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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
AMR CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
AMR
P.O. BOX 619616, DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TX 75261-9616
March 30, 1999
TO OUR STOCKHOLDERS,
You are cordially invited to attend the annual meeting of stockholders of
AMR Corporation, which will be held at the American Airlines Training &
Conference Center, 4501 Highway 360 South, Fort Worth, Texas, on Wednesday, May
19, 1999, at 10:00 A.M., Central Daylight Time. An Official Notice of the
Meeting, Proxy Statement and form of proxy are enclosed with this letter.
Whether or not you plan to attend the meeting, it is important that your
shares be represented and voted at the meeting. This year registered
stockholders can vote their shares by using a toll-free telephone number or via
the Internet. Instructions for using these convenient new services are provided
on the proxy card. Of course, you may still vote your shares by marking your
votes on the proxy card, signing and dating it and mailing it in the envelope
provided.
We hope that those of you who plan to attend the annual meeting will join us
beforehand for refreshments. If you plan to attend the annual meeting, please
make certain that you mark the appropriate box when voting, and bring to the
annual meeting the admission ticket that is printed on the proxy card. For your
convenience, a map of the area and directions to the American Airlines Training
& Conference Center are provided on the last page of the Proxy Statement and on
the admission ticket.
Sincerely,
[LOGO]
Donald J. Carty
CHAIRMAN OF THE BOARD
<PAGE>
AMR
P.O. BOX 619616, DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TX 75261-9616
------------------------
OFFICIAL NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
The annual meeting of stockholders of AMR Corporation will be held at the
American Airlines Training & Conference Center, 4501 Highway 360 South, Fort
Worth, Texas, on Wednesday, May 19, 1999, at 10:00 A.M., Central Daylight Time,
for the purpose of considering and acting upon the following:
(1) the election of directors;
(2) ratification of the selection of Ernst & Young LLP as independent
auditors for the Corporation for the year 1999;
and such other matters as may properly come before the meeting or any
adjournments thereof.
Only stockholders of record at the close of business on March 22, 1999, will
be entitled to attend or to vote at the meeting.
By Order of the Board of Directors,
[SIGCUT]
Charles D. MarLett
CORPORATE SECRETARY
March 30, 1999
IF YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU MUST HAVE AN ADMISSION TICKET
(PRINTED ON THE PROXY CARD) OR OTHER PROOF OF SHARE OWNERSHIP (FOR EXAMPLE, A
RECENT STATEMENT FROM YOUR BROKER). IF YOU DO NOT EXPECT TO ATTEND THE MEETING
IN PERSON, PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE OR VOTE YOUR SHARES VIA TELEPHONE OR THE INTERNET SO THAT YOUR SHARES
WILL BE REPRESENTED.
<PAGE>
AMR
P.O. BOX 619616, DALLAS/FORT WORTH INTERNATIONAL AIRPORT, TX 75261-9616
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1999
This statement and the form of proxy are being mailed to stockholders on or
around March 30, 1999, in connection with a solicitation of proxies by the Board
of Directors of AMR Corporation ("AMR" or the "Corporation") for use at the
annual meeting of stockholders to be held on May 19, 1999.
SOLICITATION OF PROXIES
VOTING BY TELEPHONE OR INTERNET
This year stockholders of record can simplify their voting and reduce the
Corporation's cost by voting their shares via telephone or the Internet. The
telephone and Internet voting procedures are designed to authenticate
stockholders' identities, allow stockholders to vote their shares and to confirm
that their instructions have been properly recorded. If a stockholder's shares
are held in the name of a bank or broker, the availability of telephone and
Internet voting will depend on the voting processes of the bank or broker;
therefore, stockholders should follow the voting instructions on the form they
receive from their bank or broker.
VOTING BY MAIL
Stockholders who choose to vote by mail are asked to date, sign and return
the enclosed proxy card using the postage paid envelope provided. The shares
represented will be voted in accordance with their directions.
REVOCATION OF PROXIES
Stockholders may revoke their proxy at any time before it is exercised by
writing to the Corporate Secretary, by timely delivery of a properly executed
later-dated proxy (including an Internet or telephone vote) or by attending and
voting their shares at the meeting.
PLEASE NOTE THAT STOCKHOLDERS WHO ELECT TO VOTE OVER THE INTERNET MAY INCUR
COSTS SUCH AS TELECOMMUNICATION AND INTERNET ACCESS CHARGES FOR WHICH THE
STOCKHOLDER IS SOLELY RESPONSIBLE. THE
<PAGE>
INTERNET VOTING FACILITIES FOR STOCKHOLDERS OF RECORD WILL CLOSE AT 5:00 P.M.
C.D.T. ON THE EVENING BEFORE THE MEETING. THE TELEPHONE VOTING FACILITIES WILL
BE AVAILABLE UNTIL THE MEETING BEGINS AT 10:00 A.M. C.D.T.
SOLICITATION COSTS
The Corporation will bear the cost of this solicitation. In addition to
using the mails, proxies may be solicited by directors, officers, employees, or
agents of the Corporation or its subsidiaries, in person or by telephone,
facsimile or other means of electronic communication. The Corporation will also
request brokers or nominees who hold common stock in their names to forward
proxy material at the Corporation's expense to the beneficial owners of such
stock. To aid in the solicitation of proxies, the Corporation has retained D.F.
King & Co., Inc., a firm of professional proxy solicitors, at an estimated fee
of $13,500 plus reimbursement of normal expenses.
OUTSTANDING STOCK AND VOTING RIGHTS
The holders of record at the close of business on March 22, 1999 of the
Corporation's common stock will be entitled to vote at the meeting. On that
date, the Corporation had outstanding 182,342,677 shares of common stock. Each
stockholder will be entitled to one vote in person or by proxy for each share of
stock held.
Directors of the Corporation are elected by a plurality of the votes cast at
the annual meeting. Any other matters submitted to a vote of the stockholders
will be determined by a majority of the votes cast (unless a greater vote is
required by law). Abstentions from voting (including broker non-votes) on the
election of directors or on other matters will have no effect on the outcome of
such votes, since the outcome is determined on the basis of votes cast, and
abstentions are not counted as votes cast.
PROPOSAL 1--ELECTION OF DIRECTORS
It is proposed that 11 directors be elected at the meeting, to serve until
the next annual election.
Unless otherwise indicated, all proxies that authorize the persons named
therein to vote for the election of directors will be voted for the election of
the nominees listed below. If any nominee should not be available for election,
as a result of unforeseen circumstances, it is the intention of the persons
named in the proxy to vote for the election of such substitute nominee, if any,
as the Board of Directors may propose.
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NOMINEES FOR ELECTION AS DIRECTORS
Each of the nominees for election as a director has furnished to the
Corporation the following information with respect to principal occupation or
employment and principal business directorships. Each nominee is also a director
of American Airlines, Inc. ("American").
BUSINESS AFFILIATIONS
DAVID L. BOREN, President, University of Oklahoma, Norman, Oklahoma;
educational institution. He is also a director of Phillips Petroleum Company;
Texas Instruments, Inc. and Torchmark Corporation. From 1979 through 1994, he
was a United States Senator for Oklahoma. From 1975 through 1979, he was the
Governor of Oklahoma.
Mr. Boren is 57 and was elected a director in 1994. He is a member of
the Audit and Nominating/Governance Committees.
EDWARD A. BRENNAN, retired Chairman, President and Chief Executive Officer,
Sears, Roebuck and Co., Chicago, Illinois; merchandising. He is also a director
of Allstate Corporation; Morgan Stanley Dean Witter & Co.; Minnesota Mining and
Manufacturing Company; Unicom Corporation; Dean Foods Company and The SABRE
Group Holdings, Inc.
Mr. Brennan is 65 and was elected a director in 1987. He is a member of
the Nominating/ Governance Committee and is Chairman of the Compensation
Committee.
DONALD J. CARTY, Chairman, President and Chief Executive Officer of the
Corporation and American Airlines, Inc., Fort Worth, Texas; air transportation
and information systems. He is also a director of Dell Computer Corporation;
Brinker International, Inc. and The SABRE Group Holdings, Inc.
Mr. Carty is 52 and was elected a director in April 1998. He became an
Executive Vice President of the Corporation and American in 1989 and was
named the President of American in 1995. On May 20, 1998, Mr. Carty was
elected Chairman, President and Chief Executive Officer of the Corporation
and American. Mr. Carty is Chairman of the Executive Committee.
ARMANDO M. CODINA, Chairman of the Board and Chief Executive Officer, Codina
Group, Inc., Coral Gables, Florida; real estate investments, development,
construction, property
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management and brokerage services. He is also a director of BellSouth
Corporation; Winn Dixie Stores, Inc.; FPL Group, Inc. and American Bankers
Insurance Group, Inc.
