<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
FOR QUARTERLY PERIOD ENDED AUGUST 31, 1998 COMMISSION FILE NUMBER 1-6263
AAR CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 36-2334820
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
ONE AAR PLACE, 1100 N. WOOD DALE ROAD, WOOD DALE,
ILLINOIS 60191
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 227-2000
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 CORPORATE ISSUERS)
Indicate the number of shares outstanding of each on the issuer's classes of
common stock, as of the latest practicable date.
$1.00 par value, 27,723,406 shares outstanding as of AUGUST 31, 1998.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AAR CORP. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
AUGUST 31, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets............................................... 3
Condensed Consolidated Statements of Income......................................... 4
Condensed Consolidated Statements of Cash Flows..................................... 5
Condensed Consolidated Statements of Comprehensive Income........................... 6
Notes to Condensed Consolidated Financial Statements................................ 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................................. 10-12
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibits............................................................................ 13
Reports on Form 8-K................................................................. 13
SIGNATURE PAGE....................................................................................... 14
</TABLE>
2
<PAGE>
PART I, ITEM 1 - FINANCIAL STATEMENTS
AAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 31, 1998 AND MAY 31, 1998
(000S OMMITTED)
<TABLE>
<CAPTION>
MAY 31, 1998
-------------
(DERIVED FROM
AUGUST 31, AUDITED
1998 FINANCIAL
------------- STATEMENTS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 25,708 $ 17,222
Accounts receivable, less allowances of $3,606 and $3,157, respectively........... 178,928 163,359
Inventories....................................................................... 240,370 229,930
Equipment on or available for short-term leases................................... 36,431 33,495
Deferred tax assets, deposits and other........................................... 28,371 24,394
------------- -------------
Total current assets............................................................ 509,808 468,400
------------- -------------
Property, plant and equipment, net.................................................. 87,633 82,905
Other assets:
Investments in leveraged leases................................................... 26,598 36,533
Equipment on long-term leases..................................................... 21,520 24,611
Cost in excess of underlying net assets of acquired companies, net................ 26,463 26,565
Joint ventures, retirement benefits, notes receivable and other................... 35,673 31,545
------------- -------------
110,254 119,254
------------- -------------
$ 707,695 $ 670,559
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.............................................. $ 237 $ 237
Accounts payable.................................................................. 143,452 112,980
Accrued liabilities............................................................... 29,240 29,614
Accrued taxes on income........................................................... 7,686 6,317
------------- -------------
Total current liabilities....................................................... 180,615 149,148
------------- -------------
Long-term debt, less current maturities............................................. 177,450 177,509
Deferred tax liabilities............................................................ 37,726 36,850
Retirement benefit obligation and other liabilities................................. 3,010 6,202
------------- -------------
218,186 220,561
------------- -------------
Stockholders' equity:
Preferred stock, $1.00 par value, authorized 250 shares, none issued.............. -- --
Common stock, $1.00 par value, authorized 80,000 shares; issued 28,859 and 28,832
shares, respectively............................................................ 28,859 28,832
Capital surplus................................................................... 141,621 140,898
Retained earnings................................................................. 159,489 152,233
Treasury stock, 1,136 and 1,128 shares at cost, respectively...................... (16,577) (16,470)
Accumulated other comprehensive income:
Cumulative translation adjustments.............................................. (4,498) (4,643)
------------- -------------
308,894 300,850
------------- -------------
$ 707,695 $ 670,559
------------- -------------
------------- -------------
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements
3
<PAGE>
AAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1997
(UNAUDITED)
(000S OMITTED EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Net sales................................................................................ $ 215,898 $ 170,906
---------- ----------
Costs and operating expenses:
Cost of sales.......................................................................... 174,849 138,978
Selling, general and administrative.................................................... 23,010 19,034
---------- ----------
Operating income......................................................................... 18,039 12,894
Interest expense......................................................................... (4,262) (2,759)
Interest income.......................................................................... 29 319
---------- ----------
