Aar Corp 10-Q for FY2021 Q2

Aar Corp (AIR)

10-Q 2020-12-18 For: 2020-11-30

Added on April 04, 2026

About this 10-Q

Aar Corp filed this 10-Q on December 18, 2020, covering the quarter ended November 30, 2020 (FY2021 Q2).

Headline figures

Quarter ended November 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $403.6M; down 28.0% from $560.9M a year earlier
Net income: $8.2M; down 42.3% from net income of $14.2M a year earlier
Diluted EPS: $0.23; down 42.5% from $0.40 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


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 Income (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	28
Item 4.	Controls and Procedures	28

Part II — OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 6.	Exhibits	31

Exhibit Index		31
Signature Page		32


	November 30,		May 31,
	2020		2020
	(Unaudited)
Current assets:
Cash and cash equivalents	$	110.0	$	404.7
Restricted cash		3.0		20.0
Accounts receivable, less allowances of $19.4 and $22.1, respectively		169.8		171.9
Contract assets		52.8		49.3
Inventories		585.0		623.1
Rotable assets and equipment on or available for short-term lease		59.4		69.6
Assets of discontinued operations		21.2		22.9
Other current assets		40.5		77.2
Total current assets		1,041.7		1,438.7

Property, plant and equipment, net of accumulated depreciation of $248.4 and $246.5 respectively		125.0		135.7

Other assets:
Goodwill and intangible assets, net		122.6		121.7
Operating lease right-of-use assets, net		83.3		89.7
Rotable assets supporting long-term programs		200.5		211.7
Other non-current assets		96.2		81.5
		502.6		504.6
	$	1,669.3	$	2,079.0


	November 30,		May 31,
	2020		2020
	(Unaudited)
Current liabilities:
Accounts payable	$	198.3	$	191.6
Accrued liabilities		153.1		161.6
Payroll Support Program deferred credit		23.6		—
Liabilities of discontinued operations		33.2		29.9
Total current liabilities		408.2		383.1

Long-term debt		220.3		600.0
Operating lease liabilities		66.0		70.9
Deferred revenue on long-term programs		30.3		88.0
Other liabilities		43.8		34.4
		360.4		793.3
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		475.1		478.6
Retained earnings		699.6		706.0
Treasury stock, 10,008,450 and 10,203,437 shares at cost, respectively		(276.3)		(282.7)
Accumulated other comprehensive loss		(43.0)		(44.6)
Total equity		900.7		902.6
	$	1,669.3	$	2,079.0


	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Sales:
Sales from products	$	233.1	$	293.0	$	469.4	$	568.1
Sales from services		170.5		267.9		335.0		534.3
		403.6		560.9		804.4		1,102.4
Cost and operating expenses:
Cost of products		194.3		242.0		398.8		462.1
Cost of services		139.8		233.0		287.5		472.8
Provision for doubtful accounts		4.4		0.7		4.4		1.4
Selling, general and administrative		43.4		57.1		88.7		115.2
		381.9		532.8		779.4		1,051.5
Loss from joint ventures		(0.1)		—		(0.2)		—
Operating income		21.6		28.1		24.8		50.9
Loss on sale of business		––		—		(19.5)		—
Other expenses, net		(0.7)		(0.2)		(0.5)		(0.4)
Interest expense		(1.3)		(1.9)		(3.0)		(4.1)
Interest income		––		0.1		0.1		0.2
Income from continuing operations before provision for income taxes		19.6		26.1		1.9		46.6
Provision for income taxes		5.2		6.0		1.4		9.4
Income from continuing operations		14.4		20.1		0.5		37.2
Loss from discontinued operations, net of tax		(6.2)		(5.9)		(6.8)		(18.6)
Net income (loss)	$	8.2	$	14.2	$	(6.3)	$	18.6

Earnings (Loss) per share – basic:
Earnings from continuing operations	$	0.41	$	0.58	$	0.01	$	1.07
Loss from discontinued operations		(0.18)		(0.17)		(0.20)		(0.54)
Earnings (Loss) per share – basic	$	0.23	$	0.41	$	(0.19)	$	0.53

Earnings (Loss) per share – diluted:
Earnings from continuing operations	$	0.41	$	0.57	$	0.01	$	1.06
Loss from discontinued operations		(0.18)		(0.17)		(0.19)		(0.53)
Earnings (Loss) per share – diluted	$	0.23	$	0.40	$	(0.18)	$	0.53


									Accumulated
									Other
	Common		Capital		Retained		Treasury		Comprehensive
	Stock		Surplus		Earnings		Stock		Income (Loss)		Total Equity
Balance, May 31, 2020	$	45.3	$	478.6	$	706.0	$	(282.7)	$	(44.6)	$	902.6
Net loss		—		—		(14.5)		—		—		(14.5)
Cash dividends		—		—		(0.1)		—		—		(0.1)
Stock option activity		—		0.5		—		0.5		—		1.0
Restricted stock activity		—		(6.0)		—		6.1		—		0.1
Other comprehensive income, net of tax		—		—		—		—		1.5		1.5
Balance, August 31, 2020	$	45.3	$	473.1	$	691.4	$	(276.1)	$	(43.1)	$	890.6
Net income		—		—		8.2		—		—		8.2
Stock option activity		—		1.1		—		0.1		—		1.2
Restricted stock activity		—		0.9		—		(0.3)		—		0.6
Other comprehensive income, net of tax		—		—		—		—		0.1		0.1
Balance, November 30, 2020	$	45.3	$	475.1	$	699.6	$	(276.3)	$	(43.0)	$	900.7

Balance, May 31, 2019	$	45.3	$	479.4	$	709.8	$	(287.7)	$	(40.9)	$	905.9
Cumulative effect adjustment upon adoption of ASC 842 on June 1, 2019		—		—		2.5		—		—		2.5
Net income		—		—		4.4		—		—		4.4
Cash dividends		—		—		(2.9)		—		—		(2.9)
Stock option activity		—		0.9		—		1.8		—		2.7
Restricted stock activity		—		(4.3)		—		1.1		—		(3.2)
Other comprehensive income, net of tax		—		—		—		—		0.1		0.1
Balance, August 31, 2019	$	45.3	$	476.0	$	713.8	$	(284.8)	$	(40.8)	$	909.5
Net income		—		—		14.2		—		—		14.2
Cash dividends		—		—		(2.6)		—		—		(2.6)
Stock option activity		—		0.9		—		1.2		—		2.1
Restricted stock activity		—		1.8		—		—		—		1.8
Repurchase of shares		—		—		—		(4.1)		—		(4.1)
Other comprehensive income, net of tax		—		—		—		—		0.8		0.8
Balance, November 30, 2019	$	45.3	$	478.7	$	725.4	$	(287.7)	$	(40.0)	$	921.7


Risk-free interest rate	0.4	%
Expected volatility of common stock	40.2	%
Dividend yield	1.6	%
Expected option term in years	4.8




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

Balance at September 1, 2019	$	(2.2)	$	(38.6)	$	(40.8)
Other comprehensive loss before reclassifications		0.5		—		0.5
Amounts reclassified from AOCL		—		0.3		0.3
Total other comprehensive income		0.5		0.3		0.8
Balance at November 30, 2019	$	(1.7)	$	(38.3)	$	(40.0)


	Three Months Ended November 30,						Six Months Ended November 30,
	2020		2019		% Change		2020		2019		% Change
Sales:
Aviation Services
Commercial	$	192.2	$	369.6	(48.0)	%	$	361.8	$	700.1	(48.3)	%
Government and defense		192.8		162.4	18.7	%		386.8		343.7	12.5	%
	$	385.0	$	532.0	(27.6)	%	$	748.6	$	1,043.8	(28.3)	%
Expeditionary Services
Commercial	$	2.0	$	6.4	(68.8)	%	$	7.7	$	12.1	(36.4)	%
Government and defense		16.6		22.5	(26.2)	%		48.1		46.5	3.4	%
	$	18.6	$	28.9	(35.6)	%	$	55.8	$	58.6	(4.8)	%

Exhibit No.	Description		Exhibits

10.	Material Contracts	10.1	Second Amendment to Purchase Agreement dated as of May 22, 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).

		10.2	Third Amendment to Purchase Agreement dated as of May 22, 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).

		10.3*	AAR CORP. 2013 Stock Plan (as Amended and Restated Effective July 13, 2020) (incorporated by reference to Appendix C to the Registrant’s Proxy Statement dated August 28, 2020).

31.	Rule 13a-14(a)/15(d)-14(a) Certifications	31.1	Section 302 Certification dated December 18, 2020 of John M. Holmes, President and Chief Executive Officer of Registrant (filed herewith).

		31.2	Section 302 Certification dated December 18, 2020 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 18, 2020 of John M. Holmes, President and Chief Executive Officer of Registrant (filed herewith).

		32.2	Section 906 Certification dated December 18, 2020 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, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at November 30, 2020 and May 31, 2020, (ii) Condensed Consolidated Statements of Operations for the three- and six-months ended November 30, 2020 and 2019, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three- and six-months ended November 30, 2020 and 2019, (iv) Condensed Consolidated Statements of Cash Flows for the six months ended November 30, 2020 and 2019, (v) Condensed Consolidated Statement of Changes in Equity for the three- and six-months ended November 30, 2020 and 2019 (vi) Notes to Condensed Consolidated Financial Statements.**


		AAR CORP.
		(Registrant)


Date:	December 18, 2020	/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,
	2020		2019		2020		2019
Deferred revenue at beginning of period	$	(85.4)	$	(86.3)	$	(99.2)	$	(96.4)
Revenue deferred		(50.8)		(153.7)		(123.0)		(240.3)
Revenue recognized		87.6		103.3		176.1		204.3
Other		0.2		2.9		(2.3)		(1.4)
Deferred revenue at end of period	$	(48.4)	$	(133.8)	$	(48.4)	$	(133.8)


	November 30,		May 31,
	2020		2020
U.S. Government contracts:
Trade receivables	$	30.4	$	33.9
Unbilled receivables		25.6		27.4
		56.0		61.3
All other customers:
Trade receivables		88.9		81.7
Unbilled receivables		24.9		28.9
		113.8		110.6
	$	169.8	$	171.9


	November 30,		May 31,
	2020		2020
Aircraft and engine parts, components and finished goods	$	521.9	$	556.6
Raw materials and parts		41.1		45.9
Work-in-process		22.0		20.6
	$	585.0	$	623.1