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What changed in AAR CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of AAR CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+286 added−278 removedSource: 10-K (2025-07-22) vs 10-K (2024-07-19)

Top changes in AAR CORP's 2025 10-K

286 paragraphs added · 278 removed · 207 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

57 edited+14 added−25 removed38 unchanged
Biggest changeWe believe this strategy is important because it helps us ensure workforce engagement, retention, and productivity, which enables strong business growth globally. We are proud to be recognized as one of America’s Greatest Workplaces and America’s Greatest Workplaces for Diversity for 2024 by Newsweek. This year we embarked on an ambitious journey to crystallize our Company’s purpose and mission.
Biggest changeWe are excited that Sharon Purnell has joined AAR as our Chief HR Officer leading our people strategy globally, centered on a purposeful culture, proactive career development, and an inspiring employee experience. We believe this strategy is important because it helps us ensure workforce engagement, retention, and productivity, which enables strong business growth globally.
Gillen is Senior Vice President and Chief Financial Officer, having served in that capacity since January 2019. Prior to joining AAR, Mr. Gillen was Vice President and Treasurer of USG Corporation since 2017. Prior to USG, Mr. Gillen spent nine years in investment banking with Goldman Sachs, most recently as a Vice President in their Global Industrials Group. Ms.
Gillen is Senior Vice President and Chief Financial Officer, having served in that capacity since January 2019. Prior to joining AAR, Mr. Gillen was Vice President and Treasurer of USG Corporation since 2017. Prior to USG Corporation, Mr. Gillen spent nine years in investment banking with Goldman Sachs, most recently as a Vice President in their Global Industrials Group. Ms.
Flight hour component inventory and repair programs for commercial airlines are primarily comprised of outsourcing programs for airframe parts and components including warranty claim management in support of our airline customers’ maintenance activities. Our integrated software solutions are primarily comprised of our Trax software which we recently acquired in fiscal 2023.
Flight hour component inventory and repair programs for commercial airlines are primarily comprised of outsourcing programs for airframe parts and components including warranty claim management in support of our airline customers’ maintenance activities. Our integrated software solutions are primarily comprised of our Trax software, which we acquired in fiscal 2023.
Available Information For additional information concerning our business segments, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business Segment Information” in Note 17 of Notes to Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.” Our internet address is www.aarcorp.com.
Available Information For additional information concerning our business segments, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business Segment Information” in Note 17 of Notes to Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.” 8 Table of Contents Our internet address is www.aarcorp.com.
Annual talent reviews are conducted to provide meaningful and timely feedback and to identify career aspirations and opportunities to grow technical and leadership skills. The development of our talent is ongoing through Individual Development Plans, assessments, learning and development classes, compliance training, mentorship programs, and cohort style leadership development programs.
Annual talent reviews are conducted to provide meaningful and timely feedback and to identify career aspirations and opportunities to grow technical and leadership skills. The development of our talent and creation of Career Pathways is ongoing through Individual Development Plans, assessments, learning and development classes, compliance training, mentorship programs, and cohort style leadership development programs.
Raw Materials and Procurement of Repair and Other Services Although we generated approximately 60% of our fiscal 2024 sales from the sale of products, we are generally engaged in only limited manufacturing activities and have minimal exposure to fluctuations in both the availability and pricing of raw materials.
Raw Materials and Procurement of Repair and Other Services Although we generated approximately 60% of our fiscal 2025 sales from the sale of products, we are generally engaged in only limited manufacturing activities and have minimal exposure to fluctuations in both the availability and pricing of raw materials.
Backlog includes our remaining performance obligations based on the transaction price of firm orders for which work has not yet been performed as of May 31, 2024 and excludes unexercised contract options and potential orders under contracts such as ID/IQ contracts.
Backlog includes our remaining performance obligations based on the transaction price of firm orders for which work has not yet been performed as of May 31, 2025 and excludes unexercised contract options and potential orders under contracts such as ID/IQ contracts.
Our business activities in this segment are primarily conducted through AAR Aircraft Services, Inc.; AAR Allen Services, Inc.; AAR Landing Gear LLC; AAR International, Inc.; AAR Component Services (Thailand) Ltd.; AAR Component Services - Hot Springs, LLC; and AAR Component Services - Grand Prairie, Inc.
Our business activities in this segment are primarily conducted through AAR Aircraft Services, Inc.; AAR Allen Services, Inc.; AAR International, Inc.; AAR Component Services (Thailand) Ltd.; AAR Component Services – Hot Springs, LLC; and AAR Component Services – Grand Prairie, Inc.
Our custom-built EAGLE Career Pathway program is helping AAR build the next generation labor force, hire from untapped talent pools, and enable smooth transition from military service. We are also proud to partner with Choose Aerospace, a 501(c)(3) nonprofit, to create a general aviation curriculum based on FAA standards.
We are proud to lead the way. Our custom-built EAGLE Career Pathway program is helping AAR build the next generation labor force, hire from untapped talent pools, and enable smooth transition from military service. We are also proud to partner with Choose Aerospace, a 501(c)(3) nonprofit, to create a curriculum based on FAA General certification standards.
We believe that we currently possess all licenses and certifications that are material to the conduct of our business. 6 Table of Contents Competition Competition in each of our markets is based on quality, ability to provide a broad range of products and services, speed of delivery, and price.
We believe that we currently possess all licenses and certifications that are material to the conduct of our business. Competition Competition in each of our markets is based on quality, ability to provide a broad range of products and services, speed of delivery, and price.
We have elevated our commitment to supporting the future generation of technicians by donating over $2.0 million in aged inventory to airframe and powerplant schools in February 2024. Our summer internship program continues to be an instrumental part of how we attract talent. We have expanded our internships across business sectors and locations.
We have elevated our commitment to supporting the future generation of technicians by donating over $2.5 million in aged inventory to airframe and powerplant schools in February 2025. Our summer internship program continues to be an instrumental part of how we attract talent. We have expanded our internships across business sectors and locations.
From June 2017 to May 2018, Mr. Holmes served as President and Chief Operating Officer. From February 2015 to June 2017, Mr. Holmes served as Chief Operating Officer – Aviation Services. Prior to that, Mr.
Prior to that he served as President and Chief Executive Officer since June 2018. From June 2017 to May 2018, Mr. Holmes served as President and Chief Operating Officer. From February 2015 to June 2017, Mr. Holmes served as Chief Operating Officer – Aviation Services. Prior to that, Mr.
We have thirteen FAA certificated repair stations across the United States, Canada, Asia, and Europe. Of the thirteen FAA certificated repair stations, twelve are also European Aviation Safety Agency (“EASA”) and four are also Transport Canada Civil Aviation (“TCCA”) certificated repair stations.
We have twelve FAA certificated repair stations across the United States, Canada, Asia, and Europe. Of the twelve FAA certificated repair stations, ten are also European Aviation Safety Agency (“EASA”) and three are also Transport Canada Civil Aviation (“TCCA”) certificated repair stations.
Our employees provide the foundation for our ability to achieve our strategic objectives. They are instrumental in driving operational excellence and strong financial performance and maintaining a robust safety, quality and compliance program. The success and growth of our business depends on our ability to attract, retain, and develop talented and high-performing employees at all levels of our organization.
They are instrumental in driving operational excellence and strong financial performance and maintaining a robust safety, quality and compliance program. The success and growth of our business depends on our ability to attract, retain, and develop talented and high-performing employees at all levels of our organization.
The Expeditionary Services segment accounted for approximately 3% of our sales in fiscal 2024. We design, manufacture, and repair transportation pallets and a wide variety of containers and shelters used in support of military and humanitarian tactical deployment activities.
The Expeditionary Services segment accounted for approximately 3% of our sales in fiscal 2025. 4 Table of Contents We design, manufacture, and repair transportation pallets and a wide variety of containers and shelters used in support of military and humanitarian tactical deployment activities.
Our landing gear overhaul facility is in Miami, Florida. In conjunction with the integration of the recently acquired Product Support business, we are consolidating our facility footprint which includes closing our Garden City, New York facility. We expect to complete the transition of the facility’s operations to other component repair facilities in fiscal 2026.
In conjunction with the integration of the recently acquired Product Support business, we are consolidating our facility footprint which includes closing our Garden City, New York facility. We expect to complete the transition of the facility’s operations to other component repair facilities in fiscal 2026.
Our business activities in this segment are primarily conducted through AAR Supply Chain, Inc.; AAR Aircraft & Engine Sales & Leasing, Inc.; and AAR International, Inc. Repair & Engineering Our Repair & Engineering segment provides airframe maintenance, component repair, and landing gear overhaul services. The Repair & Engineering segment accounted for approximately 28% of our sales in fiscal 2024.
Our business activities in this segment are primarily conducted through AAR Supply Chain, Inc.; AAR Aircraft & Engine Sales & Leasing, Inc.; and AAR International, Inc. Repair & Engineering Our Repair & Engineering segment primarily provides airframe maintenance and component repair services. The Repair & Engineering segment accounted for approximately 32% of our sales in fiscal 2025.
Our parts are supplied to narrow-body, wide-body and regional aircraft. In most cases, we enter exclusive relationships with OEM manufacturers for a given market where we are the only provider of that supplier’s product category. We provide global scale, independence, and highly technical sales capabilities across both commercial and government end-markets.
In most cases, we enter exclusive relationships with OEM manufacturers for a given market where we are the only provider of that supplier’s product category. We provide global scale, independence, and highly technical sales capabilities across both commercial and government end-markets.
Over the long-term, we expect to see strength in our aviation products and services given our offerings of value-added solutions to both commercial and government and defense customers. We believe long-term commercial aftermarket growth trends are favorable.
Navy to support their P-8A aircraft, advancing our support of commercial derivatives. Over the long-term, we expect to see strength in our aviation products and services given our offerings of value-added solutions to both commercial and government and defense customers. We believe long-term commercial aftermarket growth trends are favorable.
Sales to branches, agencies, and departments of the U.S. government and their contractors were $576.1 million (24.8% of consolidated sales), $577.0 million (29.0% of consolidated sales), and $620.0 million (34.1% of consolidated sales) in fiscal 2024, 2023, and 2022, respectively.
Sales to branches, agencies, and departments of the U.S. government and their contractors were $687.6 million (24.7% of consolidated sales), $576.1 million (24.8% of consolidated sales), and $577.0 million (29.0% of consolidated sales) in fiscal 2025, 2024, and 2023, respectively.
The Integrated Solutions segment accounted for approximately 28% of our sales in fiscal 2024. Fleet management and operations of customer-owned aircraft is performed for the DoS under the INL/A WASS contract. We are the prime contractor on this ten-year performance-based contract which began in fiscal 2018.
The Integrated Solutions segment accounted for approximately 25% of our sales in fiscal 2025. Fleet management and operations of customer-owned aircraft are performed for the U.S. Department of State (“DoS”) under the INL/A WASS contract. We are the prime contractor on this ten-year performance-based contract which began in fiscal 2018.
Sales to Government and Defense Customers Sales to global government and defense customers (including sales to branches, agencies, and departments of the U.S. government) were $681.0 million (29.4% of consolidated sales), $661.7 million (33.2% of consolidated sales), and $736.2 million (40.5% of consolidated sales) in fiscal 2024, 2023 and 2022, respectively.
Sales to Government and Defense Customers Sales to global government and defense customers (including sales to branches, agencies, and departments of the U.S. government) were $804.3 million (28.9% of consolidated sales), $681.0 million (29.4% of consolidated sales), and $661.7 million (33.2% of consolidated sales) in fiscal 2025, 2024, and 2023, respectively.
Although certain of our competitors have substantially greater financial and other resources than we do, we believe that we have maintained a satisfactory competitive position through our responsiveness to customer needs, our attention to safety and quality, our unique portfolio of high-quality solutions with lower cost to the customer, combination of market expertise and deep technical knowledge, our long-standing customer relationships, and our integrated, connected business model.
Although certain of our competitors have substantially greater financial and other resources than we do, we believe that we have maintained a satisfactory competitive position through our responsiveness to customer needs, our attention to safety and quality, our unique portfolio of high-quality solutions with lower cost to the customer, combination of market expertise and deep technical knowledge, our long-standing customer relationships, and our integrated, connected business model. 6 Table of Contents Backlog Backlog represents the amount of revenue that we expect to derive from unshipped orders or signed contracts.
At May 31, 2024, our firm backlog was approximately $668 million, and we expect that approximately 50% of this backlog will be recognized as revenue in fiscal 2025, an additional 28% of the firm backlog in fiscal 2026, and the balance thereafter.
At May 31, 2025, our firm backlog was $537.2 million, and we expect that approximately 75% of this backlog will be recognized as revenue in fiscal 2026, an additional 20% of the firm backlog in fiscal 2027, and the balance thereafter.
Trax has the first fully cloud-based electronic enterprise resource platform for the MRO industry and also offers a full suite of “paperless” mobility apps that are in process of automating MRO workflows with artificial intelligence.
Trax has the first fully cloud-based electronic enterprise resource platform for the MRO industry and also offers a full suite of “paperless” mobility apps that are in process of automating MRO workflows with artificial intelligence. Through Trax, we are a leading provider of maintenance software for airlines, other aircraft operators and MROs.
PMA is a designation under Federal Aviation Administration (“FAA”) regulations that permits the design of approved parts for specific aircraft components that can be provided by non-OEM sources at cost-efficient and sometimes improved availability.
PMA is a designation under Federal Aviation Administration (“FAA”) regulations that permits the design of approved parts for specific aircraft components that can be provided by non-OEM sources at cost-efficient and sometimes improved availability. In addition, this segment also designs proprietary designated engineering representative (“DER”) repairs.
To achieve this objective, our goal is to be the place of choice for people to build an inspiring career. We care about the experience our employees have with us and the impact we collectively have in our community. Our human capital management strategy is centered on a purposeful culture, proactive career development, and an inspiring employee experience.
To achieve this objective, our goal is to be the place of choice for people to build an inspiring career. We care about the experience our employees have with us and the impact we collectively have in our community.
Failure to comply with the Code and applicable laws can have severe consequences for both the Company and individuals involved, including disciplinary action, civil penalties, or criminal prosecution under certain circumstances.
The Code describes appropriate behavior and guides ethical business decisions that maintain a commitment to integrity. Failure to comply with the Code and applicable laws can have severe consequences for both the Company and individuals involved, including disciplinary action, civil penalties, or criminal prosecution under certain circumstances.
Pachapa previously served as Controller since October 2015 and Senior Director of Accounting and Reporting since April 2014. Prior to joining the Company, Mr. Pachapa was with Glanbia plc from 2011 to 2014, and with Ernst & Young LLP from 1996 to 2011. Ms.
Pachapa previously served as Controller from October 2015 to July 2016 and Senior Director of Accounting and Reporting from April 2014 to October 2015. Prior to joining the Company, Mr. Pachapa was with Glanbia plc from 2011 to 2014, and with Ernst & Young LLP from 1996 to 2011. Each executive officer is elected annually by the Board of Directors.
Parts Supply Our Parts Supply segment primarily consists of sales and leasing of USM and aftermarket distribution of new, OEM-supplied replacement parts. The Parts Supply segment accounted for approximately 41% of our sales in fiscal 2024. We have established formal distribution relationships with OEM suppliers of aircraft components, which are utilized by aircraft operators and aircraft repair and maintenance operations.
The Parts Supply segment accounted for approximately 40% of our sales in fiscal 2025. We have established formal distribution relationships with OEM suppliers of aircraft components, which are utilized by aircraft operators and aircraft repair and maintenance operations. We are a leading independent distributor of factory new aircraft parts for the aftermarket.
Our extensive network of industry relationships and presence in the market positions us with operators, lessors and other trading companies to source opportunities. Additionally, our global reach and long-standing customer relationships position us to meet market demand for these products. We also distribute new OEM-supplied replacement parts to aircraft operators, airlines, government customers and other MRO companies across the world.
