-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E3h2EulpR4tGZsqTdUZEaXLoOK7gESjG9FGflp9Fys9acP9MO/QodpR2tFCRl2UB oadKMIwzKzeMbMuiDbhNuQ== 0000912057-97-012625.txt : 19970414 0000912057-97-012625.hdr.sgml : 19970414 ACCESSION NUMBER: 0000912057-97-012625 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970228 FILED AS OF DATE: 19970411 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AAR CORP CENTRAL INDEX KEY: 0000001750 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MACHINERY, EQUIPMENT & SUPPLIES [5080] IRS NUMBER: 362334820 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06263 FILM NUMBER: 97578498 BUSINESS ADDRESS: STREET 1: 1111 NICHOLAS BLVD CITY: ELK GROVE VILLAGE STATE: IL ZIP: 60007 BUSINESS PHONE: 7084393939 MAIL ADDRESS: STREET 1: 1111 NICHOLAS BLVD CITY: ELK GROVE VILLAG STATE: IL ZIP: 60007 FORMER COMPANY: FORMER CONFORMED NAME: ALLEN AIRCRAFT RADIO INC DATE OF NAME CHANGE: 19700204 10-Q 1 FORM 10-Q 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 28, 1997 Commission file number 1-6263 ------------------ -------- AAR CORP. -------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 36-2334820 - -------------------------------- ------------------------------------ (State or other jurisdiction (I.R.S. Employer Identification No.) of 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 Address: 1111 Nicholas Boulevard, Elk Grove Village, Illinois 60007 - ----------------------------------------------------------------------------- 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 on the issuer's classes of common stock, as of the latest practicable date. $1.00 par value, 18,155,864 shares outstanding as of FEBRUARY 28, 1997 . - --------- ------------ --------------------- AAR CORP. and Subsidiaries Quarterly Report on Form 10-Q February 28, 1997 Table of Contents Page 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 Notes to Condensed Consolidated Financial Statements 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Exhibits 11 Reports on Form 8-K 11 Signature Page 12 2 PART I, ITEM 1 - FINANCIAL STATEMENTS AAR CORP. and Subsidiaries Condensed Consolidated Balance Sheets As of February 28, 1997 and May 31, 1996 (000s omitted) February 28, May 31, 1997 1996 ----------- ------------- (Unaudited) (Derived from audited financial statements) ASSETS - ------ Current assets: Cash and cash equivalents $ 53,983 $ 33,606 Accounts receivable, less allowances of $2,200 and $2,490 respectively 131,067 107,138 Inventories 167,710 138,200 Equipment on or available for short-term lease 32,905 36,884 Deferred tax assets, deposits and other 24,068 22,184 -------- -------- Total current assets 409,733 338,012 -------- -------- Property, plant and equipment, net 69,865 54,831 -------- -------- Other assets: Investments in leveraged leases 28,661 30,905 Cost in excess of underlying net assets of acquired companies 5,704 5,842 Retirement benefits, notes receivable and other 9,889 8,256 -------- -------- 44,254 45,003 -------- -------- $523,852 $437,846 -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 1,524 $ 1,474 Accounts payable 81,242 59,005 Accrued liabilities 15,646 14,356 Accrued taxes on income 3,276 4,550 -------- -------- Total current liabilities 101,688 79,385 -------- -------- Long-term debt, less current maturities 117,126 118,292 Deferred tax liabilities 30,239 30,680 Other liabilities 5,898 - Retirement benefit obligation and deferred credits 4,854 4,854 -------- -------- 158,117 153,826 -------- -------- Stockholders' equity: Preferred stock, $1.00 par value, authorized 250 shares, none issued - - Common stock, $1.00 par value, authorized 80,000 shares; issued 18,819 and 16,404 shares, respectively 18,819 16,404 Capital surplus 139,249 83,975 Retained earnings 120,785 110,645 Treasury stock, 663 and 406 shares at cost, respectively (11,513) (5,285) Cumulative translation adjustments (3,293) (1,104) -------- -------- 264,047 204,635 -------- -------- $523,852 $437,846 -------- -------- -------- -------- The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements 3 AAR CORP. and Subsidiaries Condensed Consolidated Statements of Income For the Three and Nine Months Ended February 28/29, 1997 and 1996 (Unaudited) (000s omitted except per share data)
