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Item 5. Market for Registrant’s Common Equity

2024-02-21 compared with 2023-02-22 · 24 added, 32 removed, 132 unchanged (30% of the section changed)

23 unchanged sentences

The remaining authority under our most recent $2.0 billion share repurchase program expired in December 2020, and in connection with our receipt of financial assistance under PSP1, PSP2 and PSP3, we agreed not to repurchase shares of AAG common stock through September 30, 2022, when this restriction expired.

No repurchases of AAG common stock were made in 2022 following the lapse of these restrictions.

No repurchases of AAG common stock were made in 2023 or 2022 following the lapse of these restrictions.

As of December 31, 2023, the Board of Directors of AAG had not authorized another share repurchase program.

1 unchanged sentence

See Part I, Item 1A.

Risk Factors – “ If we do decide to make repurchases of or pay dividends on our common stock, we cannot guarantee that we will continue to do so or that our capital deployment program will enhance long-term stockholder value.

Risk Factors – “ If we decide to make repurchases of or pay dividends on our common stock, we cannot guarantee that we will continue to do so or that such a capital deployment program will enhance long-term stockholder value.

Ownership Restrictions

1 unchanged sentence

Our Certificate of Incorporation and Bylaws further specify that it is the duty of each stockholder who is a non-citizen to register his, her or its equity securities on our foreign stock record and provide for remedies applicable to stockholders that exceed the voting and ownership caps described above.

In addition, to reduce the risk of a potential adverse effect on our ability to use our NOL carryforwards and certain other tax attributes for federal income tax purposes, and in connection with the expiration in December 2021 of certain transfer restrictions applicable to substantial shareholders contained in our Certificate of Incorporation, the Board of Directors of AAG adopted the Tax Benefits Preservation Plan in order to preserve our ability to use our NOLs and certain other tax attributes to reduce potential future income tax obligations.

The Tax Benefits Preservation Plan was subsequently ratified by our stockholders at the 2022 Annual Meeting of Stockholders of AAG.

The Tax Benefits Preservation Plan is designed to reduce the likelihood that we experience an "ownership change” for purposes of Section 382 by deterring certain acquisitions of AAG common stock.

The Tax Benefit Preservation Plan was subsequently ratified by our stockholders at the 2022 Annual Meeting of Stockholders of AAG.

The Tax Benefit Preservation Plan is designed to reduce the likelihood that we experience an "ownership change” for purposes of Section 382 by deterring certain acquisitions of AAG common stock.

There is no assurance, however, that the deterrent mechanism will be effective, and such acquisitions may still occur.

In addition, the Tax Benefits Preservation Plan may adversely affect the marketability of AAG common stock by discouraging existing or potential investors from acquiring AAG common stock or additional shares of AAG common stock, because any non-exempt third party that acquires 4.9% or more of the then-outstanding shares of AAG common stock would suffer substantial dilution of its ownership interest in AAG.

In addition, the Tax Benefit Preservation Plan may adversely affect the marketability of AAG common stock by discouraging existing or potential investors from acquiring AAG common stock or additional shares of AAG common stock, because any non-exempt third party that acquires 4.9% or more of the then-outstanding shares of AAG common stock would suffer substantial dilution of its ownership interest in AAG.

See Part I, Item 1A.

33 unchanged sentences

We are providing a reconciliation of reported non-GAAP financial measures to their comparable financial measures on a GAAP basis.

The following table presents the components of our total net special items and the reconciliation of pre-tax income (loss) and net income (loss) (GAAP measures) to pre-tax income (loss) excluding net special items and net income (loss) excluding net special items (non-GAAP measures).

The following table presents the components of our total net special items and the reconciliation of pre-tax income and net income (GAAP measures) to pre-tax income excluding net special items and net income excluding net special items (non-GAAP measures).

Management uses these non-GAAP financial measures to evaluate our current operating performance and to allow for period-to-period comparisons.

