General Overview

We report our activities in four business segments: Aviation Supply Chain; Maintenance, Repair and Overhaul; Structures and Systems; and Aircraft Sales and Leasing. The table below sets forth consolidated sales for our four business segments for the three-month periods ended August 31, 2008 and 2007.

                                     Three Months Ended
                                         August 31,
                                      2008        2007
Sales:
Aviation Supply Chain              $  153,514   $ 142,708
Maintenance, Repair and Overhaul       86,310      62,647
Structures and Systems                116,769      76,498
Aircraft Sales and Leasing              3,311      24,107
                                   $  359,904   $ 305,960

Since the early part of calendar year 2008, most U.S. air carriers have announced a new wave of cost reduction initiatives, including staffing reductions, route consolidations and capacity reductions. We believe the announced capacity reductions impact 10-15% of the U.S. fleet and principally impact older-generation narrow-body and certain regional aircraft. The announced fleet reductions are in response to high oil prices and softening economic conditions, and are expected to be mostly implemented beginning in the fall of 2008. In addition, certain air carriers in the U.S. and abroad have filed for bankruptcy protection, and some have ceased operations. A reduction in the global operating fleet of passenger aircraft will result in reduced demand for parts support and maintenance activities for the type of aircraft affected.

Recent severe disruptions in the financial markets, together with continued tightening in the credit markets, may affect our customers' ability to raise debt or equity capital. This may reduce the amount of liquidity available to our customers which, in turn, may limit their ability to buy parts, services and aircraft. There is also uncertainty over the direction of the U.S. and global economies as a result of slower growth rates, higher unemployment and weak housing markets. We are monitoring economic conditions for their impact on our customers and markets and assessing both risks and opportunities that may affect our business.

We expect many carriers will continue to seek ways to reduce their cost structure, including outsourcing more of their maintenance and support functions to third parties, while we believe other carriers who have historically outsourced their maintenance requirements will continue to do so. Although we believe we remain well positioned to respond to the market with our broad range of products and services as these trends continue to develop, the factors above may have an adverse impact on our growth rates and our results of operations and financial condition.

During the first quarter of fiscal 2009, sales to defense customers increased 32.2% and represented 40% of consolidated sales. We continue to see opportunities to provide performance-based logistics services and manufactured products supporting our defense customers' requirements. Although it remains difficult for us to predict long-term demand for these types of products and services, we believe we are well positioned with our current portfolio of products and services and growth plans to benefit from longer-term U.S. military deployment and program management strategies.

Results of Operations

Three-Month Period Ended August 31, 2008

Consolidated sales for the first quarter ended August 31, 2008 increased $53,944 or 17.6% over the prior year period. Sales to commercial customers increased 9.7% compared to the prior year reflecting the favorable impact of the Avborne acquisition, increased demand for airframe maintenance and landing gear overhaul and strength in supply chain programs. Sales to defense customers increased 32.2% reflecting the favorable impact of the Summa acquisition and continued strong demand for performance-based logistics programs and specialized mobility products.

In the Aviation Supply Chain segment, sales increased $10,806 or 7.6% reflecting continued strong demand for parts support from defense-related performance-based logistics programs and aftermarket parts sales to commercial customers. Gross profit in the Aviation Supply Chain segment increased $3,433 or 10.7% primarily due to the increased sales volume and the gross profit margin percentage increased to 23.1% from 22.4% in the prior year due to the favorable mix of inventories sold.

In the Maintenance, Repair and Overhaul segment, sales increased $23,663 or 37.8% over the prior year. The increase in sales is attributable to the inclusion of revenue from Avborne, which was acquired in March 2008 and contributed approximately $13,000 of revenue during the first quarter of fiscal 2009, as well as increased revenues at our landing gear overhaul business and airframe maintenance

centers. Gross profit in the Maintenance, Repair and Overhaul segment increased $4,713 or 58.6%, and the gross profit margin percentage increased to 14.8% from 12.8% in the prior year due to increased volume and operational improvement initiatives.

