Acquisitions

9 Months Ended

Feb. 29, 2012

Acquisitions

Acquisitions

Note 10 — Acquisitions

On December 2, 2011, we acquired Telair® International GmbH (“Telair”) and Nordisk Aviation Products, AS (“Nordisk”).  Telair is a leader in the design, manufacture and support of cargo loading systems for wide-body and narrow-body aircraft with established positions on the world’s most popular current and next-generation passenger and freighter aircraft.  Telair operates from facilities in Germany, Sweden and Singapore.  Nordisk designs and manufactures heavy duty pallets and lightweight cargo containers for commercial airlines from facilities in Norway and China.  The purchase price of the acquisition was approximately $293,000.  The businesses operate as part of our Structures and Systems segment.

On October 11, 2011, we acquired Airinmar Holdings Limited (“Airinmar”), an international provider of aircraft component repair management services.  Airinmar operates as part of our Aviation Supply Chain segment.  Total consideration is estimated to be $43,500, which includes $23,200 cash paid at closing, and a potential earn-out payment of $20,300.  The potential earn-out payment is based upon Airinmar achieving certain EBITDA (earnings before interest, taxes, depreciation and amortization) levels over a two-year period, as well as retaining certain key customers.  In accordance with accounting principles generally accepted in the United States of America, a liability of $20,300 was recognized as an estimate of the acquisition date fair value of the earn-out and is included in Other non-current liabilities on our condensed consolidated balance sheet as of February 29, 2012.  Any change in the fair value of the earn-out subsequent to the date of acquisition will be recognized in earnings.

We are continuing our review of our fair value estimate of assets acquired and liabilities assumed during the measurement period, which will conclude as soon as we receive the information we are seeking about facts and circumstances that existed as of the acquisition date, or learn that more information is not available.  This measurement period will not exceed one year from the acquisition date.  At the effective date of the acquisition, the assets acquired and liabilities assumed are generally required to be measured at fair value.

Our fair value estimate of assets acquired and liabilities assumed is pending completion of several elements, including the finalization of an independent appraisal and valuations of fair value of the assets acquired and liabilities assumed and final review by our management.  The primary areas that are not yet finalized relate to the fair value of accounts receivable, accounts payable, inventories, property and equipment, intangible assets, favorable or unfavorable contracts, operating leases or commitments, contingent liabilities and income and non-income related taxes.  Accordingly, there could be material adjustments to our consolidated financial statements, including changes in our depreciation and amortization expense related to the valuation of property and equipment and intangible assets acquired and their respective useful lives among other adjustments.

The final determination of the assets acquired and liabilities assumed will be based on the established fair value of the assets acquired and the liabilities assumed as of the acquisition date.  The excess of the purchase price over the fair value of net assets acquired is allocated to goodwill.  The final determination of the purchase price, fair values and resulting goodwill may differ significantly from what is reflected in these condensed consolidated financial statements.

The preliminary purchase price allocation for Telair, Nordisk and Airinmar follows:

Cash	$	5,200
Accounts receivable	55,100
Inventories	52,900
Prepaid expenses	4,700
Property, plant and equipment	14,500
Goodwill and identified intangibles	267,700
Notes payable	(1,600		)
Accounts payable	(21,400		)
Accrued liabilities	(52,900		)
Other long-term liabilities	(7,800		)

The following unaudited pro forma information is provided for acquisitions assuming the Telair, Nordisk and Airinmar acquisitions occurred as of the beginning of fiscal 2011.

	Three Months		Nine Months Ended
	Ended		February 29/28,
	February 28, 2011		2012		2011
Net sales	$	518,021	$	1,634,161	$	1,492,158
Operating income	40,490		121,393		116,821
Net income attributable to AAR	19,219		61,909		54,131
Earnings per share:
Basic	$	.51	$	1.54	$	1.41
Diluted	$	.47	$	1.49	$	1.34