Additionally, our global reach and long-standing customer relationships position us to meet market demand for these products. We also distribute new OEM-supplied replacement parts to aircraft operators, airlines, government customers and other MRO companies across the world. Our parts are supplied to narrow-body, wide-body and regional aircraft.
Backlog Backlog represents the amount of revenue that we expect to derive from unshipped orders or signed contracts. The backlog primarily relates to our long-term programs where we provide component inventory management, supply chain logistics programs, and/or repair services.
The backlog primarily relates to our long-term programs where we provide component inventory management, supply chain logistics programs, and/or repair services.
Information contained on our website is not, and will not be deemed to be, a part of this Annual Report on Form 10-K or incorporated by reference into our other filings with the Securities and Exchange Commission. 9 Table of Contents Information about our Executive Officers Information concerning each of our executive officers is set forth below: ​ ​ ​ ​ ​ Name Age Present Position with the Company John M.
Information contained on our website is not, and will not be deemed to be, a part of this Annual Report on Form 10-K or incorporated by reference into our other filings with the Securities and Exchange Commission.
These software products increase maintenance efficiency, improve asset utilization and streamline the information flow among interested parties during the maintenance process and creates the required regulatory system of record required by airline and lessor customers.
Through its eMRO and eMobility products, Trax provides comprehensive software solutions for aircraft maintenance designed to increase efficiency, improve asset utilization, streamline the information flow among interested parties during the maintenance process and create the required regulatory system of record required by airline and lessor customers.
Sales of aviation products and services to our commercial airline customers are generally affected by such factors as the number, type and average age of aircraft in service, the levels of aircraft utilization (e.g., frequency of schedules, flying hours, and take-off and landing cycles), the number of airline operators, the general economy, and the level of sales of new and used aircraft.
Customers The principal customers for our products and services are domestic and foreign passenger airlines, domestic and foreign cargo airlines, regional and commuter airlines, business and general aviation operators, OEMs, aircraft leasing companies, aftermarket aviation support companies, the DoD and its contractors, the DoS, and foreign military organizations or governments. 5 Table of Contents Sales of aviation products and services to our commercial airline customers are generally affected by such factors as the number, type and average age of aircraft in service, the levels of aircraft utilization (e.g., frequency of schedules, flying hours, and take-off and landing cycles), the number of airline operators, the general economy, and the level of sales of new and used aircraft.
Some of our contracts call for the performance of specified services or the delivery of specified products under indefinite delivery/indefinite quantity (“ID/IQ”) arrangements.
Some of our contracts call for the performance of specified services or the delivery of specified products under indefinite delivery/indefinite quantity (“ID/IQ”) arrangements. Certain inventory supply and management and performance-based logistics program agreements reflect negotiated terms and conditions.
We also retained approximately 500 contract workers as of May 31, 2024, the majority of whom are located at our airframe maintenance facilities. We retain these contract workers as they provide unique skill sets which are necessary at certain facilities as well as mitigate the impact of demand variability with our customers.
We retain these contract workers as they provide unique skill sets which are necessary at certain facilities as well as mitigate the impact of demand variability with our customers. Our employees provide the foundation for our ability to achieve our strategic objectives.
Each officer, director and employee is required to use good ethical judgement when conducting business and comply with applicable laws, rules, and regulations. The Code describes appropriate behavior and guides ethical business decisions that maintain a commitment to integrity.
Business Ethics Our Code of Conduct (“Code”) is a statement of the principles and standards that we expect our employees to follow. Each officer, director and employee is required to use good ethical judgement when conducting business and comply with applicable laws, rules, and regulations.
Employees are eligible for paid and unpaid leaves, and we offer a variety of other benefits to meet the needs of employees, including an employee assistance program that provides a series of free counseling sessions, educational assistance and adoption assistance. Some AAR facilities also have fitness centers on site for employee use.
The retirement, investment, and tax savings/deferral opportunities offered to employees include competitive 401k benefits and an Employee Stock Purchase Plan. 7 Table of Contents Employees are eligible for paid and unpaid leaves, and we offer a variety of other benefits to meet the needs of employees, including an employee assistance program that provides a series of free counseling sessions, educational assistance and adoption assistance.
USM is an important category of the aviation aftermarket in which parts removed from engines or airframes can be refurbished to be utilized as replacement parts in the aftermarket. We utilize a network of third-party repair facilities to perform this work. USM parts often represent a cost-effective and more timely solution for operators when compared to sourcing new parts.
We utilize a network of third-party repair facilities to perform this work. USM parts often represent a cost-effective and more timely solution for operators when compared to sourcing new parts. We take an active role in sourcing USM inventory by monitoring the market for opportunities to acquire used aircraft and engines.
We are a leading independent distributor of factory new aircraft parts for the aftermarket. As we continue to enhance our digital solutions, we have developed the online PAARTS sm Store, which facilitates the electronic fulfillment of orders when customers choose this channel.
As we continue to enhance our digital solutions, we have developed the online PAARTS sm Store, which facilitates the electronic fulfillment of orders when customers choose this channel. USM is an important category of the aviation aftermarket in which parts removed from engines or airframes can be refurbished to be utilized as replacement parts in the aftermarket.
As we continue to invest in the pipeline of opportunities in the government market, our long-term strategy continues to emphasize investing in the business and capitalizing on opportunities in both the commercial and government markets. 2 Table of Contents Business Segments During the first quarter of fiscal 2024, we re-aligned our operating segments resulting in the separation of our former Aviation Services segment into three new operating segments: Parts Supply, Repair & Engineering, and Integrated Solutions.
As we continue to invest in the pipeline of opportunities in the government market, our long-term strategy continues to emphasize investing in the business and capitalizing on opportunities in both the commercial and government markets. 2 Table of Contents Business Segments Parts Supply Our Parts Supply segment primarily consists of sales and leasing of USM and aftermarket distribution of new, original equipment manufacturers (“OEM”) supplied replacement parts.
We are currently evaluating a potential exit from our investment in the Indian joint venture. Our Repair & Engineering business primarily supports narrow-body Airbus, Boeing and Embraer regional aircraft for customers, as well as U.S. government defense agencies.
Our Repair & Engineering business primarily supports narrow-body Airbus, Boeing and Embraer regional aircraft for customers, as well as U.S. government defense agencies. 3 Table of Contents We operate six airframe maintenance facilities and six component repair facilities.
Our business activities in this segment are primarily conducted through AAR Supply Chain, Inc.; AAR Government Services, Inc.; AAR Aircraft Services, Inc.; AAR Landing Gear LLC; AAR International, Inc.; Trax USA CORP.; and AAR Airlift Group, Inc. 4 Table of Contents Expeditionary Services The Expeditionary Services segment primarily consists of products and services supporting the movement of equipment and personnel by the U.S. and foreign governments and non-governmental organizations.
Our business activities in this segment are primarily conducted through AAR Supply Chain, Inc.; AAR Government Services, Inc.; AAR Aircraft Services, Inc.; AAR International, Inc.; Trax USA CORP.; and AAR Airlift Group, Inc.
Providing comprehensive, competitive, and affordable benefits is important to our talent attraction and retention strategy. We offer health benefits that include various medical/pharmacy/dental plan options as well as a cost comparison tool to assist employees with their decisions.
We offer health benefits that include various medical/pharmacy/dental plan options as well as a cost comparison tool to assist employees with their decisions. Health savings accounts for those in a high-deductible health plan and flexible spending accounts for both health care and dependent care are also available to employees.
After graduation, Fellows in good standing are guaranteed employment with AAR. ​ 8 Table of Contents Talent Development Our continued success depends on a workforce of skilled talent. Attracting people to join us and retaining that workforce requires collaboration across industry, education, and government to develop pathways for future talent. We are proud to lead the way.
These values empower our people to be a team of producers, innovators, and world class leaders, who are Doing It Right® to better connect the world. Talent Development Our continued success depends on a workforce of skilled talent. Attracting people to join us and retaining that workforce requires collaboration across industry, education, and government to develop pathways for future talent.
We are the first independent third-party MRO organization to implement a corporatewide Safety and Management System (“SMS”) program that is recognized by the FAA. Our corporate SMS provides a single platform for all employees to proactively identify and report hazards, perform risk analysis, mitigate risks, and share best practices.
Our corporate Safety and Management System (“SMS”) program provides a single platform for all employees to proactively identify and report hazards, perform risk analysis, mitigate risks, and share best practices. This is complemented via companywide safety videos to encourage proactive reporting and recognize individual team members for focusing on safety and quality.
Holmes ​ 47 ​ Chairman, President, and Chief Executive Officer, Director Sean M. Gillen ​ 38 ​ Senior Vice President and Chief Financial Officer Jessica A. Garascia ​ 45 ​ Senior Vice President, General Counsel, Chief Administrative Officer and Secretary Chris Jessup ​ 46 ​ Senior Vice President, Chief Commercial Officer Eric S.
Garascia ​ 46 ​ Senior Vice President, General Counsel, Chief Administrative Officer and Secretary Chris Jessup ​ 47 ​ Senior Vice President, Chief Commercial Officer Eric S. Pachapa ​ 52 ​ Vice President, Controller and Chief Accounting Officer ​ Mr. Holmes is Chairman, President and Chief Executive Officer, having served in that capacity since January 2023.
We take an active role in sourcing USM inventory by monitoring the market for opportunities to acquire used aircraft and engines. After acquisition, we manage the process of disassembly, repair and inspection of the various parts or discreet components that can be sold to customers.
After acquisition, we manage the process of disassembly, repair and inspection of the various parts or discreet components that can be sold to customers. Our extensive network of industry relationships and presence in the market positions us with operators, lessors and other trading companies to source opportunities.
Both facilities are expected to be complete and operational in the first half of fiscal 2026. In addition to our North American airframe maintenance facilities, we also have an interest in a joint venture that operates an airframe maintenance facility in India. The facility received certain regulatory approvals and commenced airframe maintenance operations in the second quarter of fiscal 2022.
Both facilities are expected to be complete and operational in the next 12-18 months with the Oklahoma City expansion slightly ahead of schedule, and the Miami expansion slightly behind due to some permitting delays. In addition to our North American airframe maintenance facilities, we also had an interest in a joint venture that operated an airframe maintenance facility in India.
Consolidated sales to commercial customers increased $309.1 million, or 23.3%, over the prior year primarily due to strong demand and volume growth in our Parts Supply segment across both new parts distribution and USM. Our consolidated sales to government customers increased $19.3 million, or 2.9%, primarily due to higher activity on the INL/A WASS contract with the U.S.
Consolidated sales to commercial customers increased $338.2 million, or 20.6%, over the prior year primarily due to the acquisition of the Product Support business in the fourth quarter of fiscal 2024 and strong demand and volume growth in our Parts Supply segment from our new parts distribution activities.
Human Capital Resources As of May 31, 2024, we employed approximately 5,700 employees worldwide, with 4,125 employees in the United States and 1,575 employees outside of the United States. The numbers are inclusive of our employees from Trax acquired on March 20, 2023, and the Product Support business acquired on March 1, 2024.
Human Capital Resources As of May 31, 2025, we employed approximately 5,600 employees worldwide, with 4,200 employees in the United States and 1,400 employees outside of the United States. We also retained approximately 500 contract workers as of May 31, 2025, the majority of whom are located at our airframe maintenance facilities.
We complemented the program this year by launching companywide safety videos to encourage proactive reporting and recognize individual team members for focusing on safety and quality. Competitive Pay and Benefits We pay our employees competitively and reward our employees for achieving and exceeding objectives focused on creating long-term value for stockholders.
Competitive Pay and Benefits We pay our employees competitively and reward our employees for achieving and exceeding objectives focused on creating long-term value for stockholders. Providing comprehensive, competitive, and affordable benefits is important to our talent attraction and retention strategy.
We operate globally in over 20 countries through four business segments: Parts Supply, Repair & Engineering, Integrated Solutions and Expeditionary Services. In fiscal 2024, we established new partnerships, expanded our service offerings, and drove greater differentiation in our business including pursuing multiple growth prongs.
We operate globally in over 20 countries through four business segments: Parts Supply, Repair & Engineering, Integrated Solutions and Expeditionary Services. In fiscal 2025, we continued our efforts to optimize our products and services portfolio to position us for continued strong growth as well as to respond to the industry’s increased demand for aftermarket services.
Following a successful pilot program, the curriculum officially launched across six states. Our Skillbridge partnership with Embry-Riddle Aeronautical University at seven military bases trains and places transitioning military service members and veterans into aviation maintenance technician careers industrywide.
Following a successful pilot program, the curriculum officially launched across six states in 2022 and has expanded to seventeen states and over 1,000 students in the 2024/2025 academic year. AAR developed the first aviation maintenance, Skillbridge, in partnership with Embry-Riddle Aeronautical University.
Prior to Accenture, Ms. Patterson spent ten years in client service delivery with Aon and Arthur Andersen. Each executive officer is elected annually by the Board of Directors. Executive officers continue to hold office until their successors are duly elected or until their death, resignation, termination or reassignment. ​
Executive officers continue to hold office until their successors are duly elected or until their death, resignation, termination or reassignment. ​ 9 Table of Contents
Our services, capabilities, and partnerships were well matched to the landscape of the industry, which enabled us to reach higher sales than ever before. Consolidated sales in fiscal 2024 increased $328.4 million, or 16.5%, over the prior year primarily due to an increase in sales to commercial customers.
Consolidated sales in fiscal 2025 increased $461.6 million, or 19.9%, over the prior year primarily due to an increase in sales to commercial customers.
Removed
Throughout the year, the industry saw an increase in the utilization of existing aircraft, which drove greater demand for aircraft maintenance with maintenance, repair and overhaul (“MRO”) spend reaching record levels, and engine reliability issues prompted greater adoption of used serviceable material (“USM”).
Added
Double-digit sales growth in our new parts Distribution activities was a key contributor to improvements in profitability. Our fiscal 2023 investment in Trax has enabled us to scale to win the business from some of the largest airlines and maintenance, repair and overhaul (“MRO”) providers.
Removed
Department of State (“DoS”) included in our Integrated Solutions segment. Our growth strategy has long included both inorganic and organic growth. Building on our long-term relationships with valued customers as well as strong local partnerships, we recently broke ground on additional hangars in Miami, Florida and Oklahoma City, Oklahoma.
Added
We also continued our integration of our fiscal 2024 Product Support acquisition and have realized significant synergies while our broader Component Services activities have benefited from these additional capabilities, expanded global footprint, and higher margin offerings brought through the acquisition.
Removed
We plan to take advantage of the fixed cost base and strong labor availability in these locations with a target to increase our MRO network capacity by approximately 15% upon completion in fiscal 2026. We were also successful in winning new long-term agreements in our commercial market.
Added
As part of our portfolio optimization efforts, we divested our Landing Gear Overhaul (“LGO”) business to better focus on our core segments and highest margin offerings. We have made further investments to continue to strengthen our existing businesses, including in digital technologies, to help transform our service delivery and the aviation industry while contributing to improved profitability.
Removed
In our Parts Supply segment, we were awarded distribution and supply agreements for both new parts and USM across multiple original equipment manufacturers (“OEMs”) including Woodward, MTU Maintenance, Ontic, and Cebu Pacific. In our commercial programs activities, we were awarded a multi-year, flight-hour component support contract with ASL Airlines.
Added
In our Airframe MRO activities, digital advancements have driven efficiencies contributing to significant profitability improvement, and we continue to make progress toward additional maintenance capacity through the construction of two Airframe MRO facility expansions, one in Miami, Florida and one in Oklahoma City, Oklahoma.
Removed
During the fourth quarter of fiscal 2023, we acquired Trax USA Corp. (“Trax”), a leading independent provider of aircraft MRO and fleet management software. Trax offers critical software applications to a diverse global customer base of airlines and MROs supporting approximately 5,000 aircraft.
Added
Our consolidated sales to government customers increased $123.4 million, or 18.1%, primarily due to increased sales volume for our new parts distribution activities and increased pallet demand in our Mobility business. We were also successful in winning new long-term agreements in both the government and commercial markets.