In the Structures and Systems segment, sales increased $40,271 or 52.6% over the prior year. The increase in sales is attributable to the inclusion of revenue from Summa, which was acquired in December 2007 and contributed approximately $28,000 of revenue during the first quarter of fiscal 2009, as well as continued strong demand for specialized mobility products. Gross profit in the Structures and Systems segment increased $8,333 or 91.4%, and the gross profit percentage increased to 14.9% from 11.9% in the prior year due to increased volume and increased shipments of higher margin products in our mobility systems business.

In the Aircraft Sales and Leasing segment, sales decreased $20,796 or 86.3% compared with the prior year. During the first quarter of this fiscal year, we did not sell any aircraft from our wholly-owned aircraft portfolio whereas during the first quarter of the prior year, we sold two aircraft from our wholly-owned portfolio. Gross profit in the Aircraft Sales and Leasing segment decreased $5,881 or 79.3% from the prior year as a result of the reduction in aircraft sales. Our recent strategy in the Aircraft Sales and Leasing segment has been to invest in aircraft through participation in joint ventures and for our own account. At August 31, 2008, the total number of aircraft held in joint ventures was 29 (see Note 8 of Notes to Condensed Consolidated Financial Statements). Earnings from joint ventures increased $428 compared to the prior year. We also own eight aircraft outside of the joint ventures. Of the eight aircraft owned by us outside the aircraft joint ventures, four were acquired prior to September 11, 2001.

Operating income increased $4,890 or 18.2% compared with the prior year's quarter due to increased sales and gross profit, partially offset by an increase in selling, general and administrative expenses. Selling, general and administrative expenses increased $6,136 reflecting the impact of acquisitions and increased spending to support growth as well as investments in operational improvement initiatives. Selling, general and administrative expenses also increased $1,414 due to an increase in the allowance for doubtful accounts and severance expense recognized during the quarter. Net interest expense increased $552 or 14.7% over the prior year principally due to interest on our convertible notes issued in February 2008. Our effective income tax rate increased slightly to 34.5% compared to 34.1% in the prior year.

During the third quarter of fiscal 2007, we decided to exit our non-core industrial turbine business, which was part of the Structures and Systems segment, and classified the results as a discontinued operation (see Note 9 of Notes to Condensed Consolidated Financial Statements).

Income from continuing operations was $18,731 for the first quarter of fiscal 2009 compared to $15,255 in the prior year due to the factors discussed above.

Liquidity and Capital Resources

Historically, we have funded our operating activities and met our commitments through the generation of cash from operations, augmented by the periodic issuance of common stock and debt in the public and private markets. In addition to these cash sources, our current capital resources include our unsecured credit facility. We continually evaluate various financing arrangements, including the issuance of common stock or debt, which would allow us to improve our liquidity position and finance future growth on commercially reasonable terms. Our continuing ability to borrow from our lenders and issue debt and equity securities to the public and private markets in the future may be negatively affected by a number of factors, including general economic conditions, airline industry conditions, geo-political events, including the war on terrorism, and our operating performance. Our ability to generate cash from operations is influenced primarily by our operating performance and changes in working capital. We have a universal shelf registration on file with the Securities and Exchange Commission under which, subject

to market conditions, up to $163,675 of common stock, preferred stock or medium- or long-term debt securities may be issued or sold before December 1, 2008.

At August 31, 2008, our liquidity and capital resources included cash of $75,988 and working capital of $560,283. Our revolving credit agreement, as amended (the "Credit Agreement") with various financial institutions, as lenders, and LaSalle Bank National Association, as administrative agent for the lenders, provides us with unsecured revolving borrowing capacity of up to $250,000. Under certain circumstances, we may request an increase to the revolving commitment by an aggregate amount of up to $75,000, not to exceed $325,000 in total. The term of our Credit Agreement extends to August 31, 2011. Borrowings under the Credit Agreement bear interest at the London Interbank Offered Rate ("LIBOR") plus 100 to 237.5 basis points based on certain financial measurements. There were no borrowings outstanding under this facility at August 31, 2008, however, there were approximately $11,500 of outstanding letters of credit which reduced the availability of this facility. In addition to our domestic facility, we also have $1,946 available under a foreign line of credit.

