Aar Corp 10-Q for FY2022 Q3

Aar Corp (AIR)

10-Q 2022-03-22 For: 2022-02-28

Added on April 04, 2026

About this 10-Q

Aar Corp filed this 10-Q on March 22, 2022, covering the quarter ended February 28, 2022 (FY2022 Q3).

Headline figures

Quarter ended February 28, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $452.2M; up 10.2% from $410.3M a year earlier
Net income: $22.5M; down 19.9% from net income of $28.1M a year earlier
Diluted EPS: $0.63; down 20.3% from $0.79 a year earlier

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Delaware		36-2334820
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One AAR Place, 1100 N. Wood Dale Road Wood Dale, Illinois		60191
(Address of principal executive offices)		(Zip Code)


		Page
Part I — FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	5
	Condensed Consolidated Statements of Comprehensive Income	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of Changes in Equity	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

Part II — OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 6.	Exhibits	31

Exhibit Index		31
Signatures		32


ASSETS

	February 28,		May 31,
	2022		2021
	(Unaudited)
Current assets:
Cash and cash equivalents	$	40.6	$	51.8
Restricted cash		2.4		8.4
Accounts receivable, less allowances of $17.5 and $16.4, respectively		209.3		166.7
Contract assets		68.8		71.9
Inventories		535.2		540.6
Rotable assets and equipment on or available for short-term lease		53.6		50.4
Assets of discontinued operations		17.0		19.5
Other current assets		50.3		27.7
Total current assets		977.2		937.0

Property, plant and equipment, net of accumulated depreciation of $258.4 and $260.2 respectively		106.9		120.0

Other assets:
Goodwill and intangible assets, net		121.0		123.8
Operating lease right-of-use assets, net		73.2		75.8
Rotable assets supporting long-term programs		171.1		184.3
Other non-current assets		102.6		98.8
		467.9		482.7
	$	1,552.0	$	1,539.7


LIABILITIES AND EQUITY

	February 28,		May 31,
	2022		2021
	(Unaudited)
Current liabilities:
Accounts payable	$	140.8	$	127.2
Accrued liabilities		157.4		148.3
Deferred revenue		26.8		25.9
Liabilities of discontinued operations		18.1		35.4
Total current liabilities		343.1		336.8

Long-term debt		103.3		133.7
Operating lease liabilities		57.9		59.9
Other liabilities		30.0		34.9
		191.2		228.5

Equity:
Preferred stock, $1.00 par value, authorized 250,000 shares; none issued		—		—
Common stock, $1.00 par value, authorized 100,000,000 shares; issued 45,300,786 shares at cost		45.3		45.3
Capital surplus		481.4		479.8
Retained earnings		796.5		741.7
Treasury stock, 10,104,109 and 9,925,551 shares at cost, respectively		(285.4)		(274.1)
Accumulated other comprehensive loss		(20.1)		(18.3)
Total equity		1,017.7		974.4
	$	1,552.0	$	1,539.7


	Three Months Ended				Nine Months Ended
	February 28,				February 28,
	2022		2021		2022		2021
Sales:
Sales from products	$	275.1	$	227.1	$	789.2	$	696.5
Sales from services		177.1		183.2		554.7		518.2
		452.2		410.3		1,343.9		1,214.7
Cost and operating expenses:
Cost of products		217.8		179.8		637.5		578.6
Cost of services		154.0		144.5		483.0		432.0
Provision for doubtful accounts		0.1		1.4		0.9		5.8
Selling, general and administrative		48.9		44.9		145.3		133.6
		420.8		370.6		1,266.7		1,150.0
Loss from joint ventures		(1.1)		—		(1.7)		(0.2)
Operating income		30.3		39.7		75.5		64.5
Loss on sale of business		—		—		(1.3)		(19.5)
Other income, net		1.1		4.4		2.1		3.9
Interest expense		(0.6)		(1.1)		(1.8)		(4.1)
Interest income		—		0.1		0.1		0.2
Income from continuing operations before provision for income taxes		30.8		43.1		74.6		45.0
Provision for income taxes		8.2		12.0		20.0		13.4
Income from continuing operations		22.6		31.1		54.6		31.6
Income (Loss) from discontinued operations, net of tax		(0.1)		(3.0)		0.2		(9.8)
Net income	$	22.5	$	28.1	$	54.8	$	21.8

