UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 8.01. Other Events.
AAR CORP. (the “Company”), on behalf of AAR Aircraft Services, Inc., Aviation Maintenance Staffing, Inc., and AAR Landing Gear LLC, direct and indirect wholly-owned subsidiaries of the Company (the “Subsidiaries”), has reached an agreement in principle (the “Agreement”) with the United States Department of the Treasury (“Treasury”) for the grant program (the "Payroll Support Program") in connection with implementation of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Company has submitted final, signed definitive Agreement documents (the “Payroll Support Program Documents”) for Treasury’s counter-signature.
On April 3, 2020, the Company applied for $136,446,791.00 of payroll support under the Payroll Support Program. Under the Agreement and Payroll Support Documents, Treasury is expected to provide to the Subsidiaries a grant under the Payroll Support Program in an amount expected to be approximately $57,180,647.00.
In consideration for the grant, the Company would issue to Treasury a low-interest rate, senior unsecured promissory note (the “Promissory Note”) in the principal amount of approximately $8,659,485.00, which obligation will mature 10 years after issuance. The Promissory Note would be pre-payable at any time at par.
In connection with the Payroll Support Program, the Subsidiaries would be required to comply with the relevant provisions of the CARES Act, including the requirement that the funding be used exclusively for the continuation of payment of employee wages, salaries and benefits. The Subsidiaries would also be subject to certain restrictions, including, but not limited to, limitations on involuntary terminations and furloughs, and reductions in the pay rate of employees earning wages or salaries (as well as reductions in benefits), from the signing date of the Payroll Support Program Documents through September 30, 2020. In addition, the Subsidiaries and the Company would be subject to restrictions on the payment of dividends and the repurchase of shares through September 30, 2021, and certain limitations on employee compensation through March 24, 2022.
While the Company expects Treasury to date and counter sign the Payroll Support Program Documents in the near term, the Company can provide no assurance as to the final timing or terms of the Payroll Support Program grant.
A copy of the Company’s press release dated July 20, 2020 is attached hereto as Exhibit 99.1
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |
| 99.1 | Press release issued by AAR CORP. on July 20, 2020. | |
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the inline XBRL document) | |
This Form 8-K contains certain forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements that address activities, events, conditions or developments that we expect or anticipate may occur in the future and may relate to measures implemented to reduce costs and our ability to implement further actions in the future. Forward-looking statements may also be identified because they contain words such as ‘‘anticipate,’’ ‘‘believe,’’ ‘‘continue,’’ ‘‘could,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘likely,’’ ‘‘may,’’ ‘‘might,’’ ‘‘plan,’’ ‘‘potential,’’ ‘‘predict,’’ ‘‘project,’’ ‘‘seek,’’ ‘‘should,’’ ‘‘target,’’ ‘‘will,’’ ‘‘would,’’ or similar expressions and the negatives of those terms. These forward-looking statements are based on beliefs of our management, as well as assumptions and estimates based on information available to us as of the dates such assumptions and estimates are made, 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 those factors set forth under ‘‘Risk Factors’’ under Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended February 29, 2020 and Part I, Item 1A in our Annual Report on Form 10-K for the year ended May 31, 2019, which are incorporated by reference herein. Should one or more of those risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described. Those events and uncertainties are difficult or impossible to predict accurately and many are beyond our control. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
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EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press release issued by AAR CORP. on July 20, 2020 (filed herewith). | |
| 104 | Cover Page Interactive Data File (the cover page XBRL tags are embedded in the inline XBRL document). |
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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 hereunto duly authorized.
Date: July 20, 2020
| AAR CORP. | ||
| By: | /s/ Sean M. Gillen | |
| Sean M. Gillen | ||
| Vice President and Chief Financial Officer | ||
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EXHIBIT 99.1
AAR expects to receive $57.2 million from U.S. Treasury under Air Carrier Worker Support portion of CARES Act
Wood Dale, Illinois — AAR (NYSE: AIR), a leading provider of aviation services to commercial and government operators worldwide, today announced that certain of its subsidiaries expect to receive $57.2 million from the U.S. Treasury Department through the Payroll Support Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The funds are expected to consist of a $48.5 million grant and an $8.7 million loan, and will be used exclusively to pay salaries, wages and benefits of employees in AAR’s U.S. airframe and landing gear maintenance, repair and overhaul (MRO) operations.
“We thank Congress and the Administration for passing legislation that recognizes the essential service that our MRO team provides to the aviation industry. We are also grateful to our employees for their tireless support of our airline customers,” said John M. Holmes, President and Chief Executive Officer of AAR. “We appreciate the Treasury Department’s collaborative approach to identifying the AAR businesses that are eligible for assistance under the Payroll Support Program and are grateful to be able to keep the current workforce of these businesses in place.”
The loan portion of the funding is a ten-year, low-interest note that may be prepaid at any time at par. AAR will not issue warrants or other equity or equity-like securities in conjunction with the program.
The program requires AAR to refrain from involuntary furloughs, layoffs and reductions in employee pay rates and benefits at our U.S. airframe and landing gear MRO operations from the date of signing until September 30, 2020. Additionally, the program obligates AAR to eliminate dividends and share repurchases until September 30, 2021 and to limit executive compensation until March 24, 2022.
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About AAR
AAR is a global aerospace and defense aftermarket solutions company with operations in over 20 countries. Headquartered in the Chicago area, AAR supports commercial and government customers through two operating segments: Aviation Services and Expeditionary Services. AAR’s Aviation Services include Parts Supply; OEM Solutions; Integrated Solutions; and Maintenance, Repair and Overhaul (MRO) Services. AAR’s Expeditionary Services include Mobility Systems and Composites Manufacturing operations. Additional information can be found at www.aarcorp.com.
This press release 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. Forward-looking statements may also be identified because they contain words such as ‘‘anticipate,’’ ‘‘believe,’’ ‘‘continue,’’ ‘‘could,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘likely,’’ ‘‘may,’’ ‘‘might,’’ ‘‘plan,’’ ‘‘potential,’’ ‘‘predict,’’ ‘‘project,’’ ‘‘seek,’’ ‘‘should,’’ ‘‘target,’’ ‘‘will,’’ ‘‘would,’’ or similar expressions and the negatives of those terms. 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, including those factors discussed under Item 1A, entitled “Risk Factors”, included in the Company’s Form 10-K for the fiscal year ended May 31, 2019 and the Company’s Form 10-Q for the fiscal quarter ended February 29, 2020. 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. These events and uncertainties are difficult or impossible to predict accurately and many are beyond the Company’s control. The Company assumes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. For additional information, see the comments included in AAR’s filings with the Securities and Exchange Commission.
Contact:
Daniela Pietsch
Corporate Marketing & Communications
+1.630.227.5100
Editor@aarcorp.com
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