Airtran 2001 Annual Report Download - page 37

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the
amounts used for income tax purposes. Significant components of our deferred tax liabilities and assets are as follows:
(In thousands)
Deferred tax liabilities:
Depreciation
Rent expense
Gross deferred tax liabilities
Deferred tax assets:
Deferred gains from sale
and leaseback of aircraft
Accrued liabilities
Federal operating loss carryforwards
State operating loss carryfOfWards
AMT credit carryfOfWards
Other
Gross deferred tax assets
Valuation allowance
Net deferred tax assets
Total net deferred taxes
As
of December 31,
2001 2000
$
9,010
S4,436
2,841 988
11,851
5,424
16,749
3,846
4,905
1,181
36,043
47,959
4,095
4,606
4,078
3,770
4,821
4,289
70,691
65,651
(58,840)
(60,227)
11,851
5,424
$$
For financial reporting purposes, avaluation allowance has been recognized at December
31, 2001 and 2000, to reduce the net deferred income tax
assets to zero. We have not recognized any benefit from the future use
of operating loss carryforwards because management's evaluation of all tile
available evidence in assessing the realizability of the tax benefits of such loss carryforwards, indicates that the underlying assumptions of future profit-
able operations contain risks that
do not provide sufficient assurance to recognize such tax benefits currently. Although we produced operating profits
in 2001 and 2000,
we do not believe this and other positive evidence, including projections of future profitable operations, offset the effect of our
recent cumulative losses.
At
December 31, 2001, we had net operating loss carryforwards for income tax purposes of approximately $103 million thaI begin to expire in 2012.
In addition, our Alternative Minimum Tax credit carryfOlwards for income tax purposes were S4.1 million.
Prior
to the Airways merger, Airways generated net operating loss carryforwards of 523.1 million. The use of preacquisition operating loss carryforwards
is subject
to limitations imposed by the Internal Revenue Code. We do not anticipate that these limitations will affect utilization of the carryforwards
prior
to expiration. For financial reporting purposes, avaluation allowance of $8.1 million was recognized to offset the deferred tax assets related to
those carryforwards. When realized, the tax benefit for those items will be applied to reduce goodwill related 10 the acquisition of Airways. During 2001
and 1999,
we utilized 85.9 million and $6.3 million, resJ)eCtively, of /iJrways' net operating loss carryfOfWards, and reduced gex>dwill respectively by the
$2.3 million and S2.4 million tax benefit of such utilization.
13. Impairment Loss/Lease Termination
In response to the expected slowdown in air travel as aresult of the September 11 th events. we announced on September 17, 200 1an updated
capacity plan whereby we reduced Our scheduled operations 10 appfOximately 80 percent of our pre-September 11th schedule. With other airlines
similarly reducing flights
and grounding older aircraft types resulting in an overall reduction in values in the previously owned aircraft market, we
decided to review our DC-9 neet for impairment. During the second quarter of 2001, we announced our intention to retire our fleet of four 8737 aircraft
in the third quarter
of 2001 in order to simplify our fleet and reduce costs. The 8737s are being replaced with 8717 aircraft. We have subsequently
sold and delivered
two 01 the 8737 aircraft and are currently in negotiations to sell the third owned aircraft which is classified as assets held for
disposal and included in other current assets.