CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	May 31, 2011	May 31, 2010	May 31, 2009
Sales:
Sales from products	$ 1,229,320	$ 1,040,794	$ 1,125,561
Sales from services	546,462	275,622	254,968
Total sales	1,775,782	1,316,416	1,380,529
Costs and operating expenses:
Cost of products	1,055,135	890,248	912,878
Cost of services	412,232	185,818	199,814
Cost of sales - impairment charges	5,355		31,133
Selling, general and administrative	173,599	146,693	138,588
Total costs and operating expenses	1,646,321	1,222,759	1,282,413
Gain on sale of product line	5,922
Earnings from joint ventures	3,344	112	8,496
Operating income	138,727	93,769	106,612
Gain on extinguishment of debt	97	893	14,701
Interest expense	(30,670)	(26,831)	(31,408)
Interest income	349	945	1,465
Loss on sale of investments		(1,150)	(1,393)
Income from continuing operations before provision for income taxes	108,503	67,626	89,977
Provision for income taxes	35,364	22,190	28,833
Income from continuing operations	73,139	45,436	61,144
Discontinued operations, net of tax:
Operating loss	(3,313)	(2,234)	(2,969)
Loss on disposal			(1,403)
Loss from discontinued operations	(3,313)	(2,234)	(4,372)
Net income attributable to AAR and noncontrolling interest	69,826	43,202	56,772
Loss attributable to noncontrolling interest		1,426
Net income attributable to AAR	$ 69,826	$ 44,628	$ 56,772
Earnings per share - basic:
Earnings from continuing operations (in dollars per share)	$ 1.85	$ 1.23	$ 1.61
Loss from discontinued operations (in dollars per share)	$ (0.09)	$ (0.06)	$ (0.12)
Earnings per share - basic (in dollars per share)	$ 1.76	$ 1.17	$ 1.49
Earnings per share - diluted:
Earnings from continuing operations (in dollars per share)	$ 1.81	$ 1.21	$ 1.56
Loss from discontinued operations (in dollars per share)	$ (0.08)	$ (0.05)	$ (0.11)
Earnings per share - diluted (in dollars per share)	$ 1.73	$ 1.16	$ 1.45

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	May 31, 2011	May 31, 2010
Current assets:
Cash and cash equivalents	$ 57,433	$ 79,370
Accounts receivable	287,435	238,466
Inventories	363,399	356,983
Rotable spares and equipment on or available for short-term lease	143,875	122,823
Deposits, prepaids and other	38,260	27,194
Deferred tax assets	23,583	21,495
Total current assets	913,985	846,331
Property, plant and equipment, at cost:
Land	4,842	4,842
Buildings and improvements	95,201	89,547
Equipment, furniture and fixtures	459,432	319,396
Property, plant and equipment, gross	559,475	413,785
Accumulated depreciation	(235,098)	(194,139)
Property, plant and equipment, net	324,377	219,646
Other assets:
Goodwill and other intangible assets, net	181,097	190,710
Equipment on long-term lease	93,387	109,564
Investment in joint ventures	48,743	48,433
Other	142,138	85,497
Total other assets	465,365	434,204
Total assets	1,703,727	1,500,181
Current liabilities:
Short-term debt	100,000	45,009
Current maturities of long-term debt	11,323	53,292
Current maturities of non-recourse long-term debt	823	757
Current maturities of long-term capital lease obligations	1,929	1,775
Accounts and trade notes payable	185,096	114,906
Accrued liabilities	116,839	108,950
Total current liabilities	416,010	324,689
Long-term debt, less current maturities	313,981	317,594
Non-recourse debt	11,032	11,855
Capital lease obligations	4,789	6,742
Deferred tax liabilities	98,322	57,335
Other liabilities and deferred income	24,304	35,616
Total noncurrent liabilities	452,428	429,142
Equity:
Preferred stock, $1.00 par value, authorized 250 shares; none issued
Common stock, $1.00 par value, authorized 100,000 shares; issued 44,986 and 44,870 shares, respectively	44,986	44,870
Capital surplus	423,805	416,842
Retained earnings	486,130	419,287
Treasury stock, 5,205 and 5,386 shares at cost, respectively	(100,431)	(104,447)
Accumulated other comprehensive loss	(18,645)	(29,646)
Total AAR shareholders' equity	835,845	746,906
Noncontrolling interest	(556)	(556)
Total equity	835,289	746,350
Total liabilities and equity	$ 1,703,727	$ 1,500,181

