-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, bPRK4SJ2Re/I2/+Q3usjrGrjDlPFAyn+ls3vAQ8jlBrqVCHVY6NxJGKB+EuV0qQy uwKKAHYq2Rmta/KRYdANow== 0000912057-94-003411.txt : 19941026 0000912057-94-003411.hdr.sgml : 19941026 ACCESSION NUMBER: 0000912057-94-003411 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940831 FILED AS OF DATE: 19941014 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AAR CORP CENTRAL INDEX KEY: 0000001750 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94552765 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 UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- For Quarter Ended AUGUST 31, 1994 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) 1111 NICHOLAS BOULEVARD, ELK GROVE VILLAGE, ILLINOIS 60007 - - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (708) 439-3939 ----------------------------- - - ------------------------------------------------------------------------------- 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 ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS) Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under plan confirmed by a court. Yes No . ------------- ----------- (APPLICABLE ONLY TO CORPORATE ISSUERS) Indicate the number of share outstanding of each on the issuer's classed of common stock, as of the close of the period covered by this report. $1.00 par value, 15,906,792 shares outstanding as of AUGUST 31, 1994. AAR CORP. PART I FINANCIAL INFORMATION The condensed consolidated financial statements as of August 31, 1994 and 1993 included herein have been prepared by AAR CORP. ("the Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The condensed consolidated financial statements as of May 31, 1994 have been derived from audited financial statements with certain prior amounts having been reclassified, in particular, noncurrent deferred tax assets of $6.6 million against noncurrent deferred tax liabilities, to conform to the August 31, 1994 presentation. 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. 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 consolidated financial position of AAR CORP. as of August 31, 1994 and the consolidated results of operations and cash flows for the three months ended August 31, 1994 and 1993. 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 August 31, 1994 presentation. - 2 - AAR CORP. Condensed Consolidated Balance Sheets As of August 31, 1994 and May 31, 1994 (000s omitted)
August 31, May 31, 1994 1994 ------------ -------------- (Unaudited) (Derived from audited financial statements) ASSETS: Current assets: Cash and cash equivalents $ 7,199 $ 18,074 Accounts receivable, less allowances of $2,327 and $2,000 86,634 85,947 Inventories (Note B) 157,206 146,039 Equipment on or available for short-term lease 24,899 28,881 Prepaid income taxes, deposits and other 31,944 28,782 ------- ------- Total current assets 307,882 307,723 ------- ------- Property, plant and equipment, net 54,856 54,783 ------- ------- Other assets: Investment in leveraged leases 32,572 32,618 Cost in excess of underlying net assets of acquired companies 6,260 6,313 Notes receivable, retirement benefits and other (Notes A and E) 9,074 9,579 ------- ------- 47,906 48,510 ------- ------- $410,644 $411,016 ------- ------- ------- ------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank loans and current maturities of long- term debt $ 2,230 $ 568 Accounts payable 46,700 49,599 Accrued liabilities and taxes on income 14,189 15,432 Accrued interest 3,443 2,115 ------- ------- Total current liabilities 66,562 67,714 ------- ------- Long-term debt, less current maturities 115,512 115,729 Deferred tax liabilities (Note A) 32,390 32,390 Retirement benefit obligation and other deferred credits (Notes A and E) 6,060 5,695 ------- ------- 153,962 153,814 ------- ------- Stockholders' equity: Preferred stock, $1.00 par value, authorized 250 shares; none issued -- -- Common stock, $1.00 par value, authorized 80,000 shares; issued 16,216 and 16,215 shares at each date 16,216 16,215 Capital surplus 81,302 81,296 Retained earnings 99,592 99,496 Treasury stock, 309 shares at each date, at cost (3,556) (3,556) Cumulative translation adjustments (Note D) (2,064) (2,963) Minimum pension liability adjustment (Note E) (1,370) (1,000) ------- ------- 190,120 189,488 ------- ------- $410,644 $411,016 ------- ------- ------- -------
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. - 3 - AAR CORP. Condensed Consolidated Statements of Income For the three months ended August 31, 1994 and 1993 (Unaudited) (000s omitted except per share data)
