American Airlines 1998 Annual Report Download - page 56

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Year Ended December 31,
1998 1997 1996
Denominator:
Denominator for basic earnings
per share - weighted-average
shares 169 178 172
Effect of dilutive securities:
Convertible subordinated
debentures - - 8
Convertible preferred stock -- 1
Employee options and shares 13 14 7
Assumed treasury shares purchased (7) (9) (4)
Dilutive potential common shares 65 12
Denominator for diluted earnings
per share - adjusted
weighted-average shares 175 183 184
Basic earnings per share from
continuing operations before
extraordinary loss $7.73 $5.45 $ 6.29
Diluted earnings per share from
continuing operations before
extraordinary loss $7.48 $5.32 $ 5.95
12.DISCONTINUED OPERATIONS
In September 1998, the Company announced plans to sell
three of the companies within the Management Services
Group that accounted for a substantial portion of that
group’s revenues and operating income: AMR Services, AMR
Combs and TeleService Resources. As of December 31,
1998, the Company had reached agreements to sell all three
companies and expects to complete the sales by the end of
the first quarter or early part of the second quarter of 1999.
As a result of the sales, the Company expects to record a
significant gain during the first quarter of 1999.
The results of operations for AMR Services, AMR
Combs and TeleService Resources have been reflected in the
consolidated statements of operations as discontinued oper-
ations. The amounts shown are net of income taxes of
approximately $6.7 million, $9.7 million and $14.8 million
for 1998, 1997 and 1996, respectively. Revenues from the
operations of AMR Services, AMR Combs and TeleService
Resources were $513 million, $517 million and $519 mil-
lion for 1998, 1997 and 1996, respectively.
13.GAIN ON SALE
OF STOCK BY SUBSIDIARY
During October 1996, The Sabre Group completed an ini-
tial public offering of 23,230,000 shares of Sabre Common
Stock, representing 17.8 percent of its economic interest, at
$27 per share for net proceeds of approximately $589 mil-
lion. This transaction resulted in a reduction of the
Company’s economic interest in The Sabre Group from 100
percent to 82.2 percent. In accordance with the Company’s
policy of recognizing gains or losses on the sale of a sub-
sidiary’s stock based on the difference between the offering
price and the Company’s carrying amount of such stock, the
Company recorded a $497 million gain. The issuance of
stock by The Sabre Group was not subject to federal income
taxes. In accordance with Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes,” no
income tax expense was recognized on the gain.
14.OTHER INCOME (EXPENSE)-
MISCELLANEOUS
Other income (expense) - miscellaneous, net included the
following (in millions):
Year Ended December 31,
1998 1997 1996
Minority interest $(40) $(36) $ (2)
Canadian Airlines charges -- (251)
Litigation settlement/judgment 14)- (21)
Other, net (20) 13)(12)
$(46) $(23) $ (286)
During 1996, the Company determined that the
decline in the value of its investment in the cumulative
mandatorily redeemable convertible preferred stock of
Canadian was not temporary and, in accordance with
Statement of Financial Accounting Standards No. 115,
“Accounting for Certain Investments in Debt and Equity
Securities,” recorded a $192 million charge to write-off the
investment. Additionally, the Company recorded a charge
of $59 million to write-off certain deferred costs relating to
the Company’s agreement to provide a variety of services
to Canadian.
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