Aar Corp 10-Q for FY2022 Q2

Aar Corp (AIR)

10-Q 2021-12-21 For: 2021-11-30

Added on April 04, 2026

About this 10-Q

Aar Corp filed this 10-Q on December 21, 2021, covering the quarter ended November 30, 2021 (FY2022 Q2).

Headline figures

Quarter ended November 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $436.6M; up 8.2% from $403.6M a year earlier
Net income: $20.8M; up 153.7% from net income of $8.2M a year earlier
Diluted EPS: $0.58; up 152.2% from $0.23 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 Operations	5
	Condensed Consolidated Statements of Comprehensive Incom (Loss)	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 6.	Exhibits	31

Exhibit Index		31
Signatures		32


ASSETS

	November 30,		May 31,
	2021		2021
	(Unaudited)
Current assets:
Cash and cash equivalents	$	42.7	$	51.8
Restricted cash		3.7		8.4
Accounts receivable, less allowances of $17.8 and $16.4, respectively		192.1		166.7
Contract assets		68.5		71.9
Inventories		531.7		540.6
Rotable assets and equipment on or available for short-term lease		53.9		50.4
Assets of discontinued operations		17.9		19.5
Other current assets		36.2		27.7
Total current assets		946.7		937.0

Property, plant and equipment, net of accumulated depreciation of $254.8 and $260.2 respectively		106.2		120.0

Other assets:
Goodwill and intangible assets, net		120.9		123.8
Operating lease right-of-use assets, net		76.3		75.8
Rotable assets supporting long-term programs		173.6		184.3
Other non-current assets		105.9		98.8
		476.7		482.7
	$	1,529.6	$	1,539.7


LIABILITIES AND EQUITY

	November 30,		May 31,
	2021		2021
	(Unaudited)
Current liabilities:
Accounts payable	$	124.3	$	127.2
Accrued liabilities		143.1		148.3
Deferred revenue		33.6		25.9
Liabilities of discontinued operations		19.2		35.4
Total current liabilities		320.2		336.8

Long-term debt		103.2		133.7
Operating lease liabilities		60.5		59.9
Other liabilities		38.7		34.9
		202.4		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		481.5		479.8
Retained earnings		774.0		741.7
Treasury stock, 9,831,915 and 9,925,551 shares at cost, respectively		(271.6)		(274.1)
Accumulated other comprehensive loss		(22.2)		(18.3)
Total equity		1,007.0		974.4
	$	1,529.6	$	1,539.7


	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2021		2020		2021		2020
Sales:
Sales from products	$	252.0	$	233.1	$	514.1	$	469.4
Sales from services		184.6		170.5		377.6		335.0
		436.6		403.6		891.7		804.4
Cost and operating expenses:
Cost of products		202.1		194.3		419.7		398.8
Cost of services		156.1		139.8		329.0		287.5
Provision for doubtful accounts		0.8		4.4		0.8		4.4
Selling, general and administrative		47.1		43.4		96.4		88.7
		406.1		381.9		845.9		779.4
Loss from joint ventures		(0.4)		(0.1)		(0.6)		(0.2)
Operating income		30.1		21.6		45.2		24.8
Loss on sale of business		(1.3)		—		(1.3)		(19.5)
Other income (expense), net		0.3		(0.7)		1.0		(0.5)
Interest expense		(0.5)		(1.3)		(1.2)		(3.0)
Interest income		0.1		—		0.1		0.1
Income from continuing operations before provision for income taxes		28.7		19.6		43.8		1.9
Provision for income taxes		7.9		5.2		11.8		1.4
Income from continuing operations		20.8		14.4		32.0		0.5
Income (Loss) from discontinued operations, net of tax		—		(6.2)		0.3		(6.8)
Net income (loss)	$	20.8	$	8.2	$	32.3	$	(6.3)

Earnings (Loss) per share – basic:
Earnings from continuing operations	$	0.59	$	0.41	$	0.90	$	0.01
Income (Loss) from discontinued operations		—		(0.18)		0.01		(0.20)
Earnings (Loss) per share – basic	$	0.59	$	0.23	$	0.91	$	(0.19)

