JetBlue Airlines 2012 Annual Report Download - page 53

JETBLUE AIRWAYS CORPORATION-2012 10K 49
PART II
ITEM 8Financial Statements and Supplementary Data
In December 2011, the FASB issued ASU 2011-11, amending the Balance
Sheet topic of the Codifi cation. This update enhances the disclosure
requirements regarding offsetting assets and liabilities. ASU 2011-11 requires
entities to disclose both gross information and net information about both
instruments and transactions eligible for offset in the statement of fi nancial
position and instruments and transactions subject to an agreement similar to
a master netting arrangement. These amendments are effective for annual
and interim reporting periods beginning on or after January1, 2013 and
should be applied retrospectively. We will evaluate any instruments and
transactions, including derivative instruments, which are eligible for offset
but we do not expect that the adoption of this standard will have a material
impact on our our consolidated fi nancial statements or notes thereto.
On January1, 2011, the September 2009 Emerging Issues Task Force
updates to the Revenue Recognition topic of the Codifi cation rules became
effective, which changed the accounting for certain revenue arrangements.
The new requirements change the allocation methods used in determining
how to account for multiple element arrangements and may result in
accounting for more deliverables and potentially change the amount of
revenue deferrals. Additionally, this new accounting treatment requires
enhanced disclosures in fi nancial statements. This new accounting
treatment will impact any new contracts entered into by LiveTV, as well as
any TrueBlue loyalty program or commercial partnership arrangements we
may enter into or materially modify. Since adoption of this new accounting
treatment, we have not entered into any material new or modifi ed contracts.
NOTE 2 Long-term Debt, Short-term Borrowings and Capital Lease Obligations
Long-term debt and capital lease obligations and the related weighted average interest rate at December31, 2012 and 2011 consisted of the following (in millions):
2012 2011
Secured Debt
Floating rate equipment notes, due through 2025
(1) $ 816 2.7% $ 743 2.8%
Floating rate enhanced equipment notes (2)(3)
Class G-1, due 2013, 2014 and 2016 173 3.1% 202 3.1%
Class G-2, due 2014 and 2016 373 2.6% 373 2.5%
Class B-1, due 2014 49 6.5% 49 6.1%
Fixed rate equipment notes, due through 2026 960 6.3% 1,192 6.3%
Fixed rate special facility bonds, due through 2036
(4) 82 6.0% 83 6.0%
Unsecured Debt
6.75% convertible debentures due in 2039
(5) 162 162
5.5% convertible debentures due in 2038
(6) 123 123
Capital Leases
(7) 113 3.9% 121 3.9%
Total debt and capital lease obligations 2,851 3,048
Less: Current maturities (394) (198)
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS $ 2,457 $ 2,850
(1) Interest rates adjust quarterly or semi-annually based on the London Interbank Offered Rate, or LIBOR, plus a margin.
(2) In November 2006, we completed a public offering of $124 million of pass-through certificates to finance certain of our owned aircraft spare parts. Separate trusts were established for each
class of these certificates. In November 2011, we redeemed $3 million of class G-1 certificates. The remaining principal amount of the Class G-1 and Class B-1 certificates is scheduled to
be paid in a lump sum on the applicable maturity date. In April 2009, we entered into interest rate swap agreements that have effectively fixed the interest rate increases for the remaining
term of half of the Class G-1 certificates and all of the Class B-1 certificates for the November 2006 offering. The swapped portion of the Class G-1 and Class B-1 certificates had a balance
of $37 million and $49 million, respectively, at December31, 2012, and the effective interest rates are included in the above table. The interest rate for the remaining $34 million of the
Class G-1 certificates is based on three month LIBOR plus a margin. Interest is payable quarterly.
(3) In November 2004 and March 2004, we completed public offerings of $498 million and $431 million, respectively, of pass-through certificates to finance the purchase of 28 new Airbus
A320 aircraft delivered through 2005. Separate trusts were established for each class of these certificates. Quarterly principal payments are required on the Class G-1 certificates. The entire
principal amount of the Class G-2 certificates is scheduled to be paid in a lump sum on the applicable maturity dates. In February 2008, we entered into interest rate swap agreements that
have effectively fixed the interest rate for the remaining term of the Class G-1 certificates for the November 2004 offering. These certificates had a balance of $76 million at December31,
2012 and an effective interest rate of 4.5%. In February 2009, we entered into interest rate swap agreements that have effectively fixed the interest rate for the remaining term of the Class
G-2 certificates for the November 2004 offering. These certificates had a balance of $185 million at December31, 2012 and the effective interest rate is included in the above table. The
interest rate for all other certificates is based on three month LIBOR plus a margin. Interest is payable quarterly.
(4) In December 2006, the New York City Industrial Development Agency issued special facility revenue bonds for JFK and, in November 2005, the Greater Orlando Aviation Authority issued
special purpose airport facilities revenue bonds, in each case for reimbursement to us for certain airport facility construction and other costs. We have recorded the principal amount of these
bonds, net of discounts, as long-term debt on our consolidated balance sheets because we have issued a guarantee of the debt payments on the bonds. This fixed rate debt is secured by
leasehold mortgages of our airport facilities.
(5) On June9, 2009, we completed a public offering of $115 million aggregate principal amount of 6.75% Series A convertible debentures due 2039, or the Series A 6.75% Debentures, and
$86 million aggregate principal amount of 6.75% Series B convertible debentures due 2039, or the Series B 6.75% Debentures, and collectively with the Series A 6.75% Debentures, the
6.75% Debentures. The 6.75% Debentures are general obligations and rank equal in right of payment with all of our existing and future senior unsecured debt, effectively junior in right of
payment to our existing and future secured debt, including our secured equipment debentures, to the extent of the value of the assets securing such debt, and senior in right of payment to
any subordinated debt. In addition, the 6.75% Debentures are structurally subordinated to all existing and future liabilities of our subsidiaries. The net proceeds were approximately $197
million after deducting underwriting fees and other transaction related expenses. Interest on the 6.75% Debentures is payable semi-annually on April15 and October15. The first interest
payment on the 6.75% Debentures was paid October15, 2009.
Holders of either the Series A or Series B 6.75% Debentures may convert them into shares of our common stock at any time at a conversion rate of 204.6036 shares per $1,000 principal
amount of the 6.75% Debentures. The conversion rates are subject to adjustment should we declare common stock dividends or effect any common stock splits or similar transactions.
If the holders convert the 6.75% Debentures in connection with a fundamental change that occurs prior to October15, 2014 for the Series A 6.75% Debentures or October15, 2016 for
the Series B 6.75% Debentures, the applicable conversion rate may be increased depending on our then current common stock price. The maximum number of shares into which all of
the 6.75% Debentures are convertible, including pursuant to this make-whole fundamental change provision, is 235.2941 shares per $1,000 principal amount of the 6.75% Debentures
outstanding, as adjusted, or 38.1 million shares as of December 31, 2012.
We may redeem any of the 6.75% Debentures for cash at a redemption price of 100% of their principal amount, plus accrued and unpaid interest at any time on or after October15, 2014
for the Series A 6.75% Debentures and October15, 2016 for the Series B 6.75% Debentures. Holders may require us to repurchase the 6.75% Debentures for cash at a repurchase price
equal to 100% of their principal amount plus accrued and unpaid interest, if any, on October15, 2014, 2019, 2024, 2029 and 2034 for the Series A 6.75% Debentures and October15,
2016, 2021, 2026, 2031 and 2036 for the Series B 6.75% Debentures; or at any time prior to their maturity upon the occurrence of a certain designated event.