AAR(AIR) - 2025 Q2 - Quarterly Report

Sales Performance - Consolidated sales for the second quarter of fiscal 2025 increased by $140.7 million, or 25.8%, compared to the prior year quarter, driven primarily by a$ 115.0 million increase in sales to commercial customers[163]. - Consolidated sales for the six-month period ended November 30, 2024 increased by $252.7 million, or 23.1%, over the prior year period, with a significant contribution from the Product Support acquisition[172]. - Sales in the Parts Supply segment increased by$ 46.1 million, or 20.3%, over the prior year quarter, primarily due to increased demand and growth from new and expanded distribution agreements[183]. - Sales in the Repair & Engineering segment rose by $83.4 million, or 57.4%, over the prior year quarter, primarily due to the acquisition of the Product Support business, contributing$ 74.1 million in sales[185]. - Sales in the Integrated Solutions segment increased by $6.8 million, or 4.3%, over the prior year quarter, attributed to higher commercial program activity[187]. - Sales in the Expeditionary Services segment for the six-month period increased by$ 10.8 million, or 30.9%, primarily due to the termination of the Next Generation Pallet contract[199]. - For the six-month period ended November 30, 2024, sales in the Parts Supply segment increased by $59.0 million, or 12.7%, primarily due to a$ 62.2 million increase in new parts distribution activities[191]. Profitability - Gross profit for the second quarter of fiscal 2025 increased by $25.2 million, or 24.4%, over the prior year quarter, with gross profit margin on sales to commercial customers decreasing to 19.6% from 20.4%[165]. - Gross profit on sales to government customers increased by$ 6.1 million, or 24.7%, over the prior year quarter, with gross profit margin increasing to 16.6% from 15.4%[166]. - Operating income decreased by $40.6 million, or 106.0%, from the prior year quarter, primarily due to increased costs for the FCPA settlement[168]. - Operating income in the Parts Supply segment increased by$ 3.2 million, or 11.3%, compared to the prior year quarter, driven by new parts distribution activities[184]. - Operating income in the Repair & Engineering segment increased by $11.5 million, or 101.8%, with operating margin rising to 10.0% from 7.8% in the prior year quarter[186]. - Operating income in the Repair & Engineering segment for the six-month period increased by$ 23.5 million, or 115.2%, with operating margin rising to 9.8% from 7.2%[195]. - Operating income in the Expeditionary Services segment increased by $1.3 million, or 144.4%, with operating margin improving to 10.9% from 5.7% in the prior year quarter[190]. Expenses and Financial Charges - Selling, general, and administrative expenses increased by$ 67.4 million, or 102.6%, over the prior year quarter, primarily due to increased costs related to FCPA investigations[167]. - Interest expense increased by $13.1 million in the second quarter of fiscal 2025, reflecting higher interest rates and average borrowings used to fund investments[170]. - The company recognized a non-cash, pre-tax pension settlement charge of$ 26.7 million related to the accelerated recognition of unamortized net actuarial losses[179]. Cash Flow and Financing - Net cash provided by operating activities was $3.4 million for the six-month period ended November 30, 2024, an increase of$ 4.7 million compared to the prior year[219]. - Net cash used in investing activities decreased to $13.2 million from$ 20.3 million in the prior year, primarily due to favorable post-closing adjustments of $2.9 million[220]. - Net cash used in financing activities was$ 3.8 million, a decrease of $19.1 million compared to cash provided of$ 15.3 million in the prior year, mainly due to fewer stock option exercises[221]. - The company borrowed $186.2 million under the Amended Revolving Credit Facility to fund part of the acquisition of the Product Support business[207]. - The company has repurchased 2.2 million shares for an aggregate purchase price of$ 97.5 million under a stock repurchase program authorized for up to $150 million[218]. Risks and Future Outlook - The company expects long-term strength in aviation products and services, emphasizing investments in both commercial and government markets[160]. - The company continues to face various risks and uncertainties that could materially affect its future performance, including competition and operational challenges[224]. - A hypothetical 10 percent devaluation of the U.S. dollar against foreign currencies would not have had a material impact on the company's financial position for the quarter ended November 30, 2024[227]. - There were no significant changes in interest rate risk exposure during the quarter ended November 30, 2024[228]. - The company does not believe a reserve for credit loss is warranted for the customer with delayed collections[217]. Accounts Receivable and Collections - The company experienced delayed collections from a significant regional airline customer, resulting in a net termination charge of$ 4.8 million due to the termination of a power-by-the-hour program[216]. - As of November 30, 2024, accounts receivable from this customer totaled $15.1 million, with$ 7.3 million past due, and contract assets of $13.3 million[217]. - At November 30, 2024, the company had working capital of$ 939.7 million, including cash of $61.7 million, expected to meet cash requirements for at least the next 12 months[204].