| Business Segment Information |
14. Business Segment Information During the fourth quarter of fiscal 2026, we changed our operating segment structure to realign our former Integrated Solutions segment which resulted in the following changes: | ● | Combined our government programs activities and our Mobility Systems business, previously reported as Expeditionary Services, into a new operating segment named Government Solutions; |
| ● | Re-positioned our software platform to our Repair and Engineering segment, which was renamed Repair, Engineering, and Software; and |
| ● | Legacy Commercial Programs, the remaining business unit within the Integrated Solutions segment, is now separately reported as its own operating segment. |
Our operating segments are comprised of: | ● | Parts Supply, primarily consisting of our sales of used serviceable material (“USM”), including aircraft, engine and airframe parts and components and distribution of new parts (“Distribution”); |
| ● | Repair, Engineering, and Software primarily consists of MRO of airframes (“Airframe MRO”), MRO of other components (“Component MRO”), and our software platforms, including Trax, Aerostrat, Airvoyant, and Airinmar; |
| ● | Government Solutions primarily consists of our fleet management and operations of customer-owned aircraft, customized performance-based supply chain logistics programs in support of the U.S. Department of War (“DoW”), the U.S. Department of State (“DoS”) and foreign governments and the engineering, design, integration, manufacture, and repair of pallets, shelters, and containers; and |
| ● | Legacy Commercial Programs consists of asset-heavy flight hour-based component repair programs for commercial airlines and distribution of consumables and expendables inventory. |
Our previously reported segment financial information has been recast to conform to our new segment structure. The change in our operating segments had no impact on our previously reported consolidated results of operations, financial condition, or cash flows. The accounting policies for the segments are the same as those described in Note 1 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended May 31, 2026. Cost of sales consists principally of the cost of products, including material used in manufacturing operations, direct labor, and overhead. Our Chief Operating Decision Maker (“CODM”) is our Chairman, President, and Chief Executive Officer and he evaluates performance on our operating segments using operating income as the primary profitability measure. Our operating segments are aligned principally around differences in products and services and are consistent with how our CODM allocates resources, assesses performance, and makes decisions. The Company has not aggregated operating segments for purposes of identifying reportable segments. In some cases, inter-segment sales are recorded at fair value, which results in intercompany profit on inter-segment sales that is eliminated in consolidation. Corporate selling, general, and administrative expenses include centralized functions such as legal, finance, treasury and human resources with a portion of the costs allocated to our operating segments. Exit from Legacy Commercial Programs Operations During the fourth quarter of fiscal 2026, we announced our intention to exit our Legacy Commercial Programs business and expect the wind-down of this segment will take approximately three to four years as the Legacy Commercial Programs’ existing customer contracts are terminated or exited and its rotable assets are sold. As the wind-down occurs, the fair value of the segment will progressively decrease which will ultimately result in the full impairment of the Legacy Commercial Programs goodwill of $16.4 million in a future period or periods. Prior to fiscal 2027, our rotable assets which were previously supporting long-term commercial programs were depreciated on a straight-line basis over their estimated useful lives. As part of the wind-down, the rotable assets are now being actively sold and not primarily supporting long-term programs. Effective June 1, 2026, we no longer recognize depreciation expense as the fair value of the rotable asset pool is in excess of its carrying value. During the three-month period ended August 31, 2025, we recognized depreciation expense of $1.7 million associated with the rotable asset pool. Sales of rotable assets were $29.0 million and $6.5 million during the three-month periods ended August 31, 2026 and 2025, respectively. Significant expenses for each segment are as follows: | | | | | | | | | | | | | | | | | | Three Months Ended August 31, 2026 | | | | | | | Selling, | | Other | | | | | | | Cost of | | General and | | Segment | | Operating | | | Sales | | Sales | | Administrative | | Items | | Income | Parts Supply | | $ | 414.8 | | $ | 330.4 | | $ | 30.8 | | $ | (1.7) | | $ | 55.3 | Repair, Engineering, and Software | | | 297.5 | | | 239.9 | | | 42.6 | | | (1.0) | | | 16.0 | Government Solutions | | | 138.8 | | | 110.5 | | | 9.2 | | | — | | | 19.1 | Legacy Commercial Programs | | | 66.9 | | | 61.6 | | | 2.4 | | | — | | | 2.9 | | | $ | 918.0 | | $ | 742.4 | | $ | 85.0 | | $ | (2.7) | | $ | 93.3 | Corporate and other | | | | | | | | | | | | | | | (21.2) | | | | | | | | | | | | | | | | 72.1 | Other expense, net | | | | | | | | | | | | | | | (0.5) | Interest expense | | | | | | | | | | | | | | | (16.6) | Interest income | | | | | | | | | | | | | | | 0.4 | Income before income taxes | | | | | | | | | | | | | | $ | 55.4 |