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (USD $) In Thousands, unless otherwise specified	Total	Total AAR Stockholders' Equity	Common Stock	Capital Surplus	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interest
Balance at May. 31, 2008	$ 650,867	$ 650,867	$ 43,932	$ 402,995	$ 317,887	$ (100,935)	$ (13,012)
Increase (Decrease) in Stockholders' Equity
Net income	56,772	56,772			56,772
Exercise of stock options and stock awards	553	553	67	1,365		(879)
Tax benefit related to share-based plans	171	171		171
Restricted stock activity	5,059	5,059	202	4,857
Bond hedge and warrant activity	(1,810)	(1,810)		(465)		(1,345)
Equity portion of bond repurchase	(3,894)	(3,894)		(3,894)
Foreign currency translation gain (loss)	(2,759)	(2,759)					(2,759)
Change in unrealized gains (losses) on investments, net of tax	(65)	(65)					(65)
Change in unrecognized pension and post retirement costs, net of tax	(8,160)	(8,160)					(8,160)
Balance at May. 31, 2009	696,734	696,734	44,201	405,029	374,659	(103,159)	(23,996)
Increase (Decrease) in Stockholders' Equity
Net income	43,202	44,628			44,628			(1,426)
Exercise of stock options and stock awards	4,020	4,020	217	4,753		(950)
Tax benefit related to share-based plans	817	817		817
Restricted stock activity	7,391	6,983	452	6,531				408
Bond hedge and warrant activity	(252)	(252)		86		(338)
Equity portion of bond repurchase	(374)	(374)		(374)
Foreign currency translation gain (loss)	(2,238)	(2,238)					(2,238)
Change in unrecognized pension and post retirement costs, net of tax	(3,412)	(3,412)					(3,412)
Contributions from noncontrolling interest	462							462
Balance at May. 31, 2010	746,350	746,906	44,870	416,842	419,287	(104,447)	(29,646)	(556)
Increase (Decrease) in Stockholders' Equity
Net income	69,826	69,826			69,826
Cash dividends	(2,983)	(2,983)			(2,983)
Exercise of stock options and stock awards	5,154	5,154	1	3,719		1,434
Tax benefit related to share-based plans	247	247		247
Restricted stock activity	8,156	8,156	115	2,783		5,258
Repurchase of shares	(2,539)	(2,539)				(2,539)
Bond hedge and warrant activity	(236)	(236)		(99)		(137)
Equity portion of bond repurchase	313	313		313
Foreign currency translation gain (loss)	3,290	3,290					3,290
Change in unrecognized pension and post retirement costs, net of tax	7,711	7,711					7,711
Balance at May. 31, 2011	$ 835,289	$ 835,845	$ 44,986	$ 423,805	$ 486,130	$ (100,431)	$ (18,645)	$ (556)

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	May 31, 2011	May 31, 2010	May 31, 2009
Cash flows provided from operating activities:
Net income attributable to AAR and noncontrolling interest	$ 69,826	$ 43,202	$ 56,772
Adjustments to reconcile net income attributable to AAR and noncontrolling interest to net cash provided from operating activities:
Depreciation and amortization	59,296	38,930	40,094
Amortization of stock-based compensation	12,308	9,335	6,216
Amortization of debt discount	12,309	11,589	13,502
Deferred tax provision	40,644	(2,659)	5,533
Tax benefits from exercise of stock options	(247)	(817)	(171)
Impairment charges	5,355		31,133
Gain on extinguishment of debt	(97)	(893)	(14,701)
Loss on sale of investment		1,150	1,393
Gain on sale of product line	(5,922)
Earnings from joint ventures	(3,344)	(112)	(8,496)
Loss on disposal of business, net of tax			1,403
Changes in certain assets and liabilities, net of acquisitions:
Accounts and notes receivable	(45,026)	33,926	(26,388)
Inventories	(13,017)	19,015	(45,414)
Rotable spares and equipment on or available for short-term lease	(21,598)	19,157	4,270
Equipment on long-term lease	3,310	3,944	(1,265)
Accounts and trade notes payable	48,701	(1,474)	2,651
Accrued and other liabilities	8,230	(376)	(7,423)
Other, primarily deposits and program costs	(62,130)	(20,761)	5,342
Net cash provided from operating activities	108,598	153,156	64,451
Cash flows provided from (used in) investing activities:
Property, plant and equipment expenditures	(124,879)	(28,855)	(27,535)
Proceeds from disposal of assets	24	109	67
Proceeds from sale of product line	10,000		767
Proceeds from disposal of business		650	100
Proceeds from sale of available for sale securities		1,160	1,551
Company acquired, net of cash		(193,989)
Proceeds from aircraft joint ventures	8,306	44	4,230
Investment in aircraft joint ventures	(9,893)	(4,239)	(828)
Proceeds from leveraged leases		5,220	(319)
Other	(2,293)	(2,440)	(2,260)
Net cash used in investing activities	(118,735)	(222,340)	(24,227)
Cash flows provided from (used in) financing activities:
Change in short-term borrowings, net	54,991	60,004	49,090
Reduction in borrowings, net	(61,532)	(25,221)	(78,400)
Reduction in capital lease obligations	(1,796)	(1,815)	(1,635)
Reduction in equity due to convertible bond repurchase	(236)	(374)	(5,992)
Cash dividends	(2,983)
Purchase of treasury stock	(2,539)
Stock option exercises	2,021	2,297	599
Tax benefits from exercise of stock options	247	817	171
Contributions from noncontrolling interest		462
Net cash provided from (used in) financing activities	(11,827)	36,170	(36,167)
Effect of exchange rate changes on cash	27	(121)	(943)
Increase (decrease) in cash and cash equivalents	(21,937)	(33,135)	3,114
Cash and cash equivalents, beginning of year	79,370	112,505	109,391
Cash and cash equivalents, end of year	$ 57,433	$ 79,370	$ 112,505

Summary of Significant Accounting Policies

12 Months Ended

May 31, 2011

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Description of Business

AAR CORP. is a diversified provider of products and services to the worldwide aviation and government and defense markets. Products and services include: aviation supply chain and parts support programs; maintenance, repair and overhaul of aircraft and landing gear; design and manufacture of specialized mobility and cargo systems and composite and other high-end precision machined structures; expeditionary airlift services; aircraft modifications and aircraft sales and leasing. We serve commercial, defense and governmental aircraft fleet operators, original equipment manufacturers, and independent service providers around the world, and various other domestic and foreign military customers.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries after elimination of intercompany accounts and transactions. The equity method of accounting is used for investments in other companies in which we have significant influence; generally this represents common stock ownership of at least 20% and not more than 50% (see Note 8 for a discussion of aircraft joint ventures).

