Group 1 - Cintas Corp. is expected to report quarterly earnings of $1.19 per share on revenue of $2.70 million [2] - Micron Technology Inc. reported fourth-quarter revenue of $11.32 billion, exceeding analyst estimates of $11.22 billion, with adjusted earnings of $3.03 per share, surpassing expectations of $2.86 per share [2] - Thor Industries Inc. is anticipated to post earnings of $1.24 per share on revenue of $2.33 billion for the latest quarter [2] - AAR Corp. reported positive earnings for the first quarter, although shares fell by 0.7% in after-hours trading [2] - KB Home is expected to report quarterly earnings of $1.50 per share on revenue of $1.59 billion [2]

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Company Performance - AAR reported quarterly earnings of $1.08 per share, exceeding the Zacks Consensus Estimate of $0.98 per share, and up from $0.85 per share a year ago, representing an earnings surprise of +10.20% [1] - The company posted revenues of $739.6 million for the quarter ended August 2025, surpassing the Zacks Consensus Estimate by 7.86%, compared to $661.7 million in the same quarter last year [2] - AAR has surpassed consensus EPS estimates in all four of the last quarters and has topped consensus revenue estimates three times during the same period [2] Stock Performance - AAR shares have increased approximately 25.5% since the beginning of the year, outperforming the S&P 500's gain of 13.8% [3] - The current consensus EPS estimate for the upcoming quarter is $1.07 on revenues of $706.94 million, and for the current fiscal year, it is $4.43 on revenues of $2.87 billion [7] Industry Outlook - The Aerospace - Defense Equipment industry, to which AAR belongs, is currently ranked in the top 25% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact AAR's stock performance [5]

Financial Data and Key Metrics Changes - Total adjusted sales grew 13% to $740 million year over year, with organic sales growth at 17% when excluding landing gear sales from the previous year [9][10] - Adjusted EBITDA increased 18% to $86.7 million, with adjusted EBITDA margins rising to 11.7% from 11.3% [9] - Adjusted diluted EPS increased by 27% to $1.08 from $0.85 in the same quarter last year [10] Business Line Data and Key Metrics Changes - Parts supply sales grew 27% to $318 million, with adjusted EBITDA of $43.8 million, up 34%, and adjusted EBITDA margin increasing to 13.8% from 13.1% [10][11] - Repair and engineering sales decreased 1% to $215 million, but organic sales growth was 8% when excluding landing gear divestiture, with adjusted EBITDA of $28.1 million, up 1% [11][12] - Integrated solutions sales increased by 10% year over year to $185 million, with adjusted EBITDA of $14.2 million, up 5% [12] Market Data and Key Metrics Changes - Adjusted sales growth to government customers increased 21%, while adjusted organic sales to commercial customers increased 15% [9] - Total commercial sales accounted for 71% of total sales, with government sales making up the remaining 29% [9] Company Strategy and Development Direction - The company is focused on driving growth through market share capture and new business, improving margins through cost efficiency, and increasing intellectual property through software investments [5][15] - The acquisition of Aerostrat is expected to enhance software capabilities and expand the reach of Trax software solutions [8][14] - The company aims to continue strengthening its offerings with targeted acquisitions to accelerate its strategy [15][16] Management's Comments on Operating Environment and Future Outlook - Management expects sales growth of 7% to 10% for Q2, with organic sales growth approaching 10% for the full fiscal year [15] - The company is encouraged by the additional assets coming to market, which is expected to drive growth in the USM business [31] - Management highlighted the importance of maintaining cash positivity while investing in inventory to support growth [37] Other Important Information - The company invested over $50 million in inventory to support future growth, particularly in parts supply [14] - Net debt leverage increased slightly from 2.72 times to 2.82 times due to organic and inorganic investments [13] Q&A Session Summary Question: What is behind the slight uptick in full-year expectations? - Management indicated that parts supply is leading the way with a strong quarter showing 27% organic growth [18] Question: Can you comment on the pipeline for new distribution agreements? - Management noted that the majority of recent wins have been from taking market share, with a different exclusive distribution model resonating well [19][20] Question: Do you expect to outgrow the market within distribution? - Management confirmed the expectation to maintain growth above market rates in distribution [24] Question: What are the cross-selling opportunities within repair and engineering? - Management stated that they are in the early stages of executing a cross-selling strategy, with a long pipeline of opportunities [26] Question: Has the trend in USM sales continued into the current quarter? - Management confirmed a meaningful growth in USM business, driven by a loosening supply of assets [31] Question: What is the margin opportunity for parts supply with more USM available? - Management indicated that while USM margins have been depressed, they expect margins to expand as more supply comes to market [32] Question: Is there an agreement with Aerostrat employees to retain key personnel? - Management confirmed an earnout agreement for key team members to incentivize retention [33] Question: What is the company's exposure to engine-related aftermarket services? - Management highlighted significant exposure, with 80% of USM parts being engine-related [41] Question: How far along is Trax in becoming a digital marketplace? - Management stated that they are actively investing in making Trax a digital marketplace, with announcements expected in the first half of 2026 [45]

