Goodwill

[Bob Owens]

Hey how can I write off Goodwill?

According to AAs 10K. American wrote off a non-cash (in other words not real) loss of $988 million. Why didnt they just make it an even $1 Billion? So in other words this knocks their actual losses down to $2.5 Billion. Thats $700 million more than 2001 instead of $1.7 billion more.
Big difference.

What other little secrets lie in this report?

Maybe things were not nearly as bad as they claim?

Maybe just a little bit too much attention was paid to executive compensation and the real scandal lies elsewhere in the report.

All that fuss and Carty steps down. So what? The same team is still running the show and its not like Carty is going to jail or on welfare.

What exactly is this carryback of NOLs?

Is the $57 million charge another scam? Bringing the loss down to $2.443 Billion?

Firm Aircraft Commitments-2003= $1.027 Billion. It goes down every year therafter. What was it in 2002? Does AA really need to keep buying new airplanes? I'm stuck driving my 1989 wreck with 256000 miles on it for as far as I can see into the future thanks to this paycut. Cant AA stick with what they have? If they did then we all would have only had to give 800 million and I probably could have gotten a new car!

Between 2002 and 2001 total wages & benifits only increased by $360 million but we are being blamed for the increased losses of $1700 million. How they went up I dont know, my gross income actually decreased by over $10000 between 2001 and 2002.

Maint materials and repairs actually went down $57 million.

Aircraft rentals went up $11 million. Most of the leases are in place until after 2008. They would have been the first to go in BK. Did we give concessions to make the lessors rich? They are getting more while we are getting less.Are they collecting rent for aircraft that are sitting in the desert? Who was saved by avioding BK, us or them?

Total assets $30267 Million
Total debts and obligations $3854 Million

Assets - debts =net worth
30267 - 3854 =$26.413 Billion

Is that broke?


On another note lets talk about profit sharing.

In 2000 the company had revenues of 19.703 billion. It was less in 2001 and 2002.

In order for us to get back what we are giving up AA would have to have a PROFIT of $148 billion with no more than 100,000 employees. In order for us to get back what we are giving up AA would have to have a profit that I believe is more than the entire gross revenues of the domestic airline industry. In other words NEVER.

Did we get a 10K in 2002?

 

[FWAAA]

Man, I just hope you''re better at fixin'' airplanes than you are at reading financial statements.

On the liabilities, my 2002 AMR 10-K shows $29.310 billion in liabilities, for a net worth of $957 million, down about $10 billion from a couple years ago.

The carryback of NOLs allows AMR to offset today''s losses against net income from several years ago, which means AMR gets back the income taxes it paid on that income in the past. That''s a good thing.

Keep telling yourself that BK would have been better. Tell all your friends. Tell everyone who will listen. ''Cause not only are you an excellent aircraft mechanic, you''re also a business whiz who could have prevented all the pain that AMR currently finds itself in - if only they had asked you.

I''m sure everyone at U and UAL is really happy they work for airlines who have gone thru Ch 11.

Ask them how they like it. I''m sure they will answer that it was so nice - they can''t wait to try it again.

And be sure to check out UAL''s Q1 2003 charge against earnings of $248 million for "Reorganization Items." Know who''s really paying that? Some of the people paying that tab are all those MX in Oakland and Indy who were recently fired, while heavy maintenance goes to some third world country. That would help you get rid of your old car, if only AA had done that.

 

[NewHampshire Black Bears]

Bob Owens;
Good detective work. But, may I suggest you save your breath.
Why?
Because you and I, and others work with people(and It''s the "so called union members, that really hurt), that would have taken a "50% PAY CUT", and their "FIRST BORN CHILD", just so they could say that they still ''worked'' for AA. "B.F.D." !!!!!!!!!!!!!!!

When the reality of "their" YES vote starts(and it already has), to set in, coupled with info that you''ve uncovered, PLUS whatever else comes out, (AND IT WILL), then the "woe is me" posts will start popping up.

Then again, mabey these folks look at their YES vote, as a sort of "Pay Check Protection" !!!!!!!!!
Kind of like back in the days of Al Capone,Lucky Lucianno, and Carlo Gambino. I believe the Feds called It "EXTORTION" !!!!!!!!!

I don''t know about you Bob, but if these A**Holes(AA) EVER file for BK-11, after we took it in the shorts(concessions), I''m gonna'' have to upgrade my PC., because I''ll be posting 24/7.

NH/BB''s

 

[Bob Owens]

----------------
On 5/8/2003 956 PM FWAAA wrote:

Man, I just hope you're better at fixin' airplanes than you are at reading financial statements.

Not to worry.

On the liabilities, my 2002 AMR 10-K shows $29.310 billion in liabilities, for a net worth of $957 million, down about $10 billion from a couple years ago.

Is $957 million nothing?

What about the Charge for "Goodwill"?

The carryback of NOLs allows AMR to offset today's losses against net income from several years ago, which means AMR gets back the income taxes it paid on that income in the past. That's a good thing.

OK, Can I do that?

Keep telling yourself that BK would have been better. Tell all your friends. Tell everyone who will listen. 'Cause not only are you an excellent aircraft mechanic, you're also a business whiz who could have prevented all the pain that AMR currently finds itself in - if only they had asked you.
Like you right?

I'm sure everyone at U and UAL is really happy they work for airlines who have gone thru Ch 11.
Those that I've spoken to said that they would rather have their contract than ours.

Ask them how they like it. I'm sure they will answer that it was so nice - they can't wait to try it again.

And be sure to check out UAL's Q1 2003 charge against earnings of $248 million for "Reorganization Items." Know who's really paying that? Some of the people paying that tab are all those MX in Oakland and Indy who were recently fired, while heavy maintenance goes to some third world country. That would help you get rid of your old car, if only AA had done that.

Well at least those mechanics made a decent wage for the last couple of years unlike our OSMs/SRPs that are getting laid off. What about all of those that were fired after telling them that if they voted Yes it would save their jobs? Under the old contract they were protected. Now when they come back they will come back at a lower rate than when they left. Should we all agree to work for Mexican wages in order to stop the work from going overseas? I'll tell you what, lets start at the top.

Why is AA still buying new planes? Lets see we could take the one time charge for restructuring at $248 million and not spend $3 billion over the next three years on aircraft we dont need, get rid of the Airbusses we dont want and either bail out or renegotiate tons of other contracts. Oh but we wouldnt want everyone else to take the hit. I should be willing to put my kids on the corner with a tin cup to prevent that.

Why are our lease rates going up?

Why are they still building that massive terminal at JFK? Why did they start it in the first place? How many billions for what, 5 extra gates?

So did they really lose $3.5 Billion or $2.5 Billion. Tell me, how much I should pay for a unit of "Goodwill"?

How much could I sell it for?

How about some "Good Intentions", Ill give you a cut rate. Its just a good as good will and you can have all I have for a cool million. What a bargain!!! Much cheaper than than that $988 million "Good Will".
----------------​

 

[Buck]

----------------
On 5/8/2003 10:35:15 PM NewHampshire Black Bears wrote:

Bob Owens;
Good detective work. But, may I suggest you save your breath.
Why?
Because you and I, and others work with people(and It''s the "so called union members, that really hurt), that would have taken a "50% PAY CUT", and their "FIRST BORN CHILD", just so they could say that they still ''worked'' for AA. "B.F.D." !!!!!!!!!!!!!!!

When the reality of "their" YES vote starts(and it already has), to set in, coupled with info that you''ve uncovered, PLUS whatever else comes out, (AND IT WILL), then the "woe is me" posts will start popping up.

Then again, mabey these folks look at their YES vote, as a sort of "Pay Check Protection" !!!!!!!!!
Kind of like back in the days of Al Capone,Lucky Lucianno, and Carlo Gambino. I believe the Feds called It "EXTORTION" !!!!!!!!!

I don''t know about you Bob, but if these A**Holes(AA) EVER file for BK-11, after we took it in the shorts(concessions), I''m gonna'' have to upgrade my PC., because I''ll be posting 24/7.

NH/BB''s


----------------​

NH/BB''s: Who is your union?

 

[NewHampshire Black Bears]

----------------
On 5/9/2003 5:24:50 AM Buck wrote:

----------------
On 5/8/2003 10:35:15 PM NewHampshire Black Bears wrote:

Bob Owens;
Good detective work. But, may I suggest you save your breath.
Why?
Because you and I, and others work with people(and It''s the "so called union members, that really hurt), that would have taken a "50% PAY CUT", and their "FIRST BORN CHILD", just so they could say that they still ''worked'' for AA. "B.F.D." !!!!!!!!!!!!!!!

