-----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, PCXGkHDBULryUfMl5i/YoPF28OnETS/9MRkCno/OB55BUhltaVMtRd9Tbf7TPU6f 1iUNRXg9EGw9NBX1/bNgvg== 0000912057-00-018134.txt : 20000417 0000912057-00-018134.hdr.sgml : 20000417 ACCESSION NUMBER: 0000912057-00-018134 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991130 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/A SEC ACT: SEC FILE NUMBER: 001-06263 FILM NUMBER: 601518 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/A 1 10-Q/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- For Quarterly Period Ended NOVEMBER 30, 1999 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 ------------------------------ 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 of the issuer's classes of common stock, as of the latest practicable date. $1.00 par value, 27,180,521 shares outstanding as of NOVEMBER 30, 1999 - --------- ------------------ ------------------- AAR CORP. and Subsidiaries Quarterly Report on Form 10-Q November 30, 1999 Table of Contents
Page ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income (Revised) 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 4. Submission of Matters to a Vote of Security Holders 14 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 November 30, 1999 and May 31, 1999 (000s omitted)
November 30, May 31, 1999 1999 ----------- ------------- (Unaudited) (Derived from audited financial statements) ASSETS Current assets: Cash and cash equivalents $ 2,821 $ 8,250 Accounts receivable, less allowances of $4,658 and $4,830 respectively 172,360 164,302 Inventories 281,008 270,654 Equipment on or available for short-term lease 40,007 33,845 Deferred tax assets, deposits and other 26,825 31,135 --------- --------- Total current assets 523,021 508,186 --------- --------- Property, plant and equipment, net 108,868 104,012 --------- --------- Other assets: Investments in leveraged leases 34,236 34,053 Cost in excess of underlying net assets of acquired companies 39,476 40,093 Other 41,442 40,286 --------- --------- 115,154 114,432 --------- --------- $ 747,043 $ 726,630 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank borrowings $ 23,600 $ -- Current maturities of long-term debt 334 420 Accounts and trade notes payable 124,834 129,703 Accrued liabilities 26,596 36,803 Accrued taxes on income 5,072 6,660 --------- --------- Total current liabilities 180,436 173,586 --------- --------- Long-term debt, less current maturities 180,715 180,939 Deferred tax liabilities 45,604 44,870 Retirement benefit obligation 1,200 1,200 --------- --------- 227,519 227,009 --------- --------- Stockholders' equity: Preferred stock, $1.00 par value, authorized 250 shares, none issued -- -- Common stock, $1.00 par value, authorized 80,000 shares; issued 29,080 and 28,998 shares, respectively 29,080 28,998 Capital surplus 145,589 144,095 Retained earnings 201,558 184,529 Treasury stock, 1,899 and 1,617 shares at cost, respectively (30,100) (25,463) Accumulated other comprehensive income (loss)- Cumulative translation adjustments (7,039) (6,124) --------- --------- 339,088 326,035 --------- --------- $ 747,043 $ 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 Six Months Ended November 30, 1999 and 1998 (Unaudited) (000s omitted except per share data)
Three Months Ended Six Months Ended November 30, November 30, (Revised) (Revised) ----------------------------- ----------------------------- 1999 1998 1999 1998 --------- --------- --------- --------- Sales $ 248,070 $ 228,798 $ 493,979 $ 444,696 Pass through sales 12,170 53,434 32,944 88,027 --------- --------- --------- --------- Total sales 260,240 282,232 526,923 532,723 Costs and operating expenses: Cost of sales 214,512 239,492 437,005 448,934 Selling, general and administrative 24,469 23,839 48,152 46,849 --------- --------- --------- --------- 238,981 263,331 485,157 495,783 Operating income 21,259 18,901 41,766 36,940 Interest expense (5,961) (4,611) (11,770) (8,873) Interest income 282 108 970 137 --------- --------- --------- --------- Income before provision for income taxes 15,580 14,398 30,966 28,204 Provision for income taxes 4,674 4,363 9,229 8,546 --------- --------- --------- --------- Net income $ 10,906 $ 10,035 $ 21,737 $ 19,658 ========= ========= ========= ========= Earnings per share - Basic $ .40 $ .36 $ .80 $ .71 Earnings per share - Diluted $ .40 $ .36 $ .79 $ .70 Weighted average common shares outstanding - Basic 27,199 27,570 27,296 27,642 Weighted average common shares outstanding - Diluted 27,489 28,042 27,662 28,210 Dividends paid and declared per share of common stock $ .085 $ .085 $ .17 $ .17
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 Six Months Ended November 30, 1999 and 1998 (Unaudited) (000s omitted)
