JetBlue Airlines 2015 Annual Report Download - page 53

JETBLUE AIRWAYS CORPORATION-2015Annual Report 49
PART II
ITEM 8Financial Statements and Supplementary Data
New Accounting Standards
New accounting rules and disclosure requirements can impact our financial
results and the comparability of our financial statements. The authoritative
literature which has recently been issued and that we believe will impact
our consolidated financial statements is described below. There are also
several new proposals under development, including proposals related to
leases and financial instruments. If and when enacted, these proposals
may have a significant impact on our financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts
with Customers topic of the Codification, which supersedes existing
revenue recognition guidance. Under the new standard, a company will
recognize revenue when it transfers goods or services to customers in
an amount that reflects the consideration to which the company expects
to be entitled to in exchange for those goods or services. The standard
allows for either full retrospective or modified retrospective adoption. In
July 2015, the FASB voted to defer the effective date of ASU 2014-09 by
one year to interim and annual reporting periods beginning after December
15, 2017 and permitted early adoption of the standard, but not prior to
December 15, 2016. While we are still evaluating the full impact of adopting
this standard on our consolidated financial statements and disclosures,
we have determined that it will impact our loyalty program accounting.
The new standard will no longer allow us to use the incremental cost
method when recording the financial impact of TrueBlue
®
points earned
on JetBlue purchases and will require us to re-value our liability with a
relative fair value approach.
In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of
Interest, Simplifying the Presentation of Debt Issuance Costs topic of
the Codification. This standard provides a simplified presentation of
debt issuance costs and requires that debt issuance costs related to a
recognized debt liability to be presented on the balance sheet as a direct
deduction from the carrying amount of that debt liability, consistent with
debt discounts. The standard is effective for public companies for annual
periods beginning after December 15, 2015. Our unamortized debt issuance
cost at December 31, 2015 was $16 million which is included within other
long term assets on the consolidated balance sheet.
In November 2015, the FASB issued ASU 2015-17, Income Taxes,
Balance Sheet Classification of Deferred Taxes topic of the Codification.
This standard requires all deferred tax assets and liabilities to be classified
as non-current on the balance sheet instead of separating deferred taxes
into current and non-current amounts. In addition, valuation allowance
allocations between current and non-current deferred tax assets are no
longer required because those allowances also will be classified as non-
current. This standard is effective for public companies for annual periods
beginning after December 15, 2016. Our current deferred tax asset and
non-current deferred tax liability as of December 31, 2015 were $145
million and $1.2 billion, respectively.
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, 2015 and 2014 consisted of the following (in millions):
2015 2014
Secured Debt
Floating rate equipment notes, due through 2025(1) $ 193 3.7% $ 276 3.2%
Floating rate enhanced equipment notes(2)
Class G-1, due 2016 16 4.4% 35 4.4%
Class G-2, due 2016 185 1.0% 185 1.0%
Fixed rate enhanced equipment notes, due through 2023(3) 201 4.5% 217 4.5%
Fixed rate equipment notes, due through 2026 964 5.5% 1,119 5.6%
Fixed rate special facility bonds, due through 2036(4) 43 4.9% 77 5.0%
Unsecured Debt
6.75% convertible debentures due in 2039(5) 86 86
5.5% convertible debentures due in 2038(6) — 68
Capital Leases(7) 155 4.1% 170 4.1%
Total debt and capital lease obligations 1,843 2,233
Less: Current maturities (448) (265)
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS $ 1,395 $ 1,968
(1) Interest rates adjust quarterly or semi-annually based on LIBOR, plus a margin. 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.
(2) 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, 2015, these certificates had a balance of $16 million and an effective interest rate of 4.4%. 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. In March 2014, we paid the final scheduled principal payment of $188 million associated with our March
2004 EETC Class G-2 certificates. The interest rate for all other certificates is based on three month LIBOR, plus a margin. Interest is payable quarterly.
(3) In March 2014, we completed a private placement of $226 million in pass-through certificates, Series 2013-1. The certificates were issued by a pass-through trust and are not obligations
of JetBlue. The proceeds from the issuance of the pass-through certificates were used to purchase equipment notes issued by JetBlue and secured by 14 of our previously unencumbered
aircraft. Principal and interest are payable semi-annually, starting in September 2014.
(4) In November 2005, the Greater Orlando Aviation Authority, or GOAA, issued special purpose airport facilities revenue bonds to JetBlue as 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 sheets. In December 2006, the New York
City Industrial Development Agency issued special facility revenue bonds for JFK to us as reimbursement to us for certain airport facility construction and other costs. We recorded the
principal amount of the bond, net of discounