US Airways 2007 Annual Report Download - page 174

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
(a) Predecessor Company
Upon confirmation of the Plan of Reorganization, existing shares of US Airways Group's common stock were canceled. The Plan of
Reorganization resulted in holders of US Airways Group's common stock and related equity securities receiving no distribution on
account of their interest.
Prior to cancellation of the shares of US Airways Group's common stock upon emergence from bankruptcy on September 27, 2005,
there were 4,750,000 shares of US Airways Group Class A Common Stock and 2,220,570 each of Class A-1 Warrants and shares of
Class A Preferred Stock authorized to be granted to US Airways' management. Through September 27, 2005, 3,649,159 shares of US
Airways Group Class A Common Stock, 2,101,240 each of Class A-1 Warrants and shares of Class A Preferred Stock, and 354,350
options to purchase Class A Common Stock were granted to US Airways' management. Grants of Class A Common Stock, stock options
and warrants generally vested over four years. The Predecessor Company recorded compensation expense over the vesting period. The
following table summarizes the activity of the Predecessor Company's stock options and warrants during 2005 prior to the merger:
Weighted Weighted
Stock Avg. Avg.
Options Exercise Price Warrants Exercise Price
Balance at December 31, 2004 357,390 $ 1.54 2,118,490 $ 7.42
Granted — — — —
Canceled (357,390) 1.57 (2,118,490) 7.42
Balance at September 27, 2005 — $ — — $ —
US Airways Group did not grant any shares of restricted stock during the nine months ended September 30, 2005. There were
1,683,674 non-vested shares of restricted stock outstanding immediately prior to cancellation upon emergence from the second
bankruptcy on September 27, 2005.
US Airways recognized compensation expense related to US Airways Group Class A Common Stock, stock option and stock
warrant grants to US Airways employees of $11 million for the nine months ended September 30, 2005.
(b) Successor Company
Effective with the merger on September 27, 2005, US Airways Group applied the provisions of APB 25 and related interpretations.
Effective January 1, 2006, US Airways Group adopted SFAS 123R, using the modified prospective transition method.
Substantially all of America West Holdings and AWA employee stock options outstanding at the time of the merger were fully
vested in accordance with the change of control provisions of America West Holdings' stock option plans and were converted into
options of US Airways Group. Existing stock options of US Airways Group outstanding prior to the merger on September 27, 2005 were
canceled as part of the plan of reorganization. Accordingly, as of January 1, 2006, only unvested stock options, stock appreciation rights
and restricted stock units granted subsequent to and in connection with the merger are subject to the transition provisions of SFAS 123R.
As part of the plan of reorganization, the Bankruptcy Court approved a new equity incentive plan, referred to as the 2005 Incentive
Equity Plan (the "2005 Incentive Plan"). The 2005 Incentive Plan provides for the grant of incentive stock options, nonstatutory stock
options, stock appreciation rights, stock purchase awards, stock bonus awards, stock unit awards, and other forms of equity
compensation, collectively referred to as stock awards, as well as 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.
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