American Airlines 2004 Annual Report Download - page 33

30
(h) Special charges for 2003 included approximately (i) $341 million in aircraft charges offset by a $20 million
credit to adjust prior accruals, (ii) $92 million in employee charges, (iii) $62 million in facility exit costs and
a (iv) $68 million gain resulting from a transaction involving 33 of the Company’s Fokker 100 aircraft and
related debt. Special charges for 2002 included approximately (i) $658 million related to aircraft charges,
(ii) $57 million in employee charges and (iii) $3 million in facility charges. See a further discussion of
Special charges in Note 2 to the consolidated financial statements.
(i) U.S. government grant includes a $358 million benefit recognized for the reimbursement of security
service fees from the U.S. government under the Appropriations Act in 2003. See a further discussion of
U.S. government grant in Note 2 to the consolidated financial statements.
OTHER INCOME (EXPENSE)
Other income (expense) consists of interest income and expense, interest capitalized and miscellaneous - net.
2004 Compared to 2003 Interest income increased $11 million, or 20.0 percent, to $66 million due primarily to
increases in short-term investment balances and interest rates. Interest expense increased $168 million, or 23.9
percent, to $871 million resulting primarily from the increase in the Company’s long-term debt coupled with
increases in interest rates, and an $84 million reduction in interest expense in 2003 related to the agreement
reached with the IRS discussed below. Miscellaneous-net for 2004 includes a $146 million gain on the sale of the
Company’s remaining interest in Orbitz.
2003 Compared to 2002 Interest income decreased $16 million, or 22.5 percent, to $55 million due primarily to
decreases in interest rates. Interest expense increased $18 million, or 2.6 percent, to $703 million resulting
primarily from the increase in the Company’s long-term debt, offset by an $84 million reduction in interest expense
related to the agreement reached with the IRS discussed below. Interest capitalized decreased $15 million, or
17.4 percent, to $71 million due primarily to a decrease in purchase deposits for flight equipment. Miscellaneous-
net increased $115 million to $113 million, due primarily to an $80 million gain on the sale of the Company’s
investment in Hotwire and a $70 million gain related to an initial public offering by Orbitz, offset by the write-down
of certain investments held by the Company during the first quarter of 2003.
INCOME TAX BENEFIT
2004 The Company did not record a net tax benefit associated with its 2004 losses due to the Company providing
a valuation allowance, as discussed in Note 8 to the consolidated financial statements.
2003 The Company did not record a net tax benefit associated with its 2003 losses due to the Company providing
a valuation allowance. Additionally, in 2003, the Company reached an agreement with the IRS covering tax years
1990 through 1995. As a result of this agreement, the Company recorded an $80 million tax benefit to reduce
previously accrued income tax liabilities and an $84 million reduction in interest expense to reduce previously
accrued interest related to the accrued income tax liabilities.