American Airlines 1998 Annual Report Download - page 51

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The change in valuation allowance in 1998 relates to
the utilization of foreign tax credits. The change in the
valuation allowance in 1996 is primarily attributable to the
write-off of AMR’s investment in Canadian Airlines
International Limited (Canadian) (see Note 14).
The components of AMR’s deferred tax assets and
liabilities were (in millions):
December 31,
1998 1997
Deferred tax assets:
Postretirement benefits other than pensions $616 $580
Alternative minimum tax credit carryforwards 515 862
Rent expense 376 322
Frequent flyer obligation 258 232
Gains from lease transactions 223 234
Other 405 412
Valuation allowance (68) (72)
Total deferred tax assets 2,325 2,570
Deferred tax liabilities:
Accelerated depreciation and amortization (3,097) (2,963)
Pensions (54) (94)
Other (189) (219)
Total deferred tax liabilities (3,340) (3,276)
Net deferred tax liability $(1,015) $(706)
At December 31, 1998, AMR had available for federal
income tax purposes approximately $515 million of alterna-
tive minimum tax credit carryforwards which are available
for an indefinite period.
Cash payments for income taxes were $560 million,
$423 million and $194 million for 1998, 1997 and 1996,
respectively.
8.COMMON AND PREFERRED STOCK
In April 1998, the Company’s Board of Directors approved a
two-for-one stock split in the form of a stock dividend, sub-
ject to shareholder approval of an amendment to the
Company’s Certificate of Incorporation to increase the num-
ber of authorized common shares. On May 20, 1998, the
Company’s shareholders approved the amendment, thereby
increasing the total number of authorized shares of all
classes of stock to 770 million, of which 20 million are
shares of preferred stock (without par value) and 750 mil-
lion are shares of common stock ($1 par value). The stock
split was effective on June 9, 1998 for shareholders of
record on May 26, 1998. All prior period share and earn-
ings per share amounts have been restated to give effect to
the stock split.
9.STOCK AWARDS AND OPTIONS
Under the 1998 Long Term Incentive Plan, as amended,
officers and key employees of AMR and its subsidiaries may
be granted stock options, stock appreciation rights, restricted
stock, deferred stock, stock purchase rights, other stock-
based awards and/or performance-related awards, including
cash bonuses. The total number of common shares autho-
rized for distribution under the 1998 Long Term Incentive
Plan is 10,000,000 shares. The 1998 Long Term Incentive
Plan, the successor to the 1988 Long Term Incentive Plan
which expired May 18, 1998, will terminate no later than
May 21, 2008. Options granted under the 1988 and 1998
Long Term Incentive Plans (collectively, the Plans) are
awarded with an exercise price equal to the fair market
value of the stock on date of grant, become exercisable
in equal annual installments over five years following the
date of grant and expire 10 years from the date of grant.
Stock appreciation rights may be granted in tandem with
options awarded.
In 1998, 1997 and 1996, the total charge for stock
compensation expense included in wages, salaries and benefits
expense was $65 million, $75 million and $49 million,
respectively. No compensation expense was recognized for
stock option grants under the Plans since the exercise price
was the fair market value of the underlying stock on the date
of grant.
AMR CORPORATION