AAR CORP
For the period ended Aug 31, 2025. Filed Sep 23, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Aug 31, 2025 · Filed Sep 23, 2025
AIR$109.21+4.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-02-28; filed 2025-03-28.
0001410578-25-000519
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-08-31; filed 2025-09-23.
0001104659-25-092589
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 110 previous paragraphs and 81 current paragraphs.
42 unchanged; 24 reworded; 14 added; 42 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 13 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
During the first quarter of fiscal 2026, we executed a restructuring plan to streamline operations and reduce costs. As part of this plan, we eliminated approximately 60 positions and recognized severance charges of $1.0 million.
Current report
Gross profit on sales to commercial customers decreased $3.3 million, or 3.6%, from the prior year quarter with the gross profit margin decreased to 17.1% from 19.6%. These decreases are primarily due to lower profitability in our power-by-the-hour programs activities.
Current report
Selling, general and administrative expenses decreased $4.7 million, or 6.2%, from the prior year quarter primarily due to the FCPA matters which were settled in the second quarter of fiscal 2025.
Current report
As a percent of sales, selling, general and administrative expenses decreased to 9.6% from 11.5% in the prior year primarily due to settlement of the FCPA matters.
Current report
Our effective income tax rate for continuing operations was 26.8% for the first quarter of fiscal 2026 compared to 27.7% in the prior year quarter. The decrease in the effective tax rate was primarily attributable to higher tax benefits from stock compensation in fiscal 2026.
Current report
Sales in the Parts Supply segment increased $68.1 million, or 27.3%, over the prior year quarter primarily due to double-digit increases in both our new parts Distribution activities which increased 23.9% and in our USM activities which increased 32.1%. Whole asset sales in our aftermarket parts trading activities increased $27.8 million in the first quarter of fiscal 2026 over the prior year quarter.
Current report
Operating income in the Parts Supply segment increased $10.8 million, or 35.9%, over the prior year quarter, primarily due to volume growth in our new parts Distribution activities.
Current report
Operating income in the Repair & Engineering segment decreased $0.7 million, or 3.3%, from the prior year quarter primarily due to lower profitability in our Component Services activities. Operating margin decreased to 9.5% from 9.7% in the prior year quarter, reflecting the lower profitability in our Component Services activities.
Current report
Sales in the Integrated Solutions segment increased $16.1 million, or 9.5%, over the prior year quarter primarily due to higher government program activity.
Current report
Operating income in the Integrated Solutions segment increased $2.0 million, or 26.0%, over the prior year quarter and the operating margin increased to 5.2% from 4.6%. These increases were primarily attributable to our government programs activity and its sales growth as well as higher profitability from the mix of products and services.
Current report
Sales in the Expeditionary Services segment decreased $3.3 million, or 12.9%, from the prior year period. During the first quarter of fiscal 2025, our Next Generation Pallet contract was terminated for convenience by our U.S. Government customer and we recognized sales of $9.5 million in that period reflecting our estimated recovery on our incurred costs. This sales decrease from the prior year period was partially offset by sales growth across multiple product lines including pallets, containers, and shelters.
Current report
Operating income in the Expeditionary Services segment increased $4.7 million, or 276.5%, over the prior year quarter primarily due to the prior year impact of the termination of the Next Generation Pallet contract. In conjunction with the termination, we expensed equipment and inventory of $12.7 million and recognized a contract asset of $9.5 million reflecting the estimated recovery on our incurred costs. Operating margin increased to 13.5% from (6.7)% in the prior year quarter, primarily due to the prior year contract termination.
Current report
On August 14, 2025, we issued an additional $150.0 million aggregate principal amount of our Notes (the “Additional Notes”). Other than with respect to the date of issuance and the offering price, the Additional Notes have the same terms as the Notes. Debt issuance costs of $2.5 million were incurred in connection with the Additional Notes which were issued at an original issuance premium 102% of their principal amount, or $3.0 million.
Current report
Net cash used in operating activities was $44.9 million in the first quarter of fiscal 2026 compared to $18.6 million in the prior year quarter. The increase in cash used in operating activities over the prior year of $26.3 million was primarily attributable to working capital changes, including increased inventory investments in both new parts and used serviceable material in the current year.
