10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended November 30, 2020

or

☐       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                   

Commission File No. 1-6263

AAR CORP.

(Exact name of registrant as specified in its charter)

Delaware	36-2334820
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One AAR Place, 1100 N. Wood Dale Road Wood Dale, Illinois	60191
(Address of principal executive offices)	(Zip Code)

(630) 227-2000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $1.00 par value	AIR	New York Stock Exchange Chicago Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ⌧ No  ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ⌧ No  ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ⌧ Accelerated filer ◻ Non-accelerated filer ◻ Smaller reporting company  ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐ No  ⌧

As of November 30, 2020 there were 35,292,336 shares of the registrant’s Common Stock, $1.00 par value per share, outstanding.

AAR CORP. and Subsidiaries

Quarterly Report on Form 10-Q

For the Quarter Ended November 30, 2020

Table of Contents

		Page
Part I — FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive Income (Loss)	6
	Condensed Consolidated Statements of Cash Flows	7
	Condensed Consolidated Statements of Changes in Equity	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
Part II — OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 6.	Exhibits	31
Exhibit Index		31
Signature Page		32

2

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

AAR CORP. and Subsidiaries

Condensed Consolidated Balance Sheets

As of November 30, 2020 and May 31, 2020

(In millions, except share data)

ASSETS

	November 30,		May 31,
	2020		2020
	(Unaudited)
Current assets:
Cash and cash equivalents	$	110.0	$	404.7
Restricted cash		3.0		20.0
Accounts receivable, less allowances of $19.4 and $22.1, respectively		169.8		171.9
Contract assets		52.8		49.3
Inventories		585.0		623.1
Rotable assets and equipment on or available for short-term lease		59.4		69.6
Assets of discontinued operations		21.2		22.9
Other current assets		40.5		77.2
Total current assets		1,041.7		1,438.7
Property, plant and equipment, net of accumulated depreciation of $248.4 and $246.5 respectively		125.0		135.7
Other assets:
Goodwill and intangible assets, net		122.6		121.7
Operating lease right-of-use assets, net		83.3		89.7
Rotable assets supporting long-term programs		200.5		211.7
Other non-current assets		96.2		81.5
		502.6		504.6
	$	1,669.3	$	2,079.0

The accompanying Notes to Condensed Consolidated Financial

Statements are an integral part of these statements.

3

AAR CORP. and Subsidiaries

Condensed Consolidated Balance Sheets

As of November 30, 2020 and May 31, 2020

(In millions, except share data)

LIABILITIES AND EQUITY

	November 30,		May 31,
	2020		2020
	(Unaudited)
Current liabilities:
Accounts payable	$	198.3	$	191.6
Accrued liabilities		153.1		161.6
Payroll Support Program deferred credit		23.6		—
Liabilities of discontinued operations		33.2		29.9
Total current liabilities		408.2		383.1
Long-term debt		220.3		600.0
Operating lease liabilities		66.0		70.9
Deferred revenue on long-term programs		30.3		88.0
Other liabilities		43.8		34.4
		360.4		793.3
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		475.1		478.6
Retained earnings		699.6		706.0
Treasury stock, 10,008,450 and 10,203,437 shares at cost, respectively		(276.3)		(282.7)
Accumulated other comprehensive loss		(43.0)		(44.6)
Total equity		900.7		902.6
	$	1,669.3	$	2,079.0

The accompanying Notes to Condensed Consolidated Financial

Statements are an integral part of these statements.

4

AAR CORP. and Subsidiaries

Condensed Consolidated Statements of Operations

For the Three and Six Months Ended November 30, 2020 and 2019

(Unaudited)

(In millions, except share data)

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Sales:
Sales from products	$	233.1	$	293.0	$	469.4	$	568.1
Sales from services		170.5		267.9		335.0		534.3
		403.6		560.9		804.4		1,102.4
Cost and operating expenses:
Cost of products		194.3		242.0		398.8		462.1
Cost of services		139.8		233.0		287.5		472.8
Provision for doubtful accounts		4.4		0.7		4.4		1.4
Selling, general and administrative		43.4		57.1		88.7		115.2
		381.9		532.8		779.4		1,051.5
Loss from joint ventures		(0.1)		—		(0.2)		—
Operating income		21.6		28.1		24.8		50.9
Loss on sale of business		––		—		(19.5)		—
Other expenses, net		(0.7)		(0.2)		(0.5)		(0.4)
Interest expense		(1.3)		(1.9)		(3.0)		(4.1)
Interest income		––		0.1		0.1		0.2
Income from continuing operations before provision for income taxes		19.6		26.1		1.9		46.6
Provision for income taxes		5.2		6.0		1.4		9.4
Income from continuing operations		14.4		20.1		0.5		37.2
Loss from discontinued operations, net of tax		(6.2)		(5.9)		(6.8)		(18.6)
Net income (loss)	$	8.2	$	14.2	$	(6.3)	$	18.6
Earnings (Loss) per share – basic:
Earnings from continuing operations	$	0.41	$	0.58	$	0.01	$	1.07
Loss from discontinued operations		(0.18)		(0.17)		(0.20)		(0.54)
Earnings (Loss) per share – basic	$	0.23	$	0.41	$	(0.19)	$	0.53
Earnings (Loss) per share – diluted:
Earnings from continuing operations	$	0.41	$	0.57	$	0.01	$	1.06
Loss from discontinued operations		(0.18)		(0.17)		(0.19)		(0.53)
Earnings (Loss) per share – diluted	$	0.23	$	0.40	$	(0.18)	$	0.53

The accompanying Notes to Condensed Consolidated Financial

Statements are an integral part of these statements.

5

AAR CORP. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

For the Three and Six Months Ended November 30, 2020 and 2019

(Unaudited)

(In millions)

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Net income (loss)	$	8.2	$	14.2	$	(6.3)	$	18.6
Other comprehensive income, net of tax:
Currency translation adjustments		1.1		0.5		2.3		0.4
Pension and other post-retirement plans, net of tax of ($0.5) and $0.1 for the three months ended November 30, 2020 and 2019, respectively, and ($0.4) and $0.1 for the six months ended November 30, 2020 and 2019, respectively		(1.0)		0.3		(0.7)		0.5
Other comprehensive income, net of tax		0.1		0.8		1.6		0.9
Comprehensive income	$	8.3	$	15.0	$	(4.7)	$	19.5

The accompanying Notes to Condensed Consolidated Financial

Statements are an integral part of these statements.

6

AAR CORP. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended November 30, 2020 and 2019

(Unaudited)

(In millions)

	Six Months Ended
	November 30,
	2020		2019
Cash flows provided from (used in) operating activities:
Net income (loss)	$	(6.3)	$	18.6
Less: Loss from discontinued operations		6.8		18.6
Income from continuing operations		0.5		37.2
Adjustments to reconcile income from continuing operations to net cash provided from (used in) operating activities:
Depreciation and intangible amortization		18.2		21.8
Stock-based compensation		4.5		7.1
Provision for doubtful accounts		4.4		1.4
Deferred tax provision		1.0		0.9
Loss from joint ventures		0.2		—
Loss on sale of business		19.5		—
Contract termination and restructuring costs		2.2		—
Impairment charges		7.0		—
Changes in certain assets and liabilities:
Accounts receivable		(4.8)		(11.0)
Contract assets		(7.5)		(2.8)
Inventories		30.2		(56.8)
Rotable assets supporting long-term programs		(0.9)		(19.1)
Accounts payable		8.8		42.5
Accrued and other liabilities		0.2		(17.9)
Payroll Support Program deferred credit		23.6		—
Deferred revenue on long-term programs		(60.4)		23.3
Other		20.7		(36.8)
Net cash provided from (used in) operating activities — continuing operations		67.4		(10.2)
Net cash used in operating activities — discontinued operations		(1.9)		(7.7)
Net cash provided from (used in) operating activities		65.5		(17.9)
Cash flows provided from (used in) investing activities:
Property, plant and equipment expenditures		(6.0)		(10.2)
Proceeds from termination of life insurance policies		10.0		—
Other		1.6		(1.5)
Net cash provided from (used in) investing activities – continuing operations		5.6		(11.7)
Cash flows provided from (used in) financing activities:
Short-term borrowings , net		(390.0)		55.0
Proceeds from Payroll Support Program note		8.7		—
Cash dividends		(0.1)		(5.5)
Purchase of treasury stock		—		(4.1)
Financing costs		—		(1.3)
Stock compensation activity		(1.5)		(3.0)
Net cash provided from (used in) financing activities — continuing operations		(382.9)		41.1
Effect of exchange rate changes on cash		0.1		0.1
Increase (Decrease) in cash and cash equivalents		(311.7)		11.6
Cash, cash equivalents, and restricted cash at beginning of period		424.7		41.1
Cash, cash equivalents, and restricted cash at end of period	$	113.0	$	52.7

The accompanying Notes to Condensed Consolidated Financial

Statements are an integral part of these statements.

7

AAR CORP. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity

For the Three and Six Months Ended November 30, 2020 and 2019

(Unaudited)

(In millions)

									Accumulated
									Other
	Common		Capital		Retained		Treasury		Comprehensive
	Stock		Surplus		Earnings		Stock		Income (Loss)		Total Equity
Balance, May 31, 2020	$	45.3	$	478.6	$	706.0	$	(282.7)	$	(44.6)	$	902.6
Net loss		—		—		(14.5)		—		—		(14.5)
Cash dividends		—		—		(0.1)		—		—		(0.1)
Stock option activity		—		0.5		—		0.5		—		1.0
Restricted stock activity		—		(6.0)		—		6.1		—		0.1
Other comprehensive income, net of tax		—		—		—		—		1.5		1.5
Balance, August 31, 2020	$	45.3	$	473.1	$	691.4	$	(276.1)	$	(43.1)	$	890.6
Net income		—		—		8.2		—		—		8.2
Stock option activity		—		1.1		—		0.1		—		1.2
Restricted stock activity		—		0.9		—		(0.3)		—		0.6
Other comprehensive income, net of tax		—		—		—		—		0.1		0.1
Balance, November 30, 2020	$	45.3	$	475.1	$	699.6	$	(276.3)	$	(43.0)	$	900.7
Balance, May 31, 2019	$	45.3	$	479.4	$	709.8	$	(287.7)	$	(40.9)	$	905.9
Cumulative effect adjustment upon adoption of ASC 842 on June 1, 2019		—		—		2.5		—		—		2.5
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, net of tax		—		—		—		—		0.1		0.1
Balance, August 31, 2019	$	45.3	$	476.0	$	713.8	$	(284.8)	$	(40.8)	$	909.5
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, net of tax		—		—		—		—		0.8		0.8
Balance, November 30, 2019	$	45.3	$	478.7	$	725.4	$	(287.7)	$	(40.0)	$	921.7

The accompanying Notes to Condensed Consolidated Financial

Statements are an integral part of these statements.

8

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

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, 2020 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, 2020, the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income (Loss) for the three- and six-month periods ended November 30, 2020 and 2019, the Condensed Consolidated Statements of Cash Flows for the six-month periods ended November 30, 2020 and 2019, and the Condensed Consolidated Statement of Changes in Equity for the three- and six-month periods ended November 30, 2020 and 2019. The results of operations for such interim periods are not necessarily indicative of the results for the full year.

New Accounting Pronouncements

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.

Our adoption of this ASU on June 1, 2020 did not have a material impact on our Condensed Consolidated Financial Statements.

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

In the fourth quarter of fiscal 2020, we completed the sale of the last operating contract of the COCO business shortly after government approval. Our continuing involvement in the COCO business is limited to the lease of certain aircraft which is an obligation of the acquirer of this contract. The assets and liabilities of our discontinued operations are primarily comprised of right-of-use assets and lease-related liabilities.

9

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

Note 3 – Sale of Composites Business

On August 31, 2020, we completed the sale of our aerostructures and aerospace products operations located in Clearwater, Florida and Sacramento, California (“Composites”). The Composites business was formerly included in our Expeditionary Services segment. The sale of Composites is consistent with our multi-year strategy to focus our portfolio on our core services offerings and the transaction will allow us to further prioritize our efforts in our principal businesses.

We recognized a loss on the sale of the Composites business of $19.5 million which included consideration of $2.3 million. Consideration from the sale is subject to a post-closing working capital adjustment and includes contingent consideration of up to $6.5 million based on the achievement of sales targets over the next three years. Consideration included in the loss on sale was comprised of net cash received of $1.0 million and the fair value of the earn-out consideration of $1.3 million.

Note 4 – 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. We recognize revenue when we satisfy 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, we determine 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 is 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. For contracts that are

10

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

deemed to be loss contracts, we establish forward loss reserves for total estimated costs that are in excess of total estimated consideration in the period in which they become known.

When contracts are modified, we consider whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original goods or services provided, are accounted for as if they were part of that existing contract with the effect of the contract modification recognized as an adjustment to revenue on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct, they are accounted for as a new contract and performance obligation, which are recognized prospectively.

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. These changes are primarily adjustments to the estimated profitability for our long-term programs where we provide component inventory management and/or repair services. For the three-month periods ended November 30, 2020 and 2019, we recognized favorable cumulative catch-up adjustments of $2.5 million and $1.9 million, respectively. For the six-month periods ended November 30, 2020 and 2019, we recognized favorable cumulative catch-up adjustments of $2.8 million and $1.9 million, 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 ASU No. 2014-09, Revenue from Contracts with Customers. 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 on our Condensed Consolidated Statement of Operations, and are not considered a performance obligation to our customers. Our reported sales on our Condensed Consolidated Statement of Operations 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 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,
	2020		2020		Change
Contract assets – current	$	52.8	$	49.3	$	3.5
Contract assets – non-current		24.1		22.4		1.7
Contract liabilities:
Deferred revenue – current		(18.1)		(11.2)		(6.9)
Deferred revenue on long-term contracts		(30.3)		(88.0)		57.7
Net contract assets (liabilities)	$	28.5	$	(27.5)	$	56.0

11

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

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.

During the first quarter of fiscal 2021, we terminated a commercial power-by-the-hour ("PBH") customer contract which resulted in a charge of $2.2 million. During fiscal 2020, we established forward loss reserves for a certain PBH contract where total estimated costs are in excess of the total estimated consideration over the remainder of the contract. As of November 30, 2020, our Condensed Consolidated Balance Sheet included remaining forward loss reserves of $4.2 million with $3.7 million classified as current in Accrued liabilities and $0.5 million classified as long-term in Other liabilities.

To support our PBH customer contracts, we previously entered into an agreement with a component repair facility to outsource a portion of the component repair and overhaul services. The agreement included certain minimum repair volume guarantees which we have not met due to the impact of COVID-19 on commercial passenger aircraft flight hours. During the three-month period ended November 30, 2020, we recognized a $4.5 million charge to reflect our estimated obligation over the remainder of the agreement for not achieving the minimum volume guarantees.

Changes in our deferred revenue were as follows for the three- and six-month periods ended November 30, 2020 and 2019:

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Deferred revenue at beginning of period	$	(85.4)	$	(86.3)	$	(99.2)	$	(96.4)
Revenue deferred		(50.8)		(153.7)		(123.0)		(240.3)
Revenue recognized		87.6		103.3		176.1		204.3
Other		0.2		2.9		(2.3)		(1.4)
Deferred revenue at end of period	$	(48.4)	$	(133.8)	$	(48.4)	$	(133.8)

Remaining Performance Obligations

As of November 30, 2020, we had approximately $750 million 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 50% 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 that are expected to be recognized as revenue beyond 12 months, primarily relates to our long-term programs where we provide component inventory management and/or repair services.

