-----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, Re1nr1q+3OnkPBG22uh0UoInRZS2r59r9ZNPwkx3AjVcTUBiDs4evcCSY0JIkSIf 4UPizZMNLCGOYqwmz+C8cQ== 0000912057-00-018126.txt : 20000417 0000912057-00-018126.hdr.sgml : 20000417 ACCESSION NUMBER: 0000912057-00-018126 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000229 FILED AS OF DATE: 20000414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AAR CORP CENTRAL INDEX KEY: 0000001750 STANDARD INDUSTRIAL CLASSIFICATION: AIRCRAFT & PARTS [3720] IRS NUMBER: 362334820 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06263 FILM NUMBER: 601497 BUSINESS ADDRESS: STREET 1: 1100 N WOOD DALE RD CITY: WOOD DALE STATE: IL ZIP: 60191 BUSINESS PHONE: 6302272000 MAIL ADDRESS: STREET 1: 1100 N WOOD DALE RD CITY: WOOD DALE STATE: IL ZIP: 60191 FORMER COMPANY: FORMER CONFORMED NAME: ALLEN AIRCRAFT RADIO INC DATE OF NAME CHANGE: 19700204 10-Q 1 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 29, 2000 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 ------------------------------ 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, 26,963,431 shares outstanding as of FEBRUARY 29, 2000 - ---------- ---------------- ----------------- AAR CORP. and Subsidiaries Quarterly Report on Form 10-Q February 29, 2000 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 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 6. Exhibits and Reports on Form 8-K Exhibits 14 Reports on Form 8-K 14 Signature Page 15
2 PART I, ITEM 1 - FINANCIAL STATEMENTS AAR CORP. and Subsidiaries Condensed Consolidated Balance Sheets As of February 29, 2000 and May 31, 1999 (000s omitted)
February 29, May 31, 2000 1999 ----------- ------------- (Unaudited) (Derived from audited financial statements) ASSETS Current assets: Cash and cash equivalents $ 4,431 $ 8,250 Accounts and trade notes receivable, less allowances of $5,088 and $4,830, respectively 169,511 164,302 Inventories 280,285 270,654 Equipment on or available for short-term lease 38,648 33,845 Deferred tax assets, deposits and other 34,060 31,135 --------- --------- Total current assets 526,935 508,186 --------- --------- Property, plant and equipment, net 109,557 104,012 --------- --------- Other assets: Investments in leveraged leases 34,318 34,053 Cost in excess of underlying net assets of acquired companies 39,169 40,093 Other 43,776 40,286 --------- --------- 117,263 114,432 --------- --------- $ 753,755 $ 726,630 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank borrowings $ 25,000 $ -- Current maturities of long-term debt 353 420 Accounts and trade notes payable 122,875 129,703 Accrued liabilities 27,104 36,803 Accrued taxes on income 1,401 6,660 --------- --------- Total current liabilities 176,733 173,586 --------- --------- Long-term debt, less current maturities 180,639 180,939 Deferred tax liabilities 52,701 44,870 Retirement benefit obligation 1,200 1,200 --------- --------- 234,540 227,009 --------- --------- Stockholders' equity: Preferred stock, $1.00 par value, authorized 250 shares, none issued -- -- Common stock, $1.00 par value, authorized 80,000 shares; issued 29,171 and 28,998 shares, respectively 29,171 28,998 Capital surplus 146,694 144,095 Retained earnings 210,223 184,529 Treasury stock, 2,208 and 1,617 shares at cost, respectively (35,479) (25,463) Accumulated other comprehensive income (loss)- Cumulative translation adjustments (8,127) (6,124) --------- --------- 342,482 326,035 --------- --------- $ 753,755 $ 726,630 ========= =========
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, 2000 and 1999 (Unaudited) (000s omitted except per share data)
Three Months Ended Nine Months Ended February 29/28, February 29/28, ----------------------------- ---------------------------- 2000 1999 2000 1999 --------- --------- --------- --------- Sales $ 256,558 $ 227,699 $ 750,537 $ 672,395 Pass through sales 15,773 23,285 48,717 111,312 --------- --------- --------- --------- Total sales 272,331 250,984 799,254 783,707 Costs and operating expenses: Cost of sales 227,257 208,278 664,262 657,212 Selling, general and administrative 24,404 23,768 72,556 70,617 --------- --------- --------- --------- 251,661 232,046 736,818 727,829 Operating income 20,670 18,938 62,436 55,878 Interest expense (5,979) (4,591) (17,749) (13,464) Interest income 959 399 1,929 536 --------- --------- --------- --------- Income before provision for income taxes 15,650 14,746 46,616 42,950 Provision for income taxes 4,695 4,468 13,924 13,014 --------- --------- --------- --------- Net income $ 10,955 $ 10,278 $ 32,692 $ 29,936 ========= ========= ========= ========= Earnings Per Share - Basic $ .41 $ .37 $ 1.20 $ 1.08 Earnings Per Share - Diluted $ .40 $ .37 $ 1.19 $ 1.07 Weighted average common shares outstanding - Basic 26,942 27,535 27,178 27,606 Weighted average common shares outstanding - Diluted 27,273 27,965 27,520 28,108 Dividends paid and declared per share of common stock $ .085 $ .085 $ .255 $ .255