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Trax’s comprehensive solutions support the entire spectrum of maintenance activities and create the system of record required by airlines and MROs. The Trax acquisition added established, higher-margin aviation aftermarket software offerings with recurring revenue to our portfolio and provides opportunities to cross-sell products and services.
Added
In our Parts Supply segment, we were awarded multiple distribution contracts including from Unison, Chromalloy, and Ontic and we extended our exclusive agreement with FTAI Aviation to provide used serviceable material (“USM”) on the CFM56 engine platform through 2030. In the government market, we were awarded two, multi-year contracts from the U.S.
Removed
During the fourth quarter of fiscal 2024, we acquired Triumph Group, Inc.’s Product Support business (“Product Support”) for a purchase price of $725.0 million subject to customary post-closing adjustments for cash, working capital and indebtedness.
Added
In fiscal 2025, we sold our LGO business to GA Telesis for net proceeds of $48 million subject to post-closing adjustments for working capital, cash, and debt. We recognized a loss on the divestiture of $71.1 million which included goodwill of $14.6 million. Our Repair & Engineering segment also develops Parts Manufacturer Approval (“PMA”) parts for aftermarket applications.
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Product Support is a leading global provider of specialized MRO capabilities for critical aircraft components in the commercial and defense markets, providing MRO services for structural components, engine and airframe accessories, interior refurbishment and wheels and brakes. Product Support also designs proprietary designated engineering representative repairs and parts manufacturer approval parts.
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During fiscal 2025, we exited the joint venture and recognized a gain of $2.1 million related to the sale of our interests.
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The Product Support acquisition enables us to meaningfully scale our component services through additional facilities, proprietary capabilities, and a highly complementary portfolio. We expect that by better balancing our portfolio within our Repair & Engineering segment and expanding our footprint in the Asia-Pacific region, the acquisition will drive margin and revenue growth in fiscal 2025.
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Expeditionary Services The Expeditionary Services segment primarily consists of products and services supporting the movement of equipment and personnel by the U.S. and foreign governments and non-governmental organizations.
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Our landing gear overhaul services also include repair services on wheels and brakes for commercial and military aircraft. Our Repair & Engineering segment also develops Parts Manufacturer Approval (“PMA”) parts for aftermarket applications.
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We are proud to be recognized in 2025 as a Certified Great Place to Work, a Military Friendly Employer and one of Newsweek’s America’s Most Responsible Companies. Commitment to Safety Safety and wellbeing are central to AAR. Our commitment to safety starts at the top levels of our organization.
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In addition, this segment also designs proprietary designated engineering representative (“DER”) repairs. 3 Table of Contents We operate six airframe maintenance facilities, six component repair facilities and one landing gear overhaul facility.
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Some AAR facilities also have fitness centers on site for employee use. Inclusion and Engagement As reflected in our values, we have a long-standing commitment to embracing a culture of inclusion. AAR’s statement on our Work as one. Be inclusive.
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Through Trax, we are a leading provider of maintenance software for airlines, other aircraft operators and MROs with over 130 customers that have an average tenure of over 10 years.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe precise nature of any such requirements and their applicability to us and our customers are difficult to predict, but the impact to us and the aviation industry would likely be adverse and could be significant, including the potential for increased fuel costs, carbon taxes or fees, or a requirement to purchase carbon credits. 24 Table of Contents Violations of these laws or regulations by us or by those with whom or through whom we do business could subject us to administrative, civil or criminal investigations and monetary and non-monetary penalties, including suspension and debarment, which could negatively impact our reputation and ability to conduct business and could have a material adverse effect on our financial position, results of operations and/or cash flows.
Biggest changeViolations of these laws or regulations by us or by those with whom or through whom we do business could subject us to administrative, civil or criminal investigations and monetary and non-monetary penalties, including suspension and debarment, which could negatively impact our reputation and ability to conduct business and could have a material adverse effect on our financial position, results of operations and/or cash flows.
Our acquisition strategy is affected by, and poses a number of challenges and risks as a result of certain factors, including the availability of suitable acquisition candidates, incurrence of expenses, availability of capital, the cost of capital, compliance with debt covenants, consummation of acquisitions on satisfactory terms, obtaining applicable domestic and/or foreign governmental approvals such as antitrust and foreign investment related authorizations, difficulties in integrating the operations and personnel, the effects of amortization of and potential impairments of any acquired intangible assets and the potential impairment of goodwill, and the potential loss of key employees of the acquired business.
Our acquisition strategy is affected by, and poses a number of challenges and risks as a result of certain factors, including the availability of suitable acquisition candidates, incurrence of expenses, availability of capital, the cost of capital, compliance with debt covenants, consummation of acquisitions on satisfactory terms, obtaining applicable domestic and/or foreign governmental approvals such as antitrust and foreign investment related authorizations, difficulties in integrating the operations and personnel, the effects of amortization of any acquired intangible assets, the effects of potential impairments of any acquired intangible assets and/or goodwill, and the potential loss of key employees of the acquired business.
The amount of our existing debt, combined with our ability to incur significant amounts of debt in the future, could have important consequences, including: ● increasing our vulnerability to adverse economic or industry conditions; ● requiring us to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, strategic initiatives, and general corporate purposes; 21 Table of Contents ● increasing our vulnerability to, and limiting our flexibility in planning for, or reacting to, changes in our business or the industries in which we operate; ● exposing us to the risk of higher interest rates on borrowings under our Amended Revolving Credit Facility, which is subject to variable rates of interest; ● placing us at a competitive disadvantage compared to our competitors that have less debt; and ● limiting our ability to borrow additional funds.
The amount of our existing debt, combined with our ability to incur significant amounts of debt in the future, could have important consequences, including: ● increasing our vulnerability to adverse economic or industry conditions; 19 Table of Contents ● requiring us to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, strategic initiatives, and general corporate purposes; ● increasing our vulnerability to, and limiting our flexibility in planning for, or reacting to, changes in our business or the industries in which we operate; ● exposing us to the risk of higher interest rates on borrowings under our Amended Revolving Credit Facility, which is subject to variable rates of interest; ● placing us at a competitive disadvantage compared to our competitors that have less debt; and ● limiting our ability to borrow additional funds.
In addition, sometimes we encounter difficulty in finding buyers or executing alternative exit strategies at acceptable prices and terms in a timely manner. Some prospective buyers may have difficulty obtaining financing. These divestitures may require a significant investment of time and resources, may disrupt our business, and may distract management from other responsibilities.
In addition, sometimes we encounter difficulty in finding buyers or executing alternative exit strategies at acceptable prices and terms in a timely manner. Some prospective buyers may have difficulty obtaining financing. Divestitures require a significant investment of time and resources, and may disrupt our business and distract management from other responsibilities.
Our business, financial condition, results of operations, and growth rates have been and may continue to be adversely affected by these and other events that impact the aviation industry, including those mentioned elsewhere in this report and the following: ● deterioration in the financial condition of our existing and potential customers; ● reductions in the need for, or the deferral of, aircraft maintenance and repair services and spare parts support; ● retirement of older generation aircraft, resulting in lower prices for spare parts and services for those aircraft; 11 Table of Contents ● reductions in demand for used aircraft and engines; ● increased in-house maintenance by airlines; ● lack of parts in the marketplace; ● world trade policies; ● government-to-government relations; ● acts of terrorism; ● economic sanctions; ● inflationary pressures and conditions; ● political, social and economic instability and disruptions; ● climate change, environmental catastrophes and government regulations implemented to address them; ● environmental and safety-related constraints imposed upon aircraft operations, including airline operators choosing not to outsource MRO services to third-party providers due to safety oversight concerns; ● technological changes; ● cost of labor shortages and other changes in labor conditions; ● future outbreaks of infectious diseases; and ● acts of God.
Our business, financial condition, results of operations, and growth rates have been and may continue to be adversely affected by these and other events that impact the aviation industry, including those mentioned elsewhere in this report and the following: ● deterioration in the financial condition of our existing and potential customers; ● reductions in the need for, or the deferral of, aircraft maintenance and repair services and spare parts support; ● retirement of older generation aircraft, resulting in lower prices for spare parts and services for those aircraft; ● reductions in demand for used aircraft and engines; ● increased in-house maintenance by airlines; ● lack of parts in the marketplace; ● changes in world trade policies and tariffs; ● government-to-government relations; ● acts of terrorism; ● economic sanctions, including retaliatory measures; ● inflationary pressures and conditions; ● political, social and economic instability and disruptions; ● climate change, environmental catastrophes and government regulations implemented to address them; 11 Table of Contents ● environmental and safety-related constraints imposed upon aircraft operations, including airline operators choosing not to outsource MRO services to third-party providers due to safety oversight concerns; ● technological changes; ● cost of labor shortages and other changes in labor conditions; ● future outbreaks of infectious diseases; and ● acts of God.
Similarly, sanctions issued by the United Nations, the United States government, the European Union or other governments could prohibit or restrict us from doing business in certain countries, or with certain customers or persons, and we must monitor our operations and existing and potential customers and other counterparties for compliance with such sanctions.
Similarly, sanctions or prohibitions issued by the United Nations, the United States government, the European Union or other governments could prohibit or restrict us from doing business in certain countries, or with certain customers or persons, and we must monitor our operations and existing and potential customers and other counterparties for compliance with such sanctions.
In addition, there continues to be uncertainty with respect to program-level appropriations for the DoD and other government agencies in the overall budgetary framework described above. For example, the prioritization of development programs could come at the expense of the sustainment of existing platforms.
In addition, there continues to be uncertainty with respect to program-level appropriations for the DoS, DoD, and other government agencies in the overall budgetary framework described above. For example, the prioritization of development programs could come at the expense of the sustainment of existing platforms.
For example, in conjunction with the U.S. exit from Afghanistan in fiscal 2022, we concluded our activities in country under our DoS and DoD contracts. U.S. government programs are subject to annual congressional budget authorization and appropriation processes.
For example, in conjunction with the U.S. exit from Afghanistan in fiscal 2022, we concluded our activities in Afghanistan under our DoS and DoD contracts. U.S. government programs are subject to annual congressional budget authorization and appropriation processes.
In addition, U.S. government programs budgets could be negatively impacted by possible policy changes on defense spending, spending priorities outside defense, reduction in military presence overseas and general pressure to reduce DoD and DoS spending.
In addition, budgets for U.S. government programs could be negatively impacted by possible policy changes on defense spending, spending priorities outside defense, reduction in military presence overseas and general pressure to reduce DoD and DoS spending.
We cannot ensure that we will prevent all misconduct and violations of applicable laws of the jurisdictions in which we operate, including laws governing improper payments to government officials, the protection of export controlled or classified information, cost accounting and billing, competition and data privacy, that may be committed by our employees, agents, subcontractors, suppliers, business partners, or others working on our behalf or with us, and this risk of improper conduct may increase as we expand globally.
We cannot ensure that we will prevent all misconduct and violations of applicable laws of the jurisdictions in which we operate, including laws governing improper payments to government officials and commercial bribery, the protection of export controlled or classified information, cost accounting and billing, competition and data privacy, that may be committed by our employees, agents, subcontractors, suppliers, business partners, or others working on our behalf or with us, and this risk of improper conduct may increase as we expand globally.
We and certain of our customers operate in a number of jurisdictions that pose a high risk of potential FCPA violations, and we participate in collaborations and relationships with third parties whose corrupt or illegal activities could potentially subject us to liability under the FCPA or local anti-corruption laws, even if we do not explicitly authorize or have actual knowledge of such activities.
We and certain of our customers operate in a number of jurisdictions that pose a high risk of potential FCPA violations, and we participate in collaborations and relationships with third parties whose corrupt or illegal activities have subjected us and could again potentially subject us to liability under the FCPA or local anti-corruption laws, even if we do not explicitly authorize or have actual knowledge of such activities.
A deteriorating airline environment may also result in our inability to fully collect outstanding accounts receivable, which we experienced during the height of the COVID-19 pandemic in 2020 and 2021. Reduced demand from customers caused by weak economic conditions, including tight credit conditions and customer bankruptcies, may adversely impact our financial condition or results of operations.
A deteriorating airline environment may also result in our inability to fully collect outstanding accounts receivable, which we experienced during the height of the pandemic in 2020 and 2021. Reduced demand from customers caused by weak economic conditions, including tight credit conditions and customer bankruptcies, may adversely impact our financial condition or results of operations.
The supply chains for our business could also be disrupted by natural disasters, extreme weather events, pandemics, or other public health threats, governmental actions, and legislative or regulatory changes. For example, during the COVID-19 pandemic, our results of operation were materially and adversely impacted due to a steep decline in the numbers of aircraft flying.
The supply chains for our business could also be disrupted by natural disasters, extreme weather events, pandemics, or other public health threats, governmental actions, and legislative or regulatory changes. For example, during the pandemic, our results of operation were materially and adversely impacted due to a steep decline in the numbers of aircraft flying.
Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), the United Kingdom Bribery Act 2010, and other anti-bribery and anti-corruption laws (see Note 18 of Notes to Consolidated Financial Statements for information about certain pending proceedings); ● the burden and cost of compliance with foreign laws, treaties, and technical standards and changes in those regulations; ● failure by our employees or agents to comply with U.S. laws affecting the activities of U.S. companies abroad; ● difficulty staffing and managing widespread operations; ● uncertainty of the ability of foreign customers to finance purchases; ● uncertainties and restrictions concerning the availability of funding credit or guarantees; ● contract award and funding delays; ● potential restrictions on transfers of funds; ● imposition of import and export duties, value added taxes, withholding taxes or other taxes on our foreign income; ● fluctuations in currency exchange rates, which may affect demand for our products and services and may adversely affect our profitability in U.S. dollars; ● transportation delays and interruptions; ● uncertainties arising from foreign local business practices and cultural considerations; 16 Table of Contents ● changes in U.S. policies on trade relations and trade policy, including implementation of or changes in trade sanctions (such as those imposed on Russia), tariffs, and embargoes; ● difficulty enforcing agreements and managing litigation risk in certain legal systems outside the U.S.; and ● inability to obtain, maintain or enforce intellectual property rights.
Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), the United Kingdom Bribery Act 2010, and other anti-bribery and anti-corruption laws (see Note 18 of Notes to Consolidated Financial Statements for information about certain pending proceedings); ● the burden and cost of compliance with foreign laws, treaties, and technical standards and changes in those regulations; ● failure by our employees or agents to comply with U.S. laws affecting the activities of U.S. companies abroad; ● difficulty staffing and managing widespread operations; ● uncertainty of the ability of foreign customers to finance purchases; ● uncertainties and restrictions concerning the availability of funding credit or guarantees; ● contract award and funding delays; ● potential restrictions on transfers of funds; ● imposition of import and export duties, tariffs, value added taxes, withholding taxes or other taxes on our foreign income; ● fluctuations in currency exchange rates, which may affect demand for our products and services and may adversely affect our profitability in U.S. dollars; ● transportation delays and interruptions; ● uncertainties arising from foreign local business practices and cultural considerations; ● changes in U.S. policies on trade relations and trade policy, including implementation of or changes in trade sanctions (such as those imposed on Russia), tariffs, and embargoes (as detailed in the first risk factor in this section); ● difficulty enforcing agreements and managing litigation risk in certain legal systems outside the U.S.; and ● inability to obtain, maintain or enforce intellectual property rights.
Such serious harm can involve, among other things, misuse of our assets, business disruptions, loss of data, unauthorized access to trade secrets and confidential business information, unauthorized access to personal information, damage to customer relationships, legal claims or proceedings, reporting errors, processing inefficiencies, negative media attention, reputational harm, loss of sales, remediation and increased insurance costs, and interference with regulatory compliance.
Such serious harm can involve, among other things, misuse of our assets, business disruptions, loss of data, unauthorized access to trade secrets and confidential business information, unauthorized access to personal information, damage to customer relationships, legal claims or proceedings, reporting errors, processing inefficiencies, negative media attention, reputational harm, loss of sales, remediation and increased insurance costs, and interference 18 Table of Contents with regulatory compliance.
