American Airlines 2007 Annual Report Download - page 72

Download and view the complete annual report

Please find page 72 of the 2007 American Airlines annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 107

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107

69
9. Share Based Compensation (Continued)
Cash received by the Company from exercise of stock options for the years ended December 31, 2007, 2006 and
2005, was $90 million, $230 million and $56 million, respectively. No tax benefit was realized as a result of stock
options/SSARs exercised in 2007 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 2007 for performance awards accounted for as equity awards was:
Weighted
Average
Awards
Remaining
Contractual
Term
Aggregate
Intrinsic Value
Outstanding at January 1 4,195,589
Reclassified from liability awards 2,264,203
Granted 1,524,170
Settled (2,441,297)
Forfeited or Expired (142,224)
Outstanding at December 31
5,400,441
1.1
$ 82,443,348
The aggregate intrinsic value represents the Company’s current estimate of the number of shares (5,876,219
shares at December 31, 2007) that will ultimately be distributed for outstanding awards computed using the
market value of the Company’s common stock at December 31, 2007. The weighted-average grant date fair
value per share of performance share awards granted during 2007, 2006, and 2005 was $28.52, $25.01 and
$40.23, respectively. The total fair value of equity awards settled during the year ended December 31, 2007 was
$153 million. As of December 31, 2007, there was $48 million of total unrecognized compensation cost related to
performance share awards that is expected to be recognized over a period of 1.9 years.
Deferred Awards The distribution of deferred share awards granted under the LTIP Plans is based solely on a
requisite service period (generally 36 months). Career equity awards granted to certain employees of the
Company vest upon the retirement of those individuals. The fair value of each deferred award is based on AMR’s
stock price on the measurement date.