Stock-based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

On May 7, 2014, the stockholders of the Company approved the Air Lease Corporation 2014 Equity Incentive Plan (the “2014 Plan”). Upon approval of the 2014 Plan, no new awards may be granted under the Amended and Restated 2010 Equity Incentive Plan (the “2010 Plan”). As of December 31, 2021, the number of stock options (“Stock Options”) and restricted stock units (“RSUs”) authorized under the 2014 Plan is approximately 4,495,097. The Company has issued RSUs with four different vesting criteria: those RSUs that vest based on the attainment of book-value goals, those RSUs that vest based on the attainment of Total Shareholder Return (“TSR”) goals, time based RSUs that vest ratably over a time period of three years and RSUs that cliff vest at the end of a one or two year period. The Company has two types of book value RSUs; those that vest ratably over a three-year period if the performance condition has been met, and those that cliff-vest at the end of a three-year period if the performance condition has been met. For the book value RSUs that vest at the end of a three-year period, the number of shares that will ultimately vest will range from 0% to 200% of the RSUs initially granted depending on the percentage change in the Company's book value per share at the end of the vesting period. At each reporting period, the Company reassesses the probability of the performance condition being achieved and a stock-based compensation expense is recognized based upon management's assessment. Book value RSUs for which the performance metric has not been met are forfeited. The TSR RSUs vest at the end of a three-year period. The number of TSR RSUs that will ultimately vest is based upon the percentile ranking of the Company’s TSR among a peer group. The number of shares that will ultimately vest will range from 0% to 200% of the RSUs initially granted depending on the extent to which the TSR metric is achieved. For disclosure purposes, we have assumed the TSR RSUs will ultimately vest at 100%. As of December 31, 2021, the Company had 1,571,415 unvested RSUs outstanding of which 376,517 are TSR RSUs. Stock Options are generally granted for a term of 10 years and generally vest over a three-year period.

The Company recorded $26.5 million, $17.6 million, and $20.7 million of stock-based compensation expense for the years ended December 31, 2021, 2020, and 2019, respectively.

Restricted Stock Units

Compensation cost for stock awards is measured at the grant date based on fair value and recognized over the vesting period. The fair value of book value and time based RSUs is determined based on the closing market price of the Company’s Class A common stock on the date of grant, while the fair value of RSUs that vest based on the attainment of TSR goals is determined at the grant date using a Monte Carlo simulation model. Included in the Monte Carlo simulation model were certain assumptions regarding a number of highly complex and subjective variables, such as expected volatility, risk-free interest rate and expected dividends. To appropriately value the award, the risk-free interest rate is estimated for the time period from the valuation date until the vesting date and the historical volatilities were estimated based on a historical timeframe equal to the time from the valuation date until the end date of the performance period.

During the year ended December 31, 2021, the Company granted 597,728 RSUs of which 116,599 are TSR RSUs. The following table summarizes the activities for our unvested RSUs for the year ended December 31, 2021:


	Unvested Restricted Stock Units
	Number of Shares	Weighted‑ Average Grant‑Date Fair Value
Unvested at December 31, 2020	1,466,060	$	42.03
Granted	597,728	$	47.64
Vested	(423,402)	$	41.91
Forfeited/canceled	(68,971)	$	49.21
Unvested at December 31, 2021	1,571,415	$	43.88
Expected to vest after December 31, 2021	1,547,915	$	44.45

At December 31, 2021, the outstanding RSUs are expected to vest as follows: 2022—503,906; 2023—468,024; and 2024—575,985.

As of December 31, 2021 there was $28.8 million of unrecognized compensation cost related to unvested stock-based payments granted to employees. Total unrecognized compensation cost will be recognized over a weighted average remaining period of 1.79 years.

Stock Options

The Company uses the BSM option pricing model to determine the fair value of stock options. The fair value of stock-based payment awards on the date of grant is determined by an option-pricing model using a number of complex and subjective variables. These variables include expected stock price volatility over the term of the awards, a risk-free interest rate, and expected dividends.

Estimated volatility of the Company’s common stock for new grants is determined by using historical volatility of the Company’s peer group. Due to our limited operating history at the time of grant, there was no historical exercise data to provide a reasonable basis which the Company could use to estimate expected terms. Accordingly, the Company used the “simplified method” as permitted under Staff Accounting Bulletin No. 110. The risk-free interest rate used in the option valuation model was derived from U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options. The Company has not granted any stock options since 2011.

A summary of stock option activity in accordance with the Company’s stock option plan for the year ended December 31, 2021 follows:


	Shares	Exercise Price		Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)(1)
Balance at December 31, 2018	2,620,295	$	20.40	1.49	25,697
Granted	—	—		—	—
Exercised	(2,256,142)	$	20.00	—	46,358
Forfeited/canceled	—	—		—	—
Balance at December 31, 2019	364,153	$	22.90	0.75	8,965
Granted	—	—		—	—
Exercised	(314,153)	$	21.96	—	3,972
Forfeited/canceled	—	—		—	—
Balance at December 31, 2020	50,000	$	28.80	0.32	781
Granted	—	—		—	—
Exercised	(50,000)	$	28.80	—	993
Forfeited/canceled	—	—		—	—
Balance at December 31, 2021	—	$	—	0.00	—


(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the closing stock price of our Class A common stock as of the respective date.

As of December 31, 2021, there were no unrecognized compensation costs related to outstanding employee stock options. For the years ended December 31, 2021, 2020, and 2019, there was no stock-based compensation expense related to Stock Options.