Even where a bid protest does not result in the loss of an award, the resolution can extend the time until the contract activity can begin, and delay earnings. 15 Table of Contents These competitive pressures, with potential impacts on both our commercial and government business, could adversely affect our results of operations and financial condition.
Even where a bid protest does not result in the loss of an award, the resolution can extend the time until the contract activity can begin, and delay earnings. These competitive pressures, with potential impacts on both our commercial and government business, could adversely affect our results of operations and financial condition.
For any businesses we may acquire in the future, we may not be able to execute our operational, financial, or integration plans for the acquired businesses, which could adversely affect our results of operations and financial condition.
For any businesses we acquire, we may not be able to execute our operational, financial, or integration plans for the acquired businesses, which could adversely affect our results of operations and financial condition.
We are impacted, and may continue to be impacted, by higher labor costs and/or labor shortages due to wage and salary inflationary pressures in the economy, a tightening labor market and increased rates of employee resignations generally throughout the U.S. economy. Employees in certain locations have shown increased interest in unionization.
We are impacted, and may continue to be impacted, by higher labor costs and/or labor shortages due to wage and salary inflationary pressures in the economy, a tightening labor market and increased rates of employee resignations generally throughout the U.S. economy. 14 Table of Contents Employees in certain locations have shown increased interest in unionization.
Failure to react timely to industry trends and manage our offerings and innovation activities responsively could decrease the competitiveness of our services, harm our reputation, and negatively impact our ability to compete and attract top talent. 20 Table of Contents We do not own certain intellectual property and tooling that is important to our business.
Failure to react timely to industry trends and manage our offerings and innovation activities responsively could decrease the competitiveness of our services, harm our reputation, and negatively impact our ability to compete and attract top talent. We do not own certain intellectual property and tooling that is important to our business.
If we fail to maintain such standards, our reputation, business, financial results, financial condition and stock price may be adversely affected. 12 Table of Contents Our U.S. government contracts may not continue at present sales levels, which may have a material adverse effect on our financial condition and results of operations.
If we fail to maintain such standards, our reputation, business, financial results, financial condition and stock price may be adversely affected. Our U.S. government contracts may not continue at present sales levels, which may have a material adverse effect on our financial condition and results of operations.
Consequently, we are subject to a variety of risks that are specific to international operations and investments, including the following: ● military conflicts, civil strife, and political risks; ● geopolitical unrest, war, terrorism and other acts of violence; ● volatility in foreign political, regulatory and economic environments; ● ability to obtain required export licenses or approvals; ● export regulations that could erode profit margins or restrict exports; ● export controls and financial and economic sanctions imposed on certain industry sectors, including the aviation sector, and parties in Russia by the U.S., the United Kingdom, the European Union and others; ● compliance with the U.S.
Consequently, we are subject to a variety of risks that are specific to international operations and investments, including the following: ● military conflicts, civil strife, and political risks; ● geopolitical unrest, war, terrorism and other acts of violence; ● volatility in foreign political, regulatory and economic environments; ● ability to obtain required export licenses or approvals; 15 Table of Contents ● export regulations that could erode profit margins or restrict exports, including the transfer of technical data; ● export controls and financial and economic sanctions imposed on certain industry sectors, including the aviation sector, and parties in Russia by the U.S., the United Kingdom, the European Union and others; ● compliance with the U.S.
We must expend resources to comply with these regulations and our failure to comply with these regulations may subject us to regulatory actions, which may adversely impact our financial condition or results of operations. 23 Table of Contents We must comply with all applicable export control laws and regulations of the United States and other countries.
We must expend resources to comply with these regulations and our failure to comply with these regulations may subject us to regulatory actions, which may adversely impact our financial condition or results of operations. We must comply with all applicable export control laws and regulations of the United States and other countries.
U.S. government agencies routinely audit government contractors, including the Company, to review performance under contracts, cost structure and compliance with applicable laws, regulations, and standards, as well as the adequacy of and compliance with internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems.
U.S. government agencies routinely audit government contractors, including the Company, to review performance under contracts, cost structure, compliance with applicable contracting and procurement laws, regulations, and standards, and compliance with applicable cybersecurity requirements, as well as the adequacy of and compliance with internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems.
We are exposed to risks associated with operating internationally. We market our products and services globally, with approximately 33.2% of our consolidated sales in fiscal 2024 derived from sales to foreign customers (See Note 17 of Notes to Consolidated Financial Statements). In addition, we maintain offices and facilities in several foreign countries.
We are exposed to risks associated with operating internationally. We market our products and services globally, with approximately 34.2% of our consolidated sales in fiscal 2025 derived from sales to foreign customers (See Note 17 of Notes to Consolidated Financial Statements). In addition, we maintain offices and facilities in several foreign countries.
We also face risk in collecting from customers on the sales of parts. The value of any given aircraft model, or any engine model applicable thereto, can vary significantly based on supply in the marketplace.
We also face risk in collecting from customers on the sales of parts. 17 Table of Contents The value of any given aircraft model, or any engine model applicable thereto, can vary significantly based on supply in the marketplace.
If any of these events were to occur at or around any of our facilities, we may be unable to shift work to other facilities or to make up for lost work, which could result in a prolonged interruption of our business, significant delays in shipments of products, the loss of sales and customers, and large expenses to repair or replace the facility or facilities.
If any of these events were to occur at or around any of our facilities, this could result in potential damage to physical assets and we may be unable to shift work to other facilities or to make up for lost work, which could result in a prolonged interruption of our business, significant delays in shipments of products, the loss of sales and customers, and large expenses to repair or replace the facility or facilities.
Our business has historically been dependent on educated and skilled aviation mechanics because of the complex nature of many of our products and services. We face competition for management and qualified technical personnel from other companies and organizations. Furthermore, we have a collective bargaining agreement covering approximately 140 employees in our Expeditionary Services segment (approximately 2.5% of our total workforce).
Our business has historically been dependent on educated and skilled aviation mechanics because of the complex nature of many of our products and services. We face competition for management and qualified technical personnel from other companies and organizations. Furthermore, we have a collective bargaining agreement covering approximately 200 employees in our Expeditionary Services segment (approximately 4% of our total workforce).
In addition, divestitures tend to involve the retention of certain current or future liabilities in order to induce a buyer to complete a divestiture or otherwise result in losses on disposal or continued financial involvement in the divested business, including through indemnification or other arrangements, for a period of time following the transaction, which could adversely affect our financial results.
In addition, divestitures tend to involve the retention of certain current or future liabilities in order to induce a buyer to complete a divestiture or otherwise result in continued financial involvement in the divested business, including through indemnification or other arrangements, for a period of time following the transaction, which adversely affects our financial results.
These threats arise in some cases as a result of our role as a defense contractor. Our customers, including the U.S. Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our products, and we may incur additional cost to comply with such demands. We have faced and expect to continue to face cyber security threats.
These threats arise in some cases as a result of our role as a defense contractor. Our customers, including the U.S. Government, are increasingly requiring cybersecurity protections and mandating cybersecurity standards in our products, and we have incurred and expect to continue to incur additional cost to comply with such demands.
In 2021, we announced a stock repurchase program with authorization to repurchase up to $150 million of our common stock, of which $97.5 million has been repurchased under the program as of May 31, 2024.
In 2021, we announced a stock repurchase program with authorization to repurchase up to $150 million of our common stock, of which $107.5 million has been repurchased under the program as of May 31, 2025.
We are focused on acquiring complementary assets that add new products, new customers, and new capabilities or new geographic and/or operational competitive advantages in both new and existing markets within our core competencies.
We are focused on acquiring complementary businesses that add new products, customers, and/or capabilities as well as new geographic and/or operational competitive advantages in both new and existing markets within our core competencies.
A decision to divest or discontinue assets, businesses, products or services may result in asset impairments, including those related to goodwill and other intangible assets, and losses upon disposition, both of which could have adverse effects on our results of operations and financial condition.
Any future decisions to divest or discontinue assets, businesses, products or services may again result in asset impairments, including those related to goodwill and other intangible assets, and losses upon disposition, both of which could have adverse effects on our results of operations and financial condition.
Termination for convenience provisions provide only for our recovery of unrecovered costs incurred or committed, settlement expenses and profit on the work completed prior to termination. Termination for default provisions provide for the contractor to be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source.
Termination for convenience provisions provide only for our recovery of unrecovered costs incurred or committed, settlement expenses and profit on the work completed prior to termination. Termination for default provisions provide for the contractor to be liable for excess costs incurred by the U.S.
If a government inquiry or investigation uncovers improper or illegal activities, we could be subject to civil or criminal penalties or administrative sanctions, including contract termination, fines, forfeiture of fees, suspension of payment and suspension or debarment from doing business with government agencies, any of which could materially adversely affect our reputation, business, financial condition and results of operations.
If other government inquiries or investigations uncover improper or illegal activities, we have been and, if government inquiries or investigations uncover allegedly improper or illegal activities, we could be subject to civil or criminal penalties or administrative sanctions, including contract termination, fines, forfeiture of fees, suspension of payment and suspension or debarment from doing business with government agencies, any of which could materially adversely affect our reputation, business, financial condition and results of operations.
This risk is greater in periods of high inflation. 13 Table of Contents We recognize revenue on our long-term contracts primarily over time as there is continuous transfer of control to the customer over the duration of the contract as the services are delivered, which generally requires estimates of total costs at completion, fees earned on the contract, or both.
We recognize revenue on our long-term contracts primarily over time as there is continuous transfer of control to the customer over the duration of the contract as the services are delivered, which generally requires estimates of total costs at completion, fees earned on the contract, or both.
We operate in highly competitive markets, and competitive pressures may adversely affect us. The markets for our products and services to our commercial, government, and defense customers are highly competitive, and we face competition from a number of sources, both domestic and international.
The markets for our products and services to our commercial, government, and defense customers are highly competitive, and we face competition from a number of sources, both domestic and international.
In order to keep pace with technological developments in our industry, we may need to expend significant capital to develop information technology solutions, purchase new equipment, train our employees in the new methods of service, or implement new processes to increase both efficiency and capacity. Not all projects may be implemented as anticipated.
In order to keep pace with technological and other developments in our industry, we sometimes need to expend significant capital to develop information technology solutions, purchase new equipment, train our employees in the new methods of service, or implement new processes to increase both efficiency and capacity.
Our sales to branches, agencies and departments of the U.S. government and their contractors were $576.1 million (24.8% of consolidated sales) in fiscal 2024, compared to $577.0 in fiscal 2023, and $620.0 in fiscal 2022 (See Note 17 of Notes to Consolidated Financial Statements).
Our sales to branches, agencies and departments of the U.S. government and their contractors were $687.6 million (24.7% of consolidated sales) in fiscal 2025 compared to $576.1 million (24.8% of consolidated sales) in fiscal 2024 (See Note 17 of Notes to Consolidated Financial Statements).
Revenues at our airframe maintenance facilities fluctuate based on demand for maintenance which, in turn, is driven by the number of aircraft operating and the extent of outsourcing of maintenance activities by airlines.
The success of our Repair & Engineering business segment is dependent upon continued outsourcing by the airlines. Revenues at our airframe maintenance facilities fluctuate based on demand for maintenance which, in turn, is driven by the number of aircraft operating and the extent of outsourcing of maintenance activities by airlines.
Our business could be negatively affected by cyber or other security threats or other disruptions. Our business depends heavily on information technology and computerized systems to communicate and operate effectively. We store sensitive data including proprietary business information, intellectual property and confidential employee or other personal data on our servers and databases.
Our business depends heavily on information technology and computerized systems to communicate and operate effectively. We store sensitive data including proprietary business information, intellectual property and confidential employee or other personal data on our servers and databases.
Increased costs may result in cost overruns and losses on such contracts, which could adversely affect our results of operations and financial condition.
Increased costs may result in cost overruns and losses on such contracts, which could adversely affect our results of operations and financial condition. This risk is greater in periods of high inflation.
While we believe we have identified and discussed below the material risks affecting our business, there may be additional risks and uncertainties that we do not presently know or that we do not currently believe to be material that may adversely affect our business, financial condition, or results of operations in the future. 10 Table of Contents Risks Related to Our Business and Industry We are affected by factors that adversely impact the commercial aviation industry.
While we believe we have identified and discussed below the material risks affecting our business, there may be additional risks and uncertainties that we do not presently know or that we do not currently believe to be material that may adversely affect our business, financial condition, or results of operations in the future.
Our ability to monitor such third parties’ security measures and the full impact of the systemic risk is limited. If our systems, data, or any third-party service that we use is unavailable to us for any reason, our customers may experience service interruptions, which could significantly impact our operations, reputation, business, and financial results.
If our systems, data, or any third-party service that we use is unavailable to us for any reason, our customers may experience service interruptions, which could significantly impact our operations, reputation, business, and financial results.
While we would expect to compete and be well-positioned as the incumbent on existing programs, we may not be successful and, even if we are successful, the replacement programs may be funded at lower levels or result in lower margins. Uncertainty remains regarding how defense budgets in the current fiscal year and beyond will affect these programs.
While we would expect to compete and be well-positioned as the incumbent on existing programs, we may not be successful and, even if we are successful, the replacement programs may be funded at lower levels or result in lower margins.
The commercial aviation industry is historically cyclical and has been negatively affected in the past, and could be negatively affected in future periods, by geopolitical events, ongoing conflicts and wars (including between Russia and Ukraine and between Israel and Hamas), terrorism, weather-related events, natural disasters, pandemics, disruption to fuel and oil production and supply shortages, high fuel and oil prices, other supply chain disruptions, labor issues, environmental concerns (including climate change), lack of capital, cost inflation, and weak economic conditions.
The commercial aviation industry is historically cyclical and has been negatively affected in the past, and could be negatively affected in future periods, by geopolitical events, ongoing conflicts and wars (including the ongoing Russia-Ukraine conflict and Middle East conflicts), trade wars, the imposition or increase in tariffs or retaliatory countermeasures or changes in trade policies, terrorism, weather-related events, natural disasters, pandemics, disruption to fuel and oil production and supply shortages, high fuel and oil prices, other supply chain disruptions, labor issues and strikes (such as the union work stoppage at Boeing), environmental concerns (including climate change), lack of capital, cost inflation, high interest rates, and weak economic conditions.
Airlines are sometimes unable to pass on increases in fuel prices to customers by increasing fares due to the competitive nature of the airline industry, and this compounds the pressure on operating costs, and in turn, airlines’ ability to do business with us.
Airlines are sometimes unable to pass on increases in fuel prices to customers by increasing fares due to the competitive nature of the airline industry, and this compounds the pressure on operating costs, and in turn, airlines’ ability to do business with us. 10 Table of Contents In addition, our business depends on maintaining a sufficient supply of various products to meet our customers’ demands.
We have experienced growth through strategic acquisitions in recent periods and intend to continue to pursue a growth strategy, both through acquisitions and internal expansion of products and services. We continue to have discussions with third parties regarding acquisitions on a regular basis.
A key element of our business strategy has been growth through the acquisition of additional businesses. We have experienced growth through strategic acquisitions in recent periods and intend to continue to pursue growth, through both acquisitions and organic expansion of products and services. We continue to have discussions with third parties regarding potential acquisitions on a regular basis.
We compete with major commercial airlines, many of which operate their own maintenance, repair and overhaul operations. Our smaller competitors may be able to offer more attractive pricing as a result of lower labor costs or other factors. These competitive markets also create pressure on our ability to retain and fill skilled labor needs.
Our smaller competitors may be able to offer more attractive pricing as a result of lower labor costs or other factors. These competitive markets also create pressure on our ability to retain and fill skilled labor needs.
Any measures that we have adopted or may adopt in the future to reduce the potential impact of losses resulting from the risks of doing business internationally may not be adequate, and the regions in which we operate might not continue to be stable enough to allow us to operate profitably or at all.
