AIR

• Commercial aviation sales were $2.38B (72% of total) in FY2026, exposing the company to airline financial distress, reduced flight activity, and fuel-cost pressures that lower demand for parts and MRO services.
• U.S. government sales were $787.8M (24% of total), and a proposed 50% DoS budget cut has already reduced annual revenue by $70M on those contracts; the INL/A WASS contract ($92M in FY2026) is up for rebid in June 2028.
• Newly emphasized trade risks include two instances of export license applications being placed on hold by the Department of Commerce and a May 2025 Section 232 investigation into imports of commercial aircraft, jet engines, and parts.
• The Repair, Engineering, and Software segment depends on continued airline outsourcing and successful management of facility consolidation; a failure to execute the site consolidation strategy could materially harm results.
• Goodwill impairments are expected: a portion was already recognized on the Product Support acquisition, and the Legacy Commercial Programs segment’s goodwill will be impaired as operations wind down over three to four years.
• The company carries $900M in total debt, faces restrictive covenants, and relies on continued access to financing; variable-rate exposure and refinancing needs could pressure liquidity.

In our Parts Supply segment, we primarily operate from our leased headquarters in Wood Dale, Illinois and locations in Jacksonville, Florida and Randolph, New Jersey. In addition to warehouse space in our Wood Dale, Illinois location, this facility also includes executive, sales and administrative offices which support all of our segments. In our Repair, Engineering, and Software segment, our Airframe MRO services are conducted at U.S. facilities leased by us in Indianapolis, Indiana; Oklahoma City, Oklahoma; Miami, Florida; Rockford, Illinois; Greensboro, North Carolina; and Lake City, Florida and at Canadian facilities leased by us in Trois Rivieres, Quebec and Windsor, Ontario. Our Component MRO services are primarily conducted at owned facilities in Hot Springs, Arkansas; Grand Prairie, Texas; Wellington, Kansas; Chonburi, Thailand; and Amsterdam, Netherlands. In our Government Solutions segment, our services are primarily conducted from leased facilities in Rockledge, Florida; Ogden, Utah; Jacksonville, Florida; and Windsor, Connecticut. Our Mobility Systems products and services are primarily conducted from an owned facility in Cadillac, Michigan. In our Legacy Commercial Programs segment, our services are primarily conducted from leased facilities in Brussels, Belgium and Crawley, England. We also operate sales offices that support all our activities and are leased in London, England; Crawley, England; Paris, France; Rio de Janeiro, Brazil; Tokyo, Japan; Shanghai, China; Singapore, Republic of Singapore; and Dubai, United Arab Emirates. We believe that our owned and leased facilities are suitable and adequate for our operational requirements. ​

Note 16 of the Notes to our Consolidated Financial Statements for the year ended May 31, 2026 contained in Item 8 of this Annual Report on Form 10-K includes information on legal proceedings that constitute material contingencies for financial reporting purposes that could have a material adverse effect on our consolidated financial position or liquidity if they were resolved in a manner that is adverse to us. The information in Note 16 is incorporated by reference in this Item 3. There are no matters which constitute material pending legal proceedings to which we are a party other than those incorporated into this Item 3 by reference from Note 16 to our Consolidated Financial Statements for the year ended May 31, 2026 contained in Item 8 of this Annual Report on Form 10-K. ​

• Consolidated sales grew 19.0% to $3,308.0M, led by a 20.6% increase in commercial sales to $2,384.1M, reflecting strong demand in new parts distribution and contributions from the ADI and HAECO Americas acquisitions.
• Consolidated gross profit rose 17.9% to $622.0M, with government and defense gross profit up 52.2% on favorable mix and volume; commercial gross margin declined to 17.4% from 19.8% due to lower-margin HAECO Americas operations.
• Operating income increased 50.0% to $277.9M, helped by a $29.5M bargain purchase gain on the HAECO Americas acquisition and a $9.8M gain on the sale of the corporate headquarters.
• The Parts Supply segment sales surged 35.3% to $1,487.7M on higher new parts distribution volumes and USM demand, though operating margin fell to 12.5% from 14.3% due to prior-year benefits from a Russian legal liability reversal and an insurance recovery.
• The company began a multi-year wind-down of the Legacy Commercial Programs segment, which saw sales decline 6.8% and operating income fall to zero after a $4.9M inventory reserve, and expects to fully impair the segment's $16.4M goodwill in future periods.
• Liquidity remained strong with $1,128.9M in working capital and $84.0M in cash; net cash from operations rose to $98.7M, and the company raised $273.9M in a common stock offering and $150.0M in additional 6.75% Senior Notes to fund acquisitions.

Our exposure to market risk includes fluctuating interest rates under our credit agreements, changes in foreign exchange rates, and credit losses on accounts receivable. See Note 1 of Notes to Consolidated Financial Statements for a discussion on accounts receivable exposure. We are exposed to the risk that our earnings and cash flows could be adversely impacted by fluctuations in interest rates. We manage interest costs by using a mix of fixed - and floating - rate debt. A 10 percent increase to the average interest rate across our floating - rate debt obligations would have reduced our pre - tax income by $2.3 million during fiscal 2026. Revenues and expenses of our foreign operations are translated at average exchange rates during the year, and balance sheet accounts are translated at year-end exchange rates. Balance sheet translation adjustments are excluded from the results of operations and are recorded in stockholders’ equity as a component of accumulated other comprehensive loss. A hypothetical 10 percent devaluation of the U.S. dollar against foreign currencies would not have had a material impact on our financial position or operating results during fiscal 2026. ​ 42 Table of Contents

• Total sales grew 19% to $3,308.0 million in FY2026, driven by increases in both product and service sales.
• Net income rose sharply to $187.7 million from $12.5 million, aided by a $29.5 million bargain purchase gain from the HAECO Americas acquisition.
• The critical audit matter involved assessing the write-down of slow-moving inventory within the Parts Supply and Repair, Engineering, and Software segments, where the total inventory balance was $979.0 million.
• The company completed several acquisitions in FY2026, including HAECO Americas, ADI, Aerostrat, and ART, which contributed to increases in goodwill and intangible assets.
• A new segment structure was implemented, creating Government Solutions and Legacy Commercial Programs, with the latter planned for wind-down over three to four years.
• The auditor, KPMG LLP, has served as the company's auditor since 1985 and provided an unqualified opinion on internal control over financial reporting.