Income before provision for income taxes................................................. 13,806 10,454
Provision for income taxes............................................................... 4,183 3,144
---------- ----------
Net income............................................................................... $ 9,623 $ 7,310
---------- ----------
---------- ----------
Earnings per share - Basic............................................................... $ .35 $ .27
Earnings per share - Diluted............................................................. $ .34 $ .26
Weighted average common shares outstanding
- Basic................................................................................ 27,713 27,489
Weighted average common shares outstanding
- Diluted.............................................................................. 28,312 28,042
Dividends paid and declared per share of common stock.................................... $ .085 $ .080
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements
4
<PAGE>
AAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1997
(UNAUDITED)
(000S OMITTED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................................. $ 9,623 $ 7,310
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization........................................................ 4,228 3,463
Change in certain assets and liabilities:
Accounts receivable................................................................ (17,586) 5,001
Inventories........................................................................ (10,982) (12,378)
Equipment on or available for short-term leases.................................... 799 4,030
Retirement benefit obligation, deferred taxes, deposits and other.................. (311) (4,083)
Accounts payable and other liabilities............................................. 30,566 (4,134)
Accrued liabilities and taxes on income............................................ (1,236) 2,280
---------- ----------
Net cash provided from operating activities............................................ 15,101 1,489
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures, net........................................ (8,357) (2,678)
Investment in equipment on long-term leases and leveraged leases....................... 9,304 (8,501)
Notes receivable and other............................................................. (5,106) (2,193)
---------- ----------
Net cash used in investing activities.................................................. (4,159) (13,372)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in borrowings................................................................... (57) (7,293)
Cash dividends......................................................................... (2,355) (2,202)
Proceeds from exercise of stock options and other...................................... 15 100
---------- ----------
Net cash used in financing activities.................................................. (2,397) (9,395)
---------- ----------
Effect of exchange rate changes on cash.................................................. (59) (21)
---------- ----------
Increase (decrease) in cash equivalents.................................................. 8,486 (21,299)
Cash and cash equivalents, beginning of period........................................... 17,222 51,705
---------- ----------
Cash and cash equivalents, end of period................................................. $ 25,708 $ 30,406
---------- ----------
---------- ----------
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
5
<PAGE>
AAR CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED AUGUST 31, 1998 AND 1997
(000S OMITTED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Net income $ 9,623 $ 7,310
Other comprehensive income (expense) - Foreign currency translation 145 (1,660)
---------- ----------
Total Comprehensive Income $ 9,768 $ 5,650
---------- ----------
---------- ----------
</TABLE>
The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.
6
<PAGE>
AAR CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1998
(000S OMITTED)
NOTE A -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of AAR CORP. ("the Company") and its subsidiaries after elimination of
intercompany accounts and transactions.
Turbine Engine Asset Management, L.L.C., a joint venture company in which
the Company has a 51% ownership interest, was formed in the fiscal year ending
May 31, 1998 ("fiscal year") to distribute certain engine parts to aviation
customers worldwide. During the first quarter of fiscal 1999, the Company formed
Aviation Inventory Management Co. L.L.C. (AIMCO), a joint venture company in
which it has a 49% ownership interest. AIMCO will offer customers an alternative
to owning aircraft rotable spares. The Company's investment in the joint
ventures are being accounted for under the equity method of accounting.
These statements have been prepared by the Company without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission ("SEC").
The condensed consolidated balance sheet as of May 31, 1998 has been derived
from audited financial statements. To prepare the financial statements in
conformity with generally accepted accounting principles, management has made a
number of estimates and assumptions relating to the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities. Actual
results could differ from those estimates. 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 of the SEC. 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 condensed consolidated
financial position of AAR CORP. and its subsidiaries as of August 31, 1998 and
the condensed consolidated results of operations, cash flows and comprehensive
income for the three-month periods ended August 31, 1998 and 1997. The results
of operations for such interim periods are not necessarily indicative of the
results for the full year.
