-----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, LIZkVrqX2kCe99zfKExJW14YmmM8zPs6qiLx1K+2vo7AjDczcruE4lbYpL+AitAJ lNZ42qlij1om5rPPi6w70g== 0000912057-96-006227.txt : 19960411 0000912057-96-006227.hdr.sgml : 19960411 ACCESSION NUMBER: 0000912057-96-006227 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960410 SROS: CSX 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: 96545734 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 AAR CORPORATION 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 The Quarterly Period Ended FEBRUARY 29, 1996 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 incorporation or organization) Identification No.) 1111 NICHOLAS BOULEVARD, ELK GROVE VILLAGE, ILLINOIS 60007 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (847) 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 . -------- ------- 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, 16,025,024 shares outstanding as of FEBRUARY 29, 1996 . - ------- ------------ -------------------- AAR CORP. and Subsidiaries Quarterly Report on Form 10-Q February 29, 1996 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 1. Legal Proceedings 11 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 29,1996 and May 31, 1995 (000s omitted)
February 29, May 31, 1996 1995 ----------- ----------------- (Unaudited) (Derived from audited financial statements) ASSETS - ------ Current assets: Cash and cash equivalents $ 27,730 $ 22,487 Accounts receivable, less allowances of $2,900 and $2,400 at each date 114,793 110,420 Inventories (Note B) 146,644 151,827 Equipment on or available for short-term lease 18,236 18,501 Deferred tax assets, deposits and other 22,449 18,397 -------- -------- Total current assets 329,852 321,632 -------- -------- Property, plant and equipment, net 54,909 56,596 -------- -------- Other assets: Investment in leveraged leases 30,961 31,952 Cost in excess of underlying net assets of acquired companies 5,897 6,101 Retirement benefits, notes receivable and other 7,652 9,533 -------- -------- 44,510 47,586 -------- -------- $429,271 $425,814 -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Current maturities of long-term debt $ 1,505 $ 1,632 Accounts payable 50,914 51,393 Accrued liabilities 15,773 15,977 Accrued taxes on income 5,105 4,138 -------- -------- Total current liabilities 73,297 73,140 -------- -------- Long-term debt, less current maturities 118,631 119,766 Deferred tax liabilities 30,493 30,660 Retirement benefit obligation and deferred credits 3,883 5,129 -------- -------- 153,007 155,555 -------- -------- Stockholders' equity: Preferred stock, $1.00 par value, authorized 250 shares; none issued - - Common stock, $1.00 par value, authorized 80,000 shares; issued 16,394 and 16,284 shares at each date 16,394 16,284 Capital surplus 83,849 82,132 Retained earnings 107,562 102,309 Treasury stock, 369 and 323 shares at each date, at cost (4,532) (3,733) Cumulative translation adjustments (Note D) 54 1,497 Minimum pension liability adjustment (360) (1,370) -------- -------- 202,967 197,119 -------- -------- $429,271 $425,814 -------- -------- -------- --------
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 29/28, 1996 and 1995 (Unaudited) (000s omitted except per share data)
Three Months Ended Nine Months Ended February 29/28, February 29/28, ---------------------- ----------------------- 1996 1995 1996 1995 -------- -------- -------- -------- Net sales $136,065 $125,232 $366,919 $321,807 -------- -------- -------- -------- Costs and operating expenses: Cost of sales 113,602 104,795 301,997 266,562 Selling, general and administrative 14,154 13,606 42,051 37,782 -------- -------- -------- -------- 127,756 118,401 344,048 304,344 -------- -------- -------- -------- Operating income 8,309 6,831 22,871 17,463 Interest expense (2,693) (2,933) (7,978) (8,211) Interest income 183 218 768 636 -------- -------- -------- -------- Income before provision for income taxes 5,799 4,116 15,661 9,888 Provision for income taxes 1,710 1,240 4,655 2,940 -------- -------- -------- -------- Net income $ 4,089 $ 2,876 $ 11,006 $ 6,948 -------- -------- -------- -------- -------- -------- -------- -------- Net income per share of common stock (Note E): $.26 $.18 $.69 $.44 Dividends paid and declared per share of common stock $.12 $.12 $.36 $.36 Average shares outstanding 15,999 15,949 15,971 15,923
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 29/28, 1996 and 1995 (Unaudited) (000s omitted)