12

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

Disaggregation of Revenue

Sales across the major customer markets for each of our reportable segments for the three- and six-month periods ended November 30, 2020 and 2019 were as follows:

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Aviation Services:
Commercial	$	192.2	$	369.6	$	361.8	$	700.1
Government and defense		192.8		162.4		386.8		343.7
	$	385.0	$	532.0	$	748.6	$	1,043.8
Expeditionary Services:
Commercial	$	2.0	$	6.4	$	7.7	$	12.1
Government and defense		16.6		22.5		48.1		46.5
	$	18.6	$	28.9	$	55.8	$	58.6

Sales by geographic region for the three- and six-month periods ended November 30, 2020 and 2019 were as follows:

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Aviation Services:
North America	$	314.1	$	395.6	$	608.9	$	786.0
Europe/Africa		45.7		99.8		96.7		188.0
Other		25.2		36.6		43.0		69.8
	$	385.0	$	532.0	$	748.6	$	1,043.8
Expeditionary Services:
North America	$	18.4	$	26.4	$	53.3	$	54.6
Europe/Africa		0.2		2.2		2.4		3.6
Other		—		0.3		0.1		0.4
	$	18.6	$	28.9	$	55.8	$	58.6

13

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

Note 5 – 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,
	2020		2020
U.S. Government contracts:
Trade receivables	$	30.4	$	33.9
Unbilled receivables		25.6		27.4
		56.0		61.3
All other customers:
Trade receivables		88.9		81.7
Unbilled receivables		24.9		28.9
		113.8		110.6
	$	169.8	$	171.9

We currently have past due accounts receivable owed by former commercial program customers primarily related to our exit from customer contracts in certain geographies, including Colombia and Peru. Our past due accounts receivable owed by these customers was $6.9 million as of November 30, 2020 which was net of allowance for doubtful accounts of $8.4 million.

Note 6 – Restructuring and Impairment Costs

During the six-month period ended November 30, 2020, we incurred severance and furlough-related costs of $8.2 million which were included as a component of Cost of sales and Selling, general and administrative on our Condensed Consolidated Statements of Operations. Our liability for severance costs, inclusive of charges in prior periods which have not yet been paid, was $3.9 million as of November 30, 2020 which is included in Accrued liabilities on the Condensed Consolidated Balance Sheet.

In accordance with ASC 360, Property, Plant and Equipment, we are required to test for impairment of long-lived assets whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable from its undiscounted cash flows. We utilize certain assumptions to estimate future undiscounted cash flows, including demand for our services, future market conditions and trends, business development pipeline of opportunities, current and future lease rates, lease terms, and residual values. In light of recent declines in commercial airline volumes and commercial program contract terminations, we evaluated future cash flows related to certain rotable assets supporting long-term programs and recognized asset impairment charges of $5.8 million in the three-month period ended August 31, 2020.

Note 7 – Accounting for Stock-Based Compensation

Restricted Stock

In the three-month period ended August 31, 2020, as part of our annual long-term stock incentive compensation, we granted 141,615 shares of time-based restricted stock to eligible employees. The grant date fair value per share for these shares was $18.94 (the closing price on the grant date). We also granted 71,025 shares of time-based restricted stock to members of the Board of Directors with an average grant date fair value per share of $20.00.

Expense charged to operations for restricted stock during the three-month periods ended November 30, 2020 and 2019 was $0.8 million and $1.8 million, respectively, and $2.7 and $4.9 million during the six-month periods ended November 30, 2020 and 2019.

14

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

Stock Options

In July 2020, as part of our annual long-term stock incentive compensation, we issued 927,300 stock options to eligible employees at an exercise price of $18.94. The stock option awards were issued subject to stockholder approval of an increase in available shares under the AAR CORP. 2013 Stock Plan. Stockholders approved the amendment to the AAR CORP. 2013 Stock Plan at the 2020 Annual Meeting of Stockholders held October 7, 2020 and the shares were granted at a weighted average fair value of $5.89. The fair value of stock options was estimated using the Black-Scholes option pricing model with the following assumptions:

Risk-free interest rate	0.4	%
Expected volatility of common stock	40.2	%
Dividend yield	1.6	%
Expected option term in years	4.8

The total intrinsic value of stock options exercised during the six-month periods ended November 30, 2020 and 2019 was $0.1 million and $2.0 million, respectively. Expense charged to operations for stock options during the three-month periods ended November 30, 2020 and 2019 was $1.0 million and $1.0 million, respectively, and during the six-month periods ended November 30, 2020 and 2019 was $1.8 million and $2.2 million, respectively.

Note 8 – Inventories

The summary of inventories is as follows:

	November 30,		May 31,
	2020		2020
Aircraft and engine parts, components and finished goods	$	521.9	$	556.6
Raw materials and parts		41.1		45.9
Work-in-process		22.0		20.6
	$	585.0	$	623.1

During the three-month period ended November 30, 2020, we decided to exit a product line in our engineering operations and recognized a $1.2 million charge to reserve against the remaining inventory.

Note 9 – Supplemental Cash Flow Information

	Six Months Ended
	November 30,
	2020		2019
Interest paid	$	2.6	$	3.8
Income taxes paid		2.2		12.7
Income tax refunds received		0.1		2.4

Note 10 – 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 and Purchaser may, but is not required to, purchase the eligible receivables we offer to sell. The term of the Purchase Agreement runs through February 22, 2021, 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.

15

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

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, and de-recognize the sold receivables from our Condensed Consolidated Balance Sheet.

During the six-month periods ended November 30, 2020 and 2019, we sold $243.1 million and $404.8 million, respectively, of receivables under the Purchase Agreement and remitted $268.5 million and $405.3 million, respectively, to the Purchaser on their behalf. As of November 30, 2020 and May 31, 2020, we had collected cash of $3.0 million and $20.0 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 Operations. We incurred discounts on the sale of our receivables of $0.1 million and $0.5 million during the three-month periods ended November 30, 2020 and 2019, respectively, and $0.2 million and $1.1 million during the six-month periods ended November 30, 2020 and 2019, respectively.

Note 11 – Government Subsidies

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in the U.S. in response to the COVID-19 pandemic. The CARES Act includes provisions relating to refundable payroll tax credits, deferral of the employer portion of certain payroll taxes, net operating loss carrybacks, and other areas. The payroll tax deferral requires that the deferred payroll taxes be paid over two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. As of November 30, 2020, we deferred $11.0 million of payroll taxes which are included in Other liabilities on our Condensed Consolidated Balance Sheet.

During the three-month period ended August 31, 2020, we received $57.2 million from the U.S. Treasury Department through the Payroll Support Program under the CARES Act. This funding included a $48.5 million cash grant which is to be used exclusively for the continuation of payment of employee wages, salaries and benefits for employees of certain maintenance, repair, and overhaul (“ MRO”) facilities. The grant is being recognized as contra-expense on our Condensed Consolidated Statement of Operations as the eligible wages, salaries and benefits are incurred. During the three-month period ended November 30, 2020, we recognized contra-expense within Cost of sales and Selling, general and administrative expenses of $16.8 million and $0.4 million, respectively, and during the six-month period ended November 30, 2020, we recognized contra-expense within Cost of sales and Selling, general and administrative expenses of $24.3 million and $0.6 million.

The remaining funding of $8.7 million is a low interest 10-year senior unsecured promissory note (“Promissory Note”) which bears interest at a rate per annum equal to the sum of (i) 1.0% for the first five years, and the applicable secured overnight financing rate plus 2.0% in years six through ten plus (ii) in kind interest of 3.0% for the first five years and increasing by 1.0% each year over the remaining term. The Promissory Note is pre-payable at par at any time. Certain corporate restrictions apply to us for approximately the next two years which include restrictions on dividends, stock repurchases, employee compensation, and certain workforce actions.

Other countries have enacted legislation similar to the CARES Act to provide relief and stimulus measures to assist companies in mitigating the financial impact from COVID-19 and supporting their employees. During the three-and six-month periods ended November 30, 2020, our foreign subsidiaries recognized employment subsidies of $1.6 and $4.9 million from foreign governments which have been deducted from the related expenses on our Condensed Consolidated Statement of Operations.

16

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

Note 12 – Financing Arrangements

A summary of the carrying amount of our debt is as follows:

	November 30,		May 31,
	2020		2020
Revolving Credit Facility expiring September 25, 2024 with interest payable monthly	$	189.5	$	579.5
Term loan due November 1, 2021 with interest payable monthly		23.9		22.5
Payroll Support Program Promissory Note		8.7		—
Total debt		222.1		602.0
Debt issuance costs, net		(1.8)		(2.0)
Long-term debt	$	220.3	$	600.0

At November 30, 2020, our 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 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.

We maintain a Revolving Credit Facility with various financial institutions, as lenders, and Bank of America, N.A., as administrative agent for the lenders, which provides the Company an aggregate revolving credit commitment of $600 million and matures September 25, 2024. Under certain circumstances, we have the ability to request, but our lenders are not required to grant, an increase to the revolving credit commitment by an aggregate amount of up to $300 million, not to exceed $900 million in total. Borrowings under the Revolving Credit Facility bear interest at the offered Eurodollar Rate plus 87.5 to 175 basis points based on certain financial measurements if a Eurodollar Rate loan, or at the offered fluctuating Base Rate plus 0 to 75 basis points based on certain financial measurements if a Base Rate loan.

The term loan under the Credit Agreement that matures on November 1, 2021 has been classified as a long-term liability due to our intent and ability to refinance this bond on a long-term basis using our Revolving Credit Facility.

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, 2020, we were in compliance with the financial and other covenants in our financing agreements.

Note 13 – Other Non-current Assets

Investments in Joint Ventures

Our investments in joint ventures include $9.7 million for our 40% ownership interest in a joint venture in India to develop and operate an airframe maintenance facility.  Facility construction and commencement of operations are expected to occur in fiscal 2021.  

17

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

The investment balance as of November 30, 2020 includes $8.5 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 has a loan to the joint venture proportionate to its equity ownership.  Our loan to the Indian joint venture under this arrangement was $3.0 million as of November 30, 2020.

License Fees

In June 2011, we entered into a ten-year agreement with Unison Industries (“Unison”) to be the exclusive worldwide aftermarket distributor for Unison’s electrical components, sensors, switches and other systems for aircraft and industrial uses.  In June 2020, we entered into an extension and expansion of our agreement with Unison including a new termination date of December 31, 2031, an initial $25.0 million license fee paid in June 2020 to Unison, and annual license fees at a fixed percentage of our net sales of Unison products.  The June 2020 payment of $25.0 million was capitalized and is being amortized on a straight-line basis over the term of the new agreement.

Split-Dollar Life Insurance Arrangements

We previously entered into split-dollar life insurance agreements to benefit certain former executives and officers.  Under the terms of the arrangements, we made premium payments on the individuals’ behalf and we retained a collateral interest in the policies generally to the extent of the premiums we previously paid.  As of May 31, 2020, our Condensed Consolidated Balance Sheet included $15.6 million in Other non-current assets for cumulative premiums paid and expected to be reimbursed upon termination of the policies.

During the second quarter of fiscal 2021, certain split-dollar life insurance agreements were terminated and we received $12.0 million for reimbursement of both the life insurance premiums we previously paid and a portion of our prior tax payments made on the individuals’ behalf related to their imputed income on the policies.  The reimbursement of the premiums paid of $10.0 million has been classified as cash flow from investing activities with the remainder included in cash flow from operating activities as it represents the reimbursement of a portion of the taxes previously paid and expensed.  In the second quarter of fiscal 2021, we recognized a benefit of $1.3 million in Selling, general and administrative expenses on the Condensed Consolidated Statement of Operations for the net recovery of the taxes previously paid on behalf of the individuals.

Note 14 – 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.

18

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

A reconciliation of the computations of basic and diluted earnings per share information for the three-and six-month periods ended November 30, 2020 and 2019 is as follows:

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Basic and Diluted EPS:
Income from continuing operations	$	14.4	$	20.1	$	0.5	$	37.2
Less income attributable to participating shares		(0.1)		(0.1)		—		(0.2)
Income from continuing operations attributable to common shareholders		14.3		20.0		0.5		37.0
Loss from discontinued operations attributable to common shareholders		(6.2)		(5.9)		(6.8)		(18.6)
Net income (loss) attributable to common shareholders for earnings per share	$	8.1	$	14.1	$	(6.3)	$	18.4
Weighted Average Shares:
Weighted average common shares outstanding - basic		34.9		34.6		34.9		34.6
Additional shares from the assumed exercise of stock options		0.1		0.4		0.1		0.4
Weighted average common shares outstanding - diluted		35.0		35.0		35.0		35.0
Earnings (Loss) per share – basic:
Earnings from continuing operations	$	0.41	$	0.58	$	0.01	$	1.07
Loss from discontinued operations		(0.18)		(0.17)		(0.20)		(0.54)
Earnings (Loss) per share - basic	$	0.23	$	0.41	$	(0.19)	$	0.53
Earnings (Loss) per share – diluted:
Earnings from continuing operations	$	0.41	$	0.57	$	0.01	$	1.06
Loss from discontinued operations		(0.18)		(0.17)		(0.19)		(0.53)
Earnings (Loss) per share - diluted	$	0.23	$	0.40	$	(0.18)	$	0.53

The potential dilutive effect of 1,743,000 and 267,000 shares relating to stock options was excluded from the computation of weighted average common shares outstanding – diluted for the three-month periods ended November 30, 2020 and 2019, respectively, as the shares would have been anti-dilutive. The potential dilutive effect of 1,743,000 and 267,000 shares relating to stock options was excluded from the computation of weighted average common shares outstanding – diluted for the six-month periods ended November 30, 2020 and 2019.

19

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

Note 15 – Accumulated Other Comprehensive Loss

Changes in our accumulated other comprehensive loss (“AOCL”) by component for the three- and six-month periods ended November 30, 2020 and 2019 were as follows:

	Currency
	Translation		Pension
	Adjustments		Plans		Total
Balance at September 1, 2020	$	(0.8)	$	(42.3)	$	(43.1)
Other comprehensive income before reclassifications		1.1		(1.2)		(0.1)
Amounts reclassified from AOCL		—		0.2		0.2
Total other comprehensive income		1.1		(1.0)		0.1
Balance at November 30, 2020	$	0.3	$	(43.3)	$	(43.0)
Balance at September 1, 2019	$	(2.2)	$	(38.6)	$	(40.8)
Other comprehensive loss before reclassifications		0.5		—		0.5
Amounts reclassified from AOCL		—		0.3		0.3
Total other comprehensive income		0.5		0.3		0.8
Balance at November 30, 2019	$	(1.7)	$	(38.3)	$	(40.0)

	Currency
	Translation		Pension
	Adjustments		Plans		Total
Balance at June 1, 2020	$	(2.0)	$	(42.6)	$	(44.6)
Other comprehensive income before reclassifications		2.3		(1.2)		1.1
Amounts reclassified from AOCL		—		0.5		0.5
Total other comprehensive income		2.3		(0.7)		1.6
Balance at November 30, 2020	$	0.3	$	(43.3)	$	(43.0)
Balance at June 1, 2019	$	(2.1)	$	(38.8)	$	(40.9)
Other comprehensive loss before reclassifications		0.4		—		0.4
Amounts reclassified from AOCL		—		0.5		0.5
Total other comprehensive income		0.4		0.5		0.9
Balance at November 30, 2019	$	(1.7)	$	(38.3)	$	(40.0)

Note 16 – 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 reportable segments: Aviation Services comprised of supply chain and MRO activities and 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

20

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

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. 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 annual Report on Form 10-K for the year ended May 31, 2020.

Our chief operating decision making officer (Chief Executive Officer) evaluates performance based on our 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,
	2020		2019		2020		2019
Sales:
Aviation Services	$	385.0	$	532.0	$	748.6	$	1,043.8
Expeditionary Services		18.6		28.9		55.8		58.6
	$	403.6	$	560.9	$	804.4	$	1,102.4

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Gross profit:
Aviation Services	$	66.8	$	85.7	$	111.4	$	165.7
Expeditionary Services		2.7		0.2		6.7		1.8
	$	69.5	$	85.9	$	118.1	$	167.5

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,
	2020		2019		2020		2019
Segment gross profit	$	69.5	$	85.9	$	118.1	$	167.5
Selling, general and administrative		(43.4)		(57.1)		(88.7)		(115.2)
Loss from joint ventures		(0.1)		—		(0.2)		—
Provision for doubtful accounts		(4.4)		(0.7)		(4.4)		(1.4)
Loss on sale of business		—		—		(19.5)		—
Other expenses, net		(0.7)		(0.2)		(0.5)		(0.4)
Interest expense		(1.3)		(1.9)		(3.0)		(4.1)
Interest income		—		0.1		0.1		0.2
Income from continuing operations before provision for income taxes	$	19.6	$	26.1	$	1.9	$	46.6

21

AAR CORP. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

November 30, 2020

(Unaudited)

(Dollars in millions, except per share amounts)

Note 17 – 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 and believes it has meritorious defenses and counter-arguments to the concerns raised by the DoJ. 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. We believe it is probable that we will incur a loss from this matter and have recognized a charge of $6.0 million in discontinued operations in the second quarter of fiscal 2021 which increases our reserve to $8.0 million on the Condensed Consolidated Balance Sheet as of November 30, 2020. 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, and believe that $8 million is the low end of the range of loss based on our latest settlement offer, 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, in fiscal 2019, 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.

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Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations (Dollars in millions)

General Overview

We report our activities in two reportable segments: Aviation Services comprised of supply chain and maintenance, repair, and overhaul (“MRO”) activities and 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. Cost of sales consists principally of the cost of material to manufacture products, direct labor and overhead.

Our chief operating decision making officer (Chief Executive Officer) evaluates performance based on our 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.

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, 2020.

Business Trends and Outlook

In late fiscal 2020, we began to see the impact of the COVID-19 pandemic on the commercial aviation industry. In response to the impact from COVID-19, we implemented significant actions to reduce fixed costs and overhead which included a freeze on new hiring, reducing or eliminating all non-essential spend, reducing compensation and benefits, furloughs, a reduction in force, and closure of an airframe maintenance facility. We have also exited or restructured underperforming contracts and product lines across our operations.

Additionally, we sold our composites manufacturing business in the first quarter of fiscal 2021 which resulted in a charge of $19.5 million. The sale of Composites is consistent with our multi-year strategy to focus our portfolio on our core services offerings and the transaction will allow us to further prioritize our efforts in our principal operations.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted in the U.S. in response to the COVID-19 pandemic. In the first quarter of fiscal 2021, we received $57.2 million from the U.S. Treasury Department through the Payroll Support Program under the CARES Act. This funding included a $48.5 million cash grant which is to be used exclusively for the continuation of payment of employee wages, salaries and benefits for employees of certain MRO facilities and a low interest 10-year senior unsecured promissory note of $8.7 million. The grant is being recognized as contra-expense on our Condensed Consolidated Statement of Operations as the eligible wages, salaries and benefits are incurred, with $24.9 million recognized in the six-month period ended November 30, 2020.

Consolidated sales for the second quarter of fiscal 2021 decreased $157.3 million or 28.0% from the prior year quarter primarily due to a decrease in sales of $147.0 million or 27.6% in our Aviation Services segment. Consolidated sales to commercial customers decreased $181.8 million or 48.4% from the prior year quarter due to the continued impact of COVID-19 and the slow recovery in commercial passenger air traffic. Our consolidated sales to government customers increased $24.5 million or 13.3% driven by execution on recent government contract awards.

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Over the long-term, we expect to see continued strength in our Aviation Services segment given its offerings of value-added services to both commercial and government and defense customers. We believe long-term commercial aftermarket growth trends are favorable although there is uncertainty in certain fleet types as commercial operators re-evaluate their structure. Our results of operations are affected by the amount of commercial aircraft flying and flight hours. The current COVID-19 pandemic has decreased the amount of commercial aircraft flying and flight hours and has created significant economic disruption although we are encouraged that the recent announcement of COVID-19 vaccines will eventually result in increased passenger traffic.

Results of Operations

Three- and Six-Month Periods Ended November 30, 2020

Sales and gross profit for our two business segments for the three-and six-months ended November 30, 2020 and 2019 were as follows:

	Three Months Ended November 30,						Six Months Ended November 30,
	2020		2019		% Change		2020		2019		% Change
Sales:
Aviation Services
Commercial	$	192.2	$	369.6	(48.0)	%	$	361.8	$	700.1	(48.3)	%
Government and defense		192.8		162.4	18.7	%		386.8		343.7	12.5	%
	$	385.0	$	532.0	(27.6)	%	$	748.6	$	1,043.8	(28.3)	%
Expeditionary Services
Commercial	$	2.0	$	6.4	(68.8)	%	$	7.7	$	12.1	(36.4)	%
Government and defense		16.6		22.5	(26.2)	%		48.1		46.5	3.4	%
	$	18.6	$	28.9	(35.6)	%	$	55.8	$	58.6	(4.8)	%

	Three Months Ended November 30,						Six Months Ended November 30,
	2020		2019		% Change		2020		2019		% Change
Gross Profit (Loss):
Aviation Services
Commercial	$	37.9	$	56.8	(33.3)	%	$	54.2	$	110.3	(50.9)	%
Government and defense		28.9		28.9	—			57.2		55.4	3.2	%
	$	66.8	$	85.7	(22.1)	%	$	111.4	$	165.7	(32.8)	%
Expeditionary Services
Commercial	$	0.1	$	(1.5)	nm		$	(1.2)	$	(1.9)	(36.8)	%
Government and defense		2.6		1.7	52.9	%		7.9		3.7	113.5	%
	$	2.7	$	0.2	nm		$	6.7	$	1.8	272.2	%

nm – Percentage change is not meaningful.

Three Month Period Ended November 30, 2020

Aviation Services Segment

Sales in the Aviation Services segment decreased $147.0 million or 27.6% from the prior year period due to a $177.4 million or 48.0% decrease in sales to commercial customers. The decrease in sales to commercial customers was attributable to the impact of COVID-19 on commercial passenger air traffic which significantly reduced our volumes in our supply chain and MRO activities.

During the second quarter of fiscal 2021, sales in this segment to government and defense customers increased $30.4 million or 18.7% over the prior year period. This increase was primarily attributable to growth from new contracts recently awarded.

Cost of sales in Aviation Services decreased $128.1 million or 28.7% from the prior year period primarily related to the impact from the COVID-19 pandemic.

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Gross profit in the Aviation Services segment decreased $18.9 million or 22.1% from the prior year period. Gross profit on sales to commercial customers decreased $18.9 million or 33.3% from the prior year period primarily due to the COVID-19 impact discussed above. The gross profit margin on sales to commercial customers increased to 19.7% from 15.4% in the prior year period primarily from the benefit of government workforce subsidies including the Payroll Support Program in the CARES Act and other subsidies provided by foreign governments. We recognized a benefit of $18.1 million in cost of sales during the second quarter of fiscal 2021 related to the government subsidies.

Gross profit on sales to government and defense customers was unchanged from the prior year at $28.9 million. Gross profit margin on sales to government and defense customers decreased to 15.0% from 17.8% in the prior year period primarily as a result of the mix of products and services sold.

Expeditionary Services Segment

Sales in the Expeditionary Services segment decreased $10.3 million from the prior year period primarily due to the divestiture of our composites manufacturing business in the first quarter of fiscal 2021.

Gross profit in the Expeditionary Services segment increased $2.5 million over the prior period primarily due to the divestiture of our composites manufacturing business as it was not profitable in the prior year quarter. Gross profit margin increased to 14.5% from 0.7% in the prior year period primarily as a result of the divestiture.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $13.7 million or 24.0% from the prior year period due to our actions to reduce both our fixed and variable cost structure in light of the reduced volumes from COVID-19. As a percent of sales, selling, general and administrative expenses increased to 10.8% from 10.2% in the prior year period as the significant decrease in commercial sales more than offset the favorable impact from the cost reduction actions.

Income Taxes

Our effective income tax rate for continuing operations was 26.5% for the second quarter of fiscal 2021 compared to 23.0% in the prior year period. The higher rate in fiscal 2021 is primarily attributable to lower forecasted pre-tax income in fiscal 2021 as a result of COVID-19.

Discontinued Operations

Loss from discontinued operations was $6.2 million in the second quarter of fiscal 2021 compared to a loss of $5.9 million in the prior year period. The loss in the current period was attributable to a $6.0 million increase in our reserve to reflect the latest settlement offer provided to the U.S. Department of Justice to settle their investigation of our Contractor-Owned, Contractor-Operated (“COCO”) business Airlift Group, Inc. under the federal civil False Claims Act. The prior period loss includes operating losses incurred by the COCO business prior to the sale of its last operating contract in the fourth quarter of fiscal 2020.

Six Month Period Ended November 30, 2020

Aviation Services Segment

Sales in the Aviation Services segment decreased $295.2 million or 28.3% from the prior year period due to a $338.3 million or 48.3% decrease in sales to commercial customers. The decrease in sales to commercial customers was attributable to the impact of COVID-19 on commercial passenger air traffic which significantly reduced our volumes in our supply chain and MRO activities.

During the six-month period ended November 30, 2020, sales in this segment to government and defense customers increased $43.1 million or 12.5% over the prior year period. This increase was primarily attributable to growth from new contracts recently awarded.

Cost of sales in Aviation Services decreased $240.9 million or 27.4% from the prior year period primarily related to the impact from the COVID-19 pandemic.

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Gross profit in the Aviation Services segment decreased $54.3 million or 32.8% from the prior year period. Gross profit on sales to commercial customers decreased $56.1 million or 50.9% from the prior year period primarily due to the COVID-19 impact discussed above. In addition, gross profit was unfavorably impacted in the six-month period ended November 30, 2020 from asset impairment charges of $7.0 million and facility consolidation and repositioning costs of $2.4 million. These items were more than offset by a benefit of $28.2 million in government workforce subsidies from the Payroll Support Program in the CARES Act and other subsidies provided by foreign governments. Gross profit margin on sales to commercial customers decreased to 15.0% from 15.8% in the prior year period due to the COVID-19 impact discussed above.

Gross profit on sales to government and defense customers increased $1.8 million or 3.2% over the prior year primarily driven by recently awarded government contracts. Gross profit margin on sales to government and defense customers decreased to 14.8% from 16.1% in the prior year period primarily as a result of the mix of products and services sold.

Expeditionary Services Segment

Sales in the Expeditionary Services segment decreased $2.8 million or 4.8% from the prior year period primarily due to the divestiture of our composites manufacturing business.

Gross profit in the Expeditionary Services segment increased $4.9 million or 272.2% over the prior period primarily due to the divestiture of our composites manufacturing business as it was not profitable in the prior year quarter. Gross profit margin increased to 12.0% from 3.1% in the prior year period primarily as a result of the divestiture.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $26.5 million or 23.0% from the prior year period due to our actions to reduce both our fixed and variable cost structure in light of the reduced volumes from COVID-19. As a percent of sales, selling, general and administrative expenses increased to 11.0% from 10.4% in the prior year period. This increase is primarily attributable to the significant decrease in commercial sales more than offsetting the favorable impact from the cost reduction actions.

Income Taxes

Our effective income tax rate for continuing operations was 73.7% for the second quarter of fiscal 2021 compared to 20.2% in the prior year period. The prior year period included excess tax benefits from stock compensation of $1.5 million which favorably impacted the effective tax rate while the current year period included unfavorable stock compensation items of $0.9 million.

Discontinued Operations

Loss from discontinued operations was $6.8 million in the six-month period ended November 30, 2020 compared to a loss of $18.6 million in the prior year period. The loss in the current period was attributable to a $6.0 million increase in our legal reserve discussed above. The prior period loss includes both operating losses incurred by the COCO business prior to the sale of its last operating contract in the fourth quarter of fiscal 2020 and impairment charges of $11.8 million.

Liquidity, Capital Resources and Financial Position

Our operating activities are funded and commitments met through the generation of cash from operations. In addition to operations, our current capital resources include an unsecured Revolving Credit Facility and an accounts receivable financing program. Periodically, we may also raise capital through common stock and debt financings in the public or private markets. We continually evaluate various financing arrangements, including the issuance of common stock or debt, which would allow us to improve our liquidity position and finance future growth on commercially reasonable terms. Our continuing ability to borrow from our lenders and issue debt and equity securities to the public and private markets in the future may be negatively affected by a number of factors, including the overall health of the credit markets, general economic conditions, airline industry conditions, geo-political events, and our operating performance. Our ability to generate cash from operations is influenced primarily by our operating performance and changes in working capital.

At November 30, 2020, our liquidity and capital resources included working capital of $633.5 million inclusive of cash of $110.0 million.

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We maintain a Revolving Credit Facility with various financial institutions, as lenders, and Bank of America, N.A., as administrative agent for the lenders, which provides the Company an aggregate revolving credit commitment of $600 million and matures September 25, 2024. Under certain circumstances, we have the ability to request, but our lenders are not required to grant, an increase to the revolving credit commitment by an aggregate amount of up to $300 million, not to exceed $900 million in total.

Borrowings under the Revolving Credit Facility bear interest at the offered Eurodollar Rate plus 87.5 to 175 basis points based on certain financial measurements if a Eurodollar Rate loan, or at the offered fluctuating Base Rate plus 0 to 75 basis points based on certain financial measurements if a Base Rate loan.

Borrowings outstanding under the Revolving Credit Facility at November 30, 2020 were $189.5 million and there were approximately $20.7 million of outstanding letters of credit, which reduced the availability of this facility to $389.8 million. There are no other terms or covenants limiting the availability of this facility.

In the fourth quarter of fiscal 2020, we elected to draw down our Revolving Credit Facility as a precautionary measure in light of economic and market uncertainty presented by COVID-19. We elected to repay these additional funds in early fiscal 2021 and return to our normal level of cash on hand.

In the first quarter of fiscal 2021, we received $57.2 million from the U.S. Treasury Department through the Payroll Support Program under the CARES Act. This funding included a $48.5 million cash grant which is to be used exclusively for the continuation of payment of employee wages, salaries and benefits for employees of certain MRO facilities and a low interest 10-year senior unsecured promissory note of $8.7 million.

As of November 30, 2020, we also had other financing arrangements that did not limit our availability on the Revolving Credit Facility, including outstanding letters of credit of $11.6 million and foreign lines of credit of $10.0 million.

We maintain 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 and Purchaser may, but is not required to, purchase the eligible receivables we offer to sell. The term of the Purchase Agreement runs through February 22, 2021, 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, and de-recognize the sold receivables from our Condensed Consolidated Balance Sheet.

