ExpressJet Merger

12 Months Ended

Dec. 31, 2011

ExpressJet Merger

ExpressJet Merger

(2) ExpressJet Merger

        On November 12, 2010, the Company acquired ExpressJet Delaware through the merger of ExpressJet Holdings, Inc., the sole shareholder of ExpressJet Delaware ("ExpressJet Holdings"), with a wholly-owned subsidiary of Atlantic Southeast (the "ExpressJet Merger"). As a result of the ExpressJet Merger, each issued and outstanding share of ExpressJet Holdings common stock (other than shares owned by ExpressJet Holdings as treasury stock or shares owned by the Company or any of its subsidiaries) was converted into the right to receive $6.75 per share in cash, payable to the holder thereof, without interest. Based on the number of outstanding shares of ExpressJet Holdings common stock as of the effective time of the ExpressJet Merger, the aggregate value of the Merger consideration was $131.6 million. After taking in effect the number of shares acquired by the Company and its subsidiaries prior to the effective time, the aggregate value of the ExpressJet Merger consideration was $136.5 million.

        In connection with the ExpressJet Merger, ExpressJet Delaware and Continental entered into the Continental CPA, whereby ExpressJet Delaware (now ExpressJet) agreed to provide regional airline services in the Continental flight system. The Continental CPA became effective on November 12, 2010.

        The Company accounted for the ExpressJet Merger in accordance with FASB ASC Topic 805, Business Combinations, whereby the tangible assets acquired and liabilities assumed from ExpressJet Holdings are recorded based on their estimated fair values as of the closing date. The revenues of ExpressJet Delaware represented 4% of the Company's total revenues for the year ended December 31, 2010. The following table reflects the aggregate consideration and estimated fair values of the tangible assets acquired and liabilities assumed (including the attribution of ExpressJet Holdings liabilities to the purchase price, since those liabilities remained the obligation of ExpressJet Holdings post-closing) based on a preliminary valuation performed by a third party valuation advisor (in thousands):

Current assets, net	$	133,397
Property, plant and equipment		128,744
Other non-current assets		35,061
Current liabilities		(141,974	)
Long-term liabilities		(3,173	)
Purchase accounting gain		(15,586	)
Total consideration	$	136,469
Less cash acquired		(82,452	)
Net cash paid	$	54,017

        As part of the ExpressJet Merger, the Company recorded a purchase accounting gain of $15.6 million during the year ended December 31 2010. This amount represents the difference between the consideration paid and the net fair value of ExpressJet Holdings' assets acquired and liabilities assumed. The net fair value of the assets and liabilities acquired in the ExpressJet Merger was more than the consideration paid. In connection with the preparation of the Company's 2010 tax return, the Company's management identified an adjustment to the ExpressJet Merger that resulted in an increase to the Company's acquired deferred tax liabilities of $5.7 million during the year ended December 31, 2011. The adjustment is reflected on the consolidated statement of operations under the caption "Purchase accounting gain (adjustment)." The Company has determined that the adjustment to the purchase accounting gain is not material to either the prior or current period financial statements

        The following unaudited pro forma combined results of operations give effect to the ExpressJet Merger as if it had occurred at the beginning of the periods presented. The unaudited pro forma combined results of operations do not purport to represent the Company's consolidated results of operations had the ExpressJet Merger occurred on the dates assumed, nor are these results necessarily indicative of the Company's future consolidated results of operations. The Company expects to realize benefits from integrating the operations of Atlantic Southeast and ExpressJet, as discussed above, and to incur certain one-time cash costs. The unaudited pro forma combined results of operations do not reflect these benefits or costs.

	Years ended December 31,
	2010		2009
Revenue	$	3,476,415	$	3,301,872
Net Income	$	59,264	$	87,125
Basic earnings per share	$	1.07	$	1.56
Diluted earnings per share	$	1.05	$	1.53