<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 FEBRUARY 29, 2000 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 Identification No.)
incorporation or organization)
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 of the issuer's classes of
common stock, as of the latest practicable date.
$1.00 par value, 26,963,431 shares outstanding as of FEBRUARY 29, 2000
- ---------- ---------------- -----------------
<PAGE>
AAR CORP. and Subsidiaries
Quarterly Report on Form 10-Q
February 29, 2000
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <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 10-13
Item 3. Quantitative and Qualitative Disclosure About Market Risk 13
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibits 14
Reports on Form 8-K 14
Signature Page 15
</TABLE>
2
<PAGE>
PART I, ITEM 1 - FINANCIAL STATEMENTS
AAR CORP. and Subsidiaries
Condensed Consolidated Balance Sheets
As of February 29, 2000 and May 31, 1999
(000s omitted)
<TABLE>
<CAPTION>
February 29, May 31,
2000 1999
----------- -------------
<S> <C> <C>
(Unaudited) (Derived from
audited financial
statements)
ASSETS
Current assets:
Cash and cash equivalents $ 4,431 $ 8,250
Accounts and trade notes receivable, less allowances of $5,088
and $4,830, respectively 169,511 164,302
Inventories 280,285 270,654
Equipment on or available for short-term lease 38,648 33,845
Deferred tax assets, deposits and other 34,060 31,135
--------- ---------
Total current assets 526,935 508,186
--------- ---------
Property, plant and equipment, net 109,557 104,012
--------- ---------
Other assets:
Investments in leveraged leases 34,318 34,053
Cost in excess of underlying net assets of acquired companies 39,169 40,093
Other 43,776 40,286
--------- ---------
117,263 114,432
--------- ---------
$ 753,755 $ 726,630
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings $ 25,000 $ --
Current maturities of long-term debt 353 420
Accounts and trade notes payable 122,875 129,703
Accrued liabilities 27,104 36,803
Accrued taxes on income 1,401 6,660
--------- ---------
Total current liabilities 176,733 173,586
--------- ---------
Long-term debt, less current maturities 180,639 180,939
Deferred tax liabilities 52,701 44,870
Retirement benefit obligation 1,200 1,200
--------- ---------
234,540 227,009
--------- ---------
Stockholders' equity:
Preferred stock, $1.00 par value, authorized 250 shares, none issued -- --
Common stock, $1.00 par value, authorized 80,000
shares; issued 29,171 and 28,998 shares, respectively 29,171 28,998
Capital surplus 146,694 144,095
Retained earnings 210,223 184,529
Treasury stock, 2,208 and 1,617 shares at cost, respectively (35,479) (25,463)
Accumulated other comprehensive income (loss)-
Cumulative translation adjustments (8,127) (6,124)
--------- ---------
342,482 326,035
--------- ---------
$ 753,755 $ 726,630
========= =========
</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 and Nine Months Ended February 29/28, 2000 and 1999
(Unaudited)
(000s omitted except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 29/28, February 29/28,
----------------------------- ----------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 256,558 $ 227,699 $ 750,537 $ 672,395
Pass through sales 15,773 23,285 48,717 111,312
--------- --------- --------- ---------
Total sales 272,331 250,984 799,254 783,707
Costs and operating expenses:
Cost of sales 227,257 208,278 664,262 657,212
Selling, general and administrative 24,404 23,768 72,556 70,617
--------- --------- --------- ---------
251,661 232,046 736,818 727,829
Operating income 20,670 18,938 62,436 55,878
Interest expense (5,979) (4,591) (17,749) (13,464)
Interest income 959 399 1,929 536
--------- --------- --------- ---------
Income before provision for income taxes 15,650 14,746 46,616 42,950
Provision for income taxes 4,695 4,468 13,924 13,014
--------- --------- --------- ---------
Net income $ 10,955 $ 10,278 $ 32,692 $ 29,936
========= ========= ========= =========
Earnings Per Share - Basic $ .41 $ .37 $ 1.20 $ 1.08
Earnings Per Share - Diluted $ .40 $ .37 $ 1.19 $ 1.07
Weighted average common shares
outstanding - Basic 26,942 27,535 27,178 27,606
Weighted average common shares
outstanding - Diluted 27,273 27,965 27,520 28,108
Dividends paid and declared per share
of common stock $ .085 $ .085 $ .255 $ .255
</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 Nine Months Ended February 29/28, 2000 and 1999
(Unaudited)
(000s omitted)
<TABLE>
<CAPTION>
Nine Months Ended
February 29/28
