US Airways 2007 Annual Report Download - page 152

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
company. Each tranche included 3,000,000 stock options. In December 1999, US Airways exercised the first tranche of stock options at
an exercise price of $27 per option and received proceeds of $81 million in January 2000 in lieu of receiving SHC Common Stock. In
February 2000, SHC declared a cash dividend resulting in a dilution adjustment to the terms of the second tranche. The adjusted terms of
the second tranche include stock options to acquire 3,406,914 shares of SHC Common Stock at an exercise price of $23.78 subject to a
$111.83 per share cap on the fair market value of the underlying common stock. On December 12, 2006, Sabre announced that it had
agreed to be acquired by several private equity groups for $32.75 per share in cash. The acquisition of Sabre was completed during March
2007 at which time the remaining options were exercised and the related shares sold. US Airways received proceeds of $31 million in
connection with the transaction. Realized gains resulting from the exercise of Sabre options are subject to a clawback provision. Under
the clawback provision, if US Airways elects to terminate its information technology service agreement with Sabre, it will be required to
pay Sabre an amount equal to the gain multiplied by the ratio of the remaining months in the contract period over 180 months. The
deferred gain from the 1999 and 2007 exercises is amortized on a straight-line basis over a contractually determined period ending
December 2012. As of December 31, 2007, US Airways had $34 million of unamortized deferred gain related to the sale of Sabre
options.
(b) Fuel Price Risk Management
As of December 31, 2007, US Airways had entered into costless collar transactions hedging approximately 22% of US Airways'
projected 2008 fuel requirements. The fair value of the financial derivative instruments was a net asset of $121 million recorded in
prepaid expenses and other at December 31, 2007 and a net liability of $66 million recorded in accounts payable at December 31, 2006.
As of December 31, 2007, US Airways had no deposits held as collateral on open fuel hedge positions as these deposits are only required
when the fair value of the hedges is in a liability position.
US Airways is exposed to credit risks in the event any counterparty to a hedge transaction fails to meet its obligations. US Airways
does not anticipate such non-performance as counterparties are selected based on credit ratings and exposure to any one counterparty is
closely monitored.
(c) Fair Values of Financial Instruments
Cash, Cash Equivalents and Investments in Marketable Securities
As of December 31, 2007 and 2006, US Airways' cash and cash equivalents are as follows (in millions):
2007 2006
Cash and cash equivalents:
Corporate notes $ 90 $ 731
Cash and money market funds 1,850 380
Total cash and cash equivalents $ 1,940 $ 1,111
The carrying amount of cash equivalents approximates fair value because of the short-term nature of these instruments.
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