American Airlines 1999 Annual Report Download - page 46

AMR CORPORATION
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All short-term investments are classified as available-for-sale and
stated at fair value. Net unrealized gains and losses, net of deferred
taxes, are reflected as an adjustment to stockholders’ equity.
At December 31, 1998, the Company owned approximately
3.1 million depository certificates convertible, subject to certain
restrictions, into the common stock of Equant N.V. (Equant),
which completed an initial public offering in July 1998.
Approximately 1.7 million of the certificates were held by the
Company on behalf of Sabre. As of December 31, 1998, the
estimated fair value of these depository certificates was
approximately $210 million, of which approximately $110 million
was held by the Company on behalf of Sabre, based upon the
publicly traded market value of Equant common stock. The
carrying value (cost basis) of the Company’s investment in the
depository certificates as of December 31, 1998 was de minimis.
During 1999, the Company acquired approximately 400,000
Equant depository certificates from other airlines. In addition,
based upon a reallocation between the owners of the certificates
in July 1999, the Company received an additional 2.6 million
certificates. In connection with two secondary offerings by
Equant in February and December 1999, the Company sold
approximately 2.7 million depository certificates for a net gain of
approximately $118 million, after taxes and minority interest.
Of this amount, approximately $75 million is included in
Miscellaneous – net and approximately $71 million, net of taxes
and minority interest, related to depository certificates held by the
Company on behalf of Sabre, is included in income from discon-
tinued operations on the accompanying consolidated statements
of operations. Accordingly, as of December 31, 1999, the
Company holds approximately 3.5 million depository certificates
with an estimated market value of approximately $395 million, of
which approximately 2.3 million depository certificates with an
estimated market value of approximately $259 million, are held
by the Company on behalf of Sabre. The carrying value of the
Company’s investment in the depository certificates as of
December 31, 1999 was approximately $20 million.
In December 1999, the Company entered into an agreement
to sell its investment in the cumulative mandatorily redeemable
convertible preferred stock of Canadian Airlines International
Limited (Canadian) for approximately $40 million, resulting in a
gain of $40 million, which is included in Miscellaneous – net on
the accompanying consolidated statements of operations. In
addition, the Company recognized a tax benefit of $67 million
resulting from the tax loss on the investment, representing the
reversal of a deferred tax valuation allowance since it is more
likely than not that the tax benefit will be realized. The valuation
allowance was established in 1996 when the investment was
written-off because, at that time, it was not more likely than not
that the tax benefit of the write-off would be realized.
3. COMMITMENTS AND CONTINGENCIES
At December 31, 1999, the Company had commitments to
acquire the following aircraft: 81 Boeing 737-800s, 26 Boeing
777-200IGWs, 86 Embraer ERJ-135s, five Embraer ERJ-145s and
25 Bombardier CRJ-700s. Deliveries of all aircraft extend through
2006. Future payments for all aircraft, including estimated
amounts for price escalation, will approximate $2.2 billion in
2000, $1.8 billion in 2001, $600 million in 2002 and an
aggregate of approximately $1.0 billion in 2003 through 2006.
In addition to these commitments for aircraft, the Company’s
Board of Directors has authorized expenditures of approximately
$800 million over the next five years for modifications to aircraft,
renovations of – and additions to – airport and off-airport
facilities, and the acquisition of various other equipment and
assets. AMR expects to spend approximately $470 million of this
authorized amount in 2000.