AAR
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AAR - 10-Q quarterly report FY


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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 NOVEMBER 30, 1997 Commission file number 1-6263
--------------------- ----------

AAR CORP.
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE 36-2334820
- --------------------------------------- ---------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of 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, 18,361,130 shares outstanding as of NOVEMBER 30, 1997 .
- ---------- --------------- --------------------
AAR CORP. and Subsidiaries
Quarterly Report on Form 10-Q
November 30, 1997
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
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12


PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports on Form 8-K
Exhibits 14
Reports on Form 8-K 14

Signature Page 15
PART I, ITEM 1 - FINANCIAL STATEMENTS

AAR CORP. and Subsidiaries
Condensed Consolidated Balance Sheets
As of November 30, 1997 and May 31, 1997
(000s omitted)

<TABLE>
<CAPTION>

November 30, May 31,
1997 1997
------------ ---------------
(Unaudited) (Derived from
audited financial
statements)
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents $ 6,990 $ 51,705
Accounts receivable, less allowances of $2,400 and $1,965 respectively 141,843 122,944
Inventories 207,887 176,921
Equipment on or available for short-term lease 50,668 40,318
Deferred tax assets, deposits and other 29,193 22,212
------- --------
Total current assets 436,581 414,100
------- --------

Property, plant and equipment, net 75,539 71,108
------- --------
Other assets:
Investments in leveraged leases 36,329 27,606
Cost in excess of underlying net assets of acquired companies 24,727 5,653
Retirement benefits, notes receivable and other 13,960 11,117
------- --------
75,016 44,376
------- --------

$587,136 $529,584
------- --------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Bank loans $ 21,693 $ -
Current maturities of long-term debt 1,689 1,474
Accounts and notes payable 94,797 77,567
Accrued liabilities 18,530 17,647
Accrued taxes on income 1,617 3,293
------- --------
Total current liabilities 138,326 99,981
------- --------

Long-term debt, less current maturities 118,508 116,818
Deferred tax liabilities 35,117 32,560
Other liabilities 6,471 6,294
Retirement benefit obligation and deferred credits 5,384 4,672
------- --------
165,480 160,344
------- --------

Stockholders' equity:
Preferred stock, $1.00 par value, authorized 250 shares, none issued - -
Common stock, $1.00 par value, authorized 80,000
shares; issued 19,053 and 18,932 shares, respectively 19,053 18,932
Capital surplus 145,551 141,016
Retained earnings 137,010 125,694
Treasury stock, 692 and 728 shares at cost, respectively (13,732) (13,365)
Cumulative translation adjustments (4,552) (3,018)
------- --------
283,330 269,259
------- --------

$587,136 $529,584
------- --------
</TABLE>


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, 1997 and 1996
(Unaudited)
(000s omitted except per share data)

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
------------------------ ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $180,156 $135,675 $351,062 $271,712
------- ------- ------- -------

Costs and operating expenses:
Cost of sales 146,101 110,851 285,079 222,300
Selling, general and administrative 19,139 15,031 38,173 30,406
------- ------- ------- -------
165,240 125,882 323,252 252,706

Operating income 14,916 9,793 27,810 19,006

Interest expense (3,057) (2,569) (5,816) (5,194)
Interest income 157 199 476 509
------- ------- ------- -------

Income before provision for income taxes 12,016 7,423 22,470 14,321

Provision for income taxes 3,605 2,279 6,749 4,329
------- ------- ------- -------

Net income $ 8,411 $ 5,144 $ 15,721 $ 9,992
------- ------- ------- -------
------- ------- ------- -------

Net income per share of common stock $ .46 $ .32 $ .86 $ .62

Average common shares outstanding 18,353 16,078 18,339 16,027

Dividends paid and declared per share
of common stock $ .12 $ .12 $ .24 $ .24
</TABLE>


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, 1997 and 1996
(Unaudited)
(000s omitted)