Nine Months Ended February 29/28, ------------------------- 1996 1995 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 11,006 $ 6,948 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization 7,493 7,539 Change in certain assets and liabilities: Accounts receivable, net (4,791) (18,667) Inventories, net 4,180 (8,400) Equipment on or available for short-term lease 265 1,242 Deferred tax assets, deposits and other (4,838) 4,657 Accounts payable (336) 1,520 Accrued liabilities and taxes on income (1,688) 83 Accrued interest 2,454 2,474 Retirement benefit obligations, deferred tax liabilities and deferred credits - (610) ---------- ---------- Net cash provided from (used in) operating activities 13,745 (3,214) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment expenditures, net (5,050) (5,480) Investment in leveraged leases 991 544 Notes receivable and other 1,466 (1,062) ---------- ---------- Net cash used in investing activities (2,593) (5,998) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Gross proceeds from issuance of long-term notes payable - 6,186 Change in other borrowings, net (1,262) (730) Cash dividends (5,753) (5,735) Purchase of treasury stock (799) (116) Proceeds from exercise of stock options and other 1,827 902 ---------- ---------- Net cash provided from (used in) financing activities (5,987) 507 ---------- ---------- Effect of exchange rate changes on cash 78 142 ---------- ---------- Increase (decrease) in cash and cash equivalents 5,243 (8,563) Cash and cash equivalents, beginning of period 22,487 18,074 ---------- ---------- Cash and cash equivalents, end of period $ 27,730 $ 9,511 ---------- ---------- ---------- ----------
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 29, 1996 (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, 1995 has been derived from audited financial statements. 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, 1996 and the condensed consolidated results of operations and cash flows for the three and nine months ended February 29/28, 1996 and 1995. 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 29, 1996 presentation. NOTE B - INVENTORY The summary of inventories is as follows:
February 29, May 31, 1996 1995 --------- --------- Raw materials and parts $ 30,718 $ 29,316 Work-in-process 12,419 11,891 Purchased aircraft, parts, engines and components held for sale or exchange 101,852 110,948 Finished goods 1,655 1,734 --------- --------- 146,644 153,889 Progress billings on long-term contracts and programs - (2,062) --------- --------- $146,644 $151,827 --------- --------- --------- ---------
6 AAR CORP.and Subsidiaries Notes to Condensed Consolidated Financial Statements February 29, 1996 (Continued) (000s omitted) NOTE C - SUPPLEMENTAL CASH FLOWS INFORMATION Supplemental information on cash flows: Nine Months Ended February 29/28, ---------------------- 1996 1995 --------- --------- Interest paid $5,330 $5,590 Income taxes paid 3,830 2,760 Income tax refunds received 80 340 NOTE D - CUMULATIVE TRANSLATION ADJUSTMENTS The Cumulative translation adjustments account decreased due to a net translation loss of $1,443 for the nine-month period ended February 29, 1996. The loss 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 most European currencies. The noncash adjustment did not affect the Company's results of operations. NOTE E - EARNINGS PER SHARE 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. 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 PERIODS ENDED FEBRUARY 29, 1996 (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 29/28, February 29/28, ---------------------------- ----------------------- 1996 1995 1996 1995 -------- -------- -------- -------- Net Sales: Trading $ 72,694 $ 71,635 $183,057 $166,061 Overhaul 33,136 27,314 100,115 77,872 Manufacturing 30,235 26,283 83,747 77,874 -------- -------- -------- -------- $136,065 $125,232 $366,919 $321,807 -------- -------- -------- -------- -------- -------- -------- --------
THREE-MONTH PERIOD ENDED FEBRUARY 29, 1996 (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, 1996 ("fiscal 1996") increased $10,833 or 8.7% over the same period in the prior year. Net sales increases occurred across all three classes of similar products and services. Strong sales were experienced in airframe and related component overhaul, airframe parts and components, and manufactured products supporting rapid deployment requirements. Consolidated gross profit increased $2,026 or 9.9% over the prior year on increased consolidated net sales and on an improved consolidated gross profit margin of 16.5%.versus the prior years margin of 16.3%. The consolidated gross profit margin increase was due primarily to increased margins experienced on trading sales. Consolidated operating profit increased $1,478 or 21.6% over the prior year on the increased consolidated net sales and gross profit margin partially offset by certain increases in selling, general and administrative expenses. While total selling, general and administrative expenses decreased as a percent of sales, total expenditures increased over the prior year as a result of increased personnel costs and costs of enhancing information technology systems. Consolidated net income increased $1,213 or 42.2% over the prior year due primarily to increased consolidated net sales and gross profit margin. Net income also increased by a reduction in interest expense resulting from no short-term borrowings in the current period. 