Financial Data and Key Metrics Changes - Total adjusted sales grew 13% to $740 million year over year, with organic sales growth at 17% when excluding landing gear sales from the previous year [10][11] - Adjusted EBITDA increased 18% to $86.7 million, with adjusted EBITDA margins rising to 11.7% from 11.3% [10] - Adjusted diluted EPS increased by 27% to $1.08 from $0.85 in the same quarter last year [11] Business Line Data and Key Metrics Changes - Parts supply sales grew 27% to $318 million, with adjusted EBITDA of $43.8 million, up 34%, and adjusted EBITDA margin increasing to 13.8% from 13.1% [11][12] - Repair and engineering sales decreased 1% to $215 million, but organic sales growth was 8% when excluding landing gear divestiture, with adjusted EBITDA of $28.1 million, up 1% [12] - Integrated solutions sales increased by 10% year over year to $185 million, with adjusted EBITDA of $14.2 million, up 5% [13] Market Data and Key Metrics Changes - Adjusted sales growth to government customers increased 21%, while adjusted organic sales to commercial customers increased 15% [10] - Total commercial sales accounted for 71% of total sales, with government sales making up the remaining 29% [10] Company Strategy and Development Direction - The company is focused on driving growth through market share capture and new business, improving margins through cost efficiency, and increasing intellectual property through software investments [6][16] - The acquisition of Aerostrat is expected to enhance software capabilities and expand the reach of Trax software solutions [9][15] - The company aims to strengthen its offerings with targeted acquisitions to accelerate its strategy [16][17] Management's Comments on Operating Environment and Future Outlook - Management expects sales growth of 7% to 10% for Q2, with full fiscal year organic sales growth approaching 10% [16] - The company is well positioned in attractive segments of the growing aviation aftermarket, with unique distribution and repair capabilities [16] Other Important Information - The company invested over $50 million in inventory to support future growth, particularly in parts supply [15][37] - Net debt leverage increased slightly from 2.72 times to 2.82 times due to organic and inorganic investments [14] Q&A Session Summary Question: What is behind the slight uptick in full-year expectations? - Management indicated that parts supply is leading the way with a strong quarter showing 27% organic growth [19] Question: Can you comment on the pipeline for new distribution agreements? - The majority of recent wins have been from taking market share, with a different exclusive distribution model resonating well with OEMs [20][21] Question: Do you still expect to outgrow the market within distribution? - Management confirmed the expectation to maintain growth above market rates in distribution [25] Question: Can you discuss cross-selling opportunities within repair and engineering? - Management noted they are in the early stages of executing a cross-selling strategy, with a long pipeline of opportunities [26][28] Question: Has the trend in USM sales continued into the current quarter? - Management observed a meaningful growth in USM business, driven by a loosening supply of assets [31] Question: What is the margin opportunity for parts supply if more USM comes available? - Management expects margins to expand as more supply comes onto the market, although current margins are tighter than historical levels [32] Question: Is there an agreement with Aerostrat employees to ensure retention? - There is a three-year earnout associated with the acquisition to incentivize key team members to stay [33] Question: What is the company's exposure to engine-related aftermarket services? - Management stated that 80% of USM parts business is engine-related, indicating significant exposure in this area [41] Question: How far along is Trax in becoming a digital marketplace? - Management is actively investing in making Trax a digital marketplace, with expected announcements in the first half of 2026 [45]

Financial Data and Key Metrics Changes - Total adjusted sales grew 13% year-over-year to $740 million, with organic sales growth at 17% when excluding landing gear sales from the previous year [10] - Adjusted EBITDA increased 18% to $86.7 million, with adjusted EBITDA margins rising to 11.7% from 11.3% [10] - Adjusted diluted EPS rose 27% to $1.08 from $0.85 in the same quarter last year [11] Business Line Data and Key Metrics Changes - Parts supply sales increased 27% to $318 million, with adjusted EBITDA for this segment rising 34% to $43.8 million and adjusted EBITDA margins increasing to 13.8% from 13.1% [11] - Repair and engineering sales decreased 1% to $215 million, but organic sales growth was 8% when excluding the impact of landing gear divestiture [12] - Integrated solutions sales grew 10% year-over-year to $185 million, with adjusted EBITDA of $14.2 million, a 5% increase [14] Market Data and Key Metrics Changes - Adjusted sales growth to government customers increased 21%, while adjusted organic sales to commercial customers rose 15% [10] - Total commercial sales accounted for 71% of total sales, with government sales making up the remaining 29% [10] Company Strategy and Development Direction - The company is focused on driving growth through market share capture and new business, improving margins through cost efficiency, and increasing intellectual property through software investments [6] - The acquisition of Aerostrat is expected to enhance software capabilities and expand the reach of the Trax software solution [9] - The company aims to continue strengthening its offerings with targeted acquisitions to accelerate its strategy [17] Management's Comments on Operating Environment and Future Outlook - Management expects sales growth of 7%-10% for Q2, with organic sales growth for the full fiscal year approaching 10% [16] - The company is encouraged by the additional assets coming to market, which is expected to drive growth in the USM business [31] - Management remains confident in securing volume over time through strong relationships with large airline customers [28] Other Important Information - The company invested over $50 million in inventory to support future growth, particularly in the parts supply segment [15] - Net debt leverage increased slightly from 2.72x to 2.82x due to organic and inorganic investments [14] Q&A Session Summary Question: What is behind the slight uptick in full-year expectations? - Management indicated that parts supply is leading the way with a strong quarter showing 27% organic growth [19] Question: Can you comment on the pipeline for new distribution agreements? - Management noted that the majority of recent wins have been from taking market share, with a different exclusive distribution model resonating well [20][21] Question: Do you still expect to outgrow the market within distribution? - Management confirmed the outlook for distribution remains strong, expecting to continue growing above market