During the six-month periods ended November 30, 2020 and 2019, we sold $243.1 million and $404.8 million, respectively, of receivables under the Purchase Agreement and remitted $268.5 million and $405.3 million, respectively, to the Purchaser on their behalf. As of November 30, 2020 and May 31, 2020, we had collected cash of $3.0 million and $20.0 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.

At November 30, 2020, we complied with all financial and other covenants under our financing arrangements.

Cash Flows from Operating Activities

Net cash provided by operating activities–continuing operations was $67.4 million in the six-month period ended November 30, 2020 compared to a use of cash of $10.2 million in the prior year period. The increase from the prior period of $77.6 million was primarily attributable to a reduction in inventory levels and the proceeds of a $48.5 million grant from the Payroll Support Program of the CARES Act. These items were partially offset by a $25 million license fee paid to Unison Industries for our expanded and extended exclusive distribution agreement.

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Cash Flows from Investing Activities

Net cash provided from investing activities–continuing operations was $5.6 million during the six-month period ended November 30, 2020 compared to a use of cash of $11.7 million in the prior year period. The increase over the prior period was primarily related to proceeds of $10.0 million from the termination of split-dollar life insurance policies.

Cash Flows from Financing Activities

Net cash used in financing activities–continuing operations was $382.9 million during the six-month period ended November 30, 2020 compared to cash provided from financing activities-continuing operations of $41.1 million in the prior year period. The decrease was primarily related to the repayment of our additional draw down on our Revolving Credit Facility. These funds were was originally drawn in late fiscal 2020 as a precautionary measure in light of the economic and market uncertainty presented by COVID-19.

Critical Accounting Policies and Significant Estimates

We make a number of significant estimates, assumptions and judgments in the preparation of our financial statements. See Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Form 10-K for a discussion of our critical accounting policies. There have been no significant changes to the application of our critical accounting policies during fiscal 2021.

Forward-Looking Statements

This report contains certain forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on beliefs of our management, as well as assumptions and estimates based on information available to us as of the dates such assumptions and estimates are made, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, depending on a variety of factors, including those factors set forth under Part I, Item 1A in our Annual Report on Form 10-K for the year ended May 31, 2020. Should one or more of those risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described. Those events and uncertainties are difficult or impossible to predict accurately and many are beyond our control. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk includes fluctuating interest rates under our credit agreements, changes in foreign exchange rates, and credit losses on accounts receivable. See Note 1 of Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended May 31, 2020 for a discussion of accounts receivable exposure.

Foreign Currency Risk. Revenues and expenses of our foreign operations are translated at average exchange rates during the period, and balance sheet accounts are translated at period-end exchange rates. Balance sheet translation adjustments are excluded from the results of operations and are recorded in stockholders’ equity as a component of accumulated other comprehensive loss. A hypothetical 10 percent devaluation of the U.S. dollar against foreign currencies would not have had a material impact on our financial position or continuing operations for the quarter ended November 30, 2020.

Interest Rate Risk. Refer to the section Quantitative and Qualitative Disclosures about Market Risk in our Annual Report on Form 10-K for the year ended May 31, 2020. There were no significant changes during the quarter ended November 30, 2020.

Item 4 — Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of November 30, 2020. This evaluation was carried out under the supervision and with participation of our Chief Executive Officer and our Chief Financial Officer. There are

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inherent limitations to the effectiveness of any system of disclosure controls and procedures. Therefore, effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective as of November 30, 2020, ensuring that information required to be disclosed in the reports that are filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported in a timely manner.

There were no changes in our internal control over financial reporting during the quarter ended November 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1 – Legal Proceedings

The information in Note 17 to the Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated herein by reference. There are no matters which constitute material pending legal proceedings to which we are a party other than those incorporated into this item by reference from Note 17 to our Condensed Consolidated Financial Statements for the quarter ended November 30, 2020 contained in this Quarterly Report on Form 10-Q.

Item 1A — Risk Factors

There is no material change in the information reported under Part I-Item 1A “Risk Factors" contained in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020.

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Item 6 — Exhibits

The exhibits to this report are listed on the following index:

Exhibit No.	Description		Exhibits
10.	Material Contracts	10.1	Second Amendment to Purchase Agreement dated as of May 22, 2018 by and among AAR CORP., as seller representative and servicer, the sellers time to time party thereto, and Citibank, N.A., as buyer (filed herewith).
		10.2	Third Amendment to Purchase Agreement dated as of May 22, 2018 by and among AAR CORP., as seller representative and servicer, the sellers time to time party thereto, and Citibank, N.A., as buyer (filed herewith).
		10.3*	AAR CORP. 2013 Stock Plan (as Amended and Restated Effective July 13, 2020) (incorporated by reference to Appendix C to the Registrant’s Proxy Statement dated August 28, 2020).
31.	Rule 13a-14(a)/15(d)-14(a) Certifications	31.1	Section 302 Certification dated December 18, 2020 of John M. Holmes, President and Chief Executive Officer of Registrant (filed herewith).
		31.2	Section 302 Certification dated December 18, 2020 of Sean M. Gillen, Vice President and Chief Financial Officer of Registrant (filed herewith).
32.	Section 1350 Certifications	32.1	Section 906 Certification dated December 18, 2020 of John M. Holmes, President and Chief Executive Officer of Registrant (filed herewith).
		32.2	Section 906 Certification dated December 18, 2020 of Sean M. Gillen, Vice President and Chief Financial Officer of Registrant (filed herewith).
101.	Interactive Data File	101	The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at November 30, 2020 and May 31, 2020, (ii) Condensed Consolidated Statements of Operations for the three- and six-months ended November 30, 2020 and 2019, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three- and six-months ended November 30, 2020 and 2019, (iv)  Condensed Consolidated Statements of Cash Flows for the six months ended November 30, 2020 and 2019, (v) Condensed Consolidated Statement of Changes in Equity for the three- and six-months ended November 30, 2020 and 2019 (vi) Notes to Condensed Consolidated Financial Statements.**

*     Management contract and compensatory arrangement.

**   Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		AAR CORP.
		(Registrant)
Date:	December 18, 2020	/s/ SEAN M. GILLEN
		Sean M. Gillen
		Vice President and Chief Financial Officer
		(Principal Financial Officer)
		/s/ ERIC S. PACHAPA
		Eric S. Pachapa
		Vice President, Controller and Chief Accounting Officer
		(Principal Accounting Officer)

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EX-10

EXHIBIT 10.1

EXECUTION COPY

SECOND AMENDMENT TO PURCHASE AGREEMENT

This Second Amendment to Purchase Agreement, dated as of October 25, 2018 (this “Amendment”), is among AAR CORP., on behalf of itself and each Seller (in such capacity, the “Seller Representative”), as servicer (in such capacity, the “Servicer” and, together with the Seller Representative, the “AAR Parties” and each an “AAR Party”), and as parent (in such capacity, the “Parent”), and CITIBANK, N.A. (the “Buyer”).

RECITALS

WHEREAS, the AAR Parties, the Sellers and the Buyer are parties to that certain Purchase Agreement, dated as of February 23, 2018 (as amended, restated, supplemented or otherwise modified through the date hereof, the “Agreement”);

WHEREAS, the parties hereto desire to amend the Agreement in certain respects as set forth herein;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

SECTION 1.   Definitions. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings assigned thereto in the Agreement.

SECTION 2.   Amendments to the Agreement.

(a)        Schedule I and Schedule II to the Agreement are hereby amended and restated in the form of Annex A attached hereto.

(b)        Exhibit A to the Agreement is hereby amended by inserting the following definition in the appropriate alphabetical sequence:

“Tranche A Specified Account Debtors”: Each of (i) Government of the United States of America, (ii) Alaska Airlines Group Inc, (iii) United Parcel Service Inc, and (iv) Delta Air Lines Inc.

(c)        The definition of “Tranche A Account Debtor” in Exhibit A to the Agreement is hereby amended and restated in its entirety to read as follows:

“Tranche A Account Debtor”: Each of (i) the account debtors listed on Schedule I hereto, as such Schedule may be modified or supplemented from time to time, as approved by Buyer in writing in its sole and absolute discretion and (ii) solely with

respect to any Tranche A Specified Account Debtor, any wholly-owned subsidiary of such Tranche A Specified Account Debtor.

SECTION 3.   Conditions to Effectiveness. This Amendment shall become effective on the date on which each of the parties hereto shall have received counterparts of this Amendment executed by each of the other parties hereto.

SECTION 4.   Representations and Warranties. The Seller Representative (on behalf of itself and each Seller) and the Servicer hereby make to the Buyer, on and as of the date hereof, the following representations and warranties:

(a)        Authority. The execution, delivery and performance by the applicable AAR Party of this Amendment (i) are within such AAR Party’s corporate powers and (ii) have been duly authorized by all necessary corporate action;

(b)        Enforceability. This Amendment constitutes the legal, valid and binding obligation of the applicable AAR Party, enforceable against such AAR Party in accordance with its terms, except as limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or other laws relating to the enforcement of creditors’ rights generally and general principles of equity (regardless of whether enforcement is sought at equity or law);

(c)        Representations, Warranties and Covenants. Its representations, warranties and covenants contained in the Agreement other than those set forth in clauses (i) and (k) of Exhibit C thereof) are true and correct in all material respects, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date; and

(d)        No Event of Termination. No Event of Termination has occurred and is continuing.

SECTION 5.   Ratification of Parent Undertaking.  The Parent hereby acknowledges and agrees that, immediately after giving effect to this Amendment, the Parent Undertaking shall remain in full force and effect and is hereby ratified and confirmed.

SECTION 6.   Effect of Amendment; Ratification.

(a)        Upon the effectiveness of this Amendment, each reference in the Agreement to the “Purchase Agreement”, “this Agreement”, “hereunder,” “hereof,” “herein,” “hereby” or words of like import shall mean and be a reference to the Agreement as amended hereby, and each reference to the Agreement in any other document, instrument and agreement executed and/or delivered in connection with the Agreement shall mean and be a reference to the Agreement as amended hereby.

(b)       Except as specifically amended hereby, the Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed in all respects.

(c)        The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Buyer or any of its assignees under the Agreement or

2

any other document, instrument, or agreement executed in connection therewith, nor constitute a waiver of any provision contained therein.

SECTION 7.   Execution; Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by electronic mail attachment in portable document format (.pdf) shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 8.   Governing Law. This Amendment shall be governed by the laws of the State of New York, without giving effect to conflicts of law principles.

SECTION 9.   Section Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or the Agreement or any provision hereof or thereof.

3

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

AAR CORP., as Seller Representative (on behalf of itself and each Seller) and as Servicer
By:	/s/Jason Secore
Name: Jason Secore
Title: Treasurer
AAR CORP., as Parent
By:	/s/Jason Secore
Name:Jason Secore
Title: Treasurer

Second Amendment

CITIBANK, N.A.,
as Buyer
By:	/s/Adoniro Cestavi
Name: Adoniro Cestavi
Title: Vice President

Second Amendment

ANNEX A

Schedule I

Tranche A Account Debtors

Account Debtors Purchase Sublimit Credit Spread Buffer Period

Schedule II

Tranche B Account Debtors

Account Debtors Purchase Sublimit Credit Spread Buffer Period

EX-10

EXHIBIT 10.2

THIRD AMENDMENT TO PURCHASE AGREEMENT

This Third Amendment to Purchase Agreement, dated as of October 7, 2020 (this “Amendment”), is among AAR CORP., on behalf of itself and each Seller (in such capacity, the “Seller Representative”), as servicer (in such capacity, the “Servicer” and, together with the Seller Representative, the “AAR Parties” and each an “AAR Party”), and as parent (in such capacity, the “Parent”), and CITIBANK, N.A. (the “Buyer”).

RECITALS

WHEREAS, the AAR Parties, the Sellers and the Buyer are parties to that certain Purchase Agreement, dated as of February 23, 2018 (as amended, restated, supplemented or otherwise modified through the date hereof, the “Agreement”);

WHEREAS, the parties hereto desire to amend the Agreement in certain respects as set forth herein;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

SECTION 1.   Definitions. Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings assigned thereto in the Agreement.

SECTION 2.   Amendments to the Agreement.

(a)        Schedule I to the Agreement is hereby amended and restated in the form of Annex A attached hereto.

(b)        The definition of “Tranche A Account Debtor” in Exhibit A to the Agreement is hereby amended and restated in its entirety to read as follows:

“Tranche A Account Debtor”: Each of (i) the account debtors listed on Schedule I hereto, as such Schedule may be modified or supplemented from time to time, as approved by Buyer in writing in its sole and absolute discretion and (ii) solely with respect to any Tranche A Specified Account Debtor, any wholly-owned subsidiary of such Tranche A Specified Account Debtor.

SECTION 3.    Conditions to Effectiveness. This Amendment shall become effective on the date on which each of the parties hereto shall have received counterparts of this Amendment executed by each of the other parties hereto.

SECTION 4.   Representations and Warranties. The Seller Representative (on behalf of itself and each Seller) and the Servicer hereby make to the Buyer, on and as of the date hereof, the following representations and warranties:

(a)        Authority. The execution, delivery and performance by the applicable AAR Party of this Amendment (i) are within such AAR Party’s corporate powers and (ii) have been duly authorized by all necessary corporate action;

(b)        Enforceability. This Amendment constitutes the legal, valid and binding obligation of the applicable AAR Party, enforceable against such AAR Party in accordance with its terms, except as limited by bankruptcy, insolvency, moratorium, fraudulent conveyance or other laws relating to the enforcement of creditors’ rights generally and general principles of equity (regardless of whether enforcement is sought at equity or law);

(c)        Representations, Warranties and Covenants. Its representations, warranties and covenants contained in the Agreement other than those set forth in clauses (i) and (k) of Exhibit C thereof) are true and correct in all material respects, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects as of such earlier date; and

(d)        No Event of Termination. No Event of Termination has occurred and is continuing.

SECTION 5.   Ratification of Parent Undertaking.  The Parent hereby acknowledges and agrees that, immediately after giving effect to this Amendment, the Parent Undertaking shall remain in full force and effect and is hereby ratified and confirmed.

SECTION 6.   Effect of Amendment; Ratification.

(a)        Upon the effectiveness of this Amendment, each reference in the Agreement to the “Purchase Agreement”, “this Agreement”, “hereunder,” “hereof,” “herein,” “hereby” or words of like import shall mean and be a reference to the Agreement as amended hereby, and each reference to the Agreement in any other document, instrument and agreement executed and/or delivered in connection with the Agreement shall mean and be a reference to the Agreement as amended hereby.

(b)        Except as specifically amended hereby, the Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed in all respects.

(c)        The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Buyer or any of its assignees under the Agreement or any other document, instrument, or agreement executed in connection therewith, nor constitute a waiver of any provision contained therein.

SECTION 7.    Execution; Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by electronic mail attachment in portable document format (.pdf) shall be effective as delivery of a manually executed counterpart of this Amendment.

SECTION 8.   Governing Law. This Amendment shall be governed by the laws of the State

2

of New York, without giving effect to conflicts of law principles.

SECTION 9.   Section Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or the Agreement or any provision hereof or thereof.

