13. Business Segment Information

Segment Reporting

Consistent with how our chief operating decision making officer (Chief Executive Officer) evaluates performance and the way we are organized internally, we report our activities in two segments: Aviation Services comprised of supply chain and MRO activities and Expeditionary Services comprised of manufacturing activities.

In the first quarter of fiscal 2019, we re-aligned the composition of our operating segments to leverage the full breadth of our operational expertise in Aviation Services. Our government-owned, contractor-operated operations (which include the INL/A Worldwide Aviation Support Services (“INL/A WASS”) program) were previously included in our Expeditionary Services segment and are now reported within our Aviation Services segment for all periods presented.

The Aviation Services segment consists of aftermarket support and services offerings that provide spare parts and maintenance support for aircraft operated by our commercial and government/defense customers. Sales in the Aviation Services segment are derived from the sale and lease of a wide variety of new, overhauled and repaired engine and airframe parts and components to the commercial aviation and government and defense markets. We provide customized inventory supply chain management, performance based logistics programs, customer fleet management and operations, and aircraft component repair management services. The segment also includes repair, maintenance and overhaul of aircraft, landing gear and components. Cost of sales consists principally of the cost of product, direct labor, and overhead.

The Expeditionary Services segment consists of primarily manufacturing operations with sales derived from the design and manufacture of pallets, shelters, and containers used to support the U.S. military’s requirements for a mobile and agile force including engineering, design, and system integration services for specialized command and control systems. This segment also designs and manufactures advanced composite materials for commercial, business and military aircraft. Cost of sales consists principally of the cost of material to manufacture products, direct labor and overhead.

The accounting policies for the segments are the same as those described in Note 1. Our chief operating decision making officer (Chief Executive Officer) evaluates performance based on the reportable segments and utilizes gross profit as a primary profitability measure. Gross profit is calculated by subtracting cost of sales from sales. The assets and certain expenses related to corporate activities are not allocated to the segments. Our reportable segments are aligned principally around differences in products and services.

Selected financial information for each segment is as follows:


	For the Year Ended May 31,
	2019		2018		2017
Net sales:
Aviation Services	$	1,920.6	$	1,635.8	$	1,485.4
Expeditionary Services		131.2		112.5		105.4
	$	2,051.8	$	1,748.3	$	1,590.8


	For the Year Ended May 31,
	2019		2018		2017
Gross profit:
Aviation Services	$	313.3	$	275.3	$	246.0
Expeditionary Services		16.2		19.3		17.4
	$	329.5	$	294.6	$	263.4


	May 31,
	2019		2018
Total assets:
Aviation Services	$	1,346.8	$	1,241.2
Expeditionary Services		94.7		94.8
Corporate and discontinued operations		75.7		188.7
	$	1,517.2	$	1,524.7


	For the Year Ended May 31,
	2019		2018		2017
Capital expenditures:
Aviation Services	$	15.1	$	18.9	$	15.0
Expeditionary Services		1.4		1.8		2.0
Corporate		0.9		1.3		8.2
Total continuing operations		17.4		22.0		25.2
Discontinued operations		0.5		5.0		8.4
	$	17.9	$	27.0	$	33.6


	For the Year Ended May 31,
	2019		2018		2017
Depreciation and amortization:1
Aviation Services	$	37.5	$	34.6	$	30.8
Expeditionary Services		4.1		4.6		5.0
Corporate		14.7		16.6		10.9
Total continuing operations		56.3		55.8		46.7
Discontinued operations		—		7.3		17.2
	$	56.3	$	63.1	$	63.9

Includes amortization of stock‑based compensation.

The following table reconciles segment gross profit to income from continuing operations before provision for income taxes.


	For the Year Ended May 31,
	2019		2018		2017
Segment gross profit	$	329.5	$	294.6	$	263.4
Provision for doubtful accounts		(15.8)		(0.5)		(2.1)
Selling, general and administrative		(215.4)		(208.1)		(179.0)
Other expenses		(0.8)		(0.9)		—
Interest expense		(9.5)		(8.0)		(5.3)
Interest income		1.0		0.1		0.1
Income from continuing operations before provision for income taxes	$	89.0	$	77.2	$	77.1

The U.S. Department of Defense, U.S. Department of State, other U.S. government agencies and their contractors are our only customers representing 10% or more of total sales in any of the last three fiscal years. Sales by segment for these customers are as follows:


	For the Year Ended May 31,
	2019			2018			2017
Aviation Services	$	455.9		$	241.3		$	260.2
Expeditionary Services		90.3			63.0			61.3
	$	546.2		$	304.3		$	321.5
Percentage of total sales		26.6	%		17.4	%		20.2	%

Sales across the major customer markets for each of our operating segments for the fiscal years ended May 31, 2019, 2018 and 2017 were as follows:


	For the Year Ended May 31,
	2019		2018		2017
Aviation Services:
Commercial	$	1,342.3	$	1,281.9	$	1,114.9
Government and defense		578.3		353.9		370.5
	$	1,920.6	$	1,635.8	$	1,485.4

Expeditionary Services:
Commercial	$	31.6	$	37.5	$	37.1
Government and defense		99.6		75.0		68.3
	$	131.2	$	112.5	$	105.4

Sales by type of product/service was as follows:


	For the Year Ended May 31,
	2019		2018		2017
Aviation supply chain	$	1,395.2	$	1,082.9	$	998.7
Maintenance, repair and overhaul services		525.4		552.9		486.7
Mobility products		131.2		112.5		105.4
	$	2,051.8	$	1,748.3	$	1,590.8

Geographic Data

Sales by geographic region for the fiscal years ended May 31, 2019, 2018 and 2017 were as follows:


	For the Year Ended May 31,
	2019		2018		2017
Aviation Services:
North America	$	1,426.8	$	1,131.4	$	1,077.4
Europe/Africa		323.4		325.9		272.4
Other		170.4		178.5		135.6
	$	1,920.6	$	1,635.8	$	1,485.4

Expeditionary Services:
North America	$	124.1	$	105.3	$	101.0
Europe/Africa		5.8		6.9		4.3
Other		1.3		0.3		0.1
	$	131.2	$	112.5	$	105.4


	May 31,
	2019		2018
Long-lived assets:
United States	$	345.4	$	393.1
Europe		108.7		103.3
Other		110.6		85.6
	$	564.7	$	582.0

Sales to unaffiliated customers in foreign countries (including sales through foreign sales offices of domestic subsidiaries) were approximately $661.8 million (32.3% of total sales), $694.0 million (39.7% of total sales) and $595.4 million (37.4% of total sales) in fiscal 2019, 2018 and 2017, respectively.