Removed paragraphs (42)
Previous report
estimated fair value. Goodwill of $14.6 million was reclassified to assets held for sale and was included in the determination of the impairment charge. In connection with the decision to exit the LGO business, the LGO assets and liabilities have been reclassified as assets and liabilities held for sale beginning in the third quarter of fiscal 2025.
Previous report
Three- and Nine-Month Periods Ended February 28/29, 2025 and 2024
Previous report
Three Month Period Ended February 28, 2025
Previous report
Consolidated sales for the third quarter of fiscal 2025 increased $110.9 million, or 19.5%, over the prior year quarter primarily due to an increase in sales to commercial customers. Consolidated sales to commercial customers increased $86.3 million, or 21.6%, over the prior year quarter 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 new parts distribution activities. Our consolidated sales to government customers increased $24.6 million, or 14.6%, primarily due to the contribution from the recent Product Support acquisition and increased pallet volume in our Mobility business.
Previous report
Gross profit on sales to government customers increased $4.9 million, or 15.7%, over the prior year quarter. Gross profit on sales to government customers increased primarily due to strong demand and volume growth across our new parts distribution activities. Gross profit margin on sales to government customers increased to 18.7% from 18.6% primarily due to volume growth in our new parts distribution activities.
Previous report
Selling, general and administrative expenses decreased $15.7 million, or 20.4%, from the prior year quarter primarily due to the de-recognition of the $11.2 million Russian legal liability resulting from the ruling which reversed the previous judgment against us. In addition, we recognized acquisition-related costs and amortization expense of $5.3 million in the current year quarter compared to $12.2 million in the prior year quarter.
Previous report
Our income tax benefit was $2.2 million in the third quarter of fiscal 2025 compared to income tax expense of $6.5 million in the prior year quarter. The decrease in expense was driven by the change from pre-tax income in the prior year quarter to a pre-tax loss in the current year quarter due to the $63.0 million impairment charge on the pending divestiture of our LGO business.
Previous report
Nine-Month Period Ended February 28, 2025
Previous report
In addition, our Mobility business received a stop-work order from our U.S. Government customer on the Next Generation Pallet contract as the program was terminated for convenience by the customer in the first quarter of fiscal 2025. In conjunction with the termination, we recognized sales of $13.5 million reflecting the estimated recovery on our incurred costs.
Previous report
Consolidated gross profit for the nine-month period ended February 28, 2025 increased $62.5 million, or 19.8%, over the prior year period. Gross profit on sales to commercial customers increased $52.8 million, or 22.6%, over the prior year period primarily due to the acquisition of the Product Support business. Gross profit margin on sales to commercial customers decreased to 19.6% from 19.8% in the prior year period primarily due to lower margins in our aftermarket parts trading activities.
Previous report
Gross profit on sales to government customers increased $9.7 million, or 11.9%, over the prior year period. Gross profit on sales to government customers increased primarily due to strong demand and volume growth across our new parts distribution activities. Gross profit margin on sales to government customers decreased to 16.1% from 16.8% primarily due to exit-related costs and inefficiencies associated with the closing of our Garden City, New York component repair facility.
Previous report
Selling, General, and Administrative Expenses
Previous report
Selling, general and administrative expenses increased $52.9 million, or 24.3%, over the prior year period primarily due to increased costs of $65.3 million related to the previously disclosed FCPA investigations and settlement. This increase was partially offset by the de-recognition of the $11.2 million Russian legal liability resulting from the ruling which reversed the previous judgment against us.
Previous report
Pension Settlement Charge
Previous report
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. As a result of the settlements, we recognized a non-cash, pre-tax pension settlement charge of $26.7 million ($16.1 million after-tax) in fiscal 2024 related to the accelerated recognition of all unamortized net actuarial losses in Accumulated other comprehensive loss.
Previous report
Interest Expense
Previous report
Interest expense for the nine-month period ended February 28, 2025 increased $32.7 million 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. Our average borrowing rate was 6.66% for the nine-month period ended February 28, 2025 compared to 6.67% in the prior year period.
