US Airways 2007 Annual Report Download - page 117

Table of Contents
US Airways Group, Inc.
Notes to Consolidated Financial Statements — (Continued)
Weighted
Average
Stock Weighted Remaining
Options Average Contractual Term Aggregate
and SARs Exercise Price (years) Intrinsic Value
(In millions)
2005 Equity Incentive Plan
Balance at December 31, 2004 — —
Granted 2,034 $ 23.08
Exercised — —
Forfeited (61) 20.64
Expired — —
Balance at December 31, 2005 1,973 $ 23.15
Granted 1,310 40.30
Exercised (701) 24.49
Forfeited (87) 30.34
Expired — —
Balance at December 31, 2006 2,495 $ 31.53
Granted 1,123 42.23
Exercised (92) 29.74
Forfeited (93) 35.00
Expired (63) 37.48
Balance at December 31, 2007 3,370 $ 34.96 8.48 $ —
Vested or expected to vest at December 31, 2007 3,206 $ 34.82 8.45 $ —
Exercisable at December 31, 2007 1,094 $ 30.00 8.01 $ —
The fair value of stock options and SARs is determined at the grant date using a Black-Scholes option pricing model, which requires
several assumptions. The risk-free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the stock
option or SAR at the time of grant. The dividend yield is assumed to be zero since the Company does not pay dividends and has no
current plans to do so in the future. The volatility is based on the historical volatility of the Company's common stock over a time period
equal to the expected term of the stock option or SAR. The expected life of stock options and SARs is based on the historical experience
of the Company.
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, 2007, 2006 and 2005 were as follows:
Year Ended
December 31, December 31, December 31,
2007 2006 2005
Weighted average fair value $ 16.57 $ 16.77 $ 8.50
Risk free interest rate 4.5% 4.8% 3.4%
Expected dividend yield — — —
Expected life 3.0 years 2.9 years 4.0 years
Volatility 52% 57% 54%
As of December 31, 2007, there were $26 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 1.2 years.
The total intrinsic value of stock options and SARs exercised during the years ended December 31, 2007, 2006, and 2005 was
$4 million, $68 million, and $13 million, respectively. Cash received from stock option and SAR exercises during the years ended
December 31, 2007 and 2006 totaled $13 million and $51 million, respectively. The tax benefit realized from stock options and SARs
exercised during the years ended December 31, 2007 and 2006 was $2 million and $25 million, respectively. The Company recognized
no tax expense for exercises with book expense exceeding the tax deduction for 2007 and $0.2 million was recognized for 2006.
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