Mr. Codina is 52 and was elected a director in 1995. He is a member of
the Executive and Nominating/Governance Committees.
EARL G. GRAVES, Chairman and Chief Executive Officer, Earl G. Graves,
Limited, New York, New York; communications and publishing (including
publication of BLACK ENTERPRISE magazine). He is Managing Director of Black
Enterprise/Greenwich Street Corporate Growth Partners, L.P. and Chairman
Emeritus of Pepsi-Cola of Washington, D.C., L.P., a Pepsi-Cola bottling
franchise. He is a director of Aetna Inc.; DaimlerChrysler AG; Federated
Department Stores, Inc. and Rohm and Haas Company.
Mr. Graves is 64 and was elected a director in 1995. He is a member of
the Audit and Nominating/Governance Committees.
DEE J. KELLY, Partner, Kelly, Hart & Hallman, P.C., Fort Worth, Texas; law
firm. He is also a director of Justin Industries, Inc. and The SABRE Group
Holdings, Inc.
Mr. Kelly is 70 and was elected a director in 1983. He is a member of
the Executive and Nominating/Governance Committees.
ANN D. MCLAUGHLIN, Chairman of The Aspen Institute, Washington, D.C. and
Aspen, Colorado; international nonprofit educational and public policy
organization dedicated to convening and developing leaders throughout the world.
She was President of the Federal City Council, Washington, D.C. from 1990 to
1995. She was President and Chief Executive Officer of New American Schools
Development Corporation, Arlington, Virginia from 1992 to 1993. She was United
States Secretary of Labor from 1987 to 1989. She is also a director of General
Motors Corporation; Kellogg Company; Host Marriott Corporation; Union Camp
Corporation; Vulcan Materials Company; Nordstrom, Inc.; Harman International
Industries, Inc.; Donna Karan International, Inc. and Fannie Mae.
Ms. McLaughlin is 57 and was elected a director in 1990. She is Chairman
of the Audit Committee and is a member of the Nominating/Governance
Committee.
CHARLES H. PISTOR, JR., retired Vice Chair, Southern Methodist University,
Dallas, Texas; educational institution. He is a former President of the American
Bankers Association. He
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previously served as Chairman and Chief Executive Officer of First RepublicBank
Dallas, N.A. He is also a director of Fortune Brands, Inc.; Centex Corporation
and Zale Corporation.
Mr. Pistor is 68 and was elected a director in 1982. He is a member of
the Audit and Compensation Committees.
JOE M. RODGERS, Chairman, The JMR Group, Nashville, Tennessee; investment
company. From 1985 through 1989, Mr. Rodgers was the United States Ambassador to
France. He is also a director of Gaylord Entertainment Company; Lafarge
Corporation; SunTrust Bank, Nashville, N.A.; Thomas Nelson, Inc.; Towne
Services, Inc. and Tractor Supply Company.
Mr. Rodgers is 65 and was elected a director in 1989. He is a member of
the Audit and Compensation Committees.
JUDITH RODIN, President, University of Pennsylvania, Philadelphia,
Pennsylvania; educational institution. She was Provost of Yale University from
1992 through 1994. She is also a director of Aetna Inc. and Electronic Data
Systems Corporation.
Ms. Rodin is 54 and was elected a director in 1997. She is a member of
the Compensation and Nominating/Governance Committees.
MAURICE SEGALL, Senior Lecturer at the Massachusetts Institute of Technology
(Sloan School of Management), Boston, Massachusetts; educational institution. He
is the retired Chairman, President and Chief Executive Officer of Zayre
Corporation, a retailing company. He is also a director of Harcourt General,
Inc. and Cabot Industrial Trust.
Mr. Segall is 69 and was elected a director in 1985. He is a member of
the Executive and Compensation Committees.
A plurality of the votes cast is necessary for the election of a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
BOARD COMMITTEES
AMR has standing Audit, Executive, Compensation and Nominating/Governance
Committees which perform the functions described below. In 1998, the Board of
Directors of AMR held eight regular meetings. Charles T. Fisher III attended
fewer than 75% of the Board of Directors meetings and committee meetings of
which he was a member.
The Audit Committee, composed entirely of outside directors, met five times
during 1998 with the Corporation's independent auditors, representatives of
management and the internal
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audit staff. The Committee recommends the selection of independent auditors,
reviews the scope and results of the annual audit (including the independent
auditors' assessment of internal controls), reviews the Corporation's
consolidated financial statements, reviews the scope of non-audit services
provided by the independent auditors and reviews reports of the independent
auditors.
The Executive Committee met twice during 1998. The Committee may exercise
all the powers and authority of the Board in the management of the business and
affairs of the Corporation, with the exception of such powers and authority as
are specifically reserved to the Board.
The Compensation Committee, composed entirely of outside directors, met
eight times in 1998. The Committee makes recommendations with respect to
compensation and benefit programs for the officers and directors of the
Corporation and its subsidiaries. In this regard, the Compensation Committee has
retained Hewitt Associates LLC (independent compensation consultants) to assist
the Committee in structuring a compensation program for the officers and key
employees that aligns an executive's compensation with the long term interests
of the stockholders through the use of cash and stock based compensation in
conjunction with appropriate performance criteria.
The Nominating/Governance Committee, composed entirely of outside directors,
met six times in 1998 (including one meeting outside of the presence of
management with the other outside directors of the Board). The Committee
recommends candidates for officer positions, reviews with the Chief Executive
Officer succession planning for senior positions within the Corporation and its
subsidiaries, and reviews the corporate governance procedures of the Board to
ensure that the best long term interests of all stockholders are being
considered. The Nominating/Governance Committee also makes recommendations with
respect to assignments to Board committees and recommends suitable candidates
for election to the Board. In this regard, the Committee will consider nominees
for election recommended by stockholders. See page 29 for additional information
on the submission of such nominations.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee for 1998 were as follows:
Edward A. Brennan, Chairman
<TABLE>
<S> <C>
Charles H. Pistor, Jr. Judith Rodin
Joe M. Rodgers Maurice Segall
</TABLE>
6
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No member of the Compensation Committee is a current or former employee or
officer of the Corporation or any of its affiliates or has any interlocking
relationship with any other corporation that requires specific disclosure under
this heading.
COMPENSATION OF DIRECTORS
Outside directors of the Corporation receive an annual retainer of $20,000
for service on the Board of Directors, an annual retainer of $1,500 for service
on a standing Committee of the Board (generally each director serves on two
committees) and $1,000 for attending a Board or Committee meeting (provided that
the maximum payment for meeting attendance is $1,000 per day, regardless of the
number of meetings actually attended in one day). Directors may defer payment of
all or any part of these fees pursuant to two deferral plans. Under the first of
these deferral plans, the Corporation will pay interest on the amount deferred
at the prime rate from time to time in effect at The Chase Manhattan Bank, N.A.
Under the second deferral plan, compensation deferred during any calendar month
is converted into stock equivalent units by dividing the total amount of
deferred compensation by the average fair market value (as defined in the
Corporation's 1998 Long Term Incentive Plan, as amended (the "LTIP")) of the
Corporation's common stock during such month. At the end of the deferral period,
the Corporation will pay to the director an amount in cash equal to the number
of accumulated stock equivalent units multiplied by the average fair market
value of the Corporation's common stock during the month in which the deferral
period terminates.
An outside director, an outside director's spouse or companion, and an
outside director's dependent children are provided transportation on American
and reimbursement for federal income taxes incurred thereon. The cost of such
complimentary transportation for each outside director in 1998, including the
reimbursement obligation for income tax liability, was as follows: David L.
Boren ($10,178); Edward A. Brennan ($34,644); Armando M. Codina ($45,224);
Charles T. Fisher III ($12,608); Earl G. Graves ($29,519); Dee J. Kelly
($36,417); Ann D. McLaughlin ($36,487); Charles H. Pistor, Jr. ($13,322); Joe M.
Rodgers ($18,958); Judith Rodin ($38,430); and Maurice Segall ($8,403). Mr.
Carty, as an employee of American, pays service charges for his use of employee
travel privileges.
Pursuant to the 1994 Directors Stock Incentive Plan, as amended (the "SIP"),
outside directors each receive an annual award of 600 deferred shares of the
Corporation's common stock. Generally, these shares will be delivered to the
director within six months after the director ceases to be a member of the
Board.
