<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
________________
For Quarter Ended November 30, 1994 Commission file number 1-6263
------------------------ ----------------
AAR CORP.
----------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2334820
- ---------------------------------------------------- ------------------------
State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1111 NICHOLAS BOULEVARD, ELK GROVE VILLAGE, ILLINOIS 60007
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 439-3939
-----------------------------
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No .
--------- ---------
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
Yes No .
--------- ---------
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each on the issuer's classes of
common stock, as of the close of the period covered by this report.
$1.00 par value, 15,915,702 shares outstanding as of November 30, 1994 .
- -------- ------------ -------------------
<PAGE>
AAR CORP.
PART I
------
FINANCIAL INFORMATION
The condensed consolidated financial statements as of November 30, 1994 and 1993
included herein have been prepared by AAR CORP. ("the Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The condensed consolidated financial statements as of May 31, 1994 have been
derived from audited financial statements with certain prior amounts having been
reclassified (in particular, noncurrent deferred tax assets of $6.6 million
against noncurrent deferred tax liabilities) to conform to the November 30, 1994
presentation. Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted accounting
principles, have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's latest annual report on Form 10-K.
In the opinion of management of the Company, the condensed consolidated
financial statements reflect all adjustments (which consist only of normal
recurring adjustments) necessary to present fairly the consolidated financial
position of AAR CORP. as of November 30, 1994 and the consolidated results of
operations and cash flows for the three and six months ended November 30, 1994
and 1993. The results of operations for such interim periods are not
necessarily indicative of the results for the full year.
-2-
<PAGE>
AAR CORP.
Condensed Consolidated Balance Sheets
As of November 30, 1994 and May 31, 1994
(000s omitted)
<TABLE>
<CAPTION>
November 30, May 31,
1994 1994
----------- -----------
(Unaudited) (Derived from
audited financial
ASSETS: statements)
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,647 $ 18,074
Accounts receivable, less allowances
of $2,531 and $2,000 87,328 85,947
Inventories (Note B) 167,240 146,039
Equipment on or available for
short-term lease 25,253 28,881
Prepaid income taxes, deposits and other 29,213 28,782
-------- -------
Total current assets 310,681 307,723
-------- -------
Property, plant and equipment, net 55,009 54,783
-------- -------
Other assets:
Investment in leveraged leases 32,323 32,618
Cost in excess of underlying net assets of
acquired companies 6,214 6,313
Notes receivable, retirement benefits and
other (Notes A and E) 9,302 9,579
-------- -------
47,839 48,510
-------- -------
$413,529 $411,016
------- -------
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Bank loans and current maturities of long-
term debt $ 6,646 $ 568
Accounts payable 44,668 49,599
Accrued liabilities and taxes on income 17,317 16,539
Accrued interest 959 1,008
------- -------
Total current liabilities 69,590 67,714
------- -------
Long-term debt, less current maturities 115,469 115,729
Deferred tax liabilities (Note A) 32,520 32,390
Retirement benefit obligation and
other deferred credits (Notes A and E) 5,370 5,695
------- -------
153,359 153,814
------- --------
Stockholders' equity:
Preferred stock, $1.00 par value,
authorized 250 shares; none issued - -
Common stock, $1.00 par value,
authorized 80,000 shares; issued
16,231 and 16,215 shares at each date 16,231 16,215
Capital surplus 81,369 81,296
Retained earnings 99,749 99,496
Treasury stock, 316 and 309 shares at
each date, at cost (3,643) (3,556)
Cumulative translation adjustments (Note D) (1,756) (2,963)
Minimum pension liability adjustment
(Note E) (1,370) (1,000)
------- -------
190,580 189,488
------- -------
$413,529 $411,016
------- -------
------- -------
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
-3-
<PAGE>
AAR CORP.
Condensed Consolidated Statements of Income
For the Three and Six Months Ended November 30, 1994 and 1993
(Unaudited)
(000s omitted except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
------------------ ----------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales $99,384 $ 93,185 $196,575 $191,491
------ ------- ------- -------
Costs and operating expenses:
Cost of sales 81,387 76,561 161,765 156,823
Selling, general and administrative(Note E) 12,615 11,596 24,177 24,018
------ ------- ------- -------
94,002 88,157 185,942 180,841
------ ------- ------- -------
Operating income 5,382 5,028 10,633 10,650
Interest expense (2,681) (2,324) (5,278) (4,357)
Interest income 246 724 417 817
------ ------- ------- -------
Income before provision for income taxes
and cummulative effect of changes in
accounting principles 2,947 3,428 5,772 7,110
Provision for income taxes 880 1,050 1,700 2,250
------ ------- ------- -------
Income before cumulative effect
of changes in accounting principles 2,067 2,378 4,072 4,860
Cumulative effect of changes in
accounting principles: (Note A)
Income taxes - - - 900
Postretirement health care benefits,
net of tax - - - (890)
------ ------- ------- -------
Net income $ 2,067 $ 2,378 $ 4,072 $ 4,870
------ ------- ------- -------
------ ------- ------- -------
Net income per share of common stock (Note D):
Income before cumulative effect of changes
in accounting principles $ .13 $ .15 $ .26 $ .31
Net cumulative effect of changes in
accounting principles:
Income taxes - - - .06
Post-retirement health care benefits - - - (.06)
------ ------- ------- -------
Net income per share of common stock $ .13 $ .15 $ .26 $ .31
------ ------- ------- -------
------ ------- ------- -------
Dividends paid and declared
per share of common stock $ .12 $ .12 $ .24 $ .24
Average shares outstanding 15,913 15,906 15,910 15,903
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
-4-
<PAGE>
AAR CORP.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended November 30, 1994 and 1993
(Unaudited)
(000s omitted)
<TABLE>
<CAPTION>
Six Months Ended
November 30,
------------------
1994 1993
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,072 $ 4,870
Adjustments to reconcile net income to net cash
provided from (used in) operating activities:
Depreciation and amortization 4,980 4,977
Cumulative effect of changes in accounting
principles:
Income tax benefit - (900)
Postretirement health care benefit expense - 890
Leveraged lease repricing - (700)
Change in certain assets and liabilities:
Accounts receivable, net (1,085) (13,120)
Inventories, net (20,620) 488
Equipment on or available for
short-term lease 3,628 2,404
Prepaid income taxes, deposits and other (665) (2,472)
Accounts payable (5,072) 11,355
Accrued liabilities and taxes on income 685 308
Accrued interest (49) 492
Retirement benefit obligations,
deferred taxes and other deferred credits (560) 80
------- -------
Net cash provided from (used in)
operating activities (14,686) 8,672
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures, net (3,890) (1,960)
Investment in leveraged leases 295 (78)
Notes receivable and other (303) (1,537)
------- -------
Net cash used in investing activities (3,898) (3,575)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Gross proceeds from issuance of long-term
notes payable - 50,000
Repayment of bank loans with proceeds from
issuance of long-term notes payable - (28,200)
Change in other borrowings, net 5,808 3,482
Cash dividends (3,819) (3,817)
Purchase of treasury stock (87) -
Other, net 89 116
------- -------
Net cash provided from financing activities 1,991 21,581
------- -------
Effect of exchange rate changes on cash 166 (279)
------- -------
Increase (decrease) in cash and cash equivalents (16,427) 26,399
Cash and cash equivalents, beginning of period 18,074 2,255
------- -------
Cash and cash equivalents, end of period $ 1,647 $ 28,654
------- -------
------- -------
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
-5-
<PAGE>
AAR CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1994
(000s omitted except per share and percent data)
NOTE A - CHANGES IN SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES
Effective June 1, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109 "Accounting for Income Taxes." Results prior to that
date were not restated. The cumulative effect of the accounting change was a
tax benefit of $900 ($.06 per share) recorded in the three month period ended
August 31, 1993. The adoption of SFAS No. 109 changes the Company's method of
accounting for income taxes from the deferred method to the asset and liability
method of accounting. Under the asset and liability method, deferred tax assets
and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using statutory tax rates in effect for the
year in which those temporary differences are expected to be recovered or
settled. The effect of changes in deferred tax assets and liabilities and tax
rates will be recognized in the consolidated results of operations in the period
the changes occur.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective June 1, 1993, the Company adopted SFAS No. 106 "Employers' Accounting
for Postretirement Benefits Other than Pensions." Prior years' results were not
restated. Upon adoption the Company elected, as permitted under SFAS No. 106,
to record a one-time transition obligation of $1,350 ($890 after tax or $.06 per
share) which represents that portion of future retiree benefit costs related to
service already rendered by both active and retired employees up to the date of
adoption. This charge to operating results will have no direct impact on cash
flows since the Company will continue its current practice of paying benefits
when incurred.