rates [25] Question: Can you discuss cross-selling opportunities within repair and engineering? - Management stated they are in the early stages of executing their cross-selling strategy, with a long pipeline of opportunities [26][28] Question: Has the trend in USM sales continued into the current quarter? - Management confirmed a meaningful growth in USM business, driven by a loosening supply of assets [31] Question: What is the margin opportunity for parts supply if more USM comes available? - Management indicated that while USM margins have been depressed, they expect margins to expand as more supply comes to market [32] Question: Is there an agreement with Aerostrat employees to ensure retention? - Management confirmed an earnout agreement for key team members to incentivize their retention [33] Question: What is the company's exposure to engine-related aftermarket services? - Management highlighted significant exposure to the engine market, with 80% of USM parts business being engine-related [42] Question: How far along is Trax in becoming a digital marketplace? - Management stated that investments are being made to leverage Trax's position for offering parts and repair solutions, with announcements expected in the first half of 2026 [44]

Financial Data and Key Metrics Changes - Total adjusted sales grew 13% to $740 million year over year, with organic sales growth at 17% when excluding landing gear sales from the previous year [8] - Adjusted EBITDA increased 18% to $86.7 million, with adjusted EBITDA margins rising to 11.7% from 11.3% [8] - Adjusted diluted EPS increased by 27% to $1.08 from $0.85 in the same quarter last year [9] Business Line Data and Key Metrics Changes - Parts supply sales grew 27% to $318 million, with adjusted EBITDA for this segment increasing by 34% [9] - Repair and engineering sales decreased 1% to $215 million, but organic sales growth was 8% when excluding the impact of landing gear divestiture [10] - Integrated solutions sales increased by 10% year over year to $185 million, with adjusted operating income rising by 5% [11] Market Data and Key Metrics Changes - Adjusted sales growth to government customers increased 21%, while adjusted organic sales to commercial customers increased 15% [8] - Total commercial sales accounted for 71% of total sales, with government sales making up the remaining 29% [8] Company Strategy and Development Direction - The company is focused on driving growth through market share capture and new business, improving margins through cost efficiency, and increasing intellectual property through software investments [5] - The acquisition of Aerostrat is expected to enhance software capabilities and expand the reach of the Trax software solution [7] - The company aims to continue strengthening its offerings with targeted acquisitions to accelerate its strategy [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving organic sales growth approaching 10% for the full fiscal year, up from the previously cited 9% [14] - The company noted a strong start to the year and highlighted the strength of its business in the growing aviation aftermarket [14] - Management indicated that the supply of used serviceable materials (USM) is improving, which is expected to positively impact margins in the future [25][26] Other Important Information - The company invested over $50 million in inventory to support future growth, particularly in the parts supply segment [12] - The net debt leverage increased slightly from 2.72 times to 2.82 times due to organic and inorganic investments made during the quarter [11] Q&A Session Questions and Answers Question: What is behind the slight uptick in full-year expectations? - Management indicated that parts supply is leading the way with a strong quarter showing 27% organic growth [17] Question: Can you comment on the pipeline for new distribution agreements? - The majority of recent wins have been from taking market share, with a different exclusive distribution model resonating well with OEMs [18] Question: Do you still expect to outgrow the market within distribution? - Management maintained the outlook for distribution, expecting to continue growing above market rates [20] Question: What are the cross-selling opportunities within repair and engineering? - Management stated they are in the early stages of executing their cross-selling strategy, with a long pipeline of opportunities [22] Question: Has the trend in USM sales continued into the current quarter? - Management confirmed a meaningful growth in USM business, driven by a loosening supply of assets [25] Question: What is the margin opportunity for parts supply if more USM comes available? - Management expects margins to expand as more supply comes onto the market, although current margins in USM are tighter than historically [26] Question: Is there an agreement with Aerostrat employees to ensure retention? - There is a three-year earnout associated with the transaction to incentivize key team members to stay [28] Question: What is the company's exposure to engine-related aftermarket services? - Management confirmed significant exposure, with 80% of USM parts business related to engines [34] Question: How far along is Trax in becoming a digital marketplace? - Management indicated that investments are being made to leverage Trax's position for offering parts and repair solutions [36]

PART I — FINANCIAL INFORMATION This section presents AAR CORP.'s unaudited condensed consolidated financial statements and related notes, along with management's discussion and analysis, market risk disclosures, and controls [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents AAR CORP.'s unaudited condensed consolidated financial statements for the quarter ended August 31, 2025, including core financial statements and detailed explanatory notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides a snapshot of AAR CORP.'s financial position, detailing assets, liabilities, and equity at specific quarter-end dates Condensed Consolidated Balance Sheets (Millions) | Balance Sheet Item | May 31, 2025 (Millions) | August 31, 2025 (Millions) | Change (Millions) | % Change | | :----------------- | :---------------------- | :------------------------- | :---------------- | :------- | | Total Assets | $2,844.6 | $2,929.7 | $85.1 | 3.0% | | Total Liabilities | $1,078.3 | $1,141.9 | $63.6 | 5.9% | | Total Equity | $1,211.6 | $1,249.3 | $37.7 | 3.1% | | Cash & Equivalents | $96.5 | $80.0 | $(16.5) | (17.1%) | | Inventories | $809.2 | $861.5 | $52.3 | 6.5% | | Long-term Debt | $968.0 | $1,022.1 | $54.1 | 5.6% | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This table outlines AAR CORP.'s financial performance over the quarter, showing sales, costs, and net income Condensed Consolidated Statements of Income (Millions) | Income Statement Item | 3 Months Ended Aug 31, 2025 (Millions) | 3 Months Ended Aug 31, 2024 (Millions) | Change (Millions) | % Change | | :-------------------- | :------------------------------------- | :------------------------------------- | :---------------- | :------- | | Sales | $739.6 | $661.7 | $77.9 | 11.8% | | Cost of Sales | $605.9 | $544.5 | $61.4 | 11.3% | | Gross Profit | $133.7 | $117.2 | $16.5 | 14.1% | | Operating Income | $64.9 | $43.4 | $21.5 | 49.5% | | Net Income | $34.4 | $18.0 | $16.4 | 91.1% | | EPS - Basic | $0.96 | $0.50 | $0.46 | 92.0% | | EPS - Diluted | $0.95 | $0.50 | $0.45 | 90.0% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This table presents AAR CORP.'s total comprehensive income, including net income and other comprehensive income items like currency translation adjustments Condensed Consolidated Statements of Comprehensive Income (Millions) | Comprehensive Income Item | 3 Months Ended Aug 31, 2025 (Millions) | 3 Months Ended Aug 31, 2024 (Millions) | Change (Millions) | % Change | | :------------------------ | :------------------------------------- | :------------------------------------- | :---------------- | :------- | | Net Income | $34.4 | $18.0 | $16.4 | 91.1% | | Currency Translation Adj. | $0.4 | $1.5 | $(1.1) | (73.3%) | | Comprehensive Income | $34.8 | $19.5 | $15.3 | 78.5% | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table details AAR CORP.'s cash inflows and outflows from operating, investing, and financing activities for the quarter Condensed Consolidated Statements of Cash Flows (Millions) | Cash Flow Activity | 3 Months Ended Aug 31, 2025 (Millions) | 3 Months Ended Aug 31, 2024 (Millions) | Change (Millions) | | :----------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Operating | $(44.9) | $(18.6) | $(26.3) | | Investing | $(23.8) | $(5.3) | $(18.5) | | Financing | $51.1 | $(9.1) | $60.2 | | Net Decrease | $(17.6) | $(33.0) | $15.4 | | Cash, End of Period| $91.6 | $63.1 | $28.5 | [Condensed Consolidated Statements of Changes in Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) This table illustrates the changes in AAR CORP.'s equity components, including common stock, retained earnings, and treasury stock, over the quarter Condensed Consolidated Statements of Changes in Equity (Millions) | Equity Component | Balance May 31, 2025 (Millions) | Net Income (Millions) | Stock Option Activity (Millions) | Restricted Stock Activity (Millions) | Other Comprehensive Income (Millions) | Balance Aug 31, 2025 (Millions) | | :--------------- | :------------------------------ | :-------------------- | :------------------------------- | :----------------------------------- | :------------------------------------ | :------------------------------ | | Common Stock | $45.3 | — | — | — | — | $45.3 | | Capital Surplus | $505.2 | — | $2.5 | $(4.2) | — | $503.5 | | Retained Earnings| $969.4 | $34.4 | — | — | — | $1,003.8 | | Treasury Stock | $(302.7) | — | $4.2 | $0.4 | — | $(298.1) | | AOCL | $(5.6) | — | — | — | $0.4 | $(5.2) | | Total Equity | $1,211.6 | $34.4 | $6.7 | $(3.8) | $0.4 | $1,249.3 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Basis of Presentation](index=9&type=section&id=Note%201.%20Basis%20of%20Presentation) This note describes the accounting principles and assumptions used in preparing the financial statements - Financial statements are **unaudited** and prepared under GAAP and SEC rules, with management estimates[27](index=27&type=chunk)[28](index=28&type=chunk) - New ASUs (2023-09 on Income Tax Disclosures and 2024-03 on Expense Disaggregation) are expected to impact **disclosures only**, not financial condition, results of operations, or cash flows[30](index=30&type=chunk)[31](index=31&type=chunk) [Note 2. Acquisitions](index=10&type=section&id=Note%202.%20Acquisitions) This note details recent acquisitions, including purchase prices, contingent considerations, and integration activities - Acquired Aerostrat Corp. on August 11, 2025, for a base purchase price of **$15.0 million** plus up to **$5.0 million** in contingent consideration. Aerostrat's operations are included in the Integrated Solutions segment[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - Finalized purchase price adjustments for Triumph Group's Product Support business, acquired March 1, 2024, resulting in a **$2.9 million reduction** from the initial **$725.0 million**. Product Support is reported within the Repair & Engineering segment[36](index=36&type=chunk)[37](index=37&type=chunk) - Integration activities for Product Support include consolidating facility footprint, with **$1.0 million** in expenses recognized for the three months ended August 31, 2025[39](index=39&type=chunk) - Finalized post-closing adjustments for the Trax USA Corp. acquisition (March 2023), with **$4.4 million released** from escrow in Q4 FY2025 and **$5.3 million remaining**. Contingent consideration liability for Trax was **$8.1 million** as of August 31, 2025[41](index=41&type=chunk)[43](index=43&type=chunk) [Note 3. Discontinued Operations](index=14&type=section&id=Note%203.%20Discontinued%20Operations) This note provides information on assets and liabilities related to discontinued business segments - COCO business (Expeditionary Services) reported as **discontinued operations** since fiscal 2018[45](index=45&type=chunk) Discontinued Operations (Millions) | Discontinued Operations | August 31, 2025 (Millions) | May 31, 2025 (Millions) | | :---------------------- | :------------------------- | :---------------------- | | Assets | $5.2 | $6.2 | | Liabilities | $4.9 | $5.8 | [Note 4. Revenue Recognition](index=14&type=section&id=Note%204.