Airtran 2009 Annual Report Download - page 52

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(Gain) loss on disposition of assets for the year ended December 31, 2008 was ($20.0) million compared to
($5.3) million for the year ended December 31, 2007. (Gain) loss on disposition of assets in each year consisted
primarily of gains on aircraft sales. During the years ended December 31, 2008 and 2007, we sold eight and two
B737 aircraft, respectively.
Impairment of goodwill expense for the year ended December 31, 2008 was $8.4 million. Because adverse
industry conditions and our 2008 operating losses were indicators that our intangible assets may have been
impaired, we prepared an assessment and concluded that all of our goodwill was impaired as of June 30, 2008,
while our trademarks and trade names were not impaired. Consequently, we recorded a charge of $8.4 million
to write-off the financial statement carrying value of all of our goodwill during 2008.
Other (Income) Expense
Other (income) expense, net increased by $166.2 million to $224.9 million for 2008 compared to $58.7 million
for 2007. Other (income) expense, net includes: interest income, interest expense, capitalized interest, net
(gains) losses on derivative financial instruments, and other.
Interest income decreased by $16.7 million from $20.4 million in 2007 to $3.7 million in 2008 due to lower
interest rates. Also, during 2008, we recorded a $5.2 million charge to interest income related to realized and
unrealized losses on investments.
Interest expense, including amortization of debt discount and debt issuance costs, increased by $3.6 million
from $81.9 million in 2007 to $85.5 million in 2008. The increase was primarily due to the net effects of the
following: the favorable impact of lower interest rates applicable to variable-interest rate debt due to declines in
market interest rates; the unfavorable impact of debt service for our 5.5% convertible senior notes issued in May
2008; the unfavorable impact of debt service for our Credit Facility obtained in 2008; and a $2.4 million charge
related to debt issuance costs written off and prepayment penalties related to debt repayments associated with
B737 aircraft sold during 2008.
Capitalized interest decreased by $6.0 million from 2007 to $7.7 million for 2008. Capitalized interest
represents the interest cost to finance purchase deposits for future aircraft. These amounts are classified as part
of the cost of the aircraft upon delivery.
We reported net losses on derivative financial instruments of $150.8 million for 2008, compared to losses of
$0.3 million for 2007. Net (gains) losses on derivative financial instruments consisted primarily of realized and
unrealized gains and losses on fuel-related derivatives which either did not qualify for hedge accounting or were
not designated as hedges for financial accounting purposes.
Other (Income) Expense for 2007 included $10.7 million to write-off the costs associated with the attempted
acquisition of Midwest Airlines which was terminated in August 2007.
Income Tax Expense (Benefit)
Our effective income tax rate was 11.4 percent and 39.8 percent for the years ended December 31, 2008 and
2007, respectively. Our effective tax rate can differ from the 37.2 percent composite statutory tax rate (35
percent federal statutory rate plus the 2.2 percent effective state tax rate) due to changes in the valuation
allowance on our deferred tax assets, certain expenses which are not deductible for income tax purposes, and
non-recurring discrete items related to restricted stock vesting. During 2008, we recorded an $8.4 million charge
to write-off all of the carrying value of our goodwill. Because this write-off was not deductible for income tax
purposes, we did not record a tax benefit and consequently our effective tax rate was reduced.