Revenue Recognition

Sales and related cost of sales for product sales are recognized upon shipment of the product to the customer. Our standard terms and conditions provide that title passes to the customer when the product is shipped to the customer. Sales of certain defense products are recognized upon customer acceptance, which includes transfer of title. Under the majority of our expeditionary airlift services contracts, we are paid and record as revenue a fixed daily amount per aircraft for each day an aircraft is available to perform airlift services. In addition, we are paid and record as revenue an amount which is based on number of hours flown. Sales from services and the related cost of services are generally recognized when customer-owned material is shipped back to the customer. We have adopted this accounting policy because at the time the customer-owned material is shipped back to the customer, all services related to that material are complete as our service agreements generally do not require us to provide services at customer sites. Furthermore, serviced units are typically shipped to the customer immediately upon completion of the related services. Sales and related cost of sales for certain long-term manufacturing contracts and certain large airframe maintenance contracts are recognized by the percentage of completion method, either based on the relationship of costs incurred to date to estimated total costs or the units of delivery method. Lease revenues are recognized as earned. Income from monthly or quarterly rental payments is recorded in the pertinent period according to the lease agreement. However, for leases that provide variable rents, we recognize lease income on a straight-line basis. In addition to a monthly lease rate, some engine leases require an additional rental amount based on the number of hours the engine is used in a particular month. Lease income associated with these contingent rentals is recorded in the period in which actual usage is reported to us by the lessee, which is normally the month following the actual usage.

Certain supply chain management programs we provide 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.

Goodwill and Other Intangible Assets

Under accounting standards for goodwill and other intangible assets, goodwill and other intangible assets deemed to have indefinite lives are not amortized, but are subject to impairment tests at least annually, or more frequently if indicators of impairment are present. We perform our annual tests of impairment as of May 31.

The amount reported under the caption "Goodwill and other intangible assets, net" is comprised of goodwill and intangible assets associated with acquisitions we made, principally since the beginning of fiscal 1998. Each of the acquisitions involved a single business that now comprises or is included in a single operating segment.

Goodwill by reportable segment is as follows:

	May 31,

	2011		2010
Aviation Supply Chain	$	20,040	$	20,040
Government and Defense Services		38,304		38,304
Maintenance, Repair and Overhaul		28,108		28,108
Structures and Systems		47,549		47,549

	$	134,001	$	134,001

May 31, 2010 goodwill was increased by $22,457 to reflect final purchase price allocation related to the Airlift acquisition.

At May 31, 2011 and 2010, intangible assets, other than goodwill, are comprised of the following:

	May 31,

	2011			2010
Customer relationships	$	39,449		$	39,449
Lease agreements		21,500			21,500
FAA certificates		5,000			5,000
Covenants not to compete		1,570			1,570
Trademarks		600			600
Other		300			300

		68,419			68,419
Accumulated amortization		(21,323	)		(11,710	)

	$	47,096		$	56,709

Customer relationships are being amortized over one- to twenty-year periods, the lease agreements are being amortized over an eighteen-year period, the FAA certificates are being amortized over a twenty-year period, the covenants not to compete are being amortized over a three-year period and trademarks and other are being amortized over a one-year period. Amortization expense recorded during fiscal 2011, 2010 and 2009 was $9,613, $4,567 and $4,852, respectively. The estimated aggregate amount of amortization expense for intangible assets in each of the next five fiscal years is $7,861 in 2012, $6,740 in 2013, $2,826 in 2014, $2,777 in 2015 and $2,616 in 2016.

Cash and Cash Equivalents

At May 31, 2011 and 2010, cash equivalents of approximately $0 and $15,000, respectively, consist of investments in commercial paper and certificates of deposit that mature within 90 days. The carrying amount of cash equivalents approximates fair value at May 31, 2010.

Marketable Securities

Occasionally we will invest in equity securities and classify these equity securities as available for sale in the Consolidated Balance Sheet. As of May 31, 2011 and 2010, we had no amounts invested in available for sale securities.

During fiscal 2010 and 2009, we sold investments in securities that were classified as available for sale. The loss on sale of these investments was $1,150 and $1,393 in fiscal 2010 and 2009, respectively.

Foreign Currency

Our foreign subsidiaries utilize the local currency as their functional currency. All balance sheet accounts of foreign subsidiaries transacting business in currencies other than the U.S. dollar are translated at year-end exchange rates. Revenues and expenses are translated at average exchange rates during the year. Translation adjustments are excluded from the results of operations and are recorded in stockholders' equity as a component of accumulated other comprehensive loss.

Financial Instruments and Concentrations of Market or Credit Risk

Financial instruments that potentially subject us to concentrations of market or credit risk consist principally of trade receivables. While our trade receivables are diverse and represent a number of entities and geographic regions, the majority are with the U.S. Department of Defense and its contractors and entities in the aviation industry. Accounts receivable due from the U.S. Department of Defense were $70,652 and $37,379 at May 31, 2011 and 2010, respectively. We perform regular evaluations of customer payment experience, current financial condition and risk analysis. We may require collateral in the form of security interests in assets, letters of credit, and/or obligation guarantees from financial institutions for transactions executed on other than normal trade terms.