Any measures that we have adopted or may adopt in the future to reduce the potential impact of losses resulting from the risks of doing business internationally may not be adequate, and the regions in which we operate might not continue to be stable enough to allow us to operate profitably or at all. 16 Table of Contents Acquisitions, which are a part of our business strategy, expose us to risks, including the risk that we may be unable to achieve the anticipated benefits from the acquired businesses.
Restrictive covenants in the documents governing our existing and any future indebtedness may limit our current and future operations, particularly our ability to respond to changes in our business or to pursue our business strategies.
Our inability to obtain financing on favorable terms could adversely affect our results of operations and financial condition. Restrictive covenants in the documents governing our existing and any future indebtedness may limit our current and future operations, particularly our ability to respond to changes in our business or to pursue our business strategies.
If there are funding delays and constraints, we may be required to continue to perform for some period of time on certain of our U.S. government contracts even if the U.S. government is unable to make timely payments.
Uncertainty remains regarding how defense budgets in the current fiscal year and beyond will affect these programs. 12 Table of Contents If there are funding delays and constraints, we may be required to continue to perform for some period of time on certain of our U.S. government contracts even if the U.S. government is unable to make timely payments.
Our contracts with the U.S. government and their contractors are typically agreements to provide products and services at a fixed price or in some cases, under cost reimbursable terms. These contracts typically have a base term of one year, and frequently subject to extension for one or more additional periods of one year at the option of the government customer.
Our contracts with the U.S. government and their contractors are typically agreements to provide products and services at a fixed price or in some cases, under cost reimbursable terms.
Loss of a contract with an OEM customer and the related license rights to use an OEM’s intellectual property or tooling may adversely affect our business, results of operations and financial condition.
Loss of a contract with an OEM customer and the related license rights to use an OEM’s intellectual property or tooling may adversely affect our business, results of operations and financial condition. Risks Related to Financial Matters Our debt exposes us to certain risks. As of May 31, 2025, we had $977.0 million of total debt outstanding.
Department of State may, in certain cases, require us to obtain export licenses for certain items exported to foreign countries. The U.S. Department of Homeland Security, through the U.S. Customs and Border Protection, enforces regulations related to the import of aircraft, engines, engine parts and components, and airframe and accessory parts and components into the United States.
Department of Homeland Security, through the U.S. Customs and Border Protection, enforces regulations related to the import of aircraft, engines, engine parts and components, and airframe and accessory parts and components into the United States.
In addition, we may not be able to manage our growth successfully, which could have a material adverse effect on our overall business, financial condition and results of operations. We may not realize the anticipated benefits from our acquisition of the Product Support business from Triumph Group.
In addition, we may not be able to manage our growth successfully, which could have a material adverse effect on our overall business, financial condition and results of operations. Circumstances associated with divestitures could adversely affect our results of operations and financial condition.
In the U.S., these laws and regulations include the Federal Acquisition Regulations, Defense Federal Acquisition Regulations, the Truth in Negotiations Act, Cost Accounting Standards, and laws, regulations, and orders restricting the use and dissemination of classified information under the U.S. export control laws and the export of certain products and technical information and safeguarding of contractor information systems. 22 Table of Contents In addition, we are subject to U.S. government inquiries and investigations, including periodic audits of costs that we determine are reimbursable under government contracts.
In the U.S., these laws and regulations include the Federal Acquisition Regulations (“FAR”), Defense Federal Acquisition Regulations, the Truth in Negotiations Act, Cost Accounting Standards, and laws, regulations, and orders restricting the use and dissemination of classified information under the U.S. export control laws and the export of certain products and technical information and safeguarding of contractor information systems.
We cannot provide services to certain countries subject to United States trade sanctions unless we first obtain the necessary authorizations from OFAC. We are prohibited from doing business with persons designated by OFAC on its “Specially Designated Nationals List,” and must monitor our operations and existing and potential lessees and other counterparties for compliance with OFAC’s rules.
We are prohibited from doing business with entities designated by OFAC on its “Specially Designated Nationals List,” and must monitor our operations and existing and potential lessees and other counterparties for compliance with OFAC’s rules.
The aviation industry is constantly undergoing development and change, and it is likely that new products, equipment, and methods of repair and overhaul services will be introduced in the future.
The aviation industry is constantly undergoing development and change, and new products, equipment, and methods of repair and overhaul services are introduced on an ongoing basis.
Deficiencies in the performance of our subcontractors and/or suppliers could result in liquidated damages or our customer terminating our contract for default. A termination for default could expose us to liability and adversely affect our financial performance and our ability to win new contract awards.
Deficiencies in the performance of our subcontractors and/or suppliers could result in liquidated damages or our customer terminating our contract for default.
If insurance or other risk transfer mechanisms, such as existing disaster recovery and business continuity plans, are insufficient to recover all costs, we could experience a material adverse effect on our business, financial condition and results of operations. 14 Table of Contents The success of our Repair & Engineering business segment is dependent upon continued outsourcing by the airlines.
We may not have insurance to adequately compensate us for any of these events. If insurance or other risk transfer mechanisms, such as existing disaster recovery and business continuity plans, are insufficient to recover all costs, we could experience a material adverse effect on our business, financial condition and results of operations.
Some of our OEM competitors have greater name recognition than us or our subsidiaries, as well as complementary lines of business and financial, marketing and other resources that we do not have. In addition, some of our competitors may attempt to bundle their services and product offerings for customers, thereby significantly increasing industry competition.
Some of our competitors have substantially greater financial and other resources than we have, and others may price their products and services below our selling prices. Some of our OEM competitors have greater name recognition than us or our subsidiaries, as well as complementary lines of business and financial, marketing and other resources that we do not have.
The success of our Repair & Engineering business segment is dependent upon our ability to manage our operational footprint. We currently perform airframe repair and engineering activities at several of our leased and owned airframe maintenance facilities.
We currently perform airframe repair and engineering activities at several of our leased and owned airframe maintenance facilities.
Such transactions could result in us incurring additional debt or issuing additional equity, which could increase the risks described above. Risks Related to Legal and Regulatory Matters If we fail to comply with laws and regulations governing federal contractors, we could lose business and be liable for various penalties or sanctions.
Risks Related to Legal and Regulatory Matters If we fail to comply with laws and regulations governing federal contractors, we could lose business and be liable for various penalties or sanctions. We must comply with laws and regulations relating to the formation, administration, and performance of government contracts.
We periodically divest or seek to divest certain businesses and investments, including those that are no longer a part of our ongoing strategic plan.
We periodically divest or seek to divest certain businesses and investments, including those that are no longer a part of our ongoing strategic plan, such as the recent divestiture of our LGO business in the fourth quarter of fiscal 2025, which adversely affected our fiscal 2025 results of operations and financial condition.
Our competitors include aircraft manufacturers, aircraft component and parts manufacturers, airline and aircraft service companies, other companies providing maintenance, repair and overhaul services, and other aircraft spare parts distributors and redistributors. Some of our competitors have substantially greater financial and other resources than we have, and others may price their products and services below our selling prices.
Our competitors include aircraft manufacturers, aircraft component and parts manufacturers, airline and aircraft service companies, other companies providing maintenance, repair and overhaul services, and other aircraft spare parts distributors and redistributors.
We must expend resources to comply with these regulations and our failure to comply with these regulations may subject us to regulatory actions, which may adversely impact our financial condition or results of operations.
We must expend resources to comply with these regulations and our failure to comply with these regulations may subject us to regulatory actions, which may adversely impact our financial condition or results of operations. 22 Table of Contents Our operations are subject to anti-corruption laws including the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. §201, the United Kingdom Bribery Act 2010, the U.S.
For leased facilities, timely renewal of leases, and risk mitigation from the sale of leased facilities, is required to avoid any business interruption. We are currently negotiating with the Indianapolis Airport Authority to extend the current lease we have in Indianapolis, Indiana, which expires in February 2025.
For leased facilities, timely renewal of leases, and risk mitigation from the sale of leased facilities, is required to avoid any business interruption. There is risk associated with negotiating extensions of leases with terms that are, in the long-term, amenable to us.
A significant reduction in DoD or DoS spending could result in a reduction in the amount of our products and services furnished to the U.S. government. We expect the U.S. government to continue to emphasize cost-cutting and other efficiency initiatives in its procurement processes.
Additional reductions in DoD or DoS budgets and spending could result in further reductions in the amount of our products and services furnished to the U.S. government.
Risks Related to Financial Matters We may not be able to fully execute our stock repurchase program and may not otherwise return capital to our stockholders in the foreseeable future.
Such transactions could result in us incurring additional debt or issuing additional equity, which could increase the risks described above. 20 Table of Contents We may not be able to fully execute our stock repurchase program and may not otherwise return capital to our stockholders in the foreseeable future.
There is risk associated with extending the lease with terms that are, in the long-term, amenable to us. We must also manage any issues that may arise in connection with the expansion of our facilities in Miami, Florida and Oklahoma City, Oklahoma.
We must also manage any permitting delays that may arise in connection with the expansion of our facility in Miami, Florida and any other issues that may arise in connection with the construction process for both the Miami, Florida and Oklahoma City, Oklahoma facility expansions.
We have employees working remotely at times, which heightens the risk of these potential vulnerabilities. 19 Table of Contents We also rely on third parties to host certain enterprise systems and that manage and host our data and that of our customers.
We also rely on third parties to host certain enterprise systems and that manage and host our data and that of our customers. Our ability to monitor such third parties’ security measures and the full impact of the systemic risk is limited.
Department of Commerce (the “Commerce Department”) regulates exports of goods outside the United States. We are subject to the Commerce Department’s and the U.S. Department of State’s regulations with respect to the lease and sale of aircraft, engines, engine parts and components, and airframes and accessory parts and components to foreign entities. The Commerce Department and the U.S.
Department of State’s regulations with respect to the lease and sale of aircraft, engines, engine parts and components, and airframes and accessory parts and components to foreign entities. The Commerce Department and the U.S. Department of State may, in certain cases, require us to obtain authorization for the export, re-export or re-transfer within foreign countries of certain items. The U.S.
Our operations are subject to anti-corruption laws including the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. §201, the United Kingdom Bribery Act 2010, the U.S. Travel Act, and other anti-corruption laws that apply in countries where we do business.
Travel Act, and other anti-corruption laws that apply in countries where we do business.
If projects do not achieve anticipated increases in efficiency or capacity, our returns on these capital expenditures may be lower than expected.
In addition, we are exploring implementing artificial intelligence strategies for our products and services, which may be costly or ineffective, introduce errors, cause loss of intellectual property, and raise complex regulatory compliance and other business and legal issues. If projects do not achieve anticipated increases in efficiency or capacity, our returns on these capital expenditures may be lower than expected.
Removed
Our sales to commercial customers were $1,637.9 million (71% of consolidated sales) in fiscal 2024.
Added
Risks Related to Our Business and Industry We are affected by factors that adversely impact the commercial aviation industry. Our sales to commercial customers, including major airlines and related OEM suppliers, were $1,976.1 million (71.1% of consolidated sales) in fiscal 2025.
Removed
In addition, our business depends on maintaining a sufficient supply of various products to meet our customers’ demands.
Added
Current geopolitical conditions, including the adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental actions related to tariffs or trade agreements or policies (such as those announced or threatened by various countries) could cause significant materials and parts shortages, as well as delivery delays, labor shortages, distribution issues, energy cost increases and price increases, which may adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. and global economy.
Removed
We may not have insurance to adequately compensate us for any of these events.
Added
As a result, any of these factors could have a material adverse effect on our business, financial condition, results of operations and cash flows. If price increases are not sufficient to fully offset impacts, we would expect to experience lower margins.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

3 edited+6 added−0 removed12 unchanged
Biggest changeOur CDTO and CISO have extensive experience and expertise in developing, implementing, and operating security policies and procedures covering our network and critical data. The CDTO and CISO regularly review cybersecurity matters with members of our senior management.
Biggest changeThe CISO, who also serves as our data protection officer, reports directly to our Chief Digital & Technology Officer (“CDTO”), who reports directly to our Chairman, President and Chief Executive Officer. 24 Table of Contents Our CISO and CDTO have extensive experience and expertise in developing, implementing, and operating security policies and procedures covering our network and critical data.
The detailed plan defines the roles and responsibilities of all parties included in our cybersecurity incident response team which incorporates our IT team, senior management, and other functional areas. 25 Table of Contents We also have controls and procedures for reporting material cybersecurity incidents, including review of significant cybersecurity incidents by a cross-functional team to determine whether further escalation is necessary.
The detailed plan defines the roles and responsibilities of all parties included in our cybersecurity incident response team which incorporates our IT team, senior management, and other functional areas. We also have controls and procedures for reporting material cybersecurity incidents, including review of significant cybersecurity incidents by a cross-functional team to determine whether further escalation is necessary.
Governance To facilitate the prevention, detection and timely response to information security threats, we have a dedicated Chief Information Security Officer (“CISO”) whose team is responsible for managing our information security strategy, policies, standards, and processes. The CISO reports directly to our Chief Digital & Technology Officer (“CDTO”), who reports directly to our Chairman, President and Chief Executive Officer.
Results of third-party assessments are shared with the Audit Committee and the Board of Directors. Governance To facilitate the prevention, detection and timely response to information security threats, we have a dedicated CISO whose team is responsible for managing our information security strategy, policies, standards, and processes.
Added
Our Chief Information Security Officer (“CISO”) partners with management in internal functions, such as finance, legal, and internal audit, in overseeing information security risks, as well as third-party consultants who perform risk-based assessments with recommendations for designing, implementing, executing, monitoring, and improving our cybersecurity risk management program and strategies, which helps align our programs and strategies with our business and operational objectives.
Added
The information security team provides security monitoring and response and provides regular reports to the CISO to inform about and monitor the prevention, detection, mitigation and remediation of cybersecurity risks.
Added
Our CISO has 35 years of experience in information technology systems and is a 25-year military veteran of the U.S. Navy and Navy Reserves with a Top Secret/Sensitive Compartmented Information (TS/SCI) U.S. security clearance and multiple combat deployments in information warfare.
Added
Additionally, our CISO holds several certifications, including, among others, the following security certifications: Certified Information Systems Security Professional (CISSP), Certified Ethical Hacker (CEH), Certified Network Defense Analyst (CNDA), Disaster Recovery Institute International (DRII), and CompTIA – Network+ and Security+.
Added
Our CDTO has over 25 years of leadership experience across all aspects of technology-enabled digital transformations, including leading multiple transformations at a major airline prior to his role at AAR.
Added
He previously advised companies across multiple industries in collaboratively developing and executing their digital and technology roadmaps as a consultant at a major firm. ​ The CDTO and CISO regularly review cybersecurity matters with members of our senior management.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−2 removed2 unchanged
Biggest changeIn our Integrated Solutions segment, our services to the government market are primarily conducted from leased facilities in Rockledge, Florida; Ogden, Utah; Jacksonville, Florida; and Windsor, Connecticut. Our services to the commercial market are primarily conducted from leased facilities Brussels, Belgium and Crawley, England.
Biggest changeOur component repair services are primarily conducted at owned facilities in Hot Springs, Arkansas; Grand Prairie, Texas; Wellington, Kansas; Chonburi, Thailand; and Amsterdam, Netherlands. In our Integrated Solutions segment, our services to the government market are primarily conducted from leased facilities in Rockledge, Florida; Ogden, Utah; Jacksonville, Florida; and Windsor, Connecticut.
Our principal activities in the Expeditionary Services segment are conducted at a facility we own in Cadillac, Michigan. We also operate sales offices that support all our activities and are leased in London, England; Crawley, England; Paris, France; Rio de Janeiro, Brazil; Tokyo, Japan; Shanghai, China; Singapore, Republic of Singapore; and Dubai, UAE.
We also operate sales offices that support all our activities and are leased in London, England; Crawley, England; Paris, France; Rio de Janeiro, Brazil; Tokyo, Japan; Shanghai, China; Singapore, Republic of Singapore; and Dubai, UAE. We believe that our owned and leased facilities are suitable and adequate for our operational requirements. ​
Removed
Our component repair and landing gear repair services are conducted at leased facilities in Medley, Florida and Garden City, New York and owned facilities in Hot Springs, Arkansas; Grand Prairie, Texas; Wellington, Kansas; Chonburi, Thailand; and Amsterdam, Netherlands.
