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- and nine-month periods ended February 28, 2009 and February 29, 2008.

                                     Three Months Ended        Nine Months Ended
                                      February 28/29,           February 28/29,
                                      2009        2008         2009         2008
Sales:
Aviation Supply Chain              $  138,737   $ 151,227   $   438,333   $ 438,719
Maintenance, Repair and Overhaul       76,951      74,765       250,698     206,091
Structures and Systems                120,033     110,452       351,514     266,733
Aircraft Sales and Leasing              3,071      40,182        11,723      81,690
                                   $  338,792   $ 376,626   $ 1,052,268   $ 993,233

In early 2008, many U.S. air carriers announced a series of cost reduction initiatives, including staffing reductions, route consolidations and capacity reductions. The fleet reductions announced in early 2008 were principally in response to high oil prices. More recent capacity reductions have been in response to the deteriorating U.S. economic environment, including a 6.2% decline in fourth quarter 2008 U.S. gross domestic product and the highest unemployment rate in the U.S. since 1983. 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 has resulted in reduced demand for parts support and maintenance activities for the types of aircraft affected.

Continued disruptions in the financial markets, including tightened credit markets, has affected the ability to raise debt or equity capital. This has reduced the amount of liquidity available to certain of our customers which, in turn, affects their ability to buy parts, services and aircraft. We continue to monitor economic conditions for their impact on our customers and markets, 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 third quarter of fiscal 2009, sales to defense customers increased 4% and represented 44% 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 February 28, 2009

Consolidated sales for the third quarter ended February 28, 2009 declined $37,834 or 10.0% over the prior year period. Sales to commercial customers decreased 18.6% compared to the prior year reflecting lower sales to commercial customers in our Aviation Supply Chain and Aircraft Sales and Leasing segments. Sales to defense customers increased 3.6% reflecting increased sales to defense customers in the Structures and Systems and Aviation Supply Chain segments.

In the Aviation Supply Chain segment, sales declined $12,490 or 8.3% over the prior year period reflecting reduced demand for parts support from commercial customers as a result of industry wide capacity reductions, planned lower sales to a major regional airline customer and the unfavorable impact of foreign currency translation. Gross profit in the Aviation Supply Chain segment decreased $1,936 or 5.3% over the prior year due to the decrease in sales. The gross profit margin percentage increased to 24.8% from 24.0% in the prior year due to the favorable mix of inventories sold.

In the Maintenance, Repair and Overhaul segment, sales increased $2,186 or 2.9% 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 $13,800 of revenue during the third quarter of fiscal 2009. Sales were lower at certain of our MRO facilities reflecting reduced demand as a result of capacity reductions. Gross profit in the Maintenance, Repair and Overhaul segment decreased $258 or 2.3%, and the gross profit margin percentage decreased to 14.1% from 14.9% in the prior year due to reduced volumes at certain of the Company's MRO facilities.

In the Structures and Systems segment, sales increased $9,581 or 8.7% over the prior year. The increase in sales is attributable to continued strong demand for specialized mobility products and precision machined parts. Gross profit in the Structures and Systems segment increased $1,346 or 8.2% reflecting increased sales, the gross profit percentage remained unchanged at 14.8%.

In the Aircraft Sales and Leasing segment, sales decreased $37,111 or 92.4% compared with the prior year as the Company sold no aircraft in the third quarter. In the prior year third quarter, we sold two wide-body aircraft. Gross profit in the Aircraft Sales and Leasing segment decreased $4,832 from the prior year as a result of the reduction in aircraft sales.

Operating income decreased $8,519 or 22.4% compared with the prior year primarily as a result of the decrease in sales and gross profit. Selling, general and administrative expenses increased $2,572, which included $1,900 of severance expense principally associated with a staffing reduction at our Amsterdam-based component repair business.

Net interest expense decreased $2,007 or 32.7% over the prior year principally due to a reduction in borrowings outstanding and lower interest rates on our revolving credit agreement. During the third quarter of fiscal 2009, we retired $6,500 of our convertible notes. The notes were retired for $4,258 cash and the gain after consideration of unamortized debt issuance costs was $2,109 and is reported in gain (loss) on extinguishment of debt on the condensed consolidated statement of operations (see Note 6 of Notes to Condensed Consolidated Financial Statements).

Our effective income tax rate was 27.0% compared to 35.0% in the prior year. During the third quarter of fiscal 2009, upon completion of our fiscal 2008 Federal income tax return, we determined the Company qualified for additional research and development tax credits of $1,900 which were carried forward from fiscal years 2005 through 2008.

Income from continuing operations was $20,024 for the third quarter of fiscal 2009 compared to $20,285 in the prior year due to the factors discussed above.

Nine-Month Period Ended February 28, 2009

Consolidated sales for the nine-months ended February 28, 2009 increased $59,035 or 5.9% over the prior year period. Sales to commercial customers decreased 2.8% compared to the prior year due to declining sales in the Aircraft Sales and Leasing segment. All other segments experienced increased sales to our commercial customers. Sales to defense customers increased 20.9% reflecting increased sales to defense customers in the Structures and Systems and Aviation Supply Chain segments.

In the Aviation Supply Chain segment, sales were essentially flat with the prior year reflecting increased demand for parts support from defense-related performance-based logistics programs and aftermarket parts sales to commercial customers, offset by lower sales at our component repair business, reduced sales to a regional airline customer and the unfavorable impact of foreign currency translation. Gross profit in the Aviation Supply Chain segment increased $2,492 or 2.4% primarily due to the increase in the gross profit margin percentage to 24.1% from 23.5% in the prior year due to the favorable mix of inventories sold.

