<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
For Quarterly Period Ended NOVEMBER 30, 1999 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
------------------------------
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 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, 27,180,521 shares outstanding as of NOVEMBER 30, 1999
- --------- ------------------ -------------------
<PAGE>
AAR CORP. and Subsidiaries
Quarterly Report on Form 10-Q
November 30, 1999
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 (Revised) 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 4. Submission of Matters to a Vote of Security Holders 14
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 November 30, 1999 and May 31, 1999
(000s omitted)
<TABLE>
<CAPTION>
November 30, May 31,
1999 1999
----------- -------------
(Unaudited) (Derived from
audited financial
statements)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,821 $ 8,250
Accounts receivable, less allowances of $4,658 and $4,830 respectively 172,360 164,302
Inventories 281,008 270,654
Equipment on or available for short-term lease 40,007 33,845
Deferred tax assets, deposits and other 26,825 31,135
--------- ---------
Total current assets 523,021 508,186
--------- ---------
Property, plant and equipment, net 108,868 104,012
--------- ---------
Other assets:
Investments in leveraged leases 34,236 34,053
Cost in excess of underlying net assets of acquired companies 39,476 40,093
Other 41,442 40,286
--------- ---------
115,154 114,432
--------- ---------
$ 747,043 $ 726,630
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings $ 23,600 $ --
Current maturities of long-term debt 334 420
Accounts and trade notes payable 124,834 129,703
Accrued liabilities 26,596 36,803
Accrued taxes on income 5,072 6,660
--------- ---------
Total current liabilities 180,436 173,586
--------- ---------
Long-term debt, less current maturities 180,715 180,939
Deferred tax liabilities 45,604 44,870
Retirement benefit obligation 1,200 1,200
--------- ---------
227,519 227,009
--------- ---------
Stockholders' equity:
Preferred stock, $1.00 par value, authorized 250 shares, none issued -- --
Common stock, $1.00 par value, authorized 80,000
shares; issued 29,080 and 28,998 shares, respectively 29,080 28,998
Capital surplus 145,589 144,095
Retained earnings 201,558 184,529
Treasury stock, 1,899 and 1,617 shares at cost, respectively (30,100) (25,463)
Accumulated other comprehensive income (loss)-
Cumulative translation adjustments (7,039) (6,124)
--------- ---------
339,088 326,035
--------- ---------
$ 747,043 $ 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 Six Months Ended November 30, 1999 and 1998
(Unaudited)
(000s omitted except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
(Revised) (Revised)
----------------------------- -----------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 248,070 $ 228,798 $ 493,979 $ 444,696
Pass through sales 12,170 53,434 32,944 88,027
--------- --------- --------- ---------
Total sales 260,240 282,232 526,923 532,723
Costs and operating expenses:
Cost of sales 214,512 239,492 437,005 448,934
Selling, general and administrative 24,469 23,839 48,152 46,849
--------- --------- --------- ---------
238,981 263,331 485,157 495,783
Operating income 21,259 18,901 41,766 36,940
Interest expense (5,961) (4,611) (11,770) (8,873)
Interest income 282 108 970 137
--------- --------- --------- ---------
Income before provision for income taxes 15,580 14,398 30,966 28,204
Provision for income taxes 4,674 4,363 9,229 8,546
--------- --------- --------- ---------
Net income $ 10,906 $ 10,035 $ 21,737 $ 19,658
========= ========= ========= =========
Earnings per share - Basic $ .40 $ .36 $ .80 $ .71
Earnings per share - Diluted $ .40 $ .36 $ .79 $ .70
Weighted average common shares
outstanding - Basic 27,199 27,570 27,296 27,642
Weighted average common shares
outstanding - Diluted 27,489 28,042 27,662 28,210
Dividends paid and declared per share
