SkyWest Airlines 2007 Annual Report Download - page 54

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The significant components of the net deferred tax assets and liabilities are as follows (in thousands):
As of December 31,
2007 2006
Deferred tax assets:
Accrued benefits................................................................................ $20,134 $16,560
Net operating loss carryforward ........................................................ 25,738 55,332
AMT credit carryforward .................................................................. 24,511 2,266
Deferred aircraft credits..................................................................... 45,531 31,795
Accrued reserves and other................................................................ 7,739 9,779
Total deferred tax assets ....................................................................... 123,653 115,732
Deferred tax liabilities:
Accelerated depreciation ................................................................... (490,134) (355,103)
Maintenance and other....................................................................... (8,989) (29,879)
Total deferred tax liabilities.................................................................. (499,123) (384,982)
Net deferred tax liability....................................................................... $(375,470) $(269,250)
The Company’ s deferred tax liabilities were primarily generated through accelerated bonus depreciation on newly
purchased aircraft and support equipment in accordance with the Job Creation and Worker Assistance Act of 2002.
At December 31, 2007, the Company had federal net operating losses of approximately $34.6 million and state net
operating losses of approximately $350.2 million which will start to expire in 2024 and 2010 respectively. As of
December 31, 2007, the Company also had an alternative minimum tax credit of approximately $24.5 million which does not
expire.
FIN No. 48 prescribes a recognition threshold and measurement process for recording in the financial statements
uncertain tax positions taken or expected to be taken in a company’ s tax return. The provisions of FIN No. 48 became
effective for the Company beginning January 1, 2007. In conjunction with the year-end evaluation of the Company’ s FIN
No. 48 liability, the Company reduced its income tax provision by approximately $2.5 million for the year ended
December 31, 2007.
(4) Commitments and Contingencies
Lease Obligations
The Company leases 287 aircraft, as well as airport facilities, office space, and various other property and equipment
under non-cancelable operating leases which are generally on a long-term net rent basis where the Company pays taxes,
maintenance, insurance and certain other operating expenses applicable to the leased property. Management expects that, in
the normal course of business, leases that expire will be renewed or replaced by other leases. The following table summarizes
future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in
excess of one year as of December 31, 2007 (in thousands):
Year ending December 31,
2008 ........................................................................................................................... $304,948
2009 ........................................................................................................................... 315,357
2010 ........................................................................................................................... 302,479
2011 ........................................................................................................................... 292,604
2012 ........................................................................................................................... 293,171
Thereafter ..................................................................................................................... 1,821,140
$3,329,699
FASB Interpretation No. 46 (“FIN 46”), Consolidation of Variable Interest Entities, requires the consolidation of
variable interest entities. The majority of the Company’ s leased aircraft are owned and leased through trusts whose sole
purpose is to purchase, finance and lease these aircraft to the Company; therefore, they meet the criteria of a variable interest
entity. However, since these are single owner trusts in which the Company does not participate, the Company is not
considered at risk for losses and is not considered the primary beneficiary. As a result, based on the current rules, the