Six Months Ended November 30, --------------------------- 1999 1998 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 21,737 $ 19,658 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization 9,010 8,430 Deferred taxes 734 3,638 Change in certain assets and liabilities: Accounts receivable (8,383) (18,657) Inventories (10,793) (49,333) Equipment on or available for short term lease (6,168) 2,038 Accounts and trade notes payable (4,776) 49,361 Accrued liabilities and taxes on income (11,140) (7,615) Other 4,232 (1,909) -------- -------- Net cash provided from (used in) operating activities (5,547) 5,611 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment expenditures, net (12,604) (16,262) Acquisitions, less cash acquired -- (6,000) Proceeds from sale of business -- 11,685 Investment in equipment on long-term leases and leveraged leases (183) 30,689 Notes receivable and other (1,404) (7,541) -------- -------- Net cash provided from (used in) investing activities (14,191) 12,571 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Bank borrowings 23,600 -- Repayment of long-term debt (311) (123) Cash dividends (4,709) (4,697) Purchases of treasury stock (4,446) (3,520) Other (23) 30 -------- -------- Net cash provided from (used in) financing activities 14,111 (8,310) -------- -------- Effect of exchange rate changes on cash 198 (3) -------- -------- Increase (decrease) in cash and cash equivalents (5,429) 9,869 Cash and cash equivalents, beginning of period 8,250 17,222 -------- -------- Cash and cash equivalents, end of period $ 2,821 $ 27,091 ======== ========
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 Six Months Ended November 30, 1999 and 1998 (000s omitted)
Six Months Ended November 30, --------------------------- 1999 1998 -------- -------- Net income $ 21,737 $ 19,658 Other comprehensive income (loss) - Foreign currency translation (915) 1,441 -------- -------- Total Comprehensive Income $ 20,822 $ 21,099 ======== ========
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 November 30, 1999 (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 November 30, 1999 and the condensed consolidated results of operations for the three and six-month periods ended November 30, 1999 and 1998, and condensed consolidated statement of cash flows and comprehensive income for the six-month periods ended November 30, 1999 and 1998. 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. In December 1999, during the Company's 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. The Company has revised the quarterly Income Statement in this Form 10-Q/A to reflect the inclusion of pass through sales in sales and cost of sales. This change has no impact on the current period or historical net income, earnings per share, the condensed consolidated balance sheets, statements of cash flows or comprehensive income. 7 AAR CORP. and Subsidiaries Notes to Condensed Consolidated Financial Statements November 30, 1999 (Continued) (000s omitted) NOTE C - INVENTORY The summary of inventories is as follows:
November 30, May 31, 1999 1999 -------- -------- Raw materials and parts $ 55,387 $ 50,352 Work-in-process 10,709 12,733 Purchased aircraft, parts, engines and components held for sale 214,912 207,569 -------- -------- $281,008 $270,654 ======== ========
NOTE D - SUPPLEMENTAL CASH FLOWS INFORMATION Supplemental information on cash flows:
Six Months Ended November 30, ------------------------ 1999 1998 ------- ------- Interest paid $11,393 $ 8,285 Income taxes paid 8,998 2,975 Income tax refunds received 311 370
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 six-month periods ended November 30, 1999 and 1998. 8 AAR CORP. and Subsidiaries Notes to Condensed Consolidated Financial Statements November 30, 1999 (Continued) (000s omitted) NOTE E - COMMON STOCK AND EARNINGS PER SHARE OF COMMON STOCK (CONTINUED)
Three Months Ended Six Months Ended November 30 November 30 ------------------------ ------------------------ 1999 1998 1999 1998 ------- ------- ------- ------- BASIC EPS Net income $10,906 $10,035 $21,737 $19,658 Common shares outstanding 27,199 27,570 27,296 27,642 Basic earnings per share .40 .36 .80 .71 DILUTED EPS Net income $10,906 $10,035 $21,737 $19,658 Common shares outstanding 27,199 27,570 27,296 27,642 Additional shares due to hypothetical exercise of stock options 290 472 366 568 ------- ------- ------- ------- 27,489 28,042 27,662 28,210 ------- ------- ------- ------- Diluted earnings per share $ .40 $ .36 $ .79 $ .70 ======= ======= ======= =======
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 SIX-MONTH PERIOD ENDED NOVEMBER 30, 1999 (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 six months ended November 30, 1999 and 1998.
