Earnings release
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AAR reports first quarter fiscal year 2027 results WOOD DALE, Ill., Sept. 28, 2026 /PRNewswire/ -- AAR CORP. (NYSE: AIR) (the "Company" or "AAR"), a leading parts, repair, andsoftware platform in the aviation aftermarket, reported today financial results for the fiscal year 2027 first quarter ended August 31, 2026. In a separate press release issued today, AAR announced it has entered into a definitive agreement to acquire a controlling interest inMRO Holdings. For additional information on the transaction, please refer to the transaction-specific press release and the investorpresentation on the Investors section of AAR's website. Due to this agreement, AAR's previously scheduled earnings conferencecall has been rescheduled to 7:00 AM CT on Tuesday, September 29, 2026. FIRST QUARTER FISCAL YEAR 2027 HIGHLIGHTS(As compared to Q1 FY2026) Sales of $918 million; increased 24%GAAP diluted EPS of $1.00Adjusted diluted EPS of $1.49; increased 38%GAAP Net income of $40 millionAdjusted EBITDA of $117 million; increased 34%Adjusted EBITDA margin increased from 11.7% to 12.7% "This was a very strong start to our fiscal year," said John M. Holmes, AAR's Chairman, President and CEO. "Our airline customerscontinue to experience strong demand for air travel, which in turn is driving strong demand for our services, as evidenced by our resultsthis quarter. Total sales were up 24%, and we saw growth across all three core segments. In our Parts Supply segment, total growth of31% was led by 23% organic growth in new parts Distribution on strength in both Commercial and Government end markets. OurRepair, Engineering & Software (RE&S) segment reported 31% sales growth, driven by our Airframe MRO, Component MRO, andsoftware activities. Government Solutions was up 4% driven by strength in Mobility Systems. "Our sales growth resulted in an adjusted EBITDA increase of 34% in the quarter and adjusted EBITDA margins of 12.7%, up 100 basispoints year over year. Total adjusted EBITDA margin from the Parts Supply, RE&S, and Government Solutions segments was 13.3%. "Cash from operations in the quarter was $56 million, helping to further reduce net leverage to 1.81x. "Along with our strong fiscal first quarter earnings, we also announced an agreement to acquire a 65% controlling interest in MROHoldings. Over the last several years, AAR has taken important steps to reshape our portfolio into an integrated Parts, Repair, andSoftware aviation aftermarket platform. Through the acquisition of MRO Holdings, AAR will achieve scale that significantly acceleratesour strategy as heavy maintenance helps drive revenue to all other areas of the company. Further, the transaction structure allows us topartner with a proven team that brings decades of experience in a strategically important region while also providing the financialflexibility to continue to pursue AAR's broader strategy. This acquisition is highly strategic for AAR and marks a significant step in ourlong-term growth plan." Holmes concluded, "Our strategy has been successful over the last several years as we have delivered above-market growth andconsistent margin expansion. The acquisition of MRO Holdings will further propel this growth and drive a meaningful step-up in ourmargin profile. The strategy, portfolio, and combination add to the strength and resilience of our aftermarket platform. Given our solidfirst quarter results and continued demand for our solutions, we remain confident in our ability to deliver another year of strongperformance in fiscal 2027." FIRST QUARTER FISCAL YEAR 2027 RESULTS Consolidated first quarter sales increased 24% to $918.0 million, compared to $739.6 million in the same quarter last year. Sales tocommercial customers increased 28%, or $147.5 million, primarily due to the acquisition contributions combined with continued above-market Commercial Distribution sales. Sales to government customers increased 14%, or $30.9, over the same period last year,primarily due to increased volumes in our new parts distribution activities. Sales to commercial customers were 73% of consolidatedsales, compared to 71% in the prior year quarter. The Company reported net income of $40.1 million, or $1.00 per diluted share. For the first quarter of the prior year, the Companyreported net income of $34.4 million, or $0.95 per diluted share. Adjusted diluted earnings per share in the first quarter of fiscal year2027 were $1.49, compared to $1.08 in the first quarter of the prior year. Selling, general, and administrative expenses were $107.0 million in the current quarter, compared to $71.8 million in the prior yearquarter. Acquisition, amortization, and integration expenses were $19.6 million in the quarter, compared to $4.4 million in the prior yearquarter. Operating margins were 7.9% in the quarter, compared to 8.8% in the prior year quarter. Adjusted operating margin increased to 10.6%in the current year quarter from 9.7% in the prior year quarter, primarily as a result of growth in our Parts Supply segment and increasedprofitability in our Government Solutions segment. Net interest expense for the quarter was $16.2 million, compared to $18.5 million last year. Average diluted share count increased from35.9 million shares in the prior year quarter to 39.9 million shares in the current year quarter.