The Corporation provides directors who were elected on or before May 15,
1996, a pension benefit equal to 10% of the director's fees and retainers from
the Corporation for his or her last twelve months of service on the Board,
multiplied by the number of years of service on the Board,
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up to a maximum of $20,000 per year. In 1998 the Corporation adopted a
split-dollar life insurance program for those Directors who are eligible to
participate in the Directors' pension plan. The split-dollar life insurance
program is an estate planning program pursuant to which the Corporation
purchases a life insurance policy for the Director. This insurance policy is
purchased with the funds that would have been used to provide the Director's
pension benefit. After a period of time, the Corporation recovers the cost of
such insurance from the policy's then existing cash value. Having recovered its
investment in the policy, the Corporation will no longer retain an interest in
it, and the policy will then be for the sole benefit of the Director.
Pursuant to the SIP, the Corporation provides directors who were elected
after May 15, 1996, an annual grant of an additional 300 deferred shares of the
Corporation's common stock. This additional grant is in lieu of their
participation in the foregoing pension plan, and the shares will be distributed
to the director within six months after the director ceases to be a member of
the Board.
OTHER MATTERS
During 1998, the law firm of Kelly, Hart & Hallman, P.C. performed legal
services for the Corporation. Mr. Kelly is a partner of the firm.
During 1998, American advertised in, and sponsored an event hosted by, BLACK
ENTERPRISE magazine. Mr. Graves is Chairman of the Board and Chief Executive
Officer of Earl G. Graves, Limited, which publishes that magazine.
The University of Oklahoma provides meteorological information services to
American. Mr. Boren is President of the University of Oklahoma.
During 1998, the law firm of Gibson, Dunn & Crutcher performed legal
services for American. Martin B. McNamara is a partner of the firm and is the
husband of Anne H. McNamara, Senior Vice President and General Counsel of the
Corporation.
Aurora Investments, Inc., a subsidiary of the Corporation, owns an equity
interest in Canadian Airlines International Ltd. ("Canadian"). American and
other subsidiaries of the Corporation also provide airline-related services to
Canadian. Douglas A. Carty is Senior Vice President and Chief Financial Officer
of Canadian and is the brother of Mr. Carty.
American and other subsidiaries of the Corporation purchase a variety of
services from The SABRE Group, Inc., a subsidiary of The SABRE Group Holdings,
Inc., which is a majority owned subsidiary of the Corporation ("TSGH"). Messrs.
Carty, Brennan and Kelly are directors of TSGH as are Anne H. McNamara, Senior
Vice President and General Counsel of the Corporation and Gerard J. Arpey,
Senior Vice President and Chief Financial Officer of the Corporation. Mr. Carty
is the Chairman of the Board of TSGH.
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OWNERSHIP OF SECURITIES
SECURITIES OWNED BY DIRECTORS AND OFFICERS
As of March 22, 1999, each director and nominee for director, the executive
officers named in the Summary Compensation Table, and all directors and
executive officers, as a group, owned, or had been granted rights to, under the
stock based compensation or deferral plans of the Corporation and TSGH, shares
of or stock equivalent units of the Corporation's common stock and TSGH's Class
A common stock as indicated in the table below:
<TABLE>
<CAPTION>
AMR COMMON PERCENT OF TSGH CLASS A PERCENT OF
NAME STOCK CLASS COMMON STOCK CLASS
- ------------------------------------------------- -------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
David L. Boren (1)............................... 2,600 * 0 *
Edward A. Brennan (2) (3)........................ 15,106 * 20,991 *
Donald J. Carty (4).............................. 874,300 * 2,500 *
Armando M. Codina (2)............................ 4,821 * 0 *
Charles T. Fisher III (1) (5).................... 4,600 * 1,000 *
Earl G. Graves (1)............................... 3,800 * 2,500 *
Dee J. Kelly (1) (6)............................. 6,600 * 18,800 *
Ann D. McLaughlin (1)............................ 5,400 * 250 *
Charles H. Pistor, Jr. (1)....................... 6,600 * 2,500 *
Joe M. Rodgers (1) (7)........................... 4,600 * 0 *
Judith Rodin (2)................................. 1,996 * 0 *
Maurice Segall (1)............................... 4,600 * 0 *
Robert L. Crandall (8)........................... 249,732 * 2,500 *
Robert W. Baker (9).............................. 439,155 * 0 *
Michael W. Gunn (10)............................. 134,200 * 0 *
Gerard J. Arpey (11)............................. 139,000 * 500 *
Daniel P. Garton (12)............................ 108,000 * 1,000 *
Directors and executive officers as a group (22
persons) (13) (14)............................. 2,390,600 1.5 53,041 *
</TABLE>
(SEE NEXT 2 PAGES FOR FOOTNOTES.)
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- ------------------------
* Percentage does not exceed 1% of the total outstanding class.
(1) Includes deferred shares granted under the SIP to Messrs. Boren, Fisher,
Graves, Kelly, Pistor, Rodgers and Segall and Ms. McLaughlin of 2,200,
2,600, 2,200, 2,600, 2,600, 2,600, 2,600, and 2,600, respectively. Such
shares will be delivered to the director within six months after the
director ceases to be a member of the Board. See "Compensation of Directors"
on pages 7 to 8 for further information on the deferred shares.
(2) Includes deferred shares granted under the SIP to Messrs. Brennan and Codina
and Ms. Rodin of 2,600, 2,200 and 900, respectively and stock equivalent
units (which are the economic equivalent of a share of stock) of 10,506,
1,621 and 1,096, respectively. The deferred shares will be delivered to the
director within six months after the director ceases to be a member of the
Board. See "Compensation of Directors" on pages 7 to 8 for further
information on the deferred shares and the stock equivalent units.
(3) Includes stock options for 16,000 shares of TSGH Class A common stock and
2,991 TSGH stock equivalent units (which are the economic equivalent of a
share of stock). Stock options representing 2,600 shares of TSGH Class A
common stock are vested and currently exercisable. Stock options
representing 3,200 shares of TSGH Class A common stock will vest and become
exercisable May 1999. The remaining options will vest during the period from
May 2000 through May 2003.
(4) Includes stock options for 625,600 shares of common stock and 228,500 shares
of deferred stock granted under the LTIP. Stock options representing 202,800
shares of common stock are vested and currently exercisable. The remaining
options will vest and become exercisable during the period from July 1999
through July 2003. The deferred shares are comprised of: (i) 58,500
Performance Shares that are scheduled to vest (subject to the attainment of
specified performance criteria) during the period 1999 through 2000; and
(ii) 170,000 Career Equity Shares that are scheduled to vest at age 60 (with
pro rata vesting in the event of death, disability or termination not for
cause before attaining age 60).
(5) Includes 2,000 shares of the Corporation's common stock held by a trust of
which Mr. Fisher and his wife have shared voting and investment power. The
1,000 shares of TSGH Class A common stock are held by a trust of which Mr.
Fisher and his wife have shared voting and investment power.
(6) Includes 2,000 shares of the Corporation's common stock held by Kelly Group
Investors. Mr. Kelly disclaims any beneficial interest in 1,072 of such
shares. Includes stock options for 16,000 shares of TSGH Class A common
stock. Stock options representing 2,600 shares of TSGH Class A common stock
are vested and currently exercisable. Stock options representing 3,200
shares of TSGH Class A common stock will vest and become exercisable May
1999. The remaining options will vest during the period from May 2000
through May 2003.
(7) Includes 2,000 shares held by JMR Investments over which Mr. Rodgers has
shared voting and investment power.
(8) Includes stock options for 208,000 shares of common stock and 39,732 shares
of deferred stock granted under the LTIP. Stock options representing 52,000
shares of common stock are vested and currently exercisable. The remaining
options will be exercisable during the period from July 1999 through July
2002. The deferred shares are Performance Shares that are scheduled to vest
(subject to the attainment of specified performance criteria) during the
period 1999 through 2000.
(9) Includes stock options for 247,000 shares of common stock and 189,500 shares
of deferred stock granted under the LTIP. Stock options representing 158,400
shares of common stock are vested and currently exercisable. The remaining
options will vest during the period from July 1999 through July 2003. The
deferred shares are comprised of: (i) 29,500 Performance Shares that are
scheduled to vest (subject to the attainment of specified performance
criteria) during the
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period 1999 through 2000; and (ii) 160,000 Career Equity Shares that are
scheduled to vest at age 60 (with pro rata vesting in the event of death,
disability or termination not for cause before attaining age 60).
(10) Includes stock options for 42,200 shares of common stock and 92,000 shares
of deferred stock granted under the LTIP. Stock options representing 10,000
shares of common stock are vested and currently exercisable. The remaining
options will vest during the period from July 1999 through July 2003. The
deferred shares are comprised of: (i) 15,000 Performance Shares that are
scheduled to vest (subject to the attainment of specified performance
criteria) during the period 1999 through 2000; and (ii) 77,000 Career Equity
Shares that are scheduled to vest at age 60 (with pro rata vesting in the
event of death, disability or termination not for cause before attaining age
60).
