Frontier Airlines 2006 Annual Report Download - page 66

Interest expense increased 123.3% or $35.1 million, to $63.5 million in 2005 from $28.5 million in 2004 primarily due to
interest on debt related to the purchase of 31 additional 70-seat aircraft in 2005 and the full year effect of 24 regional jet aircraft
purchased in 2004. The weighted average interest rate increased to 5.6% in 2005 from 5.0% in 2004. The unit cost increased to 1.0¢ in
2005 compared to 0.6¢ in 2004.
We incurred income tax expense of $39.5 million during 2005, compared to $24.5 million in 2004. The effective tax rates for
2005 and 2004 were 39.5% and 38.7%, respectively, which were higher than the statutory rate due to state income taxes and
non-deductible meals and entertainment expense, primarily for our flight crews.
Liquidity and Capital Resources
Prior to June 2004, we had used internally generated funds and third-party financing to meet our working capital and capital
expenditure requirements. In June 2004, we completed our initial public common stock offering, which provided approximately
$58.2 million, net of offering expenses and before the repayment of debt. In addition, we completed follow-on offerings in February
and July 2005, which provided approximately $186.8 million of proceeds, net of offering expenses. As a result of our code-share
agreements with US Airways, Continental and Frontier, which require us to significantly increase our fleet of regional jets, we will
significantly increase our cash requirements for debt service and lease payments.
As of December 31, 2006, we had $195.5 million in cash and $14.0 million available under our revolving credit facility. At
December 31, 2006, we had working capital surplus of $60.1 million.
Chautauqua’s debt agreements with the bank were amended during 2006 to a Republic Airways Holdings Inc. consolidated
agreement. The Company has a credit facility with Bank of America Business Capital which provides for a $25.0 million revolving
credit facility. The revolving credit facility allows the Company to borrow up to 50% of the lower of net book value or appraised
orderly liquidation value of spare rotable parts and up to 20% of the lower of net book value or appraised orderly liquidation value of
spare non-rotable parts for our regional jet fleet. The revolving credit facility is collateralized by all of the Company’s assets,
excluding the owned aircraft and engines. Borrowings under the credit facility bear interest at a rate equal to, at the Company’s option,
LIBOR plus spreads ranging from 2.5% to 2.75% or the bank's base rate (which is generally equivalent to the prime rate) plus spreads
ranging from 0.50% to 0.75%. The Company pays an annual commitment fee on the unused portion of the revolving credit facility in
an amount equal to 0.375% of the unused amounts. The credit facility limits the Company’s ability to incur indebtedness or create or
incur liens on our assets. In addition, the credit facility requires the Company to maintain a specified fixed charge coverage ratio and a
debt to earnings leverage ratio. The Company was in compliance with both ratios at December 31, 2006. This credit facility expires
May 31, 2007.
At December 31, 2006, the Company had $11.0 million of outstanding letters of credit.
During 2006, the Company acquired 11 aircraft through debt financing totaling $194.7 million. The debt was obtained from
banks and the aircraft manufacturer for twelve to fifteen year terms at interest rates ranging from 4.75% to 7.523%. In addition, during
2006, the Company acquired five previously leased ERJ-145 aircraft from the lessors. Debt was obtained for $40.5 million from a
third-party lender for a term of ten years at interest rates between 8.46% and 8.49%.
As of December 31, 2006, we leased nine spare regional jet engines from General Electric Capital Aviation Services,
five spare regional jet engines from RRPF Engine Leasing (US) LLC and four regional jet engines from Miyabi Engine Leasing.
Net cash from operating activities was $116.8 million, $170.9 million and $229.1 million for the years ended December 31,
2004, 2005 and 2006, respectively. The increase from operating activities is primarily due to the continued growth of our business. For
2006, net cash from operating activities is primarily net income of $79.5 million, depreciation and amortization of $92.2 million, the
change in deferred income taxes of $51.4 million, the increase in accrued liabilities of $16.8 million partially offset by decreases of
$11.4 million in inventories. For 2005, net cash from operating activities is primarily net income of $60.7 million, depreciation and
amortization of $68.0 million, the change in deferred income taxes of $37.6 million and the increase in accrued liabilities of
$29.0 million. For 2004, net cash from operating activities is primarily net income of $38.9 million, depreciation and amortization of
$37.1 million, the change in deferred income taxes of $24.0 million and the increase in accounts payable and other current liabilities of
$13.3 million.
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 15, 2007 Powered by Morningstar® Document Research℠