Summary of Significant Accounting Policies (Policies)

12 Months Ended

May 31, 2019

Summary of Significant Accounting Policies

The accompanying Consolidated Financial Statements include the accounts of the Company and its majority‑owned subsidiaries after elimination of intercompany accounts and transactions.

New Accounting Pronouncements

New Accounting Pronouncements Adopted

In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation — Stock Compensation. This ASU requires excess tax benefits or deficiencies for share-based payments to be recorded in the period shares vest as income tax expense or benefit, rather than within equity. Effective with the adoption of this ASU, cash flows related to excess tax benefits are now included in operating activities and are no longer classified as a financing activity. We adopted this ASU on June 1, 2017 and recognized excess tax benefits of $2.7 million and $2.9 million as an income tax benefit in fiscal 2019 and 2018, respectively. We have also presented the excess tax benefits within operating activities in the Consolidated Statements of Cash Flows for fiscal 2019 and 2018. As permitted, we adopted the statement of cash flow presentation guidance on a prospective basis with no adjustments to fiscal 2017.

In March 2017, the FASB issued ASU 2017-07, Compensation—Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires an employer to report the service cost component of net periodic pension benefit cost in the same line item as other compensation costs for those related employees. Other components of net pension cost, including interest, expected return on plan assets, and actuarial gains and losses and settlement charges are to be presented outside of operating income. We adopted this ASU on June 1, 2018, which resulted in $1.0 million of pension income included in Other expense, net in the Consolidated Statement of Income for fiscal 2019. The Consolidated Statements of Income for fiscal years 2018 and 2017 were not restated as the non-service cost components of pension expense were not material to those fiscal years.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), which provides guidance for revenue recognition. ASC 606 superseded the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition, and most industry-specific guidance.

We adopted ASC 606 on June 1, 2018 using the modified retrospective method. Under that approach, prior periods were not restated and continue to be reported under the accounting standards in effect for those periods. We elected to use the practical expedient allowing for the application of ASC 606 only to contracts that were not completed as of June 1, 2018. We recognized the cumulative effect of initially applying ASC 606 as a decrease of $20.4 million to the opening balance of retained earnings as of June 1, 2018.

The impact of the adoption of ASC 606 on our Consolidated Balance Sheet was as follows:


	As of		ASC 606		As of
	May 31, 2018		Adjustments		June 1, 2018
Accounts receivable, net	$	202.0	$	(31.4)	$	170.6
Inventories		460.7		(17.3)		443.4
Contract assets–current		—		49.6		49.6
Other current assets		26.2		(0.9)		25.3
Other non-current assets		118.9		(19.0)		99.9
Accrued liabilities		138.3		9.1		147.4
Deferred tax liabilities		15.7		(6.6)		9.1
Deferred revenue on long-term contracts		35.8		(1.1)		34.7
Retained earnings		733.2		(20.4)		712.8

The adoption of ASC 606 impacted us in three primary areas. First, we have certain contracts in which revenue is recognized using the percentage of completion method over the expected term of the contract. Under ASC 606, the contract term used for revenue recognition purposes was shortened to exclude any unexercised customer option years or incorporate customer rights to terminate the contract without significant penalty as we do not have any enforceable rights or obligations prior to the exercise of the underlying option. The impact of this change as of June 1, 2018 resulted in the elimination of certain deferred costs and the establishment of accrued liabilities reflecting our estimated obligations under the contracts. For this change, we recognized a decrease of $22.1 million to the opening balance of retained earnings as of June 1, 2018.

Second, we have contracts under which we perform repair services on customer-owned assets whereby the customer simultaneously receives the benefits of the repair. These contracts also transitioned to an over time revenue recognition model as of June 1, 2018 compared to our prior policy of recognizing revenue at the time of shipment. The impact of this change as of June 1, 2018 resulted in the elimination of certain inventory and accounts receivable amounts and the establishment of a contract asset reflecting the over time revenue recognition treatment. For this change, we recognized an increase of $1.3 million to the opening balance of retained earnings as of June 1, 2018.

Third, we have certain contracts under which we manufacture products with no alternative use as the customer owns the underlying intellectual property and we have an enforceable right to payment from the customer. As a result, we now recognize revenue for these contracts over time as opposed to at the time of shipment, which was our policy prior to June 1, 2018. The impact of this change as of June 1, 2018 resulted in the elimination of certain inventory amounts and the establishment of a contract asset reflecting the over time revenue recognition treatment. For this change, we recognized an increase of $0.4 million to the opening balance of retained earnings as of June 1, 2018.

