Air Canada 2006 Annual Report Download - page 33

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As described in Note 1 to Air Canada’s combined consolidated financial statements, inter-company accounts
between ACE and Air Canada were settled at the time of the Air Canada IPO which resulted in an increase to cash
and cash equivalents of $170 million, a reduction to deposits and other assets of $269 million (consisting of an
advance of $186 million and a note receivable on the transfer of the Jazz investment of $83 million), a reduction to
accounts receivable of $41 million and a reduction of long-term debt of $140 million. These cash flows are included
in the applicable section of the cash flows, as described further below.
Cash Flows from Operating Activities
In Quarter 4, cash flows used from operations were $159 million, a deterioration of $111 million over Quarter 4
2005, primarily as a result of unfavourable variances in working capital items affecting cash, as well as an increase
in pension plan funding of $72 million over Quarter 4 2005. The variances in working capital items relate mainly to
timing differences in the settlement of amounts related to normal operating activities.
The Jazz segment delivered cash flows from operations of $33 million in Quarter 4 2006, which was generated in
large part by Jazz's positive operating results under the Jazz CPA with Air Canada offset by cash costs incurred.
Cash Flows from Financing Activities
Cash flows from financing activities included net proceeds of $187 million, a transfer of Air Canada’s investment to
ACE of $756 million ($673 million related to the transfer of ACTS to ACE and $83 million relating to the settlement
of a note receivable from ACE on the transfer of Air Canada’s investment in Jazz) and a settlement of notes payable
to ACE of $140 million, all of which were in conjunction with the Air Canada IPO.
Aircraft-related borrowings for the Air Canada Services segment amounted to $76 million in Quarter 4 2006 and
related mainly to the delivery of three Embraer aircraft in Quarter 4 2006. Scheduled and other debt and capital
lease payments in Quarter 4 2006 amounted to $71 million.
Cash used for financing activities for the Jazz segment amounted to $15 million in Quarter 4 2006 and related to
distributions paid to non-controlling interest.
Cash Flows used for Investing Activities
For Quarter 4 2006, additions to capital assets totaled $206 million for the Air Canada Services segment. These
additions included $89 million related to three Embraer aircraft and $50 million to the aircraft interior refurbishment
program and to the installation of an in-flight entertainment system on Jazz Bombardier CRJ-705 aircraft. Other
additions to capital assets related to inventory and spare engines, systems development projects as well as ground
equipment and facilities. In addition, Air Canada Services received $186 million from ACE related to the settlement
of notes receivable in connection with the Air Canada IPO.
Cash used for investing activities for the Jazz segment amounted to $7 million in Quarter 4 2006, primarily related to
aircraft improvements and to the purchase of two Dash 8-300 aircraft.
33
Management's Discussion and Analysis of Results and Financial Condition