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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN EXPRESS COMPANY
exposure is included in the maximum amount of undiscounted
future payments disclosed in Note 13. Historically, even for
an airline that is operating under bankruptcy protection, this
type of exposure has not generated any significant losses for the
Company. The Company’s goal in these distressed situations is
to hold sufficient cash over time to ensure that upon liquidation,
the cash held is equivalent to the credit exposure related to any
unused tickets.
As part of Delta’s decision to file for protection under Chapter
11 of the Bankruptcy Code during 2005, the Company lent funds
to Delta as part of Delta’s post-petition, debtor-in-possession
financing under the Bankruptcy Code. At December 31, 2006,
the remaining principal balance under this facility was $176
million. Delta received final approval for its reorganization plan
and emerged from bankruptcy on April 30, 2007, and repaid the
entire principal and interest outstanding at that time.
NOTE 17 STOCK PLANS
STOCK OPTION AND AWARD PROGRAMS
Under the 2007 Incentive Compensation Plan and previously
under the 1998 Incentive Compensation Plan (the Plans),
awards may be granted to officers and other key individuals
who perform services for the Company and its participating
subsidiaries. These awards may be in the form of stock options,
restricted stock awards or units (RSAs), portfolio grants (PGs),
and similar awards designed to meet the requirements of non-
U.S. jurisdictions. The Company also has options that remain
outstanding pursuant to a Directors’ Stock Option Plan that
expired in 2003.
For the Company’s Plans, there were a total of 52 million, 66
million, and 71 million common shares unissued and available
for grant at December 31, 2007, 2006, and 2005, respectively,
as authorized by the Company’s Board of Directors and
shareholders.
The Company granted a special stock option award to
its Chief Executive Officer (CEO) in November 2007 that
has performance-based and market-based conditions. This
option award is separately described in the Stock Options
with Performance-Based and Market-Based Conditions
section below and is excluded from the information and tables
presented in the following paragraphs.
A summary of stock option and RSA activity as of
December 31, 2007, and changes during the year are presented
below:
(Shares in thousands) Stock Options RSAs
Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Grant
Price
Outstanding at
December 31, 2006 97,310 $37.60 8,474 $45.87
Granted 8,520 $57.93 3,232 $57.89
Exercised/vested (17,996) $34.80 (3,502) $41.91
Forfeited/expired (2,628) $46.71 (681) $51.07
Outstanding at
December 31, 2007(a) 85,206 $39.93 7,523 $52.38
Options exercisable at
December 31, 2007(a) 68,880 $36.82
(a) At December 31, 2007, stock options outstanding and stock options
exercisable had exercise prices ranging from $24.04 to $60.95 and $24.04 to
$58.62, respectively.
STOCK OPTIONS
Each stock option has an exercise price equal to the market
price of the Company’s common stock on the date of grant and
a contractual term of 10 years from the date of grant. Vesting
provisions relating to stock options are as follows:
Grant Year Vesting Provisions
2003 and after Generally vest ratably at 25 percent per year
beginning with the first anniversary of the grant
date
2002 Generally vest ratably at 33 1/3 percent per year
beginning with the first anniversary of the grant
date
2001 Generally vest ratably at 33 1/3 percent per year
beginning with the second anniversary of the
grant date
The weighted-average remaining contractual life and intrinsic
value (the amount by which the fair value of the Company’s
stock exceeds the exercise price of the option) of the stock
options outstanding and exercisable as of December 31, 2007,
were as follows:
Outstanding Exercisable
Aggregate intrinsic value (millions) $1,077 $1,047
Weighted-average remaining
contractual life (years) 4.3 3.4
The intrinsic value for options exercised during 2007, 2006,
and 2005 was $463 million, $661 million, and $455 million,
respectively (based upon the fair value of the Company’s stock
at the date of exercise).
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