Previous report
Income Taxes
Previous report
Our income tax expense was $12.8 million for the nine-month period ended February 28, 2025 while our loss before income taxes was $8.7 million. The majority of the FCPA settlement charge is nondeductible for income tax purposes resulting in no income tax benefit.
Previous report
Our income tax expense was $7.5 million for the nine-month period ended February 29, 2024 while our income before income taxes was $44.7 million. The effective income tax rate of 16.8% was impacted by the accelerated recognition of all unamortized net actuarial losses in Accumulated other comprehensive loss.
Previous report
Sales in the Parts Supply segment increased $28.4 million, or 11.7%, over the prior year quarter primarily due to a $25.7 million increase in sales in our new parts distribution activities from increased demand and growth from new and expanded distribution agreements. Whole asset sales in our aftermarket parts trading activities increased $22.2 million in the third quarter of fiscal 2025 from the prior year quarter.
Previous report
Operating income in the Parts Supply segment increased $14.3 million, or 46.0%, over the prior year quarter, primarily due to the de-recognition of the $11.2 million Russian legal liability resulting from the ruling which reversed the previous judgment against us.
Previous report
Sales in the Repair & Engineering segment increased $75.1 million, or 53.3%, over the prior year quarter primarily due to the acquisition of the Product Support business in the fourth quarter of fiscal 2024 which contributed sales of $72.8 million inclusive of repair services transferred from our Garden City, New York location as part of our ongoing integration activities.
Previous report
Operating income in the Repair & Engineering segment increased $7.5 million, or 65.2%, over the prior year quarter primarily due to the Product Support acquisition. Operating margin increased to 8.8% from 8.2% in the prior year quarter, reflecting the favorability of the higher margin Product Support business.
Previous report
Sales in the Integrated Solutions segment decreased $2.6 million, or 1.6%, from the prior year quarter primarily due to lower government program activity.
Previous report
Operating income in the Integrated Solutions segment increased $1.0 million, or 11.6%, over the prior year quarter. The increase was driven by improved profitability across our government programs partially offset by lower profitability across our commercial programs. Operating margin increased to 5.9% from 5.2% in the prior year quarter primarily due to the mix of products and services across our commercial and government programs.
Previous report
Sales in the Expeditionary Services segment increased $10.0 million, or 53.5%, over the prior year period primarily due to higher sales volumes for pallets. In addition, we recognized sales of $4.0 million reflecting the revised estimated recovery on our incurred costs for the Next Generation Pallet contract that was terminated for convenience by the customer.
Previous report
Operating income in the Expeditionary Services segment increased $5.5 million, or 611.1%, over the prior year quarter with the operating margin increased to 22.3% from 4.8% in the prior year quarter. These increases were attributable to the pallet-related items previously discussed.
Previous report
Nine-Month Periods Ended February 28/29, 2025 and 2024
Previous report
Parts Supply Segment
Previous report
Sales in the Parts Supply segment for the nine-month period ended February 28, 2025 increased $87.4 million, or 12.4%, over the prior year period primarily due to a $87.9 million increase in sales in our new parts distribution activities from increased demand and growth from new and expanded distribution agreements. Whole asset sales in our aftermarket parts trading activities increased $3.2 million over the prior year period.
Previous report
Operating income in the Parts Supply segment increased $32.5 million, or 43.6%, over the prior year period primarily due to improved profitability from the increased sales volume within our new parts distribution activities. In addition, the de-recognition of the $11.2 million Russian legal liability contributed to the improved profitability.
Previous report
Repair & Engineering Segment
Previous report
Operating income in the Repair & Engineering segment increased $31.0 million, or 97.2%, over the prior year period primarily due to the Product Support acquisition. Operating margin increased to 9.5% from 7.5% in the prior year period, reflecting the favorability of the higher margin Product Support business.
Previous report
Integrated Solutions Segment
Previous report
Sales in the Integrated Solutions segment for the nine-month period ended February 28, 2025 increased $16.8 million, or 3.5%, over the prior year period primarily due to higher commercial program activity.
Previous report
Operating income in the Integrated Solutions segment increased $1.1 million, or 4.8%, over the prior year period primarily due to improved profitability across our Trax software solutions. Operating margin increased to 4.8% from 4.7% in the prior year period primarily due to the mix of products and services across our commercial and government programs.
