Airtran 2005 Annual Report Download - page 40

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We have variable interests in our aircraft leases. The lessors are trusts established specifically to purchase, finance and lease aircraft to us. These leasing entities meet the criteria of VIEs. We are generally not
the primary beneficiary of the leasing entities if the lease terms are consistent with market terms at the inception of the lease and do not include a residual value guarantee, fixed-price purchase options or similar
feature that obligates us to absorb decreases in value or entitles us to participate in increases in the value of the aircraft. This is the case in the majority of our aircraft leases; however, we have two aircraft leases
that contain fixed-price purchase options that allow us to purchase the aircraft at predetermined prices on specified dates during the lease term. We have not consolidated the related trusts because even taking
into consideration these purchase options, we are not the primary beneficiary based on our cash flow analysis.
: : 8. EARNINGS PER COMMON SHARE : :
The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except per share data):
For Year Ended December 31,
(In thousands, except per share data) 2005 2004 2003
Numerator : :
Net income $ 1,722 $12,255 $100,517
Plus income effect of assumed conversion-interest on convertible debt —— 4,565
Income before assumed conversion, diluted $ 1,722 $12,255 $105,082
Denominator : :
Weighted-average shares outstanding, basic 87,337 85,261 75,345
Effect of dilutive stock options 2,187 3,639 3,936
Effect of dilutive restricted shares 97 ——
Effect of detachable stock purchase warrants 564 623 1,216
Effect of convertible debt —— 6,110
Adjusted weighted-average shares outstanding, diluted 90,185 89,523 86,607
Basic earnings per common share $ 0.02 $ 0.14 $ 1.33
Diluted earnings per common share $ 0.02 $ 0.14 $ 1.21
On September 30, 2004, the Emerging Issues Task Force, or EITF, reached consensus on Issue No. 04-08, “The Effect of Contingently Convertible Instruments on Diluted Earnings per Share,” which changes the
treatment of contingently convertible debt instruments in the calculation of diluted earnings per share. EITF Issue No. 04-08 provides that these debt instruments be included in earnings per share computation, if
dilutive, regardless of whether the contingent feature has been met. This change does not have any effect on net income, but it does affect the related per share amounts. We have adopted EITF Issue No. 04-08 as
of December 31,2004. In the third quarter 2003, the notes met the convertibility requirements under the debt and we included, if dilutive, the assumed conversion of our convertible notes issued May 2003 in diluted
earnings per share calculations in subsequent periods as a result of meeting those requirements.
The assumed conversions of convertible debt in 2005 and 2004 were anti-dilutive and 11.2 million shares were excluded from the computation of weighted-average shares outstanding used in computing diluted
earnings per common share.
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