​ ​ ​ ​ ​ Page Report of Independent Registered Public Accounting Firm (KPMG LLP, Chicago, IL, Auditor Firm ID: 185) ​ 44 ​ ​ ​ Consolidated Statements of Income ​ 46 ​ ​ ​ Consolidated Statements of Comprehensive Income ​ 47 ​ ​ ​ Consolidated Balance Sheets ​ 48 ​ ​ ​ Consolidated Statements of Changes in Equity ​ 50 ​ ​ ​ Consolidated Statements of Cash Flows ​ 51 ​ ​ 43 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors AAR CORP.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of AAR CORP. and subsidiaries (the Company) as of May 31, 2026 and May 31, 2025, the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended May 31, 2026, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2026 and May 31, 2025, and the results of its operations and its cash flows for each of the years in the three-year period ended May 31, 2026, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of May 31, 2026, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated July 21, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Assessment of the write-down of inventories As discussed in Note 1 to the consolidated financial statements, the inventory balance as of May 31, 2026 was $979.0 million. The Company records inventory within certain components of the Parts Supply and Repair, Engineering, and Software segments at the lower of cost or net realizable value. The write-down of slow-moving inventory is recorded for excess or obsolete inventory based on certain inputs and assumptions used to determine the net realizable value. These assumptions include the number of days transpiring from the date the inventory was originally received and the historical sales of inventory to determine recovery rates. Other inputs include current and expected future aviation usage trends, replacement values, expected future demand, and historical scrap recovery rates. 44 Table of Contents We identified the assessment of the write-down of inventories for a portion of the inventory within the Parts Supply and Repair, Engineering, and Software segments as a critical audit matter. The primary inputs and assumptions used in determining the write-down of slow-moving inventory include the historical recovery rates, which are based on the number of days transpiring from the date the inventory was originally received, the historical sales of inventory, and the identification of specific inventories associated with aircraft with declining usage trends. The assessment of these inputs required a higher degree of subjective auditor judgment in evaluating the future customer demand for slow-moving inventory. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s inventory process, including controls over the Company’s evaluation of the impact on the estimate of net realizable value based on 1) the number of days transpiring from the date the inventory was originally received, 2) historical sales of inventory, and 3) specific inventories associated with aircraft with declining usage trends. We also tested relevant information technology application controls over the determination of the number of days transpiring from the date the inventory was originally received. We evaluated the write-down to determine that it was recorded using the Company’s policy based on the number of days transpiring from the date the inventory was originally received and the recovery rates of existing inventory based on historical sales. We also assessed that the recovery rates applied to slow-moving inventory were consistent with historical sales of these inventory items. We assessed the identification of specific inventory with declining usage trends by evaluating external industry information. ​ ​ /s/ KPMG LLP ​ ​ We have served as the Company’s auditor since 1985. ​ ​ ​ Chicago, Illinois ​ July 21, 2026 ​ ​ ​ ​ 45 Table of Contents AAR CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ (In millions, except per share data) Sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales from products ​ $ 2,138.4 ​ $ 1,712.3 ​ $ 1,387.1 Sales from services ​ 1,169.6 ​ 1,068.2 ​ 931.8 ​ ​ 3,308.0 ​ 2,780.5 ​ 2,318.9 Costs and operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of products ​ 1,742.2 ​ 1,388.9 ​ 1,096.7 Cost of services ​ 943.8 ​ 863.9 ​ 779.9 ​ ​ ​ 2,686.0 ​ ​ 2,252.8 ​ ​ 1,876.6 Gross profit ​ ​ 622.0 ​ ​ 527.7 ​ ​ 442.3 Provision for credit losses ​ ​ 2.1 ​ ​ 0.2 ​ ​ 0.7 Selling, general and administrative ​ 349.3 ​ 347.7 ​ 312.2 Earnings (Loss) from joint ventures ​ ​ 7.2 ​ ​ 5.4 ​ ​ (0.2) Operating income ​ 277.8 ​ 185.2 ​ 129.2 Bargain purchase gain ​ ​ 29.5 ​ ​ — ​ ​ — Gain on sale of headquarters building ​ ​ 9.8 ​ ​ — ​ ​ — Pension settlement charge ​ ​ — ​ ​ — ​ ​ (26.7) Gain (Loss) related to sale and exit of businesses ​ ​ 1.4 ​ ​ (72.4) ​ ​ (2.8) Other expense, net ​ ​ (2.1) ​ ​ (0.3) ​ ​ (0.4) Interest expense ​ (72.1) ​ (75.4) ​ (43.2) Interest income ​ 1.6 ​ 1.8 ​ 2.2 Income before income taxes ​ ​ 245.9 ​ ​ 38.9 ​ ​ 58.3 Income tax expense ​ ​ 58.2 ​ ​ 26.4 ​ ​ 12.0 Net income ​ $ 187.7 ​ $ 12.5 ​ $ 46.3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per share – basic ​ $ 4.88 ​ $ 0.35 ​ $ 1.30 Earnings per share – diluted ​ $ 4.86 ​ $ 0.35 ​ $ 1.29 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares used for earnings per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding – basic ​ ​ 38.3 ​ ​ 35.6 ​ ​ 35.1 Weighted average shares outstanding – diluted ​ ​ 38.4 ​ ​ 35.8 ​ ​ 35.4 ​ The accompanying notes to consolidated financial statements are an integral part of these statements. ​ ​ ​ 46 Table of Contents AAR CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 ​ ​ (In millions) Net income ​ $ 187.7 ​ $ 12.5 ​ $ 46.3 Other comprehensive income, net of tax: ​ ​ ​ ​ ​ ​ ​ ​ ​ Currency translation adjustments ​ 0.3 ​ 3.1 ​ 0.2 Pension and post retirement plans, net of tax ​ 1.4 ​ 0.1 ​ 14.5 Total other comprehensive income, net of tax ​ ​ 1.7 ​ 3.2 ​ 14.7 Comprehensive income ​ $ 189.4 ​ $ 15.7 ​ $ 61.0 ​ The accompanying notes to consolidated financial statements are an integral part of these statements. ​ ​ 47 Table of Contents AAR CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ (In millions, except share data) Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 84.0 ​ $ 96.5 Restricted cash ​ ​ 23.8 ​ ​ 12.7 Accounts receivable, net ​ ​ 386.8 ​ ​ 354.8 Contract assets ​ ​ 148.4 ​ ​ 140.3 Inventories ​ 979.0 ​ 809.2 Prepaid expenses and other current assets ​ ​ 120.1 ​ ​ 97.1 Total current assets ​ 1,742.1 ​ 1,510.6 ​ ​ ​ ​ ​ ​ ​ Property, plant and equipment, at cost: ​ ​ ​ ​ ​ ​ Land ​ ​ 7.3 ​ ​ 9.2 Buildings and improvements ​ ​ 92.7 ​ ​ 118.3 Equipment and furniture and fixtures ​ ​ 309.1 ​ ​ 309.7 ​ ​ ​ 409.1 ​ ​ 437.2 Accumulated depreciation ​ ​ (242.2) ​ ​ (278.7) ​ ​ ​ 166.9 ​ ​ 158.5 ​ ​ ​ ​ ​ ​ ​ Other assets: ​ ​ ​ ​ ​ ​ Goodwill ​ 580.3 ​ 530.8 Intangible assets, net ​ 281.6 ​ 219.6 Operating lease right-of-use assets, net ​ ​ 210.8 ​ ​ 93.3 Rotable assets, net ​ ​ 180.3 ​ ​ 172.4 Other non-current assets ​ 193.9 ​ ​ 159.4 ​ ​ 1,446.9 ​ 1,175.5 ​ ​ $ 3,355.9 ​ $ 2,844.6 ​ The accompanying notes to consolidated financial statements are an integral part of these statements. ​ 48 Table of Contents AAR CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS LIABILITIES AND EQUITY ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ (In millions, except share data) Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 295.6 ​ $ 303.1 Deferred revenue ​ ​ 50.3 ​ ​ 40.3 Other accrued liabilities ​ 267.3 ​ 211.3 Total current liabilities ​ 613.2 ​ 554.7 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 893.9 ​ 968.0 Operating lease liabilities ​ ​ 101.1 ​ ​ 79.6 Deferred tax liabilities ​ 23.1 ​ 18.4 Other liabilities ​ 20.8 ​ 12.3 ​ ​ 1,038.9 ​ 1,078.3 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 48,750,786 and 45,300,786 shares at cost, respectively ​ 48.8 ​ 45.3 Capital surplus ​ 789.7 ​ 505.2 Retained earnings ​ 1,157.1 ​ 969.4 Treasury stock, 8,871,272 and 9,470,781 shares at cost, respectively ​ (287.9) ​ (302.7) Accumulated other comprehensive loss ​ (3.9) ​ (5.6) Total equity ​ 1,703.8 ​ 1,211.6 ​ ​ $ 3,355.9 ​ $ 2,844.6 ​ The accompanying notes to consolidated financial statements are an integral part of these statements. ​ ​ 49 Table of Contents AAR CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE THREE YEARS ENDED MAY 31, 2026 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In millions) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ Common ​ Capital ​ Retained ​ Treasury ​ Comprehensive ​ Total ​ ​ ​ ​ Stock ​ ​ ​ Surplus ​ ​ ​ Earnings ​ ​ ​ Stock ​ ​ ​ Income (Loss) ​ ​ ​ Equity Balance, May 31, 2023 ​ $ 45.3 ​ $ 484.5 ​ $ 910.6 ​ $ (317.8) ​ $ (23.5) ​ $ 1,099.1 Net income ​ — ​ — ​ 46.3 ​ — ​ — ​ 46.3 Stock option activity ​ — ​ 2.9 ​ — ​ 21.7 ​ — ​ 24.6 Restricted stock activity ​ — ​ 6.5 ​ — ​ 3.7 ​ — ​ 10.2 Repurchase of shares ​ — ​ — ​ — ​ (5.1) ​ — ​ (5.1) Other comprehensive income, net of tax ​ — ​ — ​ — ​ — ​ 14.7 ​ ​ 14.7 Balance, May 31, 2024 ​ $ 45.3 ​ $ 493.9 ​ $ 956.9 ​ $ (297.5) ​ $ (8.8) ​ $ 1,189.8 Net income ​ ​ — ​ — ​ 12.5 ​ — ​ — ​ 12.5 Stock option activity ​ ​ — ​ 3.2 ​ — ​ 6.6 ​ — ​ 9.8 Restricted stock activity ​ ​ — ​ 8.1 ​ — ​ (1.7) ​ — ​ 6.4 Repurchase of shares ​ ​ — ​ — ​ — ​ (10.1) ​ — ​ (10.1) Other comprehensive income, net of tax ​ ​ — ​ — ​ — ​ — ​ 3.2 ​ 3.2 Balance, May 31, 2025 ​ $ 45.3 ​ $ 505.2 ​ $ 969.4 ​ $ (302.7) ​ $ (5.6) ​ $ 1,211.6 Net income ​ — ​ — ​ 187.7 ​ — ​ — ​ 187.7 Issuance of common stock ​ ​ 3.5 ​ ​ 270.4 ​ ​ — ​ ​ — ​ ​ — ​ ​ 273.9 Stock option activity ​ — ​ 7.6 ​ — ​ 15.3 ​ — ​ 22.9 Restricted stock activity ​ — ​ 6.5 ​ — ​ (0.5) ​ — ​ 6.0 Other comprehensive income, net of tax ​ — ​ — ​ — ​ — ​ 1.7 ​ 1.7 Balance, May 31, 2026 ​ $ 48.8 ​ $ 789.7 ​ $ 1,157.1 ​ $ (287.9) ​ $ (3.9) ​ $ 1,703.8 ​ The accompanying notes to consolidated financial statements are an integral part of these statements. ​ ​ 50 Table of Contents AAR CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In millions) ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Cash flows provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 187.7 ​ $ 12.5 ​ $ 46.3 Adjustments to reconcile income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 72.1 ​ 55.2 ​ 40.2 Amortization of financing costs ​ 3.2 ​ 2.6 ​ 1.0 Stock-based compensation expense ​ ​ 17.8 ​ ​ 19.9 ​ ​ 15.3 Bargain purchase gain ​ ​ (29.5) ​ ​ — ​ ​ — Gain on sale of building ​ ​ (9.8) ​ ​ — ​ ​ — Provision for credit losses ​ ​ 2.1 ​ ​ 0.2 ​ ​ 0.7 Pension settlement charges ​ ​ — ​ ​ — ​ ​ 26.7 Deferred tax benefit ​ ​ (3.2) ​ ​ (5.5) ​ ​ (20.5) Loss (Earnings) from joint ventures ​ ​ (7.2) ​ ​ (5.4) ​ ​ 0.2 Loss (Gain) on sale of business ​ ​ — ​ ​ 68.9 ​ ​ — Impairment charges and loss on sale of investments ​ ​ 1.0 ​ ​ — ​ ​ — Changes in certain assets and liabilities, net of acquisitions: ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ 7.7 ​ (82.8) ​ (5.3) Contract assets ​ ​ 8.1 ​ ​ (26.6) ​ ​ (17.1) Inventories ​ (69.0) ​ (109.3) ​ (90.4) Prepaid expenses and other current assets ​ ​ (11.9) ​ ​ (5.8) ​ ​ (31.7) Rotable assets ​ (22.3) ​ (23.9) ​ 2.5 Accounts payable ​ (49.9) ​ 70.5 ​ 59.4 Accrued and other liabilities ​ 21.6 ​ ​ 40.9 ​ ​ 16.9 Other ​ (19.8) ​ 24.7 ​ (0.4) Net cash provided by operating activities–continuing operations ​ 98.7 ​ 36.1 ​ 43.8 Net cash used in operating activities–discontinued operations ​ ​ — ​ ​ — ​ ​ (0.2) Net cash provided by operating activities ​ ​ 98.7 ​ ​ 36.1 ​ ​ 43.6 Cash flows provided by (used in) investing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Property, plant and equipment expenditures ​ (36.6) ​ (34.7) ​ (29.7) Acquisitions, net of cash acquired ​ ​ (259.4) ​ ​ (1.5) ​ ​ (722.9) Proceeds from sale of building and land ​ ​ 25.1 ​ ​ 4.7 ​ ​ — Proceeds from sale of business ​ ​ 0.6 ​ ​ 48.0 ​ ​ — Hangar expansion activity, net ​ ​ (28.8) ​ ​ (4.0) ​ ​ (1.5) Joint venture and other investment activity ​ ​ (9.6) ​ ​ (1.8) ​ ​ (4.4) Net cash provided by (used in) investing activities ​ ​ (308.7) ​ ​ 10.7 ​ ​ (758.5) Cash flows provided by (used in) financing activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from equity offering, net ​ ​ 273.9 ​ ​ — ​ ​ — Proceeds from long-term borrowings, net ​ ​ 153.0 ​ ​ — ​ ​ 550.0 Short-term borrowings (repayments), net ​ (227.0) ​ (20.0) ​ 175.0 Purchase of treasury stock ​ — ​ (10.1) ​ (5.1) Stock compensation activity ​ 11.2 ​ (3.5) ​ 19.6 Financing costs ​ ​ (2.5) ​ ​ (0.1) ​ ​ (10.3) Net cash provided by (used in) financing activities ​ 208.6 ​ (33.7) ​ 729.2 Increase (Decrease) in cash and cash equivalents ​ (1.4) ​ 13.1 ​ 14.3 Cash, cash equivalents, and restricted cash at beginning of year ​ 109.2 ​ 96.1 ​ 81.8 Cash, cash equivalents, and restricted cash at end of year ​ $ 107.8 ​ $ 109.2 ​ $ 96.1 ​ The accompanying notes to consolidated financial statements are an integral part of these statements. ​ ​ 51 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ 1. Summary of Significant Accounting Policies Description of Business AAR CORP. (the “Company”) is a diversified provider of services and products to the worldwide commercial aviation and government and defense markets. We serve commercial, government and defense aircraft fleet operators, original equipment manufacturers, and independent service providers around the world, and various other domestic and foreign military customers. Services and products include: aviation supply chain and parts support programs; customer fleet management and operations; maintenance, repair and overhaul (“MRO”) of airframes (“Airframe MRO”), and certain other components (“Component MRO”); design and manufacture of specialized pallets, shelters, and containers; aircraft modifications and aircraft and engine sales and leasing. Principles of Consolidation The accompanying Consolidated Financial Statements include the accounts of the Company and its majority-owned subsidiaries after elimination of intercompany accounts and transactions. Certain reclassifications have been made to the prior year presentation to conform to the 2026 presentation. 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 whether the good or service being provided is significantly integrated with other promises in the contract, whether the service provided significantly modifies or customizes another good or service or whether 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 allocate 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 typically represent distinct performance obligations and 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. 52 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ 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 are 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 can include customer volume, future labor costs and efficiencies, repair or overhaul costs, 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. We utilize the portfolio approach to estimate the amount of revenue to recognize for certain contracts which require over time revenue recognition. Such contracts are grouped together either by revenue stream, customer or product line with each portfolio of contracts grouped together based on having similar characteristics. The portfolio approach is utilized only when the result of the accounting is not expected to be materially different than if applied to individual contracts. We also may enter into offset agreements or conditions as part of obtaining orders for our products and services from certain government customers in foreign countries. These agreements are designed to enhance the social and economic environment of the foreign country by requiring the contractor to promote investment in the country. These agreements also may be satisfied through our use of cash or other means of providing financial support for in-country projects with local companies. The amounts ultimately applied against our offset agreements are based on negotiations with the customer and satisfaction of our offset obligations are included in the estimates of our total costs to complete the contract. 