Financial Data and Key Metrics Changes - Sales increased by 8% year-over-year from $404 million to $437 million, and adjusted diluted earnings per share from continuing operations rose by 71% from $0.31 to $0.53 [6][12] - Adjusted operating margin was 6.1% for the quarter, up from 5.5% in the first quarter, and exceeded pre-COVID levels despite a decline in sales [7][17] - Generated $16 million from operating activities from continuing operations, with total cash flow from operating activities reaching $142 million over the last six quarters [8][15] Business Line Data and Key Metrics Changes - Aviation Services segment sales increased by 8.9%, while Expeditionary Services segment sales decreased by $1.3 million [12] - Commercial sales rose by 33%, while government sales fell by 15%, primarily due to reduced activity on specific programs [12] - Gross profit margin improved to 18% from 17.2% year-over-year, with adjusted gross profit margin rising to 16.7% from 13.9% [13] Market Data and Key Metrics Changes - Commercial sales were up 33%, while government sales were down 15%, indicating a recovery in commercial markets but challenges in government contracts [12] - The company noted that parts supply, its highest margin activity, remained stable despite some delays caused by subcontractors and freight issues [6][10] Company Strategy and Development Direction - The company is focused on organic investments, acquisitions, and returning capital to shareholders, with a $150 million share repurchase program announced [11][15] - AAR aims to grow its business beyond recovery, particularly in the USM market, and is pursuing new long-term exclusive distribution agreements [17] - The recent $365 million contract with the U.S. Air Force for F-16 maintenance is expected to enhance the company's government program portfolio [10][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of the Omicron variant on commercial passenger traffic but expressed confidence in margin expansion and cash flow generation [5][17] - The company expects MRO activities to remain at current levels, with parts demand anticipated to recover as global travel restrictions ease [16][17] - Management is optimistic about the backlog and parts supply, expecting sequential growth in Q3 [17] Other Important Information - The company has seen a tight labor market, but initiatives taken during and before COVID-19 have positioned it well to manage labor needs [43][44] - The company is monitoring the impact of new COVID-19 variants on its operations and customer maintenance plans [5][28] Q&A Session Summary Question: Growth in the commercial business - Management indicated that growth was spread evenly across MRO and parts businesses, with most growth coming from parts [20] Question: Timing of recovery in parts trading - Management noted that recovery in international markets is crucial for parts demand, with clarity on travel restrictions needed for consistent demand [22][23] Question: Impact of Omicron variant - Management stated that the response to Omicron has been more rapid than Delta, but they expect sequential growth based on current backlog [28] Question: F-16 contract ramp-up - Management expects the F-16 contract to contribute meaningfully in FY '23, with a relatively compressed ramp-up time [34] Question: Labor market conditions - Management acknowledged the tight labor market but expressed confidence in their ability to meet schedules due to customer collaboration [43][44]