The carrying amounts of cash and cash equivalents, accounts receivable, short-term borrowings and accounts and trade notes payable approximate fair value because of the short-term maturity of these instruments. The carrying value of long-term debt bearing a variable interest rate approximates fair value.

Fair value estimates are made at a specific point in time based on relevant market information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Inventories

Inventories are valued at the lower of cost or market (estimated net realizable value). Cost is determined by the specific identification, average cost or first-in, first-out methods. From time-to-time, we purchase aircraft and engines for disassembly to individual parts and components. Costs are assigned to these individual parts and components utilizing list prices from original equipment manufacturers and recent sales history.

The following is a summary of inventories:

	May 31,

	2011		2010
Raw materials and parts	$	61,314	$	62,737
Work-in-process		51,725		51,523
Purchased aircraft, parts, engines and components held for sale		250,360		242,723

	$	363,399	$	356,983

Equipment under Leases

Lease revenue is recognized as earned. The cost of the asset under lease is original purchase price plus overhaul costs. Depreciation for aircraft is computed using the straight-line method over the estimated service life of the equipment. The balance sheet classification of equipment under lease is generally based on lease term, with fixed-term leases less than twelve months generally classified as short-term and all others generally classified as long-term.

Equipment on short-term lease includes aircraft engines and parts on or available for lease to satisfy customers' immediate short-term requirements. The leases are renewable with fixed terms, which generally vary from one to twelve months. Equipment on long-term lease consists of aircraft and engines on lease with commercial airlines generally for more than twelve months.

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 accounting standards addressing impairment to our aircraft and engine portfolio, we utilize 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 (see Note 12—Impairment Charges). Unfavorable differences between actual and expected results could result in future impairments in our aircraft and engine lease portfolio.

Future rent due to us under non-cancelable leases during each of the next five fiscal years is $18,919 in 2012, $17,319 in 2013, $17,330 in 2014, $17,146 in 2015 and $10,033 in 2016.

Property, Plant and Equipment

Depreciation is computed on the straight-line method over useful lives of 10-40 years for buildings and improvements and 3-10 years for equipment, furniture and fixtures and capitalized software. Aircraft and major components in service to support our Airlift business are depreciated over their estimated useful lives which is generally 7-20 years. Leasehold improvements are amortized over the shorter of the estimated useful life or the term of the applicable lease.

Repair and maintenance expenditures are expensed as incurred. Upon sale or disposal, cost and accumulated depreciation are removed from the accounts, and related gains and losses are included in results of operations.

Comprehensive Income

A summary of the components of comprehensive income is as follows:

		For the Year Ended May 31,

		2011		2010			2009
Net income attributable to AAR and noncontrolling interest		$	69,826	$	43,202		$	56,772
Other comprehensive income—
	Cumulative translation adjustments		3,290		(2,238	)		(2,759	)
	Unrealized loss on investment, net of tax		—		—			(65	)
	Unrecognized pension and post retirement costs, net of tax		7,711		(3,412	)		(8,160	)

Total comprehensive income		$	80,827	$	37,552		$	45,788

Supplemental Information on Cash Flows

Supplemental information on cash flows follows:

	For the Year Ended May 31,

	2011		2010		2009
Interest paid	$	17,167	$	13,629	$	17,014
Income taxes paid		9,812		30,149		29,106
Income tax refunds and interest received		4,541		709		432

During fiscal 2011, treasury stock decreased $4,016 reflecting the re-issuance of shares upon exercise of stock options, net of shares withheld to satisfy statutory tax obligations and restricted stock award grants of $6,692, partially offset by the purchase of treasury shares of $2,539 and the impact of net share settlements of $137 of bond hedge and warrants associated with convertible bond repurchases during fiscal 2011. During fiscal 2010, treasury stock increased $1,288 reflecting the impact of net share settlements of $338 of bond hedge and warrants associated with convertible bond repurchases during fiscal 2010, and the impact from shares withheld to satisfy statutory tax obligations associated with the exercise of stock options of $950. During fiscal 2009, treasury stock increased $2,224 reflecting the impact of net share settlements of $1,345 of bond hedge and warrants associated with convertible bond repurchases during fiscal 2009, and the impact from shares withheld to satisfy statutory tax obligations associated with the exercise of stock options of $879.

Use of Estimates

We have made estimates and utilized certain assumptions relating to the reporting of assets and liabilities and the disclosures of contingent liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States. Actual results could differ from those estimates.

Reclassification

Certain amounts in the prior years' consolidated financial statements have been reclassified to conform to the current year's presentation.

New Accounting Standards

In December 2010, the Financial Accounting Standards Board ("FASB") issued ASU 2010-28, Intangibles—Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts ("ASU 2010-28"). ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. We are required to adopt ASU 2010-28 on June 1, 2011 and do not expect it to have an impact on the Company's consolidated financial statements.

Financing Arrangements

12 Months Ended

May 31, 2011

Financing Arrangements

Financing Arrangements

2. Financing Arrangements

Revolving Credit Facilities

Our revolving credit agreement (the "Credit Agreement") with various financial institutions, as lenders, and Bank of America, N.A., as administrative agent for the lenders, provides us with unsecured revolving borrowing capacity of up to $400,000. Under certain circumstances, we may request an increase to the revolving commitment by an aggregate amount of up to $50,000, not to exceed $450,000 in total. The term of our Credit Agreement extends to April 12, 2016. Borrowings under the Credit Agreement bear interest at the offered Eurodollar Rate (defined as the British Bankers Association LIBOR Rate) plus 125 to 225 basis points based on certain financial measurements if a Eurodollar Rate loan, or at the offered fluctuating Base Rate plus 25 to 125 basis points based on certain financial measurements if a Base Rate loan. Borrowings outstanding under this facility at May 31, 2011 were $100,000, and there were $10,481 of outstanding letters of credit which reduced the availability of this facility to $289,519 at May 31, 2011. In addition to our Credit Agreement, we also have $3,676 available under a foreign line of credit.