When the reality of "their" YES vote starts(and it already has), to set in, coupled with info that you''ve uncovered, PLUS whatever else comes out, (AND IT WILL), then the "woe is me" posts will start popping up.

Then again, mabey these folks look at their YES vote, as a sort of "Pay Check Protection" !!!!!!!!!
Kind of like back in the days of Al Capone,Lucky Lucianno, and Carlo Gambino. I believe the Feds called It "EXTORTION" !!!!!!!!!

I don''t know about you Bob, but if these A**Holes(AA) EVER file for BK-11, after we took it in the shorts(concessions), I''m gonna'' have to upgrade my PC., because I''ll be posting 24/7.

NH/BB''s


----------------​

NH/BB''s:  Who is your union?

----------------​

Buck;
My union is (the weak sister TWU).
But I''m a bit confused, because I''m pretty sure you knew that. Buck, I''m not sure what your point is ?

NH/BB''s

 

[Connected1]

----------------
Is $957 million nothing?
----------------​

Book value means nothing. It is not the same as cash in the bank. It''s not even an accurate measure of what the company is worth - check our market cap for something closer.

----------------
What about the Charge for "Goodwill"?
----------------​

If you would like to write off some goodwill on your next tax return, try turning back time prior to 9/11 and purchasing some route authorities. There''s just something about terror attacks that makes their values drop like pets.com.

----------------
Why is AA still buying new planes?
----------------​

There is a difference between buying and taking delivery. The planes that we are receiving went firm a long time ago. I''m sure that you are happy that we declined as many options as we could.

----------------
Why are our lease rates going up?
----------------​

I''ll take a wild guess - our credit rating is now junk status?

----------------
Why are they still building that massive terminal at JFK?
----------------​

Good question. I am not familiar with the specifics on the financing, but if it is a muni bond, then it probably has debt covenants that limit what the money can be spent on (i.e. new terminal construction as opposed to financing our operating losses). Once the bond funds have been raised, you''re going to have to pay it back anyway, so you might as well use it.

 

[Oliver Stone''s Apprentice]

Why are our lease rates going up?

Because we sold a bunch of aircraft that we had originally paid cash for, primarily the B777 fleet. We sold several to banks to free up cash, and they''re leasing them back to us at a profit.

Why are they still building that massive terminal at JFK?

The terminal won''t be completed to the extent that it was going to be. For example, with Eagle being pretty much gone from JFK, there won''t be a need to complete as many RJ gates as originally spec''d out.

 

[buzzkill]

----------------
On 5/9/2003 11:53:47 AM WXGuesser wrote:


Isn''t the "goodwill" writeoff used to reflect the declining value of the company''s assets? I.e., the fact that airplanes (for example) aren''t worth as much as they used to be (because of the glut of available aircraft on the market right now)?

For all of you who screamed loudest at the financial hijinks of people like Enron and WorldCom, this is the kind of things that those companies did *not* do.

Eolesen, please correct me if my understanding of this is incorrect: This goodwill writedown is lowering the on-paper value of the airline closer to what the sum of its parts are actually worth on the market.

TANSTAAFL


----------------​

I''m not an accountant, but I have taken a few courses and have the ability to use an Internet search engine to look things up. So, here''s my crack at Goodwill.

Goodwill comprises the complete set of unidentifiable intangible assets held by the reporting entity. For instance, if somebody were to purchase a company like Nike or Frito-Lay, they would probably get a bargain if all they had to pay for was the net assets of the company. This is because these companies have certain intangible assets like their brand recognition, patents, copyrights, distribution channels, etc. To reflect the value of intangible assets, accountants must estimate the value of the company''s Goodwill.