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Cash flow provided by operating activities was $55.8 million during the current quarter, compared to $44.9 million of cash used in theprior year quarter. As of August 31, 2026, net debt was $780.5 million and net leverage was 1.81x. SECOND QUARTER AND FULL YEAR FISCAL 2027 GUIDANCE The Company is providing the following guidance for the second quarter and full year fiscal 2027. This guidance does not include anyimpact of the MRO Holdings acquisition: Second quarter FY 2027As of September 28, 2026 Sales growth (ex. LCP)1 14% - 16% Adjusted EBITDA margin (ex. LCP)2 13.0% - 13.4% 1 Reflects total sales growth excluding the Legacy Commercial Programs segment 2 Reflects Adjusted EBITDA margin excluding the Legacy Commercial Programs segment Full year FY 2027 As of September 28, 2026 Prior (as of July 28, 2026) Sales growth (ex. LCP)1 Low teens Low double-digits to low teens Conference call information On Tuesday, September 29, 2026, at 7:00 a.m. Central Time, AAR will hold a conference call to discuss the quarterly results and theannounced acquisition of MRO Holdings. A listen-only webcast and slides can be accessed at https://edge.media-server.com/mmc/p/ogsm2rh7. Participants may join via phone by registering at https://register-conf.media-server.com/register/BIe2a403237161465d99fb8af7cc93b3e8. Once registered, participants will receive a dial-in number and a uniquePIN that will allow them to access the call. A replay of the conference call will be available for on-demand listening shortly after the completion of the call at the webcast link andwill remain available for approximately one year. The slides are also available on AAR's website at https://www.aarcorp.com/en/investors/. About AAR AAR is a global aerospace and defense aftermarket solutions company with operations in over 20 countries. Headquartered in theChicago area, AAR supports commercial and government customers through four operating segments: Parts Supply; Repair,Engineering, and Software; and Government Solutions. Additional information can be found at aarcorp.com/. Contact: Chris Tillett – Investor Relations | +1-630-227-5830 | investors@aarcorp.com This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined inthe Private Securities Litigation Reform Act of 1995, which reflect management's expectations about future conditions, including, but notlimited to, our second quarter and full year FY 2027 guidance, execution of strategies, continued demand in the commercial andgovernment aviation markets; market position; anticipated activities and benefits related to new or expanding business relationships;expected contributions and synergies related to acquisitions; expansion of capabilities and operational footprint; opportunities for marginimprovement through operations, integration activities and other efficiency initiatives; and continued sales and margin growth, earningsperformance, debt management, and capital allocation. Forward-looking statements often address our expected future operating and financial performance and financial condition, or targets,goals, commitments, and other business plans, and often may also be identified because they contain words such as "anticipate,""continue," "estimate," "expect," "project," "plan," "potential," "predict," "intend," "believe," "may," "might," "will," "would," "should," "seek,""could," "positions," "likely," "target," "goal," "strategy" or similar expressions and the negatives of those terms. These forward-looking statements are subject to certain risks and uncertainties that may cause actual results to differ materially fromhistorical results or those anticipated, depending on a variety of factors, including: factors that adversely affect the commercial aviationindustry; adverse events and negative publicity in the aviation industry; a reduction in sales to the U.S. government and its contractors;cost overruns and losses on fixed-price contracts; nonperformance by subcontractors or suppliers; our ability to manage our operationalfootprint; a reduction in outsourcing of maintenance and repair activity by airlines; a shortage of skilled personnel or work stoppages;competition from other companies; financial, operational and legal risks arising as a result of operating internationally; the failure tocomplete, integrate and realize the anticipated benefits of acquisitions, including execution of related operational and financial plans;circumstances associated with divestitures; the inability to recover costs due to fluctuations in market values for aviation products andequipment; cyber or other security threats or disruptions; the need to make significant capital expenditures to keep pace withtechnological developments in our industry; restrictions on the use of intellectual property and tooling important to our business; theinability to protect the value of our intellectual property; our ability to manage our debt and fund our other liquidity needs; limitations onour ability to access the debt and equity capital markets or to draw down funds under loan agreements; non-compliance with restrictiveand financial covenants contained in our debt and loan agreements; changes in or non-compliance with laws and regulations related tofederal contractors, the aviation industry, international operations, safety and environmental matters, and the costs of complying withsuch laws and regulations; exposure to product liability and property claims that may be in excess of our liability insurance coverage; therisk that the MRO Holdings acquisition (the "Acquisition") may not be completed in a timely manner or at all; the failure to satisfy theclosing conditions to the Acquisition, including the receipt of required regulatory approvals; the occurrence of any event, change or othercircumstance or condition that could give rise to the termination of the share purchase agreement governing the Acquisition, including incertain circumstances requiring the Company to pay a termination fee; the ability of the Company to obtain the necessary financing