Added
Our services to the commercial market are primarily conducted from leased facilities Brussels, Belgium and Crawley, England. Our principal activities in the Expeditionary Services segment are conducted at a facility we own in Cadillac, Michigan.
Removed
We believe that our owned and leased facilities are suitable and adequate for our operational requirements. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+1 added−0 removed1 unchanged
Biggest changeThere are no matters which constitute material pending legal proceedings to which we are a party other than those incorporated into this item by reference from Note 18 to our Consolidated Financial Statements for the year ended May 31, 2024 contained in this Annual Report on Form 10-K. ​ 26 Table of Contents ITEM 4. MINE SAFETY DISCLOSURES Not Applicable.
Biggest changeThere are no matters which constitute material pending legal proceedings to which we are a party other than those incorporated into this item by reference from Note 18 to our Consolidated Financial Statements for the year ended May 31, 2025 contained in this Annual Report on Form 10-K. ​ ITEM 4.
LEGAL PROCEEDINGS Note 18 of the Notes to our Consolidated Financial Statements for the year ended May 31, 2024 contained in Item 8 of this Annual Report on Form 10-K includes information on legal proceedings that constitute material contingencies for financial reporting purposes that could have a material adverse effect on our consolidated financial position or liquidity if they were resolved in a manner that is adverse to us.
LEGAL PROCEEDINGS Note 18 of the Notes to our Consolidated Financial Statements for the year ended May 31, 2025 contained in Item 8 of this Annual Report on Form 10-K includes information on legal proceedings that constitute material contingencies for financial reporting purposes that could have a material adverse effect on our consolidated financial position or liquidity if they were resolved in a manner that is adverse to us.
Added
MINE SAFETY DISCLOSURES Not Applicable. ​ 25 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+4 added−2 removed0 unchanged
Biggest changeHexcel Corporation ​ Woodward, Inc. ​ The Company annually revisits the composition of the peer group to ensure that the Company’s performance is measured against those of comparably sized and situated companies.
Biggest changeThe Company annually revisits the composition of the peer group to ensure that the Company’s performance is measured against those of comparably sized and situated companies. The mix of the Company’s commercial and government/defense markets presents a challenge in constructing a peer group, given that many government/defense contractors have substantially greater resources than the Company.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the New York Stock Exchange and the Chicago Stock Exchange under the symbol “AIR.” On June 30, 2024, there were approximately 630 holders of common stock, including participants in security position listings.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the New York Stock Exchange and the Chicago Stock Exchange under the symbol “AIR.” On June 30, 2025, there were approximately 600 holders of common stock, including participants in security position listings.
The Company’s Fiscal 2024 Proxy Peer Group companies are listed as follows: Aerojet Rocketdyne Holdings, Inc. Kaman Corporation Applied Industrial Technologies, Inc. ​ Moog Inc. Barnes Group Inc. ​ MSC Industrial Direct Co., Inc. Crane Co. ​ Spirit Aerosystems Holdings, Inc. Curtiss-Wright Corporation ​ The Timken Company Ducommun Incorporated ​ TriMas Corporation Heico Corporation ​ Triumph Group, Inc.
The Company’s Fiscal 2025 Proxy Peer Group companies are listed as follows: Air Lease Corporation * MSC Industrial Direct Co., Inc. Applied Industrial Technologies, Inc. ​ Spirit AeroSystems Holdings, Inc. Barnes Group Inc. ​ The Timken Company Crane Co. ​ TriMas Corporation Curtiss-Wright Corporation ​ Triumph Group, Inc.
Stockholder Return Performance Graph The following graph compares the total return on a cumulative basis of $100 invested, and reinvestment of dividends in our common stock since May 31, 2019 to the Standard and Poor’s (“S&P”) 500 Index and the Proxy Peer Group: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Base ​ INDEXED RETURNS ​ ​ Period ​ Years Ending Company Name / Index ​ 5/31/19 ​ 5/31/20 ​ 5/31/21 ​ 5/31/22 ​ 5/31/23 ​ 5/31/24 AAR CORP. 100 67.65 140.02 161.72 168.06 238.08 S&P 500 Index 100 112.84 158.33 157.86 162.47 208.26 Peer Group 100 73.44 116.40 105.53 116.58 166.57 ​ 27 Table of Contents The S&P 500 Index is comprised of domestic industry leaders in four major sectors: Industrial, Financial, Utility, and Transportation, and serves as a broad indicator of the performance of the U.S. equity market.
Stockholder Return Performance Graph The following graph compares the total return on a cumulative basis of $100 invested, and reinvestment of dividends in our common stock since May 31, 2020 to the Standard and Poor’s (“S&P”) 500 Index and the Proxy Peer Group: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Base ​ INDEXED RETURNS ​ ​ Period ​ Years Ending Company Name / Index ​ 5/31/20 ​ 5/31/21 ​ 5/31/22 ​ 5/31/23 ​ 5/31/24 ​ 5/31/25 AAR CORP 100 206.99 239.07 248.44 351.96 ​ 304.46 S&P 500 Index 100 140.32 139.90 143.99 184.57 ​ 209.53 Peer Group 100 160.81 145.61 159.84 229.11 ​ 278.70 ​ 26 Table of Contents The S&P 500 Index is comprised of domestic industry leaders in four major sectors: Industrial, Financial, Utility, and Transportation, and serves as a broad indicator of the performance of the U.S. equity market.
Removed
The mix of the Company’s commercial and government/defense markets presents a challenge in constructing a peer group, given that many government/defense contractors have substantially greater resources than the Company. There were no changes in the composition of the peer group for fiscal 2024 from the prior year. Dividends We did not declare any dividends in fiscal 2022, 2023, or 2024.
Added
Ducommun Incorporated ​ V2X, Inc. * Heico Corporation ​ VSE Corporation * Hexcel Corporation ​ Woodward, Inc.
Removed
The declaration and payment of cash dividends is at the discretion of our Board of Directors and will be dependent upon our future earnings, cash flows, financial condition, capital requirements and strategy and any future government restrictions. ​ ITEM 6. (Reserved) ​
Added
Moog Inc. ​ ​ * New peer group companies added for fiscal 2025 due to their business and financial comparability to the Company. ​ We removed Kaman Corporation and Aerojet Rocketdyne Holdings, Inc. from our prior year peer group as each company has been acquired.
Added
Dividends We did not declare any dividends in fiscal 2023, 2024, or 2025.
Added
The declaration and payment of cash dividends is at the discretion of our Board of Directors and will be dependent upon our future earnings, cash flows, financial condition, capital requirements and strategy and any future government restrictions. ​ Issuer Purchases of Equity Securities ​ The following table provides information about share repurchases we made during the three months ended May 31, 2025 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number ​ ​ ​ ​ ​ ​ ​ ​ ​ of Shares ​ Approximate ​ ​ ​ ​ ​ ​ ​ Purchased as ​ Dollar Value of ​ ​ ​ ​ ​ ​ ​ Part of Publicly ​ Shares that May ​ ​ Total Number ​ Average ​ Announced ​ Yet Be Purchased ​ ​ of Shares ​ Price Paid per ​ Plans or ​ Under the Plans Period ​ Purchased ​ Share ​ Programs (1) ​ or Programs (1) 3/1/2025 – 3/31/2025 — ​ $ — — ​ $ 52,544,833 4/1/2025 – 4/30/2025 192,532 ​ 52.37 192,532 ​ 42,462,495 5/1/2025 – 5/31/2025 — ​ — — ​ 42,462,495 Total 192,532 ​ $ 52.37 192,532 ​ (1) On December 21, 2021, our Board of Directors announced it had authorized a renewal of our stock repurchase program providing for the repurchase of up to $150 million of our common stock, with no expiration date. ​ ITEM 6.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 6. (Reserved) 28 ​ ​ ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 ​ ​ ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk 40 ​ ​ ​ Item 8. Financial Statements and Supplementary Data 41 ​ ​ ​
Biggest changeItem 6. (Reserved) 27 ​ ​ ​ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 ​ ​ ​ Item 7A. Quantitative and Qualitative Disclosures about Market Risk 39 ​ ​ ​ Item 8. Financial Statements and Supplementary Data 40 ​ ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

62 edited+23 added−26 removed64 unchanged
Biggest changeOperating income in the Parts Supply segment increased $16.1 million, or 17.2%, over the prior year, primarily due to increased sales volumes across both new parts distribution and USM partially offset by the recognition of the $11.2 million charge in the first quarter of fiscal 2024 related to an unfavorable Russian bankruptcy court judgment. 32 Table of Contents Repair & Engineering Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, ​ 2024 2023 % Change Third-party sales ​ $ 640.1 ​ $ 533.4 ​ 20.0 % Operating income ​ ​ 52.5 ​ ​ 35.3 ​ 48.7 % Operating margin ​ 8.2 % ​ 6.6 % ​ ​ ​ Sales in the Repair & Engineering segment in fiscal 2024 increased $106.7 million, or 20.0%, over the prior year primarily due to the acquisition of the Product Support business in the fourth quarter of fiscal 2024 which contributed sales of $73.0 million.
Biggest changeRepair & Engineering Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, ​ 2025 2024 % Change Third-party sales ​ $ 884.9 ​ $ 640.1 ​ 38.2 % Operating income ​ ​ 81.2 ​ ​ 52.5 ​ 54.7 % Operating margin ​ 9.2 % ​ 8.2 % ​ ​ ​ Sales in the Repair & Engineering segment in fiscal 2025 increased $244.8 million, or 38.2%, over the prior year primarily due to the acquisition of the Product Support business in the fourth quarter of fiscal 2024 which contributed incremental sales of $232.7 32 Table of Contents million in fiscal 2025.
The term of the Purchase Agreement expires after February 22, 2025, but, the Purchase Agreement may be terminated earlier under certain circumstances. The term of the Purchase Agreement is automatically extended for annual terms unless either party provides advance notice that they do not intend to extend the term.
The term of the Purchase Agreement expires after February 22, 2026, but, the Purchase Agreement may be terminated earlier under certain circumstances. The term of the Purchase Agreement is automatically extended for annual terms unless either party provides advance notice that they do not intend to extend the term.
We engage the assistance of valuation specialists in concluding on fair value measurements in determining the fair value of assets acquired and liabilities assumed in business combinations. The fair value of the intangible assets is estimated using several valuation methodologies, including the income-based or market-based approaches, which represent Level 3 fair value measurements.
We engage the assistance of valuation specialists in concluding on fair value measurements in determining the fair value of assets acquired and liabilities assumed in business combinations. 36 Table of Contents The fair value of the intangible assets is estimated using several valuation methodologies, including the income-based or market-based approaches, which represent Level 3 fair value measurements.
Contract assets and contract liabilities are determined on a contract-by-contract basis. Allowance for Credit Losses We maintain an allowance for credit losses to reflect the expected uncollectibility of accounts receivable based on past collection history and specific risks identified among uncollected accounts.
Contract assets and contract liabilities are determined on a contract-by-contract basis. 38 Table of Contents Allowance for Credit Losses We maintain an allowance for credit losses to reflect the expected uncollectibility of accounts receivable based on past collection history and specific risks identified among uncollected accounts.
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 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.
For a discussion of the comparison of fiscal 2023 and 2022, refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended May 31, 2023 (filed July 18, 2023).
For a discussion of the comparison of fiscal 2024 and 2023, refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended May 31, 2024 (filed July 19, 2024).
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.
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 37 Table of Contents another good or service or whether the good or service is highly interdependent or interrelated.
During fiscal 2024, we repurchased 0.1 million shares for an aggregate purchase price of $5.1 million. During fiscal 2023, we repurchased 1.2 million shares for an aggregate purchase price of $50.1 million. Since inception of the renewal authorization, we have repurchased 2.2 million shares for an aggregate purchase price of $97.5 million.
During fiscal 2024, we repurchased 0.1 million shares for an aggregate purchase price of $5.1 million. During fiscal 2023, we repurchased 1.2 million shares for an aggregate purchase price of $50.1 million. Since inception of the renewal authorization, we have repurchased 2.4 million shares for an aggregate purchase price of $107.5 million.
Our financing arrangements also generally require our significant domestic subsidiaries to provide a guarantee of payment. At May 31, 2024, we were in compliance with the financial and other covenants under each of our financing arrangements. Sale of Receivables We maintain a Purchase Agreement with Citibank N.A.
Our financing arrangements also generally require 34 Table of Contents our significant domestic subsidiaries to provide a guarantee of payment. At May 31, 2025, we were in compliance with the financial and other covenants under each of our financing arrangements. Sale of Receivables We maintain a Purchase Agreement with Citibank N.A.
The timing and amount of repurchases are subject to prevailing market conditions and other considerations, including our liquidity and acquisition and other investment opportunities. Cash Flows Cash Flows from Operating Activities Net cash provided by operating activities was $43.6 million in fiscal 2024 compared to $23.3 million in the prior year.
The timing and amount of repurchases are subject to prevailing market conditions and other considerations, including our liquidity and acquisition and other investment opportunities. Cash Flows Cash Flows from Operating Activities Net cash provided by operating activities was $36.1 million in fiscal 2025 compared to $43.6 million in the prior year.
The Notes will mature on March 15, 2029. 34 Table of Contents At any time prior to March 15, 2026, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus an applicable “make-whole” premium.
At any time prior to March 15, 2026, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date plus an applicable “make-whole” premium.
The Notes bear interest at a rate of 6.75% per year, payable semiannually in cash in arrears on March 15 and September 15 of each year, commencing September 15, 2024.
The Notes bear interest at a rate of 6.75% per year, payable semiannually in cash in arrears on March 15 and September 15 of each year, which commenced on September 15, 2024. The Notes mature on March 15, 2029.
Fleet management and operations of customer-owned aircraft is performed for the U.S. Department of State (“DoS”) under the INL/A WASS contract. We are the prime contractor on this ten-year performance-based contract which began in fiscal 2018. Our services under the contract include operating and maintaining the global DoS fleet of fixed- and rotary-wing aircraft.
Department of State (“DoS”) under the INL/A WASS contract. We are the prime contractor on this ten-year performance-based contract which began in fiscal 2018. Our services under the contract include operating and maintaining the global DoS fleet of fixed- and rotary-wing aircraft.
At May 31, 2024, borrowings outstanding under the Amended Revolving Credit Facility were $447.0 million and there were approximately $10.9 million of outstanding letters of credit, which reduced the availability under this facility to $367.1 million. There are no other terms or covenants limiting the availability of the Amended Revolving Credit Facility.
At May 31, 2025, borrowings outstanding under the Amended Revolving Credit Facility were $427.0 million and there were approximately $7.9 million of outstanding letters of credit, which reduced the availability under this facility to $390.1 million. There are no other terms or covenants limiting the availability of the Amended Revolving Credit Facility.
Over the long-term, we expect to see strength in our aviation products and services given our offerings of value-added solutions to both commercial and government and defense customers. We believe long-term commercial aftermarket growth trends are favorable.
Navy to support their P-8A aircraft, advancing our support of commercial derivatives. Over the long-term, we expect to see strength in our aviation products and services given our offerings of value-added solutions to both commercial and government and defense customers. We believe long-term commercial aftermarket growth trends are favorable.
As of May 31, 2024, we also had other financing arrangements that did not limit availability on our Amended Revolving Credit Facility, including outstanding letters of credit of $11.6 million and foreign lines of credit of $9.4 million.
As of May 31, 2025, we also had other financing arrangements that did not limit availability on our Amended Revolving Credit Facility, including outstanding letters of credit of $0.1 million and foreign lines of credit of $9.8 million.
Gross profit margin on sales to commercial customers increased to 19.7% from 18.7% in the prior year primarily due to the acquisitions of Trax and the Product Support business as their margins are accretive to our historical margins.