(11) Includes stock options for 76,000 shares of common stock and 63,000 shares
of deferred stock granted under the LTIP. Stock options representing 40,400
shares of common stock are vested and currently exercisable. The remaining
options will vest during the period from July 1999 through July 2003. The
deferred shares are comprised of: (i) 21,000 Performance Shares that are
scheduled to vest (subject to the attainment of specified performance
criteria) during the period 1999 through 2000; and (ii) 42,000 Career Equity
Shares that are scheduled to vest at age 60 (with pro rata vesting in the
event of death, disability or termination not for cause before attaining age
60).
(12) Includes stock options for 53,000 shares of common stock and 55,000 shares
of deferred stock granted under the LTIP. Stock options representing 12,000
shares of common stock are vested and currently exercisable. The remaining
options will vest during the period from July 1999 through July 2003. The
deferred shares are comprised of: (i) 21,000 Performance Shares that are
scheduled to vest (subject to the attainment of specified performance
criteria) during the period 1999 through 2000; and (ii) 34,000 Career Equity
Shares that are scheduled to vest at age 60 (with pro rata vesting in the
event of death, disability or termination not for cause before attaining age
60).
(13) Includes stock options for 1,433,540 shares of the Corporation's common
stock, 865,832 shares of deferred stock granted under the LTIP, 25,700
shares of deferred stock granted under the SIP and 12,443 stock equivalent
units. Stock options representing 534,280 shares of common stock are vested
and currently exercisable. The remaining options will vest during the period
from July 1999 through July 2003. The deferred shares are comprised of: (i)
233,832 Performance Shares that are scheduled to vest (subject to the
attainment of specified performance criteria) during the period 1999 through
2000; and (ii) 632,000 Career Equity Shares that are scheduled to vest at
age 60 (with pro rata vesting in the event of death, disability or
termination not for cause before attaining age 60).
(14) Includes options for 32,000 shares of TSGH Class A common stock and 2,991
TSGH stock equivalent units. Stock options representing 5,200 shares of TSGH
Class A common stock are vested and currently exercisable. Stock options
representing 6,400 shares of TSGH Class A common stock will vest and become
exercisable May 1999. The remaining options will vest during the period from
May 2000 through May 2003.
Holders of unvested options, deferred shares under the LTIP or the SIP and
stock equivalent units do not have voting or dispositive power with regard to
such shares.
11
<PAGE>
SECURITIES OWNED BY CERTAIN BENEFICIAL OWNERS
The following firms have informed the Corporation that they were the
beneficial owners of more than 5% of the Corporation's outstanding common stock
at December 31, 1998:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT HELD PERCENT OF CLASS
- ----------------------------------------------------------------------- ------------ -----------------
<S> <C> <C>
Capital Research & Management Company.................................. 9,650,000(1) 5.3%
333 South Hope Street, 55th Floor
Los Angeles, California 90071
Oppenheimer Capital.................................................... 11,738,313(2) 6.4%
Oppenheimer Tower
World Financial Center
New York, New York 10281
PRIMECAP Management Company............................................ 9,876,200(3) 5.42%
225 South Lake Avenue, Suite 400
Pasadena, California 91101
</TABLE>
- ------------------------------
(1) Capital Research & Management Company filed a Schedule 13G in which it
disclaims beneficial ownership in all 9,650,000 shares over which it has
sole dispositive power.
(2) Oppenheimer Capital filed a Schedule 13G which indicates that it
beneficially owns, and has shared voting and dispositive power over,
11,738,313 shares of the Corporation's common stock.
(3) PRIMECAP Management Company filed a Schedule 13G which indicates that it
beneficially owns, and has sole voting and dispositive power over, 2,459,200
shares and beneficially owns, and has shared dispositive power over,
7,417,000 shares.
12
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the compensation for the
past three years paid to: (i) the individuals who, as of December 31, 1998, were
the four most highly compensated executive officers of the Corporation (other
than the Chief Executive Officer) whose aggregate current remuneration exceeded
$100,000; and (ii) those individuals who served as Chief Executive Officer of
the Corporation during the 1998 fiscal year (collectively, the "named executive
officers"). The stock amounts in the table have been adjusted to reflect the 2
for 1 stock split which occurred in June 1998.
<TABLE>
<CAPTION>
AWARDS
--------------------------
NAME ANNUAL COMPENSATION SECURITIES PAYOUTS
AND --------------------------------------------------- RESTRICTED UNDERLYING -----------
PRINCIPAL OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION(2) AWARDS(3) SARS(#)(4) PAYOUTS(5) COMPENSATION(6)
- ----------- --------- --------- ---------- ----------------- ----------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carty 1998 $ 700,417 $1,072,781 $ 0 0 309,600 $ $ 16,721
1997 648,083 648,000 0 0 70,000 3,711,969 16,721
1996 615,000 615,000 0 0 50,000 1,373,375 13,381
- ----------------------------------------------------------------------------------------------------------------------------
Crandall 1998 790,000 1,332,414 29,156 0 0 91,038
1997 766,667 1,000,000 38,925 0 100,000 4,717,086 98,045
1996 750,000 851,250 36,590 0 60,000 3,164,938 86,588
- ----------------------------------------------------------------------------------------------------------------------------
Baker 1998 560,825 560,000 0 0 25,000 18,074
1997 556,200 415,000 0 0 30,000 2,525,313 17,336
1996 546,750 310,000 0 0 30,000 1,331,875 16,241
- ----------------------------------------------------------------------------------------------------------------------------
Gunn 1998 435,967 404,000 0 0 13,000 11,404
1997 428,800 309,000 0 0 9,000 1,146,313 15,106
1996 420,750 250,000 0 0 9,000 516,250 15,106
- ----------------------------------------------------------------------------------------------------------------------------
Arpey 1998 382,833 367,000 0 0 14,000 4,171
1997 353,883 270,000 0 0 12,000 1,142,513 4,171
1996 330,750 215,000 0 0 9,000 507,150 4,171
- ----------------------------------------------------------------------------------------------------------------------------
Garton 1998 361,667 367,000 0 0 14,000 8,391
1997 328,883 328,000 0 0 12,000 1,117,813 8,391
1996 305,750 305,000 0 0 9,000 337,525 8,391
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
Carty = Donald J. Carty: Chairman, President and Chief Executive Officer of the Corporation and American (effective
May 20, 1998).
Crandall = Robert L. Crandall: Chairman, President and Chief Executive Officer of the Corporation; Chairman and Chief
Executive Officer of American (Effective May 20, 1998 he ceased to be an officer or director of the
Corporation and American).
Baker = Robert W. Baker: Executive Vice President-Operations of American.
Gunn = Michael W. Gunn: Senior Vice President-Marketing of American.
Arpey = Gerard J. Arpey: Senior Vice President and Chief Financial Officer of the Corporation; Senior Vice President-
Finance and Planning and Chief Financial Officer of American.
Garton = Daniel P. Garton: Senior Vice President-Customer Service of American.
</TABLE>
(SEE NEXT 3 PAGES FOR FOOTNOTES.)
13
<PAGE>
- ------------------------------
(1) Amounts shown for 1998 represent payments made in 1999 for 1998 services.
Amounts shown for 1997 represent payments made in 1998 for 1997 services.
Amounts shown for 1996 represent payments made in 1997 for 1996 services.
Such payments were made pursuant to American's Incentive Compensation Plan.
See the Compensation Committee Report at pages 24 to 25 for further
information on the Incentive Compensation Plan.
(2) These amounts represent reimbursement for taxes related to the payment of
insurance premiums.
(3) The following table sets forth certain information concerning restricted
stock awards:
RESTRICTED STOCK; TOTAL SHARES AND VALUE
<TABLE>
<CAPTION>
TOTAL NUMBER OF AGGREGATE MARKET VALUE
RESTRICTED SHARES OF RESTRICTED SHARES
NAME HELD AT FY-END(A) HELD AT FY-END(B)
- --------- ------------------- -----------------------
<S> <C> <C>
Carty 228,500 $ 13,745,715
Crandall 39,732 2,390,130
Baker 189,500 11,399,619
Gunn 92,000 5,534,380
Arpey 63,000 3,789,847
Garton 55,000 3,308,597
- -------------------------------------------------------
</TABLE>
(A) These amounts consist of: (i) shares of deferred common stock issued
under the LTIP which vest at retirement (Career Equity Shares); and (ii)
shares of deferred common stock issued under the LTIP which vest upon the
Corporation's attainment of predetermined cash flow objectives over a
three-year performance period (Performance Shares). See the related
discussions of Career Equity Shares and Performance Shares in the
Compensation Committee Report at pages 26 to 28.
(B) These amounts are based on the average market price of the Corporation's
common stock of $60.1563 on the NYSE on December 31, 1998.
