American Airlines 1998 Annual Report Download - page 31

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cash and short-term investments, internally generated
cash, and some new financing depending upon capital
market conditions and the Company’s evolving view of its
long-term needs.
For the year ended December 31, 1998, a total of
approximately 14.3 million shares of the Company’s com-
mon stock were purchased by the Company under three
separate share repurchase programs at a total cost of
approximately $945 million. The Company expects to
spend approximately $400 million by the end of the first
quarter of 1999 to complete the $500 million share
repurchase program initiated in October 1998. On
March 17, 1999, the Company’s Board of Directors autho-
rized management to repurchase up to an additional $500
million of the Company’s outstanding common stock.
Share repurchases may be made from time to time,
depending on market conditions, and may be discontin-
ued at any time.
In 1997, the Board of Directors of The Sabre Group
approved a stock repurchase program for The Sabre
Group, under which The Sabre Group will repurchase,
subject to certain business and market conditions, up to
1.5 million shares of The Sabre Group’s Class A common
stock. During 1998, a total of approximately 1.4 million
shares were purchased by The Sabre Group at a total cost
of approximately $49 million. In addition, on March 16,
1999, the Board of Directors of The Sabre Group approved
an additional stock repurchase program for The Sabre
Group, under which The Sabre Group will repurchase,
subject to certain business and market conditions, up to
one million shares of The Sabre Group’s Class A
common stock.
At December 31, 1998, the Company owned
approximately 3.1 million depository certificates convert-
ible, subject to certain restrictions, into the common stock
of Equant N.V. (Equant), which completed an initial public
offering in July 1998. As of December 31, 1998, the esti-
mated fair value of these depository certificates was
approximately $210 million, based upon the publicly-
traded market value of Equant common stock. In connec-
tion with a secondary offering of Equant, the Company
sold approximately 900,000 depository certificates in
February 1999 for net proceeds of $66 million. The
remaining depository certificates are subject to a final real-
location between the owners of the certificates during
1999 and thus, the number of certificates owned by the
Company is subject to change.
American has a $1.0 billion credit facility agreement
which expires December 19, 2001. At American’s option,
interest on the agreement can be calculated on one of
several different bases. For most borrowings, American
would anticipate choosing a floating rate based upon the
London Interbank Offered Rate (LIBOR). At December 31,
1998, no borrowings were outstanding under the agreement.
AMR (principally American Airlines) historically
operates with a working capital deficit as do most other
airline companies. The existence of such a deficit has not
in the past impaired the Company’s ability to meet its
obligations as they become due and is not expected to
do so in the future.
OTHER INFORMATION
ENVIRONMENTAL MATTERS Subsidiaries of AMR have
been notified of potential liability with regard to several
environmental cleanup sites and certain airport locations.
At sites where remedial litigation has commenced, poten-
tial liability is joint and several. AMR’s alleged volumetric
contributions at these sites are minimal. AMR does not
expect these matters, individually or collectively, to have
a material impact on its results of operations, financial
position or liquidity. Additional information is included
in Note 3 to the consolidated financial statements.
YEAR 2000 READINESS
STATE OF READINESS In 1995, the Company imple-
mented a project (the Year 2000 Project) intended to
ensure that hardware and software systems operated by the
Company, including software licensed to or operated for
AMR CORPORATION