Financial Data and Key Metrics Changes - Sales increased by 14% from $401 million to $455 million year-over-year, with adjusted diluted earnings per share rising 206% from $0.17 to $0.52 [5][10] - Operating margin improved to 5.5% on an adjusted basis, up from 2.5% last year and 5.2% in the previous quarter [6][10] - Generated $18 million from operating activities, with cash flow from continuing operations at $26 million excluding accounts receivable financing [7][13] Business Line Data and Key Metrics Changes - Sales to commercial customers rose by 52%, while sales to government and defense customers decreased by 17% [5] - Aviation Services segment sales increased by 19.8%, driven by recovery in commercial markets, while Expeditionary Services segment sales decreased by $17.7 million due to divestiture [10] - Gross profit margin improved to 14.2% from 12.1% year-over-year, with adjusted gross profit margin at 16.1% compared to 13% last year [10] Market Data and Key Metrics Changes - Strong demand for airframe MRO services was noted, with the majority of MRO volume being standard maintenance work rather than catch-up work [6] - The company experienced sequential growth of 4% from Q4 to Q1, with a 17% increase in commercial activities [5] Company Strategy and Development Direction - The company aims to maintain strong demand for MRO activities as airlines focus on readiness for air travel recovery and preserving maintenance supply chains [14] - The exit from Afghanistan and nearing completion of certain government programs may impact near-term business, but new contracts like the one with the Department of Energy are expected to offset this [14][15] - The company is positioned to grow its government business through additional program wins and expansions of current positions [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in a recovery occurring despite uncertainties, highlighting a strong balance sheet and full pipelines in both government and commercial sectors [15] - The company expects Q2 performance to be similar to Q1, indicating stability in both top and bottom lines [18] Other Important Information - The company announced several new business wins, including an exclusive agreement with Arkwin and a contract with the Department of Energy [8] - The company played a critical role in the U.S. withdrawal from Afghanistan, successfully transporting U.S. embassy personnel [9] Q&A Session Summary Question: Will Q2 performance be similar to Q1? - Management indicated that they expect both top and bottom line performance to be similar to Q1, but noted the uncertain environment [18] Question: What drove the strong sequential growth in Aviation Services? - The growth was largely driven by demand in the trading business, with international customers like Air Canada contributing positively [20] Question: What factors contributed to the sequential decline in gross margin? - A slight mix change on the government side contributed to the decline, with previous quarter events driving outsized profitability [22] Question: How is the relationship with Fortress trending? - The relationship is performing well, with expectations that it will continue to contribute positively throughout the year [24] Question: What is the outlook on retirements and USM availability? - There has been an increase in available assets recently, but it is too early to call it a trend [27] Question: Is the MRO business seeing better pricing? - Pricing has remained stable due to long-term contracts, with improved efficiency in operations contributing to performance [29] Question: What is the risk associated with the remaining programs? - Management feels confident about the remaining portfolio and highlighted the successful extension of contracts with long-term customers [31]

Financial Data and Key Metrics Changes - Sales for fiscal year 2021 decreased by 20% from $2.07 billion to $1.65 billion, while adjusted diluted earnings per share from continuing operations decreased by 39% from $2.15 to $1.31 [4][6] - For Q4, sales increased by 5% from $417 million to $438 million, and adjusted diluted earnings per share increased by 81% from $0.26 to $0.47 [4][5] - Operating margin for Q4 was 5.2%, up from 3.2% in the prior year [5] Business Line Data and Key Metrics Changes - Sales to commercial customers increased by 3%, while sales to government and defense customers increased by 7% [5] - Aviation Services segment sales were up 6.5%, driven by strong government performance and recovery in commercial [10] - Expeditionary Services segment sales were down slightly due to the divestiture of the Composites business [10] Market Data and Key Metrics Changes - The commercial parts supply business has not yet seen significant recovery, as operators continue to consume existing inventory [6] - The company reported strong performance in MRO operations as airlines performed maintenance in anticipation of increased travel [6][14] - The China market experienced a record year, with domestic flying recovering significantly [22] Company Strategy and Development Direction - The company has focused on cost reduction and efficiency optimization, including consolidating facilities and exiting underperforming contracts [7][12] - New business partnerships have been established, including agreements with Fortress and Honeywell, to enhance service offerings [8][10] - The company aims to maintain a strong balance sheet and leverage efficiency gains for future growth [8][14] Management's Comments on Operating Environment and Future Outlook - Management is optimistic about the recovery in US domestic leisure flying and anticipates a return to business travel [14] - The company is cautious about the pace of commercial air travel recovery due to uncertainties like the emergence of COVID-19 variants [15] - Management expects Q1 performance to be similar to or modestly better than Q4, despite Q1 typically being the slowest quarter [15] Other Important Information - The company generated $23.5 million from operating activities in Q4 and reduced accounts receivable financing by $9.8 million [6][13] - SG&A expenses were $48.8 million, with an adjusted figure of $46.7 million, reflecting cost control measures [12][13] - The company expects to recognize an impairment charge of $5 million to $10 million in Q1 of fiscal 2022 due to a terminated contract [11] Q&A Session Summary Question: Can you expand on MRO and parts trends? - MRO was stable throughout Q4, with slight improvement in parts trading observed at the beginning of Q1 [19] Question: Is there strength from cargo obscuring passenger weakness? - Cargo business has been stable, with air travel in the US pacing ahead [21] Question: What is the outlook for MRO and parts recovery? - MRO may be smaller but more profitable, while parts business could exceed pre-COVID levels due to increased acceptance of used materials [25][24] Question: What is the current utilization in MRO? - The company has significant capacity left but is focused on attracting skilled labor rather than relying on contract labor [28] Question: Are there any cost inflation pressures? - Most structural changes for margin improvement have been implemented, with future improvements expected from revenue recovery [32] Question: What is the outlook for the defense business? - There is uncertainty in defense contracts, but new distribution agreements are expected to provide growth [46][57] Question: What is the company's exposure to Afghanistan? - One program is being restructured, with a neutral to positive financial impact expected [59] Question: How does the company view PMA opportunities? - The company continues to pursue PMA as part of its growth strategy [55] Question: What are the expectations for cash flow in fiscal 2022? - The company will focus on managing working capital while investing in new opportunities [74]

