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JETBLUE AIRWAYS CORPORATION-2014Annual Report 35
PART II
ITEM7Management’s Discussion and Analysis of Financial Condition and Results of Operations
We expect to meet our obligations as they become due through available
cash, investment securities and internally generated funds, supplemented
as necessary by financing activities, as they may be available to us. We
expect to generate positive working capital through our operations.
However, we cannot predict what the effect on our business might be from
the extremely competitive environment we are operating in or from events
beyond our control, such as volatile fuel prices, economic conditions,
weather-related disruptions, the spread of infectious diseases, the impact
of airline bankruptcies, restructurings or consolidations, U.S. military actions
or acts of terrorism. We believe the working capital available to us will be
sufficient to meet our cash requirements for at least the next 12 months.
Debt and Capital Leases
Our scheduled debt maturities are expected to increase over the next
five years, with a scheduled peak in 2016 of $464 million. As part of our
efforts to effectively manage our balance sheet and improve ROIC, we
expect to continue to actively manage our debt balances. Our approach
to debt management includes managing the mix of fixed vs. floating rate
debt, annual maturities of debt and the weighted average cost of debt.
We intend to continue to opportunistically pre-purchase outstanding debt
when market conditions and terms are favorable as well as when excess
liquidity is available. The proceeds from the sale of LiveTV were allocated to
debt reduction and share buybacks which are ROIC accretive. Additionally,
our unencumbered assets, including 39 aircraft and 33 engines, allow
some flexibility in managing our cost of debt and capital requirements.
In March 2014, we completed a private placement EETC offering of
$226 million in pass-through certificates that was secured by 14 of our
unencumbered Airbus A320 aircraft. This funding coincided with the
final scheduled principal payments of $188 million associated with our
March 2004 EETC Class G-2 certificates, which resulted in 13 Airbus
A320 aircraft becoming unencumbered. In June 2014, we used some of
the proceeds from the sale of LiveTV and prepaid $299 million of floating
rate outstanding principal secured by 14 Airbus A320 aircraft which are
now unencumbered.
During 2014, we entered into two Airbus A321 aircraft capital leases for
approximately $76 million. These capital leases are included in our total
debt and capital lease obligations and the aircraft are included in property
and equipment.
Free Cash Flow (Non-GAAP)
The table below reconciles cash provided by operations determined in
accordance with U.S. GAAP to Free Cash Flow, a non-GAAP measure.
Management believes that Free Cash Flow is a relevant metric in measuring
our financial strength and is useful in assessing our ability to fund future
capital commitments and other obligations. Investors should consider this
non-GAAP financial measure in addition to, and not as a substitute for, our
financial measures prepared in accordance with U.S. GAAP.
Reconciliation of Free Cash Flow (Non-GAAP)
(in millions)
Year Ended December 31,
2014 2013 2012 2011 2010
Net cash provided by operating activities $ 912 $ 758 $ 698 $ 614 $ 523
Capital expenditures(a) (806) (615) (542) (480) (249)
Predelivery deposits for flight equipment (127) (22) (283) (44) (50)
(933) (637) (825) (524) (299)
Free Cash Flow $ (21) $ 121 $ (127) $ 90 $ 224
(a) The capital expenditures in 2014 includes two capital leases for approximately $76 million which are classified as a non-cash financing activity in the consolidated statements
of cash flows.
Contractual Obligations
Our noncancelable contractual obligations at December 31, 2014 include:
Payments due in
(in millions)
Total 2015 2016 2017 2018 2019 Thereafter
Long-term debt and capital lease
obligations(1) $ 2,895 $ 375 $ 560 $ 300 $ 295 $ 285 $ 1,080
Lease commitments 1,495 235 170 140 135 115 700
Flight equipment obligations 6,675 610 545 595 520 935 3,470
Other obligations(2) 4,195 785 640 590 590 545 1,045
TOTAL $ 15,260 $ 2,005 $ 1,915 $ 1,625 $ 1,540 $ 1,880 $ 6,295
(1) Includes actual interest and estimated interest for floating-rate debt based on December 31, 2014 rates.
(2) Amounts include noncancelable commitments for the purchase of goods and services.
The interest rates are fixed for $1.7 billion of our debt and capital lease
obligations, with the remaining $0.5 billion having floating interest rates.
The floating interest rates adjust either quarterly or semi-annually based
on LIBOR. The weighted average maturity of all of our debt was 7 years
as of December 31, 2014.
As of December 31, 2014, we believe we were in compliance with all
of our covenants in relation to our debt and lease agreements and 53%
of our owned property and equipment were pledged as security under
various loan agreements.