8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.   20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

December 18, 2007

Date of Report (Date of earliest event reported)

AAR CORP.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

(State or other jurisdiction of incorporation)

1-6263	36-2334820
(Commission File Number)	(IRS Employer Identification No.)

One AAR Place, 1100 N. Wood Dale Road

Wood Dale, Illinois 60191

(Address and Zip Code of Principal Executive Offices)

Registrant’s telephone number, including area code:  (630) 227-2000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02               Results of Operations and Financial Condition

On December 18, 2007, AAR CORP. (the “Company”) issued a press release announcing financial results for the second quarter ended November 30, 2007.  A copy of the Company’s press release is attached hereto as Exhibit 99.1.

The information furnished under Item 2.02 of this Current Report on Form 8-K and the exhibit attached hereto shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.  It may only be incorporated by reference in another filing under the Exchange Act or Securities Act of 1933, as amended, if such subsequent filing specifically references this Form 8-K.

Item 9.01Financial Statements and Exhibits

(d)	Exhibits
	99.1	Press Release issued by AAR CORP. dated December 18, 2007.

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SIGNATURE

                Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:	December 19, 2007
			AAR CORP.
		By:	/s/ RICHARD J. POULTON
			Richard J. Poulton
			Vice President-Chief Financial Officer &
			Treasurer

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EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release issued by AAR CORP. dated December 18, 2007.

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EX-99.1

Exhibit 99.1

NEWS

For immediate release

Contact:	Richard J. Poulton
	Vice President, Chief Financial Officer
	(630) 227-2075
	E-mail address: rpoulton@aarcorp.com

AAR REPORTS RECORD SECOND QUARTER RESULTS

·Record quarterly sales of $310.6 million (up 27% from prior year)

·Record quarterly income from continuing operations of $17.9 million

·Operating margin improves to 10.1%

·$0.42 earnings from continuing operations per diluted share

WOOD DALE, ILLINOIS (December 18, 2007) — AAR (NYSE: AIR) today reported fiscal 2008 second quarter net sales of $310.6 million and income from continuing operations of $17.9 million, or $0.42 per diluted share.  Sales grew 27% from $244.3 million last year, and income from continuing operations increased 28% from $14.0 million in the prior year.  For the six months ended November 30, 2007, net sales grew 27% to $616.6 million, and income from continuing operations increased 26% to $33.1 million, or $0.78 per diluted share.

“The principal markets we serve—commercial aviation and defense—continued to expand, despite the turbulence in the global credit markets, uncertainty in the U.S. economy and continued pressure from high fuel prices.  The demand from airlines for outsourced technical services and additional aircraft lift is strong, as are the opportunities to support the U.S. Department of Defense and its allies,” said David P. Storch, Chairman and Chief Executive Officer of AAR CORP.  “During the quarter the AAR team made excellent progress penetrating and growing our presence in these markets.  We experienced significant sales growth and margin improvement in our MRO business; continued strength in Aviation Supply Chain; steady progress in our Structures and Systems business; and solid growth in our Aircraft Sales and Leasing business.”

Sales and earnings growth in the second quarter was driven by higher sales across all four segments, effective sourcing and merchandising, solid execution and progress with margin improvement initiatives.  Sales to commercial customers increased 29%, and sales to defense customers grew 24%, year-over-year.

Consolidated gross profit margin was 19.4% for the second quarter compared to 18.8% last year.  The Company achieved an operating margin of 10.1% in the second quarter versus 9.7% last

One AAR Place · 1100 N. Wood Dale Road · Wood Dale, Illinois 60191 USA · 1-630-227-2000 Fax 1-630-227-2101

year.  Net interest expense increased $0.6 million year-over-year principally due to increased borrowings related to investments in the Aviation Supply Chain and Aircraft Sales & Leasing segments.

The Company purchased 272,000 shares of AAR CORP. stock on the open market through the first six months of fiscal 2008 pursuant to its Board of Directors share repurchase authorization at an average acquisition price of $29.98.

As announced on December 3, 2007, the Company completed the acquisition of Summa Technology, Inc., a leading provider of high-end sub-systems and precision machining, fabrication, welding and engineering services located in Huntsville, Alabama.  “We are very excited to add the extensive capabilities of Summa and its management team to our Company,” said Storch.  “Summa has great momentum and is performing well, and we look forward to creating even more opportunities as we integrate it with our other businesses.”

AAR is a leading provider of products and value-added services to the worldwide aerospace and defense industry.  With facilities and sales locations around the world, AAR uses its close-to-the-customer business model to serve aviation and defense customers through four operating segments: Aviation Supply Chain; Maintenance, Repair and Overhaul; Structures and Systems and Aircraft Sales and Leasing. More information can be found at www.aarcorp.com.

AAR will hold its quarterly conference call at 7:30 a.m. CST on December 19, 2007. The conference call can be accessed by calling 866-814-1918 from inside the U.S. or 703-639-1362 from outside the U.S.  A replay of the call will be available by calling 888-266-2081 from inside the U.S. or 703-925-2533 from outside the U.S. (access code 1177120) from 11:30 a.m. CST on December 19, 2007 until 11:59 p.m. CST on December 26, 2007.

