3rd Quarter Profit

[FWAAA]

Pretty simple concept. UAL had several years of "losses". The government doesn't give you money when you have "negative income", but you can use those loses to mitigate future taxes (if you lost one mill this year and made one mil next, you'd pay no taxes since your net was 0). The "credit" for "negative taxes" owed is carried on the balance sheet until it is offset by "positive taxes" owed.

In short, UAL will pay no taxes on the money they made this Q, but the total credit for "negative taxes" will be reduced on the balance sheet by the amount the would have owed without losses in previous years.

The credits don't last forever (5 years?) and are lost if the company has a "change of control" (to prevent a company from buying a BK company just for it's tax credits, this was an issue when AMR bought TWA). AMR will also have the same accounting "gimick" from their losses in the early 2000's

I agree with you and I understand the concept of net loss carryforwards.

My question is why UA and DL have shown this phantom tax they won't pay (due to the NOLs) yet AMR has not done the same thing on its quarterly financials?

AMR has shown profits for several consecutive quarters yet has completely omitted any non-cash income tax charge against those earnings.

 

[magsau]

Tilton. Lipstick. Pig.

FIRE SALE.

I read the first line and thought you were describing your "look". Read the second line and realized YOU are describing what the fellas at the dorm referred to you as.

Oh you are too easy.....whoops that is what they also said about you.

What happened? Some leggy UA F/A steal your SkyNAAzi boyfriend.

 

[Busdrvr]

I agree with you and I understand the concept of net loss carryforwards.

My question is why UA and DL have shown this phantom tax they won't pay (due to the NOLs) yet AMR has not done the same thing on its quarterly financials?

AMR has shown profits for several consecutive quarters yet has completely omitted any non-cash income tax charge against those earnings.

Ah, this is interesting....

It's all accounting smoke and mirrors. I'm NOT an accountant (but have taken my share of accounting courses as a part of two graduate degrees), so I'm not POSITIVE how they are doing the tax deal, but this is my best guess. AMR put it's tax bene's on the balance sheet, and "assumes" they won't use them (some don't expire until 2022), so they have a charge on the balance sheet of equal value called "accelerated depreciation". When AMR uses the tax credit, they reduce the "accelerated depreciation" charge by the equivilent amount. The result is no change in the "value of the company" when they are used.

In essence, AMR bit the bullet when times were bad, and wrote off a lot of stuff. Now they are able to make the numbers look better than they really are by not reporting a tax expense (when they normally would have had to pay taxes without the carry forwards). DAL and UAL IMO are making a more appropriate "apples to apples" quarter to quarter representation by charging the balance sheet for the tax credits, and by listing the current carryforwards as assets.

 

[BoeingBoy]

The different treatment of NOL's may (or may not) have something to do with "fresh start accounting" when coming out of BK. I notice that AA and CO, who haven't recently emerged from BK, use the same accounting method for NOL's while the recent BK "graduates" all use the UA method.

Jim

 

[UAL_TECH]

Well, I should feel better………..But oddly, I don’t.
Maybe I need more beans and sausages…
B) UT

 

[Busdrvr]

The different treatment of NOL's may (or may not) have something to do with "fresh start accounting" when coming out of BK. I notice that AA and CO, who haven't recently emerged from BK, use the same accounting method for NOL's while the recent BK "graduates" all use the UA method.

Jim

Doesn't look like it. When it benefitted AMR (i.e. when they were LOSING money and getting a CREDIT on the income statement for taxes made a loss look smaller...), AMR used the same method then that UAL and DAL use now. check the link

http://www.shareholder.com/aa/releaseDetai...ReleaseID=85608

UAL has consistantly used the same method (at least they did in the 2001 annual report).

Simply put, it was a way to make a mediocre Quarter at AMR look better.

 

[BoeingBoy]

AA and CO both changed their accounting after 2001 - AA in 2002 and CO in 2004 - while both (and everyone else) were still losing money. If it were done simply to make the quarterly/annual numbers look better, why change?

Jim

 

[NewHampshire Black Bears]

Hey NHBB, Thanks for the kudos.... It is a quite an impressive profit... Too bad the employees can't stuff it in their accounts... I am impressed though, I wonder if Ms. StrAAight has seen this??? Double the profit of AA and more than that of CAL and DAL.... Looks like we won't be selling off into pieces any time soon <_< ...

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

OOOPS,
(another insert sneakers into mouth moment for beauty)

"Looks like we won't be selling off into pieces anytime soon"

"GLEN" said the last day or two(in the STRONGEST Tones to date) that (sadly) UAL/M+E will be jettisoned very soon. He even went so far as to state the obvious...."I Don't know how this will be received by the unions"

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Magsau,

What ever you do......DO NOT "hold your breath until AA sells A/E !
(Because IF you do, YOU will SUFFOCATE)

 

[NewHampshire Black Bears]

I'm BACK again...beauty.