of common stock $ .085 $ .085 $ .17 $ .17
</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 Six Months Ended November 30, 1999 and 1998
(Unaudited)
(000s omitted)
<TABLE>
<CAPTION>
Six Months Ended
November 30,
---------------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 21,737 $ 19,658
Adjustments to reconcile net income to net cash
provided from (used in) operating activities:
Depreciation and amortization 9,010 8,430
Deferred taxes 734 3,638
Change in certain assets and liabilities:
Accounts receivable (8,383) (18,657)
Inventories (10,793) (49,333)
Equipment on or available for short term lease (6,168) 2,038
Accounts and trade notes payable (4,776) 49,361
Accrued liabilities and taxes on income (11,140) (7,615)
Other 4,232 (1,909)
-------- --------
Net cash provided from (used in) operating activities (5,547) 5,611
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures, net (12,604) (16,262)
Acquisitions, less cash acquired -- (6,000)
Proceeds from sale of business -- 11,685
Investment in equipment on long-term leases
and leveraged leases (183) 30,689
Notes receivable and other (1,404) (7,541)
-------- --------
Net cash provided from (used in) investing activities (14,191) 12,571
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank borrowings 23,600 --
Repayment of long-term debt (311) (123)
Cash dividends (4,709) (4,697)
Purchases of treasury stock (4,446) (3,520)
Other (23) 30
-------- --------
Net cash provided from (used in) financing activities 14,111 (8,310)
-------- --------
Effect of exchange rate changes on cash 198 (3)
-------- --------
Increase (decrease) in cash and cash equivalents (5,429) 9,869
Cash and cash equivalents, beginning of period 8,250 17,222
-------- --------
Cash and cash equivalents, end of period $ 2,821 $ 27,091
======== ========
</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 Six Months Ended November 30, 1999 and 1998
(000s omitted)
<TABLE>
<CAPTION>
Six Months Ended
November 30,
---------------------------
1999 1998
-------- --------
<S> <C> <C>
Net income $ 21,737 $ 19,658
Other comprehensive income (loss) -
Foreign currency translation (915) 1,441
-------- --------
Total Comprehensive Income $ 20,822 $ 21,099
======== ========
</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
November 30, 1999
(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 November 30, 1999 and
the condensed consolidated results of operations for the three and six-month
periods ended November 30, 1999 and 1998, and condensed consolidated statement
of cash flows and comprehensive income for the six-month periods ended November
30, 1999 and 1998. 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.
In December 1999, during the Company's 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. The Company has revised the quarterly
Income Statement in this Form 10-Q/A to reflect the inclusion of pass through
sales in sales and cost of sales. This change has no impact on the current
period or historical net income, earnings per share, the condensed consolidated
balance sheets, statements of cash flows or comprehensive income.
7
<PAGE>
AAR CORP. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
November 30, 1999 (Continued)
(000s omitted)
NOTE C - INVENTORY
The summary of inventories is as follows:
<TABLE>
<CAPTION>
November 30, May 31,
1999 1999
-------- --------
<S> <C> <C>
Raw materials and parts $ 55,387 $ 50,352
Work-in-process 10,709 12,733
Purchased aircraft, parts, engines and components held for sale 214,912 207,569
-------- --------
$281,008 $270,654
======== ========
</TABLE>
NOTE D - SUPPLEMENTAL CASH FLOWS INFORMATION
Supplemental information on cash flows:
<TABLE>
<CAPTION>
Six Months Ended
November 30,
------------------------
1999 1998
------- -------
<S> <C> <C>
Interest paid $11,393 $ 8,285
Income taxes paid 8,998 2,975
Income tax refunds received 311 370
</TABLE>
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 six-month periods ended
November 30, 1999 and 1998.