Previous report
Expeditionary Services Segment
Previous report
Sales in the Expeditionary Services segment for the nine-month period ended February 28, 2025 increased $20.8 million, or 38.8%, over the prior year period. We recognized sales of $13.5 million reflecting the estimated recovery on our incurred costs for the Next Generation Pallet contract that was terminated for convenience by the customer.
Previous report
Operating income in the Expeditionary Services segment increased $3.8 million, or 122.6%, over the prior year period with the operating margin increased to 9.3% from 5.8% in the prior year period. These increases were primarily attributable to the higher sales volume for pallets.
Showing the first 40 of 42 passages. Open the source sections for the rest.
Reworded paragraphs (24)
Previous wording
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.
Current wording
Our Parts Supply segment primarily consists of sales and leasing of USM and aftermarket distribution of new, original equipment manufacturer (“OEM”)-supplied replacement parts.
Previous wording
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. 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.
Current wording
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. Component Services are primarily comprised of MRO services for structural components, engine and airframe accessories, and interior refurbishment.
Previous wording
We continue to progress with the construction of the expansion of our Miami and Oklahoma City airframe maintenance facilities to meet growing customer demand. In Miami, we are constructing a 114,000 square foot facility with three bays adjacent to our existing hangar. We have experienced delays and cost overruns but expect incremental government reimbursements to offset a portion of these increased construction costs. We now anticipate the facility to be complete and operational in the first half of fiscal 2027. In Oklahoma City, we are constructing an 80,000 square foot facility with three bays and warehouse space adjacent to our existing hangar. The facility is expected to be complete and operational in the second half of fiscal 2026.
Current wording
We are currently expanding both our Miami and Oklahoma City airframe maintenance facilities to meet growing customer demand. In Miami, we are constructing a 114,000 square foot facility with three bays adjacent to our existing hangar. In Oklahoma City, we are constructing an 80,000 square foot facility with three bays and warehouse space adjacent to our existing hangar. The Oklahoma City expansion is expected to be complete in early calendar 2026 and the Miami expansion is expected to be complete in mid-to-late calendar 2026.
Previous wording
On December 19, 2024, we entered into an agreement to divest our Landing Gear Overhaul (“LGO”) business to GA Telesis for $51 million subject to post-closing adjustments for working capital, cash, and debt. The sale is expected to close in the fourth quarter of fiscal 2025, subject to customary and regulatory closing conditions. We expect to realize net proceeds of approximately $44.5 million from the sale of the LGO business which reflects selling costs and an estimated working capital adjustment. We recognized a non-cash, pre-tax impairment charge of $63.0 million in the third quarter of fiscal 2025 to adjust the carrying value of the LGO assets to their
Current wording
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. We recognized a loss on the divestiture of $71.1 million which included goodwill of $14.6 million.
Previous wording
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.
Current wording
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. Our services under the contract include operating and maintaining the global DoS fleet of fixed- and rotary-wing aircraft.
Previous wording
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.
Current wording
Our integrated software solutions are primarily comprised of our Trax software which we 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. In addition, we acquired Aerostrat, a leading long-range maintenance planning software company, in the first quarter of fiscal 2026 for a purchase price of $15 million plus contingent consideration of up to $5 million.
Previous wording
Consolidated sales for the nine-month period ended February 28, 2025 increased $363.6 million, or 21.9%, over the prior year period primarily due to an increase in sales to commercial customers. Consolidated sales to commercial customers increased $281.7 million, or 23.9%, over the prior year period 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. Our consolidated sales to government customers increased $81.9 million, or 16.9%, primarily due to the Product Support acquisition and volume growth in our Parts Supply segment from our new parts distribution activities.
Current wording
Consolidated sales for the first quarter of fiscal 2026 increased $77.9 million, or 11.8%, over the prior year quarter primarily due to an increase in sales to commercial customers. Consolidated sales to commercial customers increased $50.4 million, or 10.7%, over the prior year quarter primarily due to strong demand and volume growth in our Parts Supply segment from both our new parts Distribution and USM. Our consolidated sales to government customers increased $27.5 million, or 14.6%, primarily due to volume growth in our Parts Supply segment from new parts Distribution activities.