NOTE B - INVENTORY
The summary of inventories is as follows:
<TABLE>
<CAPTION>
November 30, May 31,
1994 1994
------------ --------
<S> <C> <C>
Raw materials and parts $ 30,256 $ 25,349
Work-in-process 14,144 11,974
Purchased aircraft parts, engines
and components held for
sale or exchange 121,161 106,529
Finished goods 1,679 2,189
------- -------
167,240 146,041
Progress billings on long-term
contracts and programs - (2)
------- -------
$167,240 $146,039
------- -------
------- -------
</TABLE>
-6-
<PAGE>
AAR CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1994 (Continued)
(000s omitted except per share and percent data)
NOTE C - SUPPLEMENTAL CASH FLOWS INFORMATION
Supplemental information on cash flows:
<TABLE>
<CAPTION>
Six Months Ended
November 30,
----------------
1994 1993
------ ------
<S> <C> <C>
Interest paid $5,320 $3,730
Income taxes paid 2,130 800
Income tax refunds received 340 260
</TABLE>
NOTE D - STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE
Cumulative translation adjustments increased from $(2,963) to $(1,756) for the
six-month period ended November 30, 1994. The increase in equity resulted from
an increase in the value of the Company's net investments in foreign
subsidiaries primarily resulting from an increase in the value of the U.S.
dollar against certain European currencies.
The per share data was calculated using the weighted average shares outstanding
for the periods presented. Common stock equivalents consisting of employee
stock options have not been included in the per share calculation as their
dilutive effect is not material.
NOTE E - MINIMUM PENSION LIABILITY ADJUSTMENT AND POSTRETIREMENT BENEFITS
CURTAILMENT
The Company recorded additional minimum pension liabilities during the six-month
periods ended November 30, 1994 and 1993 of $365 and $3,650, respectively,
reported within Retirement benefit obligation in the Consolidated Balance
Sheets. The liability increased as the result of the market-driven decrease in
the discount rate used by the Company to determine pension obligations. In
accordance with the method of accounting prescribed by SFAS No. 87, "Employers'
Accounting for Pensions", $370 and $1,000, at each respective date, was charged
to Stockholders' equity. The noncash adjustment did not affect the Company's
results of operations.
The Company recorded a pretax curtailment gain of $380 ($250 after tax) during
the three-month period ended November 30, 1994 reflecting the Company's
termination of certain postretirement healthcare benefits attributable to future
services of both collective-bargaining and other domestic employees. The gain is
recorded as an offset to selling, general and administrative expenses in the
Condensed Consolidated Statements of Income. The related deferred tax asset was
reversed at the statutory rate of 34 percent.
-7-
<PAGE>
AAR CORP.
PART I, ITEM II
---------------
Management's Discussion and Analysis of
Results of Operations and Financial Condition
RESULTS OF OPERATIONS
---------------------
(000s omitted except per share and percent data)
NET SALES SUMMARY
THREE AND SIX MONTH PERIODS ENDED NOVEMBER 30, 1994
(as compared with the same periods of the prior year)
The following table sets forth net sales for the Company's classes of similar
products and services within the Company's Aviation Services business segment:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
------------------ -----------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Sales:
Trading $46,755 $46,215 $ 94,426 $ 99,011
Overhaul 26,437 22,737 50,558 46,576
Manufacturing 26,192 24,233 51,591 45,904
------ ------ ------- -------
$99,384 $93,185 $196,575 $191,491
------ ------ ------- -------
------ ------ ------- -------
</TABLE>
COMPARISON OF RESULTS OF OPERATIONS
THREE MONTH PERIOD ENDED NOVEMBER 30, 1994
(as compared with the same period of the prior year)
Consolidated net sales for the second quarter of fiscal 1995 increased $6,199 or
6.7% over the prior year due to increased sales of engine and airframe parts,
manufactured aircraft cargo systems and airframe and certain component overhaul
services. These increases were partially offset by reduced sales of engines and
other component overhaul services.
Consolidated gross profit increased $1,373 or 8.3% as a result of higher
consolidated net sales and an increase in the consolidated gross profit margin
from 17.8% to 18.1%. The increase in consolidated gross profit margin was due
to improved margins on airframe and engine parts, engines, certain manufactured
products, and airframe and certain component overhaul services. These margin
increases were partially offset by continued competitive pricing pressures on
other component overhaul services. Consolidated operating profit increased $354
or 7.0% due to higher net sales and profit margins discussed above and
recognition of a curtailment gain upon termination of certain postretirement
healthcare benefits (see Note E in Notes to Condensed Consolidated Financial
Statements), partially offset by increased selling, general and administrative
expenses stemming from higher personnel and marketing support costs, as well as
other expenses resulting from aggressive marketing efforts.
Consolidated net income decreased $311 or 13.1% over the same period in the
prior year primarily as a result of increased interest expense on additional
borrowings and higher interest rates resulting primarily from the sale of $50
million of 10-year, 7 1/4% notes in October, 1993. Net income was further
impacted by reduced interest income as the prior year's results included $395 of
additional interest income recorded on income tax refunds.
-8-
<PAGE>
AAR CORP.
Management's Discussion and Analysis of
Results of Operations and Financial Condition
RESULTS OF OPERATIONS (Continued)
(000s omitted except per share and percent data)
SIX MONTH PERIOD ENDED NOVEMBER 30, 1994
(as compared with the same period of the prior year)
Consolidated net sales increased $5,084 or 2.7% over the same period in the
prior year due to increased sales of manufactured products under existing and
new contracts for products supporting the United States Government's Rapid
Deployment Program, manufactured aircraft cargo systems, airframe components,
and airframe and certain component overhaul services. These increases were
partially offset by reduced sales of engines, engine parts, aviation fasteners,
and other component overhaul services.
Consolidated gross profit increased $142 or .4% due to increased consolidated
net sales offset by a decrease in the consolidated gross profit margin from
18.1% to 17.7%. The consolidated gross profit margin declined due to the lower
margins on overhaul services stemming from the effects of continued competitive
pricing on overhaul services, in part due to overcapacity in certain areas of
the industry. The decline in margin was partially offset by higher margins on
engines, airframe and engine parts, and certain manufactured products.