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arrangements; the effect of the announcement or pendency of the Acquisition on the Company's business relationships, operatingresults and business generally; risks that the Acquisition may disrupt the Company's current business plans and operations; theCompany's ability to retain and hire key personnel in light of the Acquisition; risks related to diverting management's attention from theCompany's ongoing business operations; unexpected costs, charges or expenses resulting from the Acquisition; potential litigationrelating to the Acquisition; the ability of the Company to successfully integrate MRO Holdings and its subsidiaries following the closing ofthe Acquisition and to achieve the anticipated benefits of the Acquisition, including estimated cost and operational synergies, and thetimeline to realize such benefits; the effects of the Acquisition on the Company's earnings, financial condition, net leverage ratio andcredit ratings; the risk that the conditions to the potential private placement are not satisfied; the fact that the potential private placementmay cause dilution to the Company's existing stockholders; the impact of the Acquisition on the Company's business and future financialcondition and operating results, including the ability of the Company or MRO Holdings to repay or prepay indebtedness incurred inconnection with the transaction or otherwise; and other factors disclosed in the section entitled "Risk Factors" of the Company's AnnualReport on Form 10-K for the fiscal year ended May 31, 2026, as may be updated or supplemented by any subsequent filings with theSecurities and Exchange Commission. Should one or more of these risks or uncertainties materialize adversely, or should underlyingassumptions or estimates prove incorrect, actual results may vary materially from those described. The Company derives many of its forward-looking statements from its operating budgets and forecasts, which are based on manydetailed assumptions. While the Company believes that its assumptions are reasonable, it cautions that it is very difficult to predict theimpact of known factors, and it is impossible to anticipate all factors that could affect actual results. These events and uncertainties aredifficult or impossible to predict accurately and many are beyond the Company's control. The risks described in these reports are not theonly risks the Company faces, as additional risks and uncertainties not currently known or foreseeable or deemed immaterial maymaterially adversely affect the Company's business, financial condition or results of operations in future periods. All forward-lookingstatements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the foregoingcautionary statements. The forward-looking statements included in this press release are made only as of the date hereof. TheCompany assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, futureevents or otherwise, except as required by law. AAR CORP. and subsidiaries Condensed consolidated statements of income (In millions except per share data - unaudited) Three months ended August 31, 2026 2025 Sales $918.00 $739.60 Cost of sales 741.7 605.9 Gross profit 176.3 133.7 Selling, general and administrative 107 71.8 Earnings from joint ventures 2.8 3 Operating income 72.1 64.9 Gain related to sale and exit of businesses, net –– 0.7 Interest expense, net (16.2) (18.5) Other expense, net (0.5) (0.1) Income before income tax expense 55.4 47 Income tax expense 15.3 12.6 Net income $40.10 $34.40 Earnings per share – Basic $1.01 $0.96 Earnings per share – Diluted $1.00 $0.95 Shares used for earnings per share: Weighted average shares outstanding – Basic 39.6 35.7 Weighted average shares outstanding – Diluted 39.9 35.9 AAR CORP. and subsidiaries Condensed consolidated balance sheets(In millions) August 31,2026 May 31,2026 (unaudited) ASSETS Cash and cash equivalents $ 104.5 $ 84.0 Restricted cash 8.6 23.8 Accounts receivable, net 436.4 386.8 Contract assets 147.3 148.4 Inventories, net 1,008.9 979.0 Other current assets 134.1 120.1 Total current assets 1,839.8 1,742.1
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Property, plant, and equipment, net 172.3 166.9 Goodwill and intangible assets, net 852.7 861.9 Operating lease right-of-use assets, net 205.3 210.8 Rotable assets, net 150.4 180.3 Other non-current assets 206.4 193.9 Total assets $ 3,426.9 $ 3,355.9 LIABILITIES AND EQUITY Accounts payable $ 337.9 $ 295.6 Accrued liabilities 312.8 317.6 Total current liabilities 650.7 613.2 Long-term debt 879.6 893.9 Operating lease liabilities 98.8 101.1 Other non-current liabilities 55.4 43.9 Total liabilities 1,684.5 1,652.1 Equity 1,742.4 1,703.8 Total liabilities and equity $ 3,426.9 $ 3,355.9 AAR CORP. and subsidiaries Condensed consolidated statements of cash flows(In millions – unaudited) Three months endedAugust 31, 2026 2025 Cash flows provided by (used in) operating activities: Net income $ 40.1 $ 34.4 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 19.6 14.5 Stock-based compensation expense 7.8 5.3 Changes in certain assets and liabilities: Accounts receivable (50.5) (8.5) Contract assets 13.3 (6.4) Inventories (41.1) (51.8) Other current assets (15.4) 3.5 Rotable assets 27.5 (3.5) Accounts payable and accrued liabilities 40.8 (16.7) Other 13.7 (15.7) Net cash provided by (used in) operating activities 55.8 (44.9) Cash flows used in investing activities: Property, plant, and equipment expenditures (11.8) (8.7) Acquisitions, net of cash acquired (6.2) (11.9) Investment (7.5) –– Hangar expansion activity, net (0.5) (4.2) Other 0.4 1.0 Net cash used in investing activities (25.6) (23.8) Cash flows provided by (used in) financing activities: Short-term borrowings (repayments) on Revolving Credit Facility, net (15.0) (97.0) Proceeds from long-term borrowings –– 153.0 Financing costs –– (2.5) Stock compensation activity (9.9) (2.4) Net cash provided by (used in) financing activities (24.9) 51.1