<TABLE>
<CAPTION>
Six Months Ended
November 30,
-------------------------
1997 1996
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,721 $ 9,992
Adjustments to reconcile net income to net cash
provided from (used in) operating activities:
Depreciation and amortization 7,251 5,634

Change in certain assets and liabilities:
Accounts receivable (8,964) (12,878)
Inventories (24,185) (24,150)
Equipment on or available for
short-term lease (10,478) 7,943
Retirement benefit obligation, deferred taxes,
deposits and other (1,865) (526)
Accounts and notes payable and other liabilities 9,598 26,331
Accrued liabilities and taxes on income (4,980) (1,233)
------- -------
Net cash (used in) provided from operating activities (17,902) 11,113
------- -------

CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures, net (6,326) (18,993)
Acquisition, less cash acquired (18,973) -
Investment in leveraged leases (8,723) 1,410
Notes receivable and other (4,023) (3,105)
------- -------

Net cash used in investing activities (38,045) (20,688)
------- -------

CASH FLOWS FROM FINANCING ACTIVITIES:
Change in borrowings 14,032 (753)
Cash dividends (4,405) (3,854)
Purchase of treasury stock - (1,165)
Proceeds from exercise of stock options and other 1,573 1,233
------- -------

Net cash provided from (used in) financing activities 11,200 (4,539)
------- -------

Effect of exchange rate changes on cash 32 82
------- -------

Decrease in cash and cash equivalents (44,715) (14,032)

Cash and cash equivalents, beginning of period 51,705 33,606
------- -------

Cash and cash equivalents, end of period $ 6,990 $19,574
------- -------
</TABLE>


The accompanying Notes to Condensed Consolidated Financial
Statements are an integral part of these statements.


5
AAR CORP. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
November 30, 1997
(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. 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, 1997 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, 1997 and
the condensed consolidated results of operations for the three and six months
ended November 30, 1997 and 1996, and the condensed consolidated cash flows for
the six months ended November 30, 1997 and 1996. The results of operations for
such interim periods are not necessarily indicative of the results for the full
year. Certain prior period amounts have been reclassified to conform to the
November 30, 1997 presentation.

NOTE B - INVENTORY

The summary of inventories is as follows:

November 30, May 31,
1997 1997
------------ ---------

Raw materials and parts $ 42,056 $ 36,067
Work-in-process 15,229 15,477
Purchased aircraft, parts, engines and
components held for sale 149,127 124,212
Finished goods 1,475 1,165
--------- ---------
$207,887 $176,921
--------- ---------
--------- ---------


6
AAR CORP. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
November 30, 1997 (Continued)
(000s omitted)


NOTE C - SUPPLEMENTAL CASH FLOWS INFORMATION

Supplemental information on cash flows:

Six Months Ended
November 30,
-----------------------
1997 1996
-------- --------

Interest paid $5,703 $5,150
Income taxes paid 2,850 2,525
Income tax refunds received 215 125



On October 24, 1997, the Company purchased the stock of ATR International,
Inc. (ATR), a company which engineers and manufactures composite parts and
structures for the aerospace/aviation industry. The Company acquired ATR for
approximately $19 million cash and the transaction was recorded under the
purchase method of accounting.

On June 2, 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of Cooper Aviation Industries, Inc. (Cooper), a
distributor of factory-new aviation parts and accessories to the commercial,
regional/commuter and general aviation markets. The purchase price was paid
by issuing approximately 93 thousand common shares and the transaction was
recorded under the purchase method of accounting.

NOTE D - CUMULATIVE TRANSLATION ADJUSTMENTS

The cumulative translation adjustments account changed due to a net translation
loss of $1,534 for the six-month period ended November 30, 1997. The change
resulted from a decrease in the value of the Company's net investment in foreign
operations primarily resulting from an increase in the value of the U.S. dollar
against most European currencies. The noncash adjustment did not affect the
Company's results of operations.

NOTE E - COMMON STOCK AND NET INCOME PER SHARE OF COMMON STOCK

Net income per share is computed by dividing net income by the weighted average
number of shares of common stock outstanding during the period. Common stock
equivalents consisting of employee stock options have not been included in the
per share calculations as their dilutive effect is not material.