The Credit Agreement in part requires the Company to comply with certain financial covenants, including a fixed charge coverage ratio, a leverage ratio, and a minimum tangible net worth. The Credit Agreement contains certain affirmative and negative covenants, including those relating to financial reporting and notification, payment of indebtedness, taxes and other obligations, compliance with applicable laws, and limitations on additional liens, indebtedness, acquisitions, investments and disposition of assets. The Credit Agreement also requires significant domestic subsidiaries of the Company to provide a guarantee of payment under the Credit Agreement.

Short-term borrowing activity under the Credit Agreement and its predecessor facility during fiscal 2011, 2010 and 2009 was as follows:

	For the Year Ended May 31,

	2011			2010			2009
Maximum amount borrowed	$	135,000		$	150,000		$	75,000
Average daily borrowings		70,603			40,795			45,397
Average interest rate during the year		1.95	%		1.72	%		2.38	%

In connection with the acquisition of Airlift described in Note 7, we entered into a loan agreement with The Huntington National Bank (the "Huntington Loan Agreement"). The agreement creates a $65,000 secured revolving credit facility, subject to borrowing limitations. Borrowings under the Huntington Loan Agreement are secured by aircraft and related engines and components owned by the Company and the agreements under which such aircraft are leased to third-parties. The Huntington Loan Agreement expires on April 23, 2015. Borrowings under the Huntington Loan Agreement bear interest at LIBOR plus 325 basis points. As of May 31, 2011, $54,940 was outstanding under this agreement.

A summary of our recourse and non-recourse long-term debt is as follows:

	May 31,

	2011			2010
Recourse debt
Notes payable due May 15, 2011 with interest at 8.39% payable semi-annually on June 1 and December 1	$	—		$	42,000
Note payable due July 19, 2012 with interest at 7.22%, payable monthly		2,217			4,116
Note payable due May 1, 2015 with interest at 3.44%, payable monthly		54,940			64,225
Mortgage loan (secured by Wood Dale, Illinois facility) due August 1, 2015 with interest at 5.01%		11,000			11,000
Convertible notes payable due March 1, 2014 with interest at 1.625% payable semi-annually on March 1 and September 1		73,418			69,957
Convertible notes payable due March 1, 2016 with interest at 2.25% payable semi-annually on March 1 and September 1		51,309			53,652
Convertible notes payable due February 1, 2026 with interest at 1.75% payable semi-annually on February 1 and August 1		107,420			100,828
Industrial revenue bond (secured by trust indenture on property, plant and equipment) due August 1, 2018 with floating interest rate, payable monthly		25,000			25,108

Total recourse debt		325,304			370,886
Current maturities of recourse debt		(11,323	)		(53,292	)

Long-term recourse debt	$	313,981		$	317,594

Non-recourse debt
Non-recourse note payable due July 19, 2012 with interest at 7.22%	$	8,201		$	8,201
Non-recourse note payable due April 3, 2015 with interest at 8.38%		3,654			4,411

Total non-recourse debt		11,855			12,612
Current maturities of non-recourse debt		(823	)		(757	)

Long-term non-recourse debt	$	11,032		$	11,855

Recourse debt

During February 2008, we completed the sale of $250,000 par value of convertible notes, consisting of $137,500 aggregate principal amount of 1.625% convertible senior notes due 2014 and $112,500 aggregate principal amount of 2.25% convertible senior notes due 2016 (together, the "Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended. Interest under the Notes is payable semiannually on March 1 and September 1.

Holders may convert their Notes based on a conversion rate of 28.1116 shares of our common stock per $1,000 principal amount of Notes, which is equivalent to an initial conversion price of $35.57 per share, only under the following circumstances: (i) during any calendar quarter beginning after March 31, 2008 (and only during such calendar quarter) if, as of the last day of the preceding calendar quarter, the closing price of our common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of such preceding calendar quarter is more than 130% of the applicable conversion price per share of common stock on the last day of such preceding calendar quarter; (ii) during the five business day period after any five consecutive trading day period in which the trading price per $1,000 principal amount of notes of the applicable series for each day of that period was less than 98% of the product of the closing price of our common stock and the then applicable conversion rate; (iii) if a designated event or similar change of control transaction occurs; (iv) upon specified corporate transactions; or (v) beginning on February 1, 2014, in the case of the 2014 notes, or February 1, 2016, in the case of the 2016 notes, and ending at the close of business on the business day immediately preceding the applicable maturity date.

Upon conversion, a holder of the Notes will receive for each $1,000 principal amount, in lieu of common stock, an amount in cash equal to the lesser of (i) $1,000 and (ii) the conversion value of a number of shares of our common stock equal to the conversion rate. If the conversion value exceeds the principal amount, we will also deliver at our election, cash or common stock or a combination thereof having a value equal to such excess amount.

The Notes are senior, unsecured obligations and rank equal in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. Costs associated with the issuance and sale of the Notes of approximately $4,366 are being amortized using the effective interest method over a six- and eight-year period.

