JetBlue Airlines 2014 Annual Report Download - page 40

JETBLUE AIRWAYS CORPORATION-2014Annual Report34
PART II
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
During 2012, capital expenditures related to our purchase of flight equipment
included $344 million for seven new Airbus A320 aircraft, four new
EMBRAER 190 aircraft and five spare engines. It also included $283million
for flight equipment deposits, including a $200 million prepayment in
exchange for favorable pricing terms, and $32 million for spare part
purchases. Capital expenditures for other property and equipment, including
ground equipment purchases, facilities improvements and LiveTV in-flight
entertainment equipment inventory were $166 million, which included the
final $32 million for the 16 slots we purchased at LaGuardia and Reagan
National in 2011 and $17 million for T5i, which was paid for using cash
from operations. The receipt of $46 million in proceeds from the sale of
two EMBRAER 190 aircraft and six spare engines is included in investing
activities. Investing activities also include the net purchase of $104 million
in investment securities.
We currently anticipate 2015 capital expenditures to be between $810million
and $860 million, including approximately $660 million for aircraft and
predelivery deposits. The remaining capital expenditures of approximately
$150 million to $200 million relate to non-aircraft projects such as the
customer technology refresh, the expansion of our facilities at Boston
and updates to our IT infrastructure.
Financing Activities
Financing activities during 2014 consisted of the scheduled repayment of
$394 million relating to debt and capital lease obligations and $308 million
of debt prepayment. We issued $342 million in fixed rate equipment notes
secured by 18 aircraft, acquired $82 million in treasury shares, including
$73 million related to our share buyback program and $9 million in shares
withheld for tax purposes upon vesting of RSUs. We repaid $14 million in
principal related to our construction obligation for T5. We issued $41million
in common stock mainly due to stock options being exercised as our
stock price continued to increase in 2014. In the future we may issue, in
one or more offerings, debt securities, pass-through certificates, common
stock, preferred stock and/or other securities.
Financing activities during 2013 consisted of scheduled maturities of
$392million of debt and capital lease obligations. We issued $350 million in
fixed rate equipment notes secured by 12 aircraft and prepaid $94 million
in high-interest debt secured by four Airbus A320 aircraft and $119 million
relating to our 2006 Spare Parts EETC. It also included the refunding of our
Series 2005 GOAA bonds with proceeds of $43 million from the issuance
of new 2013 GOAA bonds, the repayment of $13 million in principal related
to our construction obligation for T5 and the acquisition of $8 million in
treasury shares primarily related to our share repurchase program and
the withholding of taxes upon the vesting of RSUs.
Financing activities during 2012 consisted of scheduled maturities of
$198 million of debt and capital lease obligations, the pre-payment of
$185 million in high-cost debt secured by seven Airbus A320 aircraft
and the repayment of $35 million of debt related to two EMBRAER
190 aircraft which we sold in 2012. It also included the proceeds of
$215million in non-public floating rate aircraft-related financing secured
by four Airbus A320 aircraft and four EMBRAER 190 aircraft and the
net repayment of $88 million under our available lines of credit. We
additionally repaid $12 million in principal related to our construction
obligation for T5 and $26 million in treasury shares primarily related to
our share repurchase program and the withholding of taxes upon the
vesting of restricted stock units.
In November 2012, we filed an automatic shelf registration statement with
the SEC. Under this universal shelf registration statement, we have the
capacity to offer and sell from time to time debt securities, pass-through
certificates, common stock, preferred stock and/or other securities. The
net proceeds of any securities we sell under this registration statement
may be used to fund working capital and capital expenditures, including
the purchase of aircraft and construction of facilities on or near airports.
Through to December 31, 2014, we had not issued any securities under
this registration statement and at this time we have no plans to sell
any such securities under this registration statement. We may utilize
this universal shelf registration statement in the future to raise capital
to fund the continued development of our products and services, the
commercialization of our products and services or for other general
corporate purposes.
None of our lenders or lessors are affiliated with us.
Capital Resources
We have been able to generate sufficient funds from operations to meet
our working capital requirements and we have historically financed our
aircraft through either secured debt or lease financing. As of December
31, 2014, we operated a fleet of 203 aircraft which included five Airbus
A321 aircraft and 34 Airbus A320 aircraft that were unencumbered. Of
the remaining aircraft, 60 were financed under operating leases, six were
financed under capital leases and 98 were financed by private and public
secured debt. Additionally we have 33 unencumbered spare engines.
Approximately 53% of our property and equipment is pledged as security
under various loan arrangements.
Dependent on market conditions, we anticipate paying cash for the 12
Airbus A321 aircraft scheduled for delivery in 2015. To the extent we cannot
secure financing on terms we deem attractive, we may be required to pay
in cash, further modify our aircraft acquisition plans or incur higher than
anticipated financing costs. Although we believe debt and/or lease financing
should be available to us if needed, we cannot give assurance we will be
able to secure financing on terms attractive to us, if at all.
Working Capital
We had a working capital deficit of $736 million as of December 31,
2014 compared to a deficit of $818 million as of December 31, 2013
and a deficit of $508 million as of December 31, 2012. Working capital
deficits can be customary in the airline industry since air traffic liability
is classified as a current liability. Our working capital deficit decreased
$82 million in 2014 mainly due to several factors including a decrease in
the balances of current debt maturities as well as an overall increase in
our cash balances. These were slightly offset by an increase in air traffic
liability. Also contributing to our working capital deficit as of December
31, 2014 is $60 million in marketable investment securities classified
as long-term assets, including $48 million related to a deposit made to
lower the interest rate on the debt secured by two aircraft. These funds
on deposit are readily available to us; however, if we were to draw upon
this deposit, the interest rates on the debt would revert to the higher
rates in effect prior to the re-financing.
In 2012, we entered into a revolving line of credit with Morgan Stanley for
up to $100 million which was subsequently increased to $200 million in
December 2012. This line of credit is secured by a portion of our investment
securities held by Morgan Stanley and the borrowing amount may vary
accordingly. This line of credit bears interest at a floating rate of interest
based upon the London Interbank Offered Rate, or LIBOR, plus a margin.
During 2013, we borrowed $190 million on this line of credit, which was
fully repaid, leaving the line undrawn as of December 31, 2013. During
2014, we did not borrow on this facility and the line was undrawn as of
December 31, 2014.
In April 2013, we entered into a Credit and Guaranty Agreement which
consisted of a revolving credit up to $350 million and letter of credit facility
with Citibank, N.A. as the administrative agent. In November 2014, we
increased the Credit Facility to $400 million. Borrowing under the Credit
Facility bears interest at a variable rate equal to LIBOR, plus a margin.
The Credit Facility is scheduled to terminate in 2018. The Credit Facility is
secured by take-off and landing slots at JFK, Newark, LaGuardia, Reagan
National and certain other assets. The Credit Facility includes covenants
that require us to maintain certain minimum balances in unrestricted
cash, cash equivalents, and unused commitments available under all
revolving credit facilities. In addition, the covenants restrict our ability to
incur additional indebtedness, issue preferred stock or pay dividends.
During 2014, we did not borrow on this facility and the line was undrawn
as of December 31, 2014.