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. Certain contracts with customers have options for the customer to acquire additional goods or services. In most cases, the pricing of these options is reflective of the standalone selling price of the good or service. These options do not provide the customer with a material right and are accounted for only when the customer exercises the option to purchase the additional goods or services. If the option on the customer contract is not indicative of the standalone selling price of the good or service, the material right would be accounted for as a separate performance obligation. 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. In the performance of our government contracts, we routinely request contract modifications that require additional funding from the customer. Most often, these requests are due to customer-directed changes in the scope of work. While we are entitled to recovery of these costs under our contracts, the administrative process with our customer may be protracted. Based on the circumstances, we periodically file requests for equitable adjustment (“REAs”) that are sometimes converted into claims. In some cases, these REAs are disputed by our customer. We believe our outstanding modifications, REAs and other similar claims will be resolved without material impact to our results of operations, financial condition or cash flows. 53 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ In the ordinary course of business, agencies of the U.S. and other governments audit our claimed costs and conduct inquiries and investigations of our business practices with respect to government contracts to determine whether our operations are conducted in accordance with these requirements and the terms of the relevant contracts. U.S. government agencies, including the Defense Contract Audit Agency (“DCAA”), routinely audit our claimed indirect costs, for compliance with the Cost Accounting Standards and the Federal Acquisition Regulations. These agencies also conduct reviews and investigations and make inquiries regarding our accounting and other systems in connection with our performance and business practices with respect to our government contracts and subcontracts. Costs to fulfill and obtain a contract are considered for capitalization based on contract specific facts and circumstances. The incremental costs to fulfill a contract, including setup and implementation costs prior to beginning the period of performance, are capitalized when expenses are incurred prior to the start of satisfying a performance obligation. The capitalized costs are subsequently expensed over the contract’s period of performance. We have elected to use certain practical expedients permitted under Accounting Standards Codification (“ASC”) 606. 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 Consolidated Statements of Income, and are not considered a performance obligation to our customers. Our reported Sales on our Consolidated Statements of Income include sales and 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. Cumulative Catch-up Adjustments 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, supply chain logistics programs, and/or repair services. Favorable and unfavorable cumulative catch-up adjustments were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Favorable cumulative catch-up adjustments ​ $ — ​ $ 3.8 ​ $ 12.1 Unfavorable cumulative catch-up adjustments ​ (2.7) ​ (6.6) ​ (9.1) Net cumulative catch-up adjustments ​ $ (2.7) ​ $ (2.8) ​ $ 3.0 ​ 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. For instances where we recognize revenue prior to having an unconditional right to payment, we record a contract asset. When an unconditional right to consideration exists, we reduce our contract asset and recognize an unbilled or trade receivable. When amounts are dependent on factors other than the passage of time in order for payment from a customer to be due, we record a contract asset which consists 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. 54 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Net contract assets and liabilities are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ ​ ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ Change Contract assets – current ​ $ 148.4 ​ $ 140.3 ​ $ 8.1 Contract assets – non-current ​ 42.9 ​ 28.4 ​ 14.5 Contract liabilities: ​ ​ ​ ​ ​ ​ Deferred revenue – current ​ ​ (50.3) ​ ​ (40.3) ​ ​ (10.0) Deferred revenue on long-term contracts ​ (6.9) ​ (6.4) ​ (0.5) Net contract assets ​ $ 134.1 ​ $ 122.0 ​ $ 12.1 ​ Contract assets – non-current is reported within Other non-current assets and deferred revenue on long-term contracts is reported within Other liabilities on our Consolidated Balance Sheets. Changes in contract assets and contract liabilities primarily result from the timing difference between our performance of services and payments from customers. During fiscal 2024, we experienced delayed collections from one of our significant regional airline customers and issued the customer a Notice of Payment and Other Defaults during the second quarter of fiscal 2024 to request payment and reserve our rights under our agreements. In the fourth quarter of fiscal 2024, we terminated a power-by-the-hour (“PBH”) program with this customer which resulted in a net termination charge of $4.8 million. The charge included a reduction in contract assets and revenue of $7.8 million and the establishment of repair reserves of $2.5 million partially offset by a $5.5 million gain recognized from the customer’s obligation to purchase the rotable assets we utilized to perform the PBH services. In conjunction with the termination for default, the customer was obligated to purchase the rotable assets, and we sold the assets to the customer in the fourth quarter of fiscal 2025 for $18.7 million. During the first quarter of fiscal 2025, our Mobility Systems’ business received a stop-work order from our U.S. government customer on the Next Generation Pallet contract as the program was terminated for convenience by the customer. Under the conditions for the termination for convenience, we have the right to submit a proposal for recovery of our incurred costs. In conjunction with the termination, we expensed equipment and inventory of $12.7 million and recognized a contract asset of $9.5 million reflecting the estimated recovery on our incurred costs. During the third quarter of fiscal 2025, we submitted our termination settlement proposal to the customer and increased our contract asset to $13.5 million based on the revised estimated recovery. In conjunction with the termination settlement proposal submission, we also expensed an additional $1.0 million of equipment and other costs. 55 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Changes in our deferred revenue were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 Deferred revenue at beginning of period ​ $ (46.7) ​ $ (21.9) Revenue deferred ​ (490.0) ​ (321.9) Revenue recognized ​ 498.3 ​ 307.6 Other (1) ​ (18.8) ​ (10.5) Deferred revenue at end of period ​ $ (57.2) ​ $ (46.7) (1) Other includes cumulative catch-up adjustments, foreign currency translation, acquisitions, and other adjustments. Remaining Performance Obligations As of May 31, 2026, we had approximately $777 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 contracts. We expect that approximately 70% of this backlog will be recognized as revenue in fiscal 2027, an additional 20% of the firm backlog in fiscal 2028, and the balance thereafter. 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, supply chain logistics programs, and/or repair services. Financial Instruments and Concentrations of Market or Credit Risk 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 U.S. government contracts: ​ ​ ​ ​ ​ Trade receivables ​ $ 32.5 ​ $ 26.6 Unbilled receivables ​ 8.8 ​ 13.4 ​ ​ 41.3 ​ 40.0 All other customers: ​ ​ ​ ​ Trade receivables ​ 318.5 ​ 283.4 Unbilled receivables ​ 27.0 ​ 31.4 ​ ​ 345.5 ​ 314.8 ​ ​ $ 386.8 ​ $ 354.8 ​ The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the short-term maturity of these instruments. Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Allowance for Credit Losses We maintain an allowance for credit losses to reflect the expected uncollectibility of accounts receivable based on past collection history and specific risks identified among uncollected accounts. In determining the required allowance, we consider factors such as general and industry-specific economic conditions, customer credit history, and our customers’ current and expected future financial performance. The majority of our customers are recurring customers with an established payment history. Certain customers are required to undergo an extensive credit check prior to delivery of products or services. 56 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Our allowance for credit losses also includes reserves for estimated product returns based on historical return rates. The reserve for estimated product returns is recognized as a reduction to sales with a corresponding reduction to cost of sales for the estimated cost of inventory that is expected to be returned. We perform regular evaluations of customer payment experience, current financial condition, and risk analysis. We may require collateral in the form of security interests in assets, letters of credit, and/or obligation guarantees from financial institutions for transactions executed on other than normal trade terms. We also maintain trade credit insurance for certain customers to provide coverage, up to a certain limit, in the event of insolvency of some customers. The change in our allowance for credit losses, including product return reserves, was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Balance, beginning of year ​ $ 10.7 ​ $ 14.1 ​ $ 13.4 Provision charged to operations, net of recoveries ​ 2.1 ​ 0.2 ​ 0.7 Deductions for accounts written off and other reclassifications ​ 1.4 ​ (3.6) ​ — Balance, end of year ​ $ 14.2 ​ $ 10.7 ​ $ 14.1 ​ Goodwill and Other Intangible Assets Goodwill represents the excess of the fair value of consideration transferred over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. In accordance with ASC 350, Intangibles–Goodwill and Other, goodwill and other intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests and more frequently if events or circumstances indicate that the carrying value of a reporting unit may not be recoverable. We review and evaluate our goodwill and indefinite life intangible assets for potential impairment at a minimum annually, on May 31, or more frequently if circumstances indicate that impairment is possible. Goodwill is evaluated for impairment either under a qualitative or a quantitative assessment approach, which depends on the facts and circumstances of a reporting unit, consideration of the estimated excess of a reporting unit’s fair value over its carrying amount, and changes in the business environment. When performing a qualitative assessment, we consider factors including, but not limited to, current macroeconomic conditions, industry and market conditions, cost factors, financial performance and other relevant events to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If we determine that it is more likely than not that a reporting unit’s fair value is less than its carrying value, a quantitative goodwill impairment test is performed which relies upon significant judgments and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates, operating margins and on the selection of guideline public companies. When performing a quantitative goodwill impairment test, the reporting unit carrying value is compared to its fair value. Goodwill is deemed impaired if, and the impairment loss is recognized for the amount by which, the reporting unit carrying value exceeds its fair value. Intangible assets with finite useful lives are amortized on a straight-line basis over their estimated useful lives. These intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Foreign Currency Our foreign subsidiaries generally utilize the local currency as their functional currency. All balance sheet accounts of foreign subsidiaries transacting business in currencies other than the U.S. dollar are translated at year-end exchange rates. Revenues and expenses are translated at average exchange rates during the year. Translation adjustments are excluded from the results of operations and are recorded in stockholders’ equity as a component of accumulated other comprehensive loss until such subsidiaries are liquidated. Income and losses from foreign currency transactions re-measurements are included in Selling, general and administrative expenses. 57 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Business Combinations Transaction costs related to business combinations are expensed as incurred. Assets acquired and liabilities assumed are measured and recognized based on their estimated fair values at the acquisition date, any excess of the purchase consideration when compared to the fair value of the net tangible and intangible assets acquired is recorded as goodwill. If the initial accounting for the business combination is incomplete by the end of the reporting period in which the acquisition occurs, the business combination is recorded and disclosed on a preliminary basis. Subsequent to the acquisition date, and not later than one year from the acquisition date, adjustments to the initial preliminary recognized amounts are recorded to the extent new information is obtained about the measurement of assets and liabilities that existed as of the date of the acquisition. Cash Cash and cash equivalents consist of highly liquid instruments which have original maturities of three months or less when purchased. Restricted cash represents cash on hand that is legally restricted as to withdrawal or usage. As of May 31, 2026, restricted cash includes amounts on deposit with an escrow agent related to our acquisitions including $5.4 million for Trax USA Corp. (“Trax”), $3.1 million for Aerostrat Corp. (“Aerostrat”), and $3.5 million for American Distributors Holding Co., LLC (“ADI”). We also have restricted cash of $11.8 million required to be set aside by a contractual agreement to provide servicing related to receivable securitization arrangements. The restrictions related to our acquisitions typically lapse at the time of resolution of certain contingencies including tax contingencies. The restrictions related to the receivable securitization arrangements lapse at the time we remit the customer payments collected by us as servicer of previously sold customer receivables to the purchaser. Inventories and Rotable Assets Inventories are valued at the lower of cost or net realizable value. Cost is determined by the specific identification, average cost, or first-in, first-out methods. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of disposal and transportation. From time-to-time, we purchase aircraft and engines for disassembly to individual parts and components. Costs are assigned to these individual parts and components utilizing list prices from original equipment manufacturers and recent sales history. Expenditures for the repair of parts and components are capitalized as inventory. The following is a summary of inventories: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ ​ 2025 Aircraft and engine parts, components and finished goods ​ $ 737.2 ​ $ 659.4 Raw materials and parts ​ ​ 185.7 ​ ​ 119.9 Work-in-process ​ 56.1 ​ 29.9 ​ ​ $ 979.0 ​ $ 809.2 ​ In conjunction with the decision to exit our consumables and expendables product line, we do not expect certain inventories to be recoverable and have recognized an inventory reserve of $4.9 million during fiscal 2026. The cost of rotable assets is typically the original purchase price plus overhaul costs. Depreciation is computed using the straight-line method over the estimated service life of the equipment. Rotable assets have been generally used for asset exchange or leasing transactions with customers. Future rent due to us under long-term leases of rotable assets during each of the next five fiscal years is $8.2 million in 2027, $6.6 million in 2028, $1.3 million in 2029, $0.6 million in 2030, and $0.4 million in 2031. 58 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Property, Plant and Equipment and Other Non-Current Assets We record property, plant and equipment at cost. Depreciation is computed on the straight-line method over useful lives of 10-40 years for buildings and improvements and 3-10 years for equipment, furniture and fixtures, and capitalized software. Leasehold improvements are amortized over the shorter of the estimated useful life or the term of the applicable lease. Repair and maintenance expenditures are expensed as incurred. Upon sale or disposal, cost and accumulated depreciation are removed from the accounts, and related gains and losses are included in results of operations. 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. Investments Investments where we have the ability to exercise significant influence, but do not control the entity, are accounted for under the equity method of accounting. Significant influence generally exists if we have a 20% to 50% ownership interest in the investee. Our share of the net earnings or loss of our investees is included in Operating income on our Consolidated Statements of Income since the activities of the investees are closely aligned with our operations. Equity investments in entities over which we do not have the ability to exercise significant influence and whose securities do not have a readily determinable fair value are carried at cost less impairment, if any, adjusted for changes resulting from qualifying observable price changes for the identical investment of the same issuer should they occur. We evaluate our investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an investment is determined to be other than temporary, a loss is recorded in earnings in the current period. During fiscal 2026, we recognized impairment charges and losses on sales of investments of $1.0 million. Our investments are classified in Other non-current assets on our Consolidated Balance Sheets. Distributions from joint ventures are classified as operating or investing activities in the Consolidated Statements of Cash Flows based upon an evaluation of the specific facts and circumstances of each distribution. Debt Issuance Costs Debt issuance costs are amortized and recognized as interest expense using the effective interest rate method, or, when the results are not materially different, on a straight-line basis over the expected term of the related debt. Debt issuance costs are presented in the Consolidated Balance Sheets as a direct reduction to the carrying amount of the related debt. Restructuring and Other Exit Costs We recognize charges for restructuring and other exit costs such as product line exits and facility closures at their fair value when incurred. In cases where employees are required to render service until they are terminated in order to receive the termination benefits and will be retained beyond the minimum retention period, we recognize the expense ratably over the future service period. 59 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Income Taxes We are subject to income taxes in the U.S., state, and several foreign jurisdictions. In the ordinary course of business, there can be transactions and calculations where the ultimate tax determination is uncertain. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns in accordance with applicable accounting guidance for accounting for income taxes, using currently enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when necessary to reduce deferred tax assets to the amount expected to be realized. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Both positive and negative evidence are considered in forming our judgment as to whether a valuation allowance is appropriate, and more weight is given to evidence that can be objectively verified. Valuation allowances are reassessed whenever there are changes in circumstances that may cause a change in judgment. The accounting for uncertainty in income taxes requires a more-likely-than-not threshold for financial statement recognition of tax positions taken or expected to be taken in a tax return. Where necessary, we record a liability for the difference between the benefit recognized for financial statement purposes and the tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. New Accounting Pronouncement Adopted in Fiscal 2026 In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures. This ASU updates income tax disclosure requirements by requiring specific categories and greater disaggregation within the income tax rate reconciliation and disaggregation of income taxes paid by jurisdiction. The ASU is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The ASU would be applied on a prospective basis with retrospective application permitted. This ASU was adopted prospectively with no impact on our consolidated financial statements except for expanded income tax-related disclosures. New Accounting Pronouncement Not Yet Adopted In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses. This ASU includes new disclosure requirements about specific expense categories, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization, and selling expenses that are included in certain expense captions presented on the face of the income statement. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted and the ASU can be applied on a prospective or retrospective basis. We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows, and financial condition. ​ 60 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ 2. Acquisitions Acquisition of the Aircraft Reconfig Technologies Business On April 24, 2026, we acquired the outstanding shares of Aircraft Reconfig Technologies (“ART”), a leading aircraft interiors engineering company for $36.0 million subject to customary post-closing adjustments for cash, working capital, and indebtedness. We accounted for the acquisition using the acquisition method and included the results of ART’s operations in our consolidated financial statements from the effective date of the acquisition. ART’s results are reported within our Repair, Engineering, and Software segment. The base purchase price was paid at closing and transaction costs associated with the acquisition of $1.1 million were expensed as incurred during fiscal 2026. The purchase price was allocated to identifiable assets and liabilities based on information available at the date of acquisition. The allocation of the purchase price is preliminary and will potentially change in future periods as fair value estimates of the assets acquired and liabilities assumed are finalized, including those related to working capital, intangible assets, property and equipment, leases, and indemnification assets. The final determination of the fair values will be completed within the one-year measurement period. The preliminary fair value of assets acquired and liabilities assumed is as follows: ​ ​ ​ ​ ​ Accounts receivable ​ ​ ​ $ 2.1 Inventory ​ 17.5 Other assets ​ 0.2 Accounts payable and other liabilities ​ (12.9) Net assets acquired ​ 6.9 Goodwill ​ 29.1 Purchase price, net of cash acquired ​ $ 36.0 ​ Acquisition of HAECO Americas On November 3, 2025, we acquired the outstanding shares of HAECO Americas, LLC and its subsidiary HAECO Airframe Services, LLC (together, “HAECO Americas”) from HAECO USA, Inc. for a purchase price of $78.0 million, which includes estimated post-closing adjustments for cash, working capital, and indebtedness. HAECO Americas provides heavy aircraft MRO and modification services across its hangars located in Greensboro, North Carolina and Lake City, Florida. We accounted for the acquisition using the acquisition method and included the results of HAECO Americas’ operations in our consolidated financial statements from the effective date of the acquisition. HAECO Americas’ results are reported within our Repair, Engineering, and Software segment. The base purchase price was paid at closing and transaction costs associated with the acquisition of $3.3 million were expensed as incurred in fiscal 2026. The purchase price was allocated to identifiable assets and liabilities based on information available at the date of acquisition. The allocation of the purchase price is preliminary and will potentially change in future periods as fair value estimates of the assets acquired and liabilities assumed are finalized, including those primarily related to working capital. The preliminary fair value of the identifiable assets acquired exceeded the total purchase price resulting in a bargain purchase gain of $29.5 million, which we recognized in fiscal 2026. We believe the acquisition resulted in a bargain purchase gain as the seller was highly motivated to divest the business as part of its long-term strategies. 61 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ The final determination of the fair values will be completed within the one-year measurement period. The preliminary fair value of assets acquired and liabilities assumed is as follows: ​ ​ ​ ​ ​ Accounts receivable ​ ​ ​ $ 25.9 Contract assets ​ 15.7 Inventory ​ 16.2 Right-of-use assets ​ 95.2 Other assets ​ 15.0 Accounts payable and accrued liabilities ​ (35.4) Deferred taxes, net ​ (8.0) Lease liabilities ​ (17.1) Net assets acquired ​ 107.5 Bargain purchase gain ​ (29.5) Purchase price, net of cash acquired ​ $ 78.0 ​ As part of our integration activities, we are consolidating our facility footprint, which includes closing our Indianapolis, Indiana airframe maintenance facility and relocating the majority of those operations to the Greensboro, North Carolina facility. Expenses incurred for integration activities during fiscal 2026 were $11.1 million. Acquisition of ADI On September 25, 2025, we acquired the outstanding shares of ADI, including ADI American Distributors, LLC and other of ADI’s subsidiaries, for an initial purchase price of $137.1 million. The post-closing adjustments for cash, working capital and indebtedness were resolved in the third quarter of fiscal 2026 resulting in a $0.6 million reduction in the purchase price. ADI is a leading distributor of electronic components and assemblies to original equipment manufacturers (“OEMs”) across the aerospace and defense industry. The initial purchase price was paid at closing except for $4.5 million, which was placed on deposit with an escrow agent to secure potential indemnification obligations and fund post-closing adjustments for working capital and indebtedness. During the third quarter of fiscal 2026, the post-closing adjustments were finalized resulting in the release of $1.0 million from the escrow. We accounted for the acquisition using the acquisition method and included the results of ADI’s operations in our consolidated financial statements from the effective date of the acquisition. ADI’s results are reported within our Parts Supply segment. Transaction costs associated with the acquisition of $4.1 million were expensed as incurred. The purchase price was allocated to identifiable assets and liabilities based on information available at the date of acquisition. The allocation of the purchase price is preliminary and will potentially change in future periods as fair value estimates of the assets acquired and liabilities assumed are finalized, including those related to working capital and leases. The final determination of the fair values will be completed within the one-year measurement period. The preliminary fair value of assets acquired and liabilities assumed is as follows: ​ ​ ​ ​ ​ Accounts receivable ​ ​ ​ $ 13.1 Inventory ​ 66.6 Intangible assets ​ 75.8 Other assets ​ 5.4 Accounts payable and other liabilities ​ (32.9) Net assets acquired ​ 128.0 Goodwill ​ 9.1 Purchase price, net of cash acquired ​ $ 137.1 ​ 62 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Acquired amortizable intangible assets include customer relationships of $43.3 million and backlog of $16.4 million, which are being amortized over 12.5 years and 3 years, respectively. We also recognized indefinite-lived trademarks of $16.1 million. The goodwill associated with the ADI acquisition is deductible for tax purposes and is primarily attributable to the benefits we expect to derive from expected synergies including complementary product lines, cross-selling opportunities, operational efficiencies, and intangible assets that do not qualify for separate recognition, such as their assembled workforce. Expenses incurred for integration activities during fiscal 2026 were $0.3 million. Acquisition of Aerostrat On August 11, 2025, we acquired the outstanding shares of Aerostrat for a base purchase price of $15.0 million plus contingent consideration of up to $5.0 million. Aerostrat is a leading long-range maintenance planning software provider used by airlines, MRO facilities, and cargo companies to automate complex scheduling, ensure production capacity, and simplify aircraft allocation. The base purchase price was paid at closing except for $3.1 million, which was placed on deposit with an escrow agent to secure potential indemnification obligations and fund post-closing adjustments for working capital and indebtedness. The contingent consideration includes $1.0 million subject to the successful launch of certain product offerings by December 31, 2026 and up to $4.0 million based on the achievement of adjusted revenue targets by August 1, 2028. The estimated fair value of the contingent consideration was $4.0 million at the acquisition date and has been included in the purchase price. We accounted for the acquisition using the acquisition method and included the results of Aerostrat’s operations in our consolidated financial statements from the effective date of the acquisition. Aerostrat’s results are reported within our Repair, Engineering, and Software segment. Transaction costs associated with the acquisition of $0.5 million were expensed as incurred in fiscal 2026. The final fair value of assets acquired and liabilities assumed is as follows: ​ ​ ​ ​ ​ Current assets ​ ​ ​ $ 0.6 Intangible assets ​ 10.3 Deferred revenue ​ (0.6) Deferred tax liabilities ​ (2.6) Net assets acquired ​ 7.7 Goodwill ​ 11.3 Purchase price, net of cash acquired ​ $ 19.0 ​ Acquired amortizable intangible assets include customer relationships of $4.7 million and developed technology of $4.9 million, which are being amortized over 10 years and 20 years, respectively. Intangible assets also include tradenames of $0.7 million which are indefinite-lived. The goodwill associated with the Aerostrat acquisition is not deductible for tax purposes and is primarily attributable to the benefits we expect to derive from expected synergies including complementary products and services, cross-selling opportunities and intangible assets that do not qualify for separate recognition, such as their assembled workforce. Acquisition of Triumph Group’s Product Support Business On March 1, 2024, we completed the acquisition of Triumph Group, Inc.’s Product Support business (“Product Support”) for an initial purchase price of $725.0 million. The post-closing adjustments for cash, working capital and indebtedness were resolved in the first quarter of fiscal 2025 resulting in a $2.9 million reduction in the purchase price. Product Support is a leading global provider of specialized MRO capabilities for critical aircraft components in the commercial and defense markets, providing MRO services for structural components, engine and airframe accessories, interior refurbishment and wheels and brakes. Product Support also designs proprietary designated engineering representative repairs and parts manufacturer approval parts. 