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, 2000 and 1999 (Unaudited) (000s omitted)
Nine Months Ended February 29/28 --------------------------- 2000 1999 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 32,692 $ 29,936 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization 13,595 12,692 Deferred taxes 7,831 7,030 Change in certain assets and liabilities: Accounts receivable (5,791) 6,198 Inventories (10,630) (50,325) Equipment on or available for short-term lease (4,906) 8,230 Accounts and trade notes payable (6,673) 13,740 Accrued liabilities and taxes on income (15,541) (5,203) Other (4,910) 1,488 -------- -------- Net cash provided from operating activities 5,667 23,786 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment expenditures, net (17,574) (27,739) Acquisitions, less cash acquired -- (6,000) Deferred payment on acquisition -- (9,175) Proceeds from sale of business -- 11,685 Investment in equipment on long-term lease and leveraged leases (265) 23,489 Notes receivable and other (892) (9,953) -------- -------- Net cash used in investing activities (18,731) (17,693) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Bank borrowings 25,000 -- Repayment of long-term debt (368) (144) Proceeds from debt issuance -- 2,250 Cash dividends (6,999) (7,048) Purchases of treasury stock (8,997) (6,419) Proceeds from exercise of stock options and other 376 (68) -------- -------- Net cash provided from (used in) financing activities 9,012 (11,429) -------- -------- Effect of exchange rate changes on cash 233 -- -------- -------- Decrease in cash and cash equivalents (3,819) (5,336) Cash and cash equivalents, beginning of period 8,250 17,222 -------- -------- Cash and cash equivalents, end of period $ 4,431 $ 11,886 ======== ========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 5 AAR CORP. and Subsidiaries Condensed Consolidated Statements of Comprehensive Income For the Nine Months Ended February 29/28, 2000 and 1999 (000s omitted)
Nine Months Ended February 29/28, -------------------------------- 2000 1999 -------- -------- Net income $ 32,692 $ 29,936 Other comprehensive income (loss): Foreign currency translation (2,003) 1,100 -------- -------- Total Comprehensive Income $ 30,689 $ 31,036 ======== ========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 6 AAR CORP. and Subsidiaries Notes to Condensed Consolidated Financial Statements February 29, 2000 (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 February 29, 2000 and the condensed consolidated results of operations for the three and nine-month periods ended February 29/28, 2000 and 1999, and condensed consolidated statement of cash flows and comprehensive income for the nine-month periods ended February 29/28, 2000 and 1999. 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. During the 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. Beginning with the third quarter Form 10-Q, the Company will report pass through sales and the related cost of sales on the Consolidated Income Statement. This change has no impact on the current period or historical net income, earnings per share, condensed consolidated balance sheets, statements of cash flows or comprehensive income. 7 AAR CORP. and Subsidiaries Notes to Condensed Consolidated Financial Statements February 29, 2000 (Continued) (000s omitted) NOTE C - INVENTORY The summary of inventories is as follows:
February 29, May 31, 2000 1999 ---- ---- Raw materials and parts $ 55,027 $ 50,352 Work-in-process 11,773 12,733 Purchased aircraft, parts, engines and components held for sale 213,485 207,569 -------- -------- $280,285 $270,654 ======== ========
NOTE D - SUPPLEMENTAL CASH FLOWS INFORMATION Supplemental information on cash flows:
Nine Months Ended February 29/28, --------------- 2000 1999 ---- ---- Interest paid $15,817 $11,353 Income taxes paid 9,800 3,779 Income tax refunds received 400 600
8 AAR CORP. and Subsidiaries Notes to Condensed Consolidated Financial Statements February 29, 2000 (Continued) (000s omitted) 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 nine-month periods ended February 29/28, 2000 and 1999.
