Document and Entity Information
Document and Entity Information | 6 Months Ended |
Nov. 30, 2019shares | |
Document Type | 10-Q |
Document Quarterly Report | true |
Document Transition Report | false |
Document Period End Date | Nov. 30, 2019 |
Entity File Number | 1-6263 |
Entity Registrant Name | AAR CORP. |
Entity Incorporation, State or Country Code | DE |
Entity Tax Identification Number | 36-2334820 |
Entity Address, Address Line One | One AAR Place, 1100 N. Wood Dale Road |
Entity Address, City or Town | Wood Dale |
Entity Address, State or Province | IL |
Entity Address, Postal Zip Code | 60191 |
City Area Code | 630 |
Local Phone Number | 227-2000 |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 34,913,642 |
Entity Central Index Key | 0000001750 |
Entity Interactive Data Current | Yes |
Current Fiscal Year End Date | --05-31 |
Document Fiscal Period Focus | Q2 |
Document Fiscal Year Focus | 2020 |
Amendment Flag | false |
NEW YORK STOCK EXCHANGE, INC. | |
Title of 12(b) Security | Common Stock, $1.00 par value |
Trading Symbol | AIR |
Security Exchange Name | NYSE |
CHICAGO STOCK EXCHANGE, INC | |
Title of 12(b) Security | Common Stock, $1.00 par value |
Trading Symbol | AIR |
Security Exchange Name | CHX |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Millions | Nov. 30, 2019 | May 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 38.2 | $ 21.3 |
Restricted cash | 14.5 | 19.8 |
Accounts receivable, less allowances of $17.5 and $16.0, respectively | 208.5 | 197.8 |
Contract assets | 62.2 | 59.2 |
Inventories | 580.4 | 523.7 |
Rotable assets and equipment on or available for short-term lease | 69.1 | 65.3 |
Assets of discontinued operations | 27.4 | 29.2 |
Other current assets | 71.9 | 36.2 |
Total current assets | 1,072.2 | 952.5 |
Property, plant and equipment, net of accumulated depreciation of $240.4 and $231.8 respectively | 134.3 | 132.8 |
Other assets: | ||
Goodwill | 116.8 | 116.2 |
Intangible assets, net of accumulated amortization of $17.8 and $30.3, respectively | 12.6 | 22.2 |
Operating lease right-of-use assets, net | 103.8 | |
Rotable assets supporting long-term programs | 225.6 | 216 |
Other non-current assets | 89.6 | 77.5 |
Total other assets | 548.4 | 431.9 |
Total assets | 1,754.9 | 1,517.2 |
Current liabilities: | ||
Accounts payable | 231.4 | 187.8 |
Accrued liabilities | 133.2 | 140.5 |
Liabilities of discontinued operations | 41.9 | 29.2 |
Total current liabilities | 406.5 | 357.5 |
Long-term debt | 196.1 | 141.7 |
Operating lease liabilities | 84 | |
Deferred revenue on long-term contracts | 122.5 | 83.8 |
Other liabilities | 24.1 | 28.3 |
Total noncurrent liabilities | 426.7 | 253.8 |
Equity: | ||
Preferred stock, $1.00 par value, authorized 250,000 shares; none issued | ||
Common stock, $1.00 par value, authorized 100,000,000 shares; issued 45,300,786 shares at cost | 45.3 | 45.3 |
Capital surplus | 478.7 | 479.4 |
Retained earnings | 725.4 | 709.8 |
Treasury stock, 10,387,144 and 10,512,974 shares at cost, respectively | (287.7) | (287.7) |
Accumulated other comprehensive loss | (40) | (40.9) |
Total equity | 921.7 | 905.9 |
Total liabilities and equity | $ 1,754.9 | $ 1,517.2 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions | Nov. 30, 2019 | May 31, 2019 |
Condensed Consolidated Balance Sheets | ||
Accounts receivable, allowances | $ 17.5 | $ 16 |
Property, plant and equipment, accumulated depreciation | 240.4 | 231.8 |
Intangible assets, accumulated amortization | $ 17.8 | $ 30.3 |
Preferred stock, par value (in dollars per share) | $ 1 | $ 1 |
Preferred stock, authorized shares | 250,000 | 250,000 |
Preferred stock, issued shares | 0 | 0 |
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, authorized shares | 100,000,000 | 100,000,000 |
Common stock, issued shares | 45,300,786 | 45,300,786 |
Treasury stock, shares | 10,387,144 | 10,512,974 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
Sales: | ||||
Sales | $ 560.9 | $ 493.3 | $ 1,102.4 | $ 959.6 |
Cost and operating expenses: | ||||
Provision for doubtful accounts | 0.7 | 12.4 | 1.4 | 13 |
Selling, general and administrative | 57.1 | 49.1 | 115.2 | 97.3 |
Total cost and operating expenses | 532.8 | 476.5 | 1,051.5 | 920.4 |
Operating income | 28.1 | 16.8 | 50.9 | 39.2 |
Other income (expense), net | (0.2) | (0.2) | (0.4) | 0.2 |
Interest expense | (1.9) | (2.5) | (4.1) | (4.6) |
Interest income | 0.1 | 0.1 | 0.2 | 0.6 |
Income from continuing operations before provision for income taxes | 26.1 | 14.2 | 46.6 | 35.4 |
Provision for income taxes | 6 | 3 | 9.4 | 5.3 |
Income from continuing operations | 20.1 | 11.2 | 37.2 | 30.1 |
Loss from discontinued operations, net of tax | (5.9) | (4.2) | (18.6) | (8) |
Net income | $ 14.2 | $ 7 | $ 18.6 | $ 22.1 |
Earnings per share - basic: | ||||
Earnings from continuing operations | $ 0.58 | $ 0.32 | $ 1.07 | $ 0.87 |
Loss from discontinued operations | (0.17) | (0.12) | (0.54) | (0.23) |
Earnings per share - basic | 0.41 | 0.20 | 0.53 | 0.64 |
Earnings per share - diluted: | ||||
Earnings from continuing operations | 0.57 | 0.32 | 1.06 | 0.85 |
Loss from discontinued operations | (0.17) | (0.12) | (0.53) | (0.23) |
Earnings per share - diluted | $ 0.40 | $ 0.20 | $ 0.53 | $ 0.62 |
Products | ||||
Sales: | ||||
Sales | $ 293 | $ 264.8 | $ 568.1 | $ 522.1 |
Cost and operating expenses: | ||||
Cost | 242 | 217 | 462.1 | 426.5 |
Services | ||||
Sales: | ||||
Sales | 267.9 | 228.5 | 534.3 | 437.5 |
Cost and operating expenses: | ||||
Cost | $ 233 | $ 198 | $ 472.8 | $ 383.6 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
Condensed Consolidated Statements of Comprehensive Income | ||||
Net income | $ 14.2 | $ 7 | $ 18.6 | $ 22.1 |
Other comprehensive income (loss), net of tax expense (benefit): | ||||
Currency translation adjustments | 0.5 | (0.6) | 0.4 | (1.1) |
Pension and other post-retirement plans: | ||||
Amortization of actuarial loss and prior service cost included in net income, net of tax of $0.1 and $0.0 for the three months ended November 30, 2019 and 2018, respectively, and $0.1 and $0.1 for the six months ended November 30, 2019 and 2018, respectively | 0.3 | 0.2 | 0.5 | 0.5 |
Other comprehensive income (loss), net of tax | 0.8 | (0.4) | 0.9 | (0.6) |
Comprehensive income | $ 15 | $ 6.6 | $ 19.5 | $ 21.5 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
Condensed Consolidated Statements of Comprehensive Income | ||||
Amortization of actuarial loss and prior service cost included in net income, tax | $ 0.1 | $ 0 | $ 0.1 | $ 0.1 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions | 6 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | |
Cash flows used in operating activities: | ||
Net income | $ 18.6 | $ 22.1 |
Less: Loss from discontinued operations | 18.6 | 8 |
Income from continuing operations | 37.2 | 30.1 |
Adjustments to reconcile income from continuing operations to net cash used in operating activities: | ||
Depreciation and intangible amortization | 21.8 | 20.5 |
Amortization of stock-based compensation | 7.1 | 5.2 |
Provision for doubtful accounts | 1.4 | 13 |
Deferred tax provision | 0.9 | 1.4 |
Changes in certain assets and liabilities: | ||
Accounts receivable | (11) | (52.1) |
Contract assets | (2.8) | (13.4) |
Inventories | (56.8) | (52.1) |
Rotable spares and equipment on or available for short-term lease | (3.9) | 6.6 |
Rotable assets supporting long-term programs | (19.1) | (26.7) |
Accounts payable | 42.5 | 35.4 |
Accrued and other liabilities | (17.9) | (29.7) |
Other | (9.6) | 20.6 |
Net cash used in operating activities - continuing operations | (10.2) | (41.2) |
Net cash provided from (used in) operating activities - discontinued operations | (7.7) | 5.7 |
Net cash used in operating activities | (17.9) | (35.5) |
Cash flows used in investing activities: | ||
Property, plant and equipment expenditures | (10.2) | (8) |
Payments for acquisitions | (2.3) | |
Other | (1.5) | 1.3 |
Net cash used in investing activities - continuing operations | (11.7) | (9) |
Net cash used in investing activities - discontinued operations | (0.4) | |
Net cash used in investing activities | (11.7) | (9.4) |
Cash flows provided from financing activities: | ||
Short-term borrowings, net | 55 | 67 |
Repayments of long-term borrowings | (25) | |
Cash dividends | (5.5) | (5.3) |
Purchase of treasury stock | (4.1) | |
Financing costs | (1.3) | |
Stock compensation activity | (3) | 8.2 |
Net cash provided from financing activities - continuing operations | 41.1 | 44.9 |
Net cash used in financing activities - discontinued operations | (0.7) | |
Net cash provided from financing activities | 41.1 | 44.2 |
Effect of exchange rate changes on cash | 0.1 | (0.2) |
Increase (Decrease) in cash and cash equivalents | 11.6 | (0.9) |
Cash, cash equivalents, and restricted cash at beginning of period | 41.1 | 41.6 |
Cash, cash equivalents, and restricted cash at end of period | $ 52.7 | $ 40.7 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Changes in Equity - USD ($) $ in Millions | Common Stock | Capital Surplus | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total |
Balance at May. 31, 2018 | $ 45.3 | $ 470.5 | $ 733.2 | $ (280.7) | $ (32) | $ 936.3 |
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 15.1 | 15.1 | ||||
Cash dividends | (2.7) | (2.7) | ||||
Stock option activity | 0.7 | 2.2 | 2.9 | |||
Restricted stock activity | (1.4) | (0.5) | (1.9) | |||
Other comprehensive income (loss), net of tax | (0.2) | (0.2) | ||||
Balance at Aug. 31, 2018 | 45.3 | 469.8 | 725.2 | (279) | (32.2) | 929.1 |
Balance at May. 31, 2018 | 45.3 | 470.5 | 733.2 | (280.7) | (32) | 936.3 |
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 22.1 | |||||
Other comprehensive income (loss), net of tax | (0.6) | |||||
Balance at Nov. 30, 2018 | 45.3 | 470.8 | 729.6 | (277.5) | (32.6) | 935.6 |
Increase (Decrease) in Stockholders' Equity | ||||||
Cumulative effect adjustment upon adoption of ASC | ASC 606 | (20.4) | (20.4) | ||||
Balance at Aug. 31, 2018 | 45.3 | 469.8 | 725.2 | (279) | (32.2) | 929.1 |
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 7 | 7 | ||||
