Southwest Airlines 2013 Annual Report Download - page 121

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contract Employees, which did not require Shareholder approval and had an insignificant number of options
outstanding as of December 31, 2013. Although the Company does not have a formal policy, upon option
exercise, the Company will typically issue treasury stock, to the extent such shares are available.
Vesting terms for the collective bargaining plans differ based on the grant made, and have ranged in length
from immediate vesting to vesting periods in accordance with the period covered by the respective collective
bargaining agreement. For other Employee plans, options vest and generally become fully exercisable over three,
five, or ten years of continued employment, depending upon the grant type. For grants in any of the Company’s
plans that are subject to graded vesting over a service period, the Company recognizes expense on a straight-line
basis over the requisite service period for the entire award. None of the Company’s grants include performance-
based or market-based vesting conditions, as defined.
The Black-Scholes option valuation model was developed for use in estimating the fair value of short-term
traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models
require the input of subjective assumptions including expected stock price volatility. The Company estimates
expected stock price volatility via observations of both historical volatility trends as well as implied future
volatility observations as determined by independent third parties. Stock options issued by the Company during
2013 and 2012 were immaterial.
Aggregated information regarding Company issued stock options is summarized below:
STOCK OPTION PLANS
Options
(000)
Wtd.
average
exercise
price
Wtd.
average
remaining
contractual
term
Aggregate
intrinsic
value
(millions)
Outstanding December 31, 2010 .......................... 50,982 $ 14.68
Granted ............................................ — —
Exercised .......................................... (181) 7.74
Surrendered ........................................ (3,477) 17.38
Outstanding December 31, 2011 .......................... 47,324 $ 14.51
Granted ............................................ 6 9.00
Exercised .......................................... (573) 8.00
Surrendered ........................................ (27,847) 14.85
Outstanding December 31, 2012 .......................... 18,910 $ 14.19
Granted ............................................ — —
Exercised .......................................... (6,633) 13.31
Surrendered ........................................ (3,116) 14.94
Outstanding December 31, 2013 .......................... 9,161 $ 14.58 1.9 $ 39
Vested or expected to vest at December 31, 2013 ............. 9,137 $ 14.58 1.9 $ 39
Exercisable at December 31, 2013 ........................ 8,689 $ 14.49 1.9 $ 38
The total aggregate intrinsic value of options exercised for all plans during the years ended December 31,
2013, 2012, and 2011, was $22 million, $1 million, and $1 million, respectively. The total grant date fair value of
shares vesting during the years ended December 31, 2013, 2012, and 2011, was $16 million, $13 million, and
$13 million, respectively.
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 11 million shares of the
Company’s common stock to Employees of the Company. These shares may be issued at a price equal to 90
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