---------------------------
2000 1999
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 32,692 $ 29,936
Adjustments to reconcile net income to net cash
provided from (used in) operating activities:
Depreciation and amortization 13,595 12,692
Deferred taxes 7,831 7,030
Change in certain assets and liabilities:
Accounts receivable (5,791) 6,198
Inventories (10,630) (50,325)
Equipment on or available for short-term lease (4,906) 8,230
Accounts and trade notes payable (6,673) 13,740
Accrued liabilities and taxes on income (15,541) (5,203)
Other (4,910) 1,488
-------- --------
Net cash provided from operating activities 5,667 23,786
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures, net (17,574) (27,739)
Acquisitions, less cash acquired -- (6,000)
Deferred payment on acquisition -- (9,175)
Proceeds from sale of business -- 11,685
Investment in equipment on long-term lease and
leveraged leases (265) 23,489
Notes receivable and other (892) (9,953)
-------- --------
Net cash used in investing activities (18,731) (17,693)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings 25,000 --
Repayment of long-term debt (368) (144)
Proceeds from debt issuance -- 2,250
Cash dividends (6,999) (7,048)
Purchases of treasury stock (8,997) (6,419)
Proceeds from exercise of stock options and other 376 (68)
-------- --------
Net cash provided from (used in) financing activities 9,012 (11,429)
-------- --------
Effect of exchange rate changes on cash 233 --
-------- --------
Decrease in cash and cash equivalents (3,819) (5,336)
Cash and cash equivalents, beginning of period 8,250 17,222
-------- --------
Cash and cash equivalents, end of period $ 4,431 $ 11,886
======== ========
</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 Nine Months Ended February 29/28, 2000 and 1999
(000s omitted)
<TABLE>
<CAPTION>
Nine Months Ended
February 29/28,
--------------------------------
2000 1999
-------- --------
<S> <C> <C>
Net income $ 32,692 $ 29,936
Other comprehensive income (loss):
Foreign currency translation (2,003) 1,100
-------- --------
Total Comprehensive Income $ 30,689 $ 31,036
======== ========
</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
February 29, 2000
(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.
The Company conducts portions of its business through joint venture investments
accounted for under the equity method. These equity affiliates are primarily
engaged in the distribution and leasing of certain engine parts and aircraft
rotable spares to worldwide aviation customers.
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, 1999 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 February 29, 2000
and the condensed consolidated results of operations for the three and
nine-month periods ended February 29/28, 2000 and 1999, and condensed
consolidated statement of cash flows and comprehensive income for the
nine-month periods ended February 29/28, 2000 and 1999. The results of
operations for such interim periods are not necessarily indicative of the
results for the full year.
NOTE B - REVENUE RECOGNITION
Sales and related cost of sales are recognized primarily upon shipment of
products and performance of services. Lease revenue is recognized as earned.
In connection with certain long-term inventory management programs, the Company
purchases factory new products on behalf of its customers from original
equipment manufacturers. These products are purchased from the manufacturer and
"passed through" to the Company's customer at the Company's cost. Previously,
the Company disclosed these "pass through" sales in the notes to the
consolidated financial statements and excluded these transactions from sales and
cost of sales.
During the third quarter, the SEC issued Staff Accounting Bulletin (SAB) No. 101
summarizing the SEC's views in applying generally accepted accounting principles
to revenue recognition. As a result of SAB No. 101, the Company now believes
that pass through sales should be included in sales. Prior to issuance of SAB
No. 101, the Company believed that excluding pass through sales from sales was
appropriate given the limited nature of the services provided for these
transactions. Beginning with the third quarter Form 10-Q, the Company will
report pass through sales and the related cost of sales on the Consolidated
Income Statement. This change has no impact on the current period or historical
net income, earnings per share, condensed consolidated balance sheets,
statements of cash flows or comprehensive income.
7
<PAGE>
AAR CORP. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
February 29, 2000 (Continued)
(000s omitted)
NOTE C - INVENTORY
The summary of inventories is as follows:
<TABLE>
<CAPTION>
February 29, May 31,
2000 1999
---- ----
<S> <C> <C>
Raw materials and parts $ 55,027 $ 50,352
Work-in-process 11,773 12,733
Purchased aircraft, parts, engines and components held
for sale 213,485 207,569
-------- --------
$280,285 $270,654
======== ========
</TABLE>
NOTE D - SUPPLEMENTAL CASH FLOWS INFORMATION
Supplemental information on cash flows:
<TABLE>
<CAPTION>
Nine Months Ended
February 29/28,
---------------
2000 1999
---- ----
<S> <C> <C>
Interest paid $15,817 $11,353
Income taxes paid 9,800 3,779
Income tax refunds received 400 600
</TABLE>
8
<PAGE>
AAR CORP. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
February 29, 2000 (Continued)
(000s omitted)
NOTE E - COMMON STOCK AND EARNINGS PER SHARE OF COMMON STOCK
The computation of basic earnings per share is based on the weighted average
number of common shares outstanding during the period. The computation of
diluted earnings per share is based on the weighted average number of common
shares outstanding during the period plus, when their effect is dilutive,
incremental shares 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 and nine-month periods ended
February 29/28, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 29/28 February 29/28,
------------------------ ------------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
BASIC EPS
Net income $10,955 $10,278 $32,692 $29,936
Common shares outstanding 26,942 27,535 27,178 27,606
------- ------- ------- -------
Earnings per share - Basic $ .41 $ .37 $ 1.20 $ 1.08
======= ======= ======= =======
DILUTED EPS
Net income $10,955 $10,278 $32,692 $29,936
Common shares outstanding 26,942 27,535 27,178 27,606
Incremental shares due to hypothetical
exercise of stock options 331 430 342 502
------- ------- ------- -------
27,273 27,965 27,520 28,108
------- ------- ------- -------
Earnings per share - Diluted $ .40 $ .37 $ 1.19 $ 1.07
======= ======= ======= =======
</TABLE>
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 AND NINE-MONTH PERIODS ENDED FEBRUARY 29, 2000
(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 sales for the Company's classes of
similar products and services within this segment for the three and nine month
periods ended February 29/28, 2000 and 1999.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 29/28, February 29/28,
-------------------------- --------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales:
Aircraft and Engines $125,443 $111,117 $366,636 $299,457
Airframe and Accessories 101,844 89,282 294,475 279,165
Manufacturing 29,271 27,300 89,426 93,773
-------- -------- -------- --------
256,558 227,699 750,537 672,395
Pass Through Sales 15,773 23,285 48,717 111,312
-------- -------- -------- --------
$272,331 $250,984 $799,254 $783,707
======== ======== ======== ========
</TABLE>
THREE-MONTH PERIOD ENDED FEBRUARY 29, 2000
(as compared with the same period of the prior year)
Consolidated sales for the third quarter of the Company's fiscal year ending May
31, 2000, excluding pass through sales, increased $28.9 million or 12.7% over
the same period in the prior year. Sales in Aircraft and Engines increased $14.3
million or 12.9% over the prior year period principally due to increased sales
in the Company's aircraft and engine sales and leasing businesses, partially
offset by reduced sales from engine parts inventory management programs as a
result of fewer shop visits at certain customer's engine overhaul facilities.
Sales in Airframe and Accessories increased $12.6 million or 14.1% over the
prior year driven by increased sales from aircraft parts inventory management
programs and strength in component, landing gear and airframe maintenance. Sales
in Manufacturing increased $2.0 million or 7.2% as a result of increased sales
of the Company's products supporting U.S. military deployment needs. Pass
through sales were $15.8 million, compared to $23.3 million in the prior year.
As inventory management programs mature, pass through sales typically decline as
the Company sources more of its customer's parts requirements with used,
serviceable parts, rather than with factory new parts. The reduction in pass
through sales during the period is attributable to the maturing of the Company's
existing long-term inventory programs, as well as lower engine inputs at certain
customer maintenance facilities.
Consolidated gross profit increased $2.4 million or 5.5% over the prior year
period due to increased sales partially offset by a decrease in the gross profit
margin. Excluding the impact from pass through sales, the gross profit margin
was 17.6% in the current quarter, compared to 18.8% in the prior year. This
reduction in the gross profit margin was attributable to a low margin,
quick-turn aircraft sale. Operating income increased $1.7 million or 9.1% as a
result of increased gross profit, partially offset by higher selling, general
and administrative expenses. Selling, general and administrative expenses were
lower as a percentage of sales, however, total expenses increased principally
due to increased personnel and information technology costs.
