American Airlines 2006 Annual Report Download - page 76

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72
9. Share Based Compensation (Continued)
Cash received from exercise of stock options/SSARs for the years ended December 31, 2006, 2005 and 2004,
was $230 million, $56 million and $7 million, respectively. No tax benefit was realized as a result of stock
options/SSARs exercised in 2006 due to the tax valuation allowance discussed in Note 8.
Performance Share Awards
During 2006 and in early January 2007, the AMR Board of Directors approved the amendment and restatement of
all of the outstanding performance share plans, the related performance share agreements and deferred share
agreements that required settlement in cash (collectively, the Amended Plans). The plans were amended to
permit settlement in a combination of cash and/or stock; however, the amendments did not impact the fair value
of the awards under the Amended Plans. As a result of these actions, any amounts accrued as liabilities at the
time of conversion or at the time it became probable that sufficient shares would be available to settle the
Amended Plans were reclassified from accrued liabilities to Additional paid-in capital. Accordingly, these awards
are now accounted for as market condition awards in accordance with SFAS 123(R).
Performance share awards are granted under the LTIP Plans, generally vest pursuant to a three year
measurement period and are settled on the vesting date. The number of awards ultimately issued under
performance share awards is contingent on AMR’s relative stock price performance compared to certain of its
competitors over a three year period and can range from zero to 175 percent of the awards granted. The fair
value of performance awards is calculated using a Monte Carlo valuation model that estimates the probability of
the potential payouts using the historical volatility of AMR’s stock and the stock of other comparative carriers.
Activity during 2006 for performance awards accounted for as equity awards was:
Weighted
Average
Awards
Remaining
Contractual
Term
Aggregate
Intrinsic Value
Outstanding at January 1 -
Reclassified from liability awards 5,804,705
Granted 7,094
Settled (1,529,841)
Forfeited or Expired (86,369)
Outstanding at December 31
4,195,589
1.0
$ 202,441,788
The aggregate intrinsic value represents the Company’s current estimate of the number of shares (6,696,719
shares at December 31, 2006) that will ultimately be distributed for outstanding awards computed using the
market value of the Company’s common stock at December 31, 2006. The weighted-average grant date fair
value per share of performance share awards granted during 2006 and 2004 was $25.01 and $26.54,
respectively. Performance share awards granted in 2005 were accounted for as a liability at December 31, 2006
and are included in the other awards section. The total fair value of equity awards settled during the year ended
December 31, 2006 was $66 million. As of December 31, 2006, there was $31 million of total unrecognized
compensation cost related to performance share awards that is expected to be recognized over a period of 2.3
years.