Southwest Airlines 2009 Annual Report Download - page 90

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2009
OTHER EMPLOYEE PLANS
Options (000)
Wtd. average
exercise price
Wtd. average
remaining contractual
term
Aggregate intrinsic
value (millions)
Outstanding December 31, 2006 .......... 32,194 $14.87
Granted ......................... 293 16.35
Exercised ........................ (2,506) 8.45
Surrendered ...................... (1,454) 16.49
Outstanding December 31, 2007 .......... 28,527 $15.37
Granted ......................... 1,642 12.13
Exercised ........................ (2,447) 10.64
Surrendered ...................... (1,233) 16.05
Outstanding December 31, 2008 .......... 26,489 $15.57
Granted ......................... 1,824 6.75
Exercised ........................ (570) 10.36
Surrendered ...................... (1,999) 14.05
Outstanding December 31, 2009 .......... 25,744 $15.17 4.1 $9
Vested or expected to vest at December 31,
2009 .............................. 25,242 $15.18 4.1 $9
Exercisable at December 31, 2009 ........ 19,410 $15.99 3.3 $1
The total aggregate intrinsic value of options exercised for all plans during the years ended December 31,
2009, 2008, and 2007, was $1 million, $24 million, and $137 million, respectively. The total fair value of shares
vesting during the years ended December 31, 2009, 2008, and 2007, was $12 million, $12 million, and $64
million, respectively. As of December 31, 2009, there was $22 million of total unrecognized compensation cost
related to share-based compensation arrangements, which is expected to be recognized over a weighted-average
period of 1.8 years.
Employee Stock Purchase Plan
Under the amended 1991 Employee Stock Purchase Plan (ESPP), which has been approved by shareholders,
the Company is authorized to issue up to a remaining balance of 8.0 million shares of Common Stock to
Employees of the Company. These shares may be issued at a price equal to 90 percent of the market value at the
end of each monthly purchase period. Common Stock purchases are paid for through periodic payroll deductions.
For the years ended December 31, 2009, 2008, and 2007, participants under the plan purchased 2.2 million
shares, 1.3 million shares, and 1.3 million shares at average prices of $6.78, $11.29, and $13.30, respectively.
The weighted-average fair value of each purchase right under the ESPP granted for the years ended
December 31, 2009, 2008, and 2007, which is equal to the ten percent discount from the market value of the
Common Stock at the end of each monthly purchase period, was $0.75, $1.25, and $1.48, respectively.
Taxes
A portion of the Company’s granted options qualify as incentive stock options (ISO) for income tax
purposes. As such, a tax benefit is not recorded at the time the compensation cost related to the options is
recorded for book purposes due to the fact that an ISO does not ordinarily result in a tax benefit unless there is a
disqualifying disposition. Grants of non-qualified stock options result in the creation of a deferred tax asset,
which is a temporary difference, until the time that the option is exercised. Due to the treatment of incentive
stock options for tax purposes, the Company’s effective tax rate from year to year is subject to variability.
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