3

IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

AAR CORP., as Seller Representative (on behalf of itself and each Seller) and as Servicer
By:	/s/Dylan Wolin
Name: Dylan Wolin
Title: Vice President and Treasurer
AAR CORP., as Parent
By:	/s/Dylan Wolin
Name: Dylan Wolin
Title: Vice President and Treasurer

Third Amendment

CITIBANK, N.A.,
as Buyer
By:	/s/John Monaghan
Name: John Monaghan
Title: Vice President

Third Amendment

ANNEX A

Schedule I

Tranche A Account Debtors

Account Debtors Purchase Sublimit Credit Spread Buffer Period

EX-31

Exhibit 31.1

SECTION 302

CERTIFICATION

I, John M. Holmes, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of AAR CORP. (the “Registrant”) for the quarterly period ended November 30, 2020;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.    The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.    The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

DATE:  December 18, 2020

/s/ JOHN M. HOLMES

John M. Holmes

President and Chief Executive Officer

EX-31

Exhibit 31.2

SECTION 302

CERTIFICATION

I, Sean M. Gillen, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of AAR CORP. (the “Registrant”) for the quarterly period ended November 30, 2020;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4.    The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5.    The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

DATE:  December 18, 2020

/s/ SEAN M. GILLEN

Sean M. Gillen

Vice President and Chief Financial Officer

(Principal Financial Officer)

EX-32

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the AAR CORP. (the “Company") quarterly report on Form 10-Q for the period ended November 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report"), I, John M. Holmes, President and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1.            The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.            The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 18, 2020

/s/ JOHN M. HOLMES

John M. Holmes

President and Chief Executive Officer

EX-32

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the AAR CORP. (the "Company") quarterly report on Form 10-Q for the period ended November 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Sean M. Gillen, Vice President and Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1.            The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.            The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: December 18, 2020

/s/ SEAN M. GILLEN

Sean M. Gillen

Vice President and Chief Financial Officer

(Principal Financial Officer)

XML

Document and Entity Information	6 Months Ended
	Nov. 30, 2020 shares
Document and Entity Information
Document Type	10-Q
Document Transition Report	false
Document Quarterly Report	true
Document Period End Date	Nov. 30, 2020
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
Entity Address, Address Line Two	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	35,292,336
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	2021
Amendment Flag	false
Common Stock | NEW YORK STOCK EXCHANGE, INC.
Document and Entity Information
Title of 12(b) Security	Common Stock, $1.00 par value
Trading Symbol	AIR
Security Exchange Name	NYSE
Common Stock | CHICAGO STOCK EXCHANGE, INC
Document and Entity Information
Title of 12(b) Security	Common Stock, $1.00 par value
Trading Symbol	AIR
Security Exchange Name	CHX

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Nov. 30, 2020	May 31, 2020
Current assets:
Cash and cash equivalents	$ 110.0	$ 404.7
Restricted cash	3.0	20.0
Accounts receivable, less allowances of $19.4 and $22.1, respectively	169.8	171.9
Contract assets	52.8	49.3
Inventories	585.0	623.1
Rotable assets and equipment on or available for short-term lease	59.4	69.6
Assets of discontinued operations	21.2	22.9
Other current assets	40.5	77.2
Total current assets	1,041.7	1,438.7
Property, plant and equipment, net of accumulated depreciation of $248.4 and $246.5 respectively	125.0	135.7
Other assets:
Goodwill and intangible assets, net	122.6	121.7
Operating lease right-of-use assets, net	83.3	89.7
Rotable assets supporting long-term programs	200.5	211.7
Other non-current assets	96.2	81.5
Total other assets	502.6	504.6
Total assets	1,669.3	2,079.0
Current liabilities:
Accounts payable	198.3	191.6
Accrued liabilities	153.1	161.6
Payroll Support Program deferred credit	23.6
Liabilities of discontinued operations	33.2	29.9
Total current liabilities	408.2	383.1
Long-term debt	220.3	600.0
Operating lease liabilities	66.0	70.9
Deferred revenue on long-term programs	30.3	88.0
Other liabilities	43.8	34.4
Total noncurrent liabilities	360.4	793.3
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	475.1	478.6
Retained earnings	699.6	706.0
Treasury stock, 10,008,450 and 10,203,437 shares at cost, respectively	(276.3)	(282.7)
Accumulated other comprehensive loss	(43.0)	(44.6)
Total equity	900.7	902.6
Total liabilities and equity	$ 1,669.3	$ 2,079.0

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Nov. 30, 2020	May 31, 2020
Condensed Consolidated Balance Sheets
Accounts receivable, allowances	$ 19.4	$ 22.1
Property, plant and equipment, accumulated depreciation	$ 248.4	$ 246.5
Preferred stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock, authorized shares	250,000	250,000
Preferred stock, issued shares	0	0
Common stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common stock, authorized shares	100,000,000	100,000,000
Common stock, issued shares	45,300,786	45,300,786
Treasury stock, shares	10,008,450	10,203,437

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019
Sales:
Sales	$ 403.6	$ 560.9	$ 804.4	$ 1,102.4
Cost and operating expenses:
Provision for doubtful accounts	4.4	0.7	4.4	1.4
Selling, general and administrative	43.4	57.1	88.7	115.2
Total cost and operating expenses	381.9	532.8	779.4	1,051.5
Loss from joint ventures	(0.1)		(0.2)
Operating income	21.6	28.1	24.8	50.9
Loss on sale of business			(19.5)
Other expenses, net	(0.7)	(0.2)	(0.5)	(0.4)
Interest expense	(1.3)	(1.9)	(3.0)	(4.1)
Interest income		0.1	0.1	0.2
Income from continuing operations before provision for income taxes	19.6	26.1	1.9	46.6
Provision for income taxes	5.2	6.0	1.4	9.4
Income from continuing operations	14.4	20.1	0.5	37.2
Loss from discontinued operations, net of tax	(6.2)	(5.9)	(6.8)	(18.6)
Net income (loss)	$ 8.2	$ 14.2	$ (6.3)	$ 18.6
Earnings (Loss) per share - basic:
Earnings from continuing operations	$ 0.41	$ 0.58	$ 0.01	$ 1.07
Loss from discontinued operations	(0.18)	(0.17)	(0.20)	(0.54)
Earnings (Loss) per share - basic	0.23	0.41	(0.19)	0.53
Earnings (Loss) per share - diluted:
Earnings from continuing operations	0.41	0.57	0.01	1.06
Loss from discontinued operations	(0.18)	(0.17)	(0.19)	(0.53)
Earnings (Loss) per share - diluted	$ 0.23	$ 0.40	$ (0.18)	$ 0.53
Products
Sales:
Sales	$ 233.1	$ 293.0	$ 469.4	$ 568.1
Cost and operating expenses:
Cost	194.3	242.0	398.8	462.1
Services
Sales:
Sales	170.5	267.9	335.0	534.3
Cost and operating expenses:
Cost	$ 139.8	$ 233.0	$ 287.5	$ 472.8

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019
Condensed Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$ 8.2	$ 14.2	$ (6.3)	$ 18.6
Other comprehensive income, net of tax:
Currency translation adjustments	1.1	0.5	2.3	0.4
Pension and other post-retirement plans, net of tax of ($0.5) and $0.1 for the three months ended November 30, 2020 and 2019, respectively, and ($0.4) and $0.1 for the six months ended November 30, 2020 and 2019, respectively	(1.0)	0.3	(0.7)	0.5
Other comprehensive income, net of tax	0.1	0.8	1.6	0.9
Comprehensive income	$ 8.3	$ 15.0	$ (4.7)	$ 19.5

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019
Condensed Consolidated Statements of Comprehensive Income (Loss)
Pension and other post-retirement plans, tax	$ (0.5)	$ 0.1	$ (0.4)	$ 0.1

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019
Cash flows provided from (used in) operating activities:
Net income (loss)	$ (6.3)	$ 18.6
Less: Loss from discontinued operations	6.8	18.6
Income from continuing operations	0.5	37.2
Adjustments to reconcile income from continuing operations to net cash provided from (used in) operating activities:
Depreciation and intangible amortization	18.2	21.8
Stock-based compensation	4.5	7.1
Provision for doubtful accounts	4.4	1.4
Deferred tax provision	1.0	0.9
Loss from joint ventures	0.2
Loss on sale of business	19.5
Contract termination and restructuring costs	2.2
Impairment charges	7.0
Changes in certain assets and liabilities:
Accounts receivable	(4.8)	(11.0)
Contract assets	(7.5)	(2.8)
Inventories	30.2	(56.8)
Rotable assets supporting long-term programs	(0.9)	(19.1)
Accounts payable	8.8	42.5
Accrued and other liabilities	0.2	(17.9)
Payroll Support Program deferred credit	23.6
Deferred revenue on long-term programs	(60.4)	23.3
Other	20.7	(36.8)
Net cash provided from (used in) operating activities - continuing operations	67.4	(10.2)
Net cash used in operating activities - discontinued operations	(1.9)	(7.7)
Net cash provided from (used in) operating activities	65.5	(17.9)
Cash flows provided from (used in) investing activities:
Property, plant and equipment expenditures	(6.0)	(10.2)
Proceeds from termination of life insurance policies	10.0
Other	1.6	(1.5)
Net cash used in investing activities	5.6	(11.7)
Cash flows provided from (used in) financing activities:
Short-term borrowings , net	(390.0)	55.0
Cash dividends	(0.1)	(5.5)
Purchase of treasury stock		(4.1)
Financing costs		(1.3)
Stock compensation activity	(1.5)	(3.0)
Net cash provided from (used in) financing activities	(382.9)	41.1
Effect of exchange rate changes on cash	0.1	0.1
Increase (Decrease) in cash and cash equivalents	(311.7)	11.6
Cash, cash equivalents, and restricted cash at beginning of period	424.7	41.1
Cash, cash equivalents, and restricted cash at end of period	113.0	$ 52.7
Payroll Support Program Promissory Note
Cash flows provided from (used in) financing activities:
Proceeds from Payroll Support Program note	$ 8.7

XML

Condensed Consolidated Statements of Changes in Equity - USD ($) $ in Millions	Common Stock	Capital Surplus	Retained Earnings Cumulative effect adjustment	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Income (Loss)	Cumulative effect adjustment	Total
Balance (ASC 842) at May. 31, 2019			$ 2.5				$ 2.5
Balance at May. 31, 2019	$ 45.3	$ 479.4		$ 709.8	$ (287.7)	$ (40.9)		$ 905.9
Increase (Decrease) in Stockholders' Equity
Net income				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, net of tax						0.1		0.1
Balance at Aug. 31, 2019	45.3	476.0		713.8	(284.8)	(40.8)		909.5
Balance (ASC 842) at May. 31, 2019			$ 2.5				$ 2.5
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, net of tax								0.9
Balance at Nov. 30, 2019	45.3	478.7		725.4	(287.7)	(40.0)		921.7
Balance at Aug. 31, 2019	45.3	476.0		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, net of tax						0.8		0.8
Balance at Nov. 30, 2019	45.3	478.7		725.4	(287.7)	(40.0)		921.7
Balance at May. 31, 2020	45.3	478.6		706.0	(282.7)	(44.6)		902.6
Increase (Decrease) in Stockholders' Equity
Net income				(14.5)				(14.5)
Cash dividends				(0.1)				(0.1)
Stock option activity		0.5			0.5			1.0
Restricted stock activity		(6.0)			6.1			0.1
Other comprehensive income, net of tax						1.5		1.5
Balance at Aug. 31, 2020	45.3	473.1		691.4	(276.1)	(43.1)		890.6
Balance at May. 31, 2020	45.3	478.6		706.0	(282.7)	(44.6)		902.6
Increase (Decrease) in Stockholders' Equity
Net income								(6.3)
Other comprehensive income, net of tax								1.6
Balance at Nov. 30, 2020	45.3	475.1		699.6	(276.3)	(43.0)		900.7
Balance at Aug. 31, 2020	45.3	473.1		691.4	(276.1)	(43.1)		890.6
Increase (Decrease) in Stockholders' Equity
Net income				8.2				8.2
Stock option activity		1.1			0.1			1.2
Restricted stock activity		0.9			(0.3)			0.6
Other comprehensive income, net of tax						0.1		0.1
Balance at Nov. 30, 2020	$ 45.3	$ 475.1		$ 699.6	$ (276.3)	$ (43.0)		$ 900.7

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Basis of Presentation

6 Months Ended

Nov. 30, 2020

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, 2020 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, 2020, the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income (Loss) for the three- and six-month periods ended November 30, 2020 and 2019, the Condensed Consolidated Statements of Cash Flows for the six-month periods ended November 30, 2020 and 2019, and the Condensed Consolidated Statement of Changes in Equity for the three- and six-month periods ended November 30, 2020 and 2019. The results of operations for such interim periods are not necessarily indicative of the results for the full year.

New Accounting Pronouncements

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.

Our adoption of this ASU on June 1, 2020 did not have a material impact on our Condensed Consolidated Financial Statements.

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Discontinued Operations

6 Months Ended

Nov. 30, 2020

Discontinued operation, Disposed of by sale | COCO

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

In the fourth quarter of fiscal 2020, we completed the sale of the last operating contract of the COCO business shortly after government approval. Our continuing involvement in the COCO business is limited to the lease of certain aircraft which is an obligation of the acquirer of this contract. The assets and liabilities of our discontinued operations are primarily comprised of right-of-use assets and lease-related liabilities.

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Sale of Composites Business

6 Months Ended

Nov. 30, 2020

Disposed of by sale | Composites Business

Sale of Business

Sale of Composites Business

Note 3 – Sale of Composites Business

On August 31, 2020, we completed the sale of our aerostructures and aerospace products operations located in Clearwater, Florida and Sacramento, California (“Composites”). The Composites business was formerly included in our Expeditionary Services segment. The sale of Composites is consistent with our multi-year strategy to focus our portfolio on our core services offerings and the transaction will allow us to further prioritize our efforts in our principal businesses.

We recognized a loss on the sale of the Composites business of $19.5 million which included consideration of $2.3 million. Consideration from the sale is subject to a post-closing working capital adjustment and includes contingent consideration of up to $6.5 million based on the achievement of sales targets over the next three years. Consideration included in the loss on sale was comprised of net cash received of $1.0 million and the fair value of the earn-out consideration of $1.3 million.

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Revenue Recognition

6 Months Ended

Nov. 30, 2020

Revenue Recognition

Revenue Recognition

Note 4 – 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. We recognize revenue when we satisfy 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, we determine 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 is 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. For contracts that are

deemed to be loss contracts, we establish forward loss reserves for total estimated costs that are in excess of total estimated consideration in the period in which they become known.

When contracts are modified, we consider whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original goods or services provided, are accounted for as if they were part of that existing contract with the effect of the contract modification recognized as an adjustment to revenue on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct, they are accounted for as a new contract and performance obligation, which are recognized prospectively.

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. These changes are primarily adjustments to the estimated profitability for our long-term programs where we provide component inventory management and/or repair services. For the three-month periods ended November 30, 2020 and 2019, we recognized favorable cumulative catch-up adjustments of $2.5 million and $1.9 million, respectively. For the six-month periods ended November 30, 2020 and 2019, we recognized favorable cumulative catch-up adjustments of $2.8 million and $1.9 million, 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 ASU No. 2014-09, Revenue from Contracts with Customers. 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 on our Condensed Consolidated Statement of Operations, and are not considered a performance obligation to our customers. Our reported sales on our Condensed Consolidated Statement of Operations 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 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,
	2020		2020		Change
Contract assets – current	$	52.8	$	49.3	$	3.5
Contract assets – non-current		24.1		22.4		1.7
Contract liabilities:
Deferred revenue – current		(18.1)		(11.2)		(6.9)
Deferred revenue on long-term contracts		(30.3)		(88.0)		57.7
Net contract assets (liabilities)	$	28.5	$	(27.5)	$	56.0

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.

