Air Canada 2009 Annual Report Download - page 37

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2009 Management’s Discussion and Analysis
37
10.2 ADJUSTED NET DEBT
The table refl ects Air Canada’s adjusted net debt balances and net debt to net debt plus equity ratio as at December 31, 2009
and as at December 31, 2008.
(Canadian dollars in millions) December 31, 2009 December 31, 2008 Change $
Total long-term debt and capital leases $ 4,054 $ 4,691 $ (637)
Current portion of long-term debt and capital leases 468 663 (195)
Total long-term debt and capital leases including current portion 4,522 5,354 (832)
Non-controlling interest 201 190 11
Less cash, cash equivalents and short-term investments (1,407) (1,005) (402)
Net debt and non-controlling interest 3,316 4,539 (1,223)
Capitalized operating leases (1) 2,513 2,093 420
Adjusted net debt and non-controlling interest 5,829 6,632 (803)
Less pre-delivery (PDP) fi nancing included in long-term debt - (81) 81
Adjusted net debt and non-controlling interest,
excluding PDP fi nancing $ 5,829 $ 6,551 $ (722)
Shareholders’ equity $ 1,446 $ 762 $ 684
Adjusted net debt to net debt plus equity ratio,
excluding PDP fi nancing 80.1 % 89.6 % (9.5) pp
(1) Adjusted net debt is a non-GAAP measure used by the Corporation and may not be comparable to measures presented by other public companies. The Corporation
includes capitalized operating leases which is a measure commonly used in the industry to ascribe a value to obligations under operating leases. Common industry
practice is to multiply annualized aircraft rent expense by 7.5. This defi nition of capital is used by the Corporation and may not be comparable to similar measures
presented by other public companies. Aircraft rent was $335 million for the twelve months ended December 31, 2009 and $279 million for the twelve months ended
December 31, 2008. Aircraft rent expense includes aircraft rent associated with aircraft subleased to third parties. The sublease revenue associated with these aircraft
leases is included in Other revenues on Air Canada’s consolidated statement of operations.
At December 31, 2009, adjusted net debt and non-controlling interest, including capitalized operating leases and excluding
PDP fi nancing, decreased $722 million from December 31, 2008. The value of capitalized operating leases increased by
$420 million primarily as a result of an increase in aircraft rent expense, mainly due to the impact of a weaker average
Canadian dollar during 2009 versus 2008, and the sale and leaseback transactions of Boeing 777 aircraft completed in 2009.
This was more than offset by a decrease in net debt of $1,223 million. Net debt declined mainly due to the impact of a
stronger Canadian dollar as at December 31, 2009 versus the exchange rate as at December 31, 2008, which accounted
for $702 million, and the impact of certain transactions to increase liquidity completed in 2009. For additional information
related to these transactions, refer to section 6 of this MD&A.
The adjusted net debt to net debt plus equity ratio for Air Canada decreased to 80.1% at December 31, 2009 from 89.6%
at December 31, 2008.
Shareholders’ equity was favourably impacted by comprehensive income of $422 million recorded in 2009, which included
foreign exchange gains of $657 million, and net proceeds of $249 million from the equity offering completed in 2009, which
is further described in section 6 of this MD&A.