Air Canada 2010 Annual Report Download - page 36

2010 Air Canada Annual Report
36
9.3 ADJUSTED NET DEBT
(Canadian dollars in millions) December 31, 2010 December 31, 2009 Change $

Total long-term debt and capital leases $ 3,952 $ 4,054 $ (102)
Current portion of long-term debt and capital leases 505 468 37
Total long-term debt and capital leases, including current portion 4,457 4,522 (65)
Less cash, cash equivalents and short-term investments (2,192) (1,407) (785)
Net debt $ 2,265 $ 3,115 $ (850)
Capitalized operating leases (1) 2,595 2,513 82
Adjusted net debt $ 4,860 $ 5,628 $ (768)
Non-controlling interest 169 201 (32)
Adjusted net debt and non-controlling interest  $ 5,029  $ 5,829 $ (800)
Shareholders’ equity $ 1,740 $ 1,446 $ 294
Adjusted net debt and non-controlling interest to adjusted net debt
and non-controlling interest plus equity ratio  74.3 %  80.1 % (5.8) pp
(1) Adjusted net debt is a non-GAAP measure used by Air Canada and may not be comparable to measures presented by other public companies. Air Canada 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 definition of capitalized operating leases is used by Air Canada and may not be comparable to similar measures
QSFsented by other public companies. Aircraft rent was $346 million in 2010, and $335 million in 2009. Aircraft rent expense includes aircraft rent associated with aircraft
subleased to third parties. The sublease revenue associated with these aircraft subleases is included in Other revenues on Air Canada’s Consolidated Statement of
Operations.
Total debt and capital leases amounted to $4,457 million at December 31, 2010, a decrease of $65 million from December
31, 2009. The decrease in long-term debt and capital leases from December 31, 2009 was mainly due to long-term debt and
capital lease repayments of $1,135 million and the favourable impact of a stronger Canadian dollar on Air Canada’s foreign
currency denominated debt (mainly U.S. dollars) and capital leases which accounted for a decrease of $160 million. These
decreases were largely offset by proceeds from borrowings of $1,175 million.
During 2010, the following key financing activities were completed:
t *OUIFGJSTURVBSUFSPG"JS$BOBEBFOUFSFEJOUPBSSBOHFNFOUTXJUIBOFXMFOEFSDPNQSJTFEPGBHSPVQPGFOUJUJFT
that are related to each other, to obtain a $100 million increase to its $600 million secured term credit facility
concluded in July 2009.
t 0O"VHVTU"JS$BOBEBDPNQMFUFEBQSJWBUFPGGFSJOHPGUXPTFSJFTPG TFOJPSTFDVSFEOPUFTDPOTJTUJOHPG
US$600 million senior secured first lien notes due 2015 (the “U.S. Dollar First Lien Notes”) and $300 million senior
secured first lien notes due 2015 (the “Canadian Dollar First Lien Notes” and, collectively with the U.S. Dollar First
Lien Notes, the “First Lien Notes”). On August 3, 2010, Air Canada also completed a private offering of US$200
million senior secured second lien notes due 2016 (the “Second Lien Notes” and, together with the First Lien Notes,
the “Notes”). Air Canada received net proceeds of $1,075 million after deduction of fees, expenses and discounts. Air
Canada used approximately $729 million of the net proceeds of the offerings to repay all of the outstanding debt
under the above-referenced secured term credit facility, including $29 million for early payment fees.
t 0O"VHVTU"JS$BOBEBDPODMVEFEBDSFEJUBHSFFNFOUXJUI(&+BQBO$PSQPSBUJPO1,"JSGJOBODF+BQBOi(&
Japan”) for a senior secured term loan facility in the amount of up to approximately US$171 million to refinance
amounts due in 2011 and 2012 related to 16 aircraft currently operated by Air Canada and leased from special
purpose leasing entities which are consolidated by Air Canada. As of this date, four of the 16 aircraft have been
refinanced in part using the proceeds of this loan facility.
The following table reflects Air Canada’s adjusted net debt balances and net debt to net debt plus equity ratio as at
December 31, 2010, and as at December 31, 2009.