Consolidated operating profit remained flat despite increased sales due
primarily to the reduced consolidated gross profit margin, increased selling,
general and administrative expenses in the three month period ended November 30,
1994 discussed above and the inclusion of $700 of income from a reduction in the
interest rate on a nonrecourse leveraged lease obligation in the prior year.
Consolidated net income for the six month period decreased $788 or 16.2% over
the period in the prior year primarily as a result of increased interest expense
on additional borrowings and higher interest rates primarily from the sale of
$50 million of 10-year, 7 1/4% notes in October, 1993. Net income was further
impacted by reduced interest income as the prior year's results included $365 of
additional interest income recorded on income tax refunds. These reductions in
net income were partially offset by a lower effective tax rate resulting from
tax benefits on certain export sales.
-9-
<PAGE>
AAR CORP.
Management's Discussion and Analysis of
Results of Operations and Financial Condition
FINANCIAL CONDITION
(000s omitted except ratios)
AT NOVEMBER 30, 1994
(as compared with May 31, 1994)
In the six-month period ended November 30, 1994, the Company utilized cash to
meet working capital requirements, make capital expenditures and pay dividends.
The Company's working capital requirements exceeded operating cash flow due to
the purchase of inventory to support existing or new inventory management
programs, as well as other advantageously priced inventory.
The Company continues to maintain sources of financing amounting to $126,675 of
available bank lines and has a shelf registration on file with the Securities
and Exchange Commission for $85,000 of medium or long-term debt securities,
which it may issue at its discretion and subject to market conditions.
The Company believes that its continued strong financial position within the
aviation services industry, available sources of financing and future income
will continue to give the Company the ability to meet ongoing working capital
requirements and take advantage of additional business opportunities.
A summary of key indicators of financial condition and lines of credit follows:
<TABLE>
<CAPTION>
Description November 30, 1994 May 31, 1994
-------------------- ----------------- ------------
<S> <C> <C>
Working capital $241,091 $240,009
Current ratio 4.5:1 4.5:1
Bank Credit Lines:
Borrowings outstanding $ 6,125 $ -
Available but unused lines 126,675 132,500
------- -------
$132,800 $132,500
------- -------
------- -------
Long-term debt less current
maturities $115,469 $115,729
Ratio of long-term debt to
capitalization 37.7% 37.9%
</TABLE>
-10-
<PAGE>
AAR CORP.
PART II
-------
OTHER INFORMATION
-----------------
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders of the Company held on October 12,
1994, Erwin E. Schulze, Joel D. Spungin and David P. Storch were elected as
directors of the Company to serve until the 1997 Annual Meeting of
Shareholders.
There were no abstentions and no broker non-votes for any of the nominees
for directors. The number of votes cast for, or withheld, for each nominee
for director were as follows:
For Withheld
---------- --------
Erwin E. Schulze 14,389,446 2,602
Joel D. Spungin 14,385,808 6,240
David P. Storch 14,379,603 12,445
No other matters were presented to the Company's shareholders for action
at the Annual Meeting of Shareholders.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
ITEM
4. Instruments 4.1 Restated Certificate of Incorporation:(3) Amendments
defining the thereto dated November 3, 1987;(3) and October 19,
rights of 1988.(5)
security 4.2 By-Laws, as amended.(12)
holders
4.3 Credit Agreement dated June 1, 1993 between the
Registrant and Continental Bank N.A.(11) and amendment
thereto dated May 16, 1994.(12)
4.4 Rights Agreement between the Registrant and The First
National Bank of Chicago;(3) Amendment thereto dated
July 18, 1989.(5)
4.5 Indenture dated October 15, 1989 between the Registrant
and Continental Bank, N.A., as Trustee, relating to
debt securities;(7) First Supplemental Indenture
thereto dated August 26, 1991. (8)
4.6 Officer's certificate dated October 24, 1989 (6) and
October 12, 1993. (6)
4.7 Credit Agreement dated October 15, 1991 between the
Registrant and The First National Bank of Chicago, as
Agent (9) and amendment thereto dated March 31, 1994.
(12)
11
<PAGE>
AAR CORP.
PART II
-------
OTHER INFORMATION
-----------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
ITEM
10. Material 10.1 AAR CORP. Stock Benefit Plan. (11)
Contracts
10.2 Death Benefit Agreement dated August 24, 1984 between
the Registrant and Ira A. Eichner ;(1) Amendment
thereto dated August 12, 1988.(4)
10.3 Further Restated and Amended Employment Agreement dated
August 1, 1985 between the Registrant and Ira A.
Eichner;(2) Amendment thereto dated August 12, 1988.(4)
10.4 Trust Agreement dated August 12, 1988 between the
Registrant and Ira A. Eichner(4) and amendment thereto
dated February 4, 1994.(12)
10.5 AAR CORP. Directors' Retirement Plan, dated April 14,
1992.(10)
10.6 AAR CORP. Supplemental Key Employee Retirement Plan,
dated July 13, 1994. (filed herewith).
27. Financial 27.1 Financial Data Schedule for the Registrant's six-
Data month interim period ended November 30, 1994.
Schedule
- -----------------------
Notes:
(1) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1985.
(2) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1986.
(3) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1987.
(4) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1988.
(5) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1989.
(6) Incorporated by reference to Exhibits to the Registrant's Current
Report on Form 8-K dated October 24, 1989 and October 12, 1993.
-12-
<PAGE>
(7) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-Q for the quarter ended November 30, 1989.
(8) Incorporated by reference to Exhibits to Registrant's Registration
Statement on Form S-3 filed August 27, 1991.
(9) Incorporated by reference to Exhibits to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended November 30, 1991.
(10) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1992.
(11) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1993.
(12) Incorporated by reference to Exhibits to the Registrant's Annual
Report on Form 10-K for the fiscal year ended May 31, 1994.
(b) REPORTS ON FORM 8-K FOR QUARTER ENDED NOVEMBER 30, 1994:
The Company filed no reports on Form 8-K during the three (3) months ended
November 30, 1994.
-13-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AAR CORP.
-------------------------------------------
(Registrant)
Date: JANUARY 13, 1995 /s/ Timothy J. Romenesko
------------------ ------------------------------------------
Timothy J. Romenesko
Vice President - Controller,
Chief Financial Officer and Treasurer
(Principal accounting officer and officer duly
authorized to sign on behalf of registrant)
-14-
<PAGE>
EXHIBIT 10.6
AAR CORP.
SUPPLEMENTAL KEY EMPLOYEE RETIREMENT PLAN
-----------------------------------------
The AAR CORP. Supplemental Key Employee Retirement Plan is adopted
effective June 1, 1994, for the Executive Officers, and other designated
officers and key employees, of AAR CORP. and its Affiliated Companies who
participate in the qualified retirement plans from time to time established and
maintained by AAR CORP. The purpose of the Plan is to ensure that the
retirement benefits provided to Executive Officers and such other officers and
key employees enhance the overall effectiveness of the AAR CORP. executive
compensation program and attract, retain and motivate such individuals.