NOTE B -- INVENTORY
The following is a summary of inventories:
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1998 1998
----------- -----------
<S> <C> <C>
Raw materials and parts............................................ $ 46,490 $ 46,573
Work-in-process.................................................... 17,549 15,787
Purchased aircraft, parts, engines and components held for sale.... 174,502 166,140
Finished goods..................................................... 1,829 1,430
----------- -----------
$ 240,370 $ 229,930
----------- -----------
----------- -----------
</TABLE>
7
<PAGE>
AAR CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1998 -- (CONTINUED)
(000S OMITTED)
NOTE C -- SUPPLEMENTAL CASH FLOWS INFORMATION
Supplemental information on cash flows follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Interest paid......................................................... $ 2,487 $ 280
Income taxes paid..................................................... 1,658 1,070
Income tax refunds received........................................... 17 50
</TABLE>
NOTE D -- COMMON STOCK AND EARNINGS PER SHARE OF COMMON STOCK
In fiscal 1998 the Company adopted the provisions of Statement of Financial
Accounting Standards No. 128 "Earnings Per Share". All earnings per share
information has been restated to conform to the provisions of SFAS No. 128. The
computation of basic earnings per share is based on the weighted average number
of common shares outstanding during the period. Diluted earnings per share is
based on the weighted average number of common shares outstanding during the
period plus, when their effect is dilutive, common stock equivalents consisting
of shares subject to stock options. The following table provides a
reconciliation of the computations of basic and diluted earnings per share
information for the three-month periods ended August 31, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31,
----------------------
1998 1997
----------- ---------
<S> <C> <C>
Basic EPS
Net income......................................................... $ 9,623 $ 7,310
Common shares outstanding.......................................... 27,713 27,489
----------- ---------
Basic earnings per share........................................... $ 0.35 $ 0.27
----------- ---------
----------- ---------
Diluted EPS
Net income......................................................... $ 9,623 $ 7,310
Common shares outstanding.......................................... 27,713 27,489
Additional shares due to hypothetical exercise of stock options.... 599 553
----------- ---------
28,312 28,042
----------- ---------
Diluted earnings per share......................................... $ 0.34 $ 0.26
----------- ---------
----------- ---------
</TABLE>
8
<PAGE>
AAR CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1998 -- (CONTINUED)
(000S OMITTED)
NOTE D -- COMMON STOCK AND EARNINGS PER SHARE OF COMMON STOCK (CONTINUED)
In January, 1998 the Board of Directors declared a three-for-two stock split
which was paid February 23, 1998 to stockholders of record February 2, 1998 and
a quarterly cash dividend of 8.5 cents per share on the increased shares, which
effectively increased the cash dividend payment by 6.25%. All prior year common
shares outstanding and earnings per share amounts have been restated to reflect
the three-for-two stock split.
NOTE E -- NEW ACCOUNTING STANDARDS
SFAS No. 130, "Reporting Comprehensive Income" is effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. The Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The Company adopted the provisions of SFAS No. 130
during the three-month period ended August 31, 1998.
9
<PAGE>
PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
AAR CORP. AND SUBSIDIARIES
RESULTS OF OPERATIONS
(000S OMITTED EXCEPT PERCENT DATA)
Three-Month Period Ended August 31, 1998
(as compared with the same period of the prior year)
The Company reports its activities in one business segment: Aviation
Services. The table below sets forth consolidated net sales for the Company's
classes of similar products and services within this segment.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net Sales:
Aircraft and Engines............................................ $ 90,067 $ 79,781
Airframe and Accessories........................................ 92,916 70,066
Manufacturing................................................... 32,915 21,059
----------- -----------
$ 215,898 $ 170,906
----------- -----------
----------- -----------
</TABLE>
Three-Month Period Ended August 31, 1998
(as compared with the same period of the prior year)
Consolidated net sales for the first quarter of the Company's fiscal year
ending May 31, 1999 (fiscal 1999) increased $45.0 million or 26.3% over the same
period in the prior year as all three classes of similar products and services
experienced sales growth. Net sales in Aircraft and Engines increased $10.3
million or 12.9% reflecting continued growth in the Company's engine parts and
engine sales and leasing business, partially offset by lower sales in aircraft
sales and leasing and the impact of certain engine parts sales which were
recorded by Turbine Engine Asset Management L.L.C. (an unconsolidated joint
venture company in which the Company has a 51% interest) during the first
quarter of fiscal 1999, but which were recorded by Aircraft and Engines during
the first quarter of fiscal 1998. Net sales in Airframe and Accessories
increased $22.9 million or 32.6% during the first quarter of fiscal 1999
reflecting the inclusion of sales from AVSCO, which was acquired in December
1997, and higher demand for the Company's aircraft maintenance and certain
component overhaul repair services. Net sales in Manufacturing increased $11.9
million or 56.3% reflecting the inclusion of sales from ATR, which was acquired
in October 1997, and higher sales of products supporting the United States
Government's rapid deployment program, as well as higher sales of cargo loading
systems.