Previous wording
Consolidated cost of sales increased $89.5 million, or 19.6%, over the prior year quarter which was largely in line with the consolidated sales increase of 19.5% discussed above.
Current wording
Consolidated cost of sales increased $61.4 million, or 11.3%, over the prior year quarter which was largely in line with the consolidated sales increase of 11.8% discussed above.
Previous wording
Consolidated gross profit for the third quarter of fiscal 2025 increased $21.4 million, or 19.4%, over the prior year quarter. Gross profit on sales to commercial customers increased $16.5 million, or 20.9%, over the prior year quarter due to the acquisition of the Product Support business. Gross profit margin on sales to commercial customers decreased slightly to 19.7% from 19.8% in the prior year quarter primarily due to lower margins in our aftermarket parts trading activities.
Current wording
Consolidated gross profit for the first quarter of fiscal 2026 increased $16.5 million, or 14.1%, over the prior year quarter. Gross profit on sales to government customers increased $19.8 million, or 81.1%, with the gross profit margin increased to 20.4% from 12.9% in the prior year quarter. These increases across government customers are primarily attributable to strong demand and volume growth for our new parts Distribution activities.
Previous wording
Interest expense increased $6.6 million in the third quarter of fiscal 2025 reflecting the impact of higher average borrowings used to fund investments in the business, including our acquisition of Product Support business in the fourth quarter of fiscal 2024. Our average borrowing rate was 6.38% in the third quarter of fiscal 2025 compared to 6.82% in the prior year quarter.
Current wording
Interest expense remained consistent at $18.8 million in the first quarter of fiscal 2026 compared to the prior year quarter reflecting the impact of lower interest rates offset by higher average borrowings used to fund inventory and other investments in the business. Our average borrowing rate on our Revolving Credit Facility was 6.14% in the first quarter of fiscal 2026 compared to 6.80% in the prior year quarter.
Previous wording
Sales in the Repair & Engineering segment for the nine-month period ended February 28, 2025 increased $238.6 million, or 56.3%, over the prior year period primarily due to the acquisition of the Product Support business in the fourth quarter of fiscal 2024 which contributed sales of $221.8 million inclusive of repair services transferred from our Garden City, New York location as part of our ongoing integration activities. In addition, sales increased $26.6 million at our airframe maintenance facilities.
Current wording
Sales in the Repair & Engineering segment decreased $3.0 million, or 1.4%, from the prior year quarter primarily due to the divestiture of our LGO business in the fourth quarter of fiscal 2025. The LGO business contributed sales of $19.2 million in the first quarter of fiscal 2025. In addition, sales increased $13.2 million at our airframe maintenance facilities in the first quarter of fiscal 2026 over the prior year quarter.
Previous wording
Changes in estimates and assumptions related to our arrangements accounted for using the cost-to-cost method are recorded using the cumulative catch-up method of accounting. In the nine-month period ended February 28, 2025, we recognized favorable cumulative catch-up adjustments of $2.4 million compared to net favorable cumulative catch-up adjustments of $2.7 million in the prior year period. 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.
Current wording
Changes in estimates and assumptions related to our arrangements accounted for using the cost-to-cost method are recorded using the cumulative catch-up method of accounting. In the first quarter of fiscal 2026, we recognized no cumulative catch-up adjustments compared to favorable cumulative catch-up adjustments of $2.4 million in the prior year quarter. These adjustments primarily relate to our long-term, power-by-the-hour programs where we provide component inventory management and repair services.
Previous wording
At February 28, 2025, our liquidity and capital resources included working capital of $989.6 million inclusive of cash of $84.4 million. We expect that our cash on hand, coupled with future cash flows from operations and other available sources of liquidity discussed below, will provide ample liquidity to enable us to meet our cash requirements for at least the next 12 months and foreseeable future thereafter.
Current wording
At August 31, 2025, our liquidity and capital resources included working capital of $1,028.4 million inclusive of cash of $80.0 million. We expect that our cash on hand, coupled with future cash flows from operations and other available sources of liquidity discussed below, will provide ample liquidity to enable us to meet our cash requirements for at least the next 12 months and foreseeable future thereafter.