Cash dividends | (2.6) | (2.6) | ||||
Stock option activity | 0.9 | 1.6 | 2.5 | |||
Restricted stock activity | 0.1 | (0.1) | ||||
Other comprehensive income (loss), net of tax | (0.4) | (0.4) | ||||
Balance at Nov. 30, 2018 | 45.3 | 470.8 | 729.6 | (277.5) | (32.6) | 935.6 |
Balance at May. 31, 2019 | 45.3 | 479.4 | 709.8 | (287.7) | (40.9) | 905.9 |
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 4.4 | 4.4 | ||||
Cash dividends | (2.9) | (2.9) | ||||
Stock option activity | 0.9 | 1.8 | 2.7 | |||
Restricted stock activity | (4.3) | 1.1 | (3.2) | |||
Other comprehensive income (loss), net of tax | 0.1 | 0.1 | ||||
Balance at Aug. 31, 2019 | 45.3 | 476 | 713.8 | (284.8) | (40.8) | 909.5 |
Balance at May. 31, 2019 | 45.3 | 479.4 | 709.8 | (287.7) | (40.9) | 905.9 |
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 18.6 | |||||
Other comprehensive income (loss), net of tax | 0.9 | |||||
Balance at Nov. 30, 2019 | 45.3 | 478.7 | 725.4 | (287.7) | (40) | 921.7 |
Increase (Decrease) in Stockholders' Equity | ||||||
Cumulative effect adjustment upon adoption of ASC | ASC 842 | 2.5 | 2.5 | ||||
Balance at Aug. 31, 2019 | 45.3 | 476 | 713.8 | (284.8) | (40.8) | 909.5 |
Increase (Decrease) in Stockholders' Equity | ||||||
Net income | 14.2 | 14.2 | ||||
Cash dividends | (2.6) | (2.6) | ||||
Stock option activity | 0.9 | 1.2 | 2.1 | |||
Restricted stock activity | 1.8 | 1.8 | ||||
Repurchase of shares | (4.1) | (4.1) | ||||
Other comprehensive income (loss), net of tax | 0.8 | 0.8 | ||||
Balance at Nov. 30, 2019 | $ 45.3 | $ 478.7 | $ 725.4 | $ (287.7) | $ (40) | $ 921.7 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Nov. 30, 2019 | |
Basis of Presentation | |
Basis of Presentation | Note 1 – Basis of Presentation AAR CORP. and its subsidiaries are referred to herein collectively as “AAR,” “Company,” “we,” “us,” and “our,” unless the context indicates otherwise. The accompanying Condensed Consolidated Financial Statements include the accounts of AAR and its subsidiaries after elimination of intercompany accounts and transactions. We have prepared these statements without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The Condensed Consolidated Balance Sheet as of May 31, 2019 has been derived from audited financial statements. To prepare the financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”), management has made a number of estimates and assumptions relating to the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Certain information and note disclosures, normally included in comprehensive financial statements prepared in accordance with GAAP, have been condensed or omitted pursuant to such rules and regulations of the SEC. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in our latest annual report on Form 10-K. In the opinion of management, the condensed consolidated financial statements reflect all adjustments (which consist only of normal recurring adjustments) necessary to present fairly the Condensed Consolidated Balance Sheet of AAR CORP. and its subsidiaries as of November 30, 2019, the Condensed Consolidated Statements of Income and Condensed Consolidated Statements of Comprehensive Income for the three- and six-month periods ended November 30, 2019 and 2018, the Condensed Consolidated Statements of Cash Flows for the six-month periods ended November 30, 2019 and 2018, and the Condensed Consolidated Statement of Changes in Equity for the three- and six-month periods ended November 30, 2019 and 2018. The results of operations for such interim periods are not necessarily indicative of the results for the full year. New Accounting Pronouncements Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“ASC 842”), which amended the existing accounting standards for lease accounting. ASC 842 requires lessees to recognize a right-of-use ("ROU") asset and lease liability on the balance sheet for most lease arrangements, including those classified as operating leases. In addition, ASC 842 requires new qualitative and quantitative disclosures about our leasing activities. We adopted ASC 842 on June 1, 2019 using the modified retrospective transition approach. Under that approach, prior periods have not been restated and continue to be reported under the accounting standards in effect for those periods. A discussion of our revised accounting policy for leases is included in Note 10. We have elected the package of practical expedients, which must be elected as a package and applied consistently to all leases. This package permits us to not reassess our prior conclusions about lease identification, lease classification and initial direct costs. In addition, we have elected the practical expedients to not separate lease and non-lease components for both lessee and lessor relationships and to not apply the recognition requirements to leases with terms of less than twelve months. Upon adoption of ASC 842 on June 1, 2019, we recognized operating lease ROU assets of $123.2 million and operating lease liabilities of $116.8 million on our Condensed Consolidated Balance Sheet. These amounts included operating lease ROU assets of $26.6 million and operating lease liabilities of $25.3 million related to our discontinued operations. In addition, we recognized the remaining unamortized deferred gains of $2.5 million, net of tax, associated with sale-leaseback transactions as a cumulative effect adjustment to the opening balance of retained earnings as of June 1, 2019. The adoption of ASC 842 did not have a material impact on the Condensed Consolidated Statements of Income or Cash Flows. The impact of the adoption of ASC 842 on our Condensed Consolidated Balance Sheet was as follows: As of ASC 842 As of May 31, 2019 Adjustments June 1, 2019 Assets of discontinued operations $ 29.2 $ 26.6 $ 55.8 Other current assets 36.2 (0.5) 35.7 Intangible assets, net 22.2 (8.5) 13.7 Operating lease ROU assets — 96.6 96.6 Other non-current assets 77.5 (1.8) 75.7 Accrued liabilities 140.5 10.0 150.5 Liabilities of discontinued operations 29.2 25.3 54.5 Operating lease liabilities — 77.7 77.7 Other liabilities 28.3 (3.1) 25.2 Retained earnings 709.8 2.5 712.3 In February 2018, the FASB issued ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . This ASU permits the reclassification of tax effects stranded in accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act (the “Tax Reform Act”) to retained earnings. The FASB made the reclassification optional and we did not exercise the option to reclassify the stranded tax effects caused by the Tax Reform Act. New Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments . This ASU requires a change in the measurement approach for credit losses on financial assets measured on an amortized cost basis from an incurred loss method to an expected loss method, thereby eliminating the requirement that a credit loss be considered probable to impact the valuation of a financial asset measured on an amortized cost basis. This ASU also requires the measurement of expected credit losses to be based on relevant information about past events, including historical experience, current conditions, and a reasonable and supportable forecast of the collectability of the related financial asset. We continue to evaluate the impact of this ASU on our consolidated financial statements and expect to adopt this ASU on June 1, 2020. |
Discontinued Operations
Discontinued Operations | 6 Months Ended |
Nov. 30, 2019 | |
Discontinued Operations | |
Discontinued Operations | Note 2 – Discontinued Operations During the third quarter of fiscal 2018, we decided to pursue the sale of our Contractor-Owned, Contractor-Operated (“COCO”) business previously included in our Expeditionary Services segment. Due to this strategic shift, the assets, liabilities, and results of operations of our COCO business have been reported as discontinued operations for all periods presented. During fiscal 2019, we signed an agreement to sell our U.S. Department of Defense ("DoD") contracts and certain assets of our COCO business. In conjunction with this agreement and other expected asset sales, we recognized an impairment charge in discontinued operations of $74.1 million during the third quarter of fiscal 2019 reflecting the expected net proceeds to be received upon the completion of the sale transactions. In fiscal 2020, we signed an agreement to sell the remaining operating contract of the COCO business and recognized an impairment charge of $11.8 million in the first quarter of fiscal 2020 related to the disposal of the remaining COCO assets. The sale of the DoD contracts and related assets was completed in the second quarter of fiscal 2020 and we expect the sale of the remaining operating contract to be completed shortly after government approval which we expect to receive before the end of fiscal 2020. No amounts for general corporate overhead or interest expense were allocated to discontinued operations during the periods presented. Unless otherwise noted, amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements relate to our continuing operations. Operating results for discontinued operations were comprised of the following: Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Sales $ 17.3 $ 22.2 $ 33.9 $ 42.2 Cost of sales (18.8) (25.4) (38.4) (47.7) Asset impairment — — (11.8) — Selling, general and administrative expenses (5.4) (2.3) (7.2) (4.8) Operating loss from discontinued operations (6.9) (5.5) (23.5) (10.3) Provision for income taxes (benefit) (1.0) (1.3) (4.9) (2.3) Loss from discontinued operations $ (5.9) $ (4.2) $ (18.6) $ (8.0) The carrying amounts of the major classes of assets and liabilities for our discontinued operations are as follows: November 30, May 31, 2019 2019 Accounts receivable, net $ 3.1 $ 16.2 Inventory, rotable assets, and equipment — 7.5 Operating lease ROU assets 22.8 — Other assets 1.5 5.5 Assets of discontinued operations $ 27.4 $ 29.2 Accounts payable and accrued liabilities $ 18.7 $ 29.2 Operating lease liabilities 23.2 — Liabilities of discontinued operations $ 41.9 $ 29.2 |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Nov. 30, 2019 | |