# # #

This press release contains certain statements relating to future results, which are 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 currently available to the Company, and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated, including those factors discussed under Item 1A, entitled “Risk Factors”, included in the Company’s May 31, 2007 Form 10-K. Should one or more of these risks or uncertainties materialize adversely, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described.  These events and uncertainties are difficult or impossible to predict accurately and many are beyond the Company’s control.  The Company assumes no obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. For additional information, see the comments included in AAR’s filings with the Securities and Exchange Commission.

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AAR CORP. and Subsidiaries

Consolidated Statements of Operations

(In thousands except per share data)

	Three Months Ended November 30,					Six Months Ended November 30,
	2007		2006			2007		2006
	(Unaudited)					(Unaudited)
Sales	$	310,647	$	244,272		$	616,607	$	484,514
Cost and expenses:
Cost of sales	250,297		198,369			499,717		395,588
Cost of sales — impairment charges	—		—			—		7,652
Selling, general and administrative	30,941		25,914			61,603		51,739
Gain on sale of product line	—		—			—		5,358
Earnings from aircraft joint ventures	1,965		3,761			2,985		6,802
Operating income	31,374		23,750			58,272		41,695
Gain on extinguishment of debt	—		—			—		2,927
Interest expense	5,026		4,736			9,364		9,402
Interest income and other	1,003		1,300			1,586		2,639
Income from continuing operations before income taxes	27,351		20,314			50,494		37,859
Income tax expense	9,463		6,332			17,351		11,648
Income from continuing operations	17,888		13,982			33,143		26,211
Discontinued operations:
Operating loss, net of tax	33		214			135		659
Net income	$	17,855	$	13,768		$	33,008	$	25,552
Share Data:
Earnings per share - Basic:
Earnings from continuing operations	$	0.49	$	0.39		$	0.90	$	0.73
Loss from discontinued operations	—		(0.01		)	—		(0.02		)
Earnings per share - Basic	$	0.49	$	0.38		$	0.90	$	0.71
Earnings per share - Diluted
Earnings from continuing operations	$	0.42	$	0.34		$	0.78	$	0.64
Loss from discontinued operations	—		(0.01		)	—		(0.02		)
Earnings per share - Diluted	$	0.42	$	0.33		$	0.78	$	0.62
Average shares outstanding - Basic	36,841		36,250			36,858		36,161
Average shares outstanding - Diluted	43,732		43,145			43,770		42,969

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Consolidated Balance Sheet Highlights

(In thousands except per share data)

	November 30, 2007		May 31, 2007
	(Unaudited)		(Derived from audited financial statements)
Cash and cash equivalents	$	28,369	$	83,317
Current assets	666,125		645,721
Current liabilities (excluding debt accounts)	179,169		182,261
Net property, plant and equipment	94,540		88,187
Total assets	1,137,290		1,067,633
Total recourse debt	284,128		284,229
Total non-recourse obligations	84,493		43,627
Stockholders’ equity	530,327		494,243
Book value per share	$	14.06	$	13.10
Shares outstanding	37,723		37,729

Sales By Business Segment

(In thousands - unaudited)

	Three Months Ended November 30,				Six Months Ended November 30,
	2007		2006		2007		2006
Aviation Supply Chain	$	144,784	$	133,904	$	287,492	$	261,420
Maintenance, Repair & Overhaul	68,679		44,477		131,326		94,072
Structures and Systems	79,783		62,473		156,281		120,880
Aircraft Sales and Leasing	17,401		3,418		41,508		8,142
	$	310,647	$	244,272	$	616,607	$	484,514

Gross Profit/(Loss) By Business Segment

(In thousands - unaudited)

	Three Months Ended November 30,				Six Months Ended November 30,
	2007		2006		2007		2006
Aviation Supply Chain	$	34,970	$	29,896	$	66,934	$	52,151
Maintenance, Repair & Overhaul	9,921		6,147		17,961		13,304
Structures and Systems	10,784		8,891		19,905		16,241
Aircraft Sales and Leasing	4,675		969		12,090		(422		)
	$	60,350	$	45,903	$	116,890	$	81,274

Note:  Gross Profit for the Six Months Ended November 30, 2006 includes impairment charges of $4.8 million in Aviation Supply Chain and $2.9 million in Aircraft Sales & Leasing.

Diluted Earnings Per Share Calculation

(In thousands except per share data)

	Three Months Ended November 30,				Six Months Ended November 30,
	2007		2006		2007		2006
	(Unaudited)				(Unaudited)
Net income as reported	$	17,855	$	13,768	$	33,008	$	25,552
Add: After-tax interest on convertible debt	491		491		983		983
Net income for diluted EPS calculation	$	18,346	$	14,259	$	33,991	$	26,535
Diluted shares outstanding	43,732		43,145		43,770		42,969
Diluted earnings per share	$	0.42	$	0.33	$	0.78	$	0.62

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