%20Revenue%20Recognition) This note explains the company's policies for recognizing revenue, including contract assets and liabilities, and disaggregated sales data - Revenue is recognized when performance obligations are satisfied, either **over time** (cost-to-cost method) or **at a point in time** (product sales upon shipment)[47](index=47&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - No cumulative catch-up adjustments were recognized for the three months ended August 31, 2025, compared to **favorable adjustments of $2.4 million** in the prior year period[67](index=67&type=chunk) Contract Assets & Liabilities (Millions) | Contract Assets & Liabilities | August 31, 2025 (Millions) | May 31, 2025 (Millions) | Change (Millions) | | :---------------------------- | :------------------------- | :---------------------- | :---------------- | | Net Contract Assets | $139.2 | $122.0 | $17.2 | | Current Contract Assets | $146.7 | $140.3 | $6.4 | | Current Deferred Revenue | $(32.3) | $(40.3) | $8.0 | - Remaining performance obligations (firm backlog) totaled approximately **$490 million** as of August 31, 2025, with **75% expected to be recognized** as revenue over the next 12 months[75](index=75&type=chunk) Disaggregation of Revenue (3 Months Ended Aug 31) (Millions) | Disaggregation of Revenue (3 Months Ended Aug 31) | 2025 (Millions) | 2024 (Millions) | % Change | | :------------------------------------------------ | :-------------- | :-------------- | :------- | | **By Segment & Customer Market:** | | | | | Parts Supply - Commercial | $254.5 | $210.4 | 20.9% | | Parts Supply - Government and defense | $63.3 | $39.3 | 61.1% | | Repair & Engineering - Commercial | $195.7 | $191.2 | 2.4% | | Repair & Engineering - Government and defense | $18.9 | $26.4 | (28.4%) | | Integrated Solutions - Commercial | $72.4 | $70.0 | 3.4% | | Integrated Solutions - Government and defense | $112.6 | $98.9 | 13.9% | | Expeditionary Services - Commercial | $0.7 | $1.3 | (46.2%) | | Expeditionary Services - Government and defense | $21.5 | $24.2 | (11.2%) | | **Consolidated Sales by Geographic Region:** | | | | | U.S./Canada | $519.1 | $473.4 | 9.7% | | Europe/Africa | $99.7 | $108.8 | (8.3%) | | Asia/South Pacific | $89.7 | $64.0 | 40.2% | | Other | $31.1 | $15.5 | 100.6% | | **Total Consolidated Sales** | $739.6 | $661.7 | 11.8% | [Note 5. Restricted Cash](index=22&type=section&id=Note%205.%20Restricted%20Cash) This note details the components and amounts of cash held under restrictions Restricted Cash Component (Millions) | Restricted Cash Component | August 31, 2025 (Millions) | | :------------------------ | :------------------------- | | Acquisition Escrows | $8.3 | | Receivable Securitization | $3.3 | | Total Restricted Cash | $11.6 | [Note 6. Accounts Receivable](index=22&type=section&id=Note%206.%20Accounts%20Receivable) This note breaks down accounts receivable by customer type, including U.S. Government and other customers Accounts Receivable (Millions) | Accounts Receivable | August 31, 2025 (Millions) | May 31, 2025 (Millions) | Change (Millions) | | :------------------ | :------------------------- | :---------------------- | :---------------- | | U.S. Government | $41.7 | $40.0 | $1.7 | | All Other Customers | $321.8 | $314.8 | $7.0 | | Total | $363.5 | $354.8 | $8.7 | [Note 7. Equity](index=22&type=section&id=Note%207.%20Equity) This note provides details on stock-based compensation, share grants, and their impact on equity - Granted **85,605 performance-based** and **64,795 time-based restricted shares** to employees, and **24,178 time-based restricted shares** to directors in July 2025[82](index=82&type=chunk) Stock-Based Compensation (Millions) | Stock-Based Compensation | 3 Months Ended Aug 31, 2025 (Millions) | 3 Months Ended Aug 31, 2024 (Millions) | Change (Millions) | | :----------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Restricted Stock Expense | $4.2 | $4.1 | $0.1 | | Stock Option Expense | $1.1 | $0.9 | $0.2 | | Intrinsic Value of Options Exercised | $4.6 | $0.2 | $4.4 | - **64,000 stock options** were anti-dilutive and excluded from diluted EPS computation for Q1 FY2026[87](index=87&type=chunk) [Note 8. Inventories](index=24&type=section&id=Note%208.%20Inventories) This note categorizes inventory components, including aircraft parts, raw materials, and work-in-process Inventory Category (Millions) | Inventory Category | August 31, 2025 (Millions) | May 31, 2025 (Millions) | Change (Millions) | | :----------------- | :------------------------- | :---------------------- | :---------------- | | Aircraft & Engine Parts | $694.6 | $659.4 | $35.2 | | Raw Materials & Parts | $135.8 | $119.9 | $15.9 | | Work-in-Process | $31.1 | $29.9 | $1.2 | | Total Inventories | $861.5 | $809.2 | $52.3 | [Note 9. Supplemental Cash Flow Information](index=24&type=section&id=Note%209.%20Supplemental%20Cash%20Flow%20Information) This note provides additional details on non-cash investing and financing activities and other cash flow items Supplemental Cash Flow Item (Millions) | Supplemental Cash Flow Item | 3 Months Ended Aug 31, 2025 (Millions) | 3 Months Ended Aug 31, 2024 (Millions) | Change (Millions) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :---------------- | | Interest Paid | $8.5 | $9.0 | $(0.5) |\ | Income Taxes Paid | $5.6 | $5.2 | $0.4 |\ | Operating Lease Liabilities | $1.6 | $0.8 | $0.8 | [Note 10. Sale of Receivables](index=24&type=section&id=Note%2010.%20Sale%20of%20Receivables) This note describes the company's accounts receivable financing program and related activities - Maintains a Purchase Agreement with Citibank N.A. for the sale of accounts receivable, with a **maximum limit of $150 million**[90](index=90&type=chunk) Receivable Sale Activity (3 Months Ended Aug 31) (Millions) | Receivable Sale Activity (3 Months Ended Aug 31) | 2025 (Millions) | 2024 (Millions) | Change (Millions) | | :----------------------------------------------- | :-------------- | :-------------- | :---------------- | | Receivables Sold | $49.2 | $50.9 | $(1.7) | | Discounts on Sale | $0.2 | $0.3 | $(0.1) | - As of August 31, 2025, **$21.0 million** of the **$150 million facility** has been utilized, leaving **$129.0 million available**[91](index=91&type=chunk) [Note 11. Financing Arrangements](index=25&type=section&id=Note%2011.%20Financing%20Arrangements) This note details the company's debt structure, credit facilities, and compliance with financial covenants Debt Component (Millions) | Debt Component | August 31, 2025 (Millions) | May 31, 2025 (Millions) | Change (Millions) | | :------------- | :------------------------- | :---------------------- | :---------------- | | Senior Notes | $700.0 | $550.0 | $150.0 | | Revolving Credit Facility | $330.0 | $427.0 | $(97.0) | | Total Long-term Debt | $1,022.1 | $968.0 | $54.1 | - Amended Revolving Credit Facility increased aggregate commitments to **$825.0 million** from **$620.0 million**, with **$485.9 million available** as of August 31, 2025[97](index=97&type=chunk)[99](index=99&type=chunk) - Issued an additional **$150.0 million** aggregate principal amount of **6.75% Senior Notes due 2029** on August 14, 2025, bringing total Senior Notes to **$700.0 million**[103](index=103&type=chunk)[107](index=107&type=chunk) - The company was in **compliance with all financial and other covenants** in its financing agreements as of August 31, 2025[110](index=110&type=chunk) [Note 12. Other Non-current Assets](index=29&type=section&id=Note%2012.