10
<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 ratios)
THREE-MONTH PERIOD ENDED FEBRUARY 29, 2000 (CONTINUED)
(as compared with the same period of the prior year)
Interest expense increased $1.4 million during the current year three month
period compared to the prior year period principally as a result of increased
average short-term borrowings outstanding. Interest income increased $0.6
million as a result of an increase in average outstanding interest bearing notes
receivable during the third quarter compared to last year.
Consolidated net income increased $0.7 million or 6.6% over the prior year
period due to the factors discussed above.
NINE-MONTH PERIOD ENDED FEBRUARY 29, 2000
(as compared with the same period of the prior year)
Consolidated net sales for the nine-month period ended February 29, 2000,
excluding pass through sales, increased $78.1 million or 11.6% over the prior
year period reflecting increased demand for the Company's products and services.
Aircraft and Engine sales increased $67.2 million or 22.4% principally due to
higher sales of the Company's aircraft and engine products, partially offset by
lower sales of engine parts in certain long-term inventory management programs.
Sales in Airframe and Accessories increased $15.3 million or 5.5% over the prior
period reflecting higher demand for aircraft and landing gear maintenance and
component services, partially offset by lower airframe parts sales.
Manufacturing sales decreased $4.3 million or 4.6% due to the impact of the sale
of the Company's floor maintenance products manufacturing subsidiary in November
1998, partially offset by higher demand of products supporting the U.S. military
deployment needs. Pass through sales were $48.7 million, compared to $111.3
million in the prior year nine month period. As inventory management programs
mature, pass through sales typically decline as the Company sources more it its
customer's parts requirements with used, serviceable parts, rather than with
factory new parts. The reduction in pass through sales during the current fiscal
year is attributable to the maturing of the Company's existing long-term
inventory management programs, as well as lower engine inputs at certain
customer maintenance facilities.
Consolidated gross profit increased $8.5 million or 6.7% over the prior year
period due to increased sales partially offset by a decrease in the gross profit
margin. Excluding the impact from pass through sales, the gross profit margin
was 18.0% in the current nine month period, compared to 18.8% in the prior year.
This reduction in the gross profit margin was primarily attributable to the mix
of inventories sold reflecting lower sales of higher margin products in certain
long-term inventory management programs, as well as the result of a low margin,
quick-turn aircraft sale in the third quarter of the current fiscal year.
Operating income increased $6.6 million or 11.7% over the prior year period as a
result of increased gross profit partially offset by higher selling, general and
administrative expenses. Selling, general and administrative expenses were lower
as a percentage of sales, however, total expenses increased principally due to
increased personnel costs.
Interest expense increased $4.3 million principally as a result of increased
average short-term borrowings outstanding during the current year nine month
period as compared to the same period last year. Interest income increased $1.4
million as a result of an increase in average outstanding interest bearing notes
receivable during the current year compared to prior year.
Consolidated net income increased $2.8 million or 9.2% principally as a result
of the factors discussed above.
11
<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 ratios)
AT FEBRUARY 29, 2000
(as compared with May 31, 1999)
At February 29, 2000, the Company's liquidity and capital resources included
cash of $4.4 million and working capital of $350.2 million. At February 29,
2000, the Company's ratio of long-term debt to capitalization was 34.5%, down
from 35.7% at May 31, 1999. The Company continues to maintain its available
external sources of financing including $154.2 million of unused bank lines, a
universal shelf registration on file with the SEC 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 $35 million. As of February 29, 2000, accounts
receivable sold under this arrangement were $28.2 million, essentially unchanged
from November 30, 1999 and $2.9 million higher compared to May 31, 1999.
During the nine month period ended February 29, 2000 the Company generated $5.7
million of cash from operations compared to $23.8 million during the nine month
period ended February 28, 1999. The decrease in cash generated from operations
was principally due to a reduction in accounts and trade notes payable and
accrued liabilities, and increases in accounts receivable, inventories and
equipment on or available for short-term lease at February 29, 2000.
During the nine month period ended February 29, 2000, the Company's investing
activities used $18.7 million of cash, primarily as a result of property, plant
and equipment expenditures. During the nine month period ended February 28,
1999, the Company used $17.7 million of cash as a result of property, plant and
equipment expenditures and an acquisition, partially offset by the proceeds
received from the Company's divestiture of its floor products manufacturing
subsidiary and proceeds from the sale of equipment on long-term lease and an
equity interest in a leveraged lease.
