American Airlines 2000 Annual Report Download - page 32

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The assumed health care cost trend rate was
changed to seven percent, effective December 31, 2000,
decreasing gradually to an ultimate rate of four percent
by 2004. The previously assumed health care cost trend
rate was five percent in 1999, decreasing gradually to
an ultimate rate of four percent by 2001.
A one percentage point change in the assumed
health care cost trend rates would have the following
effects (in millions):
One percent One percent
increase decrease
Impact on 2000 service and interest cost $ 20 $ (19)
Impact on postretirement benefit obligation
as of December 31, 2000 $ 137 $(131)
Effective January 1, 2001, American established a
defined contribution plan for non-contract employees
in which the Company will contribute a match up to
5.5 percent on employee contributions of pensionable
earnings to the Company’s existing 401(k) plan. During
2000, American provided a one-time election for current
non-contract employees to remain in the defined bene-
fit plan or discontinue accruing future credited service
in the defined benefit plan as of January 1, 2001 and
begin participation in the defined contribution plan.
11 . EARNI NGS PER SHARE
The following table sets forth the computation of basic
and diluted earnings per share (in millions, except per
share amounts):
Year Ended December 31,
200 0 1999 1998
Num er ator :
Numerator for earnings per share –
income from continuing operations
before extraordinary loss $779 $656 $ 1,114
Den o min ato r :
Denominator for basic earnings per
share – weighted-average shares 1 50 152 169
Effect of dilutive securities:
Employee options and shares 2 7 12 13
Assumed treasury shares purchased (1 5) (7) (7)
Dilutive potential common shares 1 2 56
Denominator for diluted earnings per
share – adjusted weighted-average
shares 1 62 157 175
Basic earnings per share from continuing
operations before extraordinary loss $5.20 $4.30 $ 6.60
Diluted earnings per share from
continuing operations before
extraordinary loss $4.81 $4.17 $ 6.38
12 . DI SCON TI N UED OPERATI ONS
During the first quarter of 1999, the Company sold
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 dividend, 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, AMR 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 busi-
ness 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 com-
mon stock at the close of business on February 15,
2000. Based upon its approximate 83 percent interest
in Sabre, AMR received approximately $559 million of
this dividend. The dividend of AMR’s entire ownership
interest in Sabre’s common stock resulted in a reduc-
tion to AMR’s retained earnings in March of 2000
equal to the carrying value of the Company’s invest-
ment in Sabre on March 15, 2000, which approximated
$581 million. The fair market value of AMR’s investment
in Sabre on March 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 employee stock options and awards
by approximately 19 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 had no impact
on earnings.