(4) These amounts represent options for shares of the Corporation's common stock
which were granted in 1996, 1997 and 1998.
(5) For 1996, this amount represents performance returns paid in 1996 and a
payout of cash in exchange for Performance Shares of the Corporation issued
pursuant to the Corporation's 1994-1996 Performance Share Plan. For 1997,
this amount represents performance returns paid in 1997 and a payout of cash
or equivalent cash value of Performance Shares issued under the
Corporation's 1995-1997 Performance Share Plan. For 1998, this amount
represents performance returns paid in 1998. It is also anticipated that
there will be a distribution of Performance Shares issued
14
<PAGE>
under the Corporation's 1996-1998 Performance Share Plan, but the amount of
such distribution had not been determined as of the date of the proxy
statement. The following table sets forth information concerning LTIP
payouts:
<TABLE>
<CAPTION>
LTIP PAYOUTS
- ---------------------------------------------------------------------------
NAME YEAR PERFORMANCE RETURNS PERFORMANCE SHARES TOTAL
- --------- --------- -------------------- ------------------- ----------
<S> <C> <C> <C> <C>
Carty 1998 $ 378,900 $ $
1997 276,500 3,435,469 3,711,969
1996 276,500 1,096,875 1,373,375
- ---------------------------------------------------------------------------
Crandall 1998 422,750
1997 422,750 4,294,336 4,717,086
1996 422,750 2,742,188 3,164,938
- ---------------------------------------------------------------------------
Baker 1998 235,000
1997 235,000 2,290,313 2,525,313
1996 235,000 1,096,875 1,331,875
- ---------------------------------------------------------------------------
Gunn 1998 77,500
1997 77,500 1,068,813 1,146,313
1996 77,500 438,750 516,250
- ---------------------------------------------------------------------------
Arpey 1998 73,700
1997 73,700 1,068,813 1,142,513
1996 68,400 438,750 507,150
- ---------------------------------------------------------------------------
Garton 1998 59,664
1997 49,000 1,068,813 1,117,813
1996 43,900 0 43,900
- ---------------------------------------------------------------------------
</TABLE>
15
<PAGE>
(6) The following table sets forth information concerning all other
compensation:
<TABLE>
<CAPTION>
ALL OTHER COMPENSATION
- --------------------------------------------------------------------------------------------
INTEREST CONTRIBUTIONS TO DEFINED INSURANCE
NAME YEAR DIFFERENTIAL(A) CONTRIBUTION PLANS PREMIUMS(B) TOTAL
- --------- --------- --------------- --------------------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Carty 1998 $ 0 $ -- $ 16,721 $ 16,721
1997 0 -- 16,721 16,721
1996 0 -- 13,381 13,381
- --------------------------------------------------------------------------------------------
Crandall 1998 36,348 -- 54,690 91,038
1997 29,326 -- 68,719 98,045
1996 18,882 -- 67,706 86,588
- --------------------------------------------------------------------------------------------
Baker 1998 3,814 -- 14,260 18,074
1997 3,077 -- 14,260 17,336
1996 1,981 -- 14,260 16,241
- --------------------------------------------------------------------------------------------
Gunn 1998 0 -- 11,404 11,404
1997 0 -- 15,106 15,106
1996 0 -- 15,106 15,106
- --------------------------------------------------------------------------------------------
Arpey 1998 0 -- 4,171 4,171
1997 0 -- 4,171 4,171
1996 0 -- 4,171 4,171
- --------------------------------------------------------------------------------------------
Garton 1998 0 -- 8,391 8,391
1997 0 -- 8,391 8,391
1996 0 -- 8,391 8,391
- --------------------------------------------------------------------------------------------
</TABLE>
(A) Represents amounts credited but not paid in the current fiscal year and
consists of the above-market portion of interest (defined as a rate of
interest exceeding 120% of the applicable federal long term rate, with
compounding) on deferred compensation.
(B) Represents the full amount of premiums paid under a split-dollar life
insurance arrangement whereby the Corporation will recover certain
premiums paid, except with respect to Mr. Crandall, for whom this amount
also includes premiums paid on certain long term disability policies
($16,869) and a supplemental whole life insurance policy ($25,000).
16
<PAGE>
STOCK OPTIONS GRANTED
The following table sets forth information concerning stock options granted
during 1998 by the Corporation to the named executive officers. Grants from
prior years have been adjusted to reflect the 2 for 1 stock split which occurred
in June 1998. The hypothetical present values of stock options granted in 1998
are calculated under a Black-Scholes model, a mathematical formula used to value
options. The actual amount, if any, realized upon the exercise of stock options
will depend upon the amount by which the market price (NYSE) of the
Corporation's common stock on the date of exercise exceeds the exercise price.
There is no assurance that the hypothetical present values of stock options
reflected in this table will actually be realized.
If the hypothetical present values presented in this table represent the
amounts actually realized upon exercise of the options, the corresponding
increase in total stockholder value would be nearly $4.6 billion.
<TABLE>
<CAPTION>
OPTIONS/SARS GRANTED IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------
% OF TOTAL HYPOTHETICAL
SECURITIES OPTIONS/SARS PRESENT
UNDERLYING GRANTED TO EXERCISE OR VALUE AT
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION DATE OF
NAME GRANTED(#) FISCAL YEAR PER SHARE DATE(1) GRANT(2)
- ---------- ------------- --------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Carty 309,600 25.6 $ 73.0625 7/20/08 $ 7,808,112
Crandall 0 N/A N/A N/A 0
Baker 25,000 2.1 73.0625 7/20/08 630,500
Gunn 13,000 1.1 73.0625 7/20/08 327,860
Arpey 14,000 1.2 73.0625 7/20/08 353,080
Garton 14,000 1.2 73.0625 7/20/08 353,080
</TABLE>
- ------------------------------
(1) Options have a term of ten years and have an exercise price equal to the
average market price of the Corporation's common stock on the date of grant.
They become exercisable at the rate of 20% per year over a five-year period.
Upon a change in control (as described on page 22) the vesting of the
options will be accelerated and all options will become immediately
exercisable.
(2) The Black-Scholes model used to calculate the hypothetical values of options
at the date of grant considers a number of factors to estimate the option's
present value. These factors include: (i) the stock's volatility prior to
the grant date; (ii) the exercise period of the option; (iii) interest
rates; and (iv) the stock's expected dividend yield. The assumptions used in
the valuation of the options were: stock price volatility--29.9%; exercise
period--4.5 years; interest rate-- 5.54%; and dividend yield--0.0%.
17
<PAGE>
STOCK OPTION EXERCISES AND
DECEMBER 31, 1998 STOCK OPTION VALUE
The following table sets forth certain information concerning stock options
exercised during 1998 by the named executive officers and the number and value
of unexercised in-the-money options held at December 31, 1998. Grants from prior
years have been adjusted to reflect the 2 for 1 stock split which occurred in
June 1998. The actual amount, if any, realized upon exercise of stock options
will depend upon the amount by which the market price (NYSE) of the
Corporation's common stock on the date of exercise exceeds the exercise price.
There is no assurance that the values of unexercised in-the-money stock options
(whether exercisable or unexercisable) reflected in this table will actually be
realized.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
- -------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
SHARES AT FY-END(#) AT FY-END(1)
ACQUIRED ON VALUE ----------------------- --------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------- ----------- ------------- ----------------------- --------------------------
<S> <C> <C> <C> <C>
Carty 0 $ 0 202,800 / 422,800 $ 5,284,268 / $1,960,048
Crandall 152,000 6,962,497 52,000 / 156,000 942,374 / 2,595,247
Baker 0 0 158,400 / 88,600 4,180,892 / 1,211,549
Gunn 0 0 10,000 / 32,200 232,225 / 366,518
Arpey 0 0 40,400 / 35,600 1,010,057 / 393,443
Garton 0 0 12,000 / 41,000 251,887 / 518,363
</TABLE>
- ------------------------------
(1) These amounts are based on the average market price of AMR common stock of
$60.1563 on the NYSE on December 31, 1998.
18
<PAGE>
LONG TERM INCENTIVE PLAN AWARDS
Under the LTIP, deferred shares of the Corporation's common stock
(Performance Shares) may be awarded to officers and other key employees,
including the named executive officers. Further information concerning
Performance Shares can be found in the Compensation Committee Report (see pages
27 to 28) and in the footnotes to the Summary Compensation Table.