63 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Product Support’s results are reported within our Repair, Engineering, and Software segment. The purchase price was paid at closing and was funded with debt financing. Transaction costs associated with the acquisition of $21.0 million were expensed as incurred within Selling, general and administrative expenses in fiscal 2024. In connection with the acquisition, we secured commitments for a bridge financing facility (the “Bridge Facility”). No amounts were drawn under the Bridge Facility, which was terminated on March 1, 2024 upon securing permanent debt financing and closing the acquisition. During fiscal 2024, we expensed $6.1 million within Interest expense for the fees associated with the Bridge Facility. We accounted for the acquisition using the acquisition method and included the results of Product Support’s operations in our consolidated financial statements from the effective date of the acquisition. The final fair value of assets acquired and liabilities assumed is as follows: ​ ​ ​ ​ ​ Accounts receivable ​ ​ ​ $ 42.3 Contract assets ​ 18.7 Inventory ​ 62.8 Rotable assets ​ 21.9 Property & equipment ​ 44.6 Intangible assets ​ 179.4 Investment in joint venture ​ ​ 17.9 Other assets ​ 4.1 Accounts payable ​ (21.6) Other liabilities ​ (14.9) Net assets acquired ​ 355.2 Goodwill ​ 364.8 Purchase price, net of cash acquired ​ $ 720.0 ​ Acquired amortizable intangible assets include customer relationships of $96.1 million and developed technology of $83.3 million which are being amortized over 12.5 years and 20 years, respectively. The goodwill associated with the Product Support acquisition is deductible for tax purposes and is primarily attributable to the benefits we expect to derive from expected synergies including facility rationalization, complementary products and services, cross-selling opportunities, in-sourcing repair services and intangible assets that do not qualify for separate recognition, such as their assembled workforce. As part of our integration activities, we are consolidating our facility footprint which included the closure of our Garden City, New York leased component repair facility and relocating those operations to certain Product Support facilities. In conjunction with the facility exit, environmental remediation obligations were identified and we recognized a liability for $1.1 million in fiscal 2026 as our estimate of the future costs associated with the remediation. The timing of expenditures depends on a number of factors, including the nature and extent of contamination, the timing of regulatory approvals, the complexity of the investigation and remediation, and the standards for remediation. In addition to the liability for the environmental remediation obligations, we also recognized a liability of $0.5 million which represents our estimated settlement cost for a related landlord dispute. Expenses recognized for integration activities, including facility closure costs, severance, retention, and other related costs were $2.5 million, $7.5 million, and $0.5 million in fiscal 2026, 2025, and 2024, respectively. Acquisition of Trax On March 20, 2023, we acquired the outstanding shares of Trax for a purchase price of $120.0 million plus contingent consideration of up to $20.0 million based on Trax’s adjusted revenue in calendar years 2023 and 2024. Trax is a leading provider of aircraft MRO and fleet management software supporting a broad spectrum of maintenance activities for a diverse global customer base of airlines and MROs. 64 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ The contingent consideration is based on an adjusted cumulative revenue target across calendar years 2023 and 2024. The adjusted cumulative revenue target is based on revenue recognized under U.S. GAAP adjusted for certain events related to deferred revenue, customer commitments, and other adjustments. The contingent consideration is treated as compensation expense within Selling, general and administrative expenses. Compensation expense recognized in fiscal 2025 and 2024 were $0.7 million and $6.3 million, respectively. No compensation expense was recognized in fiscal 2026. As of May 31, 2026, we have a contingent consideration liability of $8.1 million, which was classified as Other accrued liabilities on our Consolidated Balance Sheet. In November 2025, Trax’s former owners filed a demand for arbitration contesting the determination of the contingent consideration and certain tax matters. We strongly disagree with the claims by Trax’s former owners and we believe we have adequate support for our determination of the contingent consideration and our positions on the tax matters. We expect to finalize the contingent consideration in fiscal 2027. ​ 3. Goodwill and Other Intangible Assets, Net During the fourth quarter of fiscal 2026, our chief operating decision making officer (“CODM”) implemented changes in how he organizes the business, allocates resources, and assesses performance. Specifically, the business units within our Integrated Solutions segment have been realigned, resulting in the following changes: ● Combine our government programs activities and our Mobility Systems business, previously reported as Expeditionary Services, into a new operating segment named Government Solutions; ● Re-position our software platform to our Repair and Engineering segment, which is renamed Repair, Engineering, and Software; and ● Legacy Commercial Programs, the remaining business unit within the Integrated Solutions segment, will be separately reported as its own operating segment. These changes resulted in the following four operating segments: ● Parts Supply remains unchanged from the prior structure, primarily consisting of distribution of new parts and sales of used serviceable material, including aircraft, engine and airframe parts and components; ● Repair, Engineering, and Software primarily consists of Airframe MRO, Component MRO, and our software platforms, including Trax, Aerostrat, Airvoyant, and Airinmar; ● Government Solutions primarily consists of our fleet management and operations of customer-owned aircraft, customized performance-based supply chain logistics programs in support of the U.S. Department of War (“DoW”), the U.S. Department of State (“DoS”) and foreign governments and the engineering, design, integration, manufacture, and repair of pallets, shelters, and containers; and ● Legacy Commercial Programs consists of asset-heavy flight hour-based component repair programs for commercial airlines and distribution of consumables and expendables inventory, previously reported within Integrated Solutions. During the fourth quarter of fiscal 2026, we announced our intention to exit our Legacy Commercial Programs business as it requires significant asset pools and no longer meets our capital return thresholds. We anticipate that the wind-down of this segment will take approximately three to four years as the Legacy Commercial Programs’ existing customer contracts are terminated and its rotable assets are sold. Prior to the change in segments, each of our operating segments was comprised of a single reporting unit. Following the segment changes, we have six reporting units with our Repair, Engineering, and Software and Government Solutions segments each having two reporting units. During the fourth quarter of fiscal 2026, the goodwill of the former Integrated Solutions operating segment of $92.7 million was allocated to the new reporting units based on their relative fair values. 65 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ We performed quantitative impairment assessments for the impacted reporting units immediately before and after the reassignment and determined no impairment existed. As part of the goodwill re-allocation, the Legacy Commercial Programs segment was assigned goodwill of $16.4 million. As the wind-down of its operations and sale of its assets occurs over the next three to four years, the fair value of the segment will progressively decrease which will ultimately result in the full impairment of the Legacy Commercial Programs goodwill in a future period or periods. Changes in the carrying amount of goodwill by segment for fiscal 2026 and 2025 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current Segments ​ Former Segments ​ ​ ​ ​ ​ ​ ​ ​ Repair, ​ ​ ​ ​ Legacy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Parts ​ ​ ​ Engineering ​ ​ ​ Government ​ ​ ​ Commercial ​ ​ ​ Integrated ​ ​ ​ Expeditionary ​ ​ ​ ​ ​ ​ Supply ​ ​ ​ and Software ​ ​ ​ Solutions ​ ​ ​ Programs ​ ​ ​ Solutions ​ ​ ​ Services ​ ​ ​ Total Balance as of May 31, 2024 ​ $ 38.9 ​ $ 416.6 ​ $ — ​ $ — ​ $ 80.5 ​ $ 18.8 ​ $ 554.8 Acquisition ​ ​ — ​ (10.4) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ (10.4) Sale of Landing Gear Overhaul business ​ ​ — ​ (14.6) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ (14.6) Foreign currency translation adjustments ​ ​ — ​ 0.1 ​ ​ — ​ ​ — ​ ​ 0.9 ​ ​ — ​ 1.0 Balance as of May 31, 2025 ​ ​ 38.9 ​ ​ 391.7 ​ ​ — ​ ​ — ​ ​ 81.4 ​ ​ 18.8 ​ ​ 530.8 Acquisitions ​ 9.1 ​ 29.1 ​ ​ — ​ ​ — ​ ​ 11.3 ​ ​ — ​ 49.5 Goodwill re-allocation ​ — ​ 29.8 ​ ​ 65.3 ​ ​ 16.4 ​ ​ (92.7) ​ ​ (18.8) ​ — Balance as of May 31, 2026 ​ $ 48.0 ​ $ 450.6 ​ $ 65.3 ​ $ 16.4 ​ $ — ​ $ — ​ $ 580.3 ​ We utilized the qualitative assessment approach for all reporting units which considers general economic conditions, industry specific performance, changes in reporting unit carrying values, and assumptions used in the most recent fair value calculation. We concluded it was more likely than not that the fair value of each reporting unit exceeded its carrying value at May 31, 2026, and thus no impairment charges were recorded. Intangible assets, other than goodwill, are comprised of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, 2026 ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ Gross ​ Amortization ​ Net Amortizable intangible assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer relationships ​ $ 184.6 ​ $ (35.6) ​ $ 149.0 Developed technology ​ 110.2 ​ (13.1) ​ 97.1 Backlog ​ ​ 16.4 ​ ​ (5.0) ​ ​ 11.4 ​ ​ 311.2 ​ (53.7) ​ 257.5 Unamortized intangible assets: ​ ​ ​ ​ ​ ​ Trademarks ​ 24.1 ​ — ​ 24.1 ​ ​ $ 335.3 ​ $ (53.7) ​ $ 281.6 ​ 66 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, 2025 ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ Gross ​ Amortization ​ Net Amortizable intangible assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ Customer relationships ​ $ 136.6 ​ $ (21.9) ​ $ 114.7 Developed technology ​ 105.3 ​ (7.6) ​ 97.7 ​ ​ 241.9 ​ (29.5) ​ 212.4 Unamortized intangible assets: ​ ​ ​ ​ ​ ​ Trademarks ​ 7.2 ​ — ​ 7.2 ​ ​ $ 249.1 ​ $ (29.5) ​ $ 219.6 ​ Customer relationships are being amortized over 10-20 years, developed technology is being amortized over 20 years and backlog is being amortized over 27 months. Amortization expense recorded during fiscal 2026, 2025, and 2024 was $24.1 million, $16.2 million, and $7.3 million, respectively. The estimated aggregate amount of amortization expense for intangible assets in each of the next five fiscal years is $27.7 million in 2027, $24.5 million in 2028, and $20.1 million in each of 2029, 2030, and 2031. ​ 4. 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, 2027, but, the Purchase Agreement may be terminated earlier under certain circumstances. The term of the Purchase Agreement is 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 Consolidated Balance Sheets. Receivables sold under the Purchase Agreement during fiscal 2026, 2025, and 2024 were $232.7 million, $209.2 million, and $144.4 million, respectively. Amounts remitted to the Purchaser on its behalf during fiscal 2026, 2025, and 2024 were $228.3 million, $201.6 million,and $143.5 million, respectively. As of May 31, 2026 and May 31, 2025, we had collected cash of $11.8 million and $7.4 million, respectively, which was not yet remitted to the Purchaser as of those dates and was classified as Restricted cash on our 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 Consolidated Statements of Income. During fiscal 2026, 2025, and 2024, we incurred discounts on the sale of our receivables and other fees of $0.9 million, $0.9 million, and $0.7 million, respectively. ​ 67 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ 5. Financing Arrangements Debt Outstanding A summary of the carrying amount of our debt is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 Senior Notes ​ $ 700.0 ​ $ 550.0 Amended Revolving Credit Facility with interest payable monthly ​ 200.0 ​ 427.0 Debt premium, net ​ ​ 2.3 ​ ​ — Debt issuance costs, net ​ ​ (8.4) ​ ​ (9.0) Long-term debt ​ $ 893.9 ​ $ 968.0 ​ Credit Agreement On December 14, 2022, we entered into a new credit agreement with various financial institutions as lenders and Wells Fargo Bank, N.A. as administrative agent for the lenders (the “Credit Agreement”) that included an unsecured revolving credit facility (the “Revolving Credit Facility”) that we can draw upon for working capital and general corporate purposes. In conjunction with the Credit Agreement, we terminated our revolving credit facility under the credit agreement dated April 12, 2011, as amended, (the “2011 Credit Agreement”) with the outstanding borrowings under the 2011 Credit Agreement at the date of its termination rolled over to the Credit Agreement. On March 1, 2024, we entered into an amendment (the “Revolver Amendment”) to our Credit Agreement, which governs the Company’s existing revolving credit facility (the revolving credit facility as amended by the Revolver Amendment, the “Amended Revolving Credit Facility”). Among other things, the Revolver Amendment (i) increased the aggregate commitments under the Amended Revolving Credit Facility to $825.0 million from $620 million under the Revolving Credit Facility, (ii) increased the maximum leverage ratio permitted under the financial covenants applicable to the Amended Revolving Credit Facility and (iii) included an additional pricing level that will increase the applicable interest rate margins on the Amended Revolving Credit Facility to 250 basis points (in the case of secured overnight financing rate (“SOFR”)) and 150 basis points (in the case of Base Rate loans) if our adjusted total debt to EBITDA ratio exceeds 3.75:1.00. Under certain circumstances, we may request an increase to the lending commitments under the Credit Agreement by an aggregate amount of up to $300 million, not to exceed $1,125 million in total. The