US Airways 2006 Annual Report Download - page 163

Table of Contents
America West Airlines, Inc.
Notes to Consolidated Financial Statements — (Continued)
matching contribution is determined annually by the Board of Directors. AWA's contribution expense to the plan totaled $6 million,
$10 million and $11 million in 2006, 2005 and 2004, respectively.
Effective January 1, 2005 America West Holdings amended its defined contribution plan, requiring AWA to make a non-elective
discretionary employer contribution equal to 7% of the annual compensation for each pilot covered under the collective bargaining
agreement between AWA and the Air Line Pilots Association (as defined in the plan and subject to statutory annual maximums).
Effective January 1, 2006 the non-elective discretionary employer contribution was increased to 10% of each pilot's annual
compensation. These non-elective discretionary employer contributions replace the existing AWA company match under the 401(k)
defined contribution plan for pilots. The AWA company match continues for all other eligible covered employees under the plan. AWA's
contribution expense to this plan totaled $19 million and $13 million for 2006 and 2005, respectively.
(b) Profit Sharing Plans
Most non-executive employees of US Airways Group are eligible to participate in the 2005 Profit Sharing Plan, an annual bonus
program, which was established subsequent to the merger. Annual bonus awards are paid from a profit-sharing pool equal to (i) ten
percent of the annual profits of US Airways Group (excluding unusual items) for pre-tax profit margins up to ten percent, plus (ii) 15% of
the annual profits of US Airways Group (excluding unusual items) for pre-tax profit margins greater than ten percent. Awards are paid as
a lump sum no later than March 15 after the end of each fiscal year. The profit-sharing pool is shared among eligible employee groups in
proportion to each group's share of overall cost savings achieved through US Airways' 2005 transformation plan; however, the
represented pilots' and flight attendants' portions of the pool will not be less than 36% and 14.5%, respectively. An employee's share of
the pool is based on the ratio that the employee's compensation bears to the respective employee group's aggregate compensation. AWA
recorded $23 million for profit sharing in 2006, which is recorded in salaries and related costs.
10. Stockholder's Equity
(a) Common Stock
The holder of common stock is entitled to one vote per share on all matters submitted to a vote of the common shareholder. All
common stock of AWA is held by America West Holdings.
(b) Warrants
As compensation for various elements of AWA's financial restructuring completed in January 2002, America West Holdings issued
a warrant to purchase 18.8 million shares of its Class B common stock to the ATSB and additional warrants to purchase 3.8 million
shares of its Class B common stock to other loan participants, in each case at an exercise price of $3 per share and a term of ten years. For
accounting purposes, the warrants were valued at $35 million, or $1.57 per share, using the Black-Scholes pricing model with the
following assumptions: expected dividend yield of 0.0%, risk-free interest rate of 4.8%, and volatility of 44.9% and an expected life of
ten years. The warrants were recorded by AWA as a non-cash capital contribution in the consolidated statements of stockholder's equity
and comprehensive income and classified as other assets, net in the consolidated balance sheet. The warrants were being amortized over
the life of the government guaranteed loan as an increase to interest expense. In the first quarter of 2004, approximately 220,000 warrants
were exercised at $3 per share. In the third quarter of 2003, approximately 2.6 million warrants were exercised at $3 per share. These
warrant exercises were cashless transactions resulting in the issuance of approximately 1.6 million shares of America West Holdings'
Class B common stock.
In the fourth quarter of 2005, US Airways Group announced an agreement to repurchase all of the replacement warrants issued to
the ATSB in connection with the merger with America West Holdings. US Airways Group repurchased approximately 7.7 million
warrants to purchase shares of common stock that had an exercise price of
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