<TABLE>
<CAPTION>
LONG TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS
NUMBER OF SHARES, UNITS PERIOD UNTIL UNDER NON-STOCK PRICE BASED PLANS
OR MATURATION OR -------------------------------------------
NAME OTHER RIGHTS(#)(1) PAYOUT THRESHOLD(#) TARGET(#) MAXIMUM(#)
- ---------- ------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Carty 22,500 Performance 12/31/00 0 22,500 39,375
Shares
- -------------------------------------------------------------------------------------------------
Crandall 29,400 Performance 12/31/00 0 29,400 51,450
Shares
- -------------------------------------------------------------------------------------------------
Baker 8,500 Performance 12/31/00 0 8,500 14,875
Shares
- -------------------------------------------------------------------------------------------------
Gunn 5,000 Performance 12/31/00 0 5,000 8,750
Shares
- -------------------------------------------------------------------------------------------------
Arpey 6,000 Performance 12/31/00 0 6,000 10,500
Shares
- -------------------------------------------------------------------------------------------------
Garton 6,000 Performance 12/31/00 0 6,000 10,500
Shares
- -------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
(1) Performance Shares awarded to Messrs. Carty, Crandall, Baker, Gunn, Arpey
and Garton in 1998 were for deferred shares of the Corporation's common
stock and were granted, pursuant to the LTIP, under the Performance Share
Program. This program is discussed in more detail on pages 27 to 28.
PENSION PLAN
American's basic pension program for management personnel consists of a
fixed benefit retirement plan which complies with the Employee Retirement Income
Security Act of 1974 ("ERISA") and qualifies for federal exemption under the
Internal Revenue Code ("Code"). Officers of American are eligible for additional
retirement benefits, to be paid by American under the Supplemental Executive
Retirement Plan (the "SERP") as an operating expense. The SERP
19
<PAGE>
provides pension benefits (calculated upon the basis of final average base
salary, incentive compensation payments and performance returns) to which
officers of American would be entitled, but for the limit of $130,000 on the
maximum annual benefit payable under ERISA and the Code and the limit on the
maximum amount of compensation which may be taken into account under American's
basic pension program ($160,000 for 1998).
The following table shows typical annual benefits payable under the basic
pension program and the SERP, based upon retirement in 1998 at age 65, to
persons in specified remuneration and credited years-of-service classifications.
Annual retirement benefits set forth below are subject to offset for Social
Security benefits.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ANNUAL RETIREMENT BENEFITS
-------------------------------------------------------------------
FINAL AVERAGE CREDITED YEARS OF SERVICE
EARNINGS 15 20 25 30 35
- ------------- ----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
$ 600,000 $ 150,030 $ 200,040 $ 250,050 $ 300,060 $ 350,070
800,000 200,040 266,720 333,400 400,080 466,760
1,000,000 250,050 333,400 416,750 500,100 583,450
1,200,000 300,060 400,080 500,100 600,120 700,140
1,400,000 350,070 466,760 583,450 700,140 816,830
1,600,000 400,080 533,440 666,800 800,160 933,520
1,800,000 450,090 600,120 750,150 900,180 1,050,210
2,000,000 500,100 666,800 833,500 1,000,200 1,166,900
</TABLE>
As of December 31, 1998, the named executive officers had the following
credited years of service: Mr. Carty - 19.6; Mr. Baker - 29.5; Mr. Gunn - 27.5;
Mr. Arpey - 15.3; Mr. Garton - 11.3. Benefits are shown in the above table on a
straight-life annuity basis.
Effective May 20, 1998 Mr. Crandall ceased to be an officer or director of
the Corporation or American. Mr. Crandall retired with 34.5 years of service on
December 31, 1998. See page 23 for further information regarding Mr. Crandall's
retirement benefits.
20
<PAGE>
CORPORATE PERFORMANCE
The following graph compares the yearly change in the Corporation's
cumulative total return on its common stock with the cumulative total return on
the published Standard & Poor's 500 Stock Index and the cumulative total return
on an index of airlines published by Standard & Poor's, in each case over the
preceding five-year period. The Corporation believes that while total
stockholder return is an INDICATOR OF CORPORATE PERFORMANCE, it is subject to
the vagaries of the market.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS*
<S> <C> <C> <C>
ON $100 INVESTMENT ON DECEMBER 31, 1993
AMR S&P 500 S&P Airlines
1993 $100.00 $100.00 $100.00
1994 $79.48 $101.32 $69.69
1995 $110.83 $139.40 $101.78
1996 $131.54 $171.40 $111.58
1997 $191.81 $228.58 $187.80
1998 $177.25 $293.91 $181.65
</TABLE>
- ------------------------
* Defined as stock price appreciation plus dividends paid assuming
reinvestment of dividends.
** Standard & Poor's Airline Index included: (i) for 12/31/93-6/30/94, American
Airlines, Delta Air Lines, United Airlines, US Airways; and (ii) for
7/1/94-12/31/98, American Airlines, Delta Air Lines, Southwest Airlines, US
Airways.
21
<PAGE>
OTHER MATTERS INVOLVING EXECUTIVE OFFICERS
EXECUTIVE TERMINATION BENEFITS AGREEMENTS/EMPLOYMENT AGREEMENTS
The Corporation has executive termination benefits agreements (the
"Agreements") with 11 officers of American, including all of the named executive
officers (except Mr. Crandall). The benefits provided by the Agreements are
triggered by the termination of the individual who is a party to an Agreement:
(i) within two years following a change in control of the Corporation, if the
individual's employment with the Corporation is terminated other than for cause
or if the individual terminates his or her employment with "good reason"; or
(ii) within the 30 day period immediately following the first anniversary of a
change in control of the Corporation, if the individual terminates his or her
employment with the Corporation. Any termination of an individual (other than
for cause) that occurs not more than 180 days prior to a change in control and
following the commencement of any discussions with a third party that ultimately
results in a change in control will be deemed to be a termination of an
individual after a change in control. If the individual's employment is
terminated for cause or as a consequence of death or disability, the Agreement
is not triggered. Under the terms of the Agreements, a change in control of the
Corporation is deemed to occur: (i) if a third party acquires 15% or more of the
Corporation's common stock; (ii) if the individuals who, as of the date of the
Agreements, constitute the Board of Directors of the Corporation cease for any
reason to constitute at least a majority thereof (provided that directors
subsequent to the date of the Agreements whose election or nomination was
approved by a majority of the incumbent board will be considered as if such
members were members of the incumbent board); (iii) upon the consummation of a
reorganization, merger, consolidation, sale or other disposition of all or
substantially all of the assets of the Corporation or the acquisition of the
assets of another corporation unless (a) more than 60% of the Corporation's
voting stock remains in the hands of the same stockholders, (b) no person owns
more than 15% of the common stock of the surviving corporation and (c) at least
a majority of the members of the Board following the transaction is the same as
the members of the Board who approved the transaction; or (iv) upon the approval
by the stockholders of the Corporation of a complete liquidation or dissolution
of the Corporation.
The Agreements provide that upon such termination the individual will
receive: three times the sum of (i) the individual's annual base salary; (ii)
the annual award paid under American's incentive compensation plan; and (iii)
the annual performance return payments, as well as certain other miscellaneous
benefits. In addition, upon a change in control, the vesting and exercisability
of stock awards will be accelerated (for example, deferred and restricted stock
will immediately vest and all stock options will become immediately
exercisable). Finally, the individual will be reimbursed for excise taxes, if
any, paid pursuant to Section 280G of the Code (or its successor provision) and
for federal income tax paid on such excise tax reimbursement.
22
<PAGE>
RETIREMENT OF MR. CRANDALL
Effective May 20, 1998, Mr. Crandall ceased to be an officer or director of
the Corporation and American. Mr. Crandall retired on December 31, 1998.
Pursuant to a Letter Agreement, dated September 18, 1998, upon Mr.
Crandall's departure the vesting period for his stock options was accelerated;
however, the exercise dates for such options remained the same. Any Performance
Shares held by Mr. Crandall vested on a pro rata basis through December 31, 1998
and will be paid in accordance with their terms. At the time of his retirement,
Mr. Crandall was fully vested in his pension benefits. Mr. Crandall is eligible
to receive retiree medical and other benefits and is entitled to receive travel
benefits on American and American Eagle. The Corporation will continue to pay
Mr. Crandall's long term disability policies until he reaches age 65. Mr.
Crandall will also be entitled to receive other benefits through December 31,
2005, including the provision of office space and an administrative assistant.
COMPENSATION COMMITTEE REPORT
(1) OVERALL POLICY
The objectives of the Corporation's compensation policies are: (i) to
attract and retain the best possible executive talent; (ii) to motivate its
executives to achieve the Corporation's long term strategic goals; (iii) to link
executive and stockholder interests through equity based compensation; and (iv)
to provide a compensation package that appropriately recognizes both individual
and corporate contributions. With these objectives in mind, the Corporation has
developed an overall compensation strategy that links a very large portion of an
executive's compensation to the Corporation's financial success. The Corporation
expects that compensation payable in 1998 to the named executive officers will
be fully deductible for U.S. income tax purposes.
The Compensation Committee (the "Compensation Committee" or the "Committee")
is composed entirely of disinterested members of the Board of Directors. No
member of the Committee is a current or former employee or officer of the
Corporation or any of its affiliates. The Committee meets regularly throughout
the year to review general compensation issues and determines the compensation
of all of the officers of American (four of whom are also officers of the
Corporation)-including all of the named executive officers.
Once a year, the Compensation Committee conducts a comprehensive review of
the Corporation's executive compensation program. This review includes: (i) an
internal report evaluating executive compensation throughout the Corporation to
ensure consistency and program effectiveness, including the relationship of
executive pay to performance; and (ii) a comprehensive report from Hewitt
Associates LLC (an independent compensation consultant
23
<PAGE>
retained separately by the Committee) evaluating the competitiveness of
executive compensation at the Corporation relative to other major public
corporations employing similar executive talent.
The key elements of an executive's compensation consist of: (i) base salary;
(ii) an incentive compensation award (which is paid only in years when corporate
performance meets certain predetermined criteria); (iii) performance returns
(which are based upon the Corporation's return on investment, determined over
the previous five years); and (iv) stock compensation, which may include
deferred stock (career equity shares and/or performance shares), restricted
stock and/or stock options. The Committee also regularly reviews data on the
competitive marketplace, comparing total compensation and each element thereof
with compensation opportunities at comparable positions at other companies. The
Committee's policy is to establish compensation ranges that are approximately at
the median of those found at a comparator group made up of Fortune 500 companies
across industries with whom the Corporation competes for executive talent (the
"Comparator Group").(1)
(2) DISCUSSION
(A) BASE SALARY
The Committee annually reviews officers' salaries, including Mr. Carty's,
and makes adjustments based on its subjective evaluation of the performance of
the Corporation and the individual. In the case of an officer with
responsibility for business units other than American, the financial results of
those units are also considered.
On July 20, 1998, Mr. Carty's annual base salary was increased to $750,000.
The increase in salary was based on the Committee's subjective evaluation of:
(i) the fact that Mr. Carty assumed additional responsibilities as Chairman,
President and Chief Executive Officer of the Corporation and American; (ii) Mr.
Carty's service and strategic contributions; (iii) the Corporation's favorable
financial results; and (iv) the amount of Mr. Carty's compensation relative to
chief executives at Comparator Group companies.
(B) INCENTIVE COMPENSATION PLANS
American's incentive compensation plan is reviewed annually by the Committee
in conjunction with the incentive compensation plans of the Corporation's other
subsidiaries.
The American incentive compensation plan for 1998 provided that participants
would be eligible to receive awards only if the following four performance goals
were met: (i) American's cash flow return on gross assets exceeded 6.7%; (ii)
the profit sharing plan for employees
- ------------------------
(1) This group differs from the comparison group used for the calculation of the
Corporate Performance Graph because the Corporation competes with a broader
group of companies for executive talent.
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represented by the Transport Workers Union made a distribution; (iii) the
variable compensation plan for pilots made a distribution; and (iv) American's
general profit sharing plan for eligible employees made a distribution.
For the named executive officers, the amount paid cannot exceed the amount
set forth in the LTIP (i.e., the lesser of $2 million or two times such
officer's base salary in effect as of December 31 of the plan year).
In 1999, Mr. Carty was awarded $1,072,781 under the 1998 American incentive
compensation plan. This award was based on the Committee's subjective evaluation
of: (i) the fact that Mr. Carty assumed additional responsibilities as Chairman,
President and Chief Executive Officer of the Corporation and American; (ii) Mr.
Carty's service and strategic contributions; (iii) the Corporation's favorable
financial results; and (iv) the amount of Mr. Carty's compensation relative to
chief executives at Comparator Group companies.
In 1999, Mr. Crandall was awarded $1,332,414 under the 1998 American
incentive compensation plan. This award was based on the Committee's subjective
evaluation of: (i) Mr. Crandall's service and strategic contributions; and (ii)
the Corporation's favorable financial results.
(C) STOCK BASED COMPENSATION
Under the LTIP, stock based compensation (which may include stock options,
restricted stock and deferred stock) may be granted to officers and key
employees of the Corporation and its affiliates. The purpose of equity
participation is to align further the interests between executive officers and
the Corporation's stockholders in the Corporation's growth in real value over
the long term.
STOCK OPTIONS
Stock options are issued to key employees of American and the Corporation's
other subsidiaries and are options for common stock of the Corporation. They are
exercisable for ten years from the date of grant, have an exercise price equal
to the average market price on the NYSE of the Corporation's common stock on the
date of grant and vest in 20% increments over five years. This structure is
designed to provide an incentive to create stockholder value over the long term,
since the full benefit of the stock option compensation package cannot be
realized unless stock appreciation occurs over a number of years.
The Committee determines the number of options to be granted based upon a
subjective evaluation of the executive with respect to three factors: (i)
individual performance; (ii) where applicable, the executive's ability to
perform multiple functions; and (iii) the executive's retention
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value to the Corporation. The number of stock options awarded, if any, depends
upon the executive's evaluation with respect to these factors.(2) The Committee,
however, does not take into account the amount of stock options awarded in
previous years.
On July 20, 1998, the Committee granted Mr. Carty options to purchase
309,600 shares of the Corporation's common stock at an exercise price of
$73.0625, which represents the average market price (NYSE) of the Corporation's
common stock on the date of grant. This grant includes a special award of
250,000 shares in addition to the annual grant deemed appropriate for Mr. Carty
(59,600) in recognition of Mr. Carty's promotion to Chairman, President and
Chief Executive Officer of the Corporation and Chairman and Chief Executive
Officer of American in 1998. These options become exercisable at the rate of 20%
per year over a five-year period. The portion of the option related to the usual
annual grant of option was based on the Committee's subjective evaluation of:
(i) Mr. Carty's service and strategic contributions; (ii) the Corporation's
favorable financial results; and (iii) the amount of Mr. Carty's compensation
relative to chief executives of Comparator Group companies.
In 1998, no grant of options was made to Mr. Crandall.
CAREER EQUITY SHARES
Shares of deferred common stock have been granted, from time to time, to the
officers of the Corporation and the officers and key employees of its
subsidiaries through the career equity program (the "Program") to retain and
compensate these individuals and to give these individuals a stake in the long
term performance of the Corporation through stock ownership. Career equity
shares are also granted to provide retirement income competitive with the median
of the Comparator Group.
The Program provides that career equity shares vest generally upon the
executive's retirement. In order to assure the Corporation of the executive's
services for his or her career and to provide appropriate levels of retirement
income, the Corporation has agreements with each named executive officer (except
Mr. Crandall) which guarantee that the value of the individual's career equity
holdings will be equal to three and one-half times the individual's final
average salary at retirement.
The Committee determines the number of career equity shares to be granted
based upon a subjective evaluation of the executive with respect to four
factors: (i) current performance; (ii) where applicable, the executive's ability
to perform multiple functions; (iii) the executive's retention value to the
Corporation; and (iv) the executive's level of retirement income. The actual
- ------------------------
(2) See the Summary Compensation Table for information regarding the number of
stock options awarded to the named executive officers in 1998.
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<PAGE>
number of career equity shares awarded, if any, depends upon the executive's
evaluation with respect to these factors.
In 1998, no grant of career equity shares was made to Messrs. Carty or
Crandall.
The Program also provides for the annual cash payment of "performance
returns" on grants of previously awarded career equity shares. For the named
executive officers, the amount of the payment depends upon: (i) the rolling
five-year average of the Corporation's return on investment; (ii) the aggregate
number of career equity shares awarded; (iii) the percentage, if any, of the
aggregate number of career equity shares determined by the Committee to be
eligible for payment of performance returns in a given year, based upon a
subjective evaluation of individual performance; and (iv) the average market
price (NYSE) of the Corporation's common stock on the date of grant. In 1998,
the percentage of career equity shares used in the calculation of performance
returns for the named executive officers ranged from 18% to 68%.(3)
In 1998, Mr. Carty was awarded performance returns on approximately 68% of
his career equity shares based on the Committee's subjective evaluation of: (i)
his service and strategic contributions to the Corporation; (ii) the
Corporation's favorable financial results; and (iii) the amount of Mr. Carty's
compensation relative to chief executives of Comparator Group companies.
In 1998, Mr. Crandall was awarded performance returns on approximately 28%
of his career equity shares based on the Committee's subjective evaluation of:
(i) his service and strategic contribution to the Corporation; and (ii) the
Corporation's favorable financial results.
