Earnings Per Share

12 Months Ended

May 31, 2012

Earnings Per Share

Earnings Per Share

6. 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, our 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.

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

        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, 2012 (shares in thousands).

	For the Year Ended May 31,
	2012			2011			2010
Basic EPS:
Net income attributable to AAR and noncontrolling interest	$	68,029		$	69,826		$	43,202
Less income attributable to participating shares		(2,545	)		(2,279	)		—
Less (income) loss attributable to noncontrolling interest		(306	)		—			1,426
Net income attributable to AAR available to common shareholders	$	65,178		$	67,547		$	44,628
Basic shares:
Weighted average common shares outstanding		38,814			38,355			38,182
Earnings per share—basic	$	1.68		$	1.76		$	1.17
Diluted EPS:
Net income attributable to AAR and noncontrolling interest	$	68,029		$	69,826		$	43,202
Less income attributable to participating shares		(2,346	)		—			—
Less (income) loss attributable to noncontrolling interest		(306	)		—			1,426
Add after-tax interest on convertible debt		5,863			5,615			5,274
Net income attributable to AAR available to common shareholders	$	71,240		$	75,441		$	49,902
Diluted shares:
Weighted average common shares outstanding		38,814			38,355			38,182
Additional shares from the assumed exercise of stock options		213			319			196
Additional shares from the assumed vesting of restricted stock		—			851			645
Additional shares from the assumed conversion of convertible debt		4,057			4,068			4,068
Weighted average common shares outstanding—diluted		43,084			43,593			43,091
Earnings per share—diluted	$	1.65		$	1.73		$	1.16

        At May 31, 2012, 2011 and 2010, respectively, options to purchase 1,627,000 shares, 170,000 shares and 378,000 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.