During the first quarter of fiscal 2021, we terminated a commercial power-by-the-hour ("PBH") customer contract which resulted in a charge of $2.2 million. During fiscal 2020, we established forward loss reserves for a certain PBH contract where total estimated costs are in excess of the total estimated consideration over the remainder of the contract. As of November 30, 2020, our Condensed Consolidated Balance Sheet included remaining forward loss reserves of $4.2 million with $3.7 million classified as current in Accrued liabilities and $0.5 million classified as long-term in Other liabilities.

To support our PBH customer contracts, we previously entered into an agreement with a component repair facility to outsource a portion of the component repair and overhaul services. The agreement included certain minimum repair volume guarantees which we have not met due to the impact of COVID-19 on commercial passenger aircraft flight hours. During the three-month period ended November 30, 2020, we recognized a $4.5 million charge to reflect our estimated obligation over the remainder of the agreement for not achieving the minimum volume guarantees.

Changes in our deferred revenue were as follows for the three- and six-month periods ended November 30, 2020 and 2019:

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Deferred revenue at beginning of period	$	(85.4)	$	(86.3)	$	(99.2)	$	(96.4)
Revenue deferred		(50.8)		(153.7)		(123.0)		(240.3)
Revenue recognized		87.6		103.3		176.1		204.3
Other		0.2		2.9		(2.3)		(1.4)
Deferred revenue at end of period	$	(48.4)	$	(133.8)	$	(48.4)	$	(133.8)

Remaining Performance Obligations

As of November 30, 2020, we had approximately $750 million 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 50% 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 that are expected to be recognized as revenue beyond 12 months, primarily relates to our long-term programs where we provide component inventory management and/or repair services.

Disaggregation of Revenue

Sales across the major customer markets for each of our reportable segments for the three- and six-month periods ended November 30, 2020 and 2019 were as follows:

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Aviation Services:
Commercial	$	192.2	$	369.6	$	361.8	$	700.1
Government and defense		192.8		162.4		386.8		343.7
	$	385.0	$	532.0	$	748.6	$	1,043.8
Expeditionary Services:
Commercial	$	2.0	$	6.4	$	7.7	$	12.1
Government and defense		16.6		22.5		48.1		46.5
	$	18.6	$	28.9	$	55.8	$	58.6

Sales by geographic region for the three- and six-month periods ended November 30, 2020 and 2019 were as follows:

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Aviation Services:
North America	$	314.1	$	395.6	$	608.9	$	786.0
Europe/Africa		45.7		99.8		96.7		188.0
Other		25.2		36.6		43.0		69.8
	$	385.0	$	532.0	$	748.6	$	1,043.8
Expeditionary Services:
North America	$	18.4	$	26.4	$	53.3	$	54.6
Europe/Africa		0.2		2.2		2.4		3.6
Other		—		0.3		0.1		0.4
	$	18.6	$	28.9	$	55.8	$	58.6

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Accounts Receivable

6 Months Ended

Nov. 30, 2020

Accounts Receivable

Accounts Receivable

Note 5 – 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,
	2020		2020
U.S. Government contracts:
Trade receivables	$	30.4	$	33.9
Unbilled receivables		25.6		27.4
		56.0		61.3
All other customers:
Trade receivables		88.9		81.7
Unbilled receivables		24.9		28.9
		113.8		110.6
	$	169.8	$	171.9

We currently have past due accounts receivable owed by former commercial program customers primarily related to our exit from customer contracts in certain geographies, including Colombia and Peru. Our past due accounts receivable owed by these customers was $6.9 million as of November 30, 2020 which was net of allowance for doubtful accounts of $8.4 million.

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Restructuring and Impairment Costs

6 Months Ended

Nov. 30, 2020

Restructuring and Impairment Costs.

Restructuring and Impairment Costs

Note 6 – Restructuring and Impairment Costs

During the six-month period ended November 30, 2020, we incurred severance and furlough-related costs of $8.2 million which were included as a component of Cost of sales and Selling, general and administrative on our Condensed Consolidated Statements of Operations. Our liability for severance costs, inclusive of charges in prior periods which have not yet been paid, was $3.9 million as of November 30, 2020 which is included in Accrued liabilities on the Condensed Consolidated Balance Sheet.

In accordance with ASC 360, Property, Plant and Equipment, we are required to test for impairment of long-lived assets whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable from its undiscounted cash flows. We utilize certain assumptions to estimate future undiscounted cash flows, including demand for our services, future market conditions and trends, business development pipeline of opportunities, current and future lease rates, lease terms, and residual values. In light of recent declines in commercial airline volumes and commercial program contract terminations, we evaluated future cash flows related to certain rotable assets supporting long-term programs and recognized asset impairment charges of $5.8 million in the three-month period ended August 31, 2020.

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Accounting for Stock-Based Compensation

6 Months Ended

Nov. 30, 2020

Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

Note 7 – Accounting for Stock-Based Compensation

Restricted Stock

In the three-month period ended August 31, 2020, as part of our annual long-term stock incentive compensation, we granted 141,615 shares of time-based restricted stock to eligible employees. The grant date fair value per share for these shares was $18.94 (the closing price on the grant date). We also granted 71,025 shares of time-based restricted stock to members of the Board of Directors with an average grant date fair value per share of $20.00.

Expense charged to operations for restricted stock during the three-month periods ended November 30, 2020 and 2019 was $0.8 million and $1.8 million, respectively, and $2.7 and $4.9 million during the six-month periods ended November 30, 2020 and 2019.

Stock Options

In July 2020, as part of our annual long-term stock incentive compensation, we issued 927,300 stock options to eligible employees at an exercise price of $18.94. The stock option awards were issued subject to stockholder approval of an increase in available shares under the AAR CORP. 2013 Stock Plan. Stockholders approved the amendment to the AAR CORP. 2013 Stock Plan at the 2020 Annual Meeting of Stockholders held October 7, 2020 and the shares were granted at a weighted average fair value of $5.89. The fair value of stock options was estimated using the Black-Scholes option pricing model with the following assumptions:

Risk-free interest rate	0.4	%
Expected volatility of common stock	40.2	%
Dividend yield	1.6	%
Expected option term in years	4.8

The total intrinsic value of stock options exercised during the six-month periods ended November 30, 2020 and 2019 was $0.1 million and $2.0 million, respectively. Expense charged to operations for stock options during the three-month periods ended November 30, 2020 and 2019 was $1.0 million and $1.0 million, respectively, and during the six-month periods ended November 30, 2020 and 2019 was $1.8 million and $2.2 million, respectively.

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Supplemental Cash Flow Information

6 Months Ended

Nov. 30, 2020

Supplemental Cash Flow Information

Supplemental Cash Flow Information

Note 9 – Supplemental Cash Flow Information

	Six Months Ended
	November 30,
	2020		2019
Interest paid	$	2.6	$	3.8
Income taxes paid		2.2		12.7
Income tax refunds received		0.1		2.4

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Sale of Receivables

6 Months Ended

Nov. 30, 2020

Sale of Receivables

Sale of Receivables

Note 10 – 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 and Purchaser may, but is not required to, purchase the eligible receivables we offer to sell. The term of the Purchase Agreement runs through February 22, 2021, 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, and de-recognize the sold receivables from our Condensed Consolidated Balance Sheet.

During the six-month periods ended November 30, 2020 and 2019, we sold $243.1 million and $404.8 million, respectively, of receivables under the Purchase Agreement and remitted $268.5 million and $405.3 million, respectively, to the Purchaser on their behalf. As of November 30, 2020 and May 31, 2020, we had collected cash of $3.0 million and $20.0 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 Operations. We incurred discounts on the sale of our receivables of $0.1 million and $0.5 million during the three-month periods ended November 30, 2020 and 2019, respectively, and $0.2 million and $1.1 million during the six-month periods ended November 30, 2020 and 2019, respectively.

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Government Subsidies

6 Months Ended

Nov. 30, 2020

Government Subsidies

Government Subsidies

Note 11 – Government Subsidies

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in the U.S. in response to the COVID-19 pandemic. The CARES Act includes provisions relating to refundable payroll tax credits, deferral of the employer portion of certain payroll taxes, net operating loss carrybacks, and other areas. The payroll tax deferral requires that the deferred payroll taxes be paid over two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. As of November 30, 2020, we deferred $11.0 million of payroll taxes which are included in Other liabilities on our Condensed Consolidated Balance Sheet.

During the three-month period ended August 31, 2020, we received $57.2 million from the U.S. Treasury Department through the Payroll Support Program under the CARES Act. This funding included a $48.5 million cash grant which is to be used exclusively for the continuation of payment of employee wages, salaries and benefits for employees of certain maintenance, repair, and overhaul (“ MRO”) facilities. The grant is being recognized as contra-expense on our Condensed Consolidated Statement of Operations as the eligible wages, salaries and benefits are incurred. During the three-month period ended November 30, 2020, we recognized contra-expense within Cost of sales and Selling, general and administrative expenses of $16.8 million and $0.4 million, respectively, and during the six-month period ended November 30, 2020, we recognized contra-expense within Cost of sales and Selling, general and administrative expenses of $24.3 million and $0.6 million.

The remaining funding of $8.7 million is a low interest 10-year senior unsecured promissory note (“Promissory Note”) which bears interest at a rate per annum equal to the sum of (i) 1.0% for the first five years, and the applicable secured overnight financing rate plus 2.0% in years six through ten plus (ii) in kind interest of 3.0% for the first five years and increasing by 1.0% each year over the remaining term. The Promissory Note is pre-payable at par at any time. Certain corporate restrictions apply to us for approximately the next two years which include restrictions on dividends, stock repurchases, employee compensation, and certain workforce actions.

Other countries have enacted legislation similar to the CARES Act to provide relief and stimulus measures to assist companies in mitigating the financial impact from COVID-19 and supporting their employees. During the three-and six-month periods ended November 30, 2020, our foreign subsidiaries recognized employment subsidies of $1.6 and $4.9 million from foreign governments which have been deducted from the related expenses on our Condensed Consolidated Statement of Operations.

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Financing Arrangements

6 Months Ended

Nov. 30, 2020

Financing Arrangements

Financing Arrangements

Note 12 – Financing Arrangements

A summary of the carrying amount of our debt is as follows:

	November 30,		May 31,
	2020		2020
Revolving Credit Facility expiring September 25, 2024 with interest payable monthly	$	189.5	$	579.5
Term loan due November 1, 2021 with interest payable monthly		23.9		22.5
Payroll Support Program Promissory Note		8.7		—
Total debt		222.1		602.0
Debt issuance costs, net		(1.8)		(2.0)
Long-term debt	$	220.3	$	600.0

At November 30, 2020, our 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 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.

We maintain a Revolving Credit Facility with various financial institutions, as lenders, and Bank of America, N.A., as administrative agent for the lenders, which provides the Company an aggregate revolving credit commitment of $600 million and matures September 25, 2024. Under certain circumstances, we have the ability to request, but our lenders are not required to grant, an increase to the revolving credit commitment by an aggregate amount of up to $300 million, not to exceed $900 million in total. Borrowings under the Revolving Credit Facility bear interest at the offered Eurodollar Rate plus 87.5 to 175 basis points based on certain financial measurements if a Eurodollar Rate loan, or at the offered fluctuating Base Rate plus 0 to 75 basis points based on certain financial measurements if a Base Rate loan.

The term loan under the Credit Agreement that matures on November 1, 2021 has been classified as a long-term liability due to our intent and ability to refinance this bond on a long-term basis using our Revolving Credit Facility.

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, 2020, we were in compliance with the financial and other covenants in our financing agreements.

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Other Non-current Assets

6 Months Ended

Nov. 30, 2020

Other Non-current Assets

Other Non-current Assets

Note 13 – Other Non-current Assets

Investments in Joint Ventures

Our investments in joint ventures include $9.7 million for our 40% ownership interest in a joint venture in India to develop and operate an airframe maintenance facility.  Facility construction and commencement of operations are expected to occur in fiscal 2021.  

The investment balance as of November 30, 2020 includes $8.5 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 has a loan to the joint venture proportionate to its equity ownership.  Our loan to the Indian joint venture under this arrangement was $3.0 million as of November 30, 2020.

License Fees

In June 2011, we entered into a ten-year agreement with Unison Industries (“Unison”) to be the exclusive worldwide aftermarket distributor for Unison’s electrical components, sensors, switches and other systems for aircraft and industrial uses.  In June 2020, we entered into an extension and expansion of our agreement with Unison including a new termination date of December 31, 2031, an initial $25.0 million license fee paid in June 2020 to Unison, and annual license fees at a fixed percentage of our net sales of Unison products.  The June 2020 payment of $25.0 million was capitalized and is being amortized on a straight-line basis over the term of the new agreement.

Split-Dollar Life Insurance Arrangements

We previously entered into split-dollar life insurance agreements to benefit certain former executives and officers.  Under the terms of the arrangements, we made premium payments on the individuals’ behalf and we retained a collateral interest in the policies generally to the extent of the premiums we previously paid.  As of May 31, 2020, our Condensed Consolidated Balance Sheet included $15.6 million in Other non-current assets for cumulative premiums paid and expected to be reimbursed upon termination of the policies.

During the second quarter of fiscal 2021, certain split-dollar life insurance agreements were terminated and we received $12.0 million for reimbursement of both the life insurance premiums we previously paid and a portion of our prior tax payments made on the individuals’ behalf related to their imputed income on the policies.  The reimbursement of the premiums paid of $10.0 million has been classified as cash flow from investing activities with the remainder included in cash flow from operating activities as it represents the reimbursement of a portion of the taxes previously paid and expensed.  In the second quarter of fiscal 2021, we recognized a benefit of $1.3 million in Selling, general and administrative expenses on the Condensed Consolidated Statement of Operations for the net recovery of the taxes previously paid on behalf of the individuals.

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Earnings per Share

6 Months Ended

Nov. 30, 2020

Earnings per Share

Earnings per Share

Note 14 – 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, 2020 and 2019 is as follows:

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Basic and Diluted EPS:
Income from continuing operations	$	14.4	$	20.1	$	0.5	$	37.2
Less income attributable to participating shares		(0.1)		(0.1)		—		(0.2)
Income from continuing operations attributable to common shareholders		14.3		20.0		0.5		37.0
Loss from discontinued operations attributable to common shareholders		(6.2)		(5.9)		(6.8)		(18.6)
Net income (loss) attributable to common shareholders for earnings per share	$	8.1	$	14.1	$	(6.3)	$	18.4
Weighted Average Shares:
Weighted average common shares outstanding - basic		34.9		34.6		34.9		34.6
Additional shares from the assumed exercise of stock options		0.1		0.4		0.1		0.4
Weighted average common shares outstanding - diluted		35.0		35.0		35.0		35.0
Earnings (Loss) per share – basic:
Earnings from continuing operations	$	0.41	$	0.58	$	0.01	$	1.07
Loss from discontinued operations		(0.18)		(0.17)		(0.20)		(0.54)
Earnings (Loss) per share - basic	$	0.23	$	0.41	$	(0.19)	$	0.53
Earnings (Loss) per share – diluted:
Earnings from continuing operations	$	0.41	$	0.57	$	0.01	$	1.06
Loss from discontinued operations		(0.18)		(0.17)		(0.19)		(0.53)
Earnings (Loss) per share - diluted	$	0.23	$	0.40	$	(0.18)	$	0.53

The potential dilutive effect of 1,743,000 and 267,000 shares relating to stock options was excluded from the computation of weighted average common shares outstanding – diluted for the three-month periods ended November 30, 2020 and 2019, respectively, as the shares would have been anti-dilutive. The potential dilutive effect of 1,743,000 and 267,000 shares relating to stock options was excluded from the computation of weighted average common shares outstanding – diluted for the six-month periods ended November 30, 2020 and 2019.