Revenue Recognition | |
Revenue Recognition | Note 3 – Revenue Recognition Revenue is measured based on the consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Our unit of accounting for revenue recognition is a performance obligation included in our customer contracts. A performance obligation reflects the distinct good or service that we must transfer to a customer. At contract inception, we evaluate if the contract should be accounted for as a single performance obligation or if the contract contains multiple performance obligations. In some cases, our contract with the customer is considered one performance obligation as it includes factors such as the good or service being provided is significantly integrated with other promises in the contract, the service provided significantly modifies or customizes another good or service or the good or service is highly interdependent or interrelated. If the contract has more than one performance obligation, the Company determines the standalone price of each distinct good or service underlying each performance obligation and allocates the transaction price based on their relative standalone selling prices. The transaction price of a contract, which can include both fixed and variable amounts, is allocated to each performance obligation identified. Some contracts contain variable consideration, which could include incremental fees or penalty provisions related to performance. 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. 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. 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 do not account for these services separate from the related product sales as the services are inputs required to fulfill part orders received from customers. For our performance obligations that are satisfied over time, we measure progress in a manner that depicts the performance of transferring control to the customer. As such, we utilize the input method of cost-to-cost to recognize revenue over time as this depicts when control of the promised goods or services are transferred to the customer. Revenue is recognized based on the relationship of actual costs incurred to date to the estimated total cost at completion of the performance obligation. We are required to make certain judgments and estimates, including estimated revenues and costs, as well as inflation and the overall profitability of the arrangement. Key assumptions involved include future labor costs and efficiencies, overhead costs, and ultimate timing of product delivery. Differences may occur between the judgments and estimates made by management and actual program results. 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. For the three-month periods ended November 30, 2019 and 2018, we recognized favorable cumulative catch-up adjustments of $1.9 million and $3.1 million, respectively. These adjustments relate to our long-term, power-by-the-hour programs where we provide component inventory management and repair services and certain long-term government programs. For the six-month period ended November 30, 2019, we recognized favorable cumulative catch-up adjustments of $1.9 million. For the six-month period ended November 30, 2018, we recognized favorable and unfavorable cumulative catch-up adjustments of $3.8 million and $0.5 million, respectively. When considering these adjustments on a net basis, we recognized net favorable adjustments of $1.9 million and $3.3 million in the six-month periods ended November 30, 2019 and 2018, respectively. Under most of our U.S. government contracts, if the contract is terminated for convenience, we are entitled to payment for items delivered and fair compensation for work performed, the costs of settling and paying other claims, and a reasonable profit on the costs incurred or committed. We have elected to use certain practical expedients permitted under Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASC 606”). Shipping and handling fees and costs incurred associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales in our Condensed Consolidated Statement of Income, and are not considered a performance obligation to our customers. Our reported sales on our Condensed Consolidated Statement of Income are net of any sales or related non-income taxes. We also utilize the “as invoiced” practical expedient in certain cases where performance obligations are satisfied over time and the invoiced amount corresponds directly with the value we are providing to the customer. Contract Assets and Liabilities The timing of revenue recognition, customer billings, and cash collections results in a contract asset or contract liability at the end of each reporting period. Contract assets consist of unbilled receivables or costs incurred where revenue recognized over time using the cost-to-cost model exceeds the amounts billed to customers. Contract liabilities include advance payments and billings in excess of revenue recognized. Certain customers make advance payments prior to the satisfaction of our performance obligations on the contract. These amounts are recorded as contract liabilities until such performance obligations are satisfied, either over time as costs are incurred or at a point in time when deliveries are made. Contract assets and contract liabilities are determined on a contract-by-contract basis. Net contract assets and liabilities are as follows: November 30, May 31, 2019 2019 Change Contract assets – current $ 62.2 $ 59.2 $ 3.0 Contract assets – non-current 32.0 17.0 15.0 Deferred revenue – current (11.3) (12.6) 1.3 Deferred revenue on long-term contracts (122.5) (83.8) (38.7) Net contract liabilities $ (39.6) $ (20.2) $ (19.4) Contract assets – non-current is reported within Other non-current assets, and Contract liabilities – current is reported within Accrued liabilities on our Condensed Consolidated Balance Sheet. Changes in contract assets and contract liabilities primarily result from the timing difference between our performance of services and payments from customers. Changes in our deferred revenue, after adoption of ASC 606 on June 1, 2018, were as follows for the three- and six-month periods ended November 30, 2019 and 2018: Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Deferred revenue at beginning of period $ (86.3) $ (58.5) $ (96.4) $ (44.1) Revenue deferred (153.7) (103.5) (240.3) (194.0) Revenue recognized 103.3 76.4 204.3 156.5 Other 2.9 8.0 (1.4) 4.0 Deferred revenue at end of period $ (133.8) $ (77.6) $ (133.8) $ (77.6) Remaining Performance Obligations As of November 30, 2019, we had approximately $1.3 billion of remaining performance obligations, also referred to as firm backlog, which excludes unexercised contract options and potential orders under our indefinite-delivery, indefinite-quantity (IDIQ) contracts. We expect that approximately 40% of this backlog will be recognized as revenue over the next 12 months with the majority of the remainder recognized over the next three years. The amount of remaining performance obligations, which is expected to be recognized as revenue beyond 12 months, primarily relates to our . Disaggregation of Revenue Sales across the major customer markets for each of our operating segments for the three- and six-month periods ended November 30, 2019 and 2018 were as follows: Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Aviation Services: Commercial $ 369.6 $ 325.5 $ 700.1 $ 632.2 Government and defense 162.4 137.4 343.7 269.1 $ 532.0 $ 462.9 $ 1,043.8 $ 901.3 Expeditionary Services: Commercial $ 6.4 $ 8.0 $ 12.1 $ 16.5 Government and defense 22.5 22.4 46.5 41.8 $ 28.9 $ 30.4 $ 58.6 $ 58.3 Sales by geographic region for the three- and six-month periods ended November 30, 2019 and 2018 were as follows: Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Aviation Services: North America $ 395.6 $ 331.7 $ 786.0 $ 651.2 Europe/Africa 99.8 83.5 188.0 164.5 Other 36.6 47.7 69.8 85.6 $ 532.0 $ 462.9 $ 1,043.8 $ 901.3 Expeditionary Services: North America $ 26.4 $ 29.2 $ 54.6 $ 54.9 Europe/Africa 2.2 1.0 3.6 2.7 Other 0.3 0.2 0.4 0.7 $ 28.9 $ 30.4 $ 58.6 $ 58.3 |
Accounts Receivable
Accounts Receivable | 6 Months Ended |
Nov. 30, 2019 | |
Accounts Receivable | |
Accounts Receivable | Note 4 – Accounts Receivable Financial instruments that potentially subject us to concentrations of market or credit risk consist principally of trade receivables. While our trade receivables are diverse and represent a number of entities and geographic regions, the majority are with the U.S. government and its contractors and entities in the aviation industry. The composition of our accounts receivable is as follows: November 30, May 31, 2019 2019 U.S. Government contracts: Trade receivables $ 32.7 $ 28.7 Unbilled receivables 29.8 31.7 62.5 60.4 All other customers: Trade receivables 99.8 92.5 Unbilled receivables 46.2 44.9 146.0 137.4 $ 208.5 $ 197.8 In addition, we currently have past due receivables owed by former commercial program customers primarily related to our exit from customer contracts in certain geographies, including Colombia, Peru, and Poland. Our past due receivables owed by these customers was |
Accounting for Stock-Based Comp
Accounting for Stock-Based Compensation | 6 Months Ended |
Nov. 30, 2019 | |
Accounting for Stock-Based Compensation | |