Financial Data and Key Metrics Changes - Sales decreased 26% year-over-year from $553 million to $410 million, and adjusted diluted earnings per share from continuing operations decreased 45% from $0.67 to $0.37 [3][4] - Adjusted gross margin improved sequentially from 13.9% to 16.1%, and operating margin improved from 4% to 5% [5][11] - Cash generated from operating activities was $18 million, with a net debt to adjusted EBITDA ratio of 1.1 times [6][11] Business Line Data and Key Metrics Changes - Sales to commercial customers decreased 42%, while sales to government and defense customers increased 4%, accounting for 49% of total sales [3][4] - MRO segment saw a sequential increase in hangar activity due to increased demand, while commercial parts activities remained stable [4][7] - Government business continued strong performance with year-over-year growth for three consecutive quarters [55] Market Data and Key Metrics Changes - Domestic leisure travel demand has increased, with expectations for broader commercial market recovery as vaccine distribution progresses [12] - International markets, particularly Europe and the Rest of Asia, remain soft compared to pre-COVID levels, while China domestic is nearly back to pre-COVID levels [38] Company Strategy and Development Direction - The company plans to leverage its current cost structure to drive continued margin improvement while investing in USM and distribution activities, as well as technology and digital initiatives [12] - Focus on maintaining and expanding margin gains by being selective about the work taken on in the MRO segment [66] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about modest sequential improvement in Q4 and continued recovery thereafter as travel restrictions are lifted [12] - The company is committed to maintaining a strong balance sheet to fund growth opportunities [12] Other Important Information - The company fully recognized its deferred credit from the CARES Act in Q3 and will no longer have income associated with it [9] - A tentative agreement was reached with the Department of Justice to settle an investigation for approximately $11.5 million [10] Q&A Session Summary Question: Sequential performance trends in commercial business parts versus MRO - Management noted a 7% sequential growth in commercial sales, primarily driven by MRO segment activity [15][16] Question: Expectations for fourth quarter revenues - Management expects modest sequential improvement from Q3 to Q4, but not ready to call for year-over-year improvement [28] Question: Margins and overhead sustainability - The majority of overhead reductions are expected to be sustainable through recovery, with a focus on maintaining margin improvements [24][25] Question: Domestic versus international commercial exposure - Historically, the business mix is 65% domestic and 35% international, with domestic recovery pacing ahead of international [38] Question: Fortress deal significance - The Fortress deal is expected to be a meaningful contributor to future results, with initial material received [40] Question: Pricing and supply dynamics in the parts market - Management noted significant variation in pricing based on asset type but refrained from providing specific details for competitive reasons [46] Question: Future state department funding visibility - There is currently no meaningful change expected regarding additional state department funding [59]

Table of Contents 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 i ...

AAR Corp. (NYSE:AIR) Q2 2021 Earnings Conference Call December 17, 2020 4:45 PM ET Company Participants John Holmes - CEO, President & Director Sean Gillen - VP & CFO Conference Call Participants Robert Spingarn - Crédit Suisse Joseph DeNardi - Stifel, Nicolaus & Company Ken Herbert - Canaccord Genuity Michael Ciarmoli - Truist Securities Operator Good afternoon, ladies and gentlemen, and welcome to AAR's Fiscal 2021 Second Quarter Earnings Call. We are joined today by John Holmes, President and Chief Execu ...