Consolidated gross profit increased $9.1 million or 28.6% over the prior
year period due to increased consolidated net sales and an increase in the
consolidated gross profit margin to 19.0% from 18.7%. The improvement in the
consolidated gross profit margin was primarily attributable to increased sales
volume in the Company's Manufacturing activities. Consolidated operating income
increased $5.1 million or 39.9% and the Company's operating income margin
increased to 8.4% compared to the prior year period's margin of 7.5% as a result
of increased consolidated net sales and an increase in the consolidated gross
profit margin, partially offset by higher selling, general and administrative
expenses. Selling, general and administrative expenses were lower as a
percentage of consolidated net sales, however total expenses increased
principally due to the impact of acquisitions made subsequent to the first
quarter of fiscal 1998 and higher marketing support and personnel costs.
Consolidated net income increased $2.3 million or 31.6% over the prior year
period due primarily to the factors discussed above.
10
<PAGE>
PART I, ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
AAR CORP. AND SUBSIDIARIES
FINANCIAL CONDITION
(000S OMITTED EXCEPT RATIOS)
At August 31, 1998
At August 31, 1998, the Company's liquidity and capital resources included
cash of $25.7 million and working capital of $329.2 million. At August 31, 1998,
the Company's ratio of long-term debt to capitalization was 36.5%, down from
37.1% at May 31, 1998. The Company continues to maintain its available external
sources of financing including $191 million of unused bank lines, a universal
shelf registration on file with the Securities and Exchange Commission under
which up to $200 million of common stock, preferred stock or medium - or
long-term debt securities may be issued or sold subject to market conditions,
and an accounts receivable securitization program where the Company may sell an
interest in a defined pool of accounts receivable up to $50 million.
During the three-month period ended August 31, 1998, the Company generated
$15.1 million of cash from operations compared to $1.5 million during the
three-month period ended August 31, 1997. The increase in cash generated from
operations was due principally to effective working capital management and
increased net income during the three-month period ended August 31, 1998.
During the three-month period ended August 31,1998, the Company's investing
activities used $4.2 million of cash compared to $13.4 million during the
three-month period ended August 31, 1997. The decrease in cash used for
investing activities was attributable to proceeds received during the first
quarter of fiscal 1999 from the sale of an equity interest in a leveraged lease,
offset by an increase in capital expenditures related to systems enhancements
and facility expansions and an investment in a joint venture.
During the three-month period ended August 31, 1998, the Company's financing
activities used $2.4 million of cash compared to $9.4 million during the
three-month period ended August 31, 1997. The decrease in cash used for
financing activities was due to the prior year's first quarter including the
repayment of $6.9 million of debt assumed in the Cooper acquisition.
The Company believes that its cash and cash equivalents and available
sources of financing will continue to provide the Company the ability to meet
its ongoing working capital requirements, make anticipated capital expenditures,
meet contractual commitments and pay dividends.*
A summary of key indicators of financial condition and lines of credit
follows:
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
DESCRIPTION 1998 1998
- --------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Working capital........................................................................ $ 329,193 $ 319,252
Current ratio 2.8:1 3.1:1
Bank credit lines:
Borrowings outstanding............................................................... $ -- $ --
Available but unused lines........................................................... 191,000 190,970
----------- -----------
Total credit lines..................................................................... $ 191,000 $ 190,970
----------- -----------
----------- -----------
Long-term debt, less current maturities................................................ $ 177,450 $ 177,509
Ratio of long-term debt to capitalization.............................................. 36.5% 37.1%
</TABLE>
- ------------------------
* See "Forward Looking Statements" section of this item.
11
<PAGE>
PART I, ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
AAR CORP. AND SUBSIDIARIES
FINANCIAL CONDITION
(000S OMITTED EXCEPT RATIOS)
YEAR 2000
During fiscal 1997, the Company initiated a comprehensive information
technology systems review which resulted in a formal plan to replace and enhance
certain of the Company's business application systems to meet current
operational requirements and provide for future expansion. These replacement
systems are Year 2000 compliant and include new information technology systems
in the Company's recently acquired new parts distribution business, the
Company's manufacturing businesses and the Company's overhaul businesses. The
capital outlay associated with the replacement systems, which are scheduled to
be in place by June 1999, is expected to be approximately $10,400 of which
approximately $2,700 and $3,300 was paid during the three-month period ended
August 31, 1998 and the twelve-month period ended May 31, 1998, respectively.*
The Company will develop alternate plans in the event the new systems are not
successfully implemented within the planned time frame.