In connection with the issuance of the Notes, we entered into convertible note hedge transactions ("Note Hedges") with respect to our common stock with Merrill Lynch Financial Markets, Inc. ("Hedge Provider"). The Note Hedges are exercisable solely in connection with any conversion of the Notes and provide for us to receive shares of our common stock from the Hedge Provider equal to the number of shares issuable to the holders of the Notes upon conversion. We paid $69,676 for the Note Hedges.

In addition, we entered into separate warrant transactions with Merrill Lynch Financial Markets, Inc. whereby we issued warrants to purchase 7,028,000 shares of our common stock at an exercise price of $48.83 per share. We received $40,114 from the sale of these warrants. The Note Hedges and warrant transactions are intended to reduce potential dilution to our common stock upon future conversion of the Notes and generally have the effect of increasing the conversion price of the Notes to approximately $48.83 per share.

Net proceeds from the Notes transaction after paying expenses were approximately $214,410 and were used to repay the balance outstanding under our unsecured revolving credit facility, to pay for the net cost of the Note Hedges and warrant transactions and for general corporate purposes.

On February 1, 2006, we completed the sale of $150,000 par value principal amount of convertible senior notes. The notes are due on February 1, 2026 unless earlier redeemed, repurchased or converted, and bear interest at 1.75% payable semiannually on February 1 and August 1.

A holder may convert the notes into shares of common stock based on a conversion rate of 33.9789 shares per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $29.43 per share, under the following circumstances: (i) during any calendar quarter beginning after March 31, 2006 (and only during such calendar quarter), if, as of the last day of the preceding calendar quarter, the closing price of our common stock for at least 20 trading days in a period of 30 consecutive trading days ending on the last trading day of such preceding calendar quarter is more than 120% of the applicable conversion price per share of common stock on the last day of such preceding calendar quarter; (ii) during the five business day period after any five consecutive trading day period in which the "trading price" per $1,000 principal amount of notes for each day of that period was less than 98% of the product of the closing price of our common stock and the then applicable conversion rate; (iii) upon a redemption notice; (iv) if a designated event or similar change of control transaction occurs; (v) upon specified corporate transactions; or (vi) during the ten trading day period ending at the close of business on the business day immediately preceding the stated maturity date on the notes. Upon conversion, we will have the right to deliver, in lieu of shares of our common stock, cash or a combination of cash and shares of common stock, at our option, in an amount per note equal to the applicable conversion rate multiplied by the applicable stock price.

We may redeem for cash all or a portion of the notes at any time on or after February 6, 2013 at specified redemption prices. Holders of the notes have the right to require us to purchase for cash all or any portion of the notes on February 1, 2013, 2016 and 2021 at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest, if any, to the purchase date. The notes are senior, unsecured obligations and rank equal in right of payment with all other unsecured and unsubordinated indebtedness.

The mortgage loan due August 1, 2015 is secured by our Wood Dale, Illinois facility. At May 31, 2011, the net book value of our Wood Dale, Illinois facility is $13,601.

During fiscal 2011, we retired $6,000 par value of our 2.25% convertible notes due March 1, 2016. The notes were retired for $4,667 cash, and the gain of $97, after consideration of unamortized discount and debt issuance costs, is recorded in gain on extinguishment of debt on the Consolidated Statements of Income.

During fiscal 2010, we retired $13,110 par value of our 1.625% convertible notes due March 1, 2014 and $2,000 par value of our 2.25% convertible notes due March 1, 2016. Collectively, the convertible notes were retired for $11,543 cash, and the gain of $893, after consideration of unamortized debt issuance costs, is recorded in gain on extinguishment of debt on the Consolidated Statements of Income.

During fiscal 2009, we retired $30,279 par value of our 1.75% convertible notes due February 1, 2026, $40,156 par value of our 1.625% convertible notes due March 1, 2014 and $40,075 par value of our 2.25% convertible notes due March 1, 2016. Collectively, the convertible notes were retired for $72,916 cash, and the gain after consideration of unamortized debt issuance costs of $14,701 is recorded in gain on extinguishment of debt on the Consolidated Statements of Income.

We are subject to a number of covenants under our financing arrangements, including restrictions which relate to the payment of cash dividends, maintenance of minimum net working capital and tangible net worth levels, fixed charge coverage ratio, sales of assets, additional financing, purchase of our shares and other matters. We are in compliance with all financial covenants under our financing arrangements. The aggregate par value of long-term recourse debt maturing during each of the next five fiscal years is $11,323 in 2012, $9,465 in 2013, $93,520 in 2014, $27,083 in 2015 and $75,425 in 2016. At May 31, 2011, the face value of our long-term recourse debt was $361,537 and the estimated fair value was approximately $372,000. The fair value was estimated using available market information.

On June 1, 2009, we adopted a new accounting standard that clarifies the accounting for convertible debt instruments that may be settled wholly or partly in cash when converted, and requires convertible debt to be accounted for as two components: (i) a debt component which is recorded upon issuance at the estimated fair value of a similar straight-debt instrument without the debt-for-equity conversion feature; and (ii) an equity component that is included in capital surplus and represents the estimated fair value of the conversion feature at issuance. The bifurcation of the debt and equity components results in a discounted carrying value of the debt component compared to the principal amount. The discount is accreted to the carrying value of the debt component through interest expense over the expected life of the debt using the effective interest method.

As required by the transition provisions of this new accounting standard, we have adjusted the consolidated financial statements for the year ended May 31, 2009 to reflect retroactive application of its provisions. The information contained in the consolidated financial statements and notes thereto reflect the adjustments as a result of the adoption of the new accounting standard.