Earnings per share – basic:
Earnings from continuing operations	$	0.64	$	0.88	$	1.54	$	0.90
Income (Loss) from discontinued operations		—		(0.09)		0.01		(0.28)
Earnings per share – basic	$	0.64	$	0.79	$	1.55	$	0.62

Earnings per share – diluted:
Earnings from continuing operations	$	0.63	$	0.87	$	1.52	$	0.89
Income (Loss) from discontinued operations		—		(0.08)		0.01		(0.28)
Earnings per share – diluted	$	0.63	$	0.79	$	1.53	$	0.61


									Accumulated
									Other
	Common		Capital		Retained		Treasury		Comprehensive
	Stock		Surplus		Earnings		Stock		Income (Loss)		Total Equity
Balance, May 31, 2021	$	45.3	$	479.8	$	741.7	$	(274.1)	$	(18.3)	$	974.4
Net income		—		—		11.5		—		—		11.5
Stock option activity		—		1.1		—		0.2		—		1.3
Restricted stock activity		—		(1.0)		—		2.3		—		1.3
Other comprehensive loss, net of tax		—		—		—		—		(0.3)		(0.3)
Balance, August 31, 2021	$	45.3	$	479.9	$	753.2	$	(271.6)	$	(18.6)	$	988.2
Net income		—		—		20.8		—		—		20.8
Stock option activity		—		0.9		—		—		—		0.9
Restricted stock activity		—		0.7		—		—		—		0.7
Other comprehensive loss, net of tax		—		—		—		—		(3.6)		(3.6)
Balance, November 30, 2021	$	45.3	$	481.5	$	774.0	$	(271.6)	$	(22.2)	$	1,007.0
Net income		—		—		22.5		—		—		22.5
Stock option activity		—		(0.4)		—		6.4		—		6.0
Restricted stock activity		—		0.3		—		—		—		0.3
Repurchase of shares		—		—		—		(20.2)		—		(20.2)
Other comprehensive income, net of tax		—		—		—		—		2.1		2.1
Balance, February 28, 2022	$	45.3	$	481.4	$	796.5	$	(285.4)	$	(20.1)	$	1,017.7


Risk-free interest rate	0.8	%
Expected volatility of common stock	41.6	%
Dividend yield	0.8	%
Expected option term in years	5.3


	Currency
	Translation		Pension
	Adjustments		Plans		Total
Balance at December 1, 2021	$	(0.6)	$	(21.6)	$	(22.2)
Other comprehensive income before reclassifications		(0.5)		2.2		1.7
Amounts reclassified from AOCL		—		0.4		0.4
Total other comprehensive income (loss)		(0.5)		2.6		2.1
Balance at February 28, 2022	$	(1.1)	$	(19.0)	$	(20.1)

Balance at December 1, 2020	$	0.3	$	(43.3)	$	(43.0)
Other comprehensive loss before reclassifications		0.2		0.2		0.4
Amounts reclassified from AOCL		—		0.2		0.2
Total other comprehensive income		0.2		0.4		0.6
Balance at February 28, 2021	$	0.5	$	(42.9)	$	(42.4)


	Three Months Ended February 28,						Nine Months Ended February 28,
	2022		2021		% Change		2022		2021		% Change
Sales:
Aviation Services
Commercial	$	264.0	$	204.7	29.0	%	$	788.2	$	566.5	39.1	%
Government and defense		174.0		185.0	(5.9)	%		504.7		571.8	(11.7)	%
	$	438.0	$	389.7	12.4	%	$	1,292.9	$	1,138.3	13.6	%
Expeditionary Services
Commercial	$	1.0	$	3.1	(67.7)	%	$	1.8	$	10.8	(83.3)	%
Government and defense		13.2		17.5	(24.6)	%		49.2		65.6	(25.0)	%
	$	14.2	$	20.6	(31.1)	%	$	51.0	$	76.4	(33.2)	%