Credit Agreement expires on December 14, 2027. Borrowings under the Credit Agreement bear interest at an applicable variable rate based on SOFR plus 112.5 to 250 basis points based on certain financial measurements plus 10 basis points if a SOFR loan, or at the offered fluctuating Base Rate plus 12.5 to 150 basis points based on certain financial measurements if a Base Rate loan. Borrowings outstanding under the Amended Revolving Credit Facility at May 31, 2026 were $200.0 million and there were approximately $10.5 million of outstanding letters of credit, which reduced the availability of this facility to $614.5 million. Our Credit Agreement requires us to comply with leverage and interest coverage ratios and comply with certain affirmative and negative covenants, including those relating to financial reporting and notification, compliance with applicable laws, and limitations on additional liens, indebtedness, acquisitions, investments and disposition of assets. Our Credit Agreement also requires our significant domestic subsidiaries to provide a guarantee of payment under the Credit Agreement. Senior Notes - Original Issuance On March 1, 2024, we issued $550.0 million aggregate principal amount of 6.75% Senior Notes due 2029 (the “Notes”) to fund a portion of the purchase price for the acquisition of the Product Support business. The Notes were issued pursuant to an indenture (the “Base Indenture”), dated as of March 1, 2024, between us and Wilmington Trust, National Association (the “Trustee”), as trustee, and 68 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ a First Supplemental Indenture, dated as of March 1, 2024 (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”), among us, the Note Guarantors (as defined below) and the Trustee. Our domestic subsidiaries that guarantee the Amended Revolving Credit Facility (collectively, the “Note Guarantors”) guaranteed (the “Note Guarantees”) all of the Company’s obligations under the Notes and the Indenture. The Notes and the Note Guarantees have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”). The Notes bear interest at a rate of 6.75% per year, payable semiannually in cash in arrears on March 15 and September 15 of each year, commencing September 15, 2024. The Notes will mature on March 15, 2029. The Company may redeem the Notes, in whole or in part, at specified redemption prices if redeemed during the twelve-month period beginning on March 15 of the years indicated below: ​ ​ ​ ​ ​ 2026 ​ ​ ​ 103.375 % 2027 101.688 % 2028 and thereafter 100.000 % ​ The Notes are jointly and severally guaranteed by each of the Note Guarantors. The Notes and the Note Guarantees are the general unsecured obligations of us or each of the Note Guarantors and, as applicable, (i) rank equal in right of payment to all of our or such Note Guarantor’s existing and future senior indebtedness, (ii) rank senior in right of payment to all of our or such Note Guarantor’s obligations that are, by their terms expressly subordinated in right of payment to the Notes or the Note Guarantees, (iii) are effectively subordinated to all of our or such Note Guarantor’s secured indebtedness, to the extent of the value of the assets securing such indebtedness and (iv) in the case of the Note Guarantees, are structurally subordinated to indebtedness and other liabilities of our subsidiaries that are not Note Guarantors. The Indenture contains customary covenants, including limitations on the ability of us and our restricted subsidiaries to (i) incur debt, certain disqualified stock and preferred stock, (ii) create liens, (iii) pay dividends or distributions or redeem or repurchase equity, (iv) prepay subordinated debt or make certain investments, (v) transfer and sell assets, (vi) engage in consolidations, mergers or dispositions of all or substantially all of our or their assets, (vii) enter into agreements that restrict dividends, loans and other distributions from subsidiaries and (viii) enter into transactions with affiliates. These covenants are subject to a number of important exceptions and qualifications described in the Indenture. In addition, the Indenture contains a number of customary events of default, including, among other things, payment default, failure to comply with covenants or agreements contained in the Indenture or the Notes and certain provisions related to bankruptcy events. Senior Notes – Subsequent Issuance On August 14, 2025, we issued an additional $150.0 million aggregate principal amount of our Notes (the “Additional Notes”). The Additional Notes were issued under the existing Indenture and other than with respect to the date of issuance and the offering price, the Additional Notes have the same terms as the Notes. Debt issuance costs of $2.5 million were incurred in connection with the Additional Notes which were issued at an original issuance premium of 102% of their principal amount, or $3.0 million. The premium and debt issuance costs are amortized and recognized as interest expense using the effective interest rate method, or, when the results are not materially different, on a straight-line basis over the expected term of the related debt. The premium and debt issuance costs are classified within Long-term debt on our Consolidated Balance Sheet and are amortized into interest expense over the contractual term of the Notes. At May 31, 2026, our variable and fixed rate debt had a fair value that approximates their carrying values and is classified as Level 3 in the fair value hierarchy as their fair values are determined based upon one or more significant unobservable inputs. At May 31, 2026, we were in compliance with the financial and other covenants in our financing agreements. 69 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Borrowing activity under the Credit Agreement during fiscal 2026, 2025, and 2024 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Maximum amount borrowed ​ $ 650.0 ​ $ 617.0 ​ $ 577.0 ​ Average daily borrowings ​ 394.5 ​ 527.5 ​ 386.3 ​ Average interest rate during the year ​ 5.80 % 6.54 % 6.69 % ​ We also have $9.9 million available under foreign lines of credit as of May 31, 2026. Total interest paid during fiscal 2026, 2025, and 2024 was $71.7 million, $74.4 million, and $31.9 million, respectively. 6. Equity Common Stock Offering During the second quarter of fiscal 2026, we sold 3,450,000 shares of our common stock at $83.00 per share in a registered underwritten offering. After deducting underwriting fees and other offering expenses, we received $273.9 million in net proceeds. Stock-Based Compensation We grant stock-based awards under the AAR CORP. 2013 Stock Plan, as Amended and Restated Effective July 13, 2020 (the “2013 Stock Plan”) which has been approved by our stockholders. Under the 2013 Stock Plan, we are authorized to issue stock options to employees and non-employee directors that allow the grant recipients to purchase shares of common stock at a price not less than the fair market value of the common stock on the date of grant. Generally, stock options awarded expire ten years from the date of grant and are exercisable in three annual increments commencing one year after the date of grant. In addition to stock options, the 2013 Stock Plan also provides for the grant of time-based restricted stock awards and performance-based restricted stock awards. The 2013 Stock Plan also provides for the grant of stock appreciation units and restricted stock units; however, to date, no such awards have been granted. Restricted stock grants (whether time-based or performance-based) are designed, among other things, to align employee interests with the interests of stockholders and to encourage the recipient to build a career with us. Restricted stock typically vests over periods of one to three years from the date of grant. Restricted stock grants may be performance-based with vesting to generally occur over a period of three years. All restricted stock that has been granted and, if performance-based, earned according to performance criteria carries full dividend and voting rights, regardless of whether it has vested. Substantially all stock options and restricted stock are subject to forfeiture prior to vesting if the employee’s employment terminates for any reason other than death, disability or retirement. Under the 2013 Stock Plan, we have granted a total of 7,182,579 shares, and there were 1,102,614 shares available for grant as of May 31, 2026. Stock Options During fiscal 2026, 2025, and 2024, we granted stock options with respect to 160,085 shares, 157,310 shares and 141,545 shares, respectively. The weighted average fair value per share of stock options granted during fiscal 2026, 2025 and 2024 was $28.99, $25.51 and $25.31, respectively. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model using the following weighted average assumptions: ​ 70 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock Options Granted In Fiscal Year ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Risk-free interest rate ​ 3.9 % 4.2 % 4.1 % Expected volatility of common stock 34.1 % 36.0 % 42.3 % Dividend yield 0.0 % 0.0 % 0.0 % Expected option term in years 4.8 ​ 4.9 ​ 5.1 ​ ​ The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on historical volatility of our common stock, and the expected option term represents the period of time that the stock options granted are expected to be outstanding based on historical exercise trends. The dividend yield represents our anticipated cash dividends at the grant date over the expected option term. A summary of stock option activity for the three years ended May 31, 2026 consisted of the following (shares in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2026 ​ 2025 ​ 2024 ​ ​ ​ ​ Weighted ​ ​ ​ Weighted ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ ​ Shares ​ ​ ​ Exercise Price ​ ​ ​ Shares ​ ​ ​ Exercise Price ​ ​ ​ Shares ​ ​ ​ Exercise Price Outstanding at beginning of year ​ 935 ​ $ 44.94 ​ 1,004 ​ $ 38.49 ​ 1,573 ​ $ 33.24 Granted 160 ​ ​ 80.17 157 ​ ​ 67.02 142 ​ ​ 58.27 Exercised (474) ​ ​ 40.42 (212) ​ ​ 29.81 (706) ​ ​ 30.67 Cancelled (27) ​ ​ 72.61 (14) ​ ​ 60.59 (5) ​ ​ 48.40 Outstanding at end of year 594 ​ $ 54.24 935 ​ $ 44.94 1,004 ​ $ 38.49 Options exercisable at end of year 318 ​ $ 39.94 635 ​ $ 38.13 696 ​ $ 33.95 ​ The weighted-average remaining term (in years) for options outstanding at the end of the year was 7.0 years, 6.1 years, and 6.4 years at May 31, 2026, 2025, and 2024, respectively. The weighted-average remaining term (in years) for options exercisable at the end of the year was 5.6 years, 5.0 years, and 5.5 years at May 31, 2026, 2025, and 2024, respectively. The total grant date fair value of stock options that vested during fiscal 2026, 2025, and 2024 was $3.5 million, $2.9 million, and $3.3 million, respectively. The total intrinsic value of stock options exercised during fiscal 2026, 2025, and 2024 was $26.3 million, $8.0 million, and $22.5 million, respectively. The aggregate intrinsic value of options outstanding was $31.4 million and $16.3 million as of May 31, 2026 and 2025, respectively. Expense recognized in Selling, general and administrative expenses for stock options during fiscal 2026, 2025, and 2024 was $3.7 million, $3.5 million, and $3.0 million, respectively. As of May 31, 2026, we had $4.1 million of unrecognized compensation expense related to stock options that will be expensed over an average period of 1.8 years. 71 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Restricted Stock We provide executives and other key employees an opportunity to be awarded performance-based and time-based restricted stock. The fair value of restricted shares is the market value of our common stock on the date of grant. The performance-based awards are contingent upon the achievement of certain objectives, which generally include cumulative income, average return on capital, and relative total shareholder return over a three-year performance period. Performance-based restricted shares of 180,125, 124,200, and 81,100 were granted to executives and key employees during fiscal 2026, 2025 and 2024, respectively. Time-based restricted shares of 82,596, 78,541, and 111,018 were granted to executives and key employees during fiscal 2026, 2025, and 2024, respectively. We also award time-based restricted stock to our non-employee directors as part of their annual compensation. Time-based restricted shares of 24,178, 19,401, and 23,888 were granted to members of the Board of Directors during fiscal 2026, 2025, and 2024, respectively. Restricted share activity during fiscal 2026 was as follows (shares in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ ​ Number of ​ Fair Value ​ ​ ​ ​ Shares ​ ​ ​ on Grant Date Nonvested at May 31, 2025 536 ​ $ 56.47 Granted 287 ​ ​ 68.05 Vested (268) ​ ​ 44.16 Forfeited (49) ​ ​ 68.93 Nonvested at May 31, 2026 506 ​ ​ 68.31 ​ Expense recognized in Selling, general and administrative expenses for all restricted share programs during fiscal 2026, 2025, and 2024 was $14.1 million, $16.4 million, and $12.3 million, respectively. As of May 31, 2026 we had $15.0 million of unearned compensation related to restricted shares that will be expensed over a weighted average period of 1.7 years. 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 related to outstanding stock options. At May 31, 2026 and 2025, respectively, outstanding options to purchase 4,000 shares of common stock and 151,000 shares of common stock were not included in the computation of diluted earnings per share, because the exercise price of these options was greater than the average market price of the common shares for the year then ended. At May 31, 2024, no stock options were determined to be anti-dilutive. Treasury Stock During fiscal 2026, treasury stock decreased $14.8 million reflecting the re-issuance of shares upon exercise of stock options, net of shares withheld to satisfy statutory tax obligations of $15.3 million partially offset by an increase from restricted stock activity of $0.5 million. During fiscal 2025, treasury stock increased $5.2 million reflecting the repurchase of 0.2 million common shares for $10.1 million and restricted stock activity of $1.7 million partially offset by re-issuance of shares upon exercise of stock options, net of shares withheld to satisfy statutory tax obligations, of $6.6 million. During fiscal 2024, treasury stock decreased $20.3 million reflecting the re-issuance of shares upon exercise of stock options, net of shares withheld to satisfy statutory tax obligations, of $21.7 million and restricted stock activity of $3.7 million partially offset by the repurchase of 0.1 million common shares for $5.1 million. ​ 72 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ 7. Income Taxes Our income tax expense includes the following components: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Current: ​ ​ ​ ​ ​ ​ ​ ​ ​ Federal ​ $ 37.6 ​ $ 20.7 ​ $ 21.0 State ​ 11.3 ​ 3.1 ​ 4.0 Foreign ​ 12.5 ​ 8.1 ​ 7.5 ​ ​ 61.4 ​ 31.9 ​ 32.5 Deferred ​ (3.2) ​ (5.5) ​ ​ (20.5) ​ ​ $ 58.2 ​ $ 26.4 ​ $ 12.0 ​ Income (Loss) before income tax expense includes the following components: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Domestic ​ $ 184.2 ​ $ (22.5) ​ $ 14.6 Foreign ​ 61.7 ​ 61.4 ​ 43.7 ​ ​ $ 245.9 ​ $ 38.9 ​ $ 58.3 ​ Our foreign earnings are comprised primarily of the results of our operations in Canada and Thailand. The Company adopted ASU 2023-09, Income Taxes (Topic 740) Improvements To Income Tax Disclosures, on a prospective basis beginning with the year ended May 31, 2026. The following table presents the required disclosure to reconcile the U.S. federal statutory income tax amount and rate to our effective amount and rate for the year ended May 31, 2026 pursuant to the new ASU: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ ​ ​ Percent Income tax expense at the U.S. federal statutory rate ​ $ 51.6 21.0 % State income taxes, net of federal benefit ​ 9.6 3.9 ​ Foreign tax effects ​ 0.1 — ​ Nontaxable or nondeductible items: ​ ​ ​ ​ Bargain purchase gain ​ (6.2) (2.5) ​ Compensation ​ 2.6 1.1 ​ Other ​ 1.9 0.8 ​ Tax benefit from stock-based compensation ​ (1.4) (0.6) ​ ​ ​ $ 58.2 23.7 % ​ State income taxes in Illinois and Florida comprise the majority (greater than 50%) of the tax effect of this category. 