Accordingly, AAR CORP. hereby adopts the Plan pursuant to the terms and
provisions set forth below:
ARTICLE I
DEFINITIONS
Wherever used herein the following terms shall have the meanings
hereinafter set forth:
1.1. "Affiliated Company" means a business entity, or predecessor of such
entity, if any, which controls, or is under common control with, the Company.
1.2. "Board" means the Board of Directors of the Company.
1.3. "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any regulations relating thereto.
1.4. "Committee" means the Retirement Committee responsible for the
administration of the Qualified Retirement Plan.
1.5. "Company" means AAR CORP., a Delaware corporation, or, to the extent
provided in Section 8.10 below, any successor corporation or other entity
resulting from a merger or consolidation into or with the Company or a transfer
or sale of substantially all of the assets of the Company.
1.6. "Executive Officer" means each of (a) the Chairman and Chief
Executive Officer, (b) the President and Chief Operating Officer, and (c) the
Vice President, General Counsel and Secretary of the Company holding office at
any time on or after the Plan effective date. The Compensation Committee of the
Board, upon recommendation of management, shall have the discretion from time to
time to designate individuals occupying
<PAGE>
other executive positions with the Company or an Affiliated Company as Executive
Officers for purposes of the Plan.
1.7. "Key Employee" means each employee of the company who may from time
to time be designated as such for purposes of the Plan by and in the discretion
of the Compensation Committee of the Board, upon recommendation of management.
1.8. "Normal Retirement Date" means the first day of the calendar month
coincident with or next following the date a Participant attains age 65.
1.9. "Participant" means any individual who has been designated an
Executive Officer, or Key Employee of the Company or an Affiliated Company for
purposes of the Plan.
1.10. "Plan" means the AAR CORP. Supplemental Key Employee Retirement
Plan.
1.11. "Plan Year" means the calendar year or any other 12 consecutive
month period that constitutes the fiscal year of the Qualified Profit Sharing
Plan.
1.12. "Qualified Company Account" means the account maintained for a
Participant under the Qualified Profit Sharing Account that is credited with
Qualified Company Contributions.
1.13. "Qualified Company Contribution" means the Company Contribution made
by the Company or an Affiliated Company for the benefit of a Participant under
and in accordance with the terms of the Qualified Profit Sharing Plan in any
Plan Year.
1.14. "Qualified Profit Sharing Account" means the account maintained for
a Participant under the Qualified Profit Sharing Plan that is credited with
Qualified Profit Sharing Contributions.
1.15. "Qualified Profit Sharing Contribution" means the Profit Sharing
Contribution made by the Company or an Affiliated Company for the benefit of a
Participant under and in accordance with the terms of the Qualified Profit
Sharing Plan.
1.16. "Qualified Profit Sharing Plan" means the AAR CORP. Employees'
Profit Sharing Plan established effective June 1, 1965, as amended from time to
time, and each successor or replacement plan.
1.17. "Qualified Retirement Benefit" means the aggregate benefit payable
to a Participant pursuant to the Qualified Retirement Plan, and all annuities
purchased with respect to the Participant under the Qualified Retirement Plan,
by reason of his termination of employment with the Company and all Affiliated
Companies for any reason other than death.
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1.18. "Qualified Retirement Plan" means the AAR CORP. Retirement Plan
established effective August 1, 1988, as amended from time to time, and each
successor or replacement plan.
1.19. "Qualified Salary Deferral Account" means the account maintained for
a Participant under the Qualified Profit Sharing Plan that is credited with
Qualified Salary Deferral Contributions.
1.20. "Qualified Salary Deferral Contribution" means the Salary Deferral
Contribution made by the Company or an Affiliated Company for the benefit of a
Participant under and in accordance with the terms of the Qualified Profit
Sharing Plan in any Plan Year.
1.21. "Qualified Surviving Spouse Benefit" means the aggregate benefit
payable to the Surviving Spouse of a Participant pursuant to the Qualified
Retirement Plan, and all annuities purchased with respect to the Participant
under the Qualified Retirement Plan, in the event of the death of the
Participant at any time prior to the commencement of payment of his Qualified
Retirement Benefit.
1.22. "Supplemental Company Account" means the account maintained by the
Company for a Participant under the Plan that is credited with Supplemental
Company Contributions.
1.23. "Supplemental Company Contribution" means the contribution made by
the Company for the benefit of a Participant pursuant to Section 4.3 of the Plan
in any Plan Year.
1.24. "Supplemental Profit Sharing Account" means the account maintained
by the Company for a Participant under the Plan that is credited with
Supplemental Profit Sharing Contributions.
1.25. "Supplemental Profit Sharing Contribution" means the contribution
made by the Company for the benefit of a Participant pursuant to Section 4.4 of
the Plan in any Plan Year.
1.26. "Supplemental Retirement Benefit" means the benefit payable to a
Participant pursuant to Section 3.1 or 3.2 of the Plan by reason of his
termination of employment with the Company and all Affiliated Companies for any
reason other than death.
1.27. "Supplemental Salary Deferral Agreement" means a written agreement
entered into by a Participant pursuant to the provisions of Section 4.2.
1.28. "Supplemental Salary Deferral Account" means the account maintained
by the Company for a Participant under the Plan that is credited with
Supplemental Salary Deferral Contributions.
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1.29. "Supplemental Salary Deferral Contribution" means the contribution
made by the Company for the benefit of a Participant pursuant to Section 4.1 of
the Plan in any Plan Year.
1.30. "Supplemental Surviving Spouse Benefit" means the benefit payable to
a Surviving Spouse pursuant to Section 3.3 of the Plan.
1.31. "Surviving Spouse" means a person who is married to a Participant
throughout the one year period ending on the date of his death.
1.32. Except as otherwise provided in this Article I, all defined terms
used in the Plan that are defined in the Qualified Retirement Plan or in the
Qualified Profit Sharing Plan, as applicable, shall have the same meaning in the
Plan as is set forth in the definition in the Qualified Retirement Plan or the
Qualified Profit Sharing Plan.
1.33. Words in the masculine gender shall include the feminine and the
singular shall include the plural, and vice versa, unless qualified by the
context. Any headings used herein are included for ease of reference only and
are not to be construed so as to alter the terms hereof.
ARTICLE II
ELIGIBILITY
2.1. CHAIRMAN AND CHIEF EXECUTIVE OFFICER. The Chairman and Chief
Executive Officer shall be a Participant with respect to the Supplemental Salary
Deferral Contributions, the Supplemental Company Contributions and the
Supplemental Profit Sharing Contributions set forth in Article IV.
2.2. EXECUTIVE OFFICERS. Each Executive Officer (other than the Chairman
and Chief Executive Officer) shall be a Participant in the Plan with respect to
the Supplemental Retirement Benefit and Supplemental Surviving Spouse Benefit
set forth in Sections 3.1 and 3.3, and the Supplemental Salary Deferral
Contributions, the Supplemental Company Contributions and the Supplemental
Profit Sharing Contributions set forth in Article IV.
2.3. KEY EMPLOYEES. Each Key Employee shall be a Participant in the Plan
with respect to the Supplemental Retirement Benefit and the Supplemental
Surviving Spouse Benefit set forth in Sections 3.2 and 3.3, and the Supplemental
Salary Deferral Contributions, the Supplemental Company Contributions and the
Supplemental Profit Sharing Contributions set forth in Article IV.