Three Months Ended Nine Months Ended February 28/29, February 28/29, --------------------------- ------------------------- 1997 1996 1997 1996 ------ ------ ------ ------ Net sales $ 154,135 $ 136,065 $ 425,847 $ 366,919 --------- --------- --------- --------- Costs and operating expenses: Cost of sales 125,995 113,602 348,295 301,997 Selling, general and administrative 16,829 14,154 47,235 42,051 --------- --------- --------- --------- 142,824 127,756 395,530 344,048 Operating income 11,311 8,309 30,317 22,871 Interest expense (2,952) (2,693) (8,146) (7,978) Interest income 127 183 636 768 --------- --------- --------- --------- Income before provision for income taxes 8,486 5,799 22,807 15,661 Provision for income taxes 2,546 1,710 6,875 4,655 --------- --------- --------- --------- Net income $ 5,940 $ 4,089 $ 15,932 $ 11,006 --------- --------- --------- --------- --------- --------- --------- --------- Net income per share of common stock $ .36 $ .26 $ .98 $ .69 Average common shares outstanding 16,502 15,999 16,182 15,971 Dividends paid and declared per share of common stock $ .12 $ .12 $ .36 $ .36
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 4 AAR CORP. and Subsidiaries Condensed Consolidated Statements of Cash Flows For the Nine Months Ended February 28/29, 1997 and 1996 (Unaudited) (000s omitted) Nine Months Ended February 28/29 --------------------- 1997 1996 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $15,932 $11,006 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization 8,838 7,493 Change in certain assets and liabilities: Accounts receivable, net (24,491) (4,791) Inventories, net (27,507) 4,180 Equipment on or available for short-term lease 3,626 265 Deferred tax assets, deposits and other (1,293) (4,838) Accounts payable 22,733 (336) Accrued liabilities and taxes on income (2,189) (1,688) Other liabilities 5,898 - Accrued interest 2,435 2,454 --------- --------- Net cash provided from operating activities 3,982 13,745 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment expenditures, net (26,243) (5,050) Investment in leveraged leases 2,244 991 Notes receivable and other (3,125) 1,466 --------- --------- Net cash (used in) investing activities (27,124) (2,593) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in borrowings (1,116) (1,262) Cash dividends (5,792) (5,753) Purchase of treasury stock (6,228) (799) Proceeds from exercise of stock options and other 6,300 1,827 Proceeds from stock offering 50,450 - --------- --------- Net cash provided from (used in) financing activities 43,614 (5,987) --------- --------- Effect of exchange rate changes on cash (95) 78 --------- --------- Increase in cash and cash equivalents 20,377 5,243 Cash and cash equivalents, beginning of period 33,606 22,487 --------- --------- Cash and cash equivalents, end of period $ 53,983 $ 27,730 --------- --------- --------- --------- The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 5 AAR CORP. and Subsidiaries Notes to Condensed Consolidated Financial Statements February 28, 1997 (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. 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, 1996 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 28, 1997 and the condensed consolidated results of operations for the three and nine-month periods ended February 28/29, 1997 and 1996, and the condensed consolidated cash flows for the nine-month periods ended February 28/29, 1997 and 1996. The results of operations for such interim periods are not necessarily indicative of the results for the full year. Certain prior period amounts have been reclassified to conform to the February 28, 1997 presentation. NOTE B - INVENTORY The summary of inventories is as follows: February 28, May 31, 1997 1996 ------------ ---------- Raw materials and parts $ 35,522 $ 33,978 Work-in-process 14,447 12,179 Purchased aircraft, parts, engines and components held for sale 116,024 90,438 Finished goods 1,717 1,605 --------- --------- $ 167,710 $ 138,200 --------- --------- --------- --------- During the first quarter of fiscal 1997, the Company made certain inventory purchases in which the vendors provided extended terms at no interest. Other liabilities reflect the long-term obligation under these arrangements payable through December 31, 1998 and have been discounted at 6.5%. 6 AAR CORP. and Subsidiaries Notes to Condensed Consolidated Financial Statements February 28, 1997 (Continued) (000s omitted) NOTE C - SUPPLEMENTAL CASH FLOWS INFORMATION Supplemental information on cash flows: Nine Months Ended February 28/29, ------------------- 1997 1996 ------- ------ Interest paid $5,430 $5,330 Income taxes paid 7,532 3,830 Income tax refunds received 147 80 NOTE D - CUMULATIVE TRANSLATION ADJUSTMENTS The cumulative translation adjustments account changed due to a net translation loss of $2,189 for the nine-month period ended February 28, 1997. The change resulted from a decrease in the value of the Company's net investment in foreign subsidiaries primarily resulting from an increase in the value of the U.S. dollar against certain European currencies. The noncash adjustment did not affect the Company's results of operations. NOTE E - COMMON STOCK AND EARNINGS PER SHARE During February 1997, the