Alaska Airlines and Horizon Air 2014 Annual Report Download - page 137

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,
2014
December 31,
2013 Change
Cash and marketable securities $ 1,217 $ 1,330 $ (113)
Cash, marketable securities, and unused lines of credit
as a percentage of trailing twelve months revenue(a) 26% 31% (5)pts
Long-term debt, net of current portion 686 754 (68)
Shareholders’ equity 2,127 2,029 98
Long-term debt-to-capital ratio(b) 31%:69% 35%:65% (4)pts
(a) Excludes Special mileage plan revenue item.
(b) Calculated using the present value of remaining aircraft lease payments for aircraft that are in our
operating fleet as of the balance sheet date.
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
In 2014, we generated over $1 billion in operating cash flows compared to $981 million in 2013. The
increase of $49 million is primarily due to an increase in earnings, an increase in our advance ticket
sales, and a decrease in pension contributions, partially offset by a $177 million increase in payments
for income taxes.
Cash provided by operating activities was $981 million in 2013, compared to $753 million in 2012. The
$228 million increase is primarily due to an increase in revenues, excluding Special mileage plan
revenue item, an increase in cash receipts related to our Mileage Plan™ program, decrease in pension
contributions, and cash savings in 2013 as we shortened the tenor of our fuel hedge program. Partially
offsetting these increases were additional cash paid in taxes, and an increase in operating expenses to
support the growth in revenues.
We typically generate positive cash flows from operations, and expect to use a portion to invest in
capital expenditures and increasing shareholder value by stock repurchases and dividends.
Cash Used in Investing Activities
Cash used in investing activities was $541 million during 2014, compared to $698 million in 2013. Our
capital expenditures were $694 million, or $128 million higher than in 2013. This is due to the delivery
of ten B737-900ERs, the completion of our B737 cabin improvement project, and the exercise of 16
B737 options, two Q400 options, and deposits for an incremental Q400. This compares to the delivery
of nine B737-900ERs and three Q400s in the prior year.
As of December 31, 2014, we had firm commitments for 73 B737 aircraft through 2022 with options to
acquire up to 48 additional 737 NextGen (NG) aircraft and MAX aircraft in 2017 through 2024. We also
have options to acquire five Q400 aircraft with deliveries from 2018 to 2019. The options for all fleet
types give us the flexibility, but not the obligation, to grow the fleet assuming profitability and return on
invested capital targets can be met.
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ŠForm 10-K