Three Months Ended Nine Months Ended February 29/28 February 29/28, ------------------------ ------------------------ 2000 1999 2000 1999 ------- ------- ------- ------- BASIC EPS Net income $10,955 $10,278 $32,692 $29,936 Common shares outstanding 26,942 27,535 27,178 27,606 ------- ------- ------- ------- Earnings per share - Basic $ .41 $ .37 $ 1.20 $ 1.08 ======= ======= ======= ======= DILUTED EPS Net income $10,955 $10,278 $32,692 $29,936 Common shares outstanding 26,942 27,535 27,178 27,606 Incremental shares due to hypothetical exercise of stock options 331 430 342 502 ------- ------- ------- ------- 27,273 27,965 27,520 28,108 ------- ------- ------- ------- Earnings per share - Diluted $ .40 $ .37 $ 1.19 $ 1.07 ======= ======= ======= =======
9 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, 2000 (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 nine month periods ended February 29/28, 2000 and 1999.
Three Months Ended Nine Months Ended February 29/28, February 29/28, -------------------------- -------------------------- 2000 1999 2000 1999 -------- -------- -------- -------- Sales: Aircraft and Engines $125,443 $111,117 $366,636 $299,457 Airframe and Accessories 101,844 89,282 294,475 279,165 Manufacturing 29,271 27,300 89,426 93,773 -------- -------- -------- -------- 256,558 227,699 750,537 672,395 Pass Through Sales 15,773 23,285 48,717 111,312 -------- -------- -------- -------- $272,331 $250,984 $799,254 $783,707 ======== ======== ======== ========
THREE-MONTH PERIOD ENDED FEBRUARY 29, 2000 (as compared with the same period of the prior year) Consolidated sales for the third quarter of the Company's fiscal year ending May 31, 2000, excluding pass through sales, increased $28.9 million or 12.7% over the same period in the prior year. Sales in Aircraft and Engines increased $14.3 million or 12.9% over the prior year period principally due to increased sales in the Company's aircraft and engine sales and leasing businesses, partially offset by reduced sales from engine parts inventory management programs as a result of fewer shop visits at certain customer's engine overhaul facilities. Sales in Airframe and Accessories increased $12.6 million or 14.1% over the prior year driven by increased sales from aircraft parts inventory management programs and strength in component, landing gear and airframe maintenance. Sales in Manufacturing increased $2.0 million or 7.2% as a result of increased sales of the Company's products supporting U.S. military deployment needs. Pass through sales were $15.8 million, compared to $23.3 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 $2.4 million or 5.5% over the prior year period due to increased sales partially offset by a decrease in the gross profit margin. Excluding the impact from pass through sales, the gross profit margin was 17.6% in the current quarter, compared to 18.8% in the prior year. This reduction in the gross profit margin was attributable to a low margin, quick-turn aircraft sale. Operating income increased $1.7 million or 9.1% as a result of increased gross profit, partially offset by higher selling, general and administrative expenses. Selling, general and administrative expenses were lower as a percentage of sales, however, total expenses increased principally due to increased personnel and information technology costs. 10 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) THREE-MONTH PERIOD ENDED FEBRUARY 29, 2000 (CONTINUED) (as compared with the same period of the prior year) Interest expense increased $1.4 million during the current year three month period compared to the prior year period principally as a result of increased average short-term borrowings outstanding. Interest income increased $0.6 million as a result of an increase in average outstanding interest bearing notes receivable during the third quarter compared to last year. Consolidated net income increased $0.7 million or 6.6% over the prior year period due to the factors discussed above. NINE-MONTH PERIOD ENDED FEBRUARY 29, 2000 (as compared with the same period of the prior year) Consolidated net sales for the nine-month period ended February 29, 2000, excluding pass through sales, increased $78.1 million or 11.6% over the prior year period reflecting increased demand for the Company's products and services. Aircraft and Engine sales increased $67.2 million or 22.4% 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 $15.3 million or 5.5% over the prior period reflecting higher demand for aircraft and landing gear maintenance and component services, partially offset by lower airframe parts sales. Manufacturing sales decreased $4.3 million or 4.6% 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. military deployment needs. Pass through sales were $48.7 million, compared to $111.3 million in the prior year nine month period. As inventory management programs mature, pass through sales typically decline as the Company sources more it 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 $8.5 million or 6.7% over the prior year period due to increased sales partially offset by a decrease in the gross profit margin. Excluding the impact from pass through sales, the gross profit margin was 18.0% in the current nine month period, compared to 18.8% in the prior year. This reduction in the 