American Airlines 1997 Annual Report Download - page 61

AMR CORPORATION
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under the 1988 Plan is 7,200,000 shares. In the event
that additional shares of the Company’s common stock
are issued, 7.65 percent of such newly issued shares will
be allocated to the 1988 Plan. The 1988 Plan will
terminate no later than May 18, 1998. Options are award-
ed with an exercise price equal to the fair market value of
the stock on date of grant, becoming exercisable in equal
annual installments over five years following the date of
grant and expiring 10 years from the date of grant. Stock
appreciation rights may be granted in tandem with
options awarded. As of January 1, 1996, all outstanding
stock appreciation rights were canceled, while the under-
lying stock options remain in effect.
In January 1998, the Board of Directors approved the
1998 Long Term Incentive Plan (1998 Plan), the succes-
sor plan to the 1988 Plan. The 1998 Plan will be pre-
sented to the Company’s stockholders for approval at the
Company’s 1998 annual meeting. If approved, the 1998
Plan will become effective on May 21, 1998 and will ter-
minate on May 21, 2008. Under the 1998 Plan, officers
and key employees of AMR and its subsidiaries may be
granted stock options, stock appreciation rights, restrict-
ed stock, deferred stock, stock purchase rights, other
stock based awards and/or performance related awards,
including cash bonuses. The 1998 Plan authorizes the
issuance of 5,000,000 shares.
In 1997, the total charge for stock compensation expense
included in wages, salaries and benefits expense was $75
million. No compensation expense was recognized for stock
option grants under the 1988 Plan since the exercise price
of the Company’s stock option grants was the fair market
value of the underlying stock on the date of grant.
Stock option activity was:
Year Ended December 31,
1997 1996 1995
Weighted-Average Weighted-Average
Options Exercise Price Options Exercise Price Options
Outstanding at January 1 1,831,795 $ 67.19 2,322,780 $ 62.85 2,404,010
Granted 447,740 104.57 392,475 78.43 440,600
Exercised (492,888) 64.35 (580,800) 59.41 (390,510)
Canceled1(33,260) 67.64 (302,660) 62.97 (131,320)
Outstanding at December 31 1,753,387 $ 77.54 1,831,795 $ 67.19 2,322,780
1Includes 235,950 options canceled upon conversion to The SABRE Group stock options for 1996 and 20,500 options canceled upon exercise
of stock appreciation rights for 1995.
The following table summarizes information about the stock options outstanding at December 31, 1997:
Weighted-Average Weighted-Average Weighted-Average
Range of Number of Remaining Exercise Number of Exercise
Exercise Prices Options Outstanding Life (years) Price Options Exercisable Price
$40-$58 305,292 5.25 $ 54.66 189,472 $ 54.14
$61-$70 428,790 5.49 66.26 272,270 65.35
$71-$94 605,005 8.04 77.60 146,505 77.12
$97-$116 414,300 9.65 105.97 - -
1,753,387 7.30 $ 77.54 608,247 $ 64.69
In May 1997, in conjunction with the labor agreement
reached between American and members of the Allied
Pilots Association, the Company established the Pilots
Stock Option Plan (The Pilot Plan). The Pilot Plan grant-
ed members of the Allied Pilots Association the option to
purchase 5.75 million shares of AMR stock at $83.375
per share, $10 less than the average fair market value of
the stock on the date of grant, May 5, 1997. These shares
were exercisable immediately.