As of May 31, 2011 and 2010, the long-term debt and equity component (recorded in capital surplus, net of income tax benefit) consisted of the following:

		May 31,

		2011			2010
Long-term debt:
	Principal amount	$	268,380		$	274,380
	Unamortized discount		(36,233	)		(49,943	)

	Net carrying amount	$	232,147		$	224,437

Equity component, net of tax		$	74,966		$	74,653

The discount on the liability component of long-term debt is being amortized using the effective interest method based on an effective rate of 8.48% for our 1.75% convertible notes; 6.82% for our 1.625% convertible notes and 7.41% for our 2.25% convertible notes. For our 1.75% convertible notes, the discount is being amortized through February 1, 2013, which is the first put date for those notes. For our 1.625% and 2.25% convertible notes, the discount is being amortized through their respective maturity dates of March 1, 2014 and March 1, 2016.

As of May 31, 2011 and 2010, for each of our convertible note issuances, the "if converted" value does not exceed its principal amount.

The interest expense associated with the convertible notes was as follows:

	For the Year Ended May 31,

	2011		2010		2009
Coupon interest	$	4,932	$	5,102	$	6,517
Amortization of deferred financing fees		754		775		966
Amortization of discount		12,309		11,589		13,502

Interest expense related to convertible notes	$	17,995	$	17,466	$	20,985

The following table sets forth the effect of the retrospective application of the new accounting standard on fiscal 2009.

Consolidated Statement of Income:

		Twelve Months Ended May 31, 2009

		Previously Reported			Impact from New Standard			As Adjusted
Gain (loss) on extinguishment of debt		$	35,316		$	(20,615	)	$	14,701
Interest expense			18,363			13,045			31,408
Provision for income taxes			40,614			(11,781	)		28,833
Income from continuing operations			83,023			(21,879	)		61,144
Net income attributable to AAR			78,651			(21,879	)		56,772
Earnings per share—basic:
	Earnings from continuing operations	$	2.19		$	(0.58	)	$	1.61
	Loss from discontinued operations		(0.12	)		—			(0.12	)

		$	2.07		$	(0.58	)	$	1.49

Earnings per share—diluted:
	Earnings from continuing operations	$	1.98		$	(0.42	)	$	1.56
	Loss from discontinued operations		(0.11	)		—			(0.11	)

		$	1.87		$	(0.42	)	$	1.45

Non-recourse debt

On May 31, 2011, our total non-recourse debt balance is $11,855 and is secured by two aircraft with a net book value of $26,963. The aggregate amount of long-term non-recourse debt maturing during the next four fiscal years is $823 in 2012, $9,095 in 2013, $972 in 2014 and $965 in 2015.

Stock-Based Compensation

12 Months Ended

May 31, 2011

Stock-Based Compensation

Stock-Based Compensation

3. Stock-Based Compensation

We provide stock-based awards under the AAR CORP. Stock Benefit Plan ("Stock Benefit Plan") which has been approved by our stockholders. Under this plan, we are authorized to grant stock options to employees and non-employee directors that allow the grant recipients to purchase shares of common stock at a price not less than the fair market value of the common stock on the date of grant. Generally, stock options awarded expire ten years from the date of grant and become exercisable in three, four or five equal annual increments commencing one year after the date of grant. We issue common stock upon the exercise of stock options. In addition to stock options, the Stock Benefit Plan also provides for the grant of restricted stock awards and performance-based restricted stock awards. The number of performance-based shares earned is based on achievement of certain company-wide financial goals or stock price targets. The Stock Benefit Plan also provides for the grant of stock appreciation units and restricted stock unit awards; however, to date, no stock appreciation units or restricted stock units have been granted.

Restricted stock grants are designed, among other things, to align employee interests with the interests of stockholders and to encourage the recipient to build a career with the Company. Restricted stock typically vests over periods of three to ten years from date of grant. Restricted stock grants may be performance-based with vesting to occur over periods of one to ten years. All restricted stock that has been granted and earned according to performance criteria carries full dividend and voting rights, regardless of whether it has vested.

Typically, stock options and restricted stock are subject to forfeiture prior to vesting if the employee terminates employment for any reason other than death, retirement or disability, or if we terminate employment for cause. A total of 7,933,000 shares have been granted under the Stock Benefit Plan since its inception, and as of May 31, 2011, a total of 3,766,606 shares were available for future grant under the Stock Benefit Plan.

Stock Options

During fiscal 2011, 2010 and 2009, we granted stock options representing 720,970 shares, 694,500 shares and 184,750 shares, respectively.

The weighted average fair value of stock options granted during fiscal 2011, 2010 and 2009 was $8.06, $7.45 and $8.27, respectively. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

	Stock Options Granted In Fiscal Year

	2011			2010			2009
Risk-free interest rate		1.8	%		2.3	%		3.3	%
Expected volatility of common stock		47.0	%		49.1	%		38.9	%
Dividend yield		0.0	%		0.0	%		0.0	%
Expected option term in years		5.8			6.0			6.0

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on historical volatility of our common stock and the expected option term represents the period of time that the stock options granted are expected to be outstanding based on historical exercise trends. The dividend yield represents our anticipated cash dividends at the grant date over the expected option term.