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 percent data) NINE-MONTH PERIOD ENDED FEBRUARY 29, 1996 (as compared with the same period in the prior year) Consolidated net sales for the first nine months of fiscal 1996 increased $45,112 or 14% over the same period in the prior year. Net sales increases occurred across all three classes of products and services with significant increases experienced in the airframe and large component part sales, airframe and large airframe component overhaul services, and sales of manufactured products to support rapid deployment requirements and aircraft cargo systems. Consolidated gross profit increased $9,677 or 17.5% over the prior year due to increased consolidated net sales and an increase in the consolidated gross profit margin to 17.7% compared with the prior years 17.2% margin. Higher profit margins were experienced across most classes of products and services due primarily to favorable product mix and improved pricing of products and services. Consolidated operating income increased $5,408 or 31% over the prior year as a result of higher consolidated net sales and an improved consolidated gross profit margin partially offset by higher selling, general and administrative costs. While total selling, general and administrative expenses decreased as a percentage of net sales, total expenditures increased due to higher personnel costs, increased marketing support programs and costs to enhance information technology systems. Consolidated net income increased $4,058 or 58.4% over the previous year primarily due to increased consolidated net sales and on improved consolidated gross profit margin. Net income also increased by a reduction in interest expense resulting from no short-term borrowings in the current year. 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 percent data and ratios) AT FEBRUARY 29, 1996 (as compared with May 31, 1995) In the nine-month period ended February 29, 1996, the Company generated $13,745 of cash from operations through increased earnings and working capital management. The cash generated from operations was supplemented by payment on a note receivable obtained in the previous sale of a partial residual interest of an aircraft subject to a leveraged lease. The Company's cash and cash equivalents increased $5,243 during this nine-month period after taking into consideration the payments for capital expenditures and dividends of $5,050 and $5,753, respectively. The Company further strengthened its financial position during this nine month period by generating additional working capital of $8,063, eliminating short- term borrowing during this nine month period and reducing its long-term debt to capitalization ratio to 36.9%. The Company continues to maintain its available external sources of financing from $133,317 of unused available bank lines and a shelf registration on file with the Security and Exchange Commission for $85,000 of medium or long-term debt securities, which it may issue at its discretion, subject to market conditions. The Company believes that its cash and cash equivalents, available sources of financing and future income will continue to provide the Company the ability to meet its ongoing working capital requirements, make anticipated capital expenditures, pay dividends, and pursue favorable business opportunities. A summary of key financial conditions, ratios, and lines of credit follows:
Description February 29, 1996 May 31, 1995 ------------ ----------------- ------------ Working capital $256,555 $248,492 Current ratio 4.5:1 4.4:1 Bank Credit Lines: Borrowings outstanding $ - $ - Available but unused lines 133,317 133,750 -------- -------- $133,317 $133,750 -------- -------- -------- -------- Long-term debt less current maturities $118,631 $119,766 Ratio of long-term debt to capitalization 36.9% 37.8%
10 PART II - OTHER INFORMATION AAR CORP. and Subsidiaries February 29, 1996 Item 1. LEGAL PROCEEDINGS A subsidiary of the Company has negotiated a settlement in principle resolving an enforcement action brought on behalf of the United States Environmental Protection Agency ("EPA") in the U.S. District Court for the Western District of Michigan in January, 1996, alleging violations of the Clean Air Act relating to exceeding volatile organic compound emission rates under a permit issued to the subsidiary by the Michigan Department of Natural Resources. The EPA had previously issued a Notice of Proposed Civil Penalty for the alleged violations in the amount of $600,000. The settlement provides for dismissal of the alleged violations without admission of wrong doing and for the payment of approximately $200,000 by the subsidiary. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS ITEM 27. Financial 27.1 Financial Data Schedule for the Registrant's nine-month Data interim period ended February 29, 1996. Schedule (b) REPORTS ON FORM 8-K FOR QUARTER ENDED FEBRUARY 29, 1996: The Company filed no reports on Form 8-K during the three (3) months ended February 29, 1996. 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 9, 1996 ----------------- ----------------------------------- 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-27.1 2 EXH. 27.1
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 29, 1996 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS MAY-31-1996 JUN-01-1995 FEB-29-1996 27,730 0 117,693 2,900 146,644 329,852 129,846 74,937 429,271 73,297 118,631 0 0 16,394 186,573 429,271 366,919 366,919 301,997 344,048 0 800 7,210 15,661 4,655 11,006 0 0 0 11,006 .69 .69 Provisions for doubtful accounts is included in Total Costs and Expenses. Interest expense is presented net of $768 of interest income.
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