Accounting for Stock-Based Compensation | Note 5 – Accounting for Stock-Based Compensation Restricted Stock In the three-month period ended August 31, 2019, as part of our annual long-term stock incentive compensation, we granted 52,475 shares of performance-based restricted stock and 56,535 shares of time-based restricted stock to eligible employees. The grant date fair value per share for these shares was $37.66 (the closing price on the grant date). In June 2019, we also granted 43,142 shares of time-based restricted stock to members of the Board of Directors with a grant date fair value per share of $30.60. Expense charged to operations for restricted stock during the three-month periods ended November 30, 2019 and 2018 was $1.8 million and $0.2 million, respectively, and $4.9 million and $3.0 million during the six-month periods ended November 30, 2019 and 2018. Stock Options In July 2019, as part of our annual long-term stock incentive compensation, we granted 414,460 stock options to eligible employees at an exercise price of $37.66 and weighted average fair value of $10.30. The fair value of stock options was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: Risk-free interest rate 1.9 % Expected volatility of common stock 32.0 % Dividend yield 0.8 % Expected option term in years 4.5 The total intrinsic value of stock options exercised during the six-month periods ended November 30, 2019 and 2018 was $2.0 million and $11.9 million, respectively. Expense charged to operations for stock options during the three-month periods ended November 30, 2019 and 2018 was $1.0 million and $1.0 million, respectively, and during the six-month periods ended November 30, 2019 and 2018 was $2.2 million and $2.2 million, respectively. |
Inventory
Inventory | 6 Months Ended |
Nov. 30, 2019 | |
Inventory | |
Inventory | Note 6 – Inventory The summary of inventories is as follows: November 30, May 31, 2019 2019 Aircraft and engine parts, components and finished goods $ 518.9 $ 467.9 Raw materials and parts 43.6 41.8 Work-in-process 17.9 14.0 $ 580.4 $ 523.7 |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 6 Months Ended |
Nov. 30, 2019 | |
Supplemental Cash Flow Information | |
Supplemental Cash Flow Information | Note 7 – Supplemental Cash Flow Information Six Months Ended November 30, 2019 2018 Interest paid $ 3.8 $ 4.3 Income taxes paid 12.7 3.0 Income tax refunds received 2.4 — |
Sale of Receivables
Sale of Receivables | 6 Months Ended |
Nov. 30, 2019 | |
Sale of Receivables | |
Sale of Receivables | Note 8 – Sale of Receivables On February 23, 2018, we entered into a Purchase Agreement with Citibank N.A. (“Purchaser”) for the sale, from time to time, of certain accounts receivable due from certain customers (the “Purchase Agreement”). Under the Purchase Agreement, the maximum amount of receivables sold is limited to $150 million. The term of the Purchase Agreement runs through February 22, 2020, however, the Purchase Agreement may also be terminated earlier under certain circumstances. The term of the Purchase Agreement shall be automatically extended for annual terms unless either party provides advance notice that they do not intend to extend the term. 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 ASC 860, Transfers and Servicing During the six-month period ended November 30, 2019 and 2018, we sold $404.8 million and $351.0 million, respectively, of receivables under the Purchase Agreement and remitted $405.3 million and $327.5 million, respectively, to the Purchaser on their behalf. As of November 30, 2019 and May 31, 2019, we had collected cash of $14.5 million and $19.8 million, respectively, which was not yet remitted to the Purchaser as of those dates and was classified as Restricted cash on our Condensed Consolidated Balance Sheets. We recognize discounts on the sale of our receivables and other fees related to the Purchase Agreement in Other expense, net on our Condensed Consolidated Statements of Income. We incurred discounts on the sale of our receivables of $0.5 million and $0.6 million during the three-month periods ended November 30, 2019 and 2018, respectively, and $1.1 million and $1.0 million during the six-month periods ended November 30, 2019 and 2018, respectively. |
Financing Arrangements
Financing Arrangements | 6 Months Ended |
Nov. 30, 2019 | |
Financing Arrangements | |
Financing Arrangements | Note 9 – Financing Arrangements A summary of the carrying amount of our debt is as follows: November 30, May 31, 2019 2019 Revolving Credit Facility expiring September 25, 2024 with interest payable monthly $ 175.0 $ 120.0 Term loan due November 1, 2021 with interest payable monthly 23.3 22.9 Total debt 198.3 142.9 Debt issuance costs, net (2.2) (1.2) Long-term debt $ 196.1 $ 141.7 At November 30, 2019, our variable rate debt had a fair value that approximates its carrying value and is classified as Level 2 in the fair value hierarchy. On October 18, 2017, we entered into a Credit Agreement with the Canadian Imperial Bank of Commerce, as lender (the “Credit Agreement”). The Credit Agreement provided a Canadian $31 million term loan with the proceeds used to fund the acquisition of two maintenance, repair, and overhaul (“MRO”) facilities in Canada from Premier Aviation. The term loan is due in full at the expiration of the Credit Agreement on November 1, 2021 unless terminated earlier pursuant to the terms of the Credit Agreement. Interest is payable monthly on the term loan at the offered fluctuating Canadian Dollar Offer Rate plus 125 to 225 basis points based on certain financial measurements if a Bankers’ Acceptances loan, or at the offered fluctuating Prime Rate plus 25 to 125 basis points based on certain financial measurements, if a Prime Rate loan. On September 25, 2019, we entered into an amendment to our Revolving Credit Facility that extended the maturity of the Revolving Credit Facility to September 25, 2024, increased the revolving credit commitment to $600 million, and modified certain other provisions. Under certain circumstances, we have the ability to request an increase to the revolving credit commitment by an aggregate amount of up to Our financing arrangements also require us to comply with leverage and interest coverage ratios, maintain a minimum net working capital level, and comply with certain affirmative and negative covenants, including those relating to financial reporting and notification, payment of indebtedness, cash dividends, taxes and other obligations, compliance with applicable laws, and limitations on additional liens, indebtedness, acquisitions, investments and disposition of assets. The Revolving Credit Facility also requires our significant domestic subsidiaries, and any subsidiaries that guarantee our other indebtedness, to provide a guarantee of payment under the Revolving Credit Facility. At November 30, 2019, we were in compliance with the financial and other covenants in our financing agreements. |
Leases
Leases | 6 Months Ended |
Nov. 30, 2019 | |
Leases | |
Leases | Note 10 – Leases We lease facilities, offices, vehicles, and equipment. We determine at inception whether an arrangement that provides us control over the use of an asset is a lease. ROU assets and lease liabilities are recognized on the Condensed Consolidated Balance Sheet at lease commencement date based on the present value of the future minimum lease payments over the lease term. Our lease agreements do not provide a readily determinable implicit rate nor is it available to us from our lessors. We estimate our incremental borrowing rate based on information available at lease commencement in order to discount lease payments to present value. Our lease costs are allocated over the remaining lease term on a straight-line basis unless another systematic or rational basis is more representative of the pattern in which the underlying asset is expected to be used. ROU assets are evaluated for impairment in a manner consistent with the treatment of other long-lived assets. Certain leases include options to renew or extend the terms of the lease, which are included in the determination of the ROU assets and lease liabilities when it is reasonably certain that the option will be exercised. Our leases may also include variable lease payments such as escalation clauses based on consumer price index rates, maintenance costs and utilities. Variable lease payments that depend on an index or a rate are included in the determination of ROU assets and lease liabilities using the index or rate at the lease commencement date, whereas variable lease payments that do not depend on an index or rate are recorded as lease expense in the period incurred. Our lease agreements do not contain any significant residual value guarantees or restrictive covenants. The summary of our operating lease cost is as follows: Three Months Six Months Ended Ended November 30, November 30, 2019 2019 Operating lease cost $ 4.5 $ 8.7 Short-term lease cost 1.3 2.6 Variable lease cost 1.8 2.8 $ 7.6 $ 14.1 With the exception of a land lease for one of our airframe maintenance facilities that expires in 2108, our operating leases expire at various dates through 2039. Maturities of our operating lease payments as of November 30, 2019 are as follows: 2020 (excluding the six months ended November 30, 2019) $ 8.6 2021 16.6 2022 14.8 2023 13.0 2024 11.1 Thereafter 51.6 Total undiscounted payments 115.7 Less: Imputed interest (18.0) Present value of minimum lease payments 97.7 Less: Operating lease liabilities – current (13.7) Operating lease liabilities – non-current $ 84.0 The current portion of operating lease liabilities are presented within Accrued expenses on our Condensed Consolidated Balance Sheet. Prior to the adoption of ASC 842, our future minimum operating lease payments at May 31, 2019 were as follows: 2020 $ 21.6 2021 19.3 2022 16.5 2023 13.2 2024 11.0 Thereafter 39.9 $ 121.5 As of November 30, 2019, the weighted average remaining lease term and discount rate for our operating leases were approximately 8.9 years and 3.4%, respectively. Supplemental cash flow information related to leases for the three- and six-month period ended November 30, 2019 was as follows: Three Months Six Months Ended Ended November 30, November 30, 2019 2019 Cash paid for amounts included in the measurement of lease liabilities $ 3.9 $ 7.6 Operating lease liabilities arising from obtaining ROU assets 13.1 13.1 |
Investment in Joint Ventures
Investment in Joint Ventures | 6 Months Ended |
Nov. 30, 2019 | |
Investments in Joint Ventures | |