In the Maintenance, Repair and Overhaul segment, sales increased $44,607 or 21.6% 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 $44,000 of revenue during the first nine months of fiscal 2009, as well as increased revenues at our landing gear overhaul business. Sales were lower at certain of our MRO facilities reflecting reduced demand as a result of capacity reductions. Gross profit in the Maintenance, Repair and Overhaul segment increased $8,037 or 27.6%, and the gross profit margin percentage increased to 14.8% from 14.1% in the prior year due to increased volume and operational improvement initiatives.

In the Structures and Systems segment, sales increased $84,781 or 31.8% over the prior year. The increase in sales is attributable to the inclusion of revenue from Summa, which was acquired in December 2007, as well as continued strong demand for specialized mobility products. Gross profit in the Structures and Systems segment increased $17,751 or 48.9%, and the gross profit percentage increased to 15.4% from 13.6%, in the prior year due to increased volume and increased shipments of higher margin products.

In the Aircraft Sales and Leasing segment, sales decreased $69,967 or 85.6% compared with the prior year. During the nine-months ended February 28, 2009, we sold one aircraft from our wholly-owned aircraft portfolio whereas during the first nine months of the prior year, we sold five aircraft from our wholly-owned portfolio. Gross profit (loss) in the Aircraft Sales and Leasing segment decreased $34,903 from the prior year as a result of the reduction in aircraft sales and the impairment charge of $21,033 recorded in the second quarter of fiscal 2009 (see Note 11 of Notes to Condensed Consolidated Financial Statements). Earnings from joint ventures increased $2,560 compared to the prior year due to gains on the sale of two aircraft held in joint venture.

Operating income decreased $20,035 or 20.8% compared with the prior year due to the impairment charge recorded in the Aircraft Sales and Leasing segment and an increase in selling, general and administrative expenses, partially offset by increased sales and gross profit. Selling, general and administrative expenses increased $15,972 reflecting the impact of acquisitions, increased spending to support marketing efforts and severance expense. Net interest expense decreased $993 or 7.1% over the prior year principally due to a reduction in outstanding borrowings and lower interest rates on our revolving credit agreement. Our effective income tax rate decreased to 32.2% compared to 34.6% in the prior year. The decrease in the effective tax rate was due to the additional research and development tax credits of $1,900 recorded during the third quarter of fiscal 2009.

During the nine-month period ended February 28, 2009, we retired $75,060 of convertible notes. The notes were retired for $48,154 cash and the gain after consideration of unamortized debt issuance costs was $25,317 and is reported in gain (loss) on extinguishment of debt on the condensed consolidated statement of operations (see Note 6 of Notes to Condensed Consolidated Financial Statements).

During the second quarter of fiscal 2009, we sold our non-core industrial turbine business, which was classified as a discontinued operation. Loss on the sale of business, net of tax, was $1,403 (see Note 9 of Notes to Condensed Consolidated Financial Statements).

Income from continuing operations was $60,107 for the nine-months ended February 28, 2009 compared to $53,428 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. Under a universal shelf registration statement filed with the Securities and Exchange Commission that became effective on December 12, 2008, we may offer and sell up to $300,000 of various types of securities, including common stock, preferred stock and medium-term or long-term debt securities, subject to market conditions.

At February 28, 2009, our liquidity and capital resources included cash of $93,742 and working capital of $605,288. 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. Borrowings outstanding under this facility at February 28, 2009 were $75,000, and there were approximately $12,600 of outstanding letters of credit which reduced the availability of this facility. In addition to our Credit Agreement, we also have $2,666 available under a foreign line of credit.

During the nine-month period ended February 28, 2009, our operating activities used $7,928 of cash primarily due to an investment in inventory of $67,897 principally to support our Aviation Supply Chain customers, an increase in accounts receivable of $20,189 and a decrease in accrued liabilities and taxes on income of $14,911. During the nine-month period ended February 28, 2009, cash flow from operations benefited from net income and depreciation and amortization of $89,335.

During the nine-month period ended February 28, 2009, our investing activities used $20,488 of cash principally as a result of capital expenditures of $23,462 which principally reflects capacity expansion and capability improvements in our Structures and Systems and Maintenance, Repair and Overhaul segments, partially offset by proceeds from aircraft joint ventures of $4,230.

During the nine-month period ended February 28, 2009, our financing activities generated $15,081 of cash which reflects proceeds from borrowings on our revolving credit agreement of $75,000, offset by a reduction in borrowings of $59,827 (see Note 6 of Notes 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. The decline in our allowance for doubtful accounts during fiscal 2009 was attributable to write-offs of specific accounts receivable.

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.

During the second quarter of fiscal 2009, we performed a comprehensive review of our aircraft portfolio. The primary objective of this review was to assess the impact of the economic slowdown and credit crisis on market conditions. Based upon that review, and taking into consideration the desire to improve liquidity and generate cash, we made the decision to sell one of the four aircraft acquired before September 11, 2001, and offer two of the remaining three for sale. As a result of this review and taking into consideration our assessment of current market conditions, the Company recorded a $21,033 pre-tax impairment charge to reduce the carrying value of the three aircraft to their net realizable value during the second quarter of fiscal 2009.

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 2020, based on sales projections of the A400M. As of February 28, 2009, we have incurred approximately $35,000 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 as it relates to financial assets and liabilities 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 adoption of SFAS 160, 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 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 $77,000, an increase in capital surplus of approximately $50,000 and an increase in deferred taxes of approximately $27,000. In addition, we expect the implementation of FSP APB 14-1 will reduce our diluted earnings per share by $0.10 to $0.13 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 . . .