a $16.8 million charge during the quarter related to mark-to-market adjustments on foreign currency forward contracts that are no longer designated as cash flow hedges because the previously underlying purchase volumes are no longer expected to occur.

Trainer AircraftSales in the Trainer Aircraft segment are principally comprised of revenue on the Joint Primary Aircraft Training System (JPATS) contract. The segment recorded sales of $80.8 million and operating income of $0.9 million during the three months ending March 29, 2009, compared to sales of $77.3 million and operating income of $4.3 million in the comparable period in 2008. The segment’s operating results for the first quarter of 2009 included higher research and development cost in support of derivative trainer aircraft programs. In addition, the first quarter 2008 results included a favorable adjustment of $2.2 million related to updated estimates on the JPATS program. Deliveries of T-6A aircraft resumed during the first quarter of 2009 following resolution of a quality issue with a supplier’s component. The Company delivered 29 trainer aircraft during the three months ending March 29, 2009, compared to 17 in the comparable period in 2008.

Customer Support

The Customer Support segment recorded sales of $103.8 million and operating income of $18.1 million during the three months ending March 29, 2009, compared to sales of $137.7 million and operating income of $18.8 million in the comparable period in 2008. The segment was impacted by a reduction in sales as a result of the sale of its fuel and line operations in late 2008. Operating income was favorably impacted by continued efficiencies within its parts distribution operation.

The Appendix also includes the presentation of Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA), non-GAAP measures the Company believes are useful in evaluating the ability of issuers of “high-yield” securities to meet their debt service obligations. These measures are not intended as a substitute for results reported under GAAP and have been reconciled to the closest GAAP measure, Income Before Tax, in the Appendix. They also do not contain all of the adjustments necessary to reflect EBITDA as defined in the Company’s debt agreements. The Company intends to file its Quarterly Report on Form 10-Q with the Securities and Exchange Commission on or about May 4, 2009. At that time, the Form 10-Q will be available on the Company’s Web site at www.hawkerbeechcraft.com.

Earnings Conference Call:HBAC’s earnings results conference call for the three months ending March 29, 2009, will be held Wednesday, May 6, 2009, at 9 a.m. CDT. To attend, register at https://cossprereg.btci.com/prereg/key.process?key=PH4TFVWTT. Once you register, you will be provided with dial-in numbers and pass codes needed to join the conference call. A recording of the earnings call will be posted to the Company’s Web site on the afternoon of May 6, 2009, and will be available for 45 days.

Hawker Beechcraft Corporation is a world-leading manufacturer of business, special mission and trainer aircraft – designing, marketing and supporting aviation products and services for businesses, governments and individuals worldwide. The company’s headquarters and major facilities are located in Wichita, Kan., with operations in Salina, Kan.; Little Rock, Ark.; Chester, England, U.K.; and Chihuahua, Mexico. The company leads the industry with a global network of more than 100 factory-owned and authorized service centers. For more information, visit www.hawkerbeechcraft.com.