73 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ The following table presents the required disclosures prior to our adoption of new ASU and reconciles the U.S. federal statutory income tax rate of 21.0% to our effective income tax rate: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2025 ​ ​ ​ 2024 Income tax expense at the U.S. federal statutory rate ​ 21.0 % 21.0 % FCPA settlement 26.7 — ​ State income taxes, net of federal benefit 10.1 5.0 ​ Non-deductible compensation 7.1 4.4 ​ Tax benefit from stock-based compensation (1.7) (5.1) ​ Pension settlement — (8.6) ​ Other 4.7 3.9 ​ Effective income tax rate 67.9 % 20.6 % ​ The following table presents the required disclosure to present income taxes paid (net of refunds received) for the year ended May 31, 2026 pursuant to the new ASU: ​ ​ ​ ​ ​ U.S. federal taxes ​ ​ ​ $ 23.5 State taxes ​ 7.1 Foreign taxes: ​ ​ Canada ​ 12.1 Other foreign jurisdictions ​ 6.9 ​ ​ $ 49.6 ​ Income taxes paid (net of refunds received) during fiscal 2025 and 2024 was $23.7 million and $41.8 million, respectively. Income tax payable was $8.8 million at May 31, 2026 and was included in Other accrued liabilities on the Consolidated Balance Sheet. Income tax receivable was $5.6 million at May 31, 2025 and was included in Prepaid expenses and other current assets on the Consolidated Balance Sheet. 74 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Deferred tax assets and liabilities result primarily from the differences in the timing of the recognition of transactions for financial reporting and income tax purposes. Our deferred tax assets and liabilities consist of the following components: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 Deferred tax assets: ​ ​ ​ ​ ​ ​ Operating lease liabilities ​ $ 26.8 ​ $ 25.4 Employee and retirement benefits ​ ​ 10.4 ​ ​ 8.9 Inventory ​ ​ 9.4 ​ ​ — State net operating losses ​ ​ 7.3 ​ ​ 6.4 Other ​ 4.0 ​ 8.2 Total deferred tax assets ​ ​ 57.9 ​ ​ 49.0 Valuation allowance ​ ​ (1.8) ​ ​ (0.1) Total deferred tax assets net of valuation allowance ​ ​ 56.1 ​ ​ 48.9 Deferred tax liabilities: ​ ​ ​ ​ ​ ​ ROU operating lease assets ​ ​ (34.9) ​ ​ (25.8) Intangible assets ​ ​ (33.9) ​ ​ (32.2) Tangible assets ​ ​ (7.5) ​ ​ (5.0) Other ​ (2.9) ​ (4.3) Total deferred tax liabilities ​ ​ (79.2) ​ ​ (67.3) Net deferred tax liabilities ​ $ (23.1) ​ $ (18.4) ​ Our net operating losses have carry forward periods that range from 5 to 20 years. Our history of operating earnings, our expectations for continued future earnings, the nature of certain of our deferred tax assets and the scheduled reversal of deferred tax liabilities, primarily related to depreciation, support the recoverability of the majority of the deferred tax assets. Our federal income tax returns for fiscal years 2023 and subsequent are open for examination. Various states and foreign jurisdictions also remain open subject to their applicable statute of limitations. ​ 8. Employee Benefit Plans Defined Benefit Plans Prior to January 1, 2000, the pension plan for substantially all domestic salaried and non-union hourly employees (“U.S. Retirement Plan”) had a benefit formula based primarily on years of service and compensation. Effective January 1, 2000, we converted the U.S. Retirement Plan to a cash balance pension plan with the retirement benefit expressed as a dollar amount in an account that grew with annual pay-based credits and interest on the account balance. Effective June 1, 2005, the U.S. Retirement Plan was frozen and the annual pay-based credits were discontinued. Prior to May 31, 2022, our domestic plans also include a defined benefit pension plan for certain union hourly employees in which benefits are based primarily on a fixed amount per year of service (“Union Plan”). The Union Plan was frozen in fiscal 2018. Effective May 31, 2022, our Union and U.S. Retirement Plans were merged (collectively, the “Merged U.S. Plan”). During the three-month period ended August 31, 2023, we settled all future obligations under the Merged U.S. Plan. The settlement included a combination of lump-sum payments to participants who elected to receive them and the transfer of the remaining benefit obligations to a third-party insurance company under group annuity contracts. The purchase of the group annuity contracts was funded directly by assets of the Merged U.S. Plan and required no additional cash or asset contributions from us. As a result of the settlements, we recognized a non-cash, pre-tax pension settlement charge of $26.7 million ($16.1 million after-tax) related to the accelerated recognition of all unamortized net actuarial losses in Accumulated other comprehensive loss. Surplus plan assets of $7.6 million remained after the settlement. In fiscal 2026, we utilized the remaining surplus assets to fund our non-elective, discretionary contributions to the 401(k) plan. 75 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ We also have a defined benefit pension plan covering certain employees in the Netherlands (“Netherlands Plan”). Benefit formulas are generally based on years of service and compensation. Effective January 1, 2022, the Netherlands Plan was frozen and any benefits subsequent to that date are earned by participants in a multi-employer defined contribution plan with the premiums charged to us determined by the third-party pension fund who administers the multi-employer plan. Pension expense in fiscal 2026, 2025, and 2024 for this defined contribution plan was $2.0 million, $1.4 million, and $1.3 million, respectively. The change to our projected benefit obligation and the fair value of our plan assets for our Netherlands plan for the years ended May 31, 2026 and 2025 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 Change in projected benefit obligation: ​ ​ ​ ​ ​ ​ Projected benefit obligation at beginning of year ​ $ 53.8 ​ $ 52.7 Service cost ​ 0.2 ​ ​ 0.2 Interest cost ​ 2.0 ​ ​ 1.9 Net actuarial gain ​ (3.8) ​ ​ (1.1) Benefits and administrative payments ​ (2.4) ​ ​ (2.2) Foreign currency translation adjustment ​ 1.5 ​ ​ 2.3 Projected benefit obligation at end of year ​ $ 51.3 ​ $ 53.8 ​ ​ ​ ​ ​ ​ ​ Change in the fair value of plan assets: ​ ​ ​ ​ ​ ​ Fair value of plan assets at beginning of year ​ $ 53.6 ​ $ 51.4 Actual return on plan assets ​ 0.8 ​ ​ 1.7 Benefits and administrative payments ​ (2.4) ​ ​ (2.2) Employer contributions ​ ​ 0.2 ​ ​ 0.4 Foreign currency translation adjustment ​ 1.5 ​ ​ 2.3 Fair value of plan assets at end of year ​ $ 53.7 ​ $ 53.6 Funded status at end of year ​ $ 2.4 ​ $ (0.2) Accumulated other comprehensive loss ​ $ 4.9 ​ $ 6.8 Accumulated benefit obligation ​ ​ 49.9 ​ ​ 51.8 ​ The funded status of our Netherlands plan as of May 31, 2026 and 2025 is recognized in Other non-current assets and Other liabilities, respectively, on our Consolidated Balance Sheets. Net Periodic Benefit Cost Pension benefit charged to the Consolidated Statements of Income for our Netherlands plan includes the following components: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Service cost ​ $ 0.2 ​ $ 0.2 ​ $ 0.2 Interest cost ​ 2.0 ​ ​ 1.9 ​ 1.9 Expected return on plan assets ​ (2.6) ​ ​ (2.5) ​ (2.4) Recognized net actuarial loss ​ — ​ ​ 0.1 ​ — ​ ​ $ (0.4) ​ $ (0.3) ​ $ (0.3) ​ The non-service cost components above are classified in Other expense, net on the Consolidated Statements of Income. 76 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Assumptions The assumptions used in accounting for the Netherlands Plan are estimates of factors including, among other things, the amount and timing of future benefit payments. The discount rate was determined by discounting the expected future benefit payments and settlements for the projected benefit obligation, discounting those expected payments using a theoretical zero-coupon spot yield curve derived from a universe of high-quality bonds as of the measurement date and solving for the single equivalent discount rate that resulted in the same projected benefit obligation. The discount rate assumptions used in the measurement of the Netherlands projected benefit obligations were 4.30% and 3.70% at May 31, 2026 and 2025, respectively. The discount rate assumptions used to determine the Netherlands Plan net periodic pension expense were 3.70%, 3.60%, and 3.70% for fiscal 2026, 2025, and 2024, respectively. The expected long-term rate of return on Netherlands Plan assets were 4.80%, 4.80%, and 4.80% for fiscal 2026, 2025, and 2024, respectively. Plan Assets The assets of the Netherlands Plan are primarily invested in funds-of-funds where each fund holds a portfolio of equity and fixed income mutual funds. To develop our expected rate of return assumption, we use long-term historical return information for our targeted asset mix and current market conditions as of the measurement date. The expected return for each asset class is weighted based on the target asset allocation to develop the expected long-term rate of return on plan assets assumption. The following table sets forth by level, within the fair value hierarchy, the Netherlands Plan assets at their fair value as of May 31, 2026: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Level 2(1) ​ ​ ​ Level 3(2) ​ ​ ​ Total Funds-of-funds ​ $ 42.1 ​ $ — ​ $ 42.1 Insurance annuities ​ ​ — ​ ​ 11.6 ​ ​ 11.6 ​ ​ $ 42.1 ​ $ 11.6 ​ $ 53.7 ​ The following table sets forth by level, within the fair value hierarchy, the Netherlands Plan assets at their fair value as of May 31, 2025: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Level 2(1) ​ ​ ​ Level 3(2) ​ ​ ​ Total Funds-of-funds ​ $ 42.2 ​ $ — ​ $ 42.2 Insurance annuities ​ ​ — ​ ​ 11.4 ​ ​ 11.4 ​ ​ $ 42.2 ​ $ 11.4 ​ $ 53.6 (1) Inputs other than quoted prices in active markets for identical assets that are directly observable for the asset or indirectly observable through corroboration with observable market data. (2) Unobservable inputs, such as internally developed pricing models or third party valuations for the asset due to little or no market activity for the asset. The entirety of the change in Level 3 pension assets is attributable to the return on the assets. Valuation Techniques Used to Determine Fair Value Equity and fixed income mutual funds are maintained by investment companies that hold certain investments in accordance with a stated set of fund objectives, which are consistent with our overall investment strategy. The values of some of these funds are publicly quoted. As certain of our funds-of-funds investments are also derived from quoted prices in active markets, we have categorized certain funds-of-funds investments as Level 2. 77 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Insurance annuities require the utilization of unobservable inputs, including undiscounted cash flow techniques which results in Level 3 treatment in the fair value hierarchy. Future Benefit Payments and Funding The following table summarizes our estimated future pension payments by fiscal year: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2032 to ​ ​ ​ ​ 2027 ​ ​ ​ 2028 ​ ​ ​ 2029 ​ ​ ​ 2030 ​ ​ ​ 2031 ​ ​ ​ 2036 Estimated future pension payments ​ $ 2.4 ​ $ 2.5 ​ $ 2.5 ​ $ 2.6 ​ $ 2.5 ​ $ 13.9 ​ For our Netherlands Plan, our policy is to fund at least the minimum amount required by the local laws and regulations. We anticipate contributing approximately $0.2 million to our pension plans during fiscal 2027. U.S. Defined Contribution Plans Our U.S. defined contribution plans are intended to qualify as 401(k) plans under the Internal Revenue Code. Employees may contribute up to 75% of their pretax compensation, subject to applicable regulatory limits and we may make matching contributions up to 6% of employee compensation. For participants hired prior to January 1, 2020, retirement contributions (based upon a participant’s age plus service) ranging from 0.5% to 4.0%, may also be contributed to a participant’s account at our discretion. Our contributions vest on a pro-rata basis during the first three years of employment. Expense recognized in the Consolidated Statements of Income for our matching contributions during fiscal 2026, 2025, and 2024 was $8.3 million, $9.4 million, and $8.2 million, respectively. Expense recognized in the Consolidated Statements of Income for our non-elective, discretionary contributions during fiscal 2026, 2025, and 2024 was $3.9 million, $3.9 million, and $3.7 million, respectively. We also maintain a non-qualified retirement plan that makes up 401(k) benefits that would otherwise be lost as a result of Internal Revenue Code limits and provides additional employer contributions for certain executives and key employees to supplement the benefits provided by the defined contribution plans. Expense recognized in the Consolidated Statements of Income for the non-qualified contributions during fiscal 2026, 2025, and 2024 was $0.4 million, $1.7 million, and $1.2 million, respectively. 