I JUST read on another UAL thread, that .."GLEN" wants to "dump" UAL Cargo also($750M)

"OUCH"

 

[magsau]

Magsau,

What ever you do......DO NOT "hold your breath until AA sells A/E !
(Because IF you do, YOU will SUFFOCATE)

I hate to interject some reality into your world but here goes.

AA to sale FF program and AA Eagle- NY Times

Glenn has said many times he wants to merge and having learned his skills from the oil business I think he is positioning for that to happen. Not much I can do about it but hold on and hope for the best. Now for the AA group what is the plan with the sell off? disAAdvantage and Eaglet being shopped? Does this just mean that AA is going to be parting out the company? That seems to be the argument the AA crowd is using for the news about UAL selling their FF and MTC divisions. So why is that not an accurate description for AA? Is AA in the final throws?

Don't become as boneheaded as that other group of people from the LUV airport.

 

[The Gopher]

My guess is that it would be far easier to attract merger capital and reduce the ire of anti-competitive issues in DC with a smaller combined entity. Think about a smaller UA, without the MM unit and Mileage Plus, trying to merge with some other carrier. The money from the M+ selloff could nearly fund the whole thing, and if the target airline also did not have a loyalty program, well then that kills two birds with one stone.

I'm thinking that UAUA will push B-scales very hard in 2009, especially if a merger is even mentioned. However I hope these people remember with US Air that announcing a merger while in contract talks is not a good idea!

 

[FWAAA]

Doesn't look like it. When it benefitted AMR (i.e. when they were LOSING money and getting a CREDIT on the income statement for taxes made a loss look smaller...), AMR used the same method then that UAL and DAL use now. check the link

http://www.shareholder.com/aa/releaseDetai...ReleaseID=85608

UAL has consistantly used the same method (at least they did in the 2001 annual report).

Simply put, it was a way to make a mediocre Quarter at AMR look better.

What you pointed out for AMR's 2001 4th quarter was an actual tax refund of prior income taxes paid. During the 1995-2000 period, AMR paid plenty of corporate income taxes, which it then recovered during 2001-03 as actual refunds.

It's not actually the same thing. UA and DL are making their current quarters look worse than they actually are by accruing a non-cash charge for taxes they don't have to pay (due to their huge losses in prior years).

As usual, I'm inclined to think that BoeingBoy is onto something - perhaps it's related to the post-Ch 11 fresh start accounting.

 

[Busdrvr]

What you pointed out for AMR's 2001 4th quarter was an actual tax refund of prior income taxes paid. During the 1995-2000 period, AMR paid plenty of corporate income taxes, which it then recovered during 2001-03 as actual refunds.

It's not actually the same thing. UA and DL are making their current quarters look worse than they actually are by accruing a non-cash charge for taxes they don't have to pay (due to their huge losses in prior years).

As usual, I'm inclined to think that BoeingBoy is onto something - perhaps it's related to the post-Ch 11 fresh start accounting.

Financial statements are meant to represent what is going on in aa "apples to apples" way. The money UAL "made" this Q IS taxed, it's just that the amount UAL has to pay is already accounted for. IOW, if you had a full tank of gas, drove somewhere and in the process, burned half a tank, the trip cost you the value of half a tank of gas EVEN THOUGH YOU DIDN'T STOP AT THE SERVICE STATEMENT.

You may want to look at AMR's 2001 annual report and cash flow statement.... The HUGE debit to cash flow for "provision for incomee taxes" indicates to me that AMR claimed the "negative taxes" without getting all the cash back from Uncle Sam....

I actually think the truth may be somewhere in between... I'm just guessing but..... EVERY compnay has two sets of books....the tax books and the SEC books. There are some tax rules that allow accelerated depreciation while the SEC books don't. So if you look at AMR's balance sheet from back in the 2001 time frame, they had a current asset of deferred taxes and a current liability of deferred taxes owed. IOW, they had reported income taxes that they didn't have to actually pay until sometime in the future. It's quite possible that AMR used the "provision for income tax" during times of big losses until the entire pot of deferred tax liabilities where used up, THEN switched methods.

 

[spacewaitress]

Well, when you stiff your creditors; screw your employees; and don't pay your bills, I guess anything is possible.

right on!!

 

[UAL_TECH]

I'm BACK again...beauty.

I JUST read on another UAL thread, that .."GLEN" wants to "dump" UAL Cargo also($750M)

"OUCH"

Well, I for one am tired of this bashing of UAL by you cowards that have contractually capitulated with the mere threat of BK. If you have issues with Beauty, then PM each other, otherwise, bite me!

Maybe if one of you had the ‘guts’ to say no to a screwing, then we ‘all’ would not be in this situation. But you didn’t and you are foolishly elated that UAL got their ‘ComeUppins’.

If you believe that the train stops here, then you are in for a ‘BIG’ surprise.

If you all are so narrow minded as not to understand the impact on ‘your company’ then you deserve the screwing that is coming down the track.

JMHO,
B) UT