Accounting for Stock-Based Compensation

9 Months Ended

Feb. 28, 2021

Accounting for Stock-Based Compensation

Accounting for Stock-Based Compensation

Note 7 – Accounting for Stock-Based Compensation

Restricted Stock

In the three-month period ended August 31, 2020, as part of our annual long-term stock incentive compensation, we granted 141,615 shares of time-based restricted stock to eligible employees. The grant date fair value per share for these shares was $18.94 (the closing price on the grant date). We also granted 71,025 shares of time-based restricted stock to members of the Board of Directors with an average grant date fair value per share of $20.00.

Expense charged to operations for restricted stock during the three-month periods ended February 28/29, 2021 and 2020 was $1.2 million and $2.3 million, respectively, and $3.9 million and $7.2 million during the nine-month periods ended February 28, 2021 and 2020.

Stock Options

In July 2020, as part of our annual long-term stock incentive compensation, we issued 927,300 stock options to eligible employees at an exercise price of $18.94. The stock option awards were issued subject to stockholder approval of an increase in available shares under the AAR CORP. 2013 Stock Plan. Stockholders approved the amendment to the AAR CORP. 2013 Stock Plan at the 2020 Annual Meeting of Stockholders held October 7, 2020 and the shares were granted at a weighted average fair value of $5.89. The fair value of stock options was estimated using the Black-Scholes option pricing model with the following assumptions:

Risk-free interest rate	0.4	%
Expected volatility of common stock	40.2	%
Dividend yield	1.6	%
Expected option term in years	4.8

The total intrinsic value of stock options exercised during the nine-month periods ended February 28/29, 2021 and 2020 was $0.5 million and $6.2 million, respectively. Expense charged to operations for stock options during the three-month periods ended February 28/29, 2021 and 2020 was $1.1 million and $0.9 million, respectively, and during the nine-month periods ended February 28/29, 2021 and 2020 was $2.9 million and $3.1 million, respectively.