Previous wording
On March 1, 2024, we entered into an amendment (the “Revolver Amendment”) to our Credit Agreement, which governs the Company’s existing revolving credit facility (the revolving credit facility as amended by the Revolver Amendment, the “Amended Revolving Credit Facility”). Among other things, the Revolver Amendment (i) increased the aggregate commitments under the Amended Revolving Credit Facility to $825.0 million from $620.0 million under the Revolving Credit Facility, (ii) increased the maximum leverage ratio permitted under the financial covenants applicable to the Amended Revolving Credit Facility and (iii) included an additional pricing level that increases the interest rate margins on the Amended Revolving Credit Facility to 250 basis points (in the case loans based on the secured overnight financing rate (“SOFR”)) and 150 basis points (in the case of Base Rate loans as defined in the Revolver Amendment) if our Adjusted Total Debt to EBITDA Ratio as defined in the Revolver Amendment exceeds 3.75:1.00.
Current wording
On March 1, 2024, we entered into an amendment (the “Revolver Amendment”) to our Credit Agreement, which governs the Company’s existing revolving credit facility (the revolving credit facility as amended by the Revolver Amendment, the “Amended Revolving Credit Facility”). Among other things, the Revolver Amendment (i) increased the aggregate commitments under the Amended Revolving Credit Facility to $825.0 million from $620.0 million under the Revolving Credit Facility, (ii) increased the maximum leverage ratio permitted under the financial covenants applicable to the Amended Revolving Credit Facility and (iii) included an additional pricing level that increases the interest rate margins on the Amended Revolving Credit Facility to 250 basis points (in the case loans based on the secured overnight financing rate (“SOFR”)) and 150 basis points (in the case of Base Rate loans) if our adjusted total debt to EBITDA ratio exceeds 3.75:1.00.
Previous wording
At February 28, 2025, borrowings outstanding under the Amended Revolving Credit Facility were $482.0 million and there were approximately $7.8 million of outstanding letters of credit, which reduced the availability under this facility to $335.2 million. There are no other terms or covenants limiting the availability of the Amended Revolving Credit Facility. As of February 28, 2025, we also had other financing arrangements that did not limit availability on our Amended Revolving Credit Facility, including foreign lines of credit of $9.2 million.
Current wording
At August 31, 2025, borrowings outstanding under the Amended Revolving Credit Facility were $330.0 million and there were approximately $9.1 million of outstanding letters of credit, which reduced the availability under this facility to $485.9 million. There are no other terms or covenants limiting the availability of the Amended Revolving Credit Facility. As of August 31, 2025, we also had other financing arrangements that did not limit availability on our Amended Revolving Credit Facility, including foreign lines of credit of $10.0 million.
Previous wording
We have no retained interests in the sold receivables, other than limited recourse obligations in certain circumstances, and only perform collection and administrative functions for the Purchaser. We account for these receivable transfers as sales under Accounting
Current wording
We have no retained interests in the sold receivables, other than limited recourse obligations in certain circumstances, and only perform collection and administrative functions for the Purchaser. We account for these receivable transfers as sales under Accounting Standards Codification 860,Transfers and Servicing, and de-recognize the sold receivables from our Condensed Consolidated Balance Sheet. At August 31, 2025, we have utilized $21.0 million which reduced the availability under the Purchase Agreement to $129.0 million.
Previous wording
During fiscal 2024, we experienced delayed collections from one of our significant regional airline customers and issued the customer a Notice of Payment and Other Defaults during the second quarter of fiscal 2024 to request payment and reserve our rights under our agreements. In the fourth quarter of fiscal 2024, we terminated a power-by-the-hour (“PBH”) program with this customer which resulted in a net termination charge of $4.8 million. The charge included a reduction in contract assets and revenue of $7.8 million and the establishment of repair reserves of $2.5 million partially offset by a $5.5 million gain recognized from the customer’s obligation to purchase the rotable assets we utilized to perform the PBH services. 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 Condensed Consolidated Balance Sheets.