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ARTICLE III
SUPPLEMENTAL RETIREMENT BENEFIT AND
SUPPLEMENTAL SURVIVING SPOUSE BENEFIT
3.1. EXECUTIVE OFFICERS. Effective as of June 1, 1994, the Supplemental
Retirement Benefit of an Executive Officer who is a Participant as described in
Section 2.2, payable in the form of an annuity over the lifetime of the
Participant only, commencing on his Normal Retirement Date, shall be a monthly
amount equal to the difference between (a) and (b) below:
(a) The monthly amount of the Qualified Retirement Benefit to which
the Participant would have been entitled under the Qualified Retirement
Plan if (1) his Accrued Benefit earned under the Qualified Retirement Plan
was based in part on 50% of Final Average Earnings, and (2) such Qualified
Retirement Benefit was computed without giving effect to any limitations on
benefits at any time imposed by any provision of the Code;
LESS
(b) The monthly amount of the Qualified Retirement Benefit actually
payable to the Participant under the Qualified Retirement Plan.
The amounts described in (a) and (b) shall be computed as of the date of
termination of employment of the Participant with the Company and all Affiliated
Companies in the form of an annuity payable over the lifetime of the Participant
only, commencing on his Normal Retirement Date.
3.2. KEY EMPLOYEES. Effective as of June 1, 1994, the Supplemental
Retirement Benefit of a Participant who is a Key Employee of the Company,
payable in the form of an annuity over the lifetime of the Participant only,
commencing on his Normal Retirement Date, shall be a monthly amount equal to the
difference between (a) and (b) below:
(a) The monthly amount of the Qualified Retirement Benefit to which
the Participant would have been entitled under the Qualified Retirement
Plan if such Qualified Retirement Benefit was computed without giving
effect to any limitations on benefits imposed by any provision of the Code;
LESS
(b) The monthly amount of the Qualified Retirement Benefit actually
payable to the Participant under the Qualified Retirement Plan.
The amounts described in (a) and (b) shall be computed on the date of
termination of employment of a Participant with the Company and all Affiliated
Companies in the form
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of an annuity payable over the lifetime of the Participant only, commencing on
his Normal Retirement Date.
3.3. SUPPLEMENTAL SURVIVING SPOUSE BENEFITS. Effective as of June 1,
1994, if a Participant described in Section 2.2 or 2.3 dies prior to
commencement of payment of his Qualified Retirement Benefit under circumstances
in which a Qualified Surviving Spouse Benefit is payable to his Surviving
Spouse, then a Supplemental Surviving Spouse Benefit is payable to his Surviving
Spouse as hereinafter provided. The monthly amount of the Supplemental
Surviving Spouse Benefit payable to a Surviving Spouse shall be equal to the
difference between (a) and (b) below:
(a) The monthly amount of the Qualified Surviving Spouse Benefit to
which the Surviving Spouse would have been entitled under the Qualified
Retirement Plan if such Qualified Surviving Spouse Benefit were computed
with respect to a Supplemental Retirement Benefit applicable to the
Participant determined pursuant to either Section 3.1 or 3.2 above, as the
case may be;
LESS
(b) The monthly amount of the Qualified Surviving Spouse Benefit
actually payable to the Surviving Spouse under the Qualified Retirement
Plan.
3.4. FORM OF SUPPLEMENTAL RETIREMENT BENEFIT. The Supplemental Retirement
Benefit payable to a Participant shall be paid in the same form under which the
Qualified Retirement Benefit is payable to the Participant. The Participant's
election under the Qualified Retirement Plan of any optional form of payment of
his Qualified Retirement Benefit (with the valid consent of his Surviving Spouse
where required under the Qualified Retirement Plan) shall also be applicable to
the payment of his Supplemental Retirement Benefit.
3.5. COMMENCEMENT OF SUPPLEMENTAL RETIREMENT BENEFIT. Payment of the
Supplemental Retirement Benefit to a Participant shall commence on the same date
as payment of the Qualified Retirement Benefit to the Participant commences.
Any election under the Qualified Retirement Plan made by the Participant with
respect to the commencement of payment of his Qualified Retirement Benefit shall
also be applicable with respect to the commencement of payment of his
Supplemental Retirement Benefit.
3.6. APPROVAL OF COMPANY. Notwithstanding the provisions of Sections 3.4
and 3.5 above, an election made by the Participant under the Qualified
Retirement Plan with respect to the form of payment of his Qualified Retirement
Benefit (with the valid consent of his Surviving Spouse where required under the
Qualified Retirement Plan), or the date for commencement of payment thereof,
shall not be effective with respect to the form of payment or date for
commencement of payment of his Supplemental Retirement Benefit hereunder unless
such election is expressly approved in writing by the Company with respect to
his Supplemental Retirement Benefit. If the Company shall not approve such
election
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in writing, then the form of payment or date for commencement of payment of the
Participant's Supplemental Retirement Benefit shall be selected by the Company
in its sole discretion.
3.7. ACTUARIAL EQUIVALENT. A Supplemental Retirement Benefit that is
payable in any form other than an annuity over the lifetime of the Participant
only, or that commences at any time prior to the Participant's Normal Retirement
Date, shall be the actuarial equivalent of the Supplemental Retirement Benefit
determined pursuant to Section 3.1 or 3.2 above, as applicable, based upon the
same actuarial adjustments and assumptions as those specified in the Qualified
Retirement Plan with respect to determination of the amount of the Qualified
Retirement Benefit or the date for commencement of payment thereunder.
3.8. FORM AND COMMENCEMENT OF SUPPLEMENTAL SURVIVING SPOUSE BENEFIT. A
Supplemental Surviving Spouse Benefit shall be payable over the lifetime of the
Surviving Spouse only in monthly installments commencing on the date for
commencement of payment of the Qualified Surviving Spouse Benefit to the
Surviving Spouse and terminating on the date of the last payment of the
Qualified Surviving Spouse Benefit made before the Surviving Spouse's death.
ARTICLE IV
SUPPLEMENTAL CONTRIBUTIONS
4.1. SUPPLEMENTAL SALARY DEFERRAL CONTRIBUTIONS. The Supplemental Salary
Deferral Contribution to be made by the Company for the benefit of a Participant
for any Plan Year shall be an amount equal to the difference between (a) and (b)
below:
(a) The Qualified Salary Deferral Contribution that would have been
withheld and deposited to the Qualified Salary Deferral Account of the
Participant for the Plan Year, as determined by the Salary Deferral
Agreement between the Participant and the Company or an Affiliated Company
in effect for such Year pursuant to the terms of the Qualified Profit
Sharing Plan, without giving effect to any limitations imposed by the Code
on the Qualified Profit Sharing Plan;
LESS
(b) The amount of the Qualified Salary Deferral Contribution actually
allocated to the Qualified Salary Deferral Account of the Participant for
the Plan Year.
A Supplemental Salary Deferral Contribution made for the benefit of a
Participant for any Plan Year shall be credited to a Supplemental Salary
Deferral
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Account maintained under the Plan in the name of such Participant no later
than 60 days after the last day of such Plan Year.
4.2. SUPPLEMENTAL SALARY DEFERRAL AGREEMENT. As a condition to the
Company's obligation to make a Supplemental Salary Deferral Contribution for the
benefit of a Participant pursuant to Section 4.1, the Participant must execute a
Supplemental Salary Deferral Agreement in the form attached hereto. The
Agreement for any Plan Year shall be made before the beginning of that Year and
shall remain in full force and effect for subsequent Plan Years unless revised
or revoked by a Participant by written instrument delivered to the Committee
prior to the beginning of the Plan Year in which such revision or revocation is
to be effective.
