Business Segment Information

6 Months Ended

Nov. 30, 2023

Business Segment Information

Business Segment Information

Note 15 – Business Segment Information

During the first quarter of fiscal 2024, our chief operating decision maker (“CODM”) implemented changes in how he organizes the business, allocates resources, and assesses performance. Specifically, this new structure resulted in the separation of our former Aviation Services segment into three new operating segments: Parts Supply, Repair & Engineering, and Integrated Solutions.

In conjunction with the re-alignment, our CODM now evaluates each segment’s performance based on operating income instead of gross profit as our CODM believes operating income is a more comprehensive profitability measure for each operating segment.

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.

Our operating segments are comprised of:

● 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, U.S. Department of State, 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 with sales derived from the engineering, design, integration, and manufacture of pallets, shelters, and containers.

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, 2023. Cost of sales consists principally of the cost of products, including material used in manufacturing operations, direct labor, and overhead.

The Company has not aggregated operating segments for purposes of identifying reportable segments. 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.

Selected financial information for each segment is as follows:

	Three Months Ended November 30, 2023
	Third-Party		Inter-segment		Total
	Sales		Sales		Sales
Parts Supply	$	227.6	$	1.8	$	229.4
Repair & Engineering		145.4		22.1		167.5
Integrated Solutions		156.6		(0.7)		155.9
Expeditionary Services		15.8		—		15.8
	$	545.4	$	23.2	$	568.6

	Three Months Ended November 30, 2022
	Third-Party		Inter-segment		Total
	Sales		Sales		Sales
Parts Supply	$	183.6	$	2.0	$	185.6
Repair & Engineering		134.8		18.3		153.1
Integrated Solutions		127.3		—		127.3
Expeditionary Services		24.1		—		24.1
	$	469.8	$	20.3	$	490.1

	Six Months Ended November 30, 2023
	Third-Party		Inter-segment		Total
	Sales		Sales		Sales
Parts Supply	$	464.4	$	2.6	$	467.0
Repair & Engineering		282.9		41.6		324.5
Integrated Solutions		312.9		0.4		313.3
Expeditionary Services		34.9		—		34.9
	$	1,095.1	$	44.6	$	1,139.7

	Six Months Ended November 30, 2022
	Third-Party		Inter-segment		Total
	Sales		Sales		Sales
Parts Supply	$	352.2	$	3.8	$	356.0
Repair & Engineering		262.4		38.6		301.0
Integrated Solutions		255.1		—		255.1
Expeditionary Services		46.4		—		46.4
	$	916.1	$	42.4	$	958.5

The following table reconciles segment operating income to income from continuing operations before income taxes:

	Three Months Ended				Six Months Ended
	November,				November,
	2023		2022		2023		2022
Segment operating income:
Parts Supply	$	28.4	$	21.3	$	43.5	$	39.6
Repair & Engineering		11.3		8.6		20.4		16.0
Integrated Solutions		6.4		7.1		14.1		15.4
Expeditionary Services		0.9		2.0		2.2		4.3
		47.0		39.0		80.2		75.3
Corporate and other		(8.7)		(6.6)		(16.6)		(11.7)
Operating income		38.3		32.4		63.6		63.6
Pension settlement charge		—		—		(26.7)		—
Losses related to sale and exit of business		(0.9)		(0.1)		(1.6)		(0.1)
Other income (expense), net		(0.1)		0.5		(0.1)		0.7
Interest expense		(6.2)		(2.1)		(12.0)		(3.2)
Interest income		0.6		0.1		1.0		0.2
Income from continuing operations before income taxes	$	31.7	$	30.8	$	24.2	$	61.2