Three Months Ended August 31, ------------------------ 1994 1993 --------- -------- Net sales $ 97,191 $ 98,306 ------- ------- Costs and operating expenses: Cost of sales 80,377 80,262 Selling, general and administrative 11,563 12,422 ------- ------- 91,940 92,684 ------- ------- Operating income 5,251 5,622 Interest expense (2,597) (2,033) Interest income 171 93 ------- ------- Income before provision for income taxes and cumulative effect of changes in accounting principles 2,825 3,682 Provision for income taxes 820 1,200 ------- ------- Income before cumulative effect of changes in accounting principles 2,005 2,482 Cumulative effect of changes in accounting principles: (Note A) Income taxes -- 900 Postretirement health care benefits, net of tax -- (890) ------- ------- Net income $ 2,005 $ 2,492 ------- ------- ------- ------- Net income per share of common stock (Note D): Income before cumulative effect of changes in accounting principles $ .13 $ .16 Net cumulative effect of changes in accounting principles: Income taxes -- .06 Postretirement health care benefits, net of tax -- (.06) ------- ------- Net income per share of common stock $ .13 $ .16 ------- ------- ------- ------- Dividends paid and declared per share of common stock $ .12 $ .12 ------- ------- ------- ------- Average shares outstanding 15,907 15,900
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. - 4 - AAR CORP. Condensed Consolidated Statements of Cash Flows For the Three Months Ended August 31, 1994 and 1993 (Unaudited) (000s omitted)
Three Months Ended August 31, ----------------------- 1994 1993 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,005 $ 2,492 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization 2,557 2,544 Cumulative effect of changes in accounting principles: Income tax benefit -- (900) Postretirement health care benefit expense -- 890 Leveraged lease repricing -- (700) Change in certain assets and liabilities: Accounts receivable, net (472) (7,170) Inventories, net (10,695) 1,824 Equipment on or available for short-term lease 3,982 1,881 Prepaid income taxes, deposits and other (3,255) (2,997) Accounts payable (3,012) 8,561 Accrued liabilities and taxes on income (2,416) (1,545) Accrued interest 2,436 1,582 ------- ------ Net cash provided from (used in) operating activities (8,870) 6,462 ------- ------ CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment expenditures, net (1,812) (764) Investment in leveraged leases 46 (29) Notes receivable and other 115 31 ------- ------ Net cash used in investing activities (1,651) (762) ------- ------ CASH FLOWS FROM FINANCING ACTIVITIES: Change in other borrowings, net 1,426 (3,651) Cash dividends (1,909) (1,908) Proceeds from employee stock purchases 7 - ------- ------ Net cash used in financing activities (476) (5,559) ------- ------ Effect of exchange rate changes on cash 122 (223) ------- ------ Decrease in cash and cash equivalents (10,875) (82) Cash and cash equivalents, beginning of period 18,074 2,255 ------- ------ Cash and cash equivalents, end of period $ 7,199 $ 2,173 ------- ------ ------- ------
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. - 5 - AAR CORP. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS August 31, 1994 (000s omitted except per share and percent data) NOTE A - CHANGES IN SIGNIFICANT ACCOUNTING POLICIES INCOME TAXES Effective June 1, 1993, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 109 "Accounting for Income Taxes." Prior years' results were not restated. The cumulative effect of the accounting change was a tax benefit of $900 ($.06 per share) recorded in the three month period ended August 31, 1993. The adoption of SFAS No. 109 changes the Company's method of accounting for income taxes from the deferred method to the asset and liability method of accounting. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using statutory tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect of changes in deferred tax assets and liabilities and tax rates will be recognized in the consolidated results of operations in the period the changes occur. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS Effective June 1, 1993, the Company adopted SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other than Pensions." Prior years' results were not restated. Upon adoption, the Company elected, as permitted under SFAS No. 106, to record a one-time transition obligation of $1,350 ($890 after tax or $.06 per share) which represents that portion of future retiree benefit costs related to service already rendered by both active and retired employees up to the date of adoption. It is important to note the charge to operating results will have no direct impact on cash flows since the Company will continue its current practice of paying benefits when incurred. NOTE B - INVENTORY The summary of inventories is as follows:
August 31, May 31, 1994 1994 --------- --------- Raw materials and parts $ 29,028 $ 25,349 Work-in-process 13,291 11,974 Purchased aircraft parts, engines and components held for sale or exchange 112,944 106,529 Finished goods 1,944 2,189 --------- --------- 157,207 146,041 Progress billings on long-term contracts and programs (1) (2) --------- --------- $ 157,206 $ 146,039 --------- --------- --------- ---------
- 6 - AAR CORP. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS August 31, 1994 (Continued) (000s omitted except per share and percent data) NOTE C - SUPPLEMENTAL CASH FLOWS INFORMATION Supplemental information on cash flows:
Three Months Ended August 31, ------------------------ 1994 1993 -------- -------- Interest paid $ 110 $ 390 Income taxes paid 1,270 300 Income tax refunds received 140 200
NOTE D - STOCKHOLDERS' EQUITY AND EARNINGS PER SHARE The Cumulative translation adjustments account increased due to a net translation gain of $899 for the three-month period ended August 31, 1994. The gain resulted from an increase 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 most European currencies. 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 E - MINIMUM PENSION LIABILITY ADJUSTMENT The Company recorded a minimum pension liability during the three-month periods ended August 31, 1994 and 1993 of $365 and $3,650, respectively, reported within Retirement benefit obligation in the Consolidated Balance Sheets with $370 and $1,000, at each respective date, charged to Stockholders' equity in accordance with the method of accounting prescribed by SFAS No. 87, "Employers' Accounting for Pensions". The liability significantly increased as the result of the market-driven decrease in the discount rate used by the Company to determine pension obligations. The noncash adjustment did not affect the Company's results of operations. - 7 - AAR CORP. Management's Discussion and Analysis of Results of Operations and Financial Condition RESULTS OF OPERATIONS (000s omitted except per share and percent data) THREE-MONTH PERIOD ENDED AUGUST 31, 1994 (as compared with the same period of the prior year) The Company reports its activities in one business segment: Aviation Services. The following table sets forth net sales for the Company's classes of similar products and services within this segment for the three-month periods ended August 31:
Three Months Ended August 31, ----------------------- 1994 1993 -------- -------- Net Sales: Trading $47,671 $52,796 Overhaul 24,121 23,839 Manufacturing 25,399 21,671 ------- ------- $97,191 $98,306 ------- ------- ------- -------
Net income for the first quarter of fiscal 1995 decreased $487 or 19.5% from the same period in the prior year primarily as the result of a decrease in consolidated gross profit contribution. Net income was also affected by increased interest expense due to additional borrowings and higher interest rates resulting primarily from the sale of $50 million of 10-year, 7-1/4% notes. The reduction in net income was partially offset by lower operating expenses and a lower effective tax rate resulting from tax benefits on certain export sales. While total net sales remained generally constant for the respective three-month periods, trading sales decreased $5,125 or 9.7% due to reduced sales of parts and aviation fasteners. This decline was partially offset by increased sales of manufactured products of $3,728 or 17.2% under existing and new contracts for products supporting the United States Government's Rapid Deployment Program as well as increased sales of commercial cargo systems. Consolidated gross profit contribution decreased $1,230 or 6.8% as the result of the decrease in consolidated gross profit margin from 18.4% to 17.3% and slightly lower consolidated net sales. The gross profit margin was lower from the effects of continued competitive pricing pressures on overhaul margins stemming in part from overcapacity in certain areas of the industry and product mix at our floor maintenance equipment manufacturing unit. These margin decreases were partially offset by improved margins on certain manufactured products, as well as on aircraft and engine parts. Consolidated gross profit contribution in the prior year included $700 of income from a reduction in the interest rate on a non-recourse leveraged lease obligation negotiated by the Company. - 8 - AAR CORP. Management's