Alaska Airlines and Horizon Air 2013 Annual Report Download - page 129

In addition, we continued to return capital to our
shareholders by repurchasing $159 million of our
common stock in 2013, and paid dividends
totaling $28 million. Finally, we made voluntary
contributions to our qualified defined-benefit
pension plans of $83 million in 2013, although
there were no funding requirements. We will
continue to focus on preserving a strong liquidity
position and evaluate our cash needs as
conditions change.
The overall strength of our balance sheet was
one of the contributing factors for Standard &
Poor's recent decision to upgrade our credit
rating from BB to BB+, with a stable outlook.
We believe that our current cash and marketable
securities balance combined with future cash
flows from operations and other sources of
liquidity will be sufficient to fund our operations
for the foreseeable future.
In our cash and marketable securities portfolio,
we invest only in securities that meet our primary
investment strategy of maintaining and securing
investment principal. Our investment portfolio is
managed by reputable firms that adhere to our
investment policy that sets forth investment
objectives, approved and prohibited investments,
and duration and credit quality guidelines. Our
policy and the portfolio managers are 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,
2013
December 31,
2012 Change
Cash and marketable securities ........................................ $ 1,330 $ 1,252 $ 78
Cash, marketable securities, and unused lines of credit as a percentage of trailing
twelve months revenue (a) .......................................... 31% 31% — pt
Long-term debt, net of current portion ................................... 754 871 (117)
Shareholders’ equity ................................................. 2,029 1,421 608
Long-term debt-to-capital ratio (b) ....................................... 35%:65% 48%:52% (13) pts
(a) Excludes Special mileage plan revenue item.
(b) Calculated using the present value of remaining aircraft lease payments.
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
Cash from operation increased approximately
$228 million due to an increase in revenues,
excluding Special mileage plan revenue item, of
approximately $300 million, an increase in cash
receipts related to our mileage plan program of
approximately $130 million due to growth in the
program and an increase in the rate paid per
mile, an approximately $60 million savings in
fuel hedges as we changed our program to
purchase calls out of the money and shortened
the tenor of our program, and approximately
$30 million less in pension contributions.
Partially offsetting these increases were
additional cash paid in taxes of approximately
$80 million, an increase in operating expenses
to support the growth in revenues of
approximately $115 million, an increase wages
and incentive pay of $65 million, and an
increase fuel costs of $25 million.
Cash provided by operating activities was
$753 million in 2012, compared to $696 million
in 2011. The $57 million increase was primarily
driven by $339 million in increased revenue,
offset by higher fuel of $161 million as well as
higher non-fuel operating costs to support
increased revenues and capacity. In addition,
cash received from the sale of miles under our
mileage plan program increased approximately
$30 million due a 5% increase in miles sold with
a 4% increase in rate. In 2012, we made
voluntary contributions to our qualified pension
plan of $110 million versus $133 million in the
prior year, and we paid cash taxes of $78 million
in 2012 compared to $8 million in 2011.
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ŠForm 10-K