9. Accumulated Other Comprehensive Loss Changes in our accumulated other comprehensive loss (“AOCL”) by component for each of the years in the three-year period ended May 31, 2026 were as follows (all amounts are net of tax): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Currency ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Translation ​ ​ ​ ​ ​ ​ Adjustments ​ Pension Plans ​ Total Balance as of June 1, 2023 ​ $ (5.7) ​ $ (17.8) ​ $ (23.5) Other comprehensive loss before reclassifications ​ 0.2 ​ ​ (0.3) ​ ​ (0.1) Amounts reclassified from AOCL ​ — ​ ​ 14.8 ​ ​ 14.8 Total other comprehensive loss ​ 0.2 ​ ​ 14.5 ​ ​ 14.7 Balance as of May 31, 2024 ​ (5.5) ​ ​ (3.3) ​ ​ (8.8) Other comprehensive income (loss) before reclassifications ​ 3.1 ​ ​ 0.3 ​ ​ 3.4 Amounts reclassified from AOCL ​ — ​ ​ (0.2) ​ ​ (0.2) Total other comprehensive income ​ 3.1 ​ ​ 0.1 ​ ​ 3.2 Balance as of May 31, 2025 ​ ​ (2.4) ​ ​ (3.2) ​ ​ (5.6) Other comprehensive income before reclassifications ​ 0.3 ​ ​ 1.4 ​ ​ 1.7 Total other comprehensive income ​ 0.3 ​ ​ 1.4 ​ ​ 1.7 Balance as of May 31, 2026 ​ $ (2.1) ​ $ (1.8) ​ $ (3.9) ​ 78 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ ​ 10. Other Non-current Assets At May 31, 2026 and 2025, other non-current assets consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 Investments in joint ventures ​ $ 49.0 ​ $ 32.3 Contract assets ​ ​ 42.9 ​ ​ 28.4 License fees, net ​ ​ 41.2 ​ ​ 46.0 Assets under deferred compensation plan ​ 26.1 ​ 23.4 Debt and equity investments ​ ​ 13.6 ​ ​ 14.5 Other ​ 21.1 ​ 14.8 ​ ​ $ 193.9 ​ $ 159.4 ​ Investment in Indian Joint Venture Our investments in joint ventures previously included a 40% ownership interest in a joint venture in India to operate an airframe maintenance facility. We had also guaranteed 40% of the Indian joint venture’s debt and each of the partners in the Indian joint venture had a loan to the joint venture proportionate to its equity ownership. During the first quarter of fiscal 2025, we executed a Share Purchase Agreement with our Indian joint venture partners whereby we agreed to sell our equity to those partners for $0.1 million conditional on the repayment of our loan and the release of our guarantee of the Indian joint venture’s debt. During the first quarter of fiscal 2025, we were released from our debt guarantee obligations and de-recognized the related $9.4 million guarantee liability. In the second quarter of fiscal 2025, we received $2.1 million reflecting the principal value of our shareholder loan. In conjunction with these transactions, the Share Purchase Agreement, and transition services arrangements, we recognized a gain of $2.1 million during fiscal 2025. Investment in AAR Sumisho Aviation Services (ASAS) Our investments in joint ventures include a 50% ownership interest in a joint venture to provide aviation aftermarket supply chain solutions to Japanese defense and global commercial markets. Each of the partners in the ASAS joint venture have provided financial guarantees to third - parties to guarantee the payments for ASAS’s financing arrangements, including inventory purchases. No liabilities have been recognized on the outstanding guarantees. We are unable to estimate our maximum exposure under these guarantees as they are largely dependent on the volume of inventory purchase orders outstanding. Our sales to the ASAS joint venture, including service fees earned by us on providing support to the ASAS joint venture, were $15.4 million, $7.4 million, and $4.9 million for fiscal 2026, 2025, and 2024, respectively. Investments in Aircraft Joint Ventures Under the terms of servicing agreements with certain of our aircraft joint ventures, we provide administrative services and technical advisory services, including aircraft evaluations, oversight and logistical support of the maintenance process and records management. We also provide evaluation and inspection services prior to the purchase of an aircraft and remarketing services with respect to the divestiture of aircraft by the joint ventures. During fiscal 2026, 2025, and 2024, we were paid $4.1 million, $2.1 million, and $1.6 million, respectively, for such services. 79 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Investment in xCelle Americas, LLC (“xCelle”) Our investments in joint ventures include a 49.9% ownership interest in a joint venture to provide component repair services including overhaul of nacelles on next generation aircraft. In March 2025, we provided a loan to xCelle for $3.3 million with semi-annual principal payments over the five-year term of the loan. Interest is payable semi-annually at SOFR plus 2.7%. Investment in xCelle Asia Joint Venture In December 2025, we invested $7.1 million for a 49.9% interest in xCelle Asia Limited (“xCelle Asia JV”) based in Thailand. The xCelle Asia JV operations include nacelle MRO services, including on-wing and on-site inspections and rotable support for next generation aircraft nacelles. ​ 11. Leases We lease land, facilities, offices, vehicles, and equipment. We determine at inception whether an arrangement that provides us control over the use of an asset is a lease. ROU assets and lease liabilities are recognized on the Consolidated Balance Sheets at lease commencement date based on the present value of the future minimum lease payments over the lease term. Our lease agreements do not provide a readily determinable implicit rate nor is it available to us from our lessors. We estimate our incremental borrowing rate based on information available at lease commencement in order to discount lease payments to present value. Our lease costs are allocated over the remaining lease term on a straight-line basis unless another systematic or rational basis is more representative of the pattern in which the underlying asset is expected to be used. Variable lease costs are expensed in the period in which the obligation for those payments are incurred. ROU assets are evaluated for impairment in a manner consistent with the treatment of other long-lived assets. We elected the practical expedients to not separate lease and non-lease components for both lessee and lessor relationships and to not apply the recognition requirements to leases with terms of twelve months or less. Certain leases include options to renew or extend the terms of the lease, which are included in the determination of the ROU assets and lease liabilities when it is reasonably certain that the option will be exercised. Our leases may also include variable lease payments such as escalation clauses based on consumer price index rates, maintenance costs and utilities. Variable lease payments that depend on an index or a rate are included in the determination of ROU assets and lease liabilities using the index or rate at the lease commencement date, whereas variable lease payments that do not depend on an index or rate are recorded as lease expense in the period incurred. Our lease agreements do not contain any significant residual value guarantees or restrictive covenants. The summary of our operating lease cost is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Operating lease cost ​ $ 42.4 ​ $ 28.0 ​ $ 23.9 Short-term lease cost ​ 5.3 ​ 6.0 ​ 6.6 Variable lease cost ​ 13.0 ​ 5.9 ​ 5.4 ​ ​ $ 60.7 ​ $ 39.9 ​ $ 35.9 ​ 80 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ With the exception of land leases for certain airframe maintenance facilities that expire in 2122 and 2108, our operating leases expire at various dates through 2061. Maturities of our operating lease payments as of May 31, 2026 are as follows: ​ ​ ​ ​ 2027 ​ ​ ​ $ 22.8 2028 ​ ​ 18.9 2029 ​ 13.8 2030 ​ 10.6 2031 ​ 9.4 Thereafter ​ 152.3 Total undiscounted payments ​ 227.8 Less: Imputed interest ​ 109.7 Present value of minimum lease payments ​ 118.1 Less: Operating lease liabilities – current ​ (17.0) Operating lease liabilities – non-current ​ $ 101.1 ​ The current portion of operating lease liabilities are presented within Other accrued liabilities on our Consolidated Balance Sheets. Our weighted-average remaining lease term and weighted-average discount rate are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ 2026 ​ ​ ​ 2025 Remaining lease term 14.7 years 11.9 years Discount rate 7.4% ​ 6.9% ​ Supplemental cash flow information related to leases was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Cash paid for amounts included in the measurement of lease liabilities ​ $ 40.1 ​ $ 15.9 ​ $ 16.4 Operating lease liabilities arising from obtaining ROU assets ​ 58.4 ​ 21.7 ​ 42.0 ​ As of May 31, 2026, we have additional future payments on a lease for our new Corporate headquarters that has not yet commenced of approximately $31 million. This lease is expected to commence in late fiscal 2027 and has a lease term of approximately 15 years. 12. Commitments We enter into purchase obligations, which arise in the ordinary course of business and represent a binding commitment to acquire inventory, including raw materials, parts and components, as well as equipment to support the operations of our business. The aggregate amount of purchase obligations due in each of the next five fiscal years is $798.8 million in 2027, $275.5 million in 2028, $71.5 million in 2029, $9.5 million in 2030 and $1.3 million in 2031. We routinely issue letters of credit and performance bonds in the ordinary course of our business. These instruments are typically issued in conjunction with insurance contracts or other business requirements. The total of these instruments outstanding at May 31, 2026 was approximately $10.5 million. ​ 81 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ 13. Government Subsidies We receive grants from certain governments in exchange for compliance with certain conditions relating to our activities in a specific jurisdiction. Grants can be structured to encourage investment, job creation, job retention, employee training, and other related activities. We recognize government grants when there is reasonable assurance that we will comply with the conditions of the grant and the grant is received or is probable of receipt and the amount is determinable. Government grants are recorded as a reduction to the related expense to which the grant relates in our Consolidated Statement of Income. We have multiple government grants that are used to support job training and workforce development costs primarily at our Airframe MRO facilities. For these grants, we recognized contra-expense within Cost of sales and Selling, general and administrative expenses of $1.5 million and $0.3 million, respectively, in fiscal 2026. In fiscal 2025, we recognized contra-expense within Cost of sales and Selling, general and administrative expenses of $1.9 million and $0.6 million, respectively. In fiscal 2024, we recognized contra-expense within Cost of sales and Selling, general and administrative expenses of $1.5 million and $0.2 million, respectively. ​ 14. Divestitures Sale of Landing Gear Overhaul Business On December 19, 2024, we entered into an agreement to divest our LGO business to GA Telesis for $51 million subject to post-closing adjustments for working capital, cash, and debt. In the third quarter of fiscal 2025, the LGO assets and liabilities were reclassified to assets and liabilities held for sale and we recognized a non-cash, pre-tax impairment charge of $63.0 million to adjust the carrying value of the LGO assets to their estimated fair value. Goodwill of $14.6 million was also reclassified to assets held for sale and was included in the determination of the impairment charge. The LGO business was reported within our Repair, Engineering, and Software segment. The divestiture did not represent a strategic shift that will have a major effect on our operations and financial results and, therefore, did not qualify for presentation as discontinued operations. The sale closed in the fourth quarter of fiscal 2025 with net proceeds received of $48.0 million. We recognized $6.6 million of additional loss on the sale resulting from purchase price adjustments in the fourth quarter of fiscal 2025. ​ 15. Business Segment Information Our operating segments are comprised of: ● Parts Supply, primarily consisting of distribution of new parts and sales of used serviceable material, including aircraft, engine and airframe parts and components; ● Repair, Engineering, and Software primarily consists of Airframe MRO, Component MRO, and our software platforms, including Trax, Aerostrat, Airvoyant, and Airinmar; ● Government Solutions primarily consists of our fleet management and operations of customer-owned aircraft, customized performance-based supply chain logistics programs in support of the DoW, the DoS and foreign governments and the engineering, design, integration, manufacture, and repair of pallets, shelters, and containers; and ● Legacy Commercial Programs primarily consists of asset-heavy flight hour-based component repair programs for commercial airlines and distribution of consumables and expendables (“C&E”) inventory. Our CODM is our Chief Executive Officer and he evaluates performance on our operating segments using operating income as the primary profitability measure. Our operating segments are aligned principally around differences in products and services and are consistent with how our CODM allocates resources, assesses performance, and makes decisions. 82 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ We have not aggregated operating segments for purposes of identifying reportable segments. Inter-segment sales are recorded at fair value which results in intercompany profit on inter-segment sales that is eliminated in consolidation. Corporate selling, general and administrative expenses include centralized functions such as legal, finance, treasury and human resources with a portion of the costs allocated to our operating segments. Significant expenses for each segment are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, 2026 ​ ​ ​ ​ ​ ​ ​ ​ Selling, ​ Other ​ ​ ​ ​ ​ ​ ​ ​ Cost of ​ General and ​ Segment ​ Operating ​ ​ ​ ​ Sales ​ ​ ​ Sales ​ ​ ​ Administrative ​ ​ ​ Items ​ ​ ​ Income Parts Supply ​ $ 1,487.7 ​ $ 1,192.9 ​ $ 116.0 ​ $ (7.4) ​ $ 186.2 Repair, Engineering, and Software ​ ​ 1,080.8 ​ 862.8 ​ 132.7 ​ 0.7 ​ 84.6 Government Solutions ​ ​ 502.3 ​ ​ 405.8 ​ ​ 39.8 ​ ​ — ​ ​ 56.7 Legacy Commercial Programs ​ ​ 237.2 ​ 224.3 ​ 13.2 ​ (0.3) ​ — ​ ​ $ 3,308.0 ​ $ 2,685.8 ​ $ 301.7 ​ $ (7.0) ​ $ 327.5 Corporate and other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (49.7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 277.8 Bargain purchase gain ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 29.5 Gain on sale of headquarters building ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9.8 Gain related to sale and exit of business ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1.4 Other expense, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (2.1) Interest expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (72.1) Interest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1.6 Income before income taxes ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 245.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, 2025 ​ ​ ​ ​ ​ ​ ​ ​ Selling, ​ Other ​ ​ ​ ​ ​ ​ ​ Cost of ​ General and ​ Segment ​ Operating ​ ​ ​ ​ Sales ​ ​ ​ Sales ​ ​ ​ Administrative ​ ​ ​ Items ​ ​ ​ Income Parts Supply ​ $ 1,099.6 ​ $ 868.8 ​ $ 76.2 ​ $ (2.2) ​ $ 156.8 Repair, Engineering, and Software ​ 931.0 ​ 724.9 ​ 124.8 ​ (2.7) ​ 84.0 Government Solutions ​ ​ 495.4 ​ ​ 424.1 ​ ​ 36.2 ​ ​ — ​ ​ 35.1 Legacy Commercial Programs ​ 254.5 ​ 232.5 ​ 13.2 ​ 0.2 ​ 8.6 ​ ​ $ 2,780.5 ​ $ 2,250.3 ​ $ 250.4 ​ $ (4.7) ​ $ 284.5 Corporate and other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (99.3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 185.2 Losses related to sale and exit of businesses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (72.4) Other expense, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (0.3) Interest expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (75.4) Interest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1.8 Income before income taxes ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 38.9 ​ 83 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended May 31, 2024 ​ ​ ​ ​ ​ ​ Selling, ​ Other ​ ​ ​ ​ ​ ​ Cost of ​ General and ​ Segment ​ Operating ​ ​ ​ ​ Sales ​ ​ ​ Sales ​ ​ ​ Administrative ​ ​ ​ Items ​ ​ ​ Income Parts Supply ​ $ 967.0 ​ ​ ​ $ 758.4 ​ ​ ​ $ 98.3 ​ $ 0.5 ​ ​ ​ $ 109.8 Repair, Engineering, and Software ​ 681.3 ​ 534.7 ​ 99.1 ​ ​ (0.4) ​ 47.9 Government Solutions ​ ​ 451.7 ​ ​ 386.9 ​ ​ 40.6 ​ ​ (0.6) ​ ​ 24.8 Legacy Commercial Programs ​ 218.9 ​ 196.8 ​ 15.0 ​ ​ (0.1) ​ 7.2 ​ ​ $ 2,318.9 ​ $ 1,876.8 ​ $ 253.0 ​ $ (0.6) ​ $ 189.7 Corporate and other ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (60.5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 129.2 Pension settlement charge ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (26.7) Gain related to sale and exit of businesses, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (2.8) Other expense, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (0.4) Interest expense ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (43.2) Interest income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2.2 Income before income taxes ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 58.3 ​ Selected financial information for each segment is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, 2026 ​ ​ Third-Party ​ ​ ​ Inter-segment ​ ​ ​ Total ​ ​ Sales ​ Sales ​ Sales Parts Supply ​ $ 1,487.7 ​ $ 32.6 ​ $ 1,520.3 Repair, Engineering, and Software ​ 1,080.8 ​ 72.7 ​ 1,153.5 Government Solutions ​ 502.3 ​ 4.2 ​ 506.5 Legacy Commercial Programs ​ 237.2 ​ 3.7 ​ 240.9 ​ ​ $ 3,308.0 ​ $ 113.2 ​ $ 3,421.2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, 2025 ​ ​ Third-Party ​ ​ ​ Inter-segment ​ ​ ​ Total ​ ​ Sales ​ Sales ​ Sales Parts Supply ​ $ 1,099.6 ​ $ 19.8 ​ $ 1,119.4 Repair, Engineering, and Software ​ 931.0 ​ 90.2 ​ 1,021.2 Government Solutions ​ 495.4 ​ 1.3 ​ 496.7 Legacy Commercial Programs ​ 254.5 ​ 0.5 ​ 255.0 ​ ​ $ 2,780.5 ​ $ 111.8 ​ $ 2,892.3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, 2024 ​ ​ Third-Party ​ ​ ​ Inter-segment ​ ​ ​ Total ​ ​ Sales ​ Sales ​ Sales Parts Supply ​ $ 967.0 ​ $ 8.6 ​ $ 975.6 Repair, Engineering, and Software ​ 681.3 ​ 87.7 ​ 769.0 Government Solutions ​ 451.7 ​ 0.9 ​ 452.6 Legacy Commercial Programs ​ 218.9 ​ — ​ 218.9 ​ ​ $ 2,318.9 ​ $ 97.2 ​ $ 2,416.1 ​ 84 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 Total assets: ​ ​ ​ ​ ​ ​ Parts Supply ​ $ 1,099.9 ​ $ 818.8 Repair, Engineering, and Software ​ ​ 1,598.2 ​ ​ 1,328.0 Government Solutions ​ ​ 282.8 ​ ​ 253.2 Legacy Commercial Programs ​ ​ 250.2 ​ ​ 273.8 Corporate and other ​ ​ 124.8 ​ ​ 170.8 ​ ​ $ 3,355.9 ​ $ 2,844.6 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Capital expenditures: ​ ​ ​ ​ ​ ​ ​ ​ ​ Parts Supply ​ $ 0.9 ​ $ 0.2 ​ $ 0.8 Repair, Engineering, and Software ​ ​ 25.6 ​ ​ 23.9 ​ ​ 14.2 Government Solutions ​ ​ 7.5 ​ ​ 8.7 ​ ​ 11.0 Legacy Commercial Programs ​ ​ — ​ ​ 0.1 ​ ​ 0.4 Corporate and other ​ ​ 2.6 ​ ​ 1.8 ​ ​ 3.3 ​ ​ $ 36.6 ​ $ 34.7 ​ $ 29.7 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Depreciation and amortization:1 ​ ​ ​ ​ ​ ​ ​ ​ ​ Parts Supply ​ $ 24.0 ​ $ 9.7 ​ $ 8.4 Repair, Engineering, and Software ​ ​ 35.7 ​ ​ 32.5 ​ ​ 17.3 Government Solutions ​ ​ 7.1 ​ ​ 6.4 ​ ​ 3.8 Legacy Commercial Programs ​ ​ 7.2 ​ ​ 7.5 ​ ​ 10.0 Corporate ​ ​ 15.9 ​ ​ 19.0 ​ ​ 16.0 ​ ​ $ 89.9 ​ $ 75.1 ​ $ 55.5 1 Includes amortization of stock-based compensation. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Earnings (Loss) from joint ventures: ​ ​ ​ ​ ​ ​ Parts Supply ​ $ 7.3 ​ $ 2.0 ​ $ (0.5) Repair, Engineering, and Software ​ (0.1) ​ 3.4 ​ 0.3 ​ ​ $ 7.2 ​ $ 5.4 ​ $ (0.2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ 2026 ​ ​ ​ 2025 Investments in joint ventures: ​ ​ ​ ​ Parts Supply ​ $ 15.8 ​ $ 8.4 Repair, Engineering, and Software ​ 33.2 ​ 23.9 ​ ​ $ 49.0 ​ $ 32.3 ​ 85 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ The DoW, DoS, other U.S. government agencies and their contractors are our only customers representing 10% or more of total sales in any of the last three fiscal years. Sales by segment for these customers are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Parts Supply ​ $ 253.3 ​ $ 143.3 ​ $ 99.3 ​ Repair, Engineering, and Software ​ ​ 79.5 ​ ​ 82.2 ​ ​ 62.0 ​ Government Solutions ​ ​ 455.0 ​ ​ 462.1 ​ ​ 414.8 ​ ​ ​ $ 787.8 ​ $ 687.6 ​ $ 576.1 ​ Percentage of total sales ​ ​ 23.8 % ​ 24.7 % ​ 24.8 % ​ Sales across the major customer markets for each of our operating segments were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Parts Supply: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 1,153.4 ​ $ 879.2 ​ $ 800.6 Government and defense ​ 334.3 ​ 220.4 ​ 166.4 ​ ​ $ 1,487.7 ​ $ 1,099.6 ​ $ 967.0 Repair, Engineering, and Software: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 990.2 ​ $ 838.4 ​ $ 612.3 Government and defense ​ 90.6 ​ 92.6 ​ 69.0 ​ ​ $ 1,080.8 ​ $ 931.0 ​ $ 681.3 Government Solutions: ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial ​ $ 3.3 ​ $ 4.0 ​ $ 6.1 Government and defense ​ 499.0 ​ 491.4 ​ 445.6 ​ ​ $ 502.3 ​ $ 495.4 ​ $ 451.7 Legacy Commercial Programs: ​ ​ ​ ​ ​ ​ Commercial ​ $ 237.2 ​ $ 254.5 ​ $ 218.9 ​ Sales by type of product/service for each of our operating segments were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ 2026 ​ 2025 ​ 2024 Government Solutions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Government programs ​ $ 409.2 ​ $ 394.7 ​ $ 381.8 Mobility Systems ​ 93.1 ​ 100.7 ​ 69.9 ​ ​ $ 502.3 ​ $ 495.4 ​ $ 451.7 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Legacy Commercial Programs: ​ ​ ​ ​ ​ ​ Component repair programs ​ $ 210.4 ​ $ 225.1 ​ $ 185.1 Distribution of C&E inventory ​ 26.8 ​ 29.4 ​ 33.8 ​ ​ $ 237.2 ​ $ 254.5 ​ $ 218.9 ​ For our Parts Supply and Repair, Engineering, and Software segments, each of those segments is comprised of similar products and services within the individual segment. 86 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Geographic Data Sales by geographic region for the fiscal years ended May 31, 2026, 2025, and 2024 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 ​ ​ ​ 2024 Parts Supply: ​ ​ ​ ​ ​ ​ ​ ​ ​ North America ​ $ 840.6 ​ $ 631.6 ​ $ 532.1 Europe/Africa ​ ​ 331.4 ​ ​ 263.2 ​ ​ 252.9 Asia ​ 250.4 ​ 166.1 ​ 146.4 Other ​ 65.3 ​ 38.7 ​ 35.6 ​ ​ $ 1,487.7 ​ $ 1,099.6 ​ $ 967.0 Repair, Engineering, and Software: ​ ​ ​ ​ ​ ​ ​ ​ ​ North America ​ $ 881.1 ​ $ 735.9 ​ $ 589.1 Europe/Africa ​ 99.7 ​ 100.1 ​ 55.0 Asia ​ ​ 94.4 ​ ​ 86.8 ​ ​ 31.1 Other ​ 5.6 ​ 8.2 ​ 6.1 ​ ​ $ 1,080.8 ​ $ 931.0 ​ $ 681.3 Government Solutions: ​ ​ ​ ​ ​ ​ ​ ​ ​ North America ​ $ 499.9 ​ $ 493.1 ​ $ 440.1 Europe/Africa ​ 2.1 ​ 2.1 ​ 11.3 Asia ​ 0.3 ​ 0.2 ​ 0.3 ​ ​ $ 502.3 ​ $ 495.4 ​ $ 451.7 Legacy Commercial Programs: ​ ​ ​ ​ ​ ​ North America ​ $ 140.6 ​ $ 167.6 ​ $ 147.4 Europe ​ 73.4 ​ 66.4 ​ 53.4 Asia ​ 23.2 ​ 20.5 ​ 18.1 ​ ​ $ 237.2 ​ $ 254.5 ​ $ 218.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ May 31, ​ ​ ​ ​ 2026 ​ ​ ​ 2025 Long-lived assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ United States ​ $ 1,370.3 ​ $ 1,110.8 Europe ​ 96.7 ​ 93.8 Other ​ 146.8 ​ 129.4 ​ ​ $ 1,613.8 ​ $ 1,334.0 ​ Sales to unaffiliated customers in foreign countries (including sales through foreign sales offices of domestic subsidiaries) were $1,135.4 million (34.3% of sales), $951.7 million (34.2% of sales), and $770.0 million (33.2% of sales) in fiscal 2026, 2025, and 2024, respectively. ​ 87 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ 16. Legal Proceedings and Other Matters We are involved in various claims and legal actions, including environmental matters, arising in the ordinary course of business. 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: Russian Bankruptcy Litigation During calendar years 2016 and 2017, certain subsidiaries of the Company purchased four engines from VIM-AVIA Airlines, LLC (“VIM-AVIA”), a company organized in Russia. Subsequent to the purchase of the engines, VIM-AVIA declared bankruptcy in Russian courts, and in November 2019, the receiver of the VIM-AVIA bankruptcy estate (“Receiver”) and one of the major creditors of VIM-AVIA filed a clawback action in the Arbitration Court of the Russian Republic of Tartarstan (the “Russian Trial Court”) against our subsidiaries alleging that the contracts entered into with VIM-AVIA in the 2016-2017 timeframe are invalid. The clawback action alleged that our subsidiaries owe the VIM-AVIA bankruptcy estate approximately $13 million, the alleged fair market value of the four engines at the time of sale. On March 3, 2023, the Russian Trial Court awarded a $1.8 million judgment against the Company relating to one engine, and dismissed all the other claims against the Company relating to the three remaining engines. The Company recognized a corresponding charge of $1.8 million in the third quarter of fiscal 2023. Further court proceedings and multiple appeals ensued in 2024 and 2025. On September 26, 2023, the Russian Eleventh Arbitration Court of Appeal (the “Russian Appellate Court”) issued an order (i) affirming the Russian Trial Court’s adverse judgment against the Company relating to one of the four engines; (ii) reversing the Russian Trial Court’s dismissal of the claims relating to the remaining three engines; and (iii) awarding a judgment against the Company in the total amount of $13.0 million. During the first quarter of fiscal 2024, the Company recognized a charge for $11.2 million representing the judgment against the Company for the remaining three engines. Ultimately, on October 11, 2024, the Russian Court of Cassation issued a ruling that effectively affirmed (i) the $1.8 million judgment against the Company relating to one of the four engines, and (ii) the dismissal of the Receiver’s clawback claims relating to the remaining three engines. On February 10, 2025, the Russian Supreme Court denied both the Company’s request and the Receiver’s request for review of the October 11, 2024 ruling. The $1.8 million judgment against the Company is final and not subject to further review in the Russian courts. The Receiver’s claims against the Company in the VIM / AVIA bankruptcy litigation have therefore been concluded and $11.2 million liability was reversed in the third quarter of fiscal 2025. The Company believes that the claims brought against it by the Receiver, and the resulting $1.8 million judgment against it, were a result of, among other things, a hostile business and legal environment for foreign companies in Russia, which has been caused by developments in the Russia/Ukraine conflict, including the imposition of a range of sanctions and export controls on Russian entities and individuals by the U.S. and its North Atlantic Treaty Organization allies. In June 2026, the Receiver sold the $1.8 million judgment and related interest to two Russian nationals. As such, the purchasers, rather than the Receiver, may attempt to enforce the judgments against the Company. Although there can be no assurances, the Company also believes it would have strong defenses to any attempt that may be made to recognize and enforce the judgment outside of Russia. The Company’s ability to satisfy the judgment, in whole or in part, may be restricted by the Company’s obligation to comply with U.S. trade restrictions. As of May 31, 2026, our Consolidated Balance Sheet included a liability for the matter, including accrued interest, of $2.1 million classified as long-term in Other liabilities. ​ 88 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Performance Guarantee In conjunction with the fiscal 2021 sale of our Composites business, we retained a performance guarantee to a customer of the Composites business (the “Customer”) under an existing contract providing flap track fairings on the A220 aircraft (“A220 Contract”). The term of the A220 Contract and our performance guarantee extend for the duration that A220 aircraft are in service and the customer continues to maintain support for the A220 aircraft. The performance guarantee does not contain a financial cap. In March 2022, the buyer of the Composites business (the “Buyer”) filed for bankruptcy and moved to have the bankruptcy court reject the A220 Contract. The Customer also notified us that it believes the Buyer has failed to timely deliver products in accordance with the terms of the A220 Contract and that the Customer has incurred losses related to the asserted non-compliance that the Customer believes is covered by our performance guarantee. To date, the Customer has provided us with limited details in support of the extent of the Customer’s claimed losses with respect to the A220 Contract and its contention that we may be responsible under our performance guarantee to reimburse the Customer for any portion of its claimed losses. The Customer filed suit against us during the fourth quarter of fiscal 2023 claiming damages of at least $32 million. In this regard, while we are continuing to seek additional detail around the facts and legal basis underlying the claim for losses the Customer attributed to the A220 Contract and the Customer’s corresponding claim under the performance guarantee, we strongly disagree with the premise of the Customer’s claim based on the information available and known to us at this time, and we believe that we have numerous defenses available against this claim that we will vigorously pursue. While it is reasonably possible that we will incur a loss from the claim under the performance guarantee, we are unable to estimate the range of loss on this claim. There can be no assurance that the Customer’s claim under the performance guarantee will not have a material adverse effect on our operations, financial position and cash flows. In the fourth quarter of fiscal 2026, we were awarded $1.5 million for reimbursement of a portion of our legal fees incurred in connection with the Buyer’s bankruptcy proceedings. We expect the Bankruptcy Court to release the funds to us before the end of calendar 2026. Self-Reporting of Potential Foreign Corrupt Practices Act Violations As previously disclosed, in 2019, the Company retained outside counsel to investigate possible violations of the U.S. Foreign Corrupt Practices Act (the “FCPA”) relating to certain transactions in Nepal and South Africa and self-reported these matters to the U.S. Department of Justice (the “DoJ”), the SEC, and the U.K. Serious Fraud Office. On December 19, 2024, after cooperating with the DoJ’s and SEC’s investigations, the Company resolved with the DoJ pursuant to a Non-Prosecution Agreement (“NPA”) and with the SEC pursuant to a Cease-and-Desist Order (the “SEC Order”), both dated December 19, 2024. Pursuant to the NPA, the DoJ agreed that it will not prosecute the Company for conduct described in the NPA provided that the Company complies with the terms of the NPA for the NPA’s 18-month term. In the second quarter of fiscal 2025, we recognized a charge for the $55.6 million under the NPA and SEC Order. ​ 89 Table of Contents AAR CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in millions, except per share amounts) ​ Enforcement Proceeding in Nepal As previously disclosed, the Company became aware via news reports that Nepal’s Commission for Investigation of Abuse of Authority (“CIAA”) apparently initiated a criminal proceeding in April 2024 against over 35 entities and individuals, including AAR International, Inc., a subsidiary of the Company. The charges alleged violations of Nepalese public procurement law and were related to the same transactions in Nepal that the Company previously self-reported, as described above. The proceeding also named a former AAR International, Inc. employee, as well as John Holmes in his capacity as president of AAR International, Inc. at the time of the alleged conduct. AAR International, Inc. does not accept or admit these charges, and neither AAR International, Inc. nor Mr. Holmes appeared before the Special Court for several reasons including because the Company believes that any proceedings before the Special Court lack appropriate due process protections. Based on news reports and a summary judgment from the Nepalese court, we understand that several defendants were convicted in connection with the charges, including AAR International, Inc. The conviction against AAR International, Inc. purportedly carries a fine of approximately $0.9 million as well as a prison sentence of 1.5 years. AAR understands that Mr. Holmes was not personally convicted, but because under Nepalese law it is the responsibility of the company’s principal business executive to accept the sentence of the company, Mr. Holmes has been assigned the company’s sentence by the court. The Company does not currently intend to participate in the proceedings, and does not intend to pay the fine, believing the proceedings and outcome lack due process. The Company does not believe that the outcome of these proceedings will have a material adverse effect on the Company’s operations, financial position, or cash flows. We recognized a liability for the $0.9 million fine in the second quarter of fiscal 2025. ​ ​ 90 Table of Contents