US Airways 2006 Annual Report Download - page 131

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
The per share weighted-average grant-date fair value of stock options and SARs granted and the weighted-average assumptions
used for the year ended December 31, 2006, 2005, and 2004 were as follows:
Year Ended
December 31, December 31, December 31,
2006 2005 2004
Weighted average fair value $ 16.77 $ 8.50 $ 10.90
Risk free interest rate 4.8% 3.4% 3.4%
Expected dividend yield — — —
Expected life 2.9 years 4.0 years 4.8 years
Volatility 57% 54% 54%
As of December 31, 2006, there was $24 million of total unrecognized compensation costs related to stock options and SARs. These
costs are expected to be recognized over a weighted average period of 1.4 years.
The total intrinsic value of stock options and SARs exercised during the years ended December 31, 2006, 2005, and 2004 was
$68 million, $13 million, and $1 million, respectively. Cash received from stock option and SAR exercises during the year ended
December 31, 2006 totaled $51 million. The tax benefit realized from stock options and SARs exercised during 2006 was $26 million.
Tax expense of $0.2 million was recognized for exercises with book expense exceeding the tax deduction.
Agreements with ALPA — US Airways Group and US Airways have a letter of agreement with the ALPA that provides that
US Airways' pilots designated by ALPA receive stock options to purchase 1.1 million shares of the Company's common stock. At an
exercise price equal to the average market price for the 20 business days preceding the option issuance date. The first tranche of 500,000
stock options was granted on January 31, 2006 with an exercise price of $33.65. The second tranche of 300,000 stock options was granted
on January 31, 2007 with an exercise price of $56.90. The third and final tranche of 300,000 stock options will be issued on January 31,
2008. The stock options granted to ALPA pilots do not reduce the shares available for grant under any equity incentive plan. Any of these
ALPA stock options that are forfeited or that expire without being exercised will not become available for grant under any of the
Company's plans.
The per share fair value of the ALPA pilot stock options granted on January 31, 2006 was $17.11, calculated using a Black-Scholes
option pricing model with the following assumptions:
Risk free interest rate 4.4%
Expected dividend yield —%
Contractual term 5.0 years
Volatility 69.8%
As of December 31, 2006 there were no unrecognized compensation costs related to stock options granted to ALPA pilots as the
stock options were fully vested on the grant date. There were 315,390 stock options exercised as of December 31, 2006 pursuant to this
agreement. Cash received from stock options exercised during the year ended December 31, 2006 totaled $12 million. The tax benefit
realized from stock options exercised during 2006 was $2 million. Tax expense of $0.5 million was recognized for option exercises with
book expense exceeding the tax deduction. The total intrinsic value of options exercised during 2006 was $5 million.
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