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Increase (Decrease) in cash, cash equivalents, and restricted cash 5.3 (17.6) Cash, cash equivalents, and restricted cash at beginning of period 107.8 109.2 Cash, cash equivalents, and restricted cash at end of period $113.1 $ 91.6 AAR CORP. and subsidiaries Third-party sales by segment(In millions - unaudited) Three months endedAugust 31, 2026 2025 Parts Supply $ 414.8 $ 317.8 Repair, Engineering, and Software 297.5 226.4 Government Solutions 138.8 133.9 Legacy Commercial Programs 66.9 61.5 $ 918.0 $ 739.6 Operating income (loss) by segment(In millions - unaudited) Three months endedAugust 31, 2026 2025 Parts Supply $ 55.3 $ 40.9 Repair, Engineering, and Software 16.0 20.0 Government Solutions 19.1 12.7 Legacy Commercial Programs 2.9 0.4 93.3 74.0 Corporate and other (21.2) (9.1) $ 72.1 $ 64.9 Adjusted net income, adjusted diluted earnings per share, organic sales growth, adjusted operating margin, adjusted cash flow providedby (used in) operating activities, adjusted EBITDA, adjusted EBITDA margin, net debt, and net debt to adjusted EBITDA (net leverage)are "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934, as amended (the "ExchangeAct"). We believe these non-GAAP financial measures are relevant and useful for investors as they illustrate our core operatingperformance, cash flows, and leverage unaffected by the impact of certain items that management does not believe are indicative of ourongoing and core operating activities. When reviewed in conjunction with our GAAP results and the accompanying reconciliations, webelieve these non-GAAP financial measures provide additional information that is useful to gain an understanding of the factors andtrends affecting our business and provide a means by which to compare our operating performance and leverage against that of othercompanies in the industries we compete. These non-GAAP measures should be considered as a supplement to, and not as a substitutefor, or superior to, the corresponding measures calculated in accordance with GAAP. Our non-GAAP financial measures reflect adjustments for certain items including, but not limited to, the following: Expenses associated with recent acquisition activity, including professional fees for legal, due diligence, and other acquisitionactivities, intangible asset amortization, integration costs, non-cash rent expense associated with certain acquired leasesclassified within operating lease right-of-use assets, bargain purchase gains, and compensation expense related to contingentconsideration and retention agreements.Losses related to our exit from our Indian joint venture, our Landing Gear Overhaul business, and our Composites manufacturingbusiness, including legal fees for the performance guarantee associated with the Composites' A220 aircraft contract. Adjusted EBITDA is net income before interest income (expense), other income (expense), income taxes, depreciation andamortization, stock-based compensation, and items of an unusual nature including but not limited to business divestitures andacquisitions, acquisition, integration, and amortization expenses from recent acquisition activity (see detailed description above),headquarters relocation activity, product line exits, and severance charges. Although our non-GAAP financial measures excludeamortization expense associated with acquired intangible assets, they do not exclude the sales generated by the acquired businessesor otherwise attributable to those intangible assets. The Company is not providing a reconciliation of forward-looking financial measures to the most directly comparable forward-lookingGAAP measure because the information is not available without unreasonable effort. This is due to the inherent difficulty of forecastingthe timing and amount of certain items, such as, but not limited to, unusual gains and losses, the ultimate outcome of pending litigation,the impact and timing of potential acquisitions and divestitures, and other structural changes or their probable significance. Each of theadjustments has not occurred, are out of the Company's control and/or cannot be reasonably predicted. For this reason, the Company isunable to address the probable significance of the unavailable information. Pursuant to the requirements of Regulation G of the Exchange Act, we are providing the following tables that reconcile the above-mentioned non-GAAP financial measures to the most directly comparable GAAP financial measures:
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Adjusted net income(In millions - unaudited) Three months endedAugust 31, 2026 2025 Net income $ 40.1 $ 34.4 Acquisition, integration, and amortization expenses 24.9 6.4 Gain related to sale of businesses, net –– (0.7) Severance charges –– 1.0 Government COVID-related subsidy liability reversal –– (0.7) Tax effect on adjustments (a) (5.0) (1.4) Adjusted net income $ 60.0 $ 39.0 (a) Calculation uses estimated statutory tax rates on non-GAAP adjustments except for the impact from certain acquisition-related non-deductible items. Adjusted diluted earnings per share(unaudited) Three months endedAugust 31, 2026 2025 Diluted earnings per share $ 1.00 $ 0.95 Acquisition, integration, and amortization expenses 0.62 0.18 Gain related to sale of businesses, net –– (0.02) Severance charges –– 0.03 Government COVID-related subsidy liability reversal –– (0.02) Tax effect on adjustments (a) (0.13) (0.04) Adjusted diluted earnings per share $ 1.49 $ 1.08 (a) Calculation uses estimated statutory tax rates on non-GAAP adjustments except for the impact from certain acquisition-related non-deductible items. Adjusted operating margin(In millions - unaudited) Three months ended August 31,2026 May 31,2026 August 31,2025 Operating income $ 72.1 $ 80.1 $64.9 Acquisition, integration, and amortization expenses 24.9 17.0 6.4 Severance charges –– –– 1.0 Government COVID-related subsidy, net –– –– (0.7) Adjusted operating income $ 97.0 $ 98.0 $ 71.6 Operating margin 7.9 % 8.6 % 8.8 % Adjusted operating margin 10.6 % 10.6 % 9.7 % Organic sales growth for the three months ended August 31, 2026(unaudited) GAAP sales growth 24.1 % Impact of acquisitions within the last twelve months (13.3) Organic sales growth 10.8 % Adjusted cash flows provided by (used in) operating activities(In millions - unaudited) Three months endedAugust 31, 2026 2025 Cash flows provided by (used in) operating activities $ 55.8 $ (44.9) Amounts outstanding on accounts receivable financing program: Beginning of period 25.7 21.3 End of period (25.0) (24.3) Adjusted cash flows provided by (used in) operating activities $ 56.5 $ (47.9) Adjusted EBITDA(In millions - unaudited) Three months endedAugust 31, Year endedMay 31, 2026 2025 2026 Net income $ 40.1 $ 34.4 $ 187.7 Income tax expense 15.3 12.6 58.2 Other expense, net 0.5 0.1 2.1 Interest expense, net 16.2 18.5 70.5 Depreciation and amortization 18.8 13.8 72.1
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Acquisition and integration expenses 17.8 2.4 28.2 Gains related to sale and exit of business/joint venture, net –– (0.7) (1.4) Bargain purchase gain –– –– (29.5) Gain on sale of headquarters building –– –– (9.8) Impairment charge related to product line exit –– –– 4.9 Severance charges –– 1.0 1.0 Government COVID-related subsidy, net –– (0.7) (0.7) Stock-based compensation 7.8 5.3 17.8 Adjusted EBITDA $ 116.5 $ 86.7 $ 401.1 Net income margin 4.4 % 4.7 % Adjusted EBITDA margin 12.7 % 11.7 % Net debt(In millions – unaudited) August 31,2026 August 31,2025 Total debt $ 885.0 $ 1,030.0 Less: Cash and cash equivalents (104.5) (80.0) Net debt $ 780.5 $ 950.0 Net debt to adjusted EBITDA(In millions - unaudited) Adjusted EBITDA for the year ended May 31, 2026 $ 401.1 Less: Adjusted EBITDA for the three months ended August 31, 2025 (86.7) Plus: Adjusted EBITDA for the three months ended August 31, 2026 116.5 Adjusted EBITDA for the twelve months ended August 31, 2026 $ 430.9 Net debt at August 31, 2026 $ 780.5 Net debt to Adjusted EBITDA 1.81
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AAR accelerates its aftermarket platform strategy by agreeing to acquire a controlling interest in MRO Holdings Acquisition significantly enhances AAR's scale, margins, and cash flow profileAdds more than $1 billion in revenue supporting blue-chip, U.S. airline customers Expands AAR's consolidated adjusted EBITDA margins1 from approximately 12% to 16%, before synergiesExpected to be accretive to adjusted EPS in the first full fiscal year post closingUpdating AAR's adjusted EBITDA margin target to approximately 19% to 20% within three to four years WOOD DALE, Ill., Sept. 28, 2026 /PRNewswire/ -- AAR CORP. (NYSE: AIR) (the "Company" or "AAR"), a leading Parts, Repair, andSoftware platform in the aviation aftermarket, today announced it has entered into a definitive agreement to acquire a 65% controllinginterest in MRO Holdings at an implied enterprise value of $4.0 billion. This represents 10.7x MRO Holdings' forecasted full calendaryear 2026 adjusted EBITDA, including $75 million in anticipated run-rate cost synergies and net of transaction-related tax benefits withan expected present value of approximately $150 million. The transaction will expand and strengthen AAR's leading aviation aftermarketplatform and create significant additional growth opportunities across the Company's core Parts, Repair, and Software activities. Thecombination creates advantages for AAR's customers as the Company will offer a broader range of maintenance solutions. MRO Holdings is a leading global provider of aircraft maintenance, repair, and overhaul (MRO) with more than four decades ofexperience. Through its team of approximately 10,000 professionals and 115 lines of airframe maintenance capacity, MRO Holdingsperforms aircraft maintenance and modifications across its extensive network in the Americas, with facilities in El Salvador, Mexico,Colombia, and the United States. Approximately 90% of MRO Holdings' revenue is from sales to U.S. customers. "Over the last several years, AAR has taken important steps to reshape our portfolio into an integrated Parts, Repair, and Softwareaviation aftermarket platform," said John M. Holmes, Chairman, President and CEO of AAR. "Heavy maintenance is a foundationalelement of this platform, driving revenue to all other areas of the Company. Through the acquisition of MRO Holdings, we will create thelargest heavy maintenance MRO in the world, servicing a combined total of nearly 3,000 aircraft per year in our hangars. As a result ofthis scale, we expect to drive additional volume through our Component MRO facilities, we will have a much larger channel for new andexisting OEM distribution relationships, and we will have additional avenues for data collection supporting our software business. Inaddition, we see more growth opportunities for the heavy maintenance business itself, including widebody maintenance and increasedcapture of European and Middle Eastern fleets for service in the Americas. "The transaction structure allows us to partner with a