Gross profit margin on sales to commercial customers increased slightly to 19.8% from 19.7% in the prior year primarily due to the acquisition of the Product Support business as its margins are accretive to our historical margins.
Contractual Obligations and Off-Balance Sheet Arrangements A summary of contractual cash obligations and off-balance sheet arrangements as of May 31, 2024 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due by Period ​ ​ ​ ​ ​ Due in ​ Due in ​ Due in ​ Due in ​ Due in After ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​ Fiscal ​ Fiscal ​ Fiscal Fiscal ​ Total 2025 2026 2027 2028 2029 2029 On Balance Sheet: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Credit Agreement borrowings ​ $ 447.0 ​ $ — ​ $ — ​ $ — ​ $ 447.0 ​ $ — ​ $ — Credit Agreement interest 1 ​ 108.0 ​ 30.5 ​ 30.5 ​ 30.5 ​ 16.5 ​ — ​ ​ — 6.75% Senior Notes ​ ​ 550.0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 550.0 ​ ​ — 6.75% Senior Notes interest ​ ​ 177.8 ​ ​ 37.1 ​ ​ 37.1 ​ ​ 37.1 ​ ​ 37.1 ​ ​ 29.4 ​ ​ — Facilities and equipment operating leases ​ ​ 146.4 ​ ​ 16.7 ​ ​ 12.8 ​ ​ 10.9 ​ ​ 9.8 ​ ​ 7.4 ​ ​ 88.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Off Balance Sheet: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchase obligations 2 ​ 656.0 ​ 527.5 ​ 98.3 ​ 27.0 ​ 2.4 ​ 0.8 ​ ​ — Notes: 1 Interest was determined using the interest rate in effect on May 31, 2024. 2 Purchase obligations arise in the ordinary course of business and represent a binding commitment to acquire inventory, including raw materials, parts, and components, as well as equipment to support the operations of our business.
Contractual Obligations and Off-Balance Sheet Arrangements A summary of contractual cash obligations and off-balance sheet arrangements as of May 31, 2025 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due by Period ​ ​ ​ ​ ​ Due in ​ Due in ​ Due in ​ Due in ​ Due in After ​ ​ ​ ​ ​ Fiscal ​ Fiscal ​ Fiscal ​ Fiscal ​ Fiscal Fiscal ​ Total 2026 2027 2028 2029 2030 2030 On Balance Sheet: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Credit Agreement borrowings ​ $ 427.0 ​ $ — ​ $ — ​ $ 427.0 ​ $ — ​ $ — ​ $ — Credit Agreement interest 1 ​ 69.6 ​ 27.4 ​ 27.4 ​ 14.8 ​ — ​ — ​ ​ — 6.75% Senior Notes ​ ​ 550.0 ​ ​ — ​ ​ — ​ ​ — ​ ​ 550.0 ​ ​ — ​ ​ — 6.75% Senior Notes interest ​ ​ 140.7 ​ ​ 37.1 ​ ​ 37.1 ​ ​ 37.1 ​ ​ 29.4 ​ ​ — ​ ​ — Facilities and equipment operating leases ​ ​ 150.1 ​ ​ 15.3 ​ ​ 11.9 ​ ​ 10.6 ​ ​ 9.8 ​ ​ 6.7 ​ ​ 95.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Off Balance Sheet: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchase obligations 2 ​ 845.7 ​ 657.1 ​ 156.9 ​ 26.7 ​ 2.4 ​ 2.6 ​ ​ — Notes: 1 Interest was determined using the interest rates in effect on May 31, 2025. 2 Purchase obligations arise in the ordinary course of business and represent a binding commitment to acquire inventory, including raw materials, parts, and components, as well as equipment to support the operations of our business.
Operating Segment Results of Operations Parts Supply Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, ​ ​ 2024 2023 % Change Third-party sales ​ $ 967.0 ​ $ 818.4 ​ 18.2 % Operating income ​ ​ 109.8 ​ ​ 93.7 ​ 17.2 % Operating margin ​ 11.4 % ​ 11.4 % ​ ​ ​ Sales in the Parts Supply segment in fiscal 2024 increased $148.6 million, or 18.2%, over the prior year period primarily due to a $78.1 million increase in sales in our new parts distribution activities from increased demand and growth from new and expanded distribution agreements.
Operating Segment Results of Operations Parts Supply Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, ​ ​ 2025 2024 % Change Third-party sales ​ $ 1,099.6 ​ $ 967.0 ​ 13.7 % Operating income ​ ​ 156.8 ​ ​ 109.8 ​ 42.8 % Operating margin ​ 14.3 % ​ 11.4 % ​ ​ ​ Sales in the Parts Supply segment in fiscal 2025 increased $132.6 million, or 13.7%, over the prior year period primarily due to a $129.9 million increase in sales in our new parts distribution activities from increased demand and growth from new and expanded distribution agreements.
Periodically, we may also raise capital through common stock and debt financings in the public or private markets. We continually evaluate various financing arrangements, including the issuance of common stock or debt, which would allow us to improve our liquidity position and finance future growth on commercially reasonable terms.
We continually evaluate various financing arrangements, including the issuance of common stock or debt, which would allow us to improve our liquidity position and finance future growth on commercially reasonable terms.
We routinely issue letters of credit and performance bonds in the ordinary course of business. These instruments are typically issued in conjunction with insurance contracts or other business requirements.
We routinely issue letters of credit and performance bonds in the ordinary course of business. These instruments are typically issued in conjunction with insurance contracts or other business requirements. The total of these instruments outstanding at May 31, 2025 was $7.9 million.
Our continuing ability to borrow from our lenders and issue debt and equity securities to the public and private markets in the future may be negatively affected by a number of factors, including the overall health of the credit markets, general economic conditions, airline industry conditions, geo-political events, our debt service obligations, and our operating performance.
Our continuing ability to borrow from our lenders and issue debt and equity securities to the public and private markets in the future may be negatively affected by a number of factors, including the overall health of the credit markets, general economic conditions, airline industry conditions, geo-political events, our debt service obligations, and our operating performance. 33 Table of Contents At May 31, 2025, our liquidity and capital resources included working capital of $955.9 million inclusive of cash of $96.5 million.
We provide global scale, independence, and highly technical sales capabilities across both commercial and government end-markets. Repair & Engineering Our airframe maintenance services are primarily comprised of major airframe inspection, MRO, painting services, line maintenance, airframe modifications, structural repairs, avionics service and installation, exterior and interior refurbishment and engineering services and support for many types of commercial and military aircraft.
Repair & Engineering Our Airframe MRO services are primarily comprised of major airframe inspection, maintenance, repair, and overhaul services, painting services, line maintenance, airframe modifications, structural repairs, avionics service and installation, exterior and interior refurbishment and engineering services and support for many types of commercial and military aircraft.
Consolidated sales to commercial customers increased $309.1 million, or 23.3%, over the prior year primarily due to the acquisition of the Product Support business in the fourth quarter of fiscal 2024 and strong demand and volume growth in our Parts Supply segment across both new parts and used serviceable material.
Consolidated sales to commercial customers increased $338.2 million, or 20.6%, over the prior year primarily due to the acquisition of the Product Support business in the fourth quarter of fiscal 2024 and strong demand and volume growth in our Parts Supply segment from our new parts distribution activities.
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.
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 also maintain trade credit insurance for certain customers to provide coverage, up to a certain limit, in the event of insolvency of some customers. 39 Table of Contents Impairment of Long-Lived Assets 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.
Impairment of Long-Lived Assets 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.
Integrated Solutions Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, ​ 2024 2023 % Change Third-party sales ​ $ 641.9 ​ $ 546.9 ​ 17.4 % Operating income ​ ​ 23.9 ​ ​ 30.5 ​ (21.6) % Operating margin ​ 3.7 % ​ 5.6 % ​ ​ ​ Sales in the Integrated Solutions segment in fiscal 2024 increased $95.0 million, or 17.4%, over the prior year primarily due to higher commercial program activity and the Trax acquisition in the fourth quarter of fiscal 2023 which contributed sales of $36.0 million in the current year compared to $4.8 million in the prior year.
Integrated Solutions Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, ​ 2025 2024 % Change Third-party sales ​ $ 695.3 ​ $ 641.9 ​ 8.3 % Operating income ​ ​ 36.4 ​ ​ 23.9 ​ 52.3 % Operating margin ​ 5.2 % ​ 3.7 % ​ ​ ​ Sales in the Integrated Solutions segment in fiscal 2025 increased $53.4 million, or 8.3%, over the prior year primarily due to higher commercial program activity with increased sales of $36.5 million.
Cash Flows from Financing Activities Net cash provided by financing activities was $729.2 million in fiscal 2024 compared to $137.7 million in the prior year. The increase in cash provided by financing activities over the prior year of $591.5 million was primarily related to debt financing to fund the acquisition of the Product Support business in fiscal 2024.
The decrease in cash provided by financing activities from the prior year of $762.9 million was primarily related to debt financing to fund the acquisition of the Product Support business in fiscal 2024.
Expeditionary Services Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, ​ ​ 2024 2023 % Change Third-party sales ​ $ 69.9 ​ $ 91.8 ​ (23.9) % Operating income ​ ​ 3.5 ​ ​ 7.7 ​ (54.5) % Operating margin ​ 5.0 % ​ 8.4 % ​ ​ ​ Sales in the Expeditionary Services segment in fiscal 2024 decreased $21.9 million, or 23.9%, from the prior year primarily due to lower sales volumes for pallets.
Expeditionary Services Segment ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, ​ ​ 2025 2024 % Change Third-party sales ​ $ 100.7 ​ $ 69.9 ​ 44.1 % Operating income ​ ​ 10.1 ​ ​ 3.5 ​ 188.6 % Operating margin ​ 10.0 % ​ 5.0 % ​ ​ ​ Sales in the Expeditionary Services segment in fiscal 2025 increased $30.8 million, or 44.1%, over the prior year primarily due to higher sales volumes for pallets.
We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 28 Table of Contents General Overview We report our activities in four business 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 (“MRO”) 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.
General Overview We report our activities in four business segments: ● Parts Supply, primarily consisting of our sales of used serviceable material (“USM”), including aircraft, engine and airframe parts and components and distribution of new parts (“Distribution”); ● Repair & Engineering, primarily consisting of our maintenance, repair, and overhaul (“MRO”) services across airframes (“Airframe MRO”) and components (“Component Services”); ● 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.
Pension Settlement Charge During the first quarter of fiscal 2024, we settled all future obligations under our frozen U.S. defined benefit retirement plan. The settlement included a combination of lump-sum payments to participants who elected to receive them and the transfer of the remaining benefit obligations to a third-party insurance company under a group annuity contract.
The settlement included a combination of lump-sum payments to participants who elected to receive them and the transfer of the remaining benefit obligations to a third-party insurance company under a group annuity contract.
At May 31, 2024, we have utilized $12.8 million which reduced the availability under the Purchase Agreement to $137.2 million.
At May 31, 2025, we have utilized $13.9 million which reduced the availability under the Purchase Agreement to $136.1 million.
The fair value of our reporting units is also impacted by our overall market capitalization and may be impacted by volatility in our stock price and assumed control premium, among other items.
We also considered the long-term forecasts for each reporting unit, which incorporated specific opportunities and risks, working capital requirements, and capital expenditure needs. The fair value of our reporting units is also impacted by our overall market capitalization and may be impacted by volatility in our stock price and assumed control premium, among other items.
Selling, General and Administrative Expenses Selling, general and administrative expenses increased $81.8 million, or 35.5%, over the prior year primarily due to increased amortization and acquisition-related expenses of $35.7 million related to the Trax and Product Support business acquisitions.
Selling, General and Administrative Expenses Selling, general and administrative expenses increased $35.5 million, or 11.4%, over the prior year primarily due to increased costs of $54.8 million related to the previously disclosed FCPA investigation and settlement. This increase was partially offset by lower amortization and acquisition-related expenses of $18.2 million related to the Trax and Product Support business acquisitions.
Management has made estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities to prepare the Consolidated Financial Statements.
Critical Accounting Policies and Significant Estimates Our Consolidated Financial Statements are prepared in conformity with accounting principles generally accepted in the United States. Management has made estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities to prepare the Consolidated Financial Statements.
Discussion of Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, ​ 2024 2023 % Change Sales: ​ ​ ​ Commercial ​ $ 1,637.9 ​ $ 1,328.8 23.3 % Government and defense ​ 681.0 ​ 661.7 ​ 2.9 % ​ ​ $ 2,318.9 ​ $ 1,990.5 16.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 322.8 ​ $ 249.1 ​ 29.6 % Government and defense ​ ​ 119.5 ​ ​ 121.0 ​ (1.2) % ​ ​ $ 442.3 ​ $ 370.1 ​ 19.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit Margin: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ ​ 19.7 % ​ 18.7 % ​ ​ Government and defense ​ ​ 17.5 % ​ 18.3 % ​ ​ Consolidated ​ ​ 19.1 % ​ 18.6 % ​ ​ ​ Consolidated sales in fiscal 2024 increased $328.4 million, or 16.5%, over the prior year primarily due to an increase in sales to commercial customers.
As we continue to invest in the pipeline of opportunities in the government market, our long-term strategy continues to emphasize investing in the business and capitalizing on opportunities in both the commercial and government markets. 30 Table of Contents Discussion of Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, ​ 2025 2024 % Change Sales: ​ ​ ​ Commercial ​ $ 1,976.1 ​ $ 1,637.9 20.6 % Government and defense ​ 804.4 ​ 681.0 ​ 18.1 % ​ ​ $ 2,780.5 ​ $ 2,318.9 19.9 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 391.6 ​ $ 322.8 ​ 21.3 % Government and defense ​ ​ 136.1 ​ ​ 119.5 ​ 13.9 % ​ ​ $ 527.7 ​ $ 442.3 ​ 19.3 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Profit Margin: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ ​ 19.8 % ​ 19.7 % ​ ​ Government and defense ​ ​ 16.9 % ​ 17.5 % ​ ​ Consolidated ​ ​ 19.0 % ​ 19.1 % ​ ​ ​ Consolidated sales in fiscal 2025 increased $461.6 million, or 19.9%, over the prior year primarily due to an increase in sales to commercial customers.
Cash Flows from Investing Activities Net cash used in investing activities was $758.5 million in fiscal 2024 compared to $138.0 million in the prior year. The increase in cash used in investing activities over the prior year of $620.5 million was primarily related to the acquisition of the Product Support business in fiscal 2024.
The increase in cash provided by investing activities over the prior year’s use of cash was $769.2 million which was primarily related to the acquisition of the Product Support business in fiscal 2024 compared to the sale of the LGO business in fiscal 2025. 35 Table of Contents Cash Flows from Financing Activities Net cash used in financing activities was $33.7 million in fiscal 2025 compared to cash provided by financing activities of $729.2 million in the prior year.
Income Taxes Our fiscal 2024 effective income tax rate for continuing operations was 20.6% compared to 25.9% in the prior year. The decrease in the effective tax rate was primarily attributable to the deferred tax benefit recognized in conjunction with the pension settlement in the first quarter of fiscal 2024.
In fiscal 2024, our effective income tax rate was 20.6% which reflected the recognition of a deferred tax benefit in conjunction with the pension settlement in the first quarter of fiscal 2024.
PMA is a designation under Federal Aviation Administration (“FAA”) regulations that permits the design of approved parts for specific aircraft components that can be provided by non-OEM sources at cost-efficient and sometimes improved availability. 29 Table of Contents Integrated Solutions Our Integrated Solutions segment primarily consists of our fleet management and operations of customer-owned aircraft, customized performance-based supply chain logistics programs in support of the DoD and foreign governments, flight hour component inventory and repair programs for commercial airlines and integrated software solutions including Trax.
Integrated Solutions Our Integrated Solutions segment primarily consists of our fleet management and operations of customer-owned aircraft, customized performance-based supply chain logistics programs in support of the DoD and foreign governments, flight hour component inventory and repair programs for commercial airlines and integrated software solutions including Trax. Fleet management and operations of customer-owned aircraft is performed for the U.S.