NOTE F - NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board issued SFAS No. 128 "Earnings Per
Share" in February, 1997. SFAS No. 128 was issued to simplify the computation
of earnings per share (EPS) calculations and to make U.S. standards more
compatible with the EPS standards of other countries and that of the
International Accounting Standards Committee. The standard replaces the
presentation of primary EPS with a presentation of basic EPS, and fully diluted
EPS with diluted EPS. The Company is required to adopt the provisions of SFAS
No. 128 in its third quarter of fiscal 1998.


7
AAR CORP. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
November 30, 1997 (Continued)
(000s omitted)


NOTE F - NEW ACCOUNTING STANDARDS (CONTINUED)

SFAS No. 130, "Reporting Comprehensive Income" is effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 establishes standards for the
reporting and display of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. The Statement requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The Company is evaluating the Statement's
provisions to determine how it will present comprehensive income in its
financial statements. The Company will adopt SFAS No. 130 in fiscal 1999.

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" is effective for financial statements for periods beginning after
December 15, 1997. SFAS No. 131 establishes standards for the way public
companies report financial and descriptive information about reportable
operating segments in annual financial statements and interim financial reports
issued to stockholders. SFAS No. 131 supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise", but retains the requirement to
report information about major customers. The Company is evaluating the new
Statement's provisions to determine the additional disclosures required in its
financial statements, if any, and will adopt SFAS No. 131 in its fourth quarter
of fiscal 1998.

NOTE G - SUBSEQUENT EVENTS

On December 15, 1997, the Company sold $60 million of 6.875% notes due December
15, 2007. The notes were priced at 99.80 to yield 6.903%.

On December 31, 1997, the Company acquired substantially all of the assets and
assumed certain liabilities of AVSCO Aviation Service Corporation (AVSCO), a
distributor of factory new parts and accessories to the commercial,
regional/commuter and general aviation markets. The purchase price of
approximately $18.4 million was paid for with a combination of cash and a note
and the transaction was recorded under the purchase method of accounting.




8
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, 1997
- --------------------------------------------------
(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 net sales for the Company's classes of
similar products and services within this segment for the three and six months
ended November 30, 1997 and 1996. Prior period amounts have been reclassified
to conform to the current year presentation.

<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
------------------------ ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales:
Aircraft and Engines $ 76,943 $ 56,372 $156,724 $115,892
Airframe and Accessories 74,535 55,562 144,601 103,770
Manufacturing 28,678 23,741 49,737 52,050
------- ------- ------- -------
$180,156 $135,675 $351,062 $271,712
------- ------- ------- -------
------- ------- ------- -------
</TABLE>

THREE-MONTH PERIOD ENDED NOVEMBER 30, 1997
- ------------------------------------------
(as compared with the same period of the prior year)

Consolidated net sales for the second quarter of the Company's fiscal year
ending May 31, 1998 (fiscal 1998) increased $44,481 or 32.8% over the same
period in the prior year. The Company experienced increased sales in all
three business groups as it continues to benefit from the successful
implementation of its long-term strategies and a favorable industry
environment. Aircraft and Engines sales increased $20,571 or 36.5% over the
prior year period reflecting strong growth in its engine and engine parts
businesses. Airframe and Accessories sales increased $18,973 or 34.1%
reflecting the inclusion of results of Cooper Aviation and increased demand
for certain aircraft maintenance and aircraft component repair services.
Manufacturing sales increased $4,937 or 20.8% over the prior year period
reflecting higher demand for its products supporting the United States
Government's rapid deployment program and its cargo loading and handling
systems, as well as the inclusion of approximately one month's sales of ATR.

