US Airways 2011 Annual Report Download - page 126

Table of Contents
(c) On October 20, 2008, US Airways and Airbus entered into amendments to the A320 Family Aircraft Purchase Agreement, the A330 Aircraft Purchase
Agreement, and the A350 XWB Purchase Agreement. In exchange for US Airways' agreement to enter into these amendments, Airbus advanced US
Airways $200 million in consideration of aircraft deliveries under the various related purchase agreements. Under the terms of each of the amendments,
US Airways has agreed to maintain a level of unrestricted cash in the same amount required by US Airways Group's Citicorp credit facility. This
transaction was treated as a financing transaction for accounting purposes using an effective interest rate commensurate with US Airways' credit rating.
There are no stated interest payments.
(d) The industrial development revenue bonds are due April 2023. Interest at 6.3% is payable semiannually on April 1 and October 1. The bonds are
subject to optional redemption prior to the maturity date, in whole or in part, on any interest payment date at a redemption price of 100%.
Secured financings are collateralized by assets, primarily aircraft, engines, simulators, rotable aircraft parts, hangar and maintenance facilities and
airport take-off and landing slots. At December 31, 2011, the maturities of long-term debt and capital leases are as follows (in millions):
2012 $ 420
2013 364
2014 385
2015 276
2016 275
Thereafter 1,469
$ 3,189
Certain of US Airways' long-term debt agreements contain significant minimum cash balance requirements and other covenants with which US
Airways was in compliance at December 31, 2011. Certain of US Airways' long-term debt agreements contain cross-default provisions, which may be
triggered by defaults by US Airways under other agreements relating to indebtedness.
4. Income Taxes
US Airways accounts for income taxes using the asset and liability method. US Airways is part of the US Airways Group consolidated income tax
return. US Airways Group allocates tax and tax items, such as net operating losses ("NOLs") and net tax credits, between members of the group based on their
proportion of taxable income and other items. Accordingly, US Airways' tax expense is based on taxable income, taking into consideration allocated tax loss
carryforwards/carrybacks and tax credit carryforwards.
As of December 31, 2011, US Airways had approximately $1.85 billion of gross NOLs to reduce future federal taxable income. All of US Airways'
NOLs are expected to be available to reduce federal taxable income in the calendar year 2012. The NOLs expire during the years 2024 through 2031. US
Airways' net deferred tax assets, which include $1.78 billion of the NOLs, are subject to a full valuation allowance. US Airways also had approximately
$79 million of tax-effected state NOLs at December 31, 2011. At December 31, 2011, the federal and state valuation allowances were $349 million and
$61 million, respectively. In accordance with Generally Accepted Accounting Principles ("GAAP"), utilization of the NOLs will result in a corresponding
decrease in the valuation allowance and offset US Airways' tax provision dollar for dollar.
In connection with the sale of US Airways' remaining investments in auction rate securities (refer to Note 5 (b)), US Airways recorded a special non-
cash tax charge of $21 million in 2011. In the fourth quarter of 2009, US Airways had recorded in other comprehensive income ("OCI"), a subset of
stockholder's equity, a non-cash tax provision of $21 million. This provision resulted from $56 million of unrealized gains recorded in OCI due to an increase
in the fair value of certain investments in auction rate securities.
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