Three Months Ended Six Months Ended November 30, November 30, (Revised) (Revised) -------------------------- -------------------------- 1999 1998 1999 1998 -------- -------- -------- -------- Sales: Aircraft and Engines $121,315 $ 98,271 $241,192 $188,340 Airframe and Accessories 96,488 96,969 192,630 189,884 Manufacturing 30,267 33,558 60,157 66,472 -------- -------- -------- -------- 248,070 228,798 493,979 444,696 Pass Through Sales 12,170 53,434 32,944 88,027 -------- -------- -------- -------- $260,240 $282,232 $526,923 $532,723 ======== ======== ======== ========
THREE-MONTH PERIOD ENDED NOVEMBER 30, 1999 (as compared with the same period of the prior year) Consolidated sales for the second quarter of the Company's fiscal year ending May 31, 2000, excluding pass through sales, increased $19.3 million or 8.4% over the same period in the prior year. Sales in Aircraft and Engines increased $23.0 million or 23.4% reflecting higher aircraft sales and leasing, engine sales and leasing and engine parts sales, notwithstanding lower engine inputs and reduced demand at certain inventory management sites. Sales in Airframe and Accessories were essentially unchanged from the prior year as increased revenues at the Company's aircraft maintenance and component repair facilities were offset by lower airframe part sales. Sales in Manufacturing decreased $3.3 million or 9.8% due to the impact of the sale of the Company's floor maintenance products manufacturing subsidiary in November, 1998, partially offset by increased sales of products supporting the U.S. Government's rapid deployment program. Adjusting for the sale of the Company's floor maintenance products manufacturing subsidiary, net sales of the Company's manufacturing products increased 3.1%. Pass through sales were $12.1 million, compared to $53.4 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 $3.0 million or 7.0% over the prior period due to increased sales partially offset by a decrease in the consolidated gross profit margin. Excluding the impact from pass through sales, the gross profit margin was 18.4% in the current quarter, compared to 18.7% in the prior year. This reduction in the consolidated gross profit margin was primarily attributable to the mix of inventories sold. Operating income increased $2.4 million or 12.5% compared to the prior year period as a result of increased gross profit, partially offset by higher general and administrative expenses. Selling, general and administrative expenses were lower as a percentage of consolidated net sales, however total expenses increased principally due to increased information technology and personnel costs. Consolidated net income increased $1.0 million or 8.7% over the prior year period due primarily to the factors discussed above. 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) SIX-MONTH PERIOD ENDED NOVEMBER 30, 1999 (as compared with the same period of the prior year) Consolidated net sales for the first half of fiscal 2000, excluding pass through sales, increased $49.3 million or 11.1% over the prior year six month period reflecting increased demand for the Company's products and services. Aircraft and Engines sales increased $52.9 million or 28.1% 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 $2.7 million or 1.4% over the prior period reflecting higher demand for aircraft maintenance and component services, partially offset by lower airframe parts sales. Manufacturing sales decreased $6.3 million or 9.5% 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. government's rapid deployment program. Pass through sales were $32.9 million, compared to $88.0 million in the prior year six month period. 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 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 $6.1 million or 7.3% over the prior period due to increased sales partially offset by a decrease in the consolidated gross profit margin. Excluding the impact from pass through sales, the gross profit margin was 18.2% in the current six month period, compared to 18.8% in the prior six month period. This reduction in the consolidated 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. Operating income increased $4.8 million or 13.1% compared to the prior year period as a result of increased gross profit, partially offset by higher general and administrative expenses. Selling, general and administrative expenses were lower as a percentage of consolidated sales, however total expenses increased principally due to increased information technology and personnel costs. Consolidated net income increased $2.1 million or 10.6% over the prior year period due primarily to 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 FINANCIAL CONDITION (000s omitted except ratios) AT NOVEMBER 30, 1999 At November 30, 1999, the Company's liquidity and capital resources included cash of $2.8 million and working capital of $342.6 million. At November 30, 1999, the Company's ratio of long-term debt to capitalization was 34.8%, down from 35.7% at May 31, 1999. The Company continues to maintain its available external sources of financing including $155.1 million of unused bank lines, a universal shelf registration on file with the Securities and Exchange Commission 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 November 30, 1999, accounts receivable sold under this arrangement were $27.6 million, an increase of $2.3 million from May 31, 1999. During the six month period ended November 30, 1999, the Company used $5.5 million of cash from operations compared to generating $5.6 million of cash from operations during the six month period ended November 30, 1998. The decrease in cash generated from operations was due principally to a reduction in accounts and trade notes payable during the six month period ended November 30, 1999. During the six month period ended November 30, 1999, the Company's investing activities used $14.2 million of cash, principally as a result of property, plant and equipment expenditures. During the six month period ended November 30, 1998, the company generated $12.6 million of cash from investing activities reflecting 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, partially offset by property, plant and equipment expenditures and an acquisition. During the six month period ended November 30, 1999, the Company's financing activities generated $14.1 million of cash compared to using $8.3 million during the six month period ended November 30, 1998. The increase in cash generated from financing activities was due to proceeds from bank borrowings in the first half of fiscal year 2000 of $23.6 million. The Company believes that its cash and cash equivalents and available sources of financing 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.* A summary of key indicators of financial condition and lines of credit follow:
