Frontier Airlines 2007 Annual Report Download - page 57

•Deferred gain - Delta Pre-Petition Claim and Surrendered Warrants . As a result of the Delta amendment, in March 2007, we
recorded a deferred credit of $44,590, which represented the net realizable value of the pre-petition claim on the approval date by the
Bankruptcy Court. In addition, we recorded a deferred gain on the surrender of the warrants from Delta of $42,735, which was net of
the write-off of the previously reported unamortized deferred warrant charge of $6,369. The deferred credits for the proceeds of the
pre-petition claim and the gain on the surrender of the warrants totaling $87,325 will be amortized as an adjustment to revenue
over the weighted average aircraft in service during the term of the agreements with Delta.
•Income Taxes. The Company has generated significant net operating losses (“NOLs”) for federal income tax purposes primarily from
accelerated depreciation on owned aircraft. In July 2005, Wexford Capital LLC’s ownership percentage of the Company was reduced
to less than 50% as a result of a follow-on offering of our common stock. As a result of this decrease in ownership, the utilization of
NOLs generated prior to July 2005 are subject to an annual limitation under Internal Revenue Code Section 382 (“IRC 382”). The
annual limitation is based upon the enterprise value of the Company on the IRC 382 ownership change date multiplied by the
applicable long-term tax exempt rate. If the utilization of pre July 2005 NOLs becomes uncertain in future years, we will be required
to record a valuation allowance for the NOLs not expected to be utilized.
•Intangible Commuter Slots. The Company acquired commuter slots during 2005 at the New York-LaGuardia and Ronald Reagan
Washington National airports from US Airways. The licensing agreement with the Company and US Airways for the LaGuardia
commuter slots expired on December 31, 2006, but we maintain a security interest in the LaGuardia slots if US Airways fails to
perform under the current licensing agreement. The estimated useful lives of these commuter slots were determined based upon the
period of time cash flows are expected to be generated by the commuter slots and by researching the estimated useful lives of
commuter slots or similar intangibles by other airlines. In addition, an estimated residual value was determined using estimates of the
expected fair value of the commuter slots at the end of the expected useful life. The residual value will be assessed annually for
impairment. The estimated useful lives are also reviewed annually.
•Reportable Segments. The Company’s only reportable segment is scheduled transportation of passengers and air freight under
code-share agreements. In addition, the Company has charter service, aircraft leasing and commuter slot licensing fee revenues. These
activities aggregated represent less than 10% of consolidated revenues, operating income and assets. If these activities become more
significant in future years, additional reportable segments would need to be disclosed.
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Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 21, 2008 Powered by Morningstar® Document Research℠