%20Other%20Non-current%20Assets) This note provides information on investments in joint ventures and other long-term assets - Holds a **50% ownership interest** in ASAS, providing aviation aftermarket supply chain solutions, with sales to ASAS JV of **$5.0 million** in Q1 FY2026, up from **$1.7 million** in Q1 FY2025[111](index=111&type=chunk)[112](index=112&type=chunk) - Sold its **40% ownership interest** in an Indian joint venture in Q1 FY2025, recognizing a **gain of $2.1 million**[114](index=114&type=chunk) - Holds a **49.9% ownership interest** in xCelle Americas, LLC, providing component repair services, and provided a **$3.3 million loan** to xCelle in March 2025[116](index=116&type=chunk)[117](index=117&type=chunk) [Note 13. Defined Benefit Pension Settlement](index=31&type=section&id=Note%2013.%20Defined%20Benefit%20Pension%20Settlement) This note outlines the settlement of the U.S. defined benefit retirement plan and its financial impact - Settled all future obligations under its frozen U.S. defined benefit retirement plan in Q1 FY2024, resulting in a **non-cash, pre-tax pension settlement charge of $26.7 million** (**$16.1 million after-tax**)[119](index=119&type=chunk) - Remaining surplus plan assets of **$0.8 million** as of August 31, 2025, are expected to be utilized over the next twelve months to fund 401(k) contributions[120](index=120&type=chunk) [Note 14. Accumulated Other Comprehensive Loss](index=31&type=section&id=Note%2014.%20Accumulated%20Other%20Comprehensive%20Loss) This note details the components of accumulated other comprehensive loss, including currency translation adjustments and pension plan impacts AOCL Component (Millions) | AOCL Component | Balance June 1, 2025 (Millions) | Other Comprehensive Income (Millions) | Balance Aug 31, 2025 (Millions) | | :------------- | :------------------------------ | :------------------------------------ | :------------------------------ | | Currency Translation Adjustments | $(2.4) | $0.4 | $(2.0) | | Pension Plans | $(3.2) | — | $(3.2) | | Total AOCL | $(5.6) | $0.4 | $(5.2) | [Note 15. Sale of Landing Gear Overhaul Business](index=31&type=section&id=Note%2015.%20Sale%20of%20Landing%20Gear%20Overhaul%20Business) This note describes the divestiture of the Landing Gear Overhaul business, including proceeds and recognized loss - Divested the LGO business in Q4 FY2025 for **net proceeds of $48.0 million**[124](index=124&type=chunk) - Recognized a **$71.1 million loss on divestiture**, including a **$63.0 million impairment charge** and **$14.6 million goodwill reclassified** to assets held for sale[122](index=122&type=chunk)[161](index=161&type=chunk) - Recognized a **gain of $1.0 million** in Q1 FY2026 for the final resolution of purchase price adjustments[124](index=124&type=chunk) [Note 16. Business Segment Information](index=32&type=section&id=Note%2016.%20Business%20Segment%20Information) This note provides financial data disaggregated by the company's operating segments, including sales, costs, and operating income - AAR CORP. operates in **four segments**: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services[125](index=125&type=chunk)[129](index=129&type=chunk) Segment (3 Months Ended Aug 31, 2025) (Millions) | Segment (3 Months Ended Aug 31, 2025) | Sales (Millions) | Cost of Sales (Millions) | SG&A (Millions) | Operating Income (Millions) | | :------------------------------------ | :--------------- | :----------------------- | :-------------- | :-------------------------- | | Parts Supply | $317.8 | $256.5 | $23.3 | $40.9 | | Repair & Engineering | $214.6 | $172.0 | $22.0 | $20.4 | | Integrated Solutions | $185.0 | $159.3 | $16.2 | $9.7 | | Expeditionary Services | $22.2 | $17.6 | $1.6 | $3.0 | | Total Consolidated | $739.6 | $605.4 | $63.1 | $74.0 | Segment (3 Months Ended Aug 31, 2024) (Millions) | Segment (3 Months Ended Aug 31, 2024) | Sales (Millions) | Cost of Sales (Millions) | SG&A (Millions) | Operating Income (Millions) | | :------------------------------------ | :--------------- | :----------------------- | :-------------- | :-------------------------- | | Parts Supply | $249.7 | $199.7 | $20.3 | $30.1 | | Repair & Engineering | $217.6 | $175.0 | $23.1 | $21.1 | | Integrated Solutions | $168.9 | $144.1 | $17.2 | $7.7 | | Expeditionary Services | $25.5 | $25.7 | $1.5 | $(1.7) | | Total Consolidated | $661.7 | $544.5 | $62.1 | $57.2 | Segment Total Assets (Millions) | Segment Total Assets | August 31, 2025 (Millions) | May 31, 2025 (Millions) | | :------------------- | :------------------------- | :---------------------- | | Parts Supply | $875.0 | $818.8 | | Repair & Engineering | $1,166.1 | $1,155.2 | | Integrated Solutions | $660.0 | $620.8 | | Expeditionary Services | $82.6 | $79.0 | | Corporate & Discontinued | $146.0 | $170.8 | | Total Assets | $2,929.7 | $2,844.6 | [Note 17. Legal Proceedings](index=35&type=section&id=Note%2017.%20Legal%20Proceedings) This note details ongoing legal matters, including bankruptcy litigation, performance guarantee claims, and regulatory compliance issues - Russian bankruptcy litigation concluded with a **final $1.8 million judgment** against the company, which it believes is due to a hostile business environment for foreign companies in Russia[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) - Faces a performance guarantee claim of **at least $32 million** related to the A220 Contract, which the company strongly disputes and believes it has numerous defenses against[142](index=142&type=chunk)[143](index=143&type=chunk) - Resolved FCPA violations with the DoJ and SEC, resulting in a **$55.6 million charge** in Q2 FY2025[147](index=147&type=chunk)[148](index=148&type=chunk) - Convicted in Nepal for public procurement law violations related to previously self-reported FCPA matters, facing a **$0.9 million fine** and **1.5-year prison sentence** (assigned to Mr. Holmes as principal executive), which the company does not intend to pay due to perceived lack of due process[149](index=149&type=chunk)[151](index=151&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of AAR CORP.'s financial condition, operating results, liquidity, and capital resources for