US Airways 2004 Annual Report Download - page 63

Table of Contents
AMERICA WEST HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED
Composition of Deferred Tax Items:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. As of December 31, the significant components of the Company's deferred tax assets and liabilities
are a result of the temporary differences related to the items described as follows:
2004 2003
(in thousands)
Deferred tax assets:
Net operating loss carryforwards $ 184,515 $ 126,219
Aircraft leases 13,585 17,347
Vacation accrual 13,407 11,948
Frequent flyer accrual 6,592 5,958
Restructuring and other reserves 3,626 3,858
Tax credit carryforwards 1,112 1,112
Other 3,144 2,767
Gross deferred tax assets 225,981 169,209
Deferred tax liabilities:
Accelerated depreciation and amortization (95,365) (70,534)
Partnership losses (1,421) (1,420)
Other (229) (781)
Gross deferred tax liabilities (97,015) (72,735)
Net deferred tax assets before valuation allowance 128,966 96,474
Less valuation allowance (128,966) (96,474)
Net deferred liability — —
SFAS No. 109, "Accounting for Income Taxes," requires that a valuation allowance be established when it is "more likely than not" that all or a portion of
deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including the company's performance,
the market environment in which the company operates, forecasts of future profitability, the utilization of past tax credits, length of carryforward periods and
similar factors. SFAS No. 109 further states that it is difficult to conclude that a valuation allowance is not needed when there is negative evidence such as
cumulative losses in recent years. Therefore, cumulative losses weigh heavily in the overall assessment.
The Company was in a cumulative loss position three out of four years between December 31, 2001 through December 31, 2004, which weighed heavily
in the overall determination that a valuation allowance was needed. As of December 31, 2004, the Company had recorded a valuation allowance of
$129.0 million against its net deferred tax assets. The Company expects to continue to record a full valuation allowance on any future tax benefits until we
have achieved several quarters of consecutive profitable results coupled with an expectation of continued profitability. As of December 2004 and 2003, the
valuation allowance totaled $129.0 million and $96.5 million, respectively.
8. Capital Stock
Preferred Stock
The Company's Board of Directors by resolution may authorize the issuance of the preferred stock as a class, in one or more series, having the number of
shares, designations, relative voting rights, dividend rights, liquidation and other preferences and limitations that the Board of Directors fixes, without any
stockholder approval. No shares of preferred stock have been issued.
Common Stock
The holders of Class A common stock are entitled to fifty votes per share, and the holders of Class B common stock are entitled to one vote per share, on
all matters submitted to a vote of common stockholders except that voting rights of non-U.S. citizens are limited. The Class A common stock is convertible
into an equal number of Class B shares at any time at the election of the holders of the Class A common stock. Holdings' Class B common stock is listed on
the New York Stock Exchange.
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