Business Segment Information

9 Months Ended

Feb. 28, 2017

Business Segment Information

Business Segment Information

Note 13 — 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 business segments:  Aviation Services comprised of supply chain and maintenance, repair and overhaul (“MRO”) activities and Expeditionary Services comprised of airlift and mobility activities.

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.  We also sell and lease used commercial aircraft through joint venture arrangements.  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. Department of Defense (“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 and composite manufacturing.  Cost of sales consists principally of aircraft maintenance costs, depreciation, 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 annual report on Form 10-K for the year ended May 31, 2016.  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.  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 28/29,				February 28/29,
	2017		2016		2017		2016
Sales:
Aviation Services	$	382.8	$	349.2	$	1,064.1	$	1,024.6
Expeditionary Services	63.9		62.9		211.2		205.7
	$	446.7	$	412.1	$	1,275.3	$	1,230.3

	Three Months Ended				Nine Months Ended
	February 28/29,				February 28/29,
	2017		2016		2017		2016
Gross profit:
Aviation Services	$	63.4	$	58.6	$	172.8	$	166.7
Expeditionary Services	5.6		0.7		23.9		5.6
	$	69.0	$	59.3	$	196.7	$	172.3

The following table reconciles segment gross profit to consolidated income before provision for income taxes.

	Three Months Ended						Nine Months Ended
	February 28/29,						February 28/29,
	2017			2016			2017			2016
Segment gross profit	$	69.0		$	59.3		$	196.7		$	172.3
Selling, general and administrative	(47.4		)	(43.1		)	(138.5		)	(126.2		)
Loss from joint ventures	(0.2		)	—			(0.2		)	(0.4		)
Loss on extinguishment of debt	—			—			—			(0.4		)
Interest expense	(1.5		)	(1.7		)	(4.0		)	(5.2		)
Interest income	0.1			0.1			0.2			0.2
Income before provision for income taxes	$	20.0		$	14.6		$	54.2		$	40.3