4.3. SUPPLEMENTAL COMPANY CONTRIBUTIONS. The Supplemental Company
Contribution to be made by the Company for the benefit of a Participant for any
Plan Year shall be an amount equal to the difference between (a) and (b) below:
(a) The Qualified Company Contribution that would have been allocated
to the Qualified Company Account of the Participant for the Plan Year
without giving effect to any limitations imposed by the Code on the
Qualified Profit Sharing Plan;
LESS
(b) The amount of the Qualified Company Contribution actually
allocated to the Qualified Company Account of the Participant for the Plan
Year.
A Supplemental Company Contribution made for the benefit of a
Participant for any Plan Year shall be credited to a Supplemental Company
Account maintained under the Plan in the name of such Participant no later
than 60 days after the last day of such Plan Year.
4.4. SUPPLEMENTAL PROFIT SHARING CONTRIBUTIONS. The Supplemental Profit
Sharing Contribution to be made by the Company for the benefit of a Participant
for any Plan Year shall be an amount equal to the difference between (a) and (b)
below:
(a) The Qualified Profit Sharing Contribution that would have been
allocated to the Qualified Profit Sharing Account of the Participant for
the Plan Year without giving effect to any limitations imposed by the Code
on the Qualified Profit Sharing Plan;
LESS
(b) The amount of the Qualified Profit Sharing Contribution actually
allocated to the Qualified Profit Sharing Account of the Participant for
the Plan Year.
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A Supplemental Profit Sharing Contribution made for the benefit of a
Participant for any Plan Year shall be credited to a Supplemental Profit
Sharing Account maintained under the Plan in the name of such Participant
no later than 120 days after the last day of such Plan Year.
4.5. INVESTMENT OF SUPPLEMENTAL CONTRIBUTIONS.
(a) SUPPLEMENTAL SALARY DEFERRAL CONTRIBUTIONS. Amounts credited
hereunder to the Supplemental Salary Deferral Account of a Participant
shall be treated as if they were actually invested in the Qualified Salary
Deferral Account of the Participant and shall be subject to the same
Participant investment elections, and credited with earnings, gains and
losses, at the same time and in the same manner as is applicable to amounts
invested in his Qualified Salary Deferral Account. A change by a
Participant in the investment election applicable to his subsequent
Qualified Salary Deferral Contributions, or a direction to transfer amounts
in his Qualified Salary Deferral Account among Investment Funds maintained
under the Qualified Profit Sharing Plan, will also apply to his subsequent
Supplemental Salary Deferral Contributions and to amounts credited to his
Supplemental Salary Deferral Account, and will be effective at the same
time that such change in election or direction to transfer is applicable
under the Qualified Profit Sharing Plan.
(b) SUPPLEMENTAL COMPANY CONTRIBUTIONS. All amounts credited to the
Supplemental Company Account of a Participant shall be treated as if they
were actually invested in the Qualified Company Account of the Participant,
and shall be subject to the same Participant investment elections, and
credited with earnings, gains and losses, at the same time and in the same
manner as is applicable to amounts invested in his Qualified Company
Account. A change by a Participant in the investment election applicable
to his subsequent Qualified Company Contributions, or a direction to
transfer amounts in his Qualified Company Account among Investment Funds
maintained under the Qualified Profit Sharing Plan, will also apply to his
subsequent Supplemental Company Contributions and to amounts credited to
his Supplemental Company Account and will be effective at the same time
that such change in election or direction to transfer is applicable under
the Qualified Profit Sharing Plan.
(c) SUPPLEMENTAL PROFIT SHARING CONTRIBUTIONS. All amounts credited
to the Supplemental Profit Sharing Account of a Participant shall be
treated as if they were actually invested in the Qualified Profit Sharing
Account of the Participant, and shall be subject to the same Participant
investment elections, and credited with earnings, gains and losses, at the
same time and in the same manner as is applicable to amounts invested in
his Qualified Profit Sharing Plan Account. A change by a Participant in
the investment election applicable to his subsequent Qualified Profit
Sharing Contributions, or a direction to transfer amounts in his Qualified
Profit Sharing Account among Investment Funds maintained under the
Qualified Profit Sharing Plan, will also apply to his subsequent
Supplemental Profit Sharing
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Contributions and to amounts credited to his Supplemental Profit Sharing
Account and will be effective at the same time that such change in election
or direction to transfer is applicable under the Qualified Profit Sharing
Plan.
(d) INVESTMENTS. Amounts credited to a Participant's Supplemental
Salary Deferral Account, Supplemental Company Account and Supplemental
Profit Sharing Account shall be invested by the Company in such investment
vehicles as it shall select from time to time that will be similar to the
Investment Funds maintained under the Qualified Profit Sharing Plan and in
which the Participant's Qualified Salary Deferral Account, Qualified
Company Account and Qualified Profit Sharing Account are invested.
Investments pursuant to this paragraph in such similar investment vehicles
shall be maintained in the name of the Company.
(e) STATEMENT OF ACCOUNTS. A statement of accounts for each
Participant, showing contributions, earnings, gains and losses, and current
balances of the accounts provided for under this Article IV shall be
provided to each Participant on not less than a quarterly basis.
4.6. DISTRIBUTIONS.
(a) TERMINATION OF EMPLOYMENT PRIOR TO DEATH. Upon termination of a
Participant's employment with the Company and all Affiliated Companies for
any reason other than death, a Participant shall receive a distribution of
all amounts credited to his Supplemental Salary Deferral Account, his
Supplemental Company Account, and his Supplemental Profit Sharing Account,
including gains and losses credited in accordance with Section 4.5.
(b) DISTRIBUTION DUE TO DEATH. If a Participant dies before
distribution to him of the full amount of his Supplemental Salary Deferral
Account, his Supplemental Company Account and his Supplemental Profit
Sharing Account, any remaining amount shall be distributed to his
beneficiary designated under the Qualified Profit Sharing Plan. If a
Participant has not designated a beneficiary under the Qualified Profit
Sharing Plan, or if no designated beneficiary is living on the date of
distribution hereunder, amounts distributable pursuant to this paragraph
shall be distributed to those persons or entities entitled to receive
distributions of the Participant's accounts under the Qualified Profit
Sharing Plan.
(c) HARDSHIP DISTRIBUTION. A Participant shall be entitled to
request a distribution from his Supplemental Salary Deferral Account, prior
to his termination of employment with the Company and all Affiliated
Companies, in order to satisfy a hardship as defined under the Qualified
Profit Sharing Plan. The amount of a hardship distribution, and the
procedures for requesting and receiving such a distribution, shall satisfy
the requirements set forth in the Qualified Profit Sharing Plan with
respect to a hardship distribution from his Qualified Salary Deferral
Account. A request for a hardship distribution pursuant to this paragraph
shall be
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made separate and apart from a request for a hardship distribution under
the Qualified Profit Sharing Plan, and a request for a hardship
distribution under the Qualified Profit Sharing Plan shall not
automatically be deemed a request for a hardship distribution hereunder.
(d) TIME AND METHOD OF DISTRIBUTION. All amounts distributable under
this Article IV to a Participant, or to his beneficiary in the event of his
death, shall be distributed in the same manner and at the same time as is
applicable to the distribution of the Participant's accounts under the
Qualified Profit Sharing Plan following his termination of employment with
the Company and all Affiliated Companies for any reason including death.