Consolidated gross profit increased $9,231 or 37.2% over the prior year period
due to increased consolidated net sales and an increase in the consolidated
gross profit margin to 18.9 % from 18.3%. The increase in the consolidated gross
profit margin was primarily attributable to the favorable mix of inventories
sold in certain Aircraft and Engine businesses and improved margins in the
Company's principal Manufacturing business. Consolidated operating income
increased $5,123 or 52.3% and the Company's operating income margin increased to
8.3% compared to the prior year period's margin of 7.2% as a result of increased
net sales and gross profit, partially offset by higher selling, 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 the inclusion of Cooper and ATR and higher
marketing support and personnel costs.

Consolidated net income increased $3,267 or 63.5% over the prior year period due
primarily to the factors discussed above.


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 ratios)

SIX-MONTH PERIOD ENDED NOVEMBER 30, 1997
- --------------------------------------------------
(as compared with the same period of the prior year)

Consolidated net sales for the first half of fiscal 1998 increased $79,350 or
29.2% over the prior year period reflecting increased demand for the
Company's products and services. Aircraft and Engines sales increased
$40,832 or 35.2% over the prior year period due to higher sales in its engine
and engine parts businesses. The sales increase in the engine and engine
parts business continues to be driven by the success of the Company's
long-term inventory management programs. Airframe and Accessories sales
increased $40,831 or 39.3% reflecting sales from the acquisition of Cooper as
well as higher airframe parts trading sales and higher sales resulting from
increased aircraft maintenance and component repair services. Manufacturing
sales were $2,313 or 4.4% below the prior year period, reflecting lower sales
of its products supporting the United States Government's rapid deployment
program in the first quarter of fiscal 1998.

Consolidated gross profit increased $16,571 or 33.5% over the prior year period
due to increased consolidated net sales as well as an increase in the
consolidated gross profit margin to 18.8% from 18.2% in the prior year period.
The improvement in consolidated gross profit margin was due primarily to the mix
of inventories sold in certain Aircraft and Engines businesses. Consolidated
operating income increased $8,804 or 46.3% over the same six-month period in the
prior year, and the Company's operating income margin increased to 7.9% compared
to the prior year period's margin of 7.0% as a result of increased net sales,
partially offset by higher selling, 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 the
inclusion of Cooper and ATR and higher marketing support and personnel costs.

Consolidated net income increased $5,729 or 57.3% primarily as a result of 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
FINANCIAL CONDITION
(000s omitted except ratios)

AT NOVEMBER 30, 1997

At November 30, 1997, the Company's liquidity and capital resources included
cash of $6,990 and working capital of $298,255. At November 30, 1997, the
Company's ratio of long-term debt to capitalization was 29.5%, down from 30.3%
at May 31, 1997.

During the six month period ended November 30, 1997, the Company's operations
used $17,902 of cash compared to $11,113 provided by operations in the six
month period ended November 30, 1996. The reduction in cash generated from
operations was due principally to inventory and related equipment investments
made as a result of the increases in demand for certain products and services.

During the six month period ended November 30,1997, the Company's investing
activities used $38,045 of cash, compared to $20,688 in the six month period
ended November 30, 1996. This increase is attributable to the purchase of ATR
for approximately $19,000 and an investment in a new leveraged lease for $8,320
partially offset by a reduction in capital expenditures during the six month
period. Cash provided from financing activities during the six month period
ended November 30, 1997 was $11,200, compared to $4,539 used in financing
activities for the six month period ended November 30, 1996. The increase in
cash provided from financing activities was primarily the result of an increase
to short-term borrowings under the Company's credit facilities, partially offset
by the repayment of $6,942 of debt assumed in the Cooper acquisition.

On December 15, 1997, the Company sold $60 million of 6.875% notes due December
15, 2007. The notes were priced at 99.80 to yield 6.903%. Proceeds from the
offering will be used to pay down short-term interest-rate-sensitive-bank lines
and to continue to build the business through acquisitions, internal development
and advantageous inventory purchases.