8
<PAGE>
AAR CORP. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
November 30, 1999 (Continued)
(000s omitted)
NOTE E - COMMON STOCK AND EARNINGS PER SHARE OF COMMON STOCK (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30 November 30
------------------------ ------------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
BASIC EPS
Net income $10,906 $10,035 $21,737 $19,658
Common shares outstanding 27,199 27,570 27,296 27,642
Basic earnings per share .40 .36 .80 .71
DILUTED EPS
Net income $10,906 $10,035 $21,737 $19,658
Common shares outstanding 27,199 27,570 27,296 27,642
Additional shares due to hypothetical
exercise of stock options 290 472 366 568
------- ------- ------- -------
27,489 28,042 27,662 28,210
------- ------- ------- -------
Diluted earnings per share $ .40 $ .36 $ .79 $ .70
======= ======= ======= =======
</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 SIX-MONTH PERIOD ENDED NOVEMBER 30, 1999
(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 six months
ended November 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
(Revised) (Revised)
-------------------------- --------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales:
Aircraft and Engines $121,315 $ 98,271 $241,192 $188,340
Airframe and Accessories 96,488 96,969 192,630 189,884
Manufacturing 30,267 33,558 60,157 66,472
-------- -------- -------- --------
248,070 228,798 493,979 444,696
Pass Through Sales 12,170 53,434 32,944 88,027
-------- -------- -------- --------
$260,240 $282,232 $526,923 $532,723
======== ======== ======== ========
</TABLE>
THREE-MONTH PERIOD ENDED NOVEMBER 30, 1999
(as compared with the same period of the prior year)
Consolidated sales for the second quarter of the Company's fiscal year ending
May 31, 2000, excluding pass through sales, increased $19.3 million or 8.4% over
the same period in the prior year. Sales in Aircraft and Engines increased $23.0
million or 23.4% reflecting higher aircraft sales and leasing, engine sales and
leasing and engine parts sales, notwithstanding lower engine inputs and reduced
demand at certain inventory management sites. Sales in Airframe and Accessories
were essentially unchanged from the prior year as increased revenues at the
Company's aircraft maintenance and component repair facilities were offset by
lower airframe part sales. Sales in Manufacturing decreased $3.3 million or 9.8%
due to the impact of the sale of the Company's floor maintenance products
manufacturing subsidiary in November, 1998, partially offset by increased sales
of products supporting the U.S. Government's rapid deployment program. Adjusting
for the sale of the Company's floor maintenance products manufacturing
subsidiary, net sales of the Company's manufacturing products increased 3.1%.
Pass through sales were $12.1 million, compared to $53.4 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 $3.0 million or 7.0% over the prior
period due to increased sales partially offset by a decrease in the
consolidated gross profit margin. Excluding the impact from pass through
sales, the gross profit margin was 18.4% in the current quarter, compared to
18.7% in the prior year. This reduction in the consolidated gross profit
margin was primarily attributable to the mix of inventories sold. Operating
income increased $2.4 million or 12.5% compared to the prior year period as a
result of increased gross profit, partially offset by higher 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 increased information technology and personnel
costs.
Consolidated net income increased $1.0 million or 8.7% 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
RESULTS OF OPERATIONS
(000s omitted except ratios)
SIX-MONTH PERIOD ENDED NOVEMBER 30, 1999
(as compared with the same period of the prior year)
Consolidated net sales for the first half of fiscal 2000, excluding pass
through sales, increased $49.3 million or 11.1% over the prior year six month
period reflecting increased demand for the Company's products and services.
Aircraft and Engines sales increased $52.9 million or 28.1% 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 $2.7 million
or 1.4% over the prior period reflecting higher demand for aircraft
maintenance and component services, partially offset by lower airframe parts
sales. Manufacturing sales decreased $6.3 million or 9.5% 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. government's rapid deployment program. Pass through sales
were $32.9 million, compared to $88.0 million in the prior year six month
period. 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 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 $6.1 million or 7.3% over the prior
period due to increased sales partially offset by a decrease in the
consolidated gross profit margin. Excluding the impact from pass through
sales, the gross profit margin was 18.2% in the current six month period,
compared to 18.8% in the prior six month period. This reduction in the
consolidated 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. Operating income increased $4.8
million or 13.1% compared to the prior year period as a result of increased
gross profit, partially offset by higher general and administrative expenses.