Current wording
During fiscal 2024, we experienced delayed collections from one of our significant regional airline customers and issued the customer a Notice of Payment and Other Defaults during the second quarter of fiscal 2024 to request payment and reserve our rights under our agreements. In the fourth quarter of fiscal 2024, we terminated a power-by-the-hour (“PBH”) program with this customer which resulted in a net termination charge of $4.8 million. The charge included a reduction in contract assets and revenue of $7.8 million and the establishment of repair reserves of $2.5 million partially offset by a $5.5 million gain recognized from the customer’s obligation to purchase the rotable assets we utilized to perform the PBH services. 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.
Previous wording
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. Our Condensed Consolidated Balance Sheet as of February 28, 2025 included accounts receivable of $14.9 million, including $7.8 million past due, and contract assets of $10.0 million related to this customer.
Current wording
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 Condensed Consolidated Balance Sheet as of August 31, 2025 included accounts receivable of $33.5 million, including $9.0 million past due, and contract assets of $3.2 million related to this customer.
Previous wording
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. No repurchases were made during the three-month period ended February 28, 2025. Since inception of the renewal authorization, we have repurchased 2.2 million shares for an aggregate purchase price of $97.5 million. The timing and amount of repurchases are subject to prevailing market conditions and other considerations, including our liquidity and acquisition and other investment opportunities.
Current wording
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. No repurchases were made during the three-month period ended August 31, 2025. Since inception of the renewal authorization, we have repurchased 2.4 million shares for an aggregate purchase price of $107.5 million. The timing and amount of repurchases are subject to prevailing market conditions and other considerations, including our liquidity and acquisition and other investment opportunities.
Previous wording
Net cash used in investing activities was $16.9 million in the nine-month period ended February 28, 2025 compared to $26.8 million in the prior year period. The decrease in cash used in investing activities from the prior year of $9.9 million was primarily related to the sale of a building with proceeds of $4.7 million and the favorable resolution of post-closing, purchase price adjustments of $2.9 million for the Product Support business acquisition with both occurring in the current year period. In addition, we received $2.2 million of proceeds from the exit of our Indian joint venture in the current year period.
Current wording
Net cash used in investing activities was $23.8 million during the first quarter of fiscal 2026 compared to $5.3 million in the prior year period. The increase in cash used in investing activities over the prior year of $18.5 million was primarily related to the acquisition of the Aerostrat business in the first quarter of fiscal 2026.
Previous wording
Net cash provided by financing activities was $37.0 million in the nine-month period ended February 28, 2025 compared to $9.5 million in the prior year period. The increase in cash provided by financing activities over the prior year of $27.5 million was primarily related to higher borrowings on our Revolving Credit Facility in the current year period.
Current wording
Net cash provided by financing activities was $51.1 million during the first quarter of fiscal 2026 compared to cash used of $9.1 million in the prior year quarter. The increase in cash provided by financing activities over the prior year of $60.2 million was primarily related to net proceeds from incremental borrowings in the current year to finance the Aerostrat acquisition as well as inventory and other investments in the business.
Previous wording
We make a number of significant estimates, assumptions and judgments in the preparation of our financial statements. SeeManagement’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended May 31, 2024 for a discussion of our critical accounting policies. There have been no significant changes to the application of our critical accounting policies during the third quarter of fiscal 2025.
Current wording
We make a number of significant estimates, assumptions and judgments in the preparation of our financial statements. SeeManagement’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended May 31, 2025 for a discussion of our critical accounting policies. There have been no significant changes to the application of our critical accounting policies during the first quarter of fiscal 2026.
