Business Segment Information

12 Months Ended

May 31, 2023

Business Segment Information

Business Segment Information

16. Business Segment Information

Segment Reporting

Our chief operating decision making officer (“CODM”) is our Chairman, President and Chief Executive Officer and consistent with how he 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.

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. 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 CODM evaluates performance based on the operating 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 operating segments are aligned principally around differences in products and services.

During the first quarter of fiscal 2024, our CODM implemented changes in how he evaluates the business, allocates resources, and assesses performance. Specifically, this new structure results in the separation of our Aviation Services segment into three new operating segments: Parts Supply, Repair & Engineering and Integrated Solutions. Beginning with the first quarter of fiscal 2024, we will report under this new structure using the following four operating segments:

● Parts Supply, primarily consisting of our sales of used serviceable engine and airframe parts and components and distribution of new parts;

● Repair & Engineering, primarily consisting of our maintenance, repair, and overhaul services across airframes and components, including landing gear;

● Integrated Solutions, primarily consisting 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 Defense (“DoD”) and foreign governments, flight hour component inventory and repair programs for commercial airlines, and integrated software solutions including Trax; and

● Expeditionary Services, primarily consisting of products and services supporting the movement of equipment and personnel by the U.S. and foreign governments and non-governmental organizations.

In conjunction with the re-alignment, our CODM will evaluate each segment’s performance based on operating income instead of gross profit as the CODM believes operating income is a more comprehensive profitability measure for each operating segment. These changes will be initially reflected in our condensed consolidated financial statements for the quarterly period ended August 31, 2023 and are not reflected herein.

Selected financial information for each segment is as follows:

	For the Year Ended May 31,
	2023		2022		2021
Net sales:
Aviation Services	$	1,898.7	$	1,745.8	$	1,553.7
Expeditionary Services		91.8		74.2		98.6
	$	1,990.5	$	1,820.0	$	1,652.3

	For the Year Ended May 31,
	2023		2022		2021
Gross profit:
Aviation Services	$	355.1	$	297.5	$	263.2
Expeditionary Services		15.0		15.7		12.7
	$	370.1	$	313.2	$	275.9

	May 31,
	2023		2022
Total assets:
Aviation Services	$	1,617.1	$	1,367.3
Expeditionary Services		67.0		74.8
Corporate and discontinued operations		149.0		131.8
	$	1,833.1	$	1,573.9

	For the Year Ended May 31,
	2023		2022		2021
Capital expenditures:
Aviation Services	$	23.0	$	16.2	$	8.1
Expeditionary Services		6.1		1.0		3.1
Corporate		0.4		0.1		0.1
	$	29.5	$	17.3	$	11.3

	For the Year Ended May 31,
	2023		2022		2021
Depreciation and amortization:1
Aviation Services	$	25.7	$	31.2	$	33.7
Expeditionary Services		1.5		1.6		2.3
Corporate		14.2		8.5		9.5
	$	41.4	$	41.3	$	45.5

1 Includes amortization of stock-based compensation.

Reconciliations of our segment gross profit to income from continuing operations before provision for income taxes is as follows:

	For the Year Ended May 31,
	2023		2022		2021
Segment gross profit	$	370.1	$	313.2	$	275.9
Provision for credit losses		(2.6)		(1.2)		(8.5)
Selling, general and administrative		(230.4)		(202.2)		(182.4)
Earnings (Loss) from joint ventures		(3.2)		(2.9)		0.2
Losses related to sale and exit of business		(0.7)		(1.7)		(20.2)
Other income (expenses), net		(0.8)		2.2		4.3
Interest expense		(12.2)		(2.4)		(5.0)
Interest income		1.0		0.1		0.2
Income from continuing operations before provision for income taxes	$	121.2	$	105.1	$	64.5

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,
	2023			2022			2021
Aviation Services	$	499.7		$	557.4		$	657.0
Expeditionary Services		77.3			62.6			81.8
	$	577.0		$	620.0		$	738.8
Percentage of total sales		29.0	%		34.1	%		44.7	%

Sales across the major customer markets for each of our operating segments were as follows:

	For the Year Ended May 31,
	2023		2022		2021
Aviation Services:
Commercial	$	1,320.5	$	1,081.6	$	793.9
Government and defense		578.2		664.2		759.8
	$	1,898.7	$	1,745.8	$	1,553.7
Expeditionary Services:
Commercial	$	8.3	$	2.2	$	12.5
Government and defense		83.5		72.0		86.1
	$	91.8	$	74.2	$	98.6

Sales by type of product/service was as follows:

	For the Year Ended May 31,
	2023		2022		2021
Aviation supply chain	$	1,365.3	$	1,275.1	$	1,172.7
Maintenance, repair and overhaul services		533.4		470.7		381.0
Mobility products		91.8		74.2		98.6
	$	1,990.5	$	1,820.0	$	1,652.3

Geographic Data

Sales by geographic region for the fiscal years ended May 31, 2023, 2022 and 2021 were as follows:

	For the Year Ended May 31,
	2023		2022		2021
Aviation Services:
North America	$	1,443.5	$	1,346.2	$	1,255.7
Europe/Africa		267.4		223.7		207.5
Other		187.8		175.9		90.5
	$	1,898.7	$	1,745.8	$	1,553.7
Expeditionary Services:
North America	$	89.6	$	74.0	$	95.9
Other		2.2		0.2		2.7
	$	91.8	$	74.2	$	98.6

	May 31,
	2023		2022
Long-lived assets:
United States	$	559.9	$	400.4
Europe		78.5		74.3
Other		96.8		92.0
	$	735.2	$	566.7

Sales to unaffiliated customers in foreign countries (including sales through foreign sales offices of domestic subsidiaries) were approximately $588.6 million (29.6% of sales), $484.5 million (26.6% of sales) and $370.5 million (22.4% of sales) in fiscal 2023, 2022 and 2021, respectively.