During the nine month period ended February 29, 2000, the Company's financing
activities generated $9.0 million of cash compared to using $11.4 million during
the nine month period ended February 28, 1999. The increase in cash generated
from financing activities was primarily due to proceeds from short-term bank
borrowings of $25.0 million during fiscal 2000.
12
<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 FEBRUARY 29, 2000 (CONTINUED)
(as compared with May 31, 1999)
The Company believes that its cash and cash equivalents and available sources of
financing will continue to provide the Company with the ability to meet its
ongoing working capital requirements, make anticipated capital expenditures,
meet contractual commitments, and pay dividends.* A summary of key financial
conditions, ratios, and lines of credit follows:
<TABLE>
<CAPTION>
Description February 29, May 31,
----------- 2000 1999
-------- --------
<S> <C> <C>
Working capital $350,202 $334,600
Current ratio 3.0:1 2.9:1
Bank credit lines:
Borrowings outstanding 25,000 --
Available but unused lines 154,211 178,800
-------- --------
Total credit lines $179,211 $178,800
======== ========
Long-term debt less current maturities $180,639 $180,939
Ratio of long-term debt to capitalization 34.5% 35.7%
</TABLE>
FORWARD-LOOKING STATEMENTS
Part I, Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations, contains certain statements relating to future results,
which are forward-looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995 and are identified by an asterisk(*).
These forward-looking statements are based on beliefs of Company management as
well as assumptions and estimates based on information currently available to
the Company, and are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical results or those
anticipated, depending on a variety of factors, including: integration of
acquisitions, marketplace competition, economic and aviation/aerospace market
stability and Company profitability. Should one or more of these risks or
uncertainties materialize adversely, or should underlying assumptions or
estimates prove incorrect, actual results may vary materially from those
described.
PART I, ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's exposure to market risk is limited to fluctuating interest rates
under its unsecured bank credit agreements, and foreign exchange rates. During
the nine month period ended February 29/28, 2000 and 1999, respectively, the
Company did not utilize derivative financial instruments to offset these risks.
A hypothetical 10 percent increase to the average interest rate under the
Company's bank credit agreements and a hypothetical 10 percent devaluation of
foreign currencies against the U.S. dollar would not have had a material impact
on the results of operations and financial position of the Company during the
nine month period ended February 29/28, 2000 and 1999, respectively.
* See "Forward Looking Statements" section of this item.
13
<PAGE>
PART II - OTHER INFORMATION
AAR CORP. and Subsidiaries
February 29, 2000
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
ITEM
27. Financial 27.1 Financial Data Schedule for the Registrant's
Data Schedule nine-month interim period ended February 29,
2000
(b) REPORTS ON FORM 8-K FOR QUARTER ENDED FEBRUARY 29, 2000:
The Company filed no reports on Form 8-K during the three months ended
February 29, 2000.
14
<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: April 14, 2000 /s/ Timothy J. Romenesko
--------------- ---------------------------------------------
Timothy J. Romenesko
Vice President and Chief Financial Officer
(Principal Financial Officer and officer duly
authorized to sign on behalf of registrant)
/s/ Michael J. Sharp
---------------------------------------------
Michael J. Sharp
Vice President - Controller
(Principal Accounting Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S REPORT ON FORM 10-Q FOR THE NINE MONTH INTERIM PERIOD ENDED
FEBRUARY 29, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> FEB-29-2000
<CASH> 4,431
<SECURITIES> 0
<RECEIVABLES> 174,599
<ALLOWANCES> 5,088
<INVENTORY> 280,285
<CURRENT-ASSETS> 526,935
<PP&E> 198,617
<DEPRECIATION> 89,060
<TOTAL-ASSETS> 753,755
<CURRENT-LIABILITIES> 176,733
<BONDS> 180,639
0
0
<COMMON> 29,171
<OTHER-SE> 313,311
<TOTAL-LIABILITY-AND-EQUITY> 753,755
<SALES> 799,254
<TOTAL-REVENUES> 799,254
<CGS> 664,262
<TOTAL-COSTS> 736,818
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,180<F1>
<INTEREST-EXPENSE> 15,820<F2>
<INCOME-PRETAX> 46,616
<INCOME-TAX> 13,924
<INCOME-CONTINUING> 32,692
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,692
<EPS-BASIC> 1.20
<EPS-DILUTED> 1.19
<FN>
<F1>Provision for doubtful accounts is included in Total Costs and Expenses.
<F2>Interest expense is presented net of $1,929 of interest income.
</FN>
</TABLE>
