Discontinued Operations

12 Months Ended

May 31, 2017

Discontinued Operations

Discontinued Operations

2. Discontinued Operations

        On March 26, 2015, we completed the sale of our Telair Cargo Group to TransDigm, Inc. The Telair Cargo Group was comprised of Telair International, Telair US, and Nordisk Aviation Products. Cash received at closing in the fourth quarter of fiscal 2015 before fees and expenses was $705 million. The sale also allowed for contingent consideration of up to $35 million based on the occurrence of certain post-closing events related to the A400M cargo system. We recognized a pre-tax gain on the sale (net of transaction expenses and fees) of $198.6 million in the fourth quarter of fiscal 2015.

        In the first quarter of fiscal 2016, we recognized a gain of $27.7 million net of expenses representing the receipt of the contingent consideration related to the A400M cargo system.

        During fiscal 2015, we also announced our intention to sell our Precision Systems Manufacturing ("PSM") businesses comprised of our metal and composite machined and fabricated parts manufacturing operations. We recognized impairment charges of $57.5 million during fiscal 2015 to reduce the carrying value of the PSM business's net assets to their expected value at the time of sale.

        During the first quarter of fiscal 2017, we decided to retain our composite manufacturing operations within our Expeditionary Services segment as a product line within our mobility products business. As a result, we reclassified our composite manufacturing operations into continuing operations for all periods presented which included $25.6 million of impairment charges previously classified in discontinued operations which are now classified asCost of productsin our fiscal 2015 Consolidated Statement of Income. Also during the first quarter of fiscal 2017, we decided to shut down our metal machining operation which had been available for sale. The shutdown of the metal machining operation was completed prior to the end of the first quarter of fiscal 2017.

        Telair Cargo Group and PSM's metal machining operation are reported as discontinued operations in the Consolidated Statements of Income for all periods presented. No amounts for general corporate overhead were allocated to discontinued operations during the periods presented. Interest expense allocated to discontinued operations was $8.5 million for fiscal 2015. No interest expense was allocated to discontinued operations in fiscal 2017 and fiscal 2016.

        Liabilities of discontinued operations of $6.9 million and $12.5 million at May 31, 2017 and 2016, respectively, were classified as Accrued liabilities on the Consolidated Balance Sheet. Income from discontinued operations was comprised of the following:

	For the Year Ended May 31,
	2017			2016			2015
Sales	$	0.6		$	11.5		$	259.2
Cost of sales		1.0			15.3			219.7
Selling, general and administrative expenses		1.2			3.0			26.9
Interest expense, net.		—			—			9.4
Operating income (loss) from discontinued operations		(1.6	)		(6.8	)		3.2
Gain on sale of Telair Cargo Group		—			27.7			198.6
PSM Impairment charges		—			—			(31.9	)
Provision for income taxes (benefit)		(7.9	)		11.5			85.6
Income from discontinued operations		6.3			9.4			84.3
Income attributable to noncontrolling interest		—			—			(0.2	)
Income from discontinued operations attributable to AAR	$	6.3		$	9.4		$	84.1

        During the third quarter of fiscal 2016, we recognized $2.8 million of income tax expense in discontinued operations related to changes in estimates associated with tax provision to federal income tax return filing differences.

        During the fourth quarter of fiscal 2017, we recognized an income tax benefit in discontinued operations of $6.7 million for an effective settlement of a previously reserved tax position.

        Unless otherwise noted, amounts and disclosures throughout these Notes to Consolidated Financial Statements relate to our continuing operations.