3 unchanged sentences

Components of Total Special Items, Net:

Labor contract expenses (2)

Severance expenses (3)

Fleet impairment (4)

Litigation reserve adjustments — 37

PSP Financial Assistance (3)

Severance expenses (4)

Mark-to-market adjustments on bankruptcy obligations, net — (3)

Other operating special items, net (41) 7

Mainline operating special items, net 971 193

PSP Financial Assistance (3)

Regional pilot retention program (5)

Fleet impairment (2)

Severance expenses (4)

Other operating special items, net 5 —

Regional operating special items, net 8 5

Operating special items, net 979 198

Mark-to-market adjustments on equity and other investments, net (6)

Debt refinancing, extinguishment and other, net 3 29

Debt refinancing and extinguishment (5)

Mark-to-market adjustments on equity investments, net (6)

Nonoperating special items, net 362 74

2 unchanged sentences

Total special items, net $ 1,341 $ 263

Reconciliation of Pre-Tax Income (Loss) Excluding Net Special Items:

Pre-tax income (loss) – GAAP $ 186 $ (2,548)

Reconciliation of Pre-Tax Income Excluding Net Special Items:

Pre-tax income – GAAP $ 1,121 $ 186

Adjusted for:

Pre-tax special items, net 1,341 272

Pre-tax income (loss) excluding net special items $ 458 $ (6,943)

Reconciliation of Net Income (Loss) Excluding Net Special Items:

Net income (loss) – GAAP $ 127 $ (1,993)

Pre-tax income excluding net special items $ 2,462 $ 458

Reconciliation of Net Income Excluding Net Special Items:

Net income – GAAP $ 822 $ 127

Adjusted for:

2 unchanged sentences

Net tax effect of net special items (304) (62)

Net income (loss) excluding net special items $ 328 $ (5,395)

Net income excluding net special items $ 1,859 $ 328

(1) See Note 2 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information on net special items.

(2) Fleet impairment for 2022 included a non-cash impairment charge to write down the carrying value of our retired Airbus A330 fleet to the estimated fair value due to the market conditions for certain used aircraft.

(2) Labor contract expenses relate to one-time charges resulting from the ratification of a new collective bargaining agreement with our mainline pilots, including a one-time payment of $754 million as well as adjustments to other benefit-related items of $235 million.

(3) Severance expenses included costs associated with headcount reductions in certain corporate functions.

(4) Fleet impairment included a non-cash impairment charge to write down the carrying value of our retired Airbus A330 fleet to the estimated fair value due to the market conditions for certain used aircraft.

We retired our Airbus A330 fleet in 2020 as a result of the decline in demand for air travel due to the COVID-19 pandemic.

Fleet impairment for 2021 included a non-cash impairment charge to write down regional aircraft resulting from the retirement of the remaining Embraer 140 fleet earlier than planned.

(3) The PSP Financial Assistance represents recognition of a portion of the financial assistance received from the U.S.

Department of Treasury (Treasury) pursuant to the payroll support programs established by the U.S.

See Note 1(b) to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information.

(4) Severance expenses include salary and medical costs primarily associated with certain team members who opted into voluntary early retirement programs offered as a result of reductions to our operation due to the COVID-19 pandemic.

(5) Our regional pilot retention program provides for, among other things, a cash retention bonus paid in the fourth quarter of 2021 to eligible captains at our wholly-owned regional carriers included on the pilot seniority list as of September 1, 2021.

(6) Mark-to-market adjustments on equity and other investments, net principally included net unrealized gains and losses associated with certain equity investments.

(5) Debt refinancing and extinguishment costs in 2023 primarily included cash charges for premiums paid in connection with the early repayment of debt.

See Note 4 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information.

(6) Mark-to-market adjustments on equity investments, net included net unrealized gains and losses associated with certain equity investments.

See Note 8 to AAG’s Consolidated Financial Statements in Part II, Item 8A for further information related to our equity investments.

2 unchanged sentences

The price of fuel, over which we have no control, impacts the comparability of period-to-period financial performance.

The adjustment to exclude fuel and net special items allows management an additional tool to understand and analyze our non-fuel costs and core operating performance.

The adjustment to exclude net special items and fuel allows management an additional tool to understand and analyze our non-fuel costs and core operating performance.

Amounts may not recalculate due to rounding.

38 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity