Business Segment Information

3 Months Ended

Aug. 31, 2015

Business Segment Information

Business Segment Information

Note 11 — Business Segment Information

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 business segments:  Aviation Services comprised of supply chain and maintenance, repair and overhaul (“MRO”) activities and Expeditionary Services comprised of airlift and mobility activities.

The Aviation Services segment consists of businesses that provide spares 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, aircraft component repair management services, and aircraft modifications.  The segment also includes repair, maintenance and overhaul of aircraft, landing gear and components.  We also sell and lease used commercial aircraft (exclusively through joint ventures following the sale of our last two wholly-owned aircraft in the fourth quarter of fiscal 2015).  Cost of sales consists principally of the cost of product, direct labor, and overhead.

The Expeditionary Services segment consists of businesses that provide products and services supporting the movement of equipment and personnel by the U.S. Department of Defense (“DoD”), foreign governments and non-governmental organizations.  Sales in the Expeditionary Services segment are derived from the delivery of airlift services to mostly government and defense customers and the design and manufacture of pallets, shelters, and containers used to support the U.S. military’s requirements for a mobile and agile force.  We also provide system integration services for specialized command and control systems.  Cost of sales consists principally of aircraft maintenance costs, depreciation, 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 of Notes to Consolidated Financial Statements included in our annual report on Form 10-K for the year ended May 31, 2015.  Our chief operating decision making 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:

	Three Months Ended
	August 31,
	2015		2014
Net sales:
Aviation Services	$	315.8	$	311.6
Expeditionary Services	62.0		83.5
	$	377.8	$	395.1

	Three Months Ended
	August 31,
	2015		2014
Gross profit:
Aviation Services	$	49.9	$	48.2
Expeditionary Services	4.6		14.2
	$	54.5	$	62.4

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

	Three Months Ended
	August 31,
	2015			2014
Segment gross profit	$	54.5		$	62.4
Selling, general and administrative	(39.4		)	(38.5		)
Earnings (Loss) from joint ventures	(0.3		)	0.6
Loss on extinguishment of debt	(0.3		)	—
Interest expense	(2.0		)	(6.4		)
Interest income	0.1			0.1
Income from continuing operations before provision for income taxes	$	12.6		$	18.2