Company completed the sale of two million shares of common stock, raising $50,450, which is net of expenses. The per share data was calculated using the weighted average shares outstanding for the periods presented. Common stock equivalents consisting of employee stock options have not been included in the per share calculation as their dilutive effect is not material. NOTE F - NEW ACCOUNTING STANDARDS The Financial Accounting Standards Board issued SFAS No. 123 "Accounting for Stock-Based Compensation" in October 1995. Under SFAS No. 123, entities may elect to adopt the provisions of SFAS No. 123, or continue to apply the provisions of APB No. 25 "Accounting for Stock Issued to Employees" with additional disclosures. The Company has elected to continue to apply the provisions of APB No. 25 "Accounting for Stock Issued to Employees", which will result in expanded disclosures in the notes to consolidated financial statements in the fiscal 1997 annual report to stockholders. 7 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 PERIOD ENDED FEBRUARY 28, 1997 (as compared with the same period of the prior year) The following table sets forth net sales for the Company's classes of similar products and services within the Company's Aviation Services business segment: Three Months Ended Nine Months Ended February 28/29, February 28/29, ---------------------- --------------------- 1997 1996 1997 1996 --------- --------- -------- -------- Net Sales: Trading $ 95,035 $ 72,694 $251,062 $183,057 Overhaul 37,409 33,136 105,502 100,115 Manufacturing 21,691 30,235 69,283 83,747 --------- -------- -------- -------- $ 154,135 $ 136,065 $425,847 $366,919 --------- -------- -------- -------- --------- -------- -------- -------- THREE-MONTH PERIOD ENDED FEBRUARY 28, 1997 (as compared with the same period of the prior year) Consolidated net sales for the third quarter of the Company's fiscal year ending May 31, 1997 (fiscal 1997) increased $18,070 or 13.3% over the same period in the prior year reflecting continued strong demand for the Company's broad range of products and services. Trading sales increased $22,341 or 30.7% over the prior year period reflecting growth in its airframe and engine parts businesses and increased engine trading and leasing business. A majority of the sales increase in the engine parts business was in conjunction with long-term inventory management programs. Overhaul sales increased $4,273 or 12.9% reflecting higher demand for certain aircraft maintenance and aircraft component repair services. Manufacturing sales were $8,544 or 28.3% below the prior year period reflecting lower demand of its products supporting the United States Government's rapid deployment program and lower sales of its cargo loading and handling systems. Consolidated gross profit increased $5,677 or 25.3% over the prior year period due to increased consolidated net sales and an increase in the consolidated gross profit margin to 18.3% from 16.5%. The improvement in the consolidated gross profit margin was attributable to the mix of inventories sold. Consolidated operating income increased $3,002 or 36.1% and the Company's operating income margin increased to 7.3% compared to the prior year period's margin of 6.1% as a result of increased net sales and an increase in consolidated gross profit, partially offset by higher selling, general and administrative expenses from higher personnel and marketing support costs. Consolidated net income increased $1,851 or 45.3% over the prior year period due primarily to the factors discussed above. 8 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) NINE MONTH PERIOD ENDED FEBRUARY 28, 1997 (as compared with the same period of the prior year) Consolidated net sales for the nine months of fiscal 1997 increased $58,928 or 16.1% over the prior year period reflecting overall increased demand for the Company's trading and overhaul products and services. Trading sales increased $68,005 or 37.1% over the prior year period due to increased engine, airframe and large component part sales, and improved engine trading and leasing business. Overhaul sales increased $5,387 or 5.4% reflecting increased demand for aircraft maintenance services. Manufacturing sales were $14,464 or 17.3% below the prior year period, reflecting lower demand of its products supporting the United States Government's rapid deployment program and lower sales of its cargo loading and handling systems. Consolidated gross profit increased $12,630 or 19.5% over the prior year period due to increased consolidated net sales and an increase in the consolidated gross profit margin to 18.2% from 17.7% in the prior year period. The higher consolidated gross profit margin was due primarily to the mix of inventories sold during the third quarter of fiscal 1997. Consolidated operating income increased $7,446 or 32.6% over the same nine-month period in the prior year, and the Company's operating income margin increased to 7.1% compared to the prior year period's margin of 6.2% as a result of increased net sales and consolidated gross profit, partially offset by higher selling, general and administrative expenses from higher personnel and marketing support costs. Consolidated net income increased $4,926 or 44.8% primarily as a result of the factors discussed above. 