Earnings Per Share

12 Months Ended

May 31, 2011

Earnings Per Share

Earnings Per Share

5. Earnings Per Share

        The computation of basic earnings per share is based on the weighted average number of common shares outstanding during each period. The computation of diluted earnings per share is based on the weighted average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options, shares issuable upon vesting of restricted stock awards and shares to be issued upon conversion of convertible debt.

        We use the "if-converted" method in calculating the diluted earnings per share effect of the assumed conversion of our contingently convertible debt issued in fiscal 2006 because the principal for that issuance can be settled in stock, cash or a combination thereof. Under the "if converted" method, the after-tax effect of interest expense related to the convertible securities is added back to net income, and the convertible debt is assumed to have been converted into common shares at the beginning of the period.

        In accordance with ASC 260-10-45, Share-Based Payment Arrangements and Participating Securities and the Two-Class Method, the Company's unvested restricted stock awards are deemed participating securities since these shares are entitled to participate in dividends declared on common shares. During periods of net income, the calculation of earnings per share for common stock exclude income attributable to unvested restricted stock awards from the numerator and exclude the dilutive impact of those shares from the denominator. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company.

        The Company adopted the provisions of this standard during fiscal 2011. The impact of this standard was not material for fiscal 2010 or fiscal 2009.

        The following table provides a reconciliation of the computations of basic and diluted earnings per share information for each of the years in the three-year period ended May 31, 2011 (shares in thousands).

		For the Year Ended May 31,
		2011			2010			2009
Basic EPS:
Income from continuing operations		$	73,139		$	45,436		$	61,144
Less income attributable to participating shares			(2,279	)		—			—
Add loss attributable to noncontrolling interest			—			1,426			—
Income from continuing operations available to common shareholders			70,860			46,862			61,144
Add loss from discontinued operations, net of tax			(3,313	)		(2,234	)		(4,372	)
Net income attributable to AAR available to common shareholders		$	67,547		$	44,628		$	56,772
Basic shares:
	Weighted average common shares outstanding		38,355			38,182			38,059
Earnings per share—basic:
	Earnings from continuing operations	$	1.85		$	1.23		$	1.61
	Loss from discontinued operations, net of tax		(0.09	)		(0.06	)		(0.12	)
	Earnings per share—basic	$	1.76		$	1.17		$	1.49
Diluted EPS:
Income from continuing operations		$	73,139		$	45,436		$	61,144
Add loss attributable to noncontrolling interest			—			1,426			—
Add after-tax interest on convertible debt			5,615			5,274			5,429
Net income from continuing operations for diluted EPS calculation			78,754			52,136			66,573
Add loss from discontinued operations			(3,313	)		(2,234	)		(4,372	)
Net income attributable to AAR for diluted EPS calculation		$	75,441		$	49,902		$	62,201
Diluted shares:
	Weighted average common shares outstanding		38,355			38,182			38,059
	Additional shares from the assumed exercise of stock options		319			196			61
	Additional shares from the assumed vesting of restricted stock		851			645			244
	Additional shares from the assumed conversion of convertible debt		4,068			4,068			4,445
	Weighted average common shares outstanding—diluted		43,593			43,091			42,809
Earnings per share—diluted:
	Earnings from continuing operations	$	1.81		$	1.21		$	1.56
	Loss from discontinued operations, net of tax		(0.08	)		(0.05	)		(0.11	)
	Earnings per share—diluted	$	1.73		$	1.16		$	1.45

        At May 31, 2011, 2010 and 2009, respectively, options to purchase 170,000, 378,000 and 958,000 shares of common stock were outstanding, but were not included in the computation of diluted earnings per share, because the exercise price of these options was greater than the average market price of the common shares for the period then ended.