Investments in Joint Ventures | Note 11 – Investments in Joint Ventures Our investments in joint ventures includes $6.1 million for our 40 % ownership interest in our Indian joint venture with Indamer Aviation to develop and operate an airframe maintenance facility in India. Facility construction is expected to be completed in fiscal 2021. The investment balance as of November 30, 2019 includes $4.6 million related to the guarantee liability recognized in conjunction with our guarantee of 40 % of the Indian joint venture’s debt. The Indian joint venture is accounted for using the equity method. In addition, each of the partners in the Indian joint venture have a loan to the joint venture proportionate to their equity ownership. We also have a loan to the joint venture of $2.9 million as of November 30, 2019. |
Earnings per Share
Earnings per Share | 6 Months Ended |
Nov. 30, 2019 | |
Earnings per Share | |
Earnings per Share | Note 12 – Earnings per Share The computation of basic earnings per share is based on the weighted average number of common shares outstanding during each period. The computation of diluted earnings per share is based on the weighted average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options and shares issuable upon vesting of restricted stock awards. In accordance with ASC 260-10-45, Share-Based Payment Arrangements and Participating Securities and the Two-Class Method , our unvested restricted stock awards are deemed participating securities since these shares are entitled to participate in dividends declared on common shares. During periods of net income, the calculation of earnings per share for common stock excludes income attributable to unvested restricted stock awards from the numerator and excludes the dilutive impact of those shares from the denominator. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. A reconciliation of the computations of basic and diluted earnings per share information for the three- and six-month periods ended November 30, 2019 and 2018 is as follows: Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Basic and Diluted EPS Income from continuing operations $ 20.1 $ 11.2 $ 37.2 $ 30.1 Less income attributable to participating shares (0.1) (0.1) (0.2) (0.1) Income from continuing operations attributable to common shareholders 20.0 11.1 37.0 30.0 Loss from discontinued operations attributable to common shareholders (5.9) (4.2) (18.6) (8.0) Net income attributable to common shareholders for earnings per share $ 14.1 $ 6.9 $ 18.4 $ 22.0 Weighted Average Shares: Weighted average common shares outstanding–basic 34.6 34.6 34.6 34.6 Additional shares from the assumed exercise of stock options 0.4 0.4 0.4 0.5 Weighted average common shares outstanding–diluted 35.0 35.0 35.0 35.1 Earnings per share – basic: Earnings from continuing operations $ 0.58 $ 0.32 $ 1.07 $ 0.87 Loss from discontinued operations (0.17) (0.12) (0.54) (0.23) Earnings per share – basic $ 0.41 $ 0.20 $ 0.53 $ 0.64 Earnings per share – diluted: Earnings from continuing operations $ 0.57 $ 0.32 $ 1.06 $ 0.85 Loss from discontinued operations (0.17) (0.12) (0.53) (0.23) Earnings per share –diluted $ 0.40 $ 0.20 $ 0.53 $ 0.62 The potential dilutive effect of 267,000 shares relating to stock options |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 6 Months Ended |
Nov. 30, 2019 | |
Accumulated Other Comprehensive Loss | |
Accumulated Other Comprehensive Loss | Note 13 – Accumulated Other Comprehensive Loss Changes in our accumulated other comprehensive loss (“AOCL”) by component for the three- and six- month periods ended November 30, 2019 and 2018 were as follows: Currency Translation Pension Adjustments Plans Total Balance at September 1, 2019 $ (2.2) $ (38.6) $ (40.8) Other comprehensive income before reclassifications 0.5 — 0.5 Amounts reclassified from AOCL — 0.3 0.3 Total other comprehensive income (loss) 0.5 0.3 0.8 Balance at November 30, 2019 $ (1.7) $ (38.3) $ (40.0) Balance at September 1, 2018 $ (0.2) $ (32.0) $ (32.2) Other comprehensive loss before reclassifications (0.6) — (0.6) Amounts reclassified from AOCL — 0.2 0.2 Total other comprehensive income (loss) (0.6) 0.2 (0.4) Balance at November 30, 2018 $ (0.8) $ (31.8) $ (32.6) Currency Translation Pension Adjustments Plans Total Balance at June 1, 2019 $ (2.1) $ (38.8) $ (40.9) Other comprehensive income before reclassifications 0.4 — 0.4 Amounts reclassified from AOCL — 0.5 0.5 Total other comprehensive income (loss) 0.4 0.5 0.9 Balance at November 30, 2019 $ (1.7) $ (38.3) $ (40.0) Balance at June 1, 2018 $ 0.3 $ (32.3) $ (32.0) Other comprehensive loss before reclassifications (1.1) — (1.1) Amounts reclassified from AOCL — 0.5 0.5 Total other comprehensive income (loss) (1.1) 0.5 (0.6) Balance at November 30, 2018 $ (0.8) $ (31.8) $ (32.6) |
Business Segment Information
Business Segment Information | 6 Months Ended |
Nov. 30, 2019 | |
Business Segment Information | |
Business Segment Information | Note 14 – Business Segment Information Consistent with how our chief operating decision making officer (Chief Executive Officer) evaluates performance and the way we are organized internally, we report our activities in two operating segments: Aviation Services Expeditionary Services comprised of manufacturing activities. The Aviation Services segment consists of aftermarket support and services offerings that provide spare parts and maintenance support for aircraft operated by our commercial and government/defense customers. Sales in the Aviation Services segment are derived from the sale and lease of a wide variety of new, overhauled and repaired engine and airframe parts and components to the commercial aviation and government and defense markets. We provide customized inventory supply chain management, performance-based logistics programs, customer fleet management and operations, and aircraft component repair management services. The segment also includes repair, maintenance and overhaul of aircraft, landing gear and components. Cost of sales consists principally of the cost of product, direct labor, and overhead. The Expeditionary Services segment consists of primarily manufacturing operations with sales derived from the design and manufacture of pallets, shelters, and containers used to support the U.S. military’s requirements for a mobile and agile force including engineering, design, and system integration services for specialized command and control systems. This segment also designs and manufactures advanced composite materials for commercial, business and military aircraft. Cost of sales consists principally of the cost of material to manufacture products, direct labor and overhead. The accounting policies for the segments are the same as those described in Note 1 of Notes to Consolidated Financial Statements included in our a nnual Report on Form 10-K for the year ended May 31, 2019 except for our revised accounting policy for leases. On June 1, 2019, we adopted ASC 842 which amended the existing accounting standards for lease accounting. Prior periods have not been restated for ASC 842 and continue to be reported under the accounting standards in effect for those periods. A discussion of our revised accounting policy for leases is included in Note 10 to the Condensed Consolidated Financial Statements. Our chief operating decision making officer (Chief Executive Officer) evaluates performance based on the operating segments and utilizes gross profit as a primary profitability measure. Gross profit is calculated by subtracting cost of sales from sales. The assets and certain expenses related to corporate activities are not allocated to the segments. Selected financial information for each segment is as follows: Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Sales: Aviation Services $ 532.0 $ 462.9 $ 1,043.8 $ 901.3 Expeditionary Services 28.9 30.4 58.6 58.3 $ 560.9 $ 493.3 $ 1,102.4 $ 959.6 Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Gross profit: Aviation Services $ 85.7 $ 74.9 $ 165.7 $ 142.0 Expeditionary Services 0.2 3.4 1.8 7.5 $ 85.9 $ 78.3 $ 167.5 $ 149.5 The following table reconciles segment gross profit to income from continuing operations before provision for income taxes: Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Segment gross profit $ 85.9 $ 78.3 $ 167.5 $ 149.5 Selling, general and administrative (57.1) (49.1) (115.2) (97.3) Provision for doubtful accounts (0.7) (12.4) (1.4) (13.0) Other income (expense), net (0.2) (0.2) (0.4) 0.2 Interest expense (1.9) (2.5) (4.1) (4.6) Interest income 0.1 0.1 0.2 0.6 Income from continuing operations before provision for income taxes $ 26.1 $ 14.2 $ 46.6 $ 35.4 |
Legal Proceedings
Legal Proceedings | 6 Months Ended |
Nov. 30, 2019 | |
Legal Proceedings | |
Legal Proceedings | Note 15 – Legal Proceedings We are not a party to any material pending legal proceeding (including any governmental or environmental proceeding) other than routine litigation incidental to our business, except for the following: Department of Justice Investigation The U.S. Department of Justice (“DoJ”), acting through the U.S. Attorney’s Office for the Southern District of Illinois, is conducting an investigation of AAR Airlift Group, Inc. (“Airlift”), a wholly-owned subsidiary of AAR CORP., under the federal civil False Claims Act (“FCA”). The investigation relates to Airlift’s performance of several contracts awarded by the U.S. Transportation Command concerning the operations and maintenance of rotary-wing and fixed-wing aircraft in Afghanistan and Africa, as well as several U.S. Navy contracts. In June 2018, the DoJ informed Airlift that part of the investigation was precipitated by a lawsuit filed under the qui tam provisions of the FCA by a former employee of Airlift. That lawsuit remains under seal. Airlift is cooperating with the DoJ investigation. In order to explore whether a negotiated resolution of the matter is possible, and in an effort to minimize continuing legal defense costs, Airlift has entered into settlement discussions with the DoJ. Airlift believes it has meritorious defenses and counter-arguments to the concerns raised by the DoJ; however, there is no assurance that any settlement will be achieved. If no settlement is reached, the DoJ and the qui tam plaintiff could pursue civil litigation under the FCA, which provides for the recovery of, among other amounts, treble damages and penalties. While we believe that it is probable that we will incur a loss from this matter, we cannot yet reasonably estimate the maximum amount of potential loss, nor can we provide any assurance that the ultimate resolution of the remaining exposure for this matter will not be material. Self-Reporting of Potential Foreign Corrupt Practices Act Violations The Company retained outside counsel to investigate possible violations of the Company’s Code of Conduct, the U.S. Foreign Corrupt Practices Act, and other applicable laws, relating to the Company’s activities in Nepal and South Africa. Based on these investigations, we self-reported these matters to the DoJ, the U.S. Securities and Exchange Commission and the UK Serious Fraud Office. The Company is fully cooperating with the reviews by these agencies, although we are unable at this time to predict what action, if any, they may take. |
