Business Segment Information

6 Months Ended

Nov. 30, 2011

Business Segment Information

Business Segment Information

Note 15 — Business Segment Information

We report our activities in four business segments: Aviation Supply Chain; Government and Defense Services; Maintenance, Repair and Overhaul; and Structures and Systems.

Sales in the Aviation Supply Chain segment are derived from the sale and lease of a wide variety of new, overhauled and repaired engine and airframe parts and components principally to the commercial aviation market.  We also offer customized inventory supply chain management programs.  Sales also include the sale and lease of commercial aircraft and jet engines and technical and advisory services.  Cost of sales consists principally of the cost of product, direct labor, overhead (primarily indirect labor, facility cost and insurance) and the cost of lease revenue (primarily depreciation and insurance).

Sales in the Government and Defense Services segment are derived from the sale of new and overhauled engine and airframe parts and components, customized performance-based logistics programs, expeditionary airlift services, aircraft modifications and engineering, design, and integration services to our government and defense customers.  Cost of sales consists principally of the cost of the product (primarily aircraft and engine parts), direct labor, overhead and aircraft maintenance costs.

Sales in the Maintenance, Repair and Overhaul segment are principally derived from aircraft maintenance, including painting, and the repair and overhaul of landing gear.  Cost of sales consists principally of the cost of product (primarily replacement aircraft parts), direct labor and overhead.

Sales in the Structures and Systems segment are derived from the engineering, design and manufacture of containers, pallets and shelters used to support the U.S. military’s requirements for a mobile and agile force, complex machined and fabricated parts, components and sub-systems for various aerospace and defense programs and other applications, in-plane cargo loading and handling systems for commercial and military applications and composite products for aviation and industrial use.  Cost of sales consists principally of the cost of product, direct labor and overhead.

In the second quarter of fiscal 2012, we recognized losses on certain programs at our precision machining business which operates as part of our Structures and Systems segment.  The losses on certain programs include $2,157 of out-of-period expenses primarily related to an inventory adjustment, with $921 originating in fiscal 2011 and $1,236 originating in the first quarter of fiscal 2012.  This adjustment was not material to any of the related periods.

The accounting policies for the segments are the same as those described in Note 1 of Notes to Consolidated Financial Statements included in our annual report on Form 10-K for the year ended May 31, 2011.  Our chief operating decision making officer (Chief Executive Officer) evaluates performance based on the reportable segments and utilizes gross profit as a primary profitability measure.  The expenses and assets related to corporate activities are not allocated to the segments.  Our reportable segments are aligned principally around differences in products and services.

Gross profit is calculated by subtracting cost of sales from sales.  Selected financial information for each reportable segment is as follows:

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2011		2010		2011		2010
Sales:
Aviation Supply Chain	$	143,351	$	111,324	$	298,225	$	211,590
Government and Defense Services	142,389		134,406		292,388		263,736
Maintenance, Repair and Overhaul	91,881		99,041		185,058		175,860
Structures and Systems	98,281		95,751		179,521		193,729
	$	475,902	$	440,522	$	955,192	$	844,915

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2011		2010		2011		2010
Gross profit:
Aviation Supply Chain	$	25,724	$	19,340	$	51,023	$	38,580
Government and Defense Services	23,933		24,129		51,342		47,151
Maintenance, Repair and Overhaul	13,464		12,290		23,725		22,397
Structures and Systems	14,035		17,919		25,906		35,551
	$	77,156	$	73,678	$	151,996	$	143,679