AAR CORP

AAR CORP. is a leading independent provider of solutions to the global aviation aftermarket, operating in over 20 countries. The company serves commercial and government aerospace customers with a broad line of products and services. The industry is characterized by competition based on quality, ability to provide a broad range of products and services, speed of delivery, and price. Long-term commercial aftermarket growth trends are considered favorable by management, and the company's long-term strategy emphasizes investing in the business and capitalizing on opportunities in both the commercial and government markets.

Primary competitors include OEMs, the service divisions of large commercial airlines, and other independent suppliers of parts, repair, and overhaul services to the commercial and defense markets. The Government Solutions segment competes with a number of divisions of large corporations and other large and small companies. AAR believes it maintains a satisfactory competitive position through responsiveness to customer needs, attention to safety and quality, a unique portfolio of high-quality solutions with lower cost to the customer, combination of market expertise and deep technical knowledge, long-standing customer relationships, and an integrated, connected business model. The company is an authorized distributor for more than 30 product lines, which include parts from over 300 Federal Supply Class codes sourced from over 20 leading OEMs.

AAR generates revenue through the sale of products and services, with approximately 65% of fiscal 2026 sales from the sale of products. The company is engaged in only limited manufacturing activities. Revenue is derived from commercial airline customers, government and defense customers, and other segments. The company's business model is described as an integrated, connected platform, and it has developed digital solutions such as the online PAARTS sm Store for electronic fulfillment. The company also utilizes a network of third-party repair facilities for USM parts and has joint ventures supporting distribution in Asia.

The Parts Supply segment accounted for approximately 45% of sales in fiscal 2026. It primarily consists of aftermarket distribution of new, OEM supplied replacement parts and sales and leasing of used serviceable material (USM). The company has formal distribution relationships with OEM suppliers and is a leading independent distributor of factory new aircraft parts for the aftermarket. It also distributes components and assemblies to OEMs through its recent ADI acquisition. The Repair, Engineering, and Software segment accounted for approximately 35% of sales in fiscal 2026. It primarily provides Airframe MRO, Component MRO, and integrated software solutions including Trax, Aerostrat, Airvoyant, and Airinmar. The segment operates eight airframe maintenance facilities and five component repair facilities. The Government Solutions segment accounted for approximately 15% of sales in fiscal 2026. It consists of fleet management and operations of customer-owned aircraft, customized performance-based supply chain logistics programs for the DoW, DoS, and foreign governments, and Mobility Systems operations. The Legacy Commercial Programs segment accounted for approximately 5% of sales in fiscal 2026. It consists of asset-heavy flight hour-based component pool and repair programs for commercial airlines and distribution of consumables and expendables inventory.

The Parts Supply segment's business activities are primarily conducted through AAR Supply Chain, Inc.; ADI; AAR Aircraft & Engine Sales & Leasing, Inc.; and AAR International, Inc. The Repair, Engineering, and Software segment's business activities are primarily conducted through AAR Aircraft Services, Inc.; AAR Aircraft Services, LLC; AAR Allen Services, Inc.; AAR International, Inc.; Trax; AAR Component Services (Thailand) Ltd.; AAR Component Services – Hot Springs, LLC; and AAR Component Services – Grand Prairie, Inc. The Government Solutions segment's business activities are primarily conducted through AAR Government Services, Inc.; AAR Aircraft Services, Inc.; AAR International, Inc.; AAR Airlift Group, Inc.; AAR Manufacturing, Inc.; and Brown International Corporation. The Legacy Commercial Programs segment's business activities are primarily conducted through AAR Supply Chain, Inc. and AAR International, Inc.

During the fourth quarter of fiscal 2026, AAR changed its operating segment structure, combining government programs and Mobility Systems into Government Solutions, re-positioning the software platform to the Repair and Engineering segment (renamed Repair, Engineering, and Software), and separately reporting Legacy Commercial Programs as its own segment. The company announced its intention to exit the Legacy Commercial Programs business, with the wind-down expected to take approximately three to four years. In fiscal 2026, AAR completed four acquisitions: American Distributors Holding Co., LLC (ADI) for $137.1 million ¹, HAECO Americas for $78.0 million ², Aircraft Reconfig Technologies (ART) for $36.0 million ³, and Aerostrat Corp. for $19.0 million ⁴. The company also expanded its Airframe MRO facility in Oklahoma City and is expanding its Miami Airframe MRO operations with a 114,000 square foot facility ⁵ expected to be operational before the end of calendar 2026. AAR launched Airvoyant, an AI-powered aviation procurement solution.

Consolidated sales in fiscal 2026 increased $527.5 million ⁶, or 19.0% ⁷, over the prior year primarily due to an increase in sales to commercial customers. Consolidated sales to commercial customers increased $408.0 million ⁸, or 20.6% ⁹, over the prior year, including $82.2 million ¹⁰ from the ADI acquisition and $131.1 million ¹¹ from the HAECO Americas acquisition. Consolidated sales to government customers increased $119.5 million ¹², or 14.9% ¹³, including $33.2 million ¹⁴ from the ADI acquisition. Sales to global government and defense customers were $923.9 million ¹⁵ (27.9% ¹⁶ of consolidated sales) in fiscal 2026, compared to $804.3 million ¹⁷ (28.9% ¹⁸) in fiscal 2025 and $681.0 million ¹⁹ (29.4% ²⁰) in fiscal 2024. Sales to branches, agencies, and departments of the U.S. government and its contractors were $787.8 million ²¹ (23.8% ²² of consolidated sales) in fiscal 2026, compared to $687.6 million ²³ (24.7% ²⁴) in fiscal 2025 and $576.1 million ²⁵ (24.8% ²⁶) in fiscal 2024.