The impact of the ASC 606 adoption on our Consolidated Financial Statements as of May 31, 2019 and for the fiscal year ended May 31, 2019 were as follows:


	As of May 31, 2019
					Balances
			ASC 606		Excluding
	As Reported		Adjustments		ASC 606
Accounts receivable, net	$	197.8	$	38.5	$	236.3
Contract assets–current		59.2		(59.2)		—
Inventories		523.7		22.2		545.9
Other current assets		36.2		(0.4)		35.8
Other non-current assets		77.5		25.3		102.8
Accrued liabilities		140.5		(5.9)		134.5
Deferred tax liabilities		—		6.6		6.6
Deferred revenue on long-term contracts		83.8		5.2		89.0
Retained earnings		709.8		20.5		730.3


	Fiscal Year Ended May 31, 2019
					Balances
			ASC 606		Excluding
	As Reported		Adjustments		ASC 606
Sales	$	2,051.8	$	(5.0)	$	2,046.8
Cost of sales		1,722.3		(5.1)		1,717.2
Operating income		98.3		0.1		98.4
Provision for income taxes		4.9		—		4.9
Income from continuing operations		84.1		0.1		84.2


	Fiscal Year Ended May 31, 2019
					Balances
			ASC 606		Excluding
	As Reported		Adjustments		ASC 606
Cash flows provided from operating activities:
Net income	$	7.5	$	0.1	$	7.6
Income from continuing operations		84.1		0.1		84.2
Accounts receivable		(34.4)		(7.1)		(41.5)
Contract assets		(9.7)		9.7		—
Inventories		(80.9)		(4.9)		(85.8)
Accrued and other liabilities		22.9		3.2		26.1
Other		21.6		(1.0)		20.6

New Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases. This ASU amends the existing accounting standards for lease accounting, including requiring lessees to recognize a right-of-use asset and lease liability on the balance sheet for most lease arrangements, including those classified as operating leases under the current accounting guidance. In addition, this ASU will require new qualitative and quantitative disclosures about our leasing activities. This new standard will be effective for us beginning June 1, 2019 and is required to be adopted using a modified retrospective approach. The new standard provides us an option to recognize the cumulative effect adjustment on retained earnings as of June 1, 2019 or as of the beginning of the earliest period presented.

We have reviewed our lease portfolio and are finalizing implementation of the necessary processes and systems to comply with the requirements of this new ASU. This included the selection and implementation of a third-party software solution to facilitate the accounting and reporting requirements of the new ASU.

We will adopt this ASU in the first quarter of fiscal 2020 and apply it prospectively. We expect to elect the package of practical expedients, which permits us not to reassess under the new ASU our prior conclusions about lease identification, lease classification and initial direct costs. In addition, we will implement accounting policy elections to not separate lease and non-lease components for both lessee and lessor relationships and not capitalize any leases with terms of less than twelve months on our Consolidated Balance Sheet.

We expect to recognize operating lease liabilities with corresponding right-of-use assets of approximately the same amount based on the present value of the remaining lease payments over the lease term. We do not anticipate that adoption of the ASU will have a significant impact on our results of operations or cash flows.

In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU permits the reclassification of tax effects stranded in accumulated other comprehensive income to retained earnings as a result of the Tax Cuts and Jobs Act (the “Tax Reform Act”). We continue to evaluate the impact of this ASU on our consolidated financial statements and expect to adopt this ASU in the first quarter of fiscal 2020.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. This ASU requires a change in the measurement approach for credit losses on financial assets measured on an amortized cost basis from an incurred loss method to an expected loss method, thereby eliminating the requirement that a credit loss be considered probable to impact the valuation of a financial asset measured on an amortized cost basis. This ASU also requires the measurement of expected credit losses to be based on relevant information about past events, including historical experience, current conditions, and a reasonable and supportable forecast of the collectability of the related financial asset. We continue to evaluate the impact of this ASU on our consolidated financial statements and expect to adopt this ASU on June 1, 2020.

Revenue Recognition

Revenue Recognition for Fiscal 2019

Revenue is measured based on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. We recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer.