proven team that brings decades of experience in a strategically important region.This structure also provides the financial flexibility to continue to pursue AAR's broader strategy. This highly strategic acquisition is trulytransformational for AAR and marks a significant step in our long-term growth plan," concluded Holmes. In calendar year 2026, MRO Holdings is expected to generate approximately $1.0 billion of sales and $285 million of adjusted EBITDA,representing an adjusted EBITDA margin of approximately 27%. MRO Holdings also has an exceptional cash flow conversion profile,converting approximately 70% of adjusted EBITDA into adjusted cash flow from operating activities in calendar year 2025. On a pro forma basis, the Company's adjusted EBITDA margin before synergies is approximately 16%, or roughly 400 basis points accretive to AAR's standalone FY 2026 results2. AAR expects to generate approximately $75 million of run-rate cost synergies from operations optimization, procurement savings, SG&A optimization, and the sharing of operational best practices. The Company expectsto achieve the full run-rate benefit of the synergies within three to four years following closing and is targeting an adjusted EBITDAmargin of approximately 19% to 20% in that timeframe. Holmes continued, "While the strategic benefits are significant, the acquisition of MRO Holdings also greatly enhances our financialprofile. The acquisition further strengthens our ability to generate above-market sales growth, and we see a path to 20% adjustedEBITDA margins in the next three to four years. Further, the cash generated by the combination of AAR and MRO Holdings will besubstantial, allowing the Company to quickly de-lever and retain future financial flexibility. With greater scale and a stronger financialprofile, AAR will be better positioned to deliver higher, more profitable growth across our Parts, Repair, and Software platform." "This is a major milestone in MRO Holdings' evolution, and AAR is the right partner," said Roberto Kriete, Chairman of MRO Holdings."Combining our technical expertise and customer relationships with AAR's broader aftermarket capabilities will strengthen our valueproposition and support continued investment in our people, capabilities, and facilities. Together, MRO Holdings and AAR create astronger platform with greater scale, deeper technical resources, and a broader ability to serve the world's leading airlines. We arestaying on as shareholders of MRO Holdings because we share AAR's ambition for continued growth and want to be a part of it." "As a significant minority shareholder in MRO Holdings, we are proud to have been part of a period of meaningful growth for thecompany," said Matt Evans, a Partner at Bain Capital. "MRO Holdings has built a differentiated offering with deep customerrelationships, a highly skilled workforce, and a compelling position in a market supported by durable demand for aircraft maintenance.We believe AAR is an excellent partner for the company's next chapter and look forward to participating in continued value creation asshareholders." Transaction details Under the terms of the agreement, AAR will initially acquire a 65% interest in MRO Holdings for an equity value of approximately $1.8billion. As part of this initial transaction, AAR will also repay approximately $1.3 billion of MRO Holdings' existing borrowings. AAR
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expects to fund the transaction, including related expenses, through approximately $2.1 billion of new debt, approximately $780 millionof equity issued at $135 per share to existing MRO Holdings shareholders, and approximately $230 million of proceeds from a privateinvestment in public equity (PIPE) offering, led by The Pritzker Organization and other blue-chip institutional investors. AAR will have the option to acquire the remaining 35% ownership interest of MRO Holdings with 5% exercisable at any time within sixyears of the closing of the initial Acquisition, and the remaining 30% exercisable in three equal tranches of 10% on the second, third,and fourth anniversaries of the closing of the initial acquisition. AAR will control the MRO Holdings Board of Managers, and the sellingowners will be subject to customary lockups and voting-support provisions with respect to the AAR shares they receive in thetransaction. The approximately $2.1 billion of new debt financing is supported by a fully committed bridge facility, which AAR intends to replace withpermanent debt financing prior to closing. AAR expects net leverage at closing to be approximately 3.6x, including run-rate synergies.As part of the agreement, AAR will receive 100% of the excess cash flow from MRO Holdings during its first two years of ownership.AAR expects net leverage to be approximately 3.0x within two years following close of the transaction and to return to its target range of2.0x to 2.5x over the medium term, even as we exercise the purchase options. AAR expects to maintain its BB-category credit ratingprofile at each of S&P and Moody's. The transaction is expected to close in AAR's fiscal third quarter ending February 2027, subject to receipt of regulatory approvals andsatisfaction of other customary closing conditions. The Board of Directors of AAR has unanimously approved the transaction. Followingclosing, AAR will fully consolidate MRO Holdings into its financial results. Advisors Goldman Sachs & Co. LLC; William Blair & Company, LLC; and Centerview Partners LLC are serving as financial advisors to AAR.Kirkland & Ellis LLP is serving as legal counsel to AAR. Goldman Sachs Bank USA and Wells Fargo Securities, LLC are serving asunderwriters of the committed debt financing supporting the transaction, and Goldman Sachs & Co. LLC is exclusive