The Company has conducted a preliminary Year 2000 compliance review of its
internal systems which are not being replaced. At this time, the Company
believes that its existing major financial systems and the significant business
application systems not being replaced are Year 2000 compliant.* In addition to
the cost of the business application systems being implemented to meet
operational requirements, the Company expects to incur other Year 2000
compliance costs unrelated to the replacement systems referenced above. The
Company has numerous local-area networks, wide-area networks, servers and other
technical support systems (the "sub-systems"). The Company is in the process of
completing an inventory of the sub-systems as well as the compliance status of
the sub-systems. At this time, the Company believes that the cost to bring the
sub-systems which are not Year 2000 compliant to compliance will be less than
$1,000.*
As part of its continuing review, the Company is currently communicating
with its material vendors and suppliers regarding their Year 2000 compliance.
While the Company is aggressively addressing the Year 2000 issue internally, the
compliance status of third parties with which the Company has material
relationships is presently unknown and the failure of third parties to be
compliant could potentially have an adverse effect on the Company's operations.*
As any Year 2000 compliance failure risk is specifically identified, appropriate
action will be taken to develop alternative contingency plans.
FORWARD-LOOKING STATEMENTS
Certain of the statements contained herein, including those under "Year
2000" above that are identified with an asterisk (*), are forward looking and
are based on the beliefs of Company management as well as assumptions and
estimates made based on information currently available to the Company. Such
statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions. It is
not reasonably possible to itemize the many factors and specific events that
might cause the actual results to differ from the expected results; however,
they may include replacement system implementation problems, unidentified Year
2000 problems, failure of third parties to be Year 2000 compliant, economic and
aviation/aerospace market stability and Company profitability. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions or estimates prove incorrect, actual results may vary materially
from those described.
- ------------------------
* See "Forward Looking Statements" section of this item.
12
<PAGE>
PART II -- OTHER INFORMATION
AAR CORP. AND SUBSIDIARIES
AUGUST 31, 1998
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
<TABLE>
<CAPTION>
ITEM
- ----------------------------------
<S> <C> <C>
27. Financial Data Schedule 27.1 Financial Data Schedule for the Registrant's three-month interim
period ended August 31, 1998.
</TABLE>
(B) REPORTS ON FORM 8-K FOR QUARTER ENDED AUGUST 31, 1998:
The Company filed no reports on Form 8-K during the three months ended
August 31, 1998.
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: October 13, 1998
/s/ TIMOTHY J. ROMENESKO
--------------------------------------
Timothy J. Romenesko
VICE PRESIDENT, CHIEF FINANCIAL
OFFICER
(PRINCIPAL ACCOUNTING OFFICER AND
OFFICER DULY AUTHORIZED TO SIGN ON
BEHALF OF REGISTRANT)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANTS' REPORT ON FORM 10-Q FOR THE THREE MONTH INTERIM PERIOD ENDED
AUGUST 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 25,708
<SECURITIES> 0
<RECEIVABLES> 182,534
<ALLOWANCES> 3,606
<INVENTORY> 240,370
<CURRENT-ASSETS> 509,808
<PP&E> 162,455
<DEPRECIATION> 74,822
<TOTAL-ASSETS> 707,695
<CURRENT-LIABILITIES> 180,615
<BONDS> 177,450
0
0
<COMMON> 28,859
<OTHER-SE> 280,035
<TOTAL-LIABILITY-AND-EQUITY> 707,695
<SALES> 215,898
<TOTAL-REVENUES> 215,898
<CGS> 174,849
<TOTAL-COSTS> 197,859
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 401<F1>
<INTEREST-EXPENSE> 4,233<F2>
<INCOME-PRETAX> 13,806
<INCOME-TAX> 4,183
<INCOME-CONTINUING> 9,623
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,623
<EPS-PRIMARY> .35
<EPS-DILUTED> .34
<FN>
<F1>Provision for doubtful accounts is included in Total Costs and Expenses
<F2>Interest expense is presented net of $29 of interest income
</FN>
</TABLE>