Selling, general and administrative expenses were lower as a percentage of
consolidated sales, however total expenses increased principally due to
increased information technology and personnel costs.
Consolidated net income increased $2.1 million or 10.6% over the prior year
period due primarily to 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
FINANCIAL CONDITION
(000s omitted except ratios)
AT NOVEMBER 30, 1999
At November 30, 1999, the Company's liquidity and capital resources included
cash of $2.8 million and working capital of $342.6 million. At November 30,
1999, the Company's ratio of long-term debt to capitalization was 34.8%, down
from 35.7% at May 31, 1999. The Company continues to maintain its available
external sources of financing including $155.1 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 $35 million. As of
November 30, 1999, accounts receivable sold under this arrangement were $27.6
million, an increase of $2.3 million from May 31, 1999.
During the six month period ended November 30, 1999, the Company used $5.5
million of cash from operations compared to generating $5.6 million of cash from
operations during the six month period ended November 30, 1998. The decrease in
cash generated from operations was due principally to a reduction in accounts
and trade notes payable during the six month period ended November 30, 1999.
During the six month period ended November 30, 1999, the Company's investing
activities used $14.2 million of cash, principally as a result of property,
plant and equipment expenditures. During the six month period ended November 30,
1998, the company generated $12.6 million of cash from investing activities
reflecting 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, partially offset by
property, plant and equipment expenditures and an acquisition.
During the six month period ended November 30, 1999, the Company's financing
activities generated $14.1 million of cash compared to using $8.3 million during
the six month period ended November 30, 1998. The increase in cash generated
from financing activities was due to proceeds from bank borrowings in the first
half of fiscal year 2000 of $23.6 million.
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 follow:
<TABLE>
<CAPTION>
November 30, May 31,
Description 1999 1999
------------------- ---- ----
<S> <C> <C>
Working capital $342,585 $334,600
Current ratio 2.9:1 2.9:1
Bank credit lines:
Borrowings outstanding 23,600 --
Available but unused lines 155,056 178,800
-------- --------
Total credit lines $178,656 $178,800
======== ========
Long-term debt, less current maturities $180,715 $180,939
Ratio of long-term debt to capitalization 34.8% 35.7%
</TABLE>
* See "Forward Looking Statements" section of this item.
12
<PAGE>
PART I, ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
AAR CORP. AND SUBSIDIARIES
FINANCIAL CONDITION (CONTINUED)
(000s omitted except ratios)
AT NOVEMBER 30, 1999 (CONTINUED)
YEAR 2000
The Company experienced no incidents associated with the Year 2000 nor is the
Company aware of any incidents associated with the Year 2000 at its major
customers or third-party suppliers.
FORWARD-LOOKING STATEMENTS
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, or should underlying assumptions or estimates prove
incorrect, actual results may vary materially from these 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 first half of fiscal 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 for the Company during the first half of fiscal 2000 and 1999,
respectively.
13
<PAGE>
PART II - OTHER INFORMATION
AAR CORP. and Subsidiaries
November 30, 1999
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on
October 13, 1999. The following two items were acted upon at the
meeting:
1) Election of three Class III directors to serve until the 2002
Annual Meeting of Stockholders. Three directors were nominated
for election. Directors nominated who receive the majority of
votes cast are elected as directors. Those directors and the
voting results were as follows:
<TABLE>
<CAPTION>
Votes
For
----------
<S> <C>
A. Robert Abboud 22,163,992
Howard B. Bernick 22,173,232
Ira A. Eichner 22,172,853
</TABLE>
2) Amendment to the Company's restated Certificate of
Incorporation to increase the authorized number of shares of
common stock from 80,000,000 to 100,000,000. The results of
the vote were as follows:
<TABLE>
<CAPTION>
<S> <C>
For 20,346,855
Against 3,284,374
Abstain 20,128
</TABLE>
No other matters were presented to the Company's shareholders
for action at the Annual Meeting of Stockholders.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
ITEM
10 Material Contracts 10.1 Sixth Amendment to AAR Corp. Stock Benefit
Plan dated October 14, 1999.