A summary of stock option activity for the three years ended May 31, 2011 follows (shares in thousands):

	2011					2010					2009

	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at beginning of year		1,543		$	19.28		1,225		$	21.18		1,425		$	21.53
Granted		721		$	17.54		695		$	15.21		185		$	19.26
Exercised		(128	)	$	15.85		(217	)	$	12.47		(68	)	$	9.66
Cancelled		(142	)	$	21.79		(160	)	$	22.60		(317	)	$	22.11

Outstanding at end of year		1,994		$	18.56		1,543		$	19.28		1,225		$	21.18

Options exercisable at end of year		935		$	19.40		663		$	20.92		945		$	19.89

The total fair value of stock options that vested during fiscal 2011, 2010 and 2009 was $4,006, $690 and $434, respectively. The total intrinsic value of stock options exercised during fiscal 2011, 2010 and 2009 was $1,344, $2,353 and $493, respectively. The aggregate intrinsic value of options outstanding as of May 31, 2011 was $18,126. The tax benefit realized from stock options exercised during fiscal 2011, 2010 and 2009 was $247, $817 and $171, respectively. Expense charged to operations for stock options during fiscal 2011, 2010 and 2009 was $4,152, $2,265 and $781, respectively, recorded in selling, general and administrative expenses. As of May 31, 2011, we had $6,731 of unrecognized compensation expense related to stock options that will be amortized over an average period of 1.7 years.

The following table provides additional information regarding stock options outstanding as of May 31, 2011 (shares in thousands):

	Options Outstanding						Options Exercisable

Option Exercise Price Range	Number Outstanding as of 5/31/11		Weighted-Average Remaining Contractual Life in Years		Weighted- Average Exercise Price		Number Exercisable as of 5/31/11		Weighted- Average Exercise Price
$ 3.20—$13.00		70		2.1	$	7.73		70	$	7.73
$13.01—$18.50		1,494		7.6	$	16.32		594	$	16.36
$18.51—$24.50		321		6.1	$	21.59		202	$	22.31
$24.51—$34.50		109		5.3	$	30.56		69	$	30.22

		1,994		6.4	$	18.56		935	$	19.40

Restricted Stock

We provide executives and other key employees an opportunity to be awarded performance-based restricted stock. The award is contingent upon the achievement of certain performance objectives, including net income, return on capital, and leverage ratios, or the Company's stock price achieving a certain level over a period of time. After the shares are granted, the restrictions are released over a three- to seven-year period. During fiscal 2011, 2010 and 2009, we granted 269,146, 423,000 and 213,000 restricted shares, respectively, under this program.

In addition to the performance-based restricted stock awards, we also granted a total of 135,027 restricted shares to members of the Board of Directors and certain executive officers during fiscal 2011. These shares vest over a three- to five-year period.

The fair value of restricted shares is the market value of our common stock on the date of grant. Expense related to all restricted share programs during fiscal 2011, 2010 and 2009 was $8,701, $7,070 and $5,435, respectively, recorded in selling, general and administrative expenses.

Restricted share activity during the fiscal year ended May 31, 2011 is as follows (shares in thousands):

			Weighted Average Fair Value on Grant Date

Nonvested at May 31, 2010	1,205		$	23.93
Granted	404		$	17.40
Vested	(217	)	$	17.75
Forfeited	(18	)	$	18.99

Nonvested at May 31, 2011	1,374		$	23.06

As of May 31, 2011, we had $12,109 of unearned compensation related to restricted shares that will be amortized to expense over a weighted average period of 2.0 years.

Shareholders' Rights Plan

Pursuant to a shareholder rights plan adopted in 2007, each outstanding share of our common stock carries with it a Right to purchase one share at a price of $140 per share. The Rights become exercisable (and separate from the shares) when certain specified events occur, including the acquisition of 15% or more of the common stock by a person or group (an "Acquiring Person") or the commencement of a tender or exchange offer for 15% or more of the common stock.

In the event that an Acquiring Person acquires 15% or more of the common stock, or if we are the surviving corporation in a merger involving an Acquiring Person or if the Acquiring Person engages in certain types of self-dealing transactions, each Right entitles the holder to purchase for $140 per share (or the then-current exercise price), shares of our common stock having a market value of $280 (or two times the exercise price), subject to certain exceptions. Similarly, if we are acquired in a merger or other business combination or 50% or more of our assets or earning power is sold, each Right entitles the holder to purchase at the then-current exercise price that number of shares of common stock of the surviving corporation having a market value of two times the exercise price. The Rights do not entitle the holder thereof to vote or to receive dividends. The Rights will expire on August 6, 2017, and may be redeemed by us for $.01 per Right under certain circumstances.

Stock Repurchase Authorization

On June 20, 2006 our Board of Directors authorized us to purchase up to 1,500,000 shares of our common stock on the market. During fiscal 2011, we purchased 150,000 shares of our common stock on the open market at an average price of $16.92, leaving 1,028,300 shares still available for purchase.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 123R

-Paragraph 64, 65, A240

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Statement of Position (SOP)

-Number 93-6

-Paragraph 53

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Staff Accounting Bulletin (SAB)

-Number Topic 14

Reference 4: http://www.xbrl.org/2003/role/presentationRef

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-Publisher FASB

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-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

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-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 10

-Section 50

-Paragraph 4

-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 40

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929

+ Details

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	May 31, 2011	May 31, 2010
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock, authorized shares	250	250
Preferred stock, issued shares	0	0
Common stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common stock, authorized shares	100,000	100,000
Common stock, issued shares	44,986	44,870
Treasury stock, shares	5,205	5,386