Page 62 of AMR''s 10K for 2002 says, "Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets†(SFAS 142). SFAS 142 requires the Company to test goodwill and indefinite-lived intangible assets (for AMR, route acquisition costs) for impairment rather than amortize them. During the first quarter of 2002, the Company completed its impairment analysis for route acquisition costs in accordance with SFAS 142. The analysis did not result in an impairment charge. During the third quarter of 2002, the Company completed its impairment analysis related to its $1.4 billion of goodwill and determined the Company’s entire goodwill balance was impaired. In arriving at this conclusion, the Company’s net book value was determined to be in excess of the Company’s fair value at January 1, 2002, using AMR as the reporting unit for purposes of the fair value determination. The Company determined its fair value as of January 1, 2002, using various valuation methods, ultimately using market capitalization as the primary indicator of fair value. As a result, the Company recorded a one-time, non-cash charge, effective January 1, 2002, of $988 million ($6.35 per share,
net of a tax benefit of $363 million) to write-off all of AMR’s goodwill. The tax benefit of $363 million differed from the amount computed at the statutory federal income tax rate due to a portion of AMR’s goodwill not being deductible for federal tax purposes. The charge to write-off all of AMR’s goodwill is nonoperational in nature and is reflected as a cumulative effect of accounting change in the consolidated statements of operations."

I know that''s a lot of accounting lingo, but it appears that everything is being done in accordance with accounting rules and the law.

 

[WXGuesser]

Isn''t the "goodwill" writeoff used to reflect the declining value of the company''s assets? I.e., the fact that airplanes (for example) aren''t worth as much as they used to be (because of the glut of available aircraft on the market right now)?

For all of you who screamed loudest at the financial hijinks of people like Enron and WorldCom, this is the kind of things that those companies did *not* do.

Eolesen, please correct me if my understanding of this is incorrect: This goodwill writedown is lowering the on-paper value of the airline closer to what the sum of its parts are actually worth on the market.

TANSTAAFL

 

[WXGuesser]

----------------
On 5/9/2003 12:00:57 PM Connected1 wrote:

When you write off goodwill, you are marking the value of an intangible asset to its market value. The intangible assets in question were route authorities. The airplane write-offs in 2001 for the F100s, SAABs, and ATRs were impairments of tangible assets - same concept, but technically not goodwill. We did have additional aircraft impairments in 2002 but, like in 2001, they were not included in the goodwill write-off.

----------------​

Ah! And thus my confusion ends. "Much Grass" to both you and buzzkill for your clarifications!!!!!!

TANSTAAFL -- (There Ain''t No Such Thing As As Free Lunch)

 

[Connected1]

When you write off goodwill, you are marking the value of an intangible asset to its market value. The intangible assets in question were route authorities. The airplane write-offs in 2001 for the F100s, SAABs, and ATRs were impairments of tangible assets - same concept, but technically not goodwill. We did have additional aircraft impairments in 2002 but, like in 2001, they were not included in the goodwill write-off.

 

[Oliver Stone''s Apprentice]

----------------
On 5/9/2003 1226 PM buzzkill wrote:

It appears that everything is being done in accordance with accounting rules and the law.

----------------​

You''re absolutely correct.

But that''s probably not enough to satisfy Bob or any of the other people around here who are simply looking to get their pound of flesh.

 

[Bob Owens]

----------------
On 5/9/2003 1:17:23 PM eolesen wrote:

----------------
On 5/9/2003 1226 PM buzzkill wrote:

It appears that everything is being done in accordance with accounting rules and the law.

----------------​

You''re absolutely correct.

But that''s probably not enough to satisfy Bob or any of the other people around here who are simply looking to get their pound of flesh.

----------------
​

And when the mechanics go out and document every single little defect they see, they too will be acting in accordance with the law.

When pilots fly to rule, they too will be acting in accordance with the law.

I dont want a pound of flesh, I want my money and benefits back.

 

[Bob Owens]

----------------
On 5/9/2003 12:00:57 PM Connected1 wrote:

When you write off goodwill, you are marking the value of an intangible asset to its market value. The intangible assets in question were route authorities. The airplane write-offs in 2001 for the F100s, SAABs, and ATRs were impairments of tangible assets - same concept, but technically not goodwill. We did have additional aircraft impairments in 2002 but, like in 2001, they were not included in the goodwill write-off.

----------------​

Intangible- incapable of being realized or defined.

What was that you said. "Book value means nothing" It meant $988 million to the IRS and inflated actual losses up to $3.5 Billion.
Tell me, when things get better will AA pay more tax when those intangible assetts increase in value?