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, as well as the result of a low margin, quick-turn aircraft sale in the third quarter of the current fiscal year. Operating income increased $6.6 million or 11.7% over the prior year period as a result of increased gross profit partially offset by higher selling, general and administrative expenses. Selling, general and administrative expenses were lower as a percentage of sales, however, total expenses increased principally due to increased personnel costs. Interest expense increased $4.3 million principally as a result of increased average short-term borrowings outstanding during the current year nine month period as compared to the same period last year. Interest income increased $1.4 million as a result of an increase in average outstanding interest bearing notes receivable during the current year compared to prior year. Consolidated net income increased $2.8 million or 9.2% principally as a result of the factors discussed above. 11 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) AT FEBRUARY 29, 2000 (as compared with May 31, 1999) At February 29, 2000, the Company's liquidity and capital resources included cash of $4.4 million and working capital of $350.2 million. At February 29, 2000, the Company's ratio of long-term debt to capitalization was 34.5%, down from 35.7% at May 31, 1999. The Company continues to maintain its available external sources of financing including $154.2 million of unused bank lines, a universal shelf registration on file with the SEC 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 February 29, 2000, accounts receivable sold under this arrangement were $28.2 million, essentially unchanged from November 30, 1999 and $2.9 million higher compared to May 31, 1999. During the nine month period ended February 29, 2000 the Company generated $5.7 million of cash from operations compared to $23.8 million during the nine month period ended February 28, 1999. The decrease in cash generated from operations was principally due to a reduction in accounts and trade notes payable and accrued liabilities, and increases in accounts receivable, inventories and equipment on or available for short-term lease at February 29, 2000. During the nine month period ended February 29, 2000, the Company's investing activities used $18.7 million of cash, primarily as a result of property, plant and equipment expenditures. During the nine month period ended February 28, 1999, the Company used $17.7 million of cash as a result of property, plant and equipment expenditures and an acquisition, partially offset by 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. During the nine month period ended February 29, 2000, the Company's financing activities generated $9.0 million of cash compared to using $11.4 million during the nine month period ended February 28, 1999. The increase in cash generated from financing activities was primarily due to proceeds from short-term bank borrowings of $25.0 million during fiscal 2000. 12 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 29, 2000 (CONTINUED) (as compared with May 31, 1999) The Company believes that its cash and cash equivalents and available sources of financing will continue to provide the Company with the ability to meet its ongoing working capital requirements, make anticipated capital expenditures, meet contractual commitments, and pay dividends.* A summary of key financial conditions, ratios, and lines of credit follows:
Description February 29, May 31, ----------- 2000 1999 -------- -------- Working capital $350,202 $334,600 Current ratio 3.0:1 2.9:1 Bank credit lines: Borrowings outstanding 25,000 -- Available but unused lines 154,211 178,800 -------- -------- Total credit lines $179,211 $178,800 ======== ======== Long-term debt less current maturities $180,639 $180,939 Ratio of long-term debt to capitalization 34.5% 35.7%
FORWARD-LOOKING STATEMENTS Part I, Item 2 - 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 adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those 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 nine month period ended February 29/28, 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 and financial position of the Company during the nine month period ended February 29/28, 2000 and 1999, respectively. * See "Forward Looking Statements" section of this item. 13 PART II - OTHER INFORMATION AAR CORP. and Subsidiaries February 29, 2000 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 29, 2000 (b) REPORTS ON FORM 8-K FOR QUARTER ENDED FEBRUARY 29, 2000: The Company filed no reports on Form 8-K during the three months ended February 29, 2000. 14 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 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 EX-27.1 2 EXHIBIT 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, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS MAY-31-2000 JUN-01-1999 FEB-29-2000 4,431 0 174,599 5,088 280,285 526,935 198,617 89,060 753,755 176,733 180,639 0 0 29,171 313,311 753,755 799,254 799,254 664,262 736,818 0 1,180 15,820 46,616 13,924 32,692 0 0 0 32,692 1.20 1.19 Provision for doubtful accounts is included in Total Costs and Expenses. Interest expense is presented net of $1,929 of interest income.
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