9 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 28, 1997 (as compared with May 31, 1996) In the nine-month period ended February 28, 1997, the Company generated $3,982 of cash from operations compared to $13,745 in the nine-month period ended February 29, 1996. The reduction in cash generated from operations was due to working capital investments made as a result of growth in the Company's trading and overhaul businesses. The Company's cash and cash equivalent position increased $20,377 at the end of the nine-month period reflecting the sale of two million shares of common stock during the third quarter for $50,450 which is net of expenses, partially offset by capital expenditures of $26,243, and dividends of $5,792. The increase over the prior year in capital expenditures during the nine-month period reflects the Company's acquisition and refurbishment of an operating facility for approximately $18,500. This facility allowed the Company to consolidate and replace certain facilities previously operated by the Company and will accommodate the growth of the Company's principal trading operating units. Upon the sale of the facilities owned by the Company vacated as a result of the relocation to the new building, the proceeds will be added to cash and cash equivalents. In the nine-month period ended February 28, 1997, the Company acquired 256 shares of its stock for $6,229, of which 198 shares were acquired in connection with the exercise of stock options. At February 28, 1997, the Company's long-term debt to capitalization ratio is 30.7% compared to 36.6% at May 31, 1996. The reduction in the long-term debt to capitalization ratio principally reflects the Company's recently completed common stock offering. The Company continues to maintain its available external sources of financing from $136,316 of unused available bank lines and a shelf registration on file with the Securities and Exchange Commission under which up to $85,000 of additional medium or long-term debt securities may be sold subject to market conditions. The Company believes that its cash and cash equivalents and available sources of capital 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. Subsequent to the end of the third quarter, the Company completed the sale of its hardware distribution unit, realizing in cash the Company's total investment in this business. The decision to divest this business was a result of a review of the unit's performance measured against the Company's long-term financial objectives. A summary of key financial conditions, ratios, and lines of credit follows: Description February 28, May 31, ----------- 1997 1996 ------------ ------- Working capital $308,045 $258,627 Current ratio 4.0:1 4.3:1 Bank credit lines: Borrowings outstanding $ - $ - Available but unused lines 136,316 132,977 -------- -------- Total credit lines $136,316 $132,977 -------- -------- -------- -------- Long-term debt less current maturities $117,126 $118,292 Ratio of long-term debt to capitalization 30.7% 36.6% 10 PART II - OTHER INFORMATION AAR CORP. and Subsidiaries February 28, 1997 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 28, 1997. (b) REPORTS ON FORM 8-K FOR QUARTER ENDED FEBRUARY 28, 1997: The Company filed no reports on Form 8-K during the three months ended February 28, 1997. 11 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 10, 1997 /s/ Timothy J. Romenesko ---------------- -------------------------------- Timothy J. Romenesko Vice President, Chief Financial Officer and Treasurer. (Principal accounting officer and officer duly authorized to sign on behalf of registrant) 12 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S REPORT ON FORM 10-Q FOR THE NINE MONTH INTERIM PERIOD ENDED FEBRUARY 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS MAY-31-1997 JUN-01-1996 FEB-28-1997 53,983 0 133,263 2,196 167,710 409,733 138,999 69,134 523,852 101,688 117,126 0 0 18,819 245,228 523,852 425,847 425,847 348,295 395,530 0 231 7,510 22,807 6,875 15,932 0 0 0 15,932 .98 .98 Provision for doubtful accounts is included in Total Costs and Expenses. Interest expense is presented net of $636 of interest income.
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