Basis of Presentation (Tables)
Basis of Presentation (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Basis of Presentation | |
Schedule of impact of the adoption of new ASC | As of ASC 842 As of May 31, 2019 Adjustments June 1, 2019 Assets of discontinued operations $ 29.2 $ 26.6 $ 55.8 Other current assets 36.2 (0.5) 35.7 Intangible assets, net 22.2 (8.5) 13.7 Operating lease ROU assets — 96.6 96.6 Other non-current assets 77.5 (1.8) 75.7 Accrued liabilities 140.5 10.0 150.5 Liabilities of discontinued operations 29.2 25.3 54.5 Operating lease liabilities — 77.7 77.7 Other liabilities 28.3 (3.1) 25.2 Retained earnings 709.8 2.5 712.3 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Discontinued Operations | |
Schedule of operating results for discontinued operations | Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Sales $ 17.3 $ 22.2 $ 33.9 $ 42.2 Cost of sales (18.8) (25.4) (38.4) (47.7) Asset impairment — — (11.8) — Selling, general and administrative expenses (5.4) (2.3) (7.2) (4.8) Operating loss from discontinued operations (6.9) (5.5) (23.5) (10.3) Provision for income taxes (benefit) (1.0) (1.3) (4.9) (2.3) Loss from discontinued operations $ (5.9) $ (4.2) $ (18.6) $ (8.0) |
Schedule of carrying amounts of the major classes and liabilities for our discontinued operations | November 30, May 31, 2019 2019 Accounts receivable, net $ 3.1 $ 16.2 Inventory, rotable assets, and equipment — 7.5 Operating lease ROU assets 22.8 — Other assets 1.5 5.5 Assets of discontinued operations $ 27.4 $ 29.2 Accounts payable and accrued liabilities $ 18.7 $ 29.2 Operating lease liabilities 23.2 — Liabilities of discontinued operations $ 41.9 $ 29.2 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Revenue Recognition | |
Schedule of net contract assets and liabilities | November 30, May 31, 2019 2019 Change Contract assets – current $ 62.2 $ 59.2 $ 3.0 Contract assets – non-current 32.0 17.0 15.0 Deferred revenue – current (11.3) (12.6) 1.3 Deferred revenue on long-term contracts (122.5) (83.8) (38.7) Net contract liabilities $ (39.6) $ (20.2) $ (19.4) |
Schedule of changes in deferred revenue after adoption of ASC 606 | Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Deferred revenue at beginning of period $ (86.3) $ (58.5) $ (96.4) $ (44.1) Revenue deferred (153.7) (103.5) (240.3) (194.0) Revenue recognized 103.3 76.4 204.3 156.5 Other 2.9 8.0 (1.4) 4.0 Deferred revenue at end of period $ (133.8) $ (77.6) $ (133.8) $ (77.6) |
Schedule of sales across the major customer markets for each of our operating segments | Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Aviation Services: Commercial $ 369.6 $ 325.5 $ 700.1 $ 632.2 Government and defense 162.4 137.4 343.7 269.1 $ 532.0 $ 462.9 $ 1,043.8 $ 901.3 Expeditionary Services: Commercial $ 6.4 $ 8.0 $ 12.1 $ 16.5 Government and defense 22.5 22.4 46.5 41.8 $ 28.9 $ 30.4 $ 58.6 $ 58.3 |
Schedule of sales by geographic region | Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Aviation Services: North America $ 395.6 $ 331.7 $ 786.0 $ 651.2 Europe/Africa 99.8 83.5 188.0 164.5 Other 36.6 47.7 69.8 85.6 $ 532.0 $ 462.9 $ 1,043.8 $ 901.3 Expeditionary Services: North America $ 26.4 $ 29.2 $ 54.6 $ 54.9 Europe/Africa 2.2 1.0 3.6 2.7 Other 0.3 0.2 0.4 0.7 $ 28.9 $ 30.4 $ 58.6 $ 58.3 |
Accounts Receivable (Tables)
Accounts Receivable (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Accounts Receivable | |
Schedule of accounts receivable | November 30, May 31, 2019 2019 U.S. Government contracts: Trade receivables $ 32.7 $ 28.7 Unbilled receivables 29.8 31.7 62.5 60.4 All other customers: Trade receivables 99.8 92.5 Unbilled receivables 46.2 44.9 146.0 137.4 $ 208.5 $ 197.8 |
Accounting for Stock-Based Co_2
Accounting for Stock-Based Compensation (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Accounting for Stock-Based Compensation | |
Schedule of assumptions used in the Black-Scholes option pricing model to estimate the fair value of stock option grant | Risk-free interest rate 1.9 % Expected volatility of common stock 32.0 % Dividend yield 0.8 % Expected option term in years 4.5 |
Inventory (Tables)
Inventory (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Inventory | |
Summary of inventories | November 30, May 31, 2019 2019 Aircraft and engine parts, components and finished goods $ 518.9 $ 467.9 Raw materials and parts 43.6 41.8 Work-in-process 17.9 14.0 $ 580.4 $ 523.7 |
Supplemental Cash Flow Inform_2
Supplemental Cash Flow Information (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Supplemental Cash Flow Information | |
Schedule of supplemental information on cash flows | Six Months Ended November 30, 2019 2018 Interest paid $ 3.8 $ 4.3 Income taxes paid 12.7 3.0 Income tax refunds received 2.4 — |
Financing Arrangements (Tables)
Financing Arrangements (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Financing Arrangements | |
Summary of carrying amount of debt | November 30, May 31, 2019 2019 Revolving Credit Facility expiring September 25, 2024 with interest payable monthly $ 175.0 $ 120.0 Term loan due November 1, 2021 with interest payable monthly 23.3 22.9 Total debt 198.3 142.9 Debt issuance costs, net (2.2) (1.2) Long-term debt $ 196.1 $ 141.7 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Leases | |
Summary of operating lease cost | The summary of our operating lease cost is as follows: Three Months Six Months Ended Ended November 30, November 30, 2019 2019 Operating lease cost $ 4.5 $ 8.7 Short-term lease cost 1.3 2.6 Variable lease cost 1.8 2.8 $ 7.6 $ 14.1 Supplemental cash flow information related to leases for the three- and six-month period ended November 30, 2019 was as follows: Three Months Six Months Ended Ended November 30, November 30, 2019 2019 Cash paid for amounts included in the measurement of lease liabilities $ 3.9 $ 7.6 Operating lease liabilities arising from obtaining ROU assets 13.1 13.1 |
Schedule of maturities of our lease payments | 2020 (excluding the six months ended November 30, 2019) $ 8.6 2021 16.6 2022 14.8 2023 13.0 2024 11.1 Thereafter 51.6 Total undiscounted payments 115.7 Less: Imputed interest (18.0) Present value of minimum lease payments 97.7 Less: Operating lease liabilities – current (13.7) Operating lease liabilities – non-current $ 84.0 |
Schedule of future minimum operating lease payments | Prior to the adoption of ASC 842, our future minimum operating lease payments at May 31, 2019 were as follows: 2020 $ 21.6 2021 19.3 2022 16.5 2023 13.2 2024 11.0 Thereafter 39.9 $ 121.5 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Earnings per Share | |
Schedule of reconciliation of computations of basic and diluted earnings per share information | Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Basic and Diluted EPS Income from continuing operations $ 20.1 $ 11.2 $ 37.2 $ 30.1 Less income attributable to participating shares (0.1) (0.1) (0.2) (0.1) Income from continuing operations attributable to common shareholders 20.0 11.1 37.0 30.0 Loss from discontinued operations attributable to common shareholders (5.9) (4.2) (18.6) (8.0) Net income attributable to common shareholders for earnings per share $ 14.1 $ 6.9 $ 18.4 $ 22.0 Weighted Average Shares: Weighted average common shares outstanding–basic 34.6 34.6 34.6 34.6 Additional shares from the assumed exercise of stock options 0.4 0.4 0.4 0.5 Weighted average common shares outstanding–diluted 35.0 35.0 35.0 35.1 Earnings per share – basic: Earnings from continuing operations $ 0.58 $ 0.32 $ 1.07 $ 0.87 Loss from discontinued operations (0.17) (0.12) (0.54) (0.23) Earnings per share – basic $ 0.41 $ 0.20 $ 0.53 $ 0.64 Earnings per share – diluted: Earnings from continuing operations $ 0.57 $ 0.32 $ 1.06 $ 0.85 Loss from discontinued operations (0.17) (0.12) (0.53) (0.23) Earnings per share –diluted $ 0.40 $ 0.20 $ 0.53 $ 0.62 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Accumulated Other Comprehensive Loss | |
Schedule of changes in accumulated other comprehensive loss ("AOCL") by component | Currency Translation Pension Adjustments Plans Total Balance at September 1, 2019 $ (2.2) $ (38.6) $ (40.8) Other comprehensive income before reclassifications 0.5 — 0.5 Amounts reclassified from AOCL — 0.3 0.3 Total other comprehensive income (loss) 0.5 0.3 0.8 Balance at November 30, 2019 $ (1.7) $ (38.3) $ (40.0) Balance at September 1, 2018 $ (0.2) $ (32.0) $ (32.2) Other comprehensive loss before reclassifications (0.6) — (0.6) Amounts reclassified from AOCL — 0.2 0.2 Total other comprehensive income (loss) (0.6) 0.2 (0.4) Balance at November 30, 2018 $ (0.8) $ (31.8) $ (32.6) Currency Translation Pension Adjustments Plans Total Balance at June 1, 2019 $ (2.1) $ (38.8) $ (40.9) Other comprehensive income before reclassifications 0.4 — 0.4 Amounts reclassified from AOCL — 0.5 0.5 Total other comprehensive income (loss) 0.4 0.5 0.9 Balance at November 30, 2019 $ (1.7) $ (38.3) $ (40.0) Balance at June 1, 2018 $ 0.3 $ (32.3) $ (32.0) Other comprehensive loss before reclassifications (1.1) — (1.1) Amounts reclassified from AOCL — 0.5 0.5 Total other comprehensive income (loss) (1.1) 0.5 (0.6) Balance at November 30, 2018 $ (0.8) $ (31.8) $ (32.6) |