27 Financial 27.1 Financial Data Schedule for the Registrant's
Data Schedule six-month interim period ended November 30,
1999 (Revised).
(b) REPORTS ON FORM 8-K FOR QUARTER ENDED NOVEMBER 30, 1999
The Company filed no reports on Form 8-K during the three months ended
November 30, 1999.
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: January 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
<PAGE>
EXHIBIT 10.1
SIXTH AMENDMENT TO
AAR CORP. STOCK BENEFIT PLAN
WHEREAS, AAR CORP. (the "Company") adopted the AAR CORP. Stock
Benefit Plan (the "Plan") on July 16, 1992, amended the Plan by a First
Amendment dated July 29, 1996, a Second Amendment dated January 2, 1997, a
Third Amendment dated May 6, 1997, a Fourth Amendment dated March 20, 1998,
and a Fifth Amendment dated December 16, 1999, and reserved the right to
further amend the Plan; and
WHEREAS, the Board of Directors of the Company deems it appropriate to
further amend the Plan as described below and approved such amendment at its
October 14, 1999 meeting.
NOW, THEREFORE, the Plan is hereby amended as follows, effective
October 13,1999:
Section 5.1 is amended to read as follows:
"All Awards to Non-Employee Directors shall be automatic and
non-discretionary. Each individual who is a Non-Employee Director on
the effective date of the Plan shall automatically receive an Award, on
the effective date, consisting of a NSO to purchase 10,000 Shares and
each individual who becomes a Non-Employee Director after the effective
date of the Plan shall automatically receive an Award, on the date he
or she becomes a Non-Employee Director, consisting of a NSO to purchase
10,000 Shares. The preceding formula for Awards to Non-Employee
Directors shall not be changed more than once in any six-month period."
<PAGE>
This Sixth Amendment has been executed by the Company, by its duly
authorized officer, on this 14 day of October, 1999, and attested by its
Secretary.
AAR CORP.
By /s/ David P. Storch
-------------------------------------
David P. Storch
President and Chief Executive Officer
ATTEST:
/s/Howard A. Pulsifer
- --------------------------------------------
Howard A. Pulsifier, Secretary
SEAL
<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 SIX MONTH INTERIM PERIOD ENDED NOVEMBER
30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 2,821
<SECURITIES> 0
<RECEIVABLES> 177,018
<ALLOWANCES> 4,658
<INVENTORY> 281,008
<CURRENT-ASSETS> 523,021
<PP&E> 195,804
<DEPRECIATION> 86,936
<TOTAL-ASSETS> 747,043
<CURRENT-LIABILITIES> 180,436
<BONDS> 180,715
0
0
<COMMON> 29,080
<OTHER-SE> 310,008
<TOTAL-LIABILITY-AND-EQUITY> 747,043
<SALES> 526,923
<TOTAL-REVENUES> 526,923
<CGS> 437,005
<TOTAL-COSTS> 485,157
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 819<F1>
<INTEREST-EXPENSE> 10,800<F2>
<INCOME-PRETAX> 30,966
<INCOME-TAX> 9,229
<INCOME-CONTINUING> 21,737
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,737
<EPS-BASIC> .80
<EPS-DILUTED> .79
<FN>
<F1>PROVISION FOR DOUBTFUL ACCOUNTS IS INCLUDED IN TOTAL COSTS AND EXPENSES.
<F2>INTEREST EXPENSE IS PRESENTED NET OF $970 OF INTEREST INCOME.
</FN>
</TABLE>
