American Airlines 2002 Annual Report Download - page 66

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5. Investments (Continued)
Short-term investments at December 31, 2002, by contractual maturity included (in millions):
Due in one year or less $ 998
Due between one year and three years 709
Due after three years 139
$ 1,846
All short-term investments are classified as available-for-sale and stated at fair value. Unrealized gains
and losses, net of deferred taxes, are reflected as an adjustment to stockholders’ equity.
The Company has restricted cash and short-term investments related primarily to collateral held to
support standby letters of credit backing floating rate tax-exempt bonds, projected workers’ compensation
obligations and various other obligations. As of December 31, 2002, standby letter of credit agreements related to
tax-exempt bonds were secured by restricted short-term investments of $347 million, projected workers’
compensation obligations were secured by restricted cash and short-term investments of $334 million, and various
other obligations were secured by restricted cash and short-term investments of $102 million. As of December 31,
2001, standby letter of credit agreements related to tax-exempt bonds were secured by restricted short-term
investments of $422 million, projected workers’ compensation obligations were secured by restricted cash and
short-term investments of $81 million, and various other obligations were secured by restricted cash and short-
term investments of $32 million.
In the first quarter of 2003, as a result of the Company’s declining financial condition, the Company has
made approximately $500 million in fuel prepayments, tax escrow deposits and credit card holdback deposits.
During 1999, the Company entered into an agreement with priceline.com Incorporated (priceline) whereby
ticket inventory provided by the Company may be sold through priceline’s e-commerce system. In conjunction
with this agreement, the Company received warrants to purchase approximately 5.5 million shares of priceline
common stock. In the second quarter of 2000, the Company sold these warrants for proceeds of approximately
$94 million, and recorded a gain of $57 million which is included in Miscellaneous – net on the accompanying
consolidated statements of operations.
During 2000, the Company recorded a gain of approximately $41 million from the recovery of start-up
expenses (previously written-off) from the Canadian Airlines International Limited services agreement entered into
during 1995 which is included in Miscellaneous – net on the accompanying consolidated statements of operations.
6. Commitments, Contingencies and Guarantees
As of December 31, 2002, the Company had commitments to acquire the following aircraft: two Boeing
777-200 ERs, nine Boeing 767-300ERs, 22 Embraer regional jets and 10 Bombardier CRJ-700s in 2003; an
aggregate of 74 Embraer regional jets and seven Bombardier CRJ-700s in 2004 through 2006; and an aggregate
of 47 Boeing 737-800s and nine Boeing 777-200ERs in 2006 through 2010. Future payments for all aircraft,
including the estimated amounts for price escalation, will approximate $1.0 billion in 2003, $753 million in 2004,
$694 million in 2005 and an aggregate of approximately $2.6 billion in 2006 through 2010. These commitments
and cash flows reflect agreements the Company entered into with Boeing in November 2002 to defer 34 of its 2003
through 2005 deliveries to 2007 and beyond. In addition to these deferrals, Boeing Capital Corporation has agreed
to provide backstop financing for all Boeing aircraft deliveries in 2003. In return, American has agreed to grant
Boeing a security interest in certain advance payments previously made and in certain rights under the aircraft
purchase agreement between American and Boeing. In addition, the Company has pre-arranged financing or
backstop financing for all of its 2003 Embraer and Bombardier aircraft deliveries and a portion of its post 2003
deliveries.
In addition to these commitments for aircraft, the Company expects to spend approximately $400 million in
2003 for modifications to aircraft, renovations of - and additions to - airport and off-airport facilities, and the
acquisition of various other equipment and assets.