Business Segment Information (T
Business Segment Information (Tables) | 6 Months Ended |
Nov. 30, 2019 | |
Business Segment Information | |
Schedule of selected financial information for each reportable segment | Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Sales: Aviation Services $ 532.0 $ 462.9 $ 1,043.8 $ 901.3 Expeditionary Services 28.9 30.4 58.6 58.3 $ 560.9 $ 493.3 $ 1,102.4 $ 959.6 Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Gross profit: Aviation Services $ 85.7 $ 74.9 $ 165.7 $ 142.0 Expeditionary Services 0.2 3.4 1.8 7.5 $ 85.9 $ 78.3 $ 167.5 $ 149.5 |
Schedule of reconciles segment gross profit to income from continuing operations before provision for income taxes | Three Months Ended Six Months Ended November 30, November 30, 2019 2018 2019 2018 Segment gross profit $ 85.9 $ 78.3 $ 167.5 $ 149.5 Selling, general and administrative (57.1) (49.1) (115.2) (97.3) Provision for doubtful accounts (0.7) (12.4) (1.4) (13.0) Other income (expense), net (0.2) (0.2) (0.4) 0.2 Interest expense (1.9) (2.5) (4.1) (4.6) Interest income 0.1 0.1 0.2 0.6 Income from continuing operations before provision for income taxes $ 26.1 $ 14.2 $ 46.6 $ 35.4 |
Basis of Presentation (Details)
Basis of Presentation (Details) - USD ($) $ in Millions | 6 Months Ended | ||
Nov. 30, 2019 | Jun. 01, 2019 | May 31, 2019 | |
New accounting pronouncements adopted | |||
Revenue, practical expedient application of ASC 606 | true | ||
Assets of discontinued operations | $ 55.8 | $ 29.2 | |
Other current assets | $ 71.9 | 35.7 | 36.2 |
Intangible assets, net | 12.6 | 13.7 | 22.2 |
Operating lease ROU assets | 103.8 | 96.6 | |
Other non-current assets | 89.6 | 75.7 | 77.5 |
Accrued liabilities | 133.2 | 150.5 | 140.5 |
Liabilities of discontinued operations | 41.9 | 54.5 | 29.2 |
Operating lease liabilities | 84 | 77.7 | |
Other liabilities | 24.1 | 25.2 | 28.3 |
Retained earnings | 725.4 | 712.3 | 709.8 |
Unamortized deferred gains | 2.5 | ||
Deferred revenue on long-term contracts | $ 122.5 | $ 83.8 | |
Held for sale or Disposed | |||
New accounting pronouncements adopted | |||
Operating lease liabilities | 25.3 | ||
ASC 842 | |||
New accounting pronouncements adopted | |||
Assets of discontinued operations | 26.6 | ||
Other current assets | (0.5) | ||
Intangible assets, net | (8.5) | ||
Operating lease ROU assets | 96.6 | ||
Other non-current assets | (1.8) | ||
Accrued liabilities | 10 | ||
Liabilities of discontinued operations | 25.3 | ||
Operating lease liabilities | 77.7 | ||
Other liabilities | (3.1) | ||
Retained earnings | 2.5 | ||
ASC 842 | Right of use including discontinued operations | |||
New accounting pronouncements adopted | |||
Operating lease ROU assets | 123.2 | ||
Operating lease liabilities | 116.8 | ||
ASC 842 | Held for sale or Disposed | |||
New accounting pronouncements adopted | |||
Operating lease ROU assets | $ 26.6 |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||||||
Nov. 30, 2019 | Aug. 31, 2019 | Feb. 28, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | Jun. 01, 2019 | May 31, 2019 | |
Discontinued Operations | ||||||||
Interest expense | $ 1.9 | $ 2.5 | $ 4.1 | $ 4.6 | ||||
Operating results for discontinued operations | ||||||||
Sales | 17.3 | 22.2 | 33.9 | 42.2 | ||||
Cost of sales | (18.8) | (25.4) | (38.4) | (47.7) | ||||
Asset impairment | (11.8) | |||||||
Selling, general and administrative expenses | (5.4) | (2.3) | (7.2) | (4.8) | ||||
Operating loss from discontinued operations | (6.9) | (5.5) | (23.5) | (10.3) | ||||
Provision for income taxes (benefit) | (1) | (1.3) | (4.9) | (2.3) | ||||
Loss from discontinued operations | (5.9) | (4.2) | (18.6) | (8) | ||||
Carrying amounts of the major classes of assets and liabilities for our discontinued operations | ||||||||
Accounts receivable, net | 3.1 | 3.1 | $ 16.2 | |||||
Inventory, rotable assets, and equipment | 7.5 | |||||||
Operating lease ROU assets | 22.8 | 22.8 | ||||||
Other assets | 1.5 | 1.5 | 5.5 | |||||
Assets of discontinued operations | 27.4 | 27.4 | 29.2 | |||||
Accounts payable and accrued liabilities | 18.7 | 18.7 | 29.2 | |||||
Operating lease liabilities | 23.2 | 23.2 | ||||||
Liabilities of discontinued operations | 41.9 | 41.9 | $ 54.5 | $ 29.2 | ||||
COCO | Held for sale or Disposed | ||||||||
Discontinued Operations | ||||||||
Goodwill impairment charge | $ 11.8 | $ 74.1 | ||||||
General corporate overhead | 0 | 0 | 0 | 0 | ||||
Interest expense | $ 0 | $ 0 | $ 0 | $ 0 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
Revenue Recognition | ||||
Favorable cumulative catch-up adjustments | $ 1.9 | $ 3.1 | $ 1.9 | $ 3.8 |
Unfavorable cumulative catch-up adjustments | 0.5 | |||
Net favorable adjustments | $ 1.9 | $ 3.3 | ||
Practical Expedient, Incremental costs of obtaining a contract | true | |||
Practical Expedient, Remaining performance obligations | true |
Revenue Recognition - Contract
Revenue Recognition - Contract Assets and Liabilities and Remaining Performance Obligations (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | May 31, 2019 | |
Contract Assets and Liabilities | |||||
Contract assets - current | $ 62.2 | $ 62.2 | $ 59.2 | ||
Contract assets - non-current | 32 | 32 | 17 | ||
Deferred revenue - current | (11.3) | (11.3) | (12.6) | ||
Deferred revenue on long-term contracts | (122.5) | (122.5) | (83.8) | ||
Net contract liabilities | (39.6) | (39.6) | $ (20.2) | ||
Change in contract assets - current | 3 | ||||
Change in contract assets - non-current | 15 | ||||
Change in contract liabilities - current | 1.3 | ||||
Change in contract liabilities - non-current | (38.7) | ||||
Change in net contract assets (liabilities) | (19.4) | ||||
Change in Contract with Customer, Liability | |||||
Deferred revenue at beginning of period | (86.3) | $ (58.5) | (96.4) | $ (44.1) | |
Revenue deferred | (153.7) | (103.5) | (240.3) | (194) | |
Revenue recognized | 103.3 | 76.4 | 204.3 | 156.5 | |
Other | 2.9 | 8 | (1.4) | 4 | |
Deferred revenue at end of period | (133.8) | $ (77.6) | (133.8) | $ (77.6) | |
Remaining Performance Obligations | |||||
Remaining performance obligation | $ 1,300 | $ 1,300 | |||
Revenue, Remaining Performance Obligation, Percentage | 40.00% | 40.00% | |||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-05-31 | |||||
Remaining Performance Obligations | |||||
Expected timing of satisfaction of remaining performance obligation | 12 months | 12 months |
Revenue recognition - Disaggreg
Revenue recognition - Disaggregation of Revenue (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
Disaggregation of revenue by major customer markets | ||||
Net sales | $ 560.9 | $ 493.3 | $ 1,102.4 | $ 959.6 |
Aviation Services | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | 532 | 462.9 | 1,043.8 | 901.3 |
Aviation Services | North America | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | 395.6 | 331.7 | 786 | 651.2 |
Aviation Services | Europe/Africa | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | 99.8 | 83.5 | 188 | 164.5 |
Aviation Services | Other | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | 36.6 | 47.7 | 69.8 | 85.6 |
Aviation Services | Commercial | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | 369.6 | 325.5 | 700.1 | 632.2 |
Aviation Services | Government and defense | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | 162.4 | 137.4 | 343.7 | 269.1 |
Expeditionary Services | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | 28.9 | 30.4 | 58.6 | 58.3 |
Expeditionary Services | North America | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | 26.4 | 29.2 | 54.6 | 54.9 |
Expeditionary Services | Europe/Africa | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | 2.2 | 1 | 3.6 | 2.7 |
Expeditionary Services | Other | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | 0.3 | 0.2 | 0.4 | 0.7 |
Expeditionary Services | Commercial | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | 6.4 | 8 | 12.1 | 16.5 |
Expeditionary Services | Government and defense | ||||
Disaggregation of revenue by major customer markets | ||||
Net sales | $ 22.5 | $ 22.4 | $ 46.5 | $ 41.8 |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) $ in Millions | Nov. 30, 2019 | May 31, 2019 |
Accounts receivable, net | $ 208.5 | $ 197.8 |
Past due accounts receivable | 10.1 | |
Allowance for doubtful accounts | 6.2 | |
US Government Contract | ||
Accounts receivable, net | 62.5 | 60.4 |
Unbilled receivables | 29.8 | 31.7 |
US Government Contract | Trade receivables | ||
Accounts receivable, net | 32.7 | 28.7 |
All other customers | ||
Accounts receivable, net | 146 | 137.4 |
Unbilled receivables | 46.2 | 44.9 |
All other customers | Trade receivables | ||
Accounts receivable, net | $ 99.8 | $ 92.5 |
Accounting for Stock-Based Co_3
Accounting for Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
Jul. 31, 2019 | Jun. 30, 2019 | Nov. 30, 2019 | Aug. 31, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
Stock options, additional disclosures | |||||||
Compensation expense | $ (3) | $ 8.2 | |||||
Restricted stock | |||||||
Stock options, additional disclosures | |||||||
Compensation expense | $ 1.8 | $ 0.2 | 4.9 | 3 | |||
Performance-based restricted stock | |||||||
Stock options, additional disclosures | |||||||
Granted (in shares) | 52,475 | ||||||
Granted (in dollars per share) | $ 37.66 | ||||||
Time-based restricted stock | |||||||
Stock options, additional disclosures | |||||||
Granted (in shares) | 56,535 | ||||||
Granted (in dollars per share) | $ 37.66 | ||||||
Time-based restricted stock | Board of Directors | |||||||
Stock options, additional disclosures | |||||||
Granted (in shares) | 43,142 | ||||||
Granted (in dollars per share) | $ 30.60 | ||||||
Stock options | |||||||
Stock options, additional disclosures | |||||||
Granted (in shares) | 414,460 | ||||||
Granted (in dollars per share) | $ 37.66 | ||||||
Weighted average fair value of stock options granted (in dollars per share) | $ 10.30 | ||||||
Total intrinsic value of stock options exercised | 2 | 11.9 | |||||
Compensation expense | $ 1 | $ 1 | $ 2.2 | $ 2.2 | |||
