American Airlines 2000 Annual Report Download - page 28

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7. IN COME TAXES
The significant components of the income tax provision
were (in millions):
Year Ended December 31,
2000 1999 1998
Current $47 $ 167 $ 451
Deferred 461 183 268
$508 $ 350 $ 719
The income tax provision includes a federal
income tax provision of $454 million, $290 million
and $628 million and a state income tax provision of
$47 million, $49 million and $78 million for the years
ended December 31, 2000, 1999 and 1998, respectively.
The income tax provision differed from amounts
computed at the statutory federal income tax rate as fol-
lows (in millions):
Year Ended December 31,
2000 1999 1998
Statutory income tax provision $4 50 $ 352 $ 641
State income tax provision,
net of federal benefit 30 32 51
Meal expense 1 9 19 18
Change in valuation allowance –(67) (4)
Other, net 914 13
Income tax provision $508 $ 350 $ 719
The change in valuation allowance in 1999 relates
to the realization of a tax loss on the sale of the
Company’s investment in Canadian (see Note 2). The
change in valuation allowance in 1998 relates to the uti-
lization of foreign tax credits.
The components of AMR’s deferred tax assets and
liabilities were (in millions):
December 31,
200 0 1999
Deferred tax assets:
Postretirement benefits other than pensions $632 $ 614
Rent expense 52 2 449
Frequent flyer obligation 362 307
Gains from lease transactions 225 238
Alternative minimum tax credit carryforwards 1 84 289
Other 541 520
Total deferred tax assets 2,4 66 2,417
Deferred tax liabilities:
Accelerated depreciation and amortization (3,822) (3,381)
Pensions (89) (50)
Other (2 45) (220)
Total deferred tax liabilities (4,1 56) (3,651)
Net deferred tax liability $ (1 ,6 90) $(1,234)
At December 31, 2000, AMR had available for fed-
eral income tax purposes approximately $184 million of
alternative minimum tax credit carryforwards which are
available for an indefinite period.
Cash payments for income taxes were $49 million,
$71 million and $408 million for 2000, 1999 and 1998,
respectively.
8. COMM ON AN D PREFERRED STOCK
On June 9, 1998, a two-for-one stock split in the
form of a stock dividend was effective for shareholders
of record on May 26, 1998. All prior period share and
earnings per share amounts reflect the stock split. The
Company has 20 million shares of preferred stock
(without par value) authorized at December 31, 2000
and 1999.
9. ST OCK AWARDS AN D OPTI ONS
Under the 1998 Long Term Incentive Plan, as amended,
officers and key employees of AMR and its subsidiaries
may be granted stock options, stock appreciation rights,
restricted stock, deferred stock, stock purchase rights,
other stock-based awards and/or performance-related
awards, including cash bonuses. The total number of
common shares authorized for distribution under the
1998 Long Term Incentive Plan is 23,700,000 shares.
The 1998 Long Term Incentive Plan, the successor to
the 1988 Long Term Incentive Plan, which expired
May 18, 1998, will terminate no later than May 21, 2008.
Options granted under the 1988 and 1998 Long Term
Incentive Plans (collectively, the Plans) are awarded
with an exercise price equal to the fair market value of
the stock on date of grant, become exercisable in equal
annual installments over five years following the date of
grant and expire 10 years from the date of grant. Stock
appreciation rights may be granted in tandem with
options awarded.
As a result of the Sabre spin-off in March 2000,
AMR’s stock price was adjusted from $609⁄16 to $259⁄16 by
the New York Stock Exchange. Accordingly, all out-
standing stock options and other stock-based awards,
including the related exercise prices, were adjusted to
preserve the intrinsic value of the stock options and
awards. See Note 12 for information regarding the
Sabre spin-off.
In 2000, 1999 and 1998, the total charge for
stock compensation expense included in wages, salaries
and benefits expense was $52 million, $53 million and
$52 million, respectively. No compensation expense
was recognized for stock option grants under the Plans
since the exercise price was the fair market value of the
underlying stock on the date of grant.