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:

November 30, May 31,
Description 1997 1997
----------------- ------------ ----------

Working capital $298,255 $314,119
Current ratio 3.2:1 4.1:1

Bank credit lines:
Borrowings outstanding $ 21,693 $ --
Available but unused lines 129,330 136,283
------------ -----------
Total credit lines $151,023 $136,283
------------ -----------
------------ -----------
Long-term debt, less current maturities $118,508 $116,818

Ratio of long-term debt to capitalization 29.5% 30.3%



11
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, 1997 (CONTINUED)

Currently, all of the Company's major financial systems and the significant
business applications in the Company's engine and airframe parts trading
operations are Year 2000 compliant. Recently, the Company has undertaken a
systems enhancement program for other business applications which will
substantially enhance the capabilities of the Company's information technology
systems, including a substantial upgrade to the information systems in the
Company's recently acquired new parts distribution businesses. All of the
Company's business applications will be Year 2000 compliant after the
aforementioned enhancements have been made. The capital outlay associated with
the upgrade of the Company's information systems is not expected to have a
material impact on the Company's financial position or results of operations.



12
PART II - OTHER INFORMATION

AAR CORP. and Subsidiaries
November 30, 1997

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on
October 8, 1997. The following four items were acted upon at the
meeting:

1) Election of three Class I directors to serve until the 2000 Annual
Meeting of Stockholders.

There were no abstentions and no broker non-votes for any of the
nominees for director. The number of votes cast for, or withheld, for
each nominee for director were as follows:

For Withheld
----------- --------
Erwin E. Schulze 16,208,157 -
Joel D. Spungin 16,210,520 -
David P. Storch 16,210,274 -


2) Amendment to the Company's Stock Benefit Plan to limit to 300,000 the
number of shares of Common Stock that may be granted under the Plan to
any grantee during any 12-month period.

The results of the vote were as follows:
For 16,081,350
Against 117,717
Abstain 38,802

3) Approval of performance goals established by the Compensation
Committee of the Board of Directors of the Company under the
performance restricted stock incentive program for David P. Storch,
the Company's Chief Executive Officer, as described in the
Company's proxy statement dated August 28, 1997.

The results of the vote were as follows:
For 15,970,278
Against 223,464
Abstain 44,127

4) Approval of the AAR Corp. Section 162 (m) performance-based annual
cash bonus program adopted by the Compensation Committee of the Board
of Directors of the Company to executive officers of the Company,
as described in the Company's proxy statement dated August 28, 1997.

The results of the vote were as follows:
For 16,053,527
Against 140,746
Abstain 43,596

No other matters were presented to the Company's stockholders for action at
the Annual Meeting of Stockholders.


13
PART II - OTHER INFORMATION

AAR CORP. and Subsidiaries
November 30, 1997

Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS

10. Material Contracts 10.1 Third amendment dated May 6, 1997 to AAR
CORP. Stock Benefit Plan.

10.3 Fourth and Fifth amendments to
Employment agreement dated August 1, 1985
between the Registrant and Ira A. Eichner
dated October 9, 1996 and October 31,
1997, respectively.

10.7 Second and Third amendments to Employment
agreement dated June 1, 1994 between the
Registrant and David P. Storch dated May
29, 1997 and July 14, 1997, respectively.

10.8 Amended and Restated Severance and Change
in Control agreement dated April 8, 1997
between the Registrant and Philip C.
Slapke.

10.9 Amended and Restated Severance and Change
in Control agreement dated April 8, 1997
between the Registrant and Howard A.
Pulsifer.

10.10 Amended and Restated Severance and Change
in Control agreement dated April 8, 1997
between the Registrant and Timothy J.
Romenesko.

27. Financial 27.1 Financial Data Schedule for the
Data Schedule Registrant's six-month interim period
ended November 30, 1997.


(b) REPORTS ON FORM 8-K FOR QUARTER ENDED NOVEMBER 30, 1997:
The Company filed no reports on Form 8-K during the three months ended
November 30, 1997.





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 13, 1998 /s/ Timothy J. Romenesko
------------------ --------------------------------------
Timothy J. Romenesko
Vice President and Chief Financial Officer

(Principal accounting officer and officer
duly authorized to sign on behalf of
registrant)



15