AAR's growth strategy emphasizes both organic expansion and acquisitions. The company completed four acquisitions in fiscal 2026 to further expand its products and services portfolio and global footprint. The ADI acquisition positions AAR as a leading distributor of electronic components and assemblies to OEMs across the aerospace and defense industry. The HAECO Americas acquisition, which was the second largest heavy maintenance provider in North America prior to its acquisition, immediately expanded AAR's maintenance footprint and secured multi-year heavy maintenance contracts with key customers. The ART acquisition adds FAA Organization Designation Authorization, enabling AAR to issue supplemental type certificates and PMA without reliance on third parties. The Aerostrat acquisition adds a leading long-range maintenance planning software provider. The company also launched Airvoyant, an AI-powered aviation procurement solution, and reported strong market reception.

AAR is expanding its Airframe MRO capacity. The company expanded its Oklahoma City operations with a new 80,000 square foot facility ²⁷ with three bays and warehouse space, which inducted its first aircraft in early calendar 2026. The Miami Airframe MRO expansion involves a 114,000 square foot facility ²⁸ with three bays, expected to be operational before the end of calendar 2026. The company expects to begin servicing additional maintenance lines from the new Miami hangar this autumn. The company also noted that integration efforts for its four acquisitions are progressing ahead of plan, and each acquisition is already contributing to capabilities, customer value proposition, and growth strategy.

The filing does not contain specific margin or cost outlook targets for future periods. The company noted that it has consistently implemented actions to deliver efficiencies and cost savings, and that the historical benefits of these efforts have generally offset the margin impact of competitive pricing conditions. The company also stated that increases in raw material costs, freight, or other costs have generally been offset through efficiencies or price increases, and that a portion of its contracts contain terms and conditions that enable it to pass inflationary price increases to customers.

The company is investing in technology infrastructure, including the launch of Airvoyant, an AI-powered aviation procurement solution. AAR also continues to enhance its digital solutions, including the online PAARTS sm Store. The company's supply chain posture involves acquiring parts and components from domestic and foreign airlines, independent aviation service companies, aircraft leasing companies, and OEMs. AAR has ongoing arrangements with OEMs that provide access to parts, repair manuals, and service bulletins. The company employs approximately 7,100 employees worldwide ²⁹ as of May 31, 2026, with 5,400 employees in the United States ³⁰ and 1,700 employees outside of the United States ³¹. The company also retained approximately 700 contract workers ³² as of May 31, 2026.

The filing does not disclose specific R&D spending levels, capital expenditure plans, share repurchase authorization amounts, or dividend policy figures.

The company's government contracts are subject to changes with fluctuations in defense and other governmental agency spending and requirements. Government contracts are also often subject to termination for convenience by the customer. Sales to government and defense customers are subject to competitive bidding and government funding, and no assurance can be given that such sales will continue at levels previously experienced. The company's Legacy Commercial Programs segment requires significant asset pools and no longer meets capital return thresholds, leading to the decision to exit this business over approximately three to four years.

The company faces exposure to fluctuations in both the availability and pricing of raw materials, though it is engaged in only limited manufacturing activities and has minimal exposure. Increases in raw material costs, freight, or other costs have generally been offset through efficiencies or price increases, but there are no assurances that higher prices can effectively be passed through to customers or that the company will be able to fully offset the effects of higher costs through price increases on a timely basis.

AAR's business is subject to risks related to government contracts, which are subject to competitive bidding, government funding, and termination for convenience. Sales to global government and defense customers were $923.9 million ³³ (27.9% ³⁴ of consolidated sales) in fiscal 2026, and no assurance can be given that such sales will continue at previous levels. The company also faces risks from its Legacy Commercial Programs segment, which requires significant asset pools and no longer meets capital return thresholds, leading to a planned wind-down over approximately three to four years. The company's ability to pass through inflationary cost increases is not guaranteed, as there are no assurances that higher prices can effectively be passed through to customers or that the company can fully offset higher costs through price increases on a timely basis. The company's acquisitions, including ADI for $137.1 million ³⁵, HAECO Americas for $78.0 million ³⁶, ART for $36.0 million ³⁷, and Aerostrat for $19.0 million ³⁸, expose the company to integration risks, though management reports integration is progressing ahead of plan.

Management's message emphasizes that fiscal 2026 was a year of record-breaking financial results, with the repositioned portfolio and focused strategy driving performance. The company set new records throughout the year, expanding capabilities, strengthening market position, and delivering exceptional financial results that validated the strategy as the leading Parts, Repair, and Software platform in the aviation aftermarket. Management highlighted that growth of new parts Distribution activities contributed to exceptional profitability improvements, and that the focus on significantly expanding margins across all business areas drove unprecedented growth with achievements well above pre-pandemic highs. The company took decisive steps to simplify the portfolio, increase transparency, and sharpen focus on higher-margin businesses with stronger returns on capital. At the Investor Day in May 2026, management outlined how these actions position the company for long-term growth, providing additional detail on the repositioned portfolio and updated financial framework. The three strategic priorities emphasized are: simplifying the portfolio through re-segmentation and the wind-down of Legacy Commercial Programs, expanding margins across all business areas, and pursuing growth both organically and through acquisitions.