Our unit of accounting for revenue recognition is a performance obligation included in our customer contracts. A performance obligation reflects the distinct good or service that we must transfer to a customer. At contract inception, we evaluate if the contract should be accounted for as a single performance obligation or if the contract contains multiple performance obligations. In some cases, our contract with the customer is considered one performance obligation as it includes factors such as whether the good or service being provided is significantly integrated with other promises in the contract, whether the service provided significantly modifies or customizes another good or service or whether the good or service is highly interdependent or interrelated. If the contract has more than one performance obligation, we determine the standalone price of each distinct good or service underlying each performance obligation and allocate the transaction price based on their relative standalone selling prices.

The transaction price of a contract, which can include both fixed and variable amounts, is allocated to each performance obligation identified. Some contracts contain variable consideration, which could include incremental fees or penalty provisions related to performance. Variable consideration that can be reasonably estimated based on current assumptions and historical information is included in the transaction price at the inception of the contract but limited to the amount that is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Variable consideration that cannot be reasonably estimated is recorded when known.

Our performance obligations are satisfied over time as work progresses or at a point in time based on transfer of control of products and services to our customers. The majority of our sales from products are recognized at a point in time upon transfer of control to the customer, which generally occurs upon shipment. In connection with certain sales of products, we also provide logistics services, which include inventory management, replenishment, and other related services. The price of such services is generally included in the price of the products delivered to the customer, and revenues are recognized upon delivery of the product, at which point, the customer has obtained control of the product. We do not account for these services separate from the related product sales as the services are inputs required to fulfill part orders received from customers.

For our performance obligations that are satisfied over time, we measure progress in a manner that depicts the performance of transferring control to the customer. As such, we utilize the input method of cost-to-cost to recognize revenue over time as this depicts when control of the promised goods or services are transferred to the customer. Revenue is recognized based on the relationship of actual costs incurred to date to the estimated total cost at completion of the performance obligation. We are required to make certain judgments and estimates, including estimated revenues and costs, as well as inflation and the overall profitability of the arrangement. Key assumptions involved include future labor costs and efficiencies, overhead costs, and ultimate timing of product delivery. Differences may occur between the judgments and estimates made by management and actual program results.

Changes in estimates and assumptions related to our arrangements accounted for using the cost-to-cost method are recorded using the cumulative catch-up method of accounting. These changes are primarily adjustments to the estimated profitability for our long-term programs where we provide component inventory management and/or repair services. For the fiscal year ended May 31, 2019, we recognized favorable and unfavorable cumulative catch-up adjustments of $8.0 million and $2.1 million, respectively.

Under most of our U.S. government contracts, if the contract is terminated for convenience, we are entitled to payment for items delivered and fair compensation for work performed, the costs of settling and paying other claims, and a reasonable profit on the costs incurred or committed.

Lease revenues are recognized as earned. Income from monthly or quarterly rental payments is recorded in the pertinent period according to the lease agreement. However, for leases that provide variable rents, we recognize lease income on a straight-line basis. In addition to a monthly lease rate, some engine leases require an additional rental amount based on the number of hours the engine is used in a particular month. Lease income associated with these contingent rentals is recorded in the period in which actual usage is reported to us by the lessee, which is normally the month following the actual usage.

We have elected to use certain practical expedients permitted under ASC 606. Shipping and handling fees and costs incurred associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales in our Consolidated Statement of Income, and are not considered a performance obligation to our customers. Our reported sales on our Consolidated Statement of Income are net of any sales or related non-income taxes. We also utilize the “as invoiced” practical expedient in certain cases where performance obligations are satisfied over time and the invoiced amount corresponds directly with the value we are providing to the customer.

Revenue Recognition for Fiscal 2018 and 2017

Sales and related cost of sales for product sales are generally recognized upon shipment of the product to the customer. Our standard terms and conditions provide that title passes to the customer when the product is shipped to the customer. Sales of certain defense products are recognized upon customer acceptance, which includes transfer of title. Sales from services and the related cost of services are generally recognized when customer-owned material is shipped back to the customer. We have adopted this accounting policy because at the time the customer-owned material is shipped back to the customer, all services related to that material are complete as our service agreements generally do not require us to provide services at customer sites. Furthermore, serviced units are typically shipped to the customer immediately upon completion of the related services. Sales and related cost of sales for certain large airframe maintenance contracts and performance-based logistics programs are recognized by the percentage of completion method, based on the relationship of costs incurred to date to the estimated total costs. Net favorable cumulative catch-up adjustments recognized during fiscal 2018 and 2017 were $3.6 million and $8.5 million, respectively, resulting from changes to the estimated profitability of these contracts.