Our integrated software solutions are primarily comprised of our Trax software which we recently acquired in fiscal 2023. Trax has the first fully cloud-based electronic enterprise resource platform for the MRO industry and also offers a full suite of “paperless” mobility apps that are in process of automating MRO workflows with artificial intelligence.
Trax has the first fully cloud-based electronic enterprise resource platform for the MRO industry and also offers a full suite of “paperless” mobility apps that are in process of automating MRO workflows with artificial intelligence. 29 Table of Contents Expeditionary Services The Expeditionary Services segment primarily consists of products and services supporting the movement of equipment and personnel by the U.S. and foreign governments and non-governmental organizations.
We currently expect full payment from the customer of all amounts due under the terminated agreement and all other agreements and do not believe a reserve for credit loss is warranted.
We expect full payment from the customer of all amounts due under the terminated agreement and all other agreements and do not believe a reserve for credit loss is warranted. Our Consolidated Balance Sheet as of May 31, 2025 included accounts receivable of $29.4 million, including $7.5 million past due, and contract assets of $1.4 million related to this customer.
The containers and shelters are used in numerous mission requirements, including armories, supply and parts storage, refrigeration systems, tactical operation centers, briefing rooms, laundry and kitchen facilities, water treatment, and sleeping quarters. Shelters include both stationary and vehicle-mounted applications. We also provide engineering, design, and system integration services for specialized command and control systems.
We design, manufacture, and repair transportation pallets and a wide variety of containers and shelters used in support of military and humanitarian tactical deployment activities. The containers and shelters are used in numerous mission requirements, including armories, supply and parts storage, refrigeration systems, tactical operation centers, briefing rooms, laundry and kitchen facilities, water treatment, and sleeping quarters.
In fiscal 2024, we recognized net favorable cumulative catch-up adjustments of $3.0 million compared to net favorable cumulative catch-up adjustments of $8.3 million in the prior year. These adjustments primarily relate to our long-term, power-by-the-hour programs where we provide component inventory management and repair services as well as certain long-term government programs.
These adjustments primarily relate to our long-term, power-by-the-hour programs where we provide component inventory management and repair services as well as certain long-term government programs. Operating income in the Integrated Solutions segment increased $12.5 million, or 52.3%, over the prior year with the operating margin increasing to 5.2% from 3.7% in the prior year.
As a percent of sales, selling, general and administrative expenses increased to 13.5% from 11.6% in the prior year primarily due to these costs. Operating Income Operating income in fiscal 2024 decreased $4.7 million, or 3.5%, from the prior year primarily due to increased selling, general and administrative expenses discussed above.
As a percent of sales, selling, general and administrative expenses decreased to 12.5% from 13.5% in the prior year primarily due to the operating leverage from a full year of sales from the Product Support acquisition.
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.
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.
Our ability to generate cash from operations is influenced primarily by our operating performance and changes in working capital. In addition to operations, our current capital resources include an unsecured revolving credit facility under the Credit Agreement referred to below and an accounts receivable financing program.
In addition to operations, our current capital resources include an unsecured revolving credit facility under the Credit Agreement referred to below and an accounts receivable financing program. Periodically, we may also raise capital through common stock and debt financings in the public or private markets.
Under this approach, we considered the overall industry and market conditions related to the aerospace and government/defense markets as well as conditions in the global capital markets. We also considered the long-term forecasts for each reporting unit, which incorporated specific opportunities and risks, working capital requirements, and capital expenditure needs.
In fiscal 2025, 2024, and 2023, we utilized the qualitative assessment approach for our annual review of goodwill impairment for each of our reporting units. Under this approach, we considered the overall industry and market conditions related to the aerospace and government/defense markets as well as conditions in the global capital markets.
Interest Expense Interest expense in fiscal 2024 increased $31.0 million which included $6.1 million of bridge financing facility expenses related to our acquisition of the Product Support business.
This increase was partially offset by $6.1 million of bridge financing facility expenses in fiscal 2024 related to our acquisition of the Product Support business. Our average borrowing rate was 6.54% in fiscal 2025 compared to 6.69% in the prior year.
Consolidated gross profit in fiscal 2024 increased $72.2 million, or 19.5%, over the prior year. Gross profit on sales to commercial customers increased $73.7 million, or 29.6%, over the prior year due to strong demand and volume growth for both new parts and used serviceable material.
Gross profit on sales to government customers increased $16.6 million, or 13.9%, over the prior year primarily due to strong demand and volume growth across our new parts distribution activities.
We also distribute new OEM-supplied replacement parts to aircraft operators, airlines, government customers and other MRO companies across the world. Our parts are supplied to narrow-body, wide-body and regional aircraft. In most cases, we enter exclusive relationships with OEM manufacturers for a given market where we are the only provider of that supplier’s product category.
In most cases, we enter exclusive relationships with OEM manufacturers for a given market where we are the only provider of that supplier’s product category. We provide global scale, independence, and highly technical sales capabilities across both commercial and government end-markets.
USM is an important category of the aviation aftermarket in which parts removed from engines or airframes can be refurbished to be utilized as replacement parts in the aftermarket. We utilize a network of third-party repair facilities to perform this work. USM parts often represent a cost-effective and more timely solution for operators when compared to sourcing new parts.
We utilize a network of third-party repair facilities to perform this work. USM parts often represent a cost-effective and more timely solution for operators when compared to sourcing new parts. We also distribute new OEM-supplied replacement parts to aircraft operators, airlines, government customers and other MRO companies across the world. Our parts are supplied to narrow-body, wide-body and regional aircraft.
Our Consolidated Balance Sheet as of May 31, 2024 included accounts receivable of $8.4 million, including $4.1 million past due, and contract assets of $10.1 million related to this customer. 35 Table of Contents Stock Repurchase Program On December 16, 2021, our Board of Directors authorized a renewal of our stock repurchase program, under which we may repurchase up to $150 million of our common stock with no expiration date.
Stock Repurchase Program On December 16, 2021, our Board of Directors authorized a renewal of our stock repurchase program, under which we may repurchase up to $150 million of our common stock with no expiration date. During fiscal 2025, we repurchased 0.2 million shares for an aggregate purchase price of $10.1 million.
Our consolidated sales to government customers increased $19.3 million, or 2.9%, primarily due to higher activity on the INL/A WASS contract with the DoS included in our Integrated Solutions segment. Consolidated cost of sales increased $256.2 million, or 15.8%, over the prior year which was largely in line with the consolidated sales increase of 16.5% discussed above.
Our consolidated sales to government customers increased $123.4 million, or 18.1%, primarily due to increased sales volume for our new parts distribution activities and increased pallet demand in our Mobility business. Consolidated cost of sales increased $376.2 million, or 20.0%, over the prior year which was largely in line with the consolidated sales increase of 19.9% discussed above.
Operating margin decreased to 3.7% from 5.6% primarily due to mix of products and services across our government programs, including the completion of certain programs.
These increases were primarily due to lower amortization and acquisition-related expenses of $5.3 million for Trax and improved profitability from the mix of products and services across our government programs.
Operating margin decreased to 5.0% from 8.4% in the prior year, primarily due to increased selling, general and administrative expenses over the prior year. 33 Table of Contents Liquidity, Capital Resources and Financial Position Our operating activities are funded and commitments met through the generation of cash from operations.
These increases are primarily due to the higher sales volumes for pallets. Liquidity, Capital Resources and Financial Position Our operating activities are funded and commitments met through the generation of cash from operations. Our ability to generate cash from operations is influenced primarily by our operating performance and changes in working capital.
In addition, sales increased $54.6 million at our airframe maintenance facilities. These increases were partially offset by lower sales volume of $26.0 million at our landing gear facility. Operating income in the Repair & Engineering segment increased $17.2 million, or 48.7%, over the prior year primarily due to the sales volume increase in our airframe maintenance facilities.
In addition, sales increased $39.0 million at our Airframe MRO facilities. These increases were partially offset by lower sales volume of $8.6 million due to the sale of our LGO business in the fourth quarter of fiscal 2025.
In addition, interest expense in fiscal 2024 reflects the impact of both higher interest rates and higher average borrowings used to fund investments in the business, including our acquisitions of Trax and the Product Support business. Our average borrowing rate was 6.69% in fiscal 2024 compared to 5.11% in the prior year.
Interest Expense Interest expense in fiscal 2025 increased $32.2 million primarily reflecting the impact of higher average borrowings used to fund investments in the business, including our acquisition of Product Support businesses in the fourth quarter of fiscal 2024.
Parts Supply Our Parts Supply segment primarily consists of sales and leasing of used serviceable aircraft engine and airframe material (“USM”), aircraft and engines and aftermarket distribution of new, original equipment manufacturer (“OEM”)-supplied replacement parts.
Parts Supply Our Parts Supply segment primarily consists of sales and leasing of USM and aftermarket distribution of new, original equipment manufacturer (“OEM”)-supplied replacement parts. 28 Table of Contents USM is an important category of the aviation aftermarket in which parts removed from engines or airframes can be refurbished to be utilized as replacement parts in the aftermarket.
In conjunction with the termination for default, the customer is obligated to purchase the rotable assets for $20.9 million. The rotable assets are classified as assets held for sale and the carrying value of the assets is presented within Prepaid assets and other current assets on our Consolidated Balance Sheet.
In conjunction with the termination for default, the customer is obligated to purchase the rotable assets and we sold the assets to the customer in the fourth quarter of fiscal 2025 for $18.7 million.
Operating income in the Expeditionary Services segment decreased $4.2 million, or 54.5%, from the prior year primarily due to lower sales volumes.
Operating income in the Repair & Engineering segment increased $28.7 million, or 54.7%, over the prior year primarily due to the Product Support acquisition. Operating margin increased to 9.2% from 8.2% in the prior year, reflecting the favorability of the higher margin Product Support business.
Forward-looking statements may also be identified because they contain words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms.
Forward-looking statements may also be identified because they contain words such as ‘‘anticipate,’’ ‘‘believe,’’ ‘‘continue,’’ ‘‘could,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘likely,’’ ‘‘may,’’ ‘‘might,’’ ‘‘plan,’’ ‘‘potential,’’ ‘‘predict,’’ ‘‘project,’’ ‘‘seek,’’ ‘‘should,’’ ‘‘target,’’ ‘‘will,’’ ‘‘would,’’ or similar expressions and the negatives of those terms.
The increase in cash provided over the prior year of $20.3 million was primarily attributable to working capital changes, including the timing of payments for inventory and rotable asset investments in both aircraft, new parts and used serviceable material in the current year.
The decrease in cash provided from the prior year of $7.5 million was primarily attributable to working capital changes, including the timing of customer collections in accounts receivable partially offset by higher amounts of accounts payable and accrued liabilities primarily due to timing of vendor payments.
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Component repair services are primarily comprised of MRO services for structural components, engine and airframe accessories, and interior refurbishment. Our landing gear overhaul services also include repair services on wheels and brakes for commercial and military aircraft. Our Repair & Engineering segment also develops Parts Manufacturer Approval (“PMA”) parts for aftermarket applications.
Added
We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
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Expeditionary Services The Expeditionary Services segment primarily consists of products and services supporting the movement of equipment and personnel by the U.S. and foreign governments and non-governmental organizations. We design, manufacture, and repair transportation pallets and a wide variety of containers and shelters used in support of military and humanitarian tactical deployment activities.
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Component Services are primarily comprised of MRO services for structural components, engine and airframe accessories, and interior refurbishment. In fiscal 2025, we sold our Landing Gear Overhaul (“LGO”) business to GA Telesis for net proceeds of $48 million subject to post-closing adjustments for working capital, cash, and debt.
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Business Trends and Outlook In fiscal 2024, we established new partnerships, expanded our service offerings, and drove greater differentiation in our business including pursuing multiple growth prongs.
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We recognized a loss on the divestiture of $71.1 million which included goodwill of $14.6 million. Our Repair & Engineering segment also develops Parts Manufacturer Approval (“PMA”) parts for aftermarket applications.
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Throughout the year, the industry saw an increase in the utilization of existing aircraft, which drove greater demand for aircraft maintenance with MRO spend reaching record levels, and engine reliability issues prompted greater adoption of USM. Our services, capabilities, and partnerships were well matched to the landscape of the industry, which enabled us to reach higher sales than ever before.
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PMA is a designation under Federal Aviation Administration (“FAA”) regulations that permits the design of approved parts for specific aircraft components that can be provided by non-OEM sources at cost-efficient and sometimes improved availability.
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Our growth strategy has long included both inorganic and organic growth. Building on our long-term relationships with valued customers as well as strong local partnerships, we recently broke ground on additional hangars in Miami, Florida and Oklahoma City, Oklahoma.
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Our integrated software solutions are primarily comprised of our Trax software which we acquired in fiscal 2023.
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We plan to take advantage of the fixed cost base and strong labor availability in these locations with a target to increase our MRO network capacity by approximately 15% upon completion in fiscal 2026. We were also successful in winning new long-term agreements in our commercial market.
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Shelters include both stationary and vehicle-mounted applications. We also provide engineering, design, and system integration services for specialized command and control systems. Business Trends and Outlook In fiscal 2025, we continued our efforts to optimize our products and services portfolio to position us for continued strong growth as well as to respond to the industry’s increased demand for aftermarket services.
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In our Parts Supply segment, we were awarded distribution and supply agreements for both new parts and USM across multiple OEMs including Woodward, MTU Maintenance, Ontic, and Cebu Pacific. In our commercial programs activities, we were awarded a multi-year, flight-hour component support contract with ASL Airlines.
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Double-digit sales growth in our new parts Distribution activities was a key contributor to improvements in profitability. Our fiscal 2023 investment in Trax has enabled us to scale to win the business from some of the largest airlines and maintenance, repair and overhaul (“MRO”) providers.
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During the fourth quarter of fiscal 2023, we acquired Trax, a leading independent provider of aircraft MRO and fleet management software. Trax offers critical software applications to a diverse global customer base of airlines and MROs supporting approximately 5,000 aircraft.
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We also continued our integration of our fiscal 2024 Product Support acquisition and have realized significant synergies while our broader Component Services activities have benefited from these additional capabilities, expanded global footprint, and higher margin offerings brought through the acquisition.
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Trax’s comprehensive solutions support the entire spectrum of maintenance activities and create the system of record required by airlines and MROs. The Trax acquisition added established, higher-margin aviation aftermarket software offerings with recurring revenue to our portfolio and provides opportunities to cross-sell products and services.
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As part of our portfolio optimization efforts, we divested our LGO business to better focus on our core segments and highest margin offerings. We have made further investments to continue to strengthen our existing businesses, including in digital technologies, to help transform our service delivery and the aviation industry while contributing to improved profitability.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBalance sheet translation adjustments are excluded from the results of operations and are recorded in stockholders’ equity as a component of accumulated other comprehensive loss. A hypothetical 10 percent devaluation of the U.S. dollar against foreign currencies would not have had a material impact on our financial position or continuing operations during fiscal 2024. ​ 40 Table of Contents
Biggest changeBalance sheet translation adjustments are excluded from the results of operations and are recorded in stockholders’ equity as a component of accumulated other comprehensive loss. A hypothetical 10 percent devaluation of the U.S. dollar against foreign currencies would not have had a material impact on our financial position or results during fiscal 2025. ​ 39 Table of Contents
A 10 percent increase to the average interest rate across our floating - rate debt obligations would have reduced our pre - tax income by approximately $2.6 million during fiscal 2024. Revenues and expenses of our foreign operations are translated at average exchange rates during the year, and balance sheet accounts are translated at year-end exchange rates.
A 10 percent increase to the average interest rate across our floating - rate debt obligations would have reduced our pre - tax income by $3.5 million during fiscal 2025. Revenues and expenses of our foreign operations are translated at average exchange rates during the year, and balance sheet accounts are translated at year-end exchange rates.

Other AIR 10-K year-over-year comparisons