American Airlines 2012 Annual Report Download - page 89

Download and view the complete annual report

Please find page 89 of the 2012 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 123

  • 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
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123

Table of Contents
2012
2011
Unrecognized Tax Benefit at January 1
$ 5
$ 5
No Activity
—
—
Unrecognized Tax Benefit at December 31
$ 5
$ 5
The Company estimates that the unrecognized tax benefit will not significantly change within the next twelve months.
10. Share Based Compensation
Prior to the Petition Date, AMR adopted certain plans which provide for the issuance of common stock in connection with the exercise of stock options and for
other stock-based awards. AMR has granted stock compensation under three plans: the 1998 Long Term Incentive Plan (the 1998 Plan), the 2003 Employee
Stock Incentive Plan (the 2003 Plan) and the 2009 Long Term Incentive Plan (the 2009 Plan). Collectively, the 1998 Plan and the 2009 Plan are referred to as
the LTIP Plans.
The Company believes that all of its stock options could be cancelled as part of the emergence of AMR and its subsidiaries, including the Company, from
Chapter 11. The following includes additional information about these plans as of December 31, 2012. No awards were made under these plans in 2012, and
it is expected that no future awards will be made under these existing plans.
Under the LTIP Plans, officers and key people of AMR and its subsidiaries, including the Company, were granted certain types of stock or performance
based awards. At December 31, 2012, AMR had AMR stock option awards, stock appreciation right (SAR) awards, performance share awards, deferred
share awards and other awards outstanding under these plans. The total number of common shares authorized for distribution under the 1998 Plan and the
2009 Plan is 23,700,000 and 4,000,000 shares, respectively. The 1998 Plan expired by its terms in 2008.
AMR established the 2003 Plan to provide equity awards to employees. Under the 2003 Plan, employees may be granted stock options, restricted stock and
deferred stock. At December 31, 2012, the AMR had stock options and deferred awards outstanding under this plan. The total number of shares authorized
for distribution under the 2003 Plan is 42,680,000 shares.
In 2012, 2011 and 2010, the total charge for share-based compensation expense included in Wages, salaries and benefits expense was $26 million, $40
million and $49 million, respectively. In 2012, 2011 and 2010, the amount of cash used to settle equity instruments granted under share-based compensation
plans was $0 million, $2 million and $2 million, respectively.
Stock Options/SARs During 2006, the AMR Board of Directors approved an amendment covering all of the outstanding stock options previously granted
under the 1998 Plan. The amendment added to each of the outstanding options an additional SAR in tandem with each of the then outstanding stock options.
The addition of the SAR did not impact the fair value of the stock options, but simply allowed the Company to settle the exercise of the option by issuing the
net number of shares equal to the in-the-money value of the option. This amendment is estimated to make available enough shares to permit the Company to
settle all outstanding performance and deferred share awards under the 1998 Plan in stock rather than cash.
Options/SARs granted under the LTIP Plans and the 2003 Plan are awarded with an exercise price equal to the fair market value of AMR stock on date of
grant, become exercisable in equal annual installments over periods ranging from three to five years and expire no later than ten years from the date of grant.
Expense for the options is recognized on a straight-line basis. The fair value of each award is estimated on the date of grant using the modified Black-Scholes
option valuation model and the assumptions noted in the following table. Expected volatilities are based on implied volatilities from traded options on AMR's
stock, historical volatility of AMR's stock, and other factors. The Company uses historical employee exercise data to estimate the expected term of awards
granted used in the valuation model. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is assumed
to be zero based on AMR's history and expectation of not paying dividends.
20121
2011
2010
Expected volatility
—
73.5% to 75.4%
74.4% to 75.9%
Expected term (in years)
—
4.0
4.0
Risk-free rate
—
0.90% to 2.11%
1.18% to 2.58%
Annual forfeiture rate
—%
10.0%
10.0%
1 No options/SARs were granted in 2012.
A summary of stock option/SARs activity under the LTIP Plans and the 2003 Plan as of December 31, 2012, and changes during
89