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Accumulated Other Comprehensive Loss

6 Months Ended

Nov. 30, 2020

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

Note 15 – Accumulated Other Comprehensive Loss

Changes in our accumulated other comprehensive loss (“AOCL”) by component for the three- and six-month periods ended November 30, 2020 and 2019 were as follows:

	Currency
	Translation		Pension
	Adjustments		Plans		Total
Balance at September 1, 2020	$	(0.8)	$	(42.3)	$	(43.1)
Other comprehensive income before reclassifications		1.1		(1.2)		(0.1)
Amounts reclassified from AOCL		—		0.2		0.2
Total other comprehensive income		1.1		(1.0)		0.1
Balance at November 30, 2020	$	0.3	$	(43.3)	$	(43.0)
Balance at September 1, 2019	$	(2.2)	$	(38.6)	$	(40.8)
Other comprehensive loss before reclassifications		0.5		—		0.5
Amounts reclassified from AOCL		—		0.3		0.3
Total other comprehensive income		0.5		0.3		0.8
Balance at November 30, 2019	$	(1.7)	$	(38.3)	$	(40.0)

	Currency
	Translation		Pension
	Adjustments		Plans		Total
Balance at June 1, 2020	$	(2.0)	$	(42.6)	$	(44.6)
Other comprehensive income before reclassifications		2.3		(1.2)		1.1
Amounts reclassified from AOCL		—		0.5		0.5
Total other comprehensive income		2.3		(0.7)		1.6
Balance at November 30, 2020	$	0.3	$	(43.3)	$	(43.0)
Balance at June 1, 2019	$	(2.1)	$	(38.8)	$	(40.9)
Other comprehensive loss before reclassifications		0.4		—		0.4
Amounts reclassified from AOCL		—		0.5		0.5
Total other comprehensive income		0.4		0.5		0.9
Balance at November 30, 2019	$	(1.7)	$	(38.3)	$	(40.0)

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Business Segment Information

6 Months Ended

Nov. 30, 2020

Business Segment Information

Business Segment Information

Note 16 – 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 reportable segments: Aviation Services comprised of supply chain and MRO activities and 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. 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 annual Report on Form 10-K for the year ended May 31, 2020.

Our chief operating decision making officer (Chief Executive Officer) evaluates performance based on our 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,
	2020		2019		2020		2019
Sales:
Aviation Services	$	385.0	$	532.0	$	748.6	$	1,043.8
Expeditionary Services		18.6		28.9		55.8		58.6
	$	403.6	$	560.9	$	804.4	$	1,102.4

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Gross profit:
Aviation Services	$	66.8	$	85.7	$	111.4	$	165.7
Expeditionary Services		2.7		0.2		6.7		1.8
	$	69.5	$	85.9	$	118.1	$	167.5

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,
	2020		2019		2020		2019
Segment gross profit	$	69.5	$	85.9	$	118.1	$	167.5
Selling, general and administrative		(43.4)		(57.1)		(88.7)		(115.2)
Loss from joint ventures		(0.1)		—		(0.2)		—
Provision for doubtful accounts		(4.4)		(0.7)		(4.4)		(1.4)
Loss on sale of business		—		—		(19.5)		—
Other expenses, net		(0.7)		(0.2)		(0.5)		(0.4)
Interest expense		(1.3)		(1.9)		(3.0)		(4.1)
Interest income		—		0.1		0.1		0.2
Income from continuing operations before provision for income taxes	$	19.6	$	26.1	$	1.9	$	46.6

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Legal Proceedings

6 Months Ended

Nov. 30, 2020

Legal Proceedings

Legal Proceedings

Note 17 – 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 and believes it has meritorious defenses and counter-arguments to the concerns raised by the DoJ. 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. We believe it is probable that we will incur a loss from this matter and have recognized a charge of $6.0 million in discontinued operations in the second quarter of fiscal 2021 which increases our reserve to $8.0 million on the Condensed Consolidated Balance Sheet as of November 30, 2020. 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, and believe that $8 million is the low end of the range of loss based on our latest settlement offer, 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, in fiscal 2019, 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.

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Revenue Recognition (Tables)

6 Months Ended

Nov. 30, 2020

Revenue Recognition

Schedule of net contract assets and liabilities

	November 30,		May 31,
	2020		2020		Change
Contract assets – current	$	52.8	$	49.3	$	3.5
Contract assets – non-current		24.1		22.4		1.7
Contract liabilities:
Deferred revenue – current		(18.1)		(11.2)		(6.9)
Deferred revenue on long-term contracts		(30.3)		(88.0)		57.7
Net contract assets (liabilities)	$	28.5	$	(27.5)	$	56.0

Schedule of changes in deferred revenue after adoption of ASC 606

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Deferred revenue at beginning of period	$	(85.4)	$	(86.3)	$	(99.2)	$	(96.4)
Revenue deferred		(50.8)		(153.7)		(123.0)		(240.3)
Revenue recognized		87.6		103.3		176.1		204.3
Other		0.2		2.9		(2.3)		(1.4)
Deferred revenue at end of period	$	(48.4)	$	(133.8)	$	(48.4)	$	(133.8)

Schedule of sales across the major customer markets for each of our reportable segments

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Aviation Services:
Commercial	$	192.2	$	369.6	$	361.8	$	700.1
Government and defense		192.8		162.4		386.8		343.7
	$	385.0	$	532.0	$	748.6	$	1,043.8
Expeditionary Services:
Commercial	$	2.0	$	6.4	$	7.7	$	12.1
Government and defense		16.6		22.5		48.1		46.5
	$	18.6	$	28.9	$	55.8	$	58.6

Schedule of sales by geographic region

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Aviation Services:
North America	$	314.1	$	395.6	$	608.9	$	786.0
Europe/Africa		45.7		99.8		96.7		188.0
Other		25.2		36.6		43.0		69.8
	$	385.0	$	532.0	$	748.6	$	1,043.8
Expeditionary Services:
North America	$	18.4	$	26.4	$	53.3	$	54.6
Europe/Africa		0.2		2.2		2.4		3.6
Other		—		0.3		0.1		0.4
	$	18.6	$	28.9	$	55.8	$	58.6

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Accounts Receivable (Tables)

6 Months Ended

Nov. 30, 2020

Accounts Receivable

Schedule of accounts receivable

	November 30,		May 31,
	2020		2020
U.S. Government contracts:
Trade receivables	$	30.4	$	33.9
Unbilled receivables		25.6		27.4
		56.0		61.3
All other customers:
Trade receivables		88.9		81.7
Unbilled receivables		24.9		28.9
		113.8		110.6
	$	169.8	$	171.9

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Accounting for Stock-Based Compensation (Tables)

6 Months Ended

Nov. 30, 2020

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	0.4	%
Expected volatility of common stock	40.2	%
Dividend yield	1.6	%
Expected option term in years	4.8

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Inventories (Tables)

6 Months Ended

Nov. 30, 2020

Inventories

Summary of inventories

	November 30,		May 31,
	2020		2020
Aircraft and engine parts, components and finished goods	$	521.9	$	556.6
Raw materials and parts		41.1		45.9
Work-in-process		22.0		20.6
	$	585.0	$	623.1

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Supplemental Cash Flow Information (Tables)

6 Months Ended

Nov. 30, 2020

Supplemental Cash Flow Information

Schedule of supplemental information on cash flows

	Six Months Ended
	November 30,
	2020		2019
Interest paid	$	2.6	$	3.8
Income taxes paid		2.2		12.7
Income tax refunds received		0.1		2.4

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Financing Arrangements (Tables)

6 Months Ended

Nov. 30, 2020

Financing Arrangements

Summary of carrying amount of debt

	November 30,		May 31,
	2020		2020
Revolving Credit Facility expiring September 25, 2024 with interest payable monthly	$	189.5	$	579.5
Term loan due November 1, 2021 with interest payable monthly		23.9		22.5
Payroll Support Program Promissory Note		8.7		—
Total debt		222.1		602.0
Debt issuance costs, net		(1.8)		(2.0)
Long-term debt	$	220.3	$	600.0

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Earnings per Share (Tables)

6 Months Ended

Nov. 30, 2020

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,
	2020		2019		2020		2019
Basic and Diluted EPS:
Income from continuing operations	$	14.4	$	20.1	$	0.5	$	37.2
Less income attributable to participating shares		(0.1)		(0.1)		—		(0.2)
Income from continuing operations attributable to common shareholders		14.3		20.0		0.5		37.0
Loss from discontinued operations attributable to common shareholders		(6.2)		(5.9)		(6.8)		(18.6)
Net income (loss) attributable to common shareholders for earnings per share	$	8.1	$	14.1	$	(6.3)	$	18.4
Weighted Average Shares:
Weighted average common shares outstanding - basic		34.9		34.6		34.9		34.6
Additional shares from the assumed exercise of stock options		0.1		0.4		0.1		0.4
Weighted average common shares outstanding - diluted		35.0		35.0		35.0		35.0
Earnings (Loss) per share – basic:
Earnings from continuing operations	$	0.41	$	0.58	$	0.01	$	1.07
Loss from discontinued operations		(0.18)		(0.17)		(0.20)		(0.54)
Earnings (Loss) per share - basic	$	0.23	$	0.41	$	(0.19)	$	0.53
Earnings (Loss) per share – diluted:
Earnings from continuing operations	$	0.41	$	0.57	$	0.01	$	1.06
Loss from discontinued operations		(0.18)		(0.17)		(0.19)		(0.53)
Earnings (Loss) per share - diluted	$	0.23	$	0.40	$	(0.18)	$	0.53

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Accumulated Other Comprehensive Loss (Tables)

6 Months Ended

Nov. 30, 2020

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, 2020	$	(0.8)	$	(42.3)	$	(43.1)
Other comprehensive income before reclassifications		1.1		(1.2)		(0.1)
Amounts reclassified from AOCL		—		0.2		0.2
Total other comprehensive income		1.1		(1.0)		0.1
Balance at November 30, 2020	$	0.3	$	(43.3)	$	(43.0)
Balance at September 1, 2019	$	(2.2)	$	(38.6)	$	(40.8)
Other comprehensive loss before reclassifications		0.5		—		0.5
Amounts reclassified from AOCL		—		0.3		0.3
Total other comprehensive income		0.5		0.3		0.8
Balance at November 30, 2019	$	(1.7)	$	(38.3)	$	(40.0)

	Currency
	Translation		Pension
	Adjustments		Plans		Total
Balance at June 1, 2020	$	(2.0)	$	(42.6)	$	(44.6)
Other comprehensive income before reclassifications		2.3		(1.2)		1.1
Amounts reclassified from AOCL		—		0.5		0.5
Total other comprehensive income		2.3		(0.7)		1.6
Balance at November 30, 2020	$	0.3	$	(43.3)	$	(43.0)
Balance at June 1, 2019	$	(2.1)	$	(38.8)	$	(40.9)
Other comprehensive loss before reclassifications		0.4		—		0.4
Amounts reclassified from AOCL		—		0.5		0.5
Total other comprehensive income		0.4		0.5		0.9
Balance at November 30, 2019	$	(1.7)	$	(38.3)	$	(40.0)

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Business Segment Information (Tables)

6 Months Ended

Nov. 30, 2020

Business Segment Information

Schedule of selected financial information for each reportable segment

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Sales:
Aviation Services	$	385.0	$	532.0	$	748.6	$	1,043.8
Expeditionary Services		18.6		28.9		55.8		58.6
	$	403.6	$	560.9	$	804.4	$	1,102.4

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Gross profit:
Aviation Services	$	66.8	$	85.7	$	111.4	$	165.7
Expeditionary Services		2.7		0.2		6.7		1.8
	$	69.5	$	85.9	$	118.1	$	167.5

Schedule of reconciliation of segment gross profit to income from continuing operations before provision for income taxes

	Three Months Ended				Six Months Ended
	November 30,				November 30,
	2020		2019		2020		2019
Segment gross profit	$	69.5	$	85.9	$	118.1	$	167.5
Selling, general and administrative		(43.4)		(57.1)		(88.7)		(115.2)
Loss from joint ventures		(0.1)		—		(0.2)		—
Provision for doubtful accounts		(4.4)		(0.7)		(4.4)		(1.4)
Loss on sale of business		—		—		(19.5)		—
Other expenses, net		(0.7)		(0.2)		(0.5)		(0.4)
Interest expense		(1.3)		(1.9)		(3.0)		(4.1)
Interest income		—		0.1		0.1		0.2
Income from continuing operations before provision for income taxes	$	19.6	$	26.1	$	1.9	$	46.6

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Sale of Composites Business (Details) - Composites Business $ in Millions	Aug. 31, 2020 USD ($)
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Loss on the sale of the composites business	$ 19.5
Disposal group, loss on sale of business, Income Statement location	us-gaap:IncomeLossFromDiscontinuedOperationsNetOfTax
Consideration from sale	$ 2.3
Maximum contingent consideration	$ 6.5
Contingent consideration period for achievement of target sales	3 years
Cash consideration received	$ 1.0
Fair value of earn-out consideration	$ 1.3

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Revenue Recognition (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019
Revenue Recognition
Favorable cumulative catch-up adjustments	$ 2.5	$ 1.9	$ 2.8	$ 1.9
Practical Expedient, Incremental costs of obtaining a contract			true
Practical Expedient, Remaining performance obligations			true

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Revenue Recognition - Contract Assets and Liabilities and Remaining Performance Obligations (Details) - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Nov. 30, 2020	Aug. 31, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019	May 31, 2020
Contract Assets and Liabilities
Contract assets - current	$ 52.8			$ 52.8		$ 49.3
Contract assets - non-current	24.1			24.1		22.4
Contract liabilities:
Deferred revenue - current	(18.1)			(18.1)		(11.2)
Deferred revenue on long-term contracts	(30.3)			(30.3)		(88.0)
Net contract assets (liabilities)	28.5			28.5		(27.5)
Change in contract assets - current				3.5
Change in contract assets - non-current				1.7
Change in contract liabilities - current				(6.9)
Change in contract liabilities - non-current				57.7
Change in net contract assets (liabilities)				56.0
Charge related to terminiation of PBH customer contract		$ 2.2
PBH forward loss reserve	4.2			4.2
Forward loss reserves	8.4			8.4
Forward loss reserves classified as current in accrued liabilities	19.4			19.4		$ 22.1
Change in Contract with Customer, Liability
Deferred revenue at beginning of period	(85.4)	(99.2)	$ (86.3)	(99.2)	$ (96.4)
Revenue deferred	(50.8)		(153.7)	(123.0)	(240.3)
Revenue recognized	87.6		103.3	176.1	204.3
Other	0.2		2.9	(2.3)	(1.4)
Deferred revenue at end of period	(48.4)	$ (85.4)	$ (133.8)	(48.4)	$ (133.8)
Remaining Performance Obligations
Remaining performance obligation	$ 750.0			$ 750.0
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-05-31
Remaining Performance Obligations
Remaining performance obligation (as a percent)	50.00%			50.00%
Expected timing of satisfaction of remaining performance obligation	12 months			12 months
Accrued liabilities
Contract liabilities:
PBH forward loss reserve	$ 3.7			$ 3.7
Other liabilities
Contract liabilities:
PBH forward loss reserve	$ 0.5			0.5
PBH contracts
Contract liabilities:
Contract Charges on non-achievement of minimum volume guarantees				$ 4.5