During the three-month period ended August 31, 2008, our operating activities used $10,499 of cash principally reflecting an increase in inventories, equipment on short- and long-term lease and inventory deposits (reflected in "other") to support our continued growth, as well as a reduction in accounts payable and accrued liabilities. Cash used in operating activities benefitted from net income and depreciation and amortization of $29,401.

During the three-month period ended August 31, 2008, our investing activities used $9,524 of cash principally as a result of capital expenditures of $8,734 which reflects capacity expansion and capability improvements in our Structures and Systems and Maintenance, Repair and Overhaul segments.

During the three-month period ended August 31, 2008, our financing activities used $12,833 of cash which reflects $12,965 of reduction in borrowings (see Note 6 to Condensed Consolidated Financial Statements).

Critical Accounting Policies and Significant Estimates

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States. Management has made estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent liabilities to prepare the consolidated financial statements. The most significant estimates made by management include those related to the allowance for doubtful accounts, adjustments to reduce the value of inventories and aviation equipment on or available for lease, revenue recognition, loss accruals for aviation equipment operating leases, program development costs and assumptions used in determining pension plan obligations. Accordingly, actual results could differ materially from those estimates. The following is a summary of the accounting policies considered critical by management.

Allowance for Doubtful Accounts

Our allowance for doubtful accounts is intended to reduce the value of customer accounts receivable to amounts expected to be collected. In determining the required allowance, we consider

factors such as general and industry-specific economic conditions, customer credit history, and the customer's current and expected future financial performance.

Inventories

Inventories are valued at the lower of cost or market. Cost is determined by the specific identification, average cost or first-in, first-out methods. Provisions are made for excess and obsolete inventories and inventories that have been impaired as a result of industry conditions. We have utilized certain assumptions when determining the market value of inventories, such as historical sales of inventory, current and expected future aviation usage trends, replacement values and expected future demand. Reductions in demand for certain of our inventories or declining market values, as well as differences between actual results and the assumptions utilized by us when determining the market value of our inventories, could result in additional impairment charges in future periods.

Revenue Recognition

Certain supply chain management programs that we provide to our customers contain multiple elements or deliverables, such as program and warehouse management, parts distribution and maintenance and repair services. We recognize revenue for each element or deliverable that can be identified as a separate unit of accounting at the time of delivery based upon the relative fair value of the products and services. In connection with these programs, we are required to make certain judgments and estimates concerning the overall profitability of the program and the relative fair value of each element of the arrangement. Differences may occur between the judgments and estimates made by management and actual program results.

Equipment on or Available for Lease

The cost of assets under lease is original purchase price plus overhaul costs. Depreciation is computed using the straight-line method over the estimated service life of the equipment, and maintenance costs are expensed as incurred.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", 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. When applying the provisions of SFAS No. 144 to equipment on or available for lease, we have utilized certain assumptions to estimate future undiscounted cash flows, including current and future lease rates, lease terms, residual values and market conditions and trends impacting future demand. Differences between actual results and the assumptions utilized by us when determining undiscounted cash flows could result in future impairments of aircraft and engines which are currently being leased or are available for lease.

Program Development Costs

In June 2005, we announced that our Cargo Systems business was selected to provide cargo handling systems for the new Airbus A400M Military Transport Aircraft (A400M). We are subcontractor to Pfalz Flugzeugwerke GmbH (PFW) on this Airbus

program. Our portion of the revenue from this program is expected to exceed $300,000 through fiscal 2015, based on sales projections of the A400M. As of August 31, 2008, we have incurred approximately $48,000 of costs associated with the engineering and development of the cargo system and have capitalized these costs in accordance with SOP 81-1 "Accounting for Performance of Construction - Type and Certain Production - Type Contracts". Sales and related cost of sales will be recognized on the units of delivery method. In determining the recoverability of the capitalized program development costs, we have utilized certain judgments and estimates concerning expected revenues and the cost to manufacture the A400M cargo system. Differences between actual results and the assumptions utilized by us may result in us not fully recovering the value of the program development costs, which would unfavorably impact our financial condition and results of operations.

Pension Plans

The liabilities and net periodic cost of our pension plans are determined utilizing several actuarial assumptions, the most significant of which are the discount rate and the expected long-term rate of return on plan assets.

Our discount rate is determined based on a review of long-term, high quality corporate bonds as of May 31, 2008 and models that match projected benefit payments to coupons and maturities from the high quality bonds. The assumption for the expected long-term return on plan assets is developed through analysis of historical asset returns by investment category, our fund's actual return experience and current market conditions. Changes in the discount rate and differences between expected and actual return on plan assets may impact the amount of net periodic pension expense recognized in our consolidated statement of operations.

New Accounting Standards

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157 (SFAS 157) "Fair Value Measurements." SFAS 157 establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 was effective for fiscal years beginning after November 15, 2007 for financial assets and liabilities, as well as for any other assets that are carried at fair value on a recurring basis in financial statements. In November 2007, the FASB provided a one year deferral of the implementation of SFAS 157 for other non-financial assets and liabilities. We adopted the provisions of SFAS 157 effective June 1, 2008. The adoption did not have an impact on our results of operations and financial position.

In December 2007, the FASB issued SFAS No. 160 (SFAS 160), "Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB 51." This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. Upon its adoption, effective for us as of June 1, 2009, noncontrolling interests will be classified as equity in the Company's financial statements and income and comprehensive income attributed to the noncontrolling interest will be included in the Company's income and comprehensive income. The provisions of this standard must be applied retrospectively upon adoption. We are currently evaluating the impact of adopting SFAS 160 on our results of operations and financial position.

In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 141 (revised 2007) (SFAS 141(R)), "Business Combinations." SFAS 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes and measures the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree. The provisions of SFAS 141(R) are effective for our business combinations occurring on or after June 1, 2009.

In March 2008, the FASB issued SFAS No. 161 (SFAS 161), "Disclosures about Derivative Instruments and Hedging Activities." SFAS 161 amends and expands the disclosure requirements of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", and is effective for fiscal years beginning after November 15, 2008. We do not expect the adoption of SFAS 161 will have a material impact on our results of operations or financial condition.

In May 2008, the FASB issued Staff Position FSP APB 14-1 (FSP APB 14-1), "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)." FSP APB 14-1 requires companies that have issued convertible debt that may be settled wholly or partly in cash when converted, to account for the debt and equity components separately. The value assigned to the bond liability is the estimated value of a similar bond without the conversion feature as of the issuance date. The difference between the proceeds for the convertible debt and the amount reflected as a bond liability is recorded as additional paid-in-capital. Interest expense is recorded using the issuer's comparable debt rate. FSP APB 14-1 will be effective for us beginning June 1, 2009 (fiscal 2010) and will require retrospective application. We continue to review the impact of FSP APB 14-1 on our financial statements, however, we are currently estimating, based on the outstanding convertible notes, the implementation of FSP APB 14-1 will result in a reduction of our convertible notes of approximately $95,000, an increase in capital surplus of approximately $62,000 and an increase in deferred taxes of approximately $33,000. In addition, we expect the implementation of FSP APB 14-1 will reduce our diluted earnings per share by $0.12 to $0.15 per share in fiscal 2010.

Forward-Looking Statements

This report contains certain forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on beliefs of Company management, as well as assumptions and estimates based on information available to the Company as of the dates such assumptions and estimates are made, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, depending on a variety of factors, including those factors discussed under Part II, Item 1A under the heading "Risk Factors". Should one or more of those risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described. Those events and uncertainties are difficult or impossible to predict accurately and many are beyond the Company's control. The Company assumes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.