Alaska Airlines and Horizon Air 2009 Annual Report Download - page 150

Because of the severe economic uncertainty in
the early part of 2009 and the volatility of fuel
prices in recent years, we intentionally increased
our balance of cash and marketable securities to
current levels. As the economic climate
stabilizes, we will likely seek to reduce our cash
and marketable securities to 25% to 30% of
revenues over the next 24 months, either
through debt repayment, further share
repurchases, or pension funding. We will
continue to focus on preserving a strong liquidity
position and evaluate our cash needs as
conditions change.
We believe that our current cash and marketable
securities balance of $1.2 billion combined with
future cash flows from operations and other
sources of liquidity will be sufficient to fund our
operations for at least the next 12 months and
would continue to be sufficient if we reduce our
cash balance as described above.
In our cash and marketable securities portfolio,
we invest only in U.S. government securities,
asset-backed obligations and corporate debt
securities. We do not invest in equities or
auction-rate securities. As of December 31,
2009, we had a $14.0 million net unrealized
gain on our $1.2 billion cash and marketable
securities balance.
Our overall investment strategy for our
marketable securities portfolio has a primary
goal of maintaining and securing its investment
principal. Our investment portfolio is managed by
reputable financial institutions and continually
reviewed to ensure that the investments are
aligned with our strategy.
The table below presents the major indicators of financial condition and liquidity.
(In millions, except per-share and debt-to-capital amounts)
December 31,
2009
December 31,
2008 Change
Cash and marketable securities ........................ $ 1,192.1 $ 1,077.4 $ 114.7
Cash and marketable securities as a percentage of last twelve
months revenue ................................... 35% 29% 6 pts
Long-term debt, net of current portion .................... 1,699.2 1,596.3 102.9
Shareholders’ equity ................................. 872.1 661.9 210.2
Long-term debt-to-capital assuming aircraft operating leases
are capitalized at seven times annualized rent ........... 76%:24% 81%:19% (5) pts
The following discussion summarizes the primary
drivers of the increase in our cash and
marketable securities balance and our
expectation of future cash requirements.
ANALYSIS OF OUR CASH FLOWS
Cash Provided by Operating Activities
During 2009, net cash provided by operating
activities was $305.3 million, compared to
$164.3 million during 2008. The $141.0 million
increase was primarily driven by the significant
decline in fuel costs compared to the prior year,
partially offset by lower revenues and a
supplementary $100 million contribution to our
pension plans in December 2009.
We typically generate positive cash flows from
operations, but historically have consumed
substantially all of that cash plus additional debt
proceeds for capital expenditures and debt
payments. In 2010, however, we anticipate much
lower capital expenditures than in the past few
years and may choose to use our operating cash
flow to pay down debt, provide more funding to
our pension plans, repurchase our common
stock, or a combination thereof.
Cash Used in Investing Activities
Our investing activities are primarily made up of
capital expenditures associated with our fleet
transitions and, to a lesser extent, purchases
and sales of marketable securities. Cash used in
investing activities was $657.4 million during
2009, compared to $581.3 million in 2008. Our
capital expenditures increased by $25.6 million
as a result of the purchase of ten B737-800s
and five Q400s in 2009, versus the purchase of
11 B737-800s and two Q400s in 2008.
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