Discussion and Analysis of Results of Operations and Financial Condition FINANCIAL CONDITION (000s omitted except ratios) AT AUGUST 31, 1994 (as compared with May 31, 1994) In the three-month period ended August 31, 1994, the Company utilized cash to meet working capital requirements, make capital expenditures and pay dividends. The Company's working capital requirements exceeded operating cash flow due to payments or deposits on the purchase of advantageously priced inventory and inventory to support existing or new inventory management programs. The Company continues to maintain sources of financing amounting to $131,065 of available bank lines and has a shelf registration on file with the Securities and Exchange Commission for $85,000 of medium or long-term debt securities, which it may issue at its discretion and subject to market conditions. The Company believes that its continued strong financial position within the aviation services industry, available sources of financing and future income will continue to give the Company the ability to meet ongoing working capital requirements and take advantage of additional business opportunities. A summary of key indicators of financial condition and lines of credit follows:
Description August 31, 1994 May 31, 1994 ------------------------ --------------- ------------ Working capital $ 241,320 $ 240,009 Current ratio 4.6:1 4.5:1 Bank Credit Lines: Borrowings outstanding $ 1,685 $ - Available but unused lines 131,065 132,500 -------- ------- $ 132,750 $132,500 -------- ------- -------- ------- Long-term debt less current maturities $ 115,512 $ 115,729 Ratio of long-term debt to capitalization 37.8% 37.9%
- 9 - AAR CORP. PART II OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS ITEM 4. Instruments 4.1 Restated Certificate of Incorporation:(1) Amendments defining the thereto dated November 3, 1987;(2) and October 19, rights of 1988.(2) security holders 4.2 By-Laws, as amended.(8) 4.3 Credit Agreement dated June 1, 1993 between the Registrant and Continental Bank N.A.(7) and amendment thereto dated May 16, 1994.(8) 4.4 Rights Agreement between the Registrant and The First National Bank of Chicago;(1) Amendment thereto dated July 18, 1989.(2) 4.5 Indenture dated October 15, 1989 between the Registrant and Continental Bank, N.A., as Trustee, relating to debt securities;(4) First Supplemental Indenture thereto dated August 26, 1991.(5) 4.6 Officer's certificate dated October 24, 1989 (3) and October 12, 1993.(3) 4.7 Credit Agreement dated October 15, 1991 between the Registrant and The First National Bank of Chicago, as Agent (6) and amendment thereto dated March 31, 1994.(8) 27. Financial 27.1 Financial Data Schedule for the Registrant's three- Data month interim period ended August 31, 1994. Schedule - 10 - AAR CORP. PART II OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED) - - ---------------------- Notes: (1) Incorporated by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 1987. (2) Incorporated by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 1989. (3) Incorporated by reference to Exhibits to the Registrant's Current Report on Form 8-K dated October 24, 1989 and October 12, 1993. (4) Incorporated by reference to Exhibits to the Registrant's Annual Report on Form 10-Q for the quarter ended November 30, 1989. (5) Incorporated by reference to Exhibits to Registrant's Registration Statement on Form S-3 filed August 27, 1991. (6) Incorporated by reference to Exhibits to the Registrant's Quarterly Report on Form 10-Q for the quarter ended November 30, 1991. (7) Incorporated by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 1993. (8) Incorporated by reference to Exhibits to the Registrant's Annual Report on Form 10-K for the fiscal year ended May 31, 1994. (b) REPORTS ON FORM 8-K FOR QUARTER ENDED AUGUST 31, 1994: The Company filed no reports on Form 8-K during the three (3) months ended August 31, 1994. - 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: October 13, 1994 ------------------------------------------ Timothy J. Romenesko Vice President - Controller and Chief Accounting Officer (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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED AUGUST 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 3-MOS MAY-31-1994 JUN-1-1994 AUG-31-1994 7,199 0 88,961 2,327 157,206 307,882 124,353 69,497 410,644 66,562 115,512 16,216 0 0 173,904 410,644 97,191 97,191 80,377 91,940 0 325 2,426 2,825 820 2,005 0 0 0 2,005 .13 .13 Provision for doubtful accounts is included in TOTAL COSTS.
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