Business Segment Information

9 Months Ended

Feb. 28, 2015

Business Segment Information

Business Segment Information

Note 11 — Business Segment Information

As discussed in Note 2 — Discontinued Operations, we began reporting our Telair Cargo Group and Precision Systems Manufacturing businesses as discontinued operations effective in the third quarter of fiscal 2015.   Prior to the decision to sell these two businesses, we reported our activities in the following two business segments: Aviation Services comprised of our supply chain, maintenance, repair and overhaul (“MRO”) and airlift activities and Technology Products comprised of our Telair Cargo Group, Precision Systems Manufacturing, and mobility businesses.

As a result of the divestitures of the Telair Cargo Group and Precision Systems Manufacturing, we have revised our reportable segments to align to our new organizational structure.  We will report our results in two new segments:  Aviation Services comprised of supply chain and MRO activities and Expeditionary Services comprised of airlift and mobility activities.  This new presentation reflects the way our chief operating decision making officer (Chief Executive Officer) now evaluates performance and our internal organizational and management structure.

The Aviation Services segment consists of businesses that provide spares 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, aircraft component repair management services, and aircraft modifications.  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 businesses that provide products and services supporting the movement of equipment and personnel by the U.S. DoD, foreign governments and non-governmental organizations. Sales in the Expeditionary Services segment are derived from the delivery of airlift services to mostly government and defense customers and the design and manufacture of pallets, shelters, and containers used to support the U.S. military’s requirements for a mobile and agile force.  We also provide system integration services for specialized command and control systems.  Cost of sales consists principally of aircraft maintenance costs, depreciation, the cost of material to manufacture products, direct labor and overhead.

Segment results have been reclassified for all periods presented to reflect our new segment presentation.

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, 2014.  Our Chief Executive Officer evaluates performance based on the reportable 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.  Our reportable segments are aligned principally around differences in products and services.

Selected financial information for each segment is as follows:

	Three Months Ended				Nine Months Ended
	February 28,				February 28,
	2015		2014		2015		2014
Sales:
Aviation Services	$	318.4	$	289.7	$	955.9	$	923.5
Expeditionary Services	61.7		110.1		222.6		365.0
	$	380.1	$	399.8	$	1,178.5	$	1,288.5

	Three Months Ended					Nine Months Ended
	February 28,					February 28,
	2015			2014		2015		2014
Gross profit:
Aviation Services	$	50.7		$	38.3	$	152.8	$	125.5
Expeditionary Services	(0.6		)	27.9		26.9		89.9
	$	50.1		$	66.2	$	179.7	$	215.4

The following table reconciles segment gross profit to income from continuing operations before provision for income taxes:

	Three Months Ended						Nine Months Ended
	February 28,						February 28,
	2015			2014			2015			2014
Segment gross profit	$	50.1		$	66.2		$	179.7		$	215.4
Selling, general and administrative	(41.7		)	(37.7		)	(120.3		)	(120.3		)
Earnings from joint ventures	0.6			0.6			1.8			2.5
Interest expense	(6.4		)	(7.1		)	(19.4		)	(21.9		)
Interest income	—			0.3			0.2			0.9
Income before provision for income taxes	$	2.6		$	22.3		$	42.0		$	76.6