Certain supply chain management programs we provide to our customers contain multiple elements or deliverables, such as program and warehouse management, parts distribution, and maintenance and repair services. We recognize revenue for each element or deliverable that can be identified as a separate unit of accounting at the time of delivery based upon the relative fair value of the products and services.

Contract Assets and Liabilities

The timing of revenue recognition, customer billings, and cash collections results in a contract asset or contract liability at the end of each reporting period. Contract assets consist of unbilled receivables or costs incurred where revenue recognized over time using the cost-to-cost model exceeds the amounts billed to customers. Contract liabilities include advance payments and billings in excess of revenue recognized. Certain customers make advance payments prior to the satisfaction of our performance obligations on the contract. These amounts are recorded as contract liabilities until such performance obligations are satisfied, either over time as costs are incurred or at a point in time when deliveries are made. Contract assets and contract liabilities are determined on a contract-by-contract basis.

Net contract assets and liabilities are as follows:


	May 31, 2019		June 1, 2018		Change
Contract assets – current	$	59.2	$	49.6	$	9.6
Contract assets – non-current		17.0		12.9		4.1
Deferred revenue – current		(12.6)		(9.4)		(3.2)
Deferred revenue on long-term contracts		(83.8)		(34.7)		(49.1)
Net contract assets (liabilities)	$	(20.2)	$	18.4	$	(38.6)

Contract assets – non-current is reported within Other non-current assets, and Contract liabilities – current is reported within Accrued Liabilities on our Consolidated Balance Sheet. Changes in contract assets and contract liabilities primarily result from the timing difference between our performance of services and payments from customers. For the fiscal year ended May 31, 2019, we recognized as revenue the entire opening balance of our contract liabilities as the timing between customer payment and our performance of the services is a short period of time and generally no longer than three months.

Remaining Performance Obligations

As of May 31, 2019, we had approximately $1.5 billion of remaining performance obligations, also referred to as firm backlog, which excludes unexercised contract options and potential orders under our indefinite-delivery, indefinite-quantity contracts. We expect that approximately 40% of this backlog will be recognized as revenue over the next 12 months, with the majority of the remaining balance recognized over the next three years. The amount of remaining performance obligations that is expected to be recognized as revenue beyond 12 months primarily relates to our long-term programs where we provide component inventory management and/or repair services.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts to reflect the expected uncollectibility of accounts receivable based on past collection history and specific risks identified among uncollected accounts. In determining the required allowance, we consider factors such as general and industry‑specific economic conditions, customer credit history, and our customers’ current and expected future financial performance. The majority of our customers are recurring customers with an established payment history. Certain customers are required to undergo an extensive credit check prior to delivery of products or services.

We perform regular evaluations of customer payment experience, current financial condition, and risk analysis. We may require collateral in the form of security interests in assets, letters of credit, and/or obligation guarantees from financial institutions for transactions executed on other than normal trade terms. We also maintain trade credit insurance for certain customers to provide coverage, up to a certain limit, in the event of insolvency of some customers.

In fiscal 2019, we recognized a provision for doubtful accounts of $12.4 million related to the bankruptcy of a European airline customer. The provision consisted of impairment of non-current contract assets of $7.6 million, allowance for doubtful accounts of $3.3 million, and other liabilities of $1.5 million.

The change in our allowance for doubtful accounts was as follows:


	May 31,
	2019		2018		2017
Balance, beginning of year	$	7.5	$	4.9	$	3.3
Provision charged to operations		15.8		0.5		2.1
Recoveries, deductions for accounts written off and other reclassifications		(7.3)		2.1		(0.5)
Balance, end of year	$	16.0	$	7.5	$	4.9

Goodwill and Other Intangible Assets

In accordance with ASC 350, Intangibles–Goodwill and Other, goodwill and other intangible assets deemed to have indefinite lives are not amortized, but are subject to annual impairment tests. We review and evaluate our goodwill and indefinite life intangible assets for potential impairment at a minimum annually, on May 31, or more frequently if circumstances indicate that impairment is possible.

As of May 31, 2019, we had three reporting units, which included two in our Aviation Services segment (Aviation Supply Chain and Maintenance, Repair, and Overhaul) and one comprised of our Expeditionary Services segment. We utilized the qualitative assessment approach for all reporting units and concluded it was more likely than not that the fair value of each reporting unit exceeded its carrying value at May 31, 2019, and thus no impairment charge was recorded.