placement agentfor the PIPE offering. Solomon Partners is serving as lead financial advisor to MRO Holdings. RBC Capital Markets, LLC is also advising MRO Holdings.Greenberg Traurig, LLP is serving as legal counsel to MRO Holdings. Conference call On Tuesday, September 29, 2026, at 7:00 a.m. CT, AAR will hold a conference call to discuss the transaction as well as the Company'sfirst quarter fiscal 2027 earnings results, which were announced in a separate release today. A listen-only webcast and slides can beaccessed at https://edge.media-server.com/mmc/p/ogsm2rh7. Participants may join via phone by registering at https://register-conf.media-server.com/register/BIe2a403237161465d99fb8af7cc93b3e8. Once registered, participants will receive a dial-in number anda unique PIN that will allow them to access the call. A replay of the conference call will be available for on-demand listening shortly after the completion of the call at the webcast link andwill remain available for approximately one year. A slide presentation pertaining to the transaction has also been made available on the Investors section of AAR's website athttps://www.aarcorp.com/en/investors/. About AAR AAR is a leading global aerospace and defense aftermarket solutions company with operations in over 20 countries. Headquartered inthe Chicago area, AAR supports commercial and government customers through three primary operating segments: Parts Supply;Repair, Engineering, and Software; and Government Solutions. Additional information can be found at aarcorp.com. About MRO Holdings MRO Holdings is a leading aircraft maintenance and modifications provider with a focus on long-term solutions for the aviation industry.The company operates five facilities across the Americas, with a team of approximately 10,000 professionals and 115 lines of capacity.Driven by a deep commitment to safety, excellence, and partnership, MRO Holdings serves premier airlines around the world. United bythe belief that "Together, we fly further," the group is shaping the future of aviation through operational excellence, innovation, and trust.For more information, visit https://mroholdings.com/ Contacts Investorsinvestors@aarcorp.com +1-630-227-5830 Mediaeditor@aarcorp.com +1-630-227-5100 Forward-looking statements This press release contains certain statements relating to future events, which are forward-looking statements as that term is defined inthe Private Securities Litigation Reform Act of 1995. The forward-looking statements included herein are subject to risks and
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uncertainties. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements givethe Company's current expectations and projections relating to its financial condition, results of operations, plans, objectives, futureperformance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or currentfacts. These statements may include words such as "anticipate," "continue," "estimate," "expect," "project," "plan," "potential," "predict,""intend," "believe," "may," "might," "will," "would," "should," "seek," "could," "positions," "likely," "target," "goal," "strategy" or similarexpressions and the negatives of those terms in connection with any discussion of the timing or nature of future operating or financialperformance or other events, including statements regarding the Company's expectations, intentions or strategies regarding the PIPEoffering, the expected use of proceeds from the PIPE offering, the acquisition, the expected benefits of the acquisition, the anticipatedtimetable for completing the acquisition, and the impact of the acquisition on the Company's business and future financial condition andoperating results. These forward-looking statements are subject to certain risks and uncertainties that may cause actual results to differ materially fromhistorical results or those anticipated, depending on a variety of factors, including: factors that adversely affect the commercial aviationindustry; adverse events and negative publicity in the aviation industry; a reduction in sales to the U.S. government and its contractors;cost overruns and losses on fixed-price contracts; nonperformance by subcontractors or suppliers; our ability to manage our operationalfootprint; a reduction in outsourcing of maintenance and repair activity by airlines; a shortage of skilled personnel or work stoppages;competition from other companies; financial, operational and legal risks arising as a result of operating internationally; the failure tocomplete, integrate and realize the anticipated benefits of acquisitions, including execution of related operational and financial plans;circumstances associated with divestitures; the inability to recover costs due to fluctuations in market values for aviation products andequipment; cyber or other security threats or disruptions; the need to make significant capital expenditures to keep pace withtechnological developments in our industry; restrictions on the use of intellectual property and tooling important to our business; theinability to protect the value of our intellectual property; our ability to manage our debt and fund our other liquidity needs; limitations onour ability to access the debt and equity capital markets or to draw down funds under loan agreements; non-compliance with restrictiveand financial covenants contained in our debt and loan agreements; changes in or non-compliance with laws and regulations related tofederal contractors, the aviation industry, international operations, safety and environmental matters, and the costs of complying withsuch laws and regulations; exposure to product liability and property claims that may be in excess of our liability insurance coverage; therisk that the acquisition may not be completed