the three months ended August 31, 2025 [General Overview and Outlook](index=40&type=section&id=General%20Overview%20and%20Outlook) This section provides an overview of AAR CORP.'s business segments, recent restructuring, and future market expectations - AAR CORP. operates in **four business segments**: Parts Supply, Repair & Engineering, Integrated Solutions, and Expeditionary Services[153](index=153&type=chunk)[159](index=159&type=chunk) - Executed a restructuring plan in Q1 FY2026, eliminating approximately **60 positions** and recognizing **$1.0 million in severance charges**[154](index=154&type=chunk) - Expects **long-term strength in aviation products and services**, with favorable commercial aftermarket growth trends and continued investment in both commercial and government markets[168](index=168&type=chunk) - Expanding Miami and Oklahoma City airframe maintenance facilities, with completion expected in early to mid-to-late calendar 2026[159](index=159&type=chunk)[160](index=160&type=chunk) [Discussion of Results of Operations](index=43&type=section&id=Discussion%20of%20Results%20of%20Operations) This section analyzes consolidated sales, gross profit, operating expenses, and tax rates for the quarter Financial Metric (3 Months Ended Aug 31) (Millions) | Financial Metric (3 Months Ended Aug 31) | 2025 (Millions) | 2024 (Millions) | % Change | | :--------------------------------------- | :-------------- | :-------------- | :------- | | Consolidated Sales | $739.6 | $661.7 | 11.8% | | Commercial Sales | $523.3 | $472.9 | 10.7% | | Government and Defense Sales | $216.3 | $188.8 | 14.6% | | Consolidated Gross Profit | $133.7 | $117.2 | 14.1% | | Commercial Gross Profit | $89.5 | $92.8 | (3.6%) | | Government and Defense Gross Profit | $44.2 | $24.4 | 81.1% | | Consolidated Gross Profit Margin | 18.1% | 17.7% | | | Commercial Gross Profit Margin | 17.1% | 19.6% | | | Government and Defense Gross Profit Margin | 20.4% | 12.9% | | - Selling, general, and administrative expenses decreased by **$4.7 million (6.2%)** to **$71.2 million**, primarily due to the settlement of FCPA matters. As a percentage of sales, SG&A decreased to **9.6%** from **11.5%**[173](index=173&type=chunk) - Interest expense remained **consistent at $18.8 million**, reflecting lower interest rates offset by higher average borrowings[174](index=174&type=chunk) - Effective income tax rate decreased to **26.8%** from **27.7%**, primarily due to higher tax benefits from stock compensation[175](index=175&type=chunk) [Operating Segment Results of Operations](index=44&type=section&id=Operating%20Segment%20Results%20of%20Operations) This section presents a detailed breakdown of financial performance for each of AAR CORP.'s operating segments [Parts Supply Segment](index=44&type=section&id=Parts%20Supply%20Segment) This section details the financial performance of the Parts Supply segment, including sales and operating income Parts Supply Segment (3 Months Ended Aug 31) (Millions) | Parts Supply Segment (3 Months Ended Aug 31) | 2025 (Millions) | 2024 (Millions) | % Change | | :------------------------------------------- | :-------------- | :-------------- | :------- | | Third-party sales | $317.8 | $249.7 | 27.3% | | Operating income | $40.9 | $30.1 | 35.9% | | Operating margin | 12.9% | 12.1% | | - Sales growth driven by **23.9% increase** in new parts Distribution and **32.1% increase** in USM activities[176](index=176&type=chunk) [Repair & Engineering Segment](index=44&type=section&id=Repair%20%26%20Engineering%20Segment) This section details the financial performance of the Repair & Engineering segment, including sales and operating income Repair & Engineering Segment (3 Months Ended Aug 31) (Millions) | Repair & Engineering Segment (3 Months Ended Aug 31) | 2025 (Millions) | 2024 (Millions) | % Change | | :--------------------------------------------------- | :-------------- | :-------------- | :------- | | Third-party sales | $214.6 | $217.6 | (1.4%) | | Operating income | $20.4 | $21.1 | (3.3%) | | Operating margin | 9.5% | 9.7% | | - Sales decrease primarily due to the divestiture of the LGO business (contributed **$19.2 million** in prior year sales), partially offset by a **$13.2 million increase** at airframe maintenance facilities[178](index=178&type=chunk) - Operating income and margin decreased due to **lower profitability** in Component Services activities[179](index=179&type=chunk) [Integrated Solutions Segment](index=44&type=section&id=Integrated%20Solutions%20Segment) This section details the financial performance of the Integrated Solutions segment, including sales and operating income Integrated Solutions Segment (3 Months Ended Aug 31) (Millions) | Integrated Solutions Segment (3 Months Ended Aug 31) | 2025 (Millions) | 2024 (Millions) | % Change | | :--------------------------------------------------- | :-------------- | :-------------- | :------- | | Third-party sales | $185.0 | $168.9 | 9.5% | | Operating income | $9.7 | $7.7 | 26.0% | | Operating margin | 5.2% | 4.6% | | - Sales and operating income increases primarily attributable to **higher government program activity** and a **favorable mix of products and services**[180](index=180&type=chunk)[182](index=182&type=chunk) - No cumulative catch-up adjustments were recognized in Q1 FY2026, compared to **favorable adjustments of $2.4 million** in the prior year quarter[181](index=181&type=chunk) [Expeditionary Services Segment](index=46&type=section&id=Expeditionary%20Services%20Segment) This section details the financial performance of the Expeditionary Services segment, including sales and operating income Expeditionary Services Segment (3 Months Ended Aug 31) (Millions) | Expeditionary Services Segment (3 Months Ended Aug 31) | 2025 (Millions) | 2024 (Millions) | % Change | | :----------------------------------------------------- | :-------------- | :-------------- | :------- | | Third-party sales | $22.2 | $25.5 | (12.9%) | | Operating income (loss) | $3.0 | $(1.7) | 276.5% | | Operating margin | 13.5% | (6.7%) | | - Sales decrease primarily due to the termination of the Next Generation Pallet contract in Q1 FY2025 (contributed **$9.5 million** in prior year sales), partially offset by growth in other product lines[183](index=183&type=chunk) - Operating income and margin significantly improved due to the **absence of the prior year's $12.7 million equipment and inventory expensing** related to the contract termination[184](index=184&type=chunk) [Liquidity, Capital Resources and Financial