JetBlue Airlines 2013 Annual Report Download - page 55

JETBLUE AIRWAYS CORPORATION-2013Annual Report 49
PART II
ITEM 8Financial Statements and Supplementary Data
consolidated financial statements is described below. There are also several
new proposals under development, including proposals related to leases,
revenue recognition and financial instruments. If and when enacted these
proposals may have a significant impact on our financial statements.
In February 2013, the FASB issued ASU 2013-02, amending the
Comprehensive Income topic of the Codification. This update amends
the requirement to present either on the face of the statement of operations
or in the notes, the effects of significant net income line items reclassified
out of accumulated other comprehensive income or loss, but only if the
amount reclassified is required under U.S. GAAP to be reclassified to net
income in its entirety in the same reporting period. For amounts that are
not required to be reclassified in their entirety to net income, the Company
is required to cross-reference to other disclosures that provide additional
detail about those amounts. ASU 2013-02 became effective for the annual
and interim periods beginning January 1, 2013. The required disclosures
are included in Note 15.
In July 2013, the FASB issued ASU 2013-10, amending the Derivatives
and Hedging topic of the Codification. This update permits the Federal
Funds Effective Swap rate (Overnight Index Swap rate, or OIS) to be
designated as a benchmark interest rate for hedging accounting purposes
for all new or redesigned hedging relationships as of the issue date of the
final guidance. Adoption of this standard did not have a material impact
on our consolidated financial statements or notes thereto.
In December 2011, the FASB issued ASU 2011-11, amending the Balance
Sheet topic of the Codification. 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 financial 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 evaluated our
instruments and transactions, including derivative instruments, which are
eligible for offset but the adoption of this standard did not have a material
impact on our our consolidated financial statements or notes thereto.
On January 1, 2011, the September 2009 Emerging Issues Task Force
updates to the Revenue Recognition topic of the Codification 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 financial 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 modified 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, 2013 and 2012 consisted of the following (in millions):
2013 2012
Secured Debt
Floating rate equipment notes, due through 2025(1) $ 634 2.8% $ 816 2.7%
Floating rate enhanced equipment notes (2)(3)
Class G-1, due 2013, 2014 and 2016 55 4.5% 173 3.1%
Class G-2, due 2014 and 2016 373 1.0% 373 2.6%
Class B-1, due 2014 — —% 49 6.5%
Fixed rate equipment notes, due through 2026 1,110 5.8% 960 6.3%
Fixed rate special facility bonds, due through 2036(4) 78 5.0% 82 6.0%
Unsecured Debt
6.75% convertible debentures due in 2039(5) 162 162
5.5% convertible debentures due in 2038(6) 68 123
Capital Leases(7) 105 3.9% 113 3.9%
Total debt and capital lease obligations 2,585 2,851
Less: Current maturities (469) (394)
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS $ 2,116 $ 2,457
(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 a certain number 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. In 2013, the remaining $119 million principal amount of the Class G-1
and Class B-1 certificates due in January 2014 were prepaid on December 16, 2013, ahead of the scheduled maturities. In April 2009 we entered into interest rate swap agreements for
half of the Class G-1 certificates and all of the Class B-1 certificates in the November 2006 offering which expired in 2013.
(3) In March and November 2004 we completed public offerings for $431 million and $498 million respectively, of pass-through certificates. These offerings were set up in order 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. In February 2008 we entered into interest rate swap agreements for the Class G-1 certificates in the November 2004 offering. These swap agreements effectively
fixed the interest rate for the remaining term of these certificates. As of December 31, 2013 these certificates had a balance of $55 million and an effective interest rate of 4.5%. 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 2009, we entered into interest rate swap agreements for
the Class G-2 certificates in the November 2004 offering which expired in 2013. The interest rate for all other certificates is based on three month LIBOR plus a margin. Interest is payable
quarterly.
(4) In November 2005, the Greater Orlando Aviation Authority, or GOAA, issued special purpose airport facilities revenue bonds to us as a reimbursement for certain airport facility construction
and other costs. In April 2013 GOAA issued $42 million in special purpose airport facility revenue bonds to refund the bonds issued in 2005. The proceeds from the refunded bonds were
loaned to us and we recorded the issuance of $43 million, net of $1 million premium, as long term debt on our consolidated balance sheet. In December 2006, the New York City Industrial
Development Agency issued special facility revenue bonds for JFK to us as a reimbursement to us for certain airport facility construction and other costs. We recorded the principal amount
of both 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.