This increase in revenue was driven by strong sales growth in the Aviation Services segment, which increased 13% from $346.7 million to $391.6 million.
The company reports its activities in two business segments: Aviation Services comprised of supply chain and maintenance, repair and overhaul ("MRO") activities and Expeditionary Services comprised of airlift and mobility activities.
Its Aviation segment makes up about 84% of total company revenue and about 89% of gross profit. Operating results included robust performance in Aviation Services, which contributed $66.0 million of gross profit, up $10.0 million or 18% over the prior year.
The company experienced profitability gains across all of its Aviation Services businesses including programs, MRO services, trading and distribution.
Gross profit margins at Aviation Services increased from 16% in the prior year quarter to 17% in the current year as increased sales volume improved profitability within the segment.
"Our Aviation Services segment continues to experience double-digit growth as we deliver on our industry-leading services. We are executing on our strategy to expand our comprehensive portfolio of aviation services, including supply chain and maintenance solutions, to the global commercial and government markets," said John M. Holmes, President and Chief Operating Officer of AAR CORP. Holmes continued, "I'm exceptionally pleased with our sales growth to commercial customers of 20% as we benefited from the successful ramp of our recent program wins, growth in parts supply and expansion of our MRO network."
During the quarter, the company announced the receipt of its first task order from the U.S. Department of State and the commencement of work under the transition phase of the INL/A Worldwide Aviation Support Services (INL/A WASS) contract. These activities followed the October 31, 2017 decision by the U.S. Court of Federal Claims upholding the Department of State's September 1, 2016 award of the contract.
Second quarter sales to commercial customers represented 71% of consolidated sales compared to 64% of consolidated sales in the second quarter of last year. Sales to government and defense customers represented 29% of consolidated sales compared to 36% in the prior year's quarter resulting from the completion of certain expeditionary airlift services contracts and the wind-down of the KC-10 CLS Program.
The company will provide preliminary guidance for Fiscal Year 2019 at their Investor Day scheduled for January 11, 2018.
After the open, shares of AIR extended losses and fell as low as $39.14/share. The stock has since been slowly climbing back and is now down 5% at $41.70/share