				Total Number
				of Shares	Approximate
				Purchased as	Dollar Value of
				Part of Publicly	Shares that May Yet Be
	Total Number	Average		Announced	Purchased
	of Shares	Price Paid per		Plans or	Under the Plans
Period	Purchased	Share		Programs ⁽¹⁾	or Programs ⁽¹⁾
12/1/2021 – 12/31/2021	114,954	$	38.73	114,954	$	145,545,523
1/1/2022 – 1/31/2022	277,285		40.85	277,285		134,211,711
2/1/2022 – 2/28/2022	108,000		40.41	108,000		129,844,763
Total	500,239	$	40.27	500,239

Exhibit No.	Description		Exhibits

10.	Material Contracts	10.1	Amendment dated December 23, 2021 to Purchase Agreement dated as of February 23, 2018 by and among AAR CORP., as seller representative and servicer, the sellers time to time party thereto, and Citibank, N.A., as buyer (filed herewith).

31.	Rule 13a-14(a)/15(d)-14(a) Certifications	31.1	Section 302 Certification dated March 22, 2022 of John M. Holmes, President and Chief Executive Officer of Registrant (filed herewith).

		31.2	Section 302 Certification dated March 22, 2022 of Sean M. Gillen, Vice President and Chief Financial Officer of Registrant (filed herewith).

32.	Section 1350 Certifications	32.1	Section 906 Certification dated March 22, 2022 of John M. Holmes, President and Chief Executive Officer of Registrant (filed herewith).

		32.2	Section 906 Certification dated March 22, 2022 of Sean M. Gillen, Vice President and Chief Financial Officer of Registrant (filed herewith).

101.	Interactive Data File	101	The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2022, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at February 28, 2022 and May 31, 2021, (ii) Condensed Consolidated Statements of Income for the three- and nine-months ended February 28, 2022 and 2021, (iii) Condensed Consolidated Statements of Comprehensive Income for the three- and nine-months ended February 28, 2022 and 2021, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended February 28, 2022 and 2021, (v) Condensed Consolidated Statements of Changes in Equity for the three- and nine-months ended February 28, 2022 and 2021 (vi) Notes to Condensed Consolidated Financial Statements.**

104.	Cover Page Interactive Data File	104	Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)


		AAR CORP.
		(Registrant)


Date:	March 22, 2022	/s/ SEAN M. GILLEN
		Sean M. Gillen
		Vice President and Chief Financial Officer
		(Principal Financial Officer)



		/s/ ERIC S. PACHAPA
		Eric S. Pachapa
		Vice President, Controller and Chief Accounting Officer
		(Principal Accounting Officer)


	Three Months Ended				Nine Months Ended
	February 28,				February 28,
	2022		2021		2022		2021
Deferred revenue at beginning of period	$	(42.7)	$	(48.4)	$	(31.3)	$	(99.2)
Revenue deferred		(81.9)		(61.7)		(204.0)		(184.7)
Revenue recognized		82.4		72.4		187.4		248.5
Other		6.7		(0.6)		12.4		(2.9)
Deferred revenue at end of period	$	(35.5)	$	(38.3)	$	(35.5)	$	(38.3)


	February 28,		May 31,
	2022		2021
U.S. Government contracts:
Trade receivables	$	33.6	$	24.1
Unbilled receivables		16.9		25.2
		50.5		49.3
All other customers:
Trade receivables		144.7		104.9
Unbilled receivables		14.1		12.5
		158.8		117.4
	$	209.3	$	166.7


	February 28,		May 31,
	2022		2021
Aircraft and engine parts, components and finished goods	$	451.0	$	468.4
Raw materials and parts		61.4		53.0
Work-in-process		22.8		19.2
	$	535.2	$	540.6


	February 28,		May 31,
	2022		2021
Revolving Credit Facility expiring September 25, 2024 with interest payable monthly	$	104.5	$	109.5
Term loan due November 1, 2021 with interest payable monthly		—		25.7
Total debt		104.5		135.2
Debt issuance costs, net		(1.2)		(1.5)
Long-term debt	$	103.3	$	133.7