Notwithstanding the preceding sentence, an election made by a Participant
under the Qualified Profit Sharing Plan with respect to the form of
distribution of his accounts thereunder following termination of
employment, or the date for commencement of payment thereof, shall not be
effective with respect to the form of payment or date for commencement of
payment of his accounts pursuant to this Article IV, unless such election
is expressly approved in writing by the Company. If the Company shall not
approve such election in writing, the form of payment or date for
commencement of payment under this Article shall be selected by the Company
in its sole discretion. If a Participant does not elect a time or form of
distribution under this Article, such distribution shall be made at the
same time and in the same method as is applicable to distributions made
with respect to his accounts under the Qualified Profit Sharing Plan. In
no event may a Participant borrow amounts credited to the accounts
maintained for him pursuant to this Article IV.
ARTICLE V
FORFEITURES
5.1 FORFEITURE OF SUPPLEMENTAL RETIREMENT BENEFIT AND SUPPLEMENTAL
SURVIVING SPOUSE BENEFIT. Notwithstanding any other provisions of the Plan, (i)
if the employment of a Participant with the Company and all Affiliated Companies
terminates due to Cause, or (ii) if a Participant during his employment with the
Company and all Affiliated Companies or at any time during the two year period
after the termination of such employment, violates the covenant not to compete
with the Company and its Affiliated Companies set forth in Section 5.3, all
rights of the Participant and his Surviving Spouse to a Supplemental Retirement
Benefit or a Supplemental Surviving Spouse Benefit, shall be forfeited and shall
be retained by the Company free of any and all claims of the Participant, his
Surviving Spouse or any other person claiming with respect to the Participant or
his Surviving Spouse.
5.2 TERMINATION FOR CAUSE. For purposes of this Section, a termination
for Cause shall mean termination of a Participant's employment by the Company or
any Affiliated Company because of (i) the Participant's conduct, involving
theft, embezzlement or fraud,
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or (ii) the Participant's willful misconduct in the performance of his duties
that materially injures the Company or any Affiliated Company, as determined by
the Board.
5.3 COVENANT NOT TO COMPETE. A Participant shall not, during the term of
the Participant's employment with the Company and all Affiliated Companies, and
for a period of two years thereafter, without the Company's express written
consent, directly or indirectly, alone or as a member of a partnership, group,
or joint stock venture, or as an employee, officer, director or stockholder of
any corporation, or in any capacity (a) engage in any activity which is
competitive with any of the businesses conducted by the Company or its
Affiliated Companies from time to time or at any time during the Participant's
term of employment, provided that the foregoing provision shall not be deemed to
prohibit the Participant from purchasing for investment any securities or
interest in any publicly-owned organization which is competitive with the
business of the Company and its Affiliated Companies, so long as the
Participant's investment in such organization does not exceed the lesser of one
percent of its total outstanding equity securities or Two Hundred Fifty Thousand
Dollars ($250,000); (b) solicit in connection with any activity which is
competitive with any of the businesses of the Company and its Affiliated
Companies, any customers or suppliers of the Company and its Affiliated
Companies; (c) use the name "AAR" or any variant thereof; or (d) actively
solicit, directly or indirectly, any employee or induce any customer or supplier
of the Company or any of its Affiliated Companies to terminate or materially
change such relationship.
ARTICLE VI
ADMINISTRATION OF THE PLAN
6.1. ADMINISTRATION BY THE COMMITTEE. The Committee shall be responsible
for the general operation and administration of the Plan and for carrying out
the provisions thereof.
6.2. GENERAL POWERS OF ADMINISTRATION. All provisions set forth in the
Qualified Retirement Plan with respect to the administrative powers and duties
of the Committee, expenses of administration, and procedures for filing claims,
shall also be applicable with respect to the Plan. The Committee shall be
entitled to rely conclusively upon all tables, valuations, certificates,
opinions and reports furnished by any actuary, accountant, controller, counsel
or other person employed or engaged by the Committee with respect to the Plan.
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ARTICLE VII
AMENDMENT OR TERMINATION
7.1. AMENDMENT OR TERMINATION. The Company intends the Plan to be
permanent but reserves the right to amend or terminate the Plan when, in the
sole opinion of the Company, such amendment or termination is advisable. Any
such amendment or termination shall be made pursuant to a resolution of the
Board and shall be effective as of the date of such resolution or such later
date as the resolution may expressly state.
7.2 EFFECT OF AMENDMENT OR TERMINATION. No amendment or termination of
the Plan shall (i) directly or indirectly deprive any current or former
Participant or Surviving Spouse of all or any portion of any Supplemental
Retirement Benefit or Supplemental Surviving Spouse Benefit, the right to which
has accrued prior to the effective date of such amendment or termination, or
which would be payable if the Participant terminated employment for any reason,
including death, on such effective date, or (ii) directly or indirectly reduce
the balance of any Supplemental Salary Deferral Account, Supplemental Company
Account or Supplemental Profit Sharing Account held hereunder as of the
effective date of such amendment or termination. Upon termination of the Plan,
distribution of Supplemental Retirement Benefits and Supplemental Surviving
Spouse Benefits, and of amounts in Supplemental Salary Deferral Accounts,
Supplemental Company Accounts and Supplemental Profit Sharing Accounts shall be
made to Participants, their Surviving Spouses or beneficiaries in the manner and
at the time described in Sections 3.4 through 3.8 and 4.6(d) of the Plan. No
additional Supplemental Retirement Benefits or Supplemental Surviving Spouse
Benefits shall be earned after termination of the Plan, and no additional
credits of Supplemental Salary Reduction Contributions, Supplemental Company
Contributions or Supplemental Profit Sharing Contributions shall be made to the
accounts of Participants after termination of the Plan, but the Company shall
continue to credit gains and losses to accounts pursuant to Section 4.5 until
the balances of such accounts have been fully distributed to Participants or
their beneficiaries.
ARTICLE VIII
GENERAL PROVISIONS
8.1. PARTICIPANTS' RIGHTS UNSECURED. Except as set forth in Section 8.2,
the Plan at all times shall be entirely unfunded and no provision shall at any
time be made with respect to segregating any assets of the Company or an
Affiliated Company for payment of any benefits hereunder. The right of a
Participant or his Surviving Spouse or beneficiary to receive a benefit
hereunder shall be an unsecured claim against the general assets of the Company,
and neither the Participant nor a Surviving Spouse or beneficiary shall have any
rights in or against any specific assets of the Company or any Affiliated
Company. All amounts credited to Supplemental Salary Deferral Accounts,
Supplemental Company
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Accounts and Supplemental Profit Sharing Accounts of Participants shall
constitute general assets of the Company.
8.2. TRUST AGREEMENT. Notwithstanding the provisions of Section 8.1, the
Company, promptly after the Plan effective date, shall enter into a trust
agreement ("Trust Agreement") with a bank or trust company (with a combined
capital and surplus in excess of $100 million dollars), located in the
Continental United States, as trustee, whereby the Company shall agree to
contribute to a trust ("Trust") initially and annually thereafter, for the
purpose of accumulating assets actuarially sufficient to satisfy accrued
obligations to Participants and Surviving Spouses under Article III hereof, in
the event of a change in control of the Company. The Trust Agreement shall
obligate the Company to make contributions sufficient to satisfy the obligations
to Participants, and Surviving Spouses under Article III hereof; provided,
however, that such initial contribution shall be made within [10] days after the
date the Board, in its discretion, deems a change in control of the Company
likely to occur. The discretion of the Board shall be binding and conclusive
with respect to the likelihood of a change in control of the Company to occur.