November 30, May 31, Description 1999 1999 ------------------- ---- ---- Working capital $342,585 $334,600 Current ratio 2.9:1 2.9:1 Bank credit lines: Borrowings outstanding 23,600 -- Available but unused lines 155,056 178,800 -------- -------- Total credit lines $178,656 $178,800 ======== ======== Long-term debt, less current maturities $180,715 $180,939 Ratio of long-term debt to capitalization 34.8% 35.7%
* See "Forward Looking Statements" section of this item. 12 PART I, ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS AAR CORP. AND SUBSIDIARIES FINANCIAL CONDITION (CONTINUED) (000s omitted except ratios) AT NOVEMBER 30, 1999 (CONTINUED) YEAR 2000 The Company experienced no incidents associated with the Year 2000 nor is the Company aware of any incidents associated with the Year 2000 at its major customers or third-party suppliers. FORWARD-LOOKING STATEMENTS 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, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from these 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 first half of fiscal 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 for the Company during the first half of fiscal 2000 and 1999, respectively. 13 PART II - OTHER INFORMATION AAR CORP. and Subsidiaries November 30, 1999 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Stockholders of the Company was held on October 13, 1999. The following two items were acted upon at the meeting: 1) Election of three Class III directors to serve until the 2002 Annual Meeting of Stockholders. Three directors were nominated for election. Directors nominated who receive the majority of votes cast are elected as directors. Those directors and the voting results were as follows:
Votes For ---------- A. Robert Abboud 22,163,992 Howard B. Bernick 22,173,232 Ira A. Eichner 22,172,853
2) Amendment to the Company's restated Certificate of Incorporation to increase the authorized number of shares of common stock from 80,000,000 to 100,000,000. The results of the vote were as follows:
For 20,346,855 Against 3,284,374 Abstain 20,128
No other matters were presented to the Company's shareholders for action at the Annual Meeting of Stockholders. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS ITEM 10 Material Contracts 10.1 Sixth Amendment to AAR Corp. Stock Benefit Plan dated October 14, 1999. 27 Financial 27.1 Financial Data Schedule for the Registrant's Data Schedule six-month interim period ended November 30, 1999 (Revised). (b) REPORTS ON FORM 8-K FOR QUARTER ENDED NOVEMBER 30, 1999 The Company filed no reports on Form 8-K during the three months ended November 30, 1999. 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: January 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-10 2 EXHIBIT 10 EXHIBIT 10.1 SIXTH AMENDMENT TO AAR CORP. STOCK BENEFIT PLAN WHEREAS, AAR CORP. (the "Company") adopted the AAR CORP. Stock Benefit Plan (the "Plan") on July 16, 1992, amended the Plan by a First Amendment dated July 29, 1996, a Second Amendment dated January 2, 1997, a Third Amendment dated May 6, 1997, a Fourth Amendment dated March 20, 1998, and a Fifth Amendment dated December 16, 1999, and reserved the right to further amend the Plan; and WHEREAS, the Board of Directors of the Company deems it appropriate to further amend the Plan as described below and approved such amendment at its October 14, 1999 meeting. NOW, THEREFORE, the Plan is hereby amended as follows, effective October 13,1999: Section 5.1 is amended to read as follows: "All Awards to Non-Employee Directors shall be automatic and non-discretionary. Each individual who is a Non-Employee Director on the effective date of the Plan shall automatically receive an Award, on the effective date, consisting of a NSO to purchase 10,000 Shares and each individual who becomes a Non-Employee Director after the effective date of the Plan shall automatically receive an Award, on the date he or she becomes a Non-Employee Director, consisting of a NSO to purchase 10,000 Shares. The preceding formula for Awards to Non-Employee Directors shall not be changed more than once in any six-month period." This Sixth Amendment has been executed by the Company, by its duly authorized officer, on this 14 day of October, 1999, and attested by its Secretary. AAR CORP. By /s/ David P. Storch ------------------------------------- David P. Storch President and Chief Executive Officer ATTEST: /s/Howard A. Pulsifer - -------------------------------------------- Howard A. Pulsifier, Secretary SEAL EX-27 3 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S REPORT ON FORM 10-Q FOR THE SIX MONTH INTERIM PERIOD ENDED NOVEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS MAY-31-2000 JUN-01-1999 NOV-30-1999 2,821 0 177,018 4,658 281,008 523,021 195,804 86,936 747,043 180,436 180,715 0 0 29,080 310,008 747,043 526,923 526,923 437,005 485,157 0 819 10,800 30,966 9,229 21,737 0 0 0 21,737 .80 .79 PROVISION FOR DOUBTFUL ACCOUNTS IS INCLUDED IN TOTAL COSTS AND EXPENSES. INTEREST EXPENSE IS PRESENTED NET OF $970 OF INTEREST INCOME.
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