Changes in the carrying amount of goodwill by segment for fiscal 2019 and 2018 are as follows:


	Aviation		Expeditionary
	Services		Services		Total
Balance as of May 31, 2017	$	86.3	$	19.3	$	105.6
Acquisition		12.5		—		12.5
Foreign currency translation adjustments		0.6		—		0.6
Balance as of May 31, 2018		99.4		19.3		118.7
Finalization of purchase price allocation		(1.0)		—		(1.0)
Foreign currency translation adjustments		(1.5)		—		(1.5)
Balance as of May 31, 2019	$	96.9	$	19.3	$	116.2

Intangible assets with finite useful lives are amortized on a straight‑line basis over their estimated useful lives. Intangible assets, other than goodwill, are comprised of the following:


	May 31, 2019
			Accumulated
	Gross		Amortization		Net
Amortizable intangible assets:
Customer relationships	$	25.5	$	(15.6)	$	9.9
Lease agreements		22.5		(14.0)		8.5
Other		3.4		(0.7)		2.7
		51.4		(30.3)		21.1
Unamortized intangible assets:
Trademarks		1.1		—		1.1
	$	52.5	$	(30.3)	$	22.2


	May 31, 2018
			Accumulated
	Gross		Amortization		Net
Amortizable intangible assets:
Customer relationships	$	26.3	$	(13.9)	$	12.4
Lease agreements		22.5		(12.6)		9.9
Other		11.2		(6.8)		4.4
		60.0		(33.3)		26.7
Unamortized intangible assets:
Trademarks		1.1		—		1.1
	$	61.1	$	(33.3)	$	27.8

Customer relationships are being amortized over 5‑20 years and lease agreements are being amortized over 5-18 years. Amortization expense recorded during fiscal 2019, 2018 and 2017 was $3.9 million, $4.7 million, and $4.2 million, respectively. The estimated aggregate amount of amortization expense for intangible assets in each of the next five fiscal years is $3.7 million in 2020, $3.7 million in 2021, $2.8 million in 2022, $2.3 million in 2023 and $2.1 million in 2024.

Foreign Currency

Our foreign subsidiaries utilize the local currency as their functional currency. All balance sheet accounts of foreign subsidiaries transacting business in currencies other than the U.S. dollar are translated at year‑end exchange rates. Revenues and expenses are translated at average exchange rates during the year. Translation adjustments are excluded from the results of operations and are recorded in stockholders’ equity as a component of accumulated other comprehensive loss until such subsidiaries are liquidated.

Cash

Cash and cash equivalents consist of highly liquid instruments which have original maturities of three months or less when purchased. Restricted cash represents cash on hand required to be set aside by a contractual agreement related to receivable securitization arrangements. Generally, the restrictions related to the receivable securitization arrangements lapse at the time we remit the customer payments collected by us as servicer of previously sold customer receivables to the purchaser.

Financial Instruments and Concentrations of Market or Credit Risk

Financial instruments that potentially subject us to concentrations of market or credit risk consist principally of trade receivables. While our trade receivables are diverse and represent a number of entities and geographic regions, the majority are with the U.S. government and its contractors and entities in the aviation industry.

The composition of our accounts receivable is as follows:


	May 31,
	2019		2018
U.S. Government contracts:
Trade receivables	$	28.7	$	31.9
Unbilled receivables		31.7		13.4
		60.4		45.3
All other customers:
Trade receivables		92.5		96.2
Unbilled receivables		44.9		60.5
		137.4		156.7
	$	197.8	$	202.0

In addition, we currently have past due accounts receivable owed by former commercial program customers primarily related to our exit from customer contracts in certain geographies, including Colombia, Peru, and Poland. Our past due accounts receivable owed by these customers was $12.4 million as of May 31, 2019 which was net of allowance for doubtful accounts of $8.2 million.

The carrying amounts of cash and cash equivalents, accounts receivable, and accounts and trade notes payable approximate fair value because of the short‑term maturity of these instruments. The carrying value of long‑term debt bearing a variable interest rate approximates fair value.

Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Inventories

Inventories are valued at the lower of cost or market (estimated net realizable value). Cost is determined by the specific identification, average cost, or first‑in, first‑out methods. From time‑to‑time, we purchase aircraft and engines for disassembly to individual parts and components. Costs are assigned to these individual parts and components utilizing list prices from original equipment manufacturers and recent sales history.

The following is a summary of inventories:


	May 31,
	2019		2018
Aircraft and engine parts, components and finished goods	$	467.9	$	383.5
Raw materials and parts		41.8		45.1
Work-in-process		14.0		32.1
	$	523.7	$	460.7

Rotable Assets and Equipment under Leases

The cost of the asset under lease is the original purchase price plus overhaul costs. Depreciation is computed using the straight‑line method over the estimated service life of the equipment. The balance sheet classification of equipment under lease is generally based on lease term, with fixed‑term leases less than twelve months generally classified as short‑term and all others generally classified as long‑term.

