American Airlines 1999 Annual Report Download - page 57

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12. DISCONTI NUED OPERATI ONS
During the first quarter of 1999, the Company completed the sales
of AMR Services, AMR Combs and TeleService Resources. As a
result of these sales, the Company recorded a gain of approximately
$64 million, net of income taxes of approximately $19 million.
On February 7, 2000, the Company declared its intent to
distribute AMR’s entire ownership interest in Sabre as a dividend
on all outstanding shares of its common stock. To effect the divi-
dend, AMR exchanged all of its 107,374,000 shares of Sabre’s
Class B common stock for an equal number of shares of Sabre’s
Class A common stock. Effective after the close of business on
March 15, 2000, AM R distributed 0.722652 shares of Sabre
Class A common stock for each share of AMR stock owned by
AMR’s shareholders. The record date for the dividend of Sabre
stock was the close of business on March 1, 2000. In addition, on
February 18, 2000, Sabre paid a special one-time cash dividend
of $675 million to shareholders of record of Sabre common stock
at the close of business on February 15, 2000. Based upon its
approximate 83 percent interest in Sabre, AM R received approxi-
mately $560 million of this dividend. These funds will be used for
general corporate purposes. The dividend of AMR’s entire owner-
ship interest in Sabre’s common stock resulted in a reduction to
AMR’s retained earnings in M arch of 2000 equal to the carrying
value of the Company’s investment in Sabre on March 15, 2000,
which approximated $600 million. The fair market value of AM R’s
investment in Sabre on M arch 15, 2000, based upon the quoted
market closing price of Sabre Class A common stock on the New
York Stock Exchange, was approximately $5.2 billion. In addition,
effective March 15, 2000, the Company reduced the exercise
price and increased the number of stock options and awards by
approximately 18 million to offset the dilution to the holders,
which occurred as a result of the spin-off. These changes were
made to keep the holders in the same economic position as
before the spin-off. This dilution adjustment was determined in
accordance with Emerging Issues Task Force Consensus No. 90-9,
“ Changes to Fixed Employee Stock Option Plans as a Result of
Equity Restructuring,” and will have no impact on earnings.
The results of operations for Sabre, AMR Services, AMR Combs
and TeleService Resources have been reflected in the consolidated
statements of operations as discontinued operations. Summarized
financial information of the discontinued operations is as follows
(in millions):
Year Ended December 31,
1999 1998 1997
Sabre
Revenues $2,435 $2,306 $1,788
Minority interest 57 40 36
Income taxes 196 140 124
Net income 265 192 164
AM R Services, AM R Combs and
TeleService Resources
Revenues $ 97 $ 513 $ 518
Income taxes –710
Net income –812
The historical assets and liabilities of Sabre, AMR Services,
AMR Combs and TeleService Resources, which have been
reflected on a net basis in other assets on the consolidated
balance sheets, are summarized as follows (in millions):
December 31,
1999 1998 1997
Current assets $ 976 $1,004 $ 967
Total assets 1,951 2,198 1,758
Current liabilities 525 434 359
Total liabilities, including minority interest 912 1,263 987
Net assets of discontinued operations 1,039 935 771