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Revenue recognition - Disaggregation of Revenue (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019
Disaggregation of revenue by major customer markets
Net sales	$ 403.6	$ 560.9	$ 804.4	$ 1,102.4
Aviation Services
Disaggregation of revenue by major customer markets
Net sales	385.0	532.0	748.6	1,043.8
Aviation Services | North America
Disaggregation of revenue by major customer markets
Net sales	314.1	395.6	608.9	786.0
Aviation Services | Europe
Disaggregation of revenue by major customer markets
Net sales	45.7	99.8	96.7	188.0
Aviation Services | Other
Disaggregation of revenue by major customer markets
Net sales	25.2	36.6	43.0	69.8
Aviation Services | Commercial
Disaggregation of revenue by major customer markets
Net sales	192.2	369.6	361.8	700.1
Aviation Services | Government and defense
Disaggregation of revenue by major customer markets
Net sales	192.8	162.4	386.8	343.7
Expeditionary Services
Disaggregation of revenue by major customer markets
Net sales	18.6	28.9	55.8	58.6
Expeditionary Services | North America
Disaggregation of revenue by major customer markets
Net sales	18.4	26.4	53.3	54.6
Expeditionary Services | Europe
Disaggregation of revenue by major customer markets
Net sales	0.2	2.2	2.4	3.6
Expeditionary Services | Other
Disaggregation of revenue by major customer markets
Net sales		0.3	0.1	0.4
Expeditionary Services | Commercial
Disaggregation of revenue by major customer markets
Net sales	2.0	6.4	7.7	12.1
Expeditionary Services | Government and defense
Disaggregation of revenue by major customer markets
Net sales	$ 16.6	$ 22.5	$ 48.1	$ 46.5

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Accounts Receivable (Details) - USD ($) $ in Millions	Nov. 30, 2020	May 31, 2020
Accounts Receivable
Accounts receivable	$ 169.8	$ 171.9
Accounts receivable, net	169.8	171.9
Past due accounts receivable	6.9
Allowance for doubtful accounts	8.4
U.S. Government Contract
Accounts Receivable
Accounts receivable	56.0	61.3
Unbilled receivables	25.6	27.4
U.S. Government Contract | Trade receivables
Accounts Receivable
Accounts receivable	30.4	33.9
All other customers
Accounts Receivable
Accounts receivable	113.8	110.6
Unbilled receivables	24.9	28.9
All other customers | Trade receivables
Accounts Receivable
Accounts receivable	$ 88.9	$ 81.7

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Restructuring and Impairment Costs (Details) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Aug. 31, 2020	Nov. 30, 2020
Restructuring and Impairment Costs
Rotable asset impairment charges	$ 5.8	$ 7.0
Cost of sales and Selling, general and administrative expenses
Restructuring and Impairment Costs
Severance and furlough-related costs		8.2
Accounts liabilities
Restructuring and Impairment Costs
Liability for severance costs		$ 3.9

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Accounting for Stock-Based Compensation (Details) - USD ($) $ / shares in Units, $ in Millions		1 Months Ended	3 Months Ended			6 Months Ended
	Oct. 07, 2020	Jul. 31, 2020	Nov. 30, 2020	Aug. 31, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019
Stock options, additional disclosures
Compensation expense						$ (1.5)	$ (3.0)
Assumptions used in the Black-Scholes option pricing models to estimate the fair value of each stock option grant
Risk-free interest rate						0.40%
Expected volatility of common stock						40.20%
Dividend yield						1.60%
Expected option term in years						4 years 9 months 18 days
Restricted stock
Stock options, additional disclosures
Compensation expense			$ 0.8		$ 1.8	$ 2.7	4.9
Time-based restricted stock
Stock options, additional disclosures
Granted (in shares)				141,615
Granted (in dollars per share)				$ 18.94
Time-based restricted stock | Board of Directors
Stock options, additional disclosures
Granted (in shares)				71,025
Granted (in dollars per share)				$ 20.00
Stock options
Stock options, additional disclosures
Granted (in shares)		927,300
Granted (in dollars per share)		$ 18.94
Weighted average fair value of stock options granted (in dollars per share)	$ 5.89
Total intrinsic value of stock options exercised						0.1	2.0
Compensation expense			$ 1.0		$ 1.0	$ 1.8	$ 2.2

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Inventories (Details) - USD ($) $ in Millions	3 Months Ended
	Nov. 30, 2020	May 31, 2020
Inventories
Aircraft and engine parts, components and finished goods	$ 521.9	$ 556.6
Raw materials and parts	41.1	45.9
Work-in-process	22.0	20.6
Total inventories	585.0	$ 623.1
Inventory loss charged to reserves	$ 1.2

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Supplemental Cash Flow Information (Details) - USD ($) $ in Millions	6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019
Supplemental Cash Flow Information
Interest paid	$ 2.6	$ 3.8
Income taxes paid	2.2	12.7
Income tax refunds received	$ 0.1	$ 2.4

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Sale of Receivables (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019	May 31, 2020	Feb. 23, 2018
Sale of Receivables
Retained interests	$ 0.0		$ 0.0
Sale of receivables	243.1	$ 404.8	243.1	$ 404.8
Remitted receivables			268.5	405.3
Restricted cash	3.0		3.0		$ 20.0
Maximum
Sale of Receivables
Sale of receivables						$ 150.0
Other expense, net
Sale of Receivables
Discount and other fees	$ 0.1	$ 0.5	$ 0.2	$ 1.1

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Government Subsidies (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Aug. 31, 2020	Nov. 30, 2020
Unusual or Infrequent Item, or Both [Line Items]
Deferred payroll taxes, CARES Act	$ 23.6		$ 23.6
Cost of sales
Unusual or Infrequent Item, or Both [Line Items]
Contra-expense recognized for grant received from the Payroll Support Program under the CARES Act	16.8		24.3
Selling, general and administrative expenses
Unusual or Infrequent Item, or Both [Line Items]
Contra-expense recognized for grant received from the Payroll Support Program under the CARES Act	0.4		$ 0.6
Covid-19
Unusual or Infrequent Item, or Both [Line Items]
Period for repayment of deferred payroll taxes, CARES Act			2 years
Deferred payroll taxes, CARES Act	11.0		$ 11.0
Proceeds From Government Assistance Cares Act		$ 57.2
Grant proceeds to be used for payment of employee wages, salaries and benefits under the CARES Act			48.5
Foreign subsidies received related to COVID-19	1.6		4.9
Covid-19 | Payroll Support Program Promissory Note
Unusual or Infrequent Item, or Both [Line Items]
Promissory note proceeds	$ 8.7		$ 8.7
Debt instrument term			10 years
First five years | Covid-19 | Payroll Support Program Promissory Note
Unusual or Infrequent Item, or Both [Line Items]
Interest rate (as a percent)	1.00%		1.00%
Six to ten years | Covid-19 | Payroll Support Program Promissory Note
Unusual or Infrequent Item, or Both [Line Items]
Interest rate (as a percent)	2.00%		2.00%
First five years interest in kind | Covid-19 | Payroll Support Program Promissory Note
Unusual or Infrequent Item, or Both [Line Items]
Interest rate (as a percent)	3.00%		3.00%
Remaining term | Covid-19 | Payroll Support Program Promissory Note
Unusual or Infrequent Item, or Both [Line Items]
Interest rate (as a percent)	1.00%		1.00%

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Financing Arrangements (Details) $ in Millions, $ in Millions	Sep. 25, 2020 USD ($)	Oct. 18, 2017 CAD ($) facility	Nov. 30, 2020 USD ($)	May 31, 2020 USD ($)
Financing Arrangements
Total debt			$ 222.1	$ 602.0
Debt issuance costs, net			(1.8)	(2.0)
Long-term debt			220.3	600.0
Term loan
Financing Arrangements
Total debt			23.9	22.5
Long-term debt		$ 31
Revolving Credit Facility expiring September 25, 2024 with interest payable monthly
Financing Arrangements
Current borrowing capacity	$ 600.0
Increase in borrowing capacity	300.0
Maximum borrowing capacity	$ 900.0
Payroll Support Program Promissory Note
Financing Arrangements
Total debt			8.7
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 September 25, 2024 with interest payable monthly | Minimum
Financing Arrangements
Debt Instrument Basis Spread On Variable Rate After Amendment	0.875%
Eurodollar rate | Revolving Credit Facility expiring September 25, 2024 with interest payable monthly | Maximum
Financing Arrangements
Debt Instrument Basis Spread On Variable Rate After Amendment	1.75%
Base rate | Revolving Credit Facility expiring September 25, 2024 with interest payable monthly | Minimum
Financing Arrangements
Debt Instrument Basis Spread On Variable Rate After Amendment	0.00%
Base rate | Revolving Credit Facility expiring September 25, 2024 with interest payable monthly | Maximum
Financing Arrangements
Debt Instrument Basis Spread On Variable Rate After Amendment	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			$ 189.5	$ 579.5
MRO facilities acquired in Canada owned by Premier Aviation
Financing Arrangements
Number of facilities acquired | facility		2

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Other Non-current Assets - Investments in Joint Ventures (Details) - USD ($) $ in Millions	1 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2011	Nov. 30, 2020
License Fees
Cumulative premiums paid			$ 15.6
Proceeds from termination of life insurance policy and reimbursement of prior tax payments			10.0
Net recoveries of prior taxes paid on behalf of employees			1.3
Unison Industries
License Fees
Agreement period (in years)		10 years
Payment of license fee	$ 25.0
License fee capitalized	$ 25.0
Owned Through Joint Ventures
Investments in Joint Ventures
Investments in joint ventures			$ 9.7
Membership interest in joint ventures (as a percent)			40.00%
Amount of guarantee liability recognized			$ 8.5
Percentage on outstanding debt			40.00%
Loan to joint venture			$ 3.0
License Fees
Proceeds from termination of life insurance policy and reimbursement of prior tax payments			$ 12.0

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Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019
Earnings per Share
Effect, participating securities			$ 0.0
Basic and Diluted EPS:
Income from continuing operations	$ 14.4	$ 20.1	0.5	$ 37.2
Less income attributable to participating shares	(0.1)	(0.1)		(0.2)
Income from continuing operations attributable to common stockholders	14.3	20.0	0.5	37.0
Loss from discontinued operations attributable to common stockholders	(6.2)	(5.9)	(6.8)	(18.6)
Net income (loss) attributable to common stockholders for earnings per share	$ 8.1	$ 14.1	$ (6.3)	$ 18.4
Weighted Average Shares:
Weighted average common shares outstanding - basic	34,900,000	34,600,000	34,900,000	34,600,000
Additional shares from the assumed exercise of stock options	100,000	400,000	100,000	400,000
Weighted average common shares outstanding - diluted	35,000,000.0	35,000,000.0	35,000,000.0	35,000,000.0
Earnings (Loss) per share - basic:
Earnings from continuing operations	$ 0.41	$ 0.58	$ 0.01	$ 1.07
Loss from discontinued operations	(0.18)	(0.17)	(0.20)	(0.54)
Earnings (Loss) per share - basic	0.23	0.41	(0.19)	0.53
Earnings (Loss) per share - diluted:
Earnings from continuing operations	0.41	0.57	0.01	1.06
Loss from discontinued operations	(0.18)	(0.17)	(0.19)	(0.53)
Earnings (Loss) per share - diluted	$ 0.23	$ 0.40	$ (0.18)	$ 0.53
Antidilutive shares excluded from the computation of diluted earnings per share (in shares)	1,743,000	267,000	1,743,000	267,000

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Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	3 Months Ended				6 Months Ended
	Nov. 30, 2020	Aug. 31, 2020	Nov. 30, 2019	Aug. 31, 2019	Nov. 30, 2020	Nov. 30, 2019
Accumulated Other Comprehensive Loss
Balance at beginning of the period	$ (43.1)	$ (44.6)	$ (40.8)	$ (40.9)	$ (44.6)	$ (40.9)
Other comprehensive income (loss) before reclassifications	(0.1)		0.5		1.1	0.4
Amounts reclassified from AOCL	0.2		0.3		0.5	0.5
Other comprehensive income, net of tax	0.1	1.5	0.8	0.1	1.6	0.9
Balance at end of the period	(43.0)	(43.1)	(40.0)	(40.8)	(43.0)	(40.0)
Currency Translation Adjustments
Accumulated Other Comprehensive Loss
Balance at beginning of the period	(0.8)	(2.0)	(2.2)	(2.1)	(2.0)	(2.1)
Other comprehensive income (loss) before reclassifications	1.1		0.5		2.3	0.4
Other comprehensive income, net of tax	1.1		0.5		2.3	0.4
Balance at end of the period	0.3	(0.8)	(1.7)	(2.2)	0.3	(1.7)
Pensions Plans
Accumulated Other Comprehensive Loss
Balance at beginning of the period	(42.3)	(42.6)	(38.6)	(38.8)	(42.6)	(38.8)
Other comprehensive income (loss) before reclassifications	(1.2)				(1.2)
Amounts reclassified from AOCL	0.2		0.3		0.5	0.5
Other comprehensive income, net of tax	(1.0)		0.3		(0.7)	0.5
Balance at end of the period	$ (43.3)	$ (42.3)	$ (38.3)	$ (38.6)	$ (43.3)	$ (38.3)

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Business Segment Information - Sales and Gross Profit (Details) $ in Millions	3 Months Ended		6 Months Ended
	Nov. 30, 2020 USD ($)	Nov. 30, 2019 USD ($)	Nov. 30, 2020 USD ($) segment	Nov. 30, 2019 USD ($)
Disaggregation of revenue by major customer markets
Operating segments (in segments) | segment			2
Sales	$ 403.6	$ 560.9	$ 804.4	$ 1,102.4
Gross profit	69.5	85.9	118.1	167.5
Aviation Services
Disaggregation of revenue by major customer markets
Sales	385.0	532.0	748.6	1,043.8
Gross profit	66.8	85.7	111.4	165.7
Expeditionary Services
Disaggregation of revenue by major customer markets
Sales	18.6	28.9	55.8	58.6
Gross profit	$ 2.7	$ 0.2	$ 6.7	$ 1.8

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Business Segment Information - Reconciliation of Gross Profit to Income (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Nov. 30, 2019	Nov. 30, 2020	Nov. 30, 2019
Reconciliation of segment gross profit to income from continuing operations before provision for income taxes
Segment gross profit	$ 69.5	$ 85.9	$ 118.1	$ 167.5
Selling, general and administrative	(43.4)	(57.1)	(88.7)	(115.2)
Loss from joint ventures	(0.1)		(0.2)
Provision for doubtful accounts	(4.4)	(0.7)	(4.4)	(1.4)
Loss on sale of business			(19.5)
Other income (expense), net	(0.7)	(0.2)	(0.5)	(0.4)
Interest expense	(1.3)	(1.9)	(3.0)	(4.1)
Interest income		0.1	0.1	0.2
Income from continuing operations before provision for income taxes	$ 19.6	$ 26.1	$ 1.9	$ 46.6

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Legal Proceedings (Details) $ in Millions	3 Months Ended
	Nov. 30, 2020 USD ($)
Legal Proceedings
Loss contingency liability recognized	$ 8.0
Loss contingency, loss recognized in period	$ 6.0