Earnings (Loss) per share – diluted:
Earnings from continuing operations	$	0.58	$	0.41	$	0.89	$	0.01
Income (Loss) from discontinued operations		—		(0.18)		0.01		(0.19)
Earnings (Loss) per share – diluted	$	0.58	$	0.23	$	0.90	$	(0.18)


									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 income, 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 income, net of tax		—		—		—		—		(3.6)		(3.6)
Balance, November 30, 2021	$	45.3	$	481.5	$	774.0	$	(271.6)	$	(22.2)	$	1,007.0


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 September 1, 2021	$	3.3	$	(21.9)	$	(18.6)
Other comprehensive income before reclassifications		(3.7)		—		(3.7)
Amounts reclassified from AOCL		(0.2)		0.3		0.1
Total other comprehensive income (loss)		(3.9)		0.3		(3.6)
Balance at November 30, 2021	$	(0.6)	$	(21.6)	$	(22.2)

Balance at September 1, 2020	$	(0.8)	$	(42.3)	$	(43.1)
Other comprehensive loss before reclassifications		1.1		(1.2)		(0.1)
Amounts reclassified from AOCL		—		0.2		0.2
Total other comprehensive income (loss)		1.1		(1.0)		0.1
Balance at November 30, 2020	$	0.3	$	(43.3)	$	(43.0)


	Three Months Ended November 30,						Six Months Ended November 30,
	2021		2020		% Change		2021		2020		% Change
Sales:
Aviation Services
Commercial	$	257.0	$	192.2	33.7	%	$	524.2	$	361.8	44.9	%
Government and defense		162.3		192.8	(15.8)	%		330.7		386.8	(14.5)	%
	$	419.3	$	385.0	8.9	%	$	854.9	$	748.6	14.2	%
Expeditionary Services
Commercial	$	0.7	$	2.0	(65.0)	%	$	0.8	$	7.7	(89.6)	%
Government and defense		16.6		16.6	—			36.0		48.1	(25.2)	%
	$	17.3	$	18.6	(7.0)	%	$	36.8	$	55.8	(34.1)	%

Exhibit No.	Description		Exhibits

31.	Rule 13a-14(a)/15(d)-14(a) Certifications	31.1	Section 302 Certification dated December 21, 2021 of John M. Holmes, President and Chief Executive Officer of Registrant (filed herewith).

		31.2	Section 302 Certification dated December 21, 2021 of Sean M. Gillen, Vice President and Chief Financial Officer of Registrant (filed herewith).

32.	Section 1350 Certifications	32.1	Section 906 Certification dated December 21, 2021 of John M. Holmes, President and Chief Executive Officer of Registrant (filed herewith).

		32.2	Section 906 Certification dated December 21, 2021 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 November 30, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at November 30, 2021 and May 31, 2021, (ii) Condensed Consolidated Statements of Operations for the three- and six-months ended November 30, 2021 and 2020, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three- and six-months ended November 30, 2021 and 2020, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended November 30, 2021 and 2020, (v) Condensed Consolidated Statement of Changes in Equity for the three- and six-months ended November 30, 2021 and 2020 (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:	December 21, 2021	/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				Six Months Ended
	November 30,				November 30,
	2021		2020		2021		2020
Deferred revenue at beginning of period	$	(33.0)	$	(85.4)	$	(31.3)	$	(99.2)
Revenue deferred		(72.0)		(50.8)		(122.1)		(123.0)
Revenue recognized		58.6		87.6		105.0		176.1
Other		3.7		0.2		5.7		(2.3)
Deferred revenue at end of period	$	(42.7)	$	(48.4)	$	(42.7)	$	(48.4)


	November 30,		May 31,
	2021		2021
U.S. Government contracts:
Trade receivables	$	22.8	$	24.1
Unbilled receivables		21.1		25.2
		43.9		49.3
All other customers:
Trade receivables		131.6		104.9
Unbilled receivables		16.6		12.5
		148.2		117.4
	$	192.1	$	166.7


	November 30,		May 31,
	2021		2021
Aircraft and engine parts, components and finished goods	$	453.1	$	468.4
Raw materials and parts		58.7		53.0
Work-in-process		19.9		19.2
	$	531.7	$	540.6