in a timely manner or at all; the failure to satisfy the closing conditions to the acquisition,including the receipt of required regulatory approvals; the occurrence of any event, change or other circumstance or condition that couldgive rise to the termination of the Share Purchase Agreement, including in certain circumstances requiring the Company to pay atermination fee; the ability of the Company to obtain the necessary financing arrangements, including under the Debt CommitmentLetter; the effect of the announcement or pendency of the acquisition on the Company's business relationships, operating results andbusiness generally; risks that the acquisition may disrupt the Company's current business plans and operations; the Company's ability toretain and hire key personnel in light of the acquisition; risks related to diverting management's attention from the Company's ongoingbusiness operations; unexpected costs, charges or expenses resulting from the acquisition; potential litigation relating to the acquisition;the ability of the Company to successfully integrate MRO Holdings and its subsidiaries following the Closing and to achieve theanticipated benefits of the acquisition, including estimated cost and operational synergies, and the timeline to realize such benefits; theeffects of the acquisition on the Company's earnings, financial condition, net leverage ratio and credit ratings; the risk that the conditionsto the PIPE Closing are not satisfied; the fact that the PIPE offering may cause dilution to the Company's existing stockholders; theimpact of the acquisition on the Company's business and future financial condition and operating results, including the ability of theCompany or MRO Holdings to repay or prepay indebtedness incurred in connection with the transaction or otherwise; and other factorsdisclosed in the section entitled "Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 2026,as may be updated or supplemented by any subsequent filings with the SEC. Should one or more of these risks or uncertaintiesmaterialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from thosedescribed. The Company derives many of its forward-looking statements from its operating budgets and forecasts, which are based on manydetailed assumptions. While the Company believes that its assumptions are reasonable, it cautions that it is very difficult to predict theimpact of known factors, and it is impossible to anticipate all factors that could affect actual results. These events and uncertainties aredifficult or impossible to predict accurately and many are beyond the Company's control. The risks described in these reports are not theonly risks the Company faces, as additional risks and uncertainties not currently known or foreseeable or deemed immaterial maymaterially adversely affect the Company's business, financial condition or results of operations in future periods. All forward-lookingstatements attributable to the Company, or persons acting on its behalf, are expressly qualified in their entirety by the foregoingcautionary statements. The forward-looking statements included in this press release are made only as of the date hereof. TheCompany assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, futureevents or otherwise, except as required by law. Adjusted EBITDA margin is a "non-GAAP financial measure" as defined in Regulation G of the Securities Exchange Act of 1934, asamended (the "Exchange Act"). We believe this non-GAAP financial measure is relevant and useful for investors as it illustrates our coreoperating performance unaffected by the impact of certain items that management does not believe are indicative of our ongoing andcore operating activities. When reviewed in conjunction with our GAAP results and the accompanying reconciliation, we believe this non-GAAP financial measure provides additional information that is useful to gain an understanding of the factors and trends affecting ourbusiness and provides a means by which to compare our operating performance against that of other companies in the industries inwhich we compete. This non-GAAP measure should be considered as a supplement to, and not as a substitute for, or superior to, thecorresponding measure calculated in accordance with GAAP. Pursuant to the requirements of Regulation G of the Exchange Act, we are providing the following table that reconciles the above-mentioned non-GAAP financial measure to the most directly comparable GAAP financial measure: AAR CORP. and subsidiaries Adjusted EBITDA(In millions - unaudited) Three months endedMay 31, Year endedMay 31,
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2026 2025 2026 2025 Net income $50.7 $ 34.0 $187.7 $ 12.5 Income tax expense 7.0 13.6 58.2 26.4 Other (income) expense, net 1.1 (0.1) 2.1 0.3 Interest expense, net 16.3 18.4 70.5 73.6 Depreciation and amortization 21.0 13.7 72.1 55.2 Acquisition and integration expenses (benefit) 10.2 (0.9) 28.2 10.8 Bargain purchase gain 6.2 –– (29.5) –– Loss (Gain) related to sale and exit of business/joint venture, net (1.2) 7.1 (1.4) 70.3 Gain on sale of headquarters building –– –– (9.8) –– Impairment charge related to product line exit –– –– 4.9 –– Severance charges –– –– 1.0 –– Government COVID-related subsidy liability (reversal) –– 0.8 (0.7) 0.8 FCPA settlement and investigation costs –– –– –– 65.3 Russian bankruptcy court judgment (reversal) –– –– –– (11.1) Contract termination cost –– –– –– 0.2 Stock-based compensation 4.5 4.3 17.8 19.9 Adjusted EBITDA $ 115.8 $ 90.9 $ 401.1 $ 324.2 Net income margin 5.5 % 4.5 % 5.7 % 0.4 % Adjusted EBITDA margin 12.5 % 12.4 % 12.1 % 11.8 % _____________________________ 1 Based on fiscal year 2026 results 2 Based upon AAR fiscal year 2026 and MRO Holdings expected calendar year 2026 results.