Frontier Airlines 2007 Annual Report Download - page 59

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141R). SFAS 141R
establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes
disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is
effective for fiscal years beginning after December 15, 2008.
In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements—an
amendment of Accounting Research Bulletin No. 51 (SFAS 160). SFAS 160 establishes accounting and reporting standards for
ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the
parent and to the non-controlling interest, changes in a parent's ownership interest, and the valuation of retained non-controlling equity
investments when a subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and
distinguish between the interests of the parent and the interests of the non-controlling owners. SFAS 160 is effective for fiscal years
beginning after December 15, 2008.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have been and are subject to market risks, including commodity price risk (such as, to a limited extent, aircraft fuel
prices) and interest rate risk.
Interest Rates
Our earnings can be affected by changes in interest rates due to the amounts of variable rate debt and the amount of cash and
securities held. The interest rate applicable to variable rate debt may rise and increase the amount of interest expense. At December
31, 2007 and December 31, 2006 all of our long-term debt was fixed rate debt. We anticipate that additional debt will be at fixed rates.
However, we believe we could fund any interest rate increases on additional variable rate long-term debt with the increased amounts
of interest income.
We currently intend to finance the acquisition of aircraft through the manufacturer, third-party leases or long-term
borrowings. Changes in interest rates may impact the actual cost to us to acquire these aircraft. To the extent we place these aircraft in
service under our code-share agreements our reimbursement rates may not be adjusted higher or lower to reflect any changes in our
aircraft rental rates.
Beginning in April 2004, in anticipation of financing the purchase of regional jet aircraft on firm order with the manufacturer,
we entered into fourteen treasury lock agreements with notional amounts totaling $373.5 million and a weighted average interest rate
of 4.47% with expiration dates through June 2005. Management designated the treasury lock agreements as cash flow hedges of
forecasted transactions. The treasury lock agreements were settled at each respective settlement date, which were the purchase dates of
the respective aircraft. We settled all of the agreements during 2004 and 2005 and the net amount paid was $7.5 million. Amounts
paid or received on the settlement date are reclassified to interest expense over the term of the respective aircraft debt. During 2007
and 2006, we reclassified $0.8 million and $0.3 million to interest expense, respectively. The Company expects to reclassify $0.7
million to interest expense for the year ended December 31, 2008.
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Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 21, 2008 Powered by Morningstar® Document Research℠