American Airlines 2005 Annual Report Download - page 41

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38
OTHER INCOME (EXPENSE)
Other income (expense) consists of interest income and expense, interest capitalized and miscellaneous - net.
2005 Compared to 2004 Increases in both short-term investment balances and interest rates caused an
increase in Interest income of $83 million, or 125.8 percent, to $149 million. Interest expense increased $86
million, or 9.9 percent, to $957 million primarily as a result of increases in interest rates. Miscellaneous-net for
2004 includes a $146 million gain on the sale of the Company’s remaining interest in Orbitz.
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.
INCOME TAX BENEFIT
2005 and 2004 The Company did not record a net tax benefit associated with its 2005 and 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.