American Airlines 2008 Annual Report Download - page 78

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75
9. Share Based Compensation (Continued)
As of December 31, 2008, there was $15 million of total unrecognized compensation cost related to non-vested
stock options/SSARs granted under the LTIP Plans and the 2003 Plan that is expected to be recognized over a
weighted-average period of 3.3 years. The total fair value of stock options/SSARs vested during the years ended
December 31, 2008, 2007 and 2006, was $9 million, $9 million and $25 million, respectively.
Cash received by the Company from exercise of stock options for the years ended December 31, 2008, 2007 and
2006, was $1 million, $90 million and $230 million, respectively. No tax benefit was realized as a result of stock
options/SSARs exercised in 2008 due to the tax valuation allowance discussed in Note 8.
Performance Share Awards During 2006 and 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 by multiplying the stock price on the date of grant by the expected
payout percentage and the number of shares granted.
Activity during 2008 for performance awards accounted for as equity awards was:
Weighted
Average
Awards
Remaining
Contractual
Term
Aggregate
Intrinsic Value
Outstanding at January 1
5,400,441
Reclassified to liability awards
(97,215)
Granted
2,850,240
Settled
(2,330,852)
Forfeited or Expired
(56,361)
Outstanding at December 31
5,766,253
1.5
$ 61,360,092
The aggregate intrinsic value represents the Company’s current estimate of the number of shares (5,750,712
shares at December 31, 2008) that will ultimately be distributed for outstanding awards computed using the
market value of the Company’s common stock at December 31, 2008. The weighted-average grant date fair
value per share of performance share awards granted during 2008, 2007, and 2006 was $8.20, $28.52 and
$25.01, respectively. The total fair value of equity awards settled during the year ended December 31, 2008 was
$14 million. As of December 31, 2008, there was $38 million of total unrecognized compensation cost related to
performance share awards that is expected to be recognized over a period of 1.6 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.