| | | | | | | | | | | | | | | | | | Three Months Ended August 31, 2025 | | | | | | | | Selling, | | Other | | | | | | | | Cost of | | General and | | Segment | | Operating | | | Sales | | Sales | | Administrative | | Items | | Income | Parts Supply | | $ | 317.8 | | $ | 256.5 | | $ | 23.3 | | $ | (2.9) | | $ | 40.9 | Repair, Engineering, and Software | | | 226.4 | | | 177.3 | | | 28.5 | | | 0.6 | | | 20.0 | Government Solutions | | | 133.9 | | | 113.4 | | | 7.8 | | | — | | | 12.7 | Legacy Commercial Programs | | | 61.5 | | | 58.2 | | | 3.5 | | | (0.6) | | | 0.4 | | | $ | 739.6 | | $ | 605.4 | | $ | 63.1 | | $ | (2.9) | | $ | 74.0 | Corporate and other | | | | | | | | | | | | | | | (9.1) | | | | | | | | | | | | | | | | 64.9 | Gains (Losses) related to sale and exit of businesses, net | | | | | | | | | | | | | | | 0.7 | Other expense, net | | | | | | | | | | | | | | | (0.1) | Interest expense | | | | | | | | | | | | | | | (18.8) | Interest income | | | | | | | | | | | | | | | 0.3 | Income before income taxes | | | | | | | | | | | | | | $ | 47.0 |
Selected financial information for each segment is as follows: | | | | | | | | | | | | Three Months Ended August 31, 2026 | | | Third-Party | | Inter-segment | | Total | | | Sales | | Sales | | Sales | Parts Supply | | $ | 414.8 | | $ | 16.9 | | $ | 431.7 | Repair, Engineering, and Software | | | 297.5 | | | 17.4 | | | 314.9 | Government Solutions | | | 138.8 | | | 1.8 | | | 140.6 | Legacy Commercial Programs | | | 66.9 | | | 2.6 | | | 69.5 | | | $ | 918.0 | | $ | 38.7 | | $ | 956.7 |
| | | | | | | | | | | | Three Months Ended August 31, 2025 | | | Third-Party | | Inter-segment | | Total | | | Sales | | Sales | | Sales | Parts Supply | | $ | 317.8 | | $ | 2.1 | | $ | 319.9 | Repair, Engineering, and Software | | | 226.4 | | | 22.0 | | | 248.4 | Government Solutions | | | 133.9 | | | 0.4 | | | 134.3 | Legacy Commercial Programs | | | 61.5 | | | 0.9 | | | 62.4 | | | $ | 739.6 | | $ | 25.4 | | $ | 765.0 |
Sales by type of product/service for each of our operating segments were as follows: | | | | | | | | | Three Months Ended | | | August 31, | | | 2026 | | 2025 | Government Solutions: | | | | | | | Government programs | | $ | 106.0 | | $ | 111.7 | Mobility Systems | | | 32.8 | | | 22.2 | | | $ | 138.8 | | $ | 133.9 | | | | | | | | Legacy Commercial Programs: | | | | | | | Component repair programs | | $ | 63.1 | | $ | 53.9 | Distribution of C&E inventory | | | 3.8 | | | 7.6 | | | $ | 66.9 | | $ | 61.5 |
For our Parts Supply and Repair, Engineering, and Software segments, each of those segments is comprised of similar products and services within the individual segment. | | | | | | | | | Three Months Ended | | | August 31, | | | 2026 | | 2025 | Capital expenditures: | | | | | | | Parts Supply | | $ | 0.4 | | $ | 0.3 | Repair, Engineering, and Software | | | 8.9 | | | 5.8 | Government Solutions | | | 1.6 | | | 1.9 | Corporate and discontinued operations | | | 0.9 | | | 0.7 | | | $ | 11.8 | | $ | 8.7 |
| | | | | | | | | Three Months Ended | | | August 31, | | | 2026 | | 2025 | Depreciation and amortization: 1 | | | | | | | Parts Supply | | $ | 8.3 | | $ | 2.9 | Repair, Engineering, and Software | | | 10.1 | | | 8.1 | Government Solutions | | | 2.1 | | | 1.6 | Legacy Commercial Programs | | | 0.1 | | | 1.8 | Corporate and discontinued operations | | | 6.0 | | | 4.7 | | | $ | 26.6 | | $ | 19.1 |
1 Includes amortization of stock-based compensation. | | | | | | | | | Three Months Ended | | | August 31, | | | 2026 | | 2025 | Earnings from joint ventures: | | | | | | | Parts Supply | | $ | 1.8 | | $ | 2.9 | Repair, Engineering, and Software | | | 1.0 | | | 0.1 | | | $ | 2.8 | | $ | 3.0 |
| | | | | | | | | August 31, | | May 31, | | | 2026 | | 2026 | Total assets: | | | | | | | Parts Supply | | $ | 1,169.3 | | $ | 1,099.9 | Repair, Engineering, and Software | | | 1,586.8 | | | 1,598.2 | Government Solutions | | | 309.5 | | | 282.8 | Legacy Commercial Programs | | | 240.1 | | | 250.2 | Corporate and discontinued operations | | | 121.2 | | | 124.8 | | | $ | 3,426.9 | | $ | 3,355.9 |
| | | | | | | | | August 31, | | May 31, | | | 2026 | | 2026 | Investments in joint ventures: | | | | | | | Parts Supply | | $ | 17.6 | | $ | 15.8 | Repair, Engineering, and Software | | | 33.9 | | | 33.2 | | | $ | 51.5 | | $ | 49.0 |
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