Previous wording
These forward-looking statements are based on beliefs of our management, as well as assumptions and estimates based on information available to us as of the dates such assumptions and estimates are made, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, depending on a variety of factors, including: (i) factors that adversely affect the commercial aviation industry; (ii) adverse events and negative publicity in the aviation industry; (iii) a reduction in sales to the U.S. government and its contractors; (iv) cost overruns and losses on fixed-price contracts; (v) nonperformance by subcontractors or suppliers; (vi) a reduction in outsourcing of maintenance activity by airlines; (vii) a shortage of skilled personnel or work stoppages; (viii) competition from other companies; (ix) financial, operational and legal risks arising as a result of operating internationally; (x) inability to integrate acquisitions effectively and execute operational and financial plans related to the acquisitions; (xi) failure to realize the anticipated benefits of acquisitions; (xii) circumstances associated with divestitures; (xiii) inability to recover costs due to fluctuations in market values for aviation products and equipment; (xiv) cyber or other security threats or disruptions; (xv) a need to make significant capital expenditures to keep pace with technological developments in our industry; (xvi) restrictions on use of intellectual property and tooling important to our business; (xvii) inability to fully execute our stock repurchase program and return capital to stockholders; (xviii) limitations on our ability to access the debt and equity capital markets or to draw down funds under loan agreements; (xix) non-compliance with restrictive and financial covenants contained in our debt and loan agreements; (xx) changes in or non-compliance with laws and regulations related to federal contractors, the aviation industry, international operations, safety, and environmental matters, and the costs of complying with such laws and regulations; and (xxi) exposure to product liability and property claims that may be in excess of our liability insurance coverage. Should one or more of these risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described.
Current wording
These forward-looking statements are based on beliefs of our management, as well as assumptions and estimates based on information available to us as of the dates such assumptions and estimates are made, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, depending on a variety of factors, including: (i) factors that adversely affect the commercial aviation industry; (ii) adverse events and negative publicity in the aviation industry; (iii) a reduction in sales to the U.S. government and its contractors; (iv) cost overruns and losses on fixed-price contracts; (v) nonperformance by subcontractors or suppliers; (vi) our ability to manage our operational footprint; (vii) a reduction in outsourcing of maintenance activity by airlines; (viii) a shortage of skilled personnel or work stoppages; (ix) competition from other companies; (x) financial, operational and legal risks arising as a result of operating internationally; (xi) inability to integrate acquisitions effectively and execute operational and financial plans related to the acquisitions; (xii) failure to realize the anticipated benefits of acquisitions; (xiii) circumstances associated with divestitures; (xiv) inability to recover costs due to fluctuations in market values for aviation products and equipment; (xv) cyber or other security threats or disruptions; (xvi) a need to make significant capital expenditures to keep pace with
Previous wording
For a discussion of these and other risks and uncertainties, refer to our Annual Report on Form 10-K, Part I, “Item 1A, Risk Factors” and our other filings from time to time with the SEC. These events and uncertainties are difficult or impossible to predict accurately and many are beyond our control. The risks described in these reports are not the only risks we face, as additional risks and uncertainties are not currently known or foreseeable or impossible to predict accurately or risks that are beyond our control or deemed immaterial may materially adversely affect our business, financial condition or results of operations in future periods. 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, except as required by law.
Current wording
For a discussion of these and other risks and uncertainties, refer to our Annual Report on Form 10-K, Part I, “Item 1A, Risk Factors” and our other filings from time to time with the SEC. These events and uncertainties are difficult or impossible to predict accurately and many are beyond our control. The risks described in these reports are not the only risks we face, as additional risks and uncertainties are not currently known or foreseeable or impossible to predict accurately or risks that are beyond our control or deemed immaterial may materially adversely affect our business, financial condition or results of operations in future periods. 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.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
technological developments in our industry; (xvii) restrictions on use of intellectual property and tooling important to our business; (xviii) inability to fully execute our stock repurchase program and return capital to stockholders; (xix) limitations on our ability to access the debt and equity capital markets or to draw down funds under loan agreements; (xx) non-compliance with restrictive and financial covenants contained in our debt and loan agreements; (xxi) changes in or non-compliance with laws and regulations related to federal contractors, the aviation industry, international operations, safety, and environmental matters, and the costs of complying with such laws and regulations; and (xxii) exposure to product liability and property claims that may be in excess of our liability insurance coverage. Should one or more of these risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Consolidated cost of sales increased $301.1 million, or 22.3%, over the prior year period which was largely in line with the consolidated sales increase of 21.9% discussed above.
Previous report — wording carried elsewhere
Standards Codification 860,Transfers and Servicing, and de-recognize the sold receivables from our Condensed Consolidated Balance Sheet. At February 28, 2025, we had utilized $13.4 million which reduced the availability under the Purchase Agreement to $136.6 million.