Equipment on short‑term lease includes aircraft engines and parts on or available for lease to satisfy customers’ immediate short‑term requirements. The leases are renewable with fixed terms, which generally vary from one to twelve months.

Future rent due to us under non‑cancelable leases during each of the next five fiscal years is $29.4 million in 2020, $28.7 million in 2021, $28.2 million in 2022, $28.0 million in 2023, and $28.0 million in 2024.

Rotable Assets Supporting Long-term Programs

Rotable Assets Supporting Long-Term Programs

Rotable assets supporting long-term programs consist of rotable component parts used to support long-term supply chain programs. The assets are being depreciated on a straight-line basis over their estimated useful lives.

Property, Plant and Equipment

We record property, plant and equipment at cost. Depreciation is computed on the straight‑line method over useful lives of 10‑40 years for buildings and improvements and 3-10 years for equipment, furniture and fixtures, and capitalized software. Leasehold improvements are amortized over the shorter of the estimated useful life or the term of the applicable lease.

Repair and maintenance expenditures are expensed as incurred. Upon sale or disposal, cost and accumulated depreciation are removed from the accounts, and related gains and losses are included in results of operations.

In accordance with ASC 360, Property, Plant and Equipment, we are required to test for impairment of long-lived assets whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable from its undiscounted cash flows. We utilize certain assumptions to estimate future undiscounted cash flows, including demand for our services, future market conditions and trends, business development pipeline of opportunities, current and future lease rates, lease terms, and residual values.

Investments

Investments where we have the ability to exercise significant influence, but do not control the entity, are accounted for under the equity method of accounting. Significant influence generally exists if we have a 20% to 50% ownership interest in the investee. Our share of the net earnings or loss of our investees is included in operating income in our Consolidated Statements of Income since the activities of the investees are closely aligned with our operations. Equity investments in entities over which we do not have the ability to exercise significant influence and whose securities do not have a readily determinable fair value are carried at cost.

We evaluate our investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

Our investments are classified in Other non-current assets on our Consolidated Balance Sheets. Distributions from joint ventures are classified as operating or investing activities in the Consolidated Statements of Cash Flows based upon an evaluation of the specific facts and circumstances of each distribution.

Income Taxes

We are subject to income taxes in the U.S., state, and several foreign jurisdictions. In the ordinary course of business, there can be transactions and calculations where the ultimate tax determination is uncertain. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse.

We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Both positive and negative evidence are considered in forming our judgment as to whether a valuation allowance is appropriate, and more weight is given to evidence that can be objectively verified. Valuation allowances are reassessed whenever there are changes in circumstances that may cause a change in judgment.

The accounting for uncertainty in income taxes requires a more‑likely‑than‑not threshold for financial statement recognition of tax positions taken or expected to be taken in a tax return. Where necessary, we record a liability for the difference between the benefit recognized for financial statement purposes and the tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made.

Supplemental Information on Cash Flows

Supplemental information on cash flows is as follows:


	For the Year Ended
	May 31,
	2019		2018		2017
Interest paid	$	8.8	$	7.2	$	4.4
Income taxes paid		7.0		17.0		12.7
Income tax refunds and interest received		6.4		0.1		1.3

During fiscal 2019, treasury stock increased $7.0 million reflecting the repurchase of common shares of $10.3 million, restricted stock activity of $0.8 million partially offset by the re-issuance of shares upon exercise of stock options, net of shares withheld to satisfy statutory tax obligations, of $4.1 million.

During fiscal 2018, treasury stock increased $0.9 million reflecting the repurchase of common shares of $13.1 million, restricted stock activity of $1.0 million and the re-issuance of shares upon exercise of stock options, net of shares withheld to satisfy statutory tax obligations, of $11.2 million.

During fiscal 2017, treasury stock increased $12.2 million reflecting the repurchase of common shares of $19.8 million, restricted stock grants of $1.3 million and the re-issuance of shares upon exercise of stock options, net of shares withheld to satisfy statutory tax obligations, of $8.9 million.

Use of Estimates

We have made estimates and utilized certain assumptions relating to the reporting of assets and liabilities and the disclosures of contingent liabilities to prepare these Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States. Actual results could differ from those estimates.