PERFORMANCE SHARES
Performance shares are shares of deferred stock which are granted to
officers and key employees of American and the Corporation's other subsidiaries
and are issued pursuant to the LTIP. Distribution of these shares is contingent
upon the Corporation's attainment of predetermined cash flow objectives over a
three-year "performance period." The cash flow objective is based on the
Corporation's cumulative operating cash flow return on adjusted gross assets
("CFROGA") over the performance period. The percentage of the shares which will
be distributed ranges from 0% to 175% based upon varying levels of CFROGA over
the three-year period, as well as the Corporation's standing (on the same basis)
relative to four major competitors (United Airlines, Inc., Delta Air Lines,
Inc., Southwest Airlines, Inc. and US Airways, Inc.).(4) If each competitor
outperforms the Corporation with respect to this
- ------------------------
(3) See the Summary Compensation Table for information regarding the payment of
performance returns to the named executive officers in 1998.
(4) See the Long Term Incentive Plan Award Table for the number of performance
shares granted to the named executive officers in 1998.
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<PAGE>
measurement, or if the Corporation fails to achieve a certain level of
cumulative operating cash flow relative to adjusted assets, no performance
shares will be earned. Performance share grants are based upon a subjective
evaluation of: (i) the executive's current performance; (ii) the executive's
retention value; and (iii) where applicable, ability to perform multiple
functions.
In 1998, Mr. Carty was granted 22,500 performance shares based on the
Committee's subjective evaluation of: (i) the fact that Mr. Carty assumed
additional responsibilities as Chairman, President and Chief Executive Officer
of the Corporation and American; (ii) Mr. Carty's service and strategic
contributions to the Corporation; (iii) the Corporation's favorable financial
results; and (iv) the amount of Mr. Carty's compensation relative to chief
executives of Comparator Group companies.
In 1998, Mr. Crandall was granted 29,400 performance shares based on the
Committee's subjective evaluation of: (i) Mr. Crandall's service and strategic
contributions to the Corporation; and (ii) the Corporation's favorable financial
results.
COMPENSATION COMMITTEE OF AMR
Edward A. Brennan, Chairman
<TABLE>
<S> <C>
Charles H. Pistor, Jr. Judith Rodin
Joe M. Rodgers Maurice Segall
</TABLE>
28
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PROPOSAL 2--SELECTION OF AUDITORS
Based upon the recommendation of the Corporation's Audit Committee, the
Board of Directors has selected Ernst & Young LLP to serve as the Corporation's
independent auditors for the year ending December 31, 1999. The stockholders
will be requested to ratify the Board's selection. Representatives of Ernst &
Young LLP will be present at the annual meeting, will have the opportunity to
make a statement, if they so desire, and will be available to answer appropriate
questions.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares represented and entitled to
vote is required to approve the Board's selection of auditors. If the
stockholders do not ratify the selection of Ernst & Young LLP, the selection of
independent auditors will be reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
OTHER MATTERS
The Board of Directors knows of no other matters to be acted upon at the
meeting, but if any such matters properly come before the meeting, it is
intended that the persons voting the proxies will vote in accordance with their
best judgment.
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS/NOMINATIONS
From time to time, stockholders submit proposals which may be proper
subjects for inclusion in the proxy statement and for consideration at the
annual meeting. Proposals for inclusion in the 2000 proxy statement must be
received by the Corporation no later than December 1, 1999. Any such proposal,
as well as any related questions, should be directed to the Corporate Secretary
of the Corporation.
The Corporation's By-Laws provide that any stockholder wishing to bring any
other matter (other than proposals intended to be included in the proxy
materials and nominations for directors) before an annual meeting must notify
the Corporate Secretary of such fact not less than 60 nor more than 90 days
before the date of the meeting. For the Corporation's year 2000 annual meeting
such notice must be received between February 17 and March 18, 2000. Such notice
shall
29
<PAGE>
be in writing and shall set forth the business proposed to be brought before the
meeting, shall identify the stockholder and shall disclose the stockholder's
interest in the proposed business.
Under the Corporation's By-Laws, nominations for director, other than those
made by or at the direction of the Board of Directors, must be made by timely
written notice to the Corporate Secretary of the Corporation setting forth as to
each nominee the information required to be included in a proxy statement under
the proxy rules of the Securities and Exchange Commission and including evidence
of such nominee's consent to same. Such notice must be received not less than
120 calendar days before the date of the Corporation's proxy statement released
to stockholders in connection with the previous year's annual meeting. For the
Corporation's year 2000 annual meeting, the Corporation must receive such notice
prior to December 1, 1999.
By Order of the Board of Directors,
[SIGCUT]
Charles D. MarLett
CORPORATE SECRETARY
March 30, 1999
30
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DIRECTIONS TO THE AMERICAN AIRLINES
TRAINING & CONFERENCE CENTER
[LOGO]
31
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AMR
<PAGE>
AMR CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF AMR CORPORATION
P
R
O
X
Y
The undersigned hereby appoints Donald J. Carty, Dee J. Kelly, and Charles H.
Pistor, Jr., or any of them, proxies, each with full power of substitution,
to vote the shares of the undersigned at the Annual Meeting of Stockholders
of AMR Corporation on May 19, 1999, and any adjournments thereof, upon all
matters as may properly come before the meeting. Without otherwise limiting
the foregoing general authorization, the proxies are instructed to vote as
indicated herein.
Election of Directors, Nominees:
David L. Boren, Edward A. Brennan, Donald J. Carty, Armando M. Codina,
Earl G. Graves, Dee J. Kelly, Ann D. McLaughlin, Charles H. Pistor, Jr.,
Joe M. Rodgers, Judith Rodin, Maurice Segall.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES.
SEE REVERSE SIDE. YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
-------
SEE
REVERSE
SIDE
- ----------------------------- FOLD AND DETACH HERE -----------------------------
A D M I T T A N C E T I C K E T
[AMR LOGO]
AMR CORPORATION
The 1999 Annual Meeting of Stockholders will be held
at 10:00 A.M., CDT, on Wednesday, May 19, 1999,
at the American Airlines Training & Conference Center,
Flagship Auditorium
4501 Highway 360 South, Fort Worth, Texas.
TO ATTEND THIS MEETING YOU MUST PRESENT
THIS TICKET OR OTHER PROOF OF SHARE OWNERSHIP
Doors open at 9:00 A.M.
NOTE: Cameras, tape recorders or other similar recording devices
will not be allowed in the meeting room.
[MAP GRAPHIC]
<PAGE>
/X/ PLEASE MARK YOUR VOTES
AS IN THIS EXAMPLE.
THIS PROXY, WHEN PROPERLY SIGNED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL OF THE
BOARD OF DIRECTORS' NOMINEES AND FOR PROPOSAL 2.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
- --------------------------------------------------------------------------------
FOR WITHHELD
1. Election of / / / /
Directors (see
reverse).
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------
FOR AGAINST ABSTAIN
2. Ratification of the / / / / / /
selection of Ernst &
Young LLP as
independent auditors
for the year 1999.
- --------------------------------------------------------------------------------
If you are interested in receiving
proxy materials and the annual report
electronically in the future, please
mark this box: / /
If you plan to attend the Annual
Meeting, please mark this box: / /
SIGNATURE(S) DATE
---------------------------------------- ---------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
- ----------------------------- FOLD AND DETACH HERE -----------------------------
NAME & ADDRESS -------------------- ----SHIFT TO RIGHT
PRINT HERE [CONTROL NUMBER]
--------------------
AMR Corporation encourages you to take advantage of new and convenient ways
by which you can vote your shares on matters to be covered at the 1999 Annual
Meeting of Stockholders. Please take the opportunity to use one of the three
voting methods outlined below to cast your ballot.
TO VOTE OVER THE INTERNET:
- Have your proxy card in hand when you access the web site.
- Log on to the Internet and go to the web site
HTTP://WWW.VOTE-BY-NET.COM, 24 hours a day, 7 days a week.
- You will be prompted to enter your control number printed in the box
above.
- Follow the instructions provided.
TO VOTE OVER THE TELEPHONE:
- Have your proxy card in hand when you call.
- On a touch-tone telephone call 1-800-652-8683 (1-800-OK2-VOTE), 24 hours
a day, 7 days a week.
- You will be prompted to enter your control number printed in the box
above.
- Follow the recorded instructions.
TO VOTE BY MAIL:
- Mark, sign and date your proxy card.
- Return your proxy card in the postage-paid envelope provided.
Your electronic vote authorizes the named proxies in the same manner as if
you signed, dated and returned the proxy card. IF YOU CHOOSE TO VOTE YOUR
SHARES ELECTRONICALLY, THERE IS NO NEED FOR YOU TO MAIL BACK YOUR PROXY CARD.
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
