Alaska Airlines and Horizon Air 2007 Annual Report Download - page 157

are effective for fiscal years beginning on or after
December 15, 2008. SFAS No. 141R will be
applied only to acquisitions subsequent to the
effective date and SFAS No. 160 will be applied
prospectively to all noncontrolling interests,
including any that arose before the effective
date. We do not expect these statements to
have a significant impact on our financial
position, results of operations, or cash flows.
LIQUIDITY AND CAPITAL RESOURCES
The table below presents the major indicators of financial condition and liquidity.
(In millions, except per-share and debt-to-capital amounts)
December 31,
2007
December 31,
2006 Change
Cash and marketable securities ....................................... $ 822.8 $1,013.9 $(191.1)
Long-term debt, net of current portion ................................... 1,124.6 1,031.7 92.9
Shareholders’ equity ................................................ 1,024.0 885.5 138.5
Book value per common share outstanding ............................... $ 26.91 $ 21.97 $ 4.94
Long-term debt-to-capital ............................................. 52%:48% 54%:46% (2) pts
Long-term debt-to-capital assuming aircraft operating leases are capitalized at
seven times annualized rent ........................................ 70%:30% 72%:28% (2) pts
During the year ended December 31, 2007, our
cash and marketable securities declined $191.1
million to $822.8 million. The following
discussion summarizes the primary drivers of the
decrease and our expectation of future cash
requirements.
ANALYSIS OF OUR CASH FLOWS
Cash Provided by Operating Activities
During 2007, net cash provided by operating
activities was $482.0 million, compared to
$449.8 million during 2006. The increase
resulted from higher revenues and lower cash
contributions to our defined-benefit pension
plans in 2007, offset by the $47.7 million
reduction in cash received from settled hedges,
and higher raw fuel costs and other non-fuel
operating expenses. We contributed $52.5
million to our defined-benefit pension plans in
2007 compared to $121.9 million in 2006. We
typically generate positive cash flows from
operations, but anticipate consuming
substantially all of that cash for capital
expenditures and debt payments in 2008 and
2009.
Cash Used in Investing Activities
Our investing activities are primarily made up of
capital expenditures associated with our fleet
transition programs and, to a lesser extent,
purchases and sales of marketable securities.
Cash used in investing activities was $601.8
million during 2007, compared to $533.0 million
in 2006. Our capital expenditures grew by
$152.3 million as a result of the purchase of 14
B737-800s and 13 Q400s, versus the purchase
of ten B737-800s, five leased MD-80s, two
Q400s and one CRJ-700 in 2006. This was
partially offset by proceeds of approximately $50
million from the sale of our MD-80s, which were
subsequently leased back. We currently expect
capital expenditures to be approximately $570
million (of which $490 million is expected to be
aircraft-related) during 2008 as we take delivery
of 16 new B737-800s and three new Q400s.
Capital expenditures are expected to decrease
significantly in 2009 and 2010 as we near the
end of our committed firm aircraft deliveries. We
do have a number of options for both B737-800
and Q400 aircraft available should we decide to
convert those into firm commitments. However, a
decision to exercise those options is highly
dependent on our ability to deploy those new
aircraft profitably and generate returns that
exceed our cost of capital.
Cash Provided by Financing Activities
We finance a large portion of our capital
spending with debt financing. Net cash provided
by financing activities was $93.4 million during
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ŠForm 10-K