US Airways 2007 Annual Report Download - page 114

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
performance-based cash awards. Incentive stock options granted under the 2005 Incentive Plan are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. Nonstatutory stock options granted under
the 2005 Incentive Plan are not intended to qualify as incentive stock options under the Internal Revenue Code.
At the time of adoption, a maximum of 12.5% of the fully-diluted shares (as of the completion of the merger) of US Airways Group
common stock was available for issuance under the 2005 Incentive Plan, totaling 10,969,191 shares. Any or all of these shares may be
granted pursuant to incentive stock options. Shares of US Airways Group common stock issued under the 2005 Incentive Plan may be
unissued shares or reacquired shares, purchased on the open market or otherwise. At December 31, 2007, approximately 4 million shares
are available for grant under the 2005 Equity Incentive Plan.
The number of shares of US Airways Group common stock available for issuance under the 2005 Incentive Plan is reduced by
(i) one share for each share of stock issued pursuant to a stock option or a stock appreciation right, and (ii) three shares for each share of
stock issued pursuant to a stock purchase award, stock bonus award, stock unit award, and other full-value types of stock awards. Stock
awards that are terminated, forfeited or repurchased result in an increase in the share reserve of the 2005 Incentive Plan corresponding to
the reduction originally made in respect of the award.
If a stock award granted under the 2005 Incentive Plan or AWA's previous incentive plan (the "2002 Incentive Plan") expires or
otherwise terminates without being exercised in full, or if any shares of US Airways Group common stock issued pursuant to a stock
award under the 2005 Incentive Plan are forfeited to or repurchased by US Airways Group, including, but not limited to, any repurchase
or forfeiture caused by the failure to meet a contingency or condition required for the vesting of such shares, then the shares of US
Airways Group common stock not issued under that stock award, or forfeited to or repurchased by US Airways Group, will revert to and
again become available for issuance under the 2005 Incentive Plan. If any shares subject to a stock award are not delivered to a
participant because those shares are withheld for the payment of taxes or the stock award is exercised through a reduction of shares
subject to the stock award (i.e., "net exercised"), the number of shares that are not delivered will remain available for issuance under the
2005 Incentive Plan. If the exercise price of any stock award is satisfied by tendering shares of US Airways Group common stock held by
the participant, then the number of shares so tendered (whether by actual tender or by attestation of ownership) will remain available for
issuance under the 2005 Incentive Plan. Shares of US Airways Group common stock subject to stock awards issued in substitution for
previously outstanding awards assumed in connection with a merger, consolidation or similar transaction will not reduce the number of
shares available for issuance under the 2005 Incentive Plan.
The Company's net income for the years ended December 31, 2007 and 2006 includes $32 million and $34 million, respectively, of
compensation costs related to share-based payments. Compensation expense of $4 million, calculated using the provisions of APB 25,
was recorded for stock appreciation rights and restricted stock units granted to employees of US Airways Group in the fourth quarter of
2005. Upon adoption of SFAS 123R, the Company recorded a cumulative benefit from the accounting change of $1 million, which
reflects the impact of estimating future forfeitures for previously recognized compensation expense. Pursuant to APB 25, stock
compensation expense was not reduced for estimated future forfeitures, but instead was reversed upon actual forfeiture. No income tax
effect related to share-based payments or cumulative effect has been recorded as the effects have been immediately offset by the
recording of a valuation allowance through the same financial statement caption.
Restricted Stock Unit Awards — As of December 31, 2007, the Company has outstanding restricted stock unit awards ("RSUs")
with service conditions (vesting periods) and RSUs with service and performance conditions (which performance condition of obtaining a
combined operating certificate for AWA and US Airways was met on September 26, 2007). SFAS 123R requires that the grant-date fair
value of RSUs be equal to the market price of the share on the date of grant if vesting is based on a service or a performance condition.
The grant-date fair value of RSU awards that are subject to both a service and a performance condition are being expensed over the
vesting
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