Assumptions used in the Black-Scholes option pricing models to estimate the fair value of each stock option grant | |||||||
Risk-free interest rate | 1.90% | ||||||
Expected volatility of common stock | 32.00% | ||||||
Dividend yield | 0.80% | ||||||
Expected option term in years | 4 years 6 months |
Inventory (Details)
Inventory (Details) - USD ($) $ in Millions | Nov. 30, 2019 | May 31, 2019 |
Inventory | ||
Aircraft and engine parts, components and finished goods | $ 518.9 | $ 467.9 |
Raw materials and parts | 43.6 | 41.8 |
Work-in-process | 17.9 | 14 |
Total inventories | $ 580.4 | $ 523.7 |
Supplemental Cash Flow Inform_3
Supplemental Cash Flow Information (Details) - USD ($) $ in Millions | 6 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | |
Supplemental Cash Flow Information | ||
Interest paid | $ 3.8 | $ 4.3 |
Income taxes paid | 12.7 | $ 3 |
Income tax refunds received | $ 2.4 |
Sale of Receivables (Details)
Sale of Receivables (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||||
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | May 31, 2019 | Feb. 23, 2018 | |
Sale of Receivables | ||||||
Sale of receivables | $ 404.8 | $ 351 | $ 404.8 | $ 351 | ||
Retained interests | 0 | 0 | ||||
Remitted receivables | 405.3 | 327.5 | ||||
Restricted cash | 14.5 | 14.5 | $ 19.8 | |||
Maximum | ||||||
Sale of Receivables | ||||||
Sale of receivables | $ 150 | |||||
Other expense, net | ||||||
Sale of Receivables | ||||||
Discount and other fees | $ 0.5 | $ 0.6 | $ 1.1 | $ 1 |
Financing Arrangements (Details
Financing Arrangements (Details) $ in Millions, $ in Millions | Sep. 25, 2019USD ($) | Oct. 18, 2017CAD ($)facility | Nov. 30, 2019USD ($) | May 31, 2019USD ($) |
Financing Arrangements | ||||
Total debt | $ 198.3 | $ 142.9 | ||
Debt issuance costs, net | (2.2) | (1.2) | ||
Long-term debt | 196.1 | 141.7 | ||
Number of facilities acquired | facility | 2 | |||
Term Loan | ||||
Financing Arrangements | ||||
Total debt | 23.3 | 22.9 | ||
Maximum borrowing capacity | $ 31 | |||
CDOR | Minimum | Term Loan | ||||
Financing Arrangements | ||||
Basis spread on variable rate (as a percent) | 1.25% | |||
CDOR | Maximum | Term Loan | ||||
Financing Arrangements | ||||
Basis spread on variable rate (as a percent) | 2.25% | |||
Eurodollar rate | Revolving Credit Facility expiring November 1, 2021 with interest payable monthly | Minimum | ||||
Financing Arrangements | ||||
Basis spread on variable rate (as a percent) | 0.875% | |||
Eurodollar rate | Revolving Credit Facility expiring November 1, 2021 with interest payable monthly | Maximum | ||||
Financing Arrangements | ||||
Basis spread on variable rate (as a percent) | 1.75% | |||
Base rate | Revolving Credit Facility expiring November 1, 2021 with interest payable monthly | Minimum | ||||
Financing Arrangements | ||||
Basis spread on variable rate (as a percent) | 0.00% | |||
Base rate | Revolving Credit Facility expiring November 1, 2021 with interest payable monthly | Maximum | ||||
Financing Arrangements | ||||
Basis spread on variable rate (as a percent) | 0.75% | |||
Prime Rate | Minimum | Term Loan | ||||
Financing Arrangements | ||||
Basis spread on variable rate (as a percent) | 0.25% | |||
Prime Rate | Maximum | Term Loan | ||||
Financing Arrangements | ||||
Basis spread on variable rate (as a percent) | 1.25% | |||
Revolving credit facility | ||||
Financing Arrangements | ||||
Total debt | $ 175 | $ 120 | ||
Current borrowing capacity | $ 600 | |||
Increase in borrowing capacity | 300 | |||
Maximum borrowing capacity | $ 900 |
Leases (Details)
Leases (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended |
Nov. 30, 2019 | Nov. 30, 2019 | |
Operating lease cost | ||
Operating lease cost | $ 4.5 | $ 8.7 |
Short-term lease cost | 1.3 | 2.6 |
Variable lease cost | 1.8 | 2.8 |
Total operating lease cost | $ 7.6 | $ 14.1 |
Leases - Maturities (Details)
Leases - Maturities (Details) - USD ($) $ in Millions | Nov. 30, 2019 | Jun. 01, 2019 |
Future minimum payments under operating leases | ||
2020 (excluding the six months ended November 30, 2019) | $ 8.6 | |
2021 | 16.6 | |
2022 | 14.8 | |
2023 | 13 | |
2024 | 11.1 | |
Thereafter | 51.6 | |
Total undiscounted payments | 115.7 | |
Less: Imputed interest | (18) | |
Present value of minimum lease payments | 97.7 | |
Less: Operating lease liabilities - current | (13.7) | |
Operating lease liabilities - non-current | $ 84 | $ 77.7 |
Leases - Operating lease cost p
Leases - Operating lease cost prior to the adoption of ASC 842 (Details) $ in Millions | May 31, 2019USD ($) |
Leases | |
2020 | $ 21.6 |
2021 | 19.3 |
2022 | 16.5 |
2023 | 13.2 |
2024 | 11 |
Thereafter | 39.9 |
Total | $ 121.5 |
Leases - Supplemental cash flow
Leases - Supplemental cash flow information (Details) $ in Millions | 3 Months Ended | 6 Months Ended |
Nov. 30, 2019USD ($) | Nov. 30, 2019USD ($) | |
Leases | ||
Weighted-average remaining lease term (years) | 8 years 10 months 24 days | 8 years 10 months 24 days |
Weighted-average discount rate | 3.40% | 3.40% |
Cash paid for amounts included in the measurement of lease liabilities | $ 3.9 | $ 7.6 |
Operating lease liabilities arising from obtaining ROU assets | $ 13.1 | $ 13.1 |
Investment in Joint Ventures (D
Investment in Joint Ventures (Details) $ in Millions | Nov. 30, 2019USD ($) |
Investments in Joint Ventures | |
Investment in joint ventures | $ 6.1 |
Ownership interest (as a percent) | 40.00% |
Amount of guarantee liability recognized | $ 4.6 |
Loan to joint venture | $ 2.9 |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
Earnings per Share | ||||
Effect, participating securities | $ 0 | |||
Basic and Diluted EPS: | ||||
Income from continuing operations | $ 20.1 | $ 11.2 | 37.2 | $ 30.1 |
Less income attributable to participating shares | (0.1) | (0.1) | (0.2) | (0.1) |
Income from continuing operations attributable to common shareholders | 20 | 11.1 | 37 | 30 |
Loss from discontinued operations attributable to common shareholders | (5.9) | (4.2) | (18.6) | (8) |
Net income attributable to common shareholders for earnings per share | $ 14.1 | $ 6.9 | $ 18.4 | $ 22 |
Weighted Average Shares: | ||||
Weighted average common shares outstanding - basic | 34,600,000 | 34,600,000 | 34,600,000 | 34,600,000 |
Additional shares from the assumed exercise of stock options | 400,000 | 400,000 | 400,000 | 500,000 |
Weighted average common shares outstanding - diluted | 35,000,000 | 35,000,000 | 35,000,000 | 35,100,000 |
Earnings per share - basic: | ||||
Earnings from continuing operations | $ 0.58 | $ 0.32 | $ 1.07 | $ 0.87 |
Loss from discontinued operations | (0.17) | (0.12) | (0.54) | (0.23) |
Earnings per share - basic | 0.41 | 0.20 | 0.53 | 0.64 |
Earnings per share - diluted: | ||||
Earnings from continuing operations | 0.57 | 0.32 | 1.06 | 0.85 |
Loss from discontinued operations | (0.17) | (0.12) | (0.53) | (0.23) |
Earnings per share - diluted | $ 0.40 | $ 0.20 | $ 0.53 | $ 0.62 |
Antidilutive shares excluded from the computation of diluted earnings per share (in shares) | 267,000 | 290,000 | 267,000 | 290,000 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||||
Nov. 30, 2019 | Aug. 31, 2019 | Nov. 30, 2018 | Aug. 31, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
Accumulated Other Comprehensive Loss | ||||||
Balance at beginning of the period | $ (40.8) | $ (40.9) | $ (32.2) | $ (32) | $ (40.9) | $ (32) |
Other comprehensive income (loss) before reclassifications | 0.5 | (0.6) | 0.4 | (1.1) | ||
Amounts reclassified from AOCL | 0.3 | 0.2 | 0.5 | 0.5 | ||
Other comprehensive income (loss), net of tax | 0.8 | 0.1 | (0.4) | (0.2) | 0.9 | (0.6) |
Balance at end of the period | (40) | (40.8) | (32.6) | (32.2) | (40) | (32.6) |
Currency Translation Adjustments | ||||||
Accumulated Other Comprehensive Loss | ||||||
Balance at beginning of the period | (2.2) | (2.1) | (0.2) | 0.3 | (2.1) | 0.3 |
Other comprehensive income (loss) before reclassifications | 0.5 | (0.6) | 0.4 | (1.1) | ||
Other comprehensive income (loss), net of tax | 0.5 | (0.6) | 0.4 | (1.1) | ||
Balance at end of the period | (1.7) | (2.2) | (0.8) | (0.2) | (1.7) | (0.8) |
Pensions Plans | ||||||
Accumulated Other Comprehensive Loss | ||||||
Balance at beginning of the period | (38.6) | (38.8) | (32) | (32.3) | (38.8) | (32.3) |
Amounts reclassified from AOCL | 0.3 | 0.2 | 0.5 | 0.5 | ||
Other comprehensive income (loss), net of tax | 0.3 | 0.2 | 0.5 | 0.5 | ||
Balance at end of the period | $ (38.3) | $ (38.6) | $ (31.8) | $ (32) | $ (38.3) | $ (31.8) |
Business Segment Information -
Business Segment Information - Sales and Gross profit (Details) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2019USD ($) | Nov. 30, 2018USD ($) | Nov. 30, 2019USD ($)segment | Nov. 30, 2018USD ($) | |
Disaggregation of revenue by major customer markets | ||||
Operating segments (in segments) | segment | 2 | |||
Sales | $ 560.9 | $ 493.3 | $ 1,102.4 | $ 959.6 |
Gross profit | 85.9 | 78.3 | 167.5 | 149.5 |
Aviation Services | ||||
Disaggregation of revenue by major customer markets | ||||
Sales | 532 | 462.9 | 1,043.8 | 901.3 |
Gross profit | 85.7 | 74.9 | 165.7 | 142 |
Expeditionary Services | ||||
Disaggregation of revenue by major customer markets | ||||
Sales | 28.9 | 30.4 | 58.6 | 58.3 |
Gross profit | $ 0.2 | $ 3.4 | $ 1.8 | $ 7.5 |
Business Segment Information _2
Business Segment Information - Reconcile of Gross Profit to Income (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Nov. 30, 2019 | Nov. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | |
Reconciles segment gross profit to income from continuing operations before provision for income taxes | ||||
Segment gross profit | $ 85.9 | $ 78.3 | $ 167.5 | $ 149.5 |
Selling, general and administrative | (57.1) | (49.1) | (115.2) | (97.3) |
Provision for doubtful accounts | (0.7) | (12.4) | (1.4) | (13) |
Other income (expense), net | (0.2) | (0.2) | (0.4) | 0.2 |
Interest expense | (1.9) | (2.5) | (4.1) | (4.6) |
Interest income | 0.1 | 0.1 | 0.2 | 0.6 |
Income from continuing operations before provision for income taxes | $ 26.1 | $ 14.2 | $ 46.6 | $ 35.4 |