American Airlines 2009 Annual Report Download - page 70

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67
7. Financial Instruments and Risk Management (Continued)
The carrying value and estimated fair values of the Company's long-term debt, including current maturities, were
(in millions):
December 31,
2009
2008
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
Secured variable and fixed rate
indebtedness
$ 5,553
$ 4,310
$ 4,783
$ 2,534
Enhanced equipment trust
certificates
2,022
1,999
2,382
1,885
6.00% - 8.50% special facility
revenue bonds
1,658
1,600
1,674
1,001
Credit facility agreement
-
-
691
545
AAdvantage Miles advance
purchase
890
893
-
-
4.50% - 6.25% senior convertible
notes
460
476
314
308
9.00% - 10.20% debentures
214
158
213
105
7.88% - 10.55% notes
211
181
211
96
$ 11,008
$ 9,617
$ 10,268
$ 6,474
8. Income Taxes
The Company recorded a $248 million non-cash income tax benefit from continuing operations during the fourth
quarter of 2009. Under current accounting rules, the Company is required to consider all items (including items
recorded in other comprehensive income) in determining the amount of tax benefit that results from a loss from
continuing operations and that should be allocated to continuing operations. As a result, the Company recorded a
tax benefit on the loss from continuing operations for the year, which will be exactly offset by income tax expense
on other comprehensive income. However, while the income tax benefit from continuing operations is reported on
the income statement, the income tax expense on other comprehensive income is recorded directly to
Accumulated other comprehensive income, which is a component of stockholders' equity. Because the income
tax expense on other comprehensive income is equal to the income tax benefit from continuing operations, the
Company's year-end net deferred tax position is not impacted by this tax allocation.
The change in the valuation allowance reflects the recording by the Company in 2009 of an income tax expense
credit of approximately $36 million resulting from the Company’s anticipated election under Section 3081 of the
Housing and Economic Recovery Act of 2008 (as extended by Section 1201(b) of the American Recovery and
Reinvestment Act of 2009), allowing corporations to accelerate utilization of certain research and alternative
minimum tax (AMT) credit carryforwards in lieu of applicable bonus depreciation on certain qualifying capital
investments.
The Company has an unrecognized tax benefit of approximately $6 million, which decreased $18 million during
the twelve months ended December 31, 2009 from resolution of an Internal Revenue Service Appeals process.
Changes in the unrecognized tax benefit have no impact on the effective tax rate due to the existence of the
valuation allowance. Accrued interest on tax positions is recorded as a component of interest expense but is not
significant at December 31, 2009.
The reconciliation of the beginning and ending amounts of unrecognized tax benefit are (in millions):
2009
2008
Unrecognized Tax Benefit at January 1
$ 24
$ 40
Decreases due to settlements with taxing authority
(18)
(16)
Unrecognized Tax Benefit at December 31
$ 6
$ 24