Position](index=46&type=section&id=Liquidity%2C%20Capital%20Resources%20and%20Financial%20Position) This section assesses the company's working capital, cash position, credit facilities, and cash flow activities - Working capital was **$1,028.4 million** and cash was **$80.0 million** as of August 31, 2025, providing **ample liquidity** for the foreseeable future[186](index=186&type=chunk) - Amended Revolving Credit Facility has **$485.9 million available**, and the accounts receivable financing program has **$129.0 million available**[189](index=189&type=chunk)[195](index=195&type=chunk) - Net cash used in operating activities increased to **$44.9 million** (from **$18.6 million** in prior year) primarily due to increased inventory investments[200](index=200&type=chunk) - Net cash provided by financing activities was **$51.1 million** (compared to **$9.1 million used** in prior year), driven by incremental borrowings to fund the Aerostrat acquisition and other investments[202](index=202&type=chunk) - Net cash used in investing activities increased to **$23.8 million** (from **$5.3 million** in prior year) primarily due to the Aerostrat acquisition[201](index=201&type=chunk) - No stock repurchases were made in Q1 FY2026 under the **$150 million stock repurchase program**, with **$107.5 million utilized** since inception[199](index=199&type=chunk) [Critical Accounting Policies and Significant Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) This section discusses the company's critical accounting policies and significant estimates, noting no material changes - No **significant changes** to the application of critical accounting policies during the first quarter of fiscal 2026[203](index=203&type=chunk) [Forward-Looking Statements](index=50&type=section&id=Forward-Looking%20Statements) This section highlights the inherent risks and uncertainties associated with forward-looking statements in the report - The report contains **forward-looking statements** subject to various risks and uncertainties, including those related to the commercial aviation industry, government contracts, acquisitions, and regulatory compliance[204](index=204&type=chunk)[205](index=205&type=chunk)[207](index=207&type=chunk) - The company assumes **no obligation to update** any forward-looking statements[208](index=208&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) AAR CORP.'s market risk exposure includes fluctuating interest rates, foreign exchange rates, and credit losses on accounts receivable, with no material impact from a hypothetical 10% U.S. dollar devaluation or significant changes in interest rate risk during the quarter - Market risk exposure includes fluctuating interest rates, foreign exchange rates, and credit losses on accounts receivable[209](index=209&type=chunk) - A hypothetical **10% devaluation of the U.S. dollar** would not have a **material impact** on financial position or continuing operations for the quarter ended August 31, 2025[210](index=210&type=chunk) - No **significant changes** in interest rate risk during the quarter ended August 31, 2025[211](index=211&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective as of August 31, 2025, with no material changes to internal control over financial reporting during the quarter - CEO and CFO concluded that disclosure controls and procedures were **effective** as of August 31, 2025, providing **reasonable assurance** of timely and accurate reporting[212](index=212&type=chunk) - No **material changes** in internal control over financial reporting occurred during the quarter ended August 31, 2025[213](index=213&type=chunk) PART II — OTHER INFORMATION This section covers legal proceedings, risk factors, other information including executive trading plans, and a list of exhibits [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the legal proceedings detailed in Note 17, confirming no other material pending legal proceedings - Incorporates by reference the legal proceedings detailed in Note 17, confirming **no other material pending legal proceedings**[214](index=214&type=chunk) [Item 1A. Risk Factors](index=53&type=page&id=Item%201A.%20Risk%20Factors) There have been no material changes in risk factors from the Annual Report on Form 10-K for the fiscal year ended May 31, 2025 - No **material changes** in risk factors from the Annual Report on Form 10-K for the fiscal year ended May 31, 2025[215](index=215&type=chunk) [Item 5. Other Information](index=53&type=section&id=Item%205.%20Other%20Information) CEO John M. Holmes adopted a Rule 10b5-1 trading plan for potential stock sales, with no other directors or officers initiating or modifying similar arrangements during the quarter - CEO John M. Holmes adopted a Rule 10b5-1 trading plan on August 6, 2025, for the potential sale of up to **61,539 shares** of common stock between November 5, 2025, and February 2, 2026[216](index=216&type=chunk) - No other directors or officers adopted, modified, or terminated trading arrangements during the three months ended August 31, 2025[217](index=217&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including material contracts, Section 302 and 906 certifications, and Interactive Data Files (Inline XBRL) - Lists exhibits including material contracts (incentive plans, stock agreements), Section 302 and 906 certifications, and Interactive Data Files (Inline XBRL)[219](index=219&type=chunk)

Financial Performance Highlights - Adjusted Earnings Per Share (EPS) increased by 27%, from $0.85 in Q1 FY25 to $1.08 in Q1 FY26 [16] - Adjusted sales increased by 13%, from $652.2 million in Q1 FY25 to $739.6 million in Q1 FY26 [16] - Adjusted EBITDA increased by 18%, from $73.7 million in Q1 FY25 to $86.7 million in Q1 FY26 [16] - The company delivered 17% adjusted organic sales growth with margin expansion [9] Segment Performance - Parts Supply sales increased by 27%, from $249.7 million in Q1 FY25 to $317.8 million in Q1 FY26 [16] - Repair & Engineering sales decreased by 1%, from $217.6 million in Q1 FY25 to $214.6 million in Q1 FY26, but organic growth excluding Landing Gear was 8% [16, 25] - Integrated Solutions sales increased by 10%, from $168.9 million in Q1 FY25 to $185.0 million in Q1 FY26 [16] Strategic Initiatives and Outlook - The company secured a multi-year exclusive defense agreement with AmSafe Bridport [14] - The company acquired Aerostrat, a long-range maintenance planning software company [13, 14] - The company expects sales growth of 7% - 10% and an adjusted operating margin of 9.6% - 10.0% for Q2 2026 [37]