AAR(AIR) - 2025 Q3 - Quarterly Report

Sales Performance - Consolidated sales for the third quarter of fiscal 2025 increased by $110.9 million, or 19.5$86.3 million, or 21.6%, driven by the acquisition of the Product Support business and strong demand in the Parts Supply segment [163]. - Consolidated sales for the nine-month period ended February 28, 2025 increased by $363.6 million, or 21.9$281.7 million, or 23.9% [171]. - In the Parts Supply segment, third-party sales increased by $28.4 million, or 11.7$270.7 million for the three months ended February 28, 2025, driven by new parts distribution activities [181]. - The Repair & Engineering segment saw third-party sales increase by $75.1 million, or 53.3$215.9 million, largely due to the acquisition of the Product Support business [183]. - The Integrated Solutions segment reported a slight decrease in third-party sales by $2.6 million, or 1.6$162.9 million, attributed to lower government program activity [185]. - The Expeditionary Services segment experienced a significant sales increase of $10.0 million, or 53.5$28.7 million, driven by higher sales volumes for pallets [187]. Profitability - Gross profit for the third quarter of fiscal 2025 increased by $21.4 million, or 19.4$62.5 million, or 19.8%, with commercial gross profit margin decreasing to 19.6% from 19.8% [174]. - Operating income in the Parts Supply segment rose by $14.3 million, or 46.0$45.4 million, primarily due to the de-recognition of an 11.2 million Russian legal liability [182]. - Operating income in the Repair & Engineering segment increased by 7.5 million, or 65.2%, to $19.0 million, reflecting the higher margin from the Product Support business [184]. Expenses and Liabilities - Selling, general, and administrative expenses decreased by$15.7 million, or 20.4%, primarily due to the de-recognition of an $11.2 million Russian legal liability [167]. - Selling, general, and administrative expenses for the nine-month period increased by$52.9 million, or 24.3%, primarily due to costs related to FCPA investigations [176]. - Interest expense increased by $6.6 million in the third quarter of fiscal 2025 due to higher average borrowings related to the Product Support acquisition [168]. - The company recognized a non-cash, pre-tax impairment charge of$63.0 million related to the pending divestiture of the Landing Gear Overhaul business [170]. Cash Flow and Financing - Net cash used in operating activities was $15.3 million for the nine-month period ended February 28, 2025, a decrease of$34.4 million compared to the prior year, primarily due to a $55.6 million payment related to an FCPA settlement [213]. - Net cash used in investing activities was$16.9 million for the nine-month period ended February 28, 2025, a decrease of $9.9 million from the prior year, attributed to the sale of a building and favorable purchase price adjustments [214]. - Net cash provided by financing activities was$37.0 million for the nine-month period ended February 28, 2025, an increase of $27.5 million compared to the prior year, primarily due to higher borrowings on the Revolving Credit Facility [215]. - The company has repurchased 2.2 million shares for an aggregate purchase price of$97.5 million under the stock repurchase program authorized for up to $150 million [212]. Capital Resources - At February 28, 2025, the company had liquidity and capital resources of$989.6 million, including cash of $84.4 million, expected to meet cash requirements for at least the next 12 months [199]. - The company entered into an amendment to its Credit Agreement, increasing the revolving credit facility commitments to$825.0 million from 620.0 million [201]. - As of February 28, 2025, borrowings under the Amended Revolving Credit Facility were $482.0 million, with$335.2 million available for future use [203]. - The maximum amount of receivables sold under the Purchase Agreement with Citibank N.A. is limited to $150 million, with$13.4 million utilized as of February 28, 2025, reducing availability to $136.6 million [207][209]. Other Notable Events - A net termination charge of$4.8 million was incurred due to the termination of a power-by-the-hour program with a significant regional airline customer, which included a reduction in contract assets and revenue of $7.8 million [210]. - The company expects full payment from the customer for all amounts due under the terminated agreement, with accounts receivable of$14.9 million, including $7.8 million past due, as of February 28, 2025 [211]. - 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 or operations for the quarter ended February 28, 2025 [221]. - There have been no significant changes to the application of critical accounting policies during the third quarter of fiscal 2025 [216]. Future Developments - The company is constructing a 114,000 square foot facility in Miami, expected to be operational in the first half of fiscal 2027, and an 80,000 square foot facility in Oklahoma City, expected to be operational in the second half of fiscal 2026 [155].