For purposes of this Section 8.2, the definition of a change in control of the
Company shall be the same as that found in the AAR CORP. Amended Stock Option
and Incentive Plan, as amended and restated effective July 16, 1992. Such Trust
Agreement shall be substantially in the form of the model trust agreement set
forth in Internal Revenue Service Revenue Procedure 92-64, or any subsequent
Internal Revenue Service Revenue Procedure, and shall include provisions
required in such model trust agreement that all assets of the Trust shall be
subject to the creditors of the Company in the event of insolvency.
8.3. GENERAL CONDITIONS. Except as otherwise expressly provided herein,
all terms and conditions of the Qualified Retirement Plan applicable to a
Qualified Retirement Benefit, or a Qualified Surviving Spouse Benefit, shall
also be applicable to a Supplemental Retirement Benefit or a Supplemental
Surviving Spouse Benefit payable hereunder, and all terms and conditions of the
Qualified Profit Sharing Plan applicable to a Qualified Salary Deferral
Contribution, a Qualified Company Contribution or a Qualified Profit Sharing
Contribution shall also be applicable to a Supplemental Salary Deferral
Contribution, Supplemental Company Contribution or Supplemental Profit Sharing
Contribution to be made hereunder. Any Qualified Retirement Benefit or
Qualified Surviving Spouse Benefit or any other benefit payable under the
Qualified Retirement Plan shall be paid solely in accordance with the terms and
conditions of the Qualified Retirement Plan, any Qualified Salary Deferral
Contribution, Qualified Company Contribution or Qualified Profit Sharing
Contribution, or any other contribution to be made under the Qualified Profit
Sharing Plan shall be made solely in accordance with the terms and conditions of
the Qualified Profit Sharing Plan, and nothing in this Plan shall operate or be
construed in any way to modify, amend or affect the terms and provisions of the
Qualified Retirement Plan or the Qualified Profit Sharing Plan.
8.4. NO GUARANTY OF BENEFITS. Nothing contained in the Plan shall
constitute a guaranty by the Company, any Affiliated Company, or any other
person or entity that the assets of the Company or any Affiliated Company will
be sufficient to pay any benefit
14
<PAGE>
hereunder. No Participant, Surviving Spouse or beneficiary shall have any right
to receive a benefit or a distribution of contributions under the Plan except in
accordance with the terms of the Plan.
8.5 NO ENLARGEMENT OF EMPLOYEE RIGHTS. Establishment of the Plan shall
not be construed to give any Participant the right to be retained in the service
of the Company or any Affiliated Company.
8.6. SPENDTHRIFT PROVISION. No interest of any person or entity in, or
right to receive a distribution under, the Plan shall be subject in any manner
to sale, transfer, assignment, pledge, attachment, garnishment, or other
alienation or encumbrance of any kind; nor may such interest or right to receive
a distribution be taken, either voluntarily or involuntarily for the
satisfaction of the debts of, or other obligations or claims against, such
person or entity, including claims for alimony, support, separate maintenance
and claims in bankruptcy proceedings.
8.7 APPLICABLE LAW. The Plan shall be construed and administered under
the laws of the State of Illinois except to the extent preempted by federal law.
8.8. SMALL BENEFITS. If the actuarial value of any Supplemental
Retirement Benefit or Supplemental Surviving Spouse Benefit is less than $3,500,
the Company may pay the actuarial value of such Benefit to the Participant or
Surviving Spouse in a single lump sum in lieu of any further Benefit payments
hereunder.
8.9. INCAPACITY OF RECIPIENT. If any person entitled to a payment under
the Plan is deemed by the Company to be incapable of personally receiving and
giving a valid receipt for such payment, then, unless and until claim therefor
shall have been made by a duly appointed guardian or other legal representative
of such person, the Company may provide for such payment or any part thereof to
be made to any other person or institution then contributing toward or providing
for the care and maintenance of such person. Any such payment shall be a
payment for the account of such person and a complete discharge of any liability
of the Company and the Plan therefor.
8.10. CORPORATE SUCCESSORS. The Plan shall be continued, following a
transfer or sale of assets of the Company, or following the merger or
consolidation of the Company into or with any other corporation or entity, by
the transferee, purchaser or successor entity, unless the Plan has been
terminated by the Company pursuant to the provisions of Article VII, prior to
the effective date of such transaction.
8.11. UNCLAIMED BENEFIT. Each Participant, Surviving Spouse or
beneficiary shall keep the Company informed of his current address. The Company
shall not be obligated to search for the whereabouts of any person. If the
location of a Participant is not made known to the Company within three years
after the date on which payment of the Participant's benefits under the Plan,
may first be made, payment may be made as though the Participant had died at the
end of the three-year period. If, within one additional year
15
<PAGE>
after such three-year period has elapsed, or, within three years after the
actual death of a Participant, the Company is unable to locate any Surviving
Spouse or beneficiary of the Participant, then the Company shall have no further
obligation to pay any benefit hereunder to such Participant, Surviving Spouse or
beneficiary or any other person and such benefit shall be irrevocably forfeited.
8.12. LIMITATIONS ON LIABILITY. Notwithstanding any of the preceding
provisions of the Plan, none of the Company, any Affiliated Company, any member
of the Committee, nor any individual acting as an employee or agent of the
Company, any Affiliated Company or the Committee, shall be liable to any
Participant, former Participant, Surviving Spouse or any other beneficiary or
other person for any claim, loss, liability or expense incurred by such
Participant, Surviving Spouse or other beneficiary or other person in connection
with the Plan.
IN WITNESS WHEREOF, this Plan has been executed this _____ day of _______,
1994.
AAR CORP.
By________________________________
ATTEST:
_____________________________________
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted From The
Registrant's Condensed Consolidated Financial Statements For The Six Month
Period Ended November 30, 1994 And Is Qualified In Its Entirety By Reference To
Such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> NOV-30-1994
<EXCHANGE-RATE> 1
<CASH> 1,647
<SECURITIES> 0
<RECEIVABLES> 89,859
<ALLOWANCES> 2,531
<INVENTORY> 167,240
<CURRENT-ASSETS> 310,681
<PP&E> 126,366
<DEPRECIATION> 71,357
<TOTAL-ASSETS> 413,529
<CURRENT-LIABILITIES> 69,590
<BONDS> 115,469
<COMMON> 16,231
0
0
<OTHER-SE> 174,349
<TOTAL-LIABILITY-AND-EQUITY> 413,529
<SALES> 196,575
<TOTAL-REVENUES> 196,575
<CGS> 161,765
<TOTAL-COSTS> 185,942
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 676<F1>
<INTEREST-EXPENSE> 4,861<F2>
<INCOME-PRETAX> 5,772
<INCOME-TAX> 1,700
<INCOME-CONTINUING> 4,072
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,072
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
<FN>
<F1>Provision for doubtful accounts is included in Total Costs and Expenses
<F2>Interest expense is presented net of $417 of interest income.
</FN>
</TABLE>
