American Airlines 1997 Annual Report Download - page 62

AMR CORPORATION
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Pilot Plan option activity was:
Year Ended
December 31, 1997
Options
Outstanding at January 1 -
Granted 5,750,000
Exercised (2,030,890)
Outstanding at December 31 3,719,110
The weighted-average grant date fair value of all stock
option awards granted during 1997 and 1996 was
$22.01 and $25.80, respectively.
Shares of deferred stock are awarded at no cost to offi-
cers and key employees under the 1988 Plan’s Career
Equity Program and will be issued upon the individual’s
retirement from AMR or, in certain circumstances, will
vest on a pro rata basis. Deferred stock activity was:
Year Ended December 31,
1997 1996 1995
Outstanding at January 1 1,197,331 1,424,058 1,496,803
Granted 87,750 102,650 120,300
Issued (33,670) (54,724) (116,016)
Canceled1(22,816) (274,653) (77,029)
Outstanding at December 31 1,228,595 1,197,331 1,424,058
1Includes 210,400 shares canceled upon conversion to The SABRE Group
stock options and awards for 1996.
The weighted-average grant date fair value of career
equity awards granted during 1997 and 1996 was
$109.96 and $79.27, respectively.
A performance share plan was implemented in 1993
under the terms of which shares of deferred stock are
awarded at no cost to officers and key employees under
the 1988 Plan. The shares vest over a three-year perfor-
mance period based upon AMR’s ratio of operating cash
flow to adjusted assets. Performance share activity was:
Year Ended December 31,
1997 1996 1995
Outstanding at January 1 839,730 824,411 508,330
Granted 404,368 382,307 340,991
Issued (95,383) (68,504) -
Awards settled in cash (256,532) (178,088) -
Canceled1(23,546) (120,396) (24,910)
Outstanding at December 31 868,637 839,730 824,411
1Includes 90,551 shares canceled upon conversion to The SABRE Group
stock awards for 1996.
The weighted-average grant date fair value of perfor-
mance share awards granted during 1997 and 1996 was
$104.55 and $78.81, respectively.
There were 9.1 million shares of AMR’s common stock at
December 31, 1997 reserved for the issuance of stock upon
the exercise of options and the issuance of stock awards.
The SABRE Group has established the 1996 Long Term
Incentive Plan (1996 Plan), whereby its officers and other
key employees may be granted stock options and other
stock-based awards. Initially, 13 million shares of The SABRE
Group’s Class A Common Stock were authorized to be
issued under the 1996 Plan. At December 31, 1997, approx-
imately 3.8 million shares of The SABRE Group’s Class A
Common Stock were outstanding under the 1996 Plan.
In January 1998, in connection with the information
technology services agreement executed between The
SABRE Group and US Airways, Inc., The SABRE Group
granted two tranches of stock options to US Airways,
each to acquire three million shares of The SABRE
Group’s Class A Common Stock. US Airways may select
an alternative vehicle of substantially equivalent value in
place of receiving stock. The first tranche of options is
exercisable during the six month period ending two years
after the transfer of US Airways’ information technology
assets, has an exercise price of $27 per share and is sub-
ject to a cap on share price of $90. The second tranche of
options is exercisable during the 10 year period begin-
ning on the fifth anniversary of the asset transfer date, has
an exercise price of $27 per share and is subject to a cap
on share price of $127.
The Company has adopted the pro forma disclosure
features of Statement of Financial Accounting Standards
No. 123, “Accounting for Stock-Based Compensation”
(SFAS 123). As required by SFAS 123, pro forma infor-
mation regarding net earnings and earnings per share has
been determined as if the Company and The SABRE
Group had accounted for its employee stock options and
awards granted subsequent to December 31, 1994 using
the fair value method prescribed by SFAS 123. The fair
value for the stock options was estimated at the date of
grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for 1997, 1996
and 1995: risk-free interest rates ranging from 5.80% to
6.70%; dividend yields of 0%; expected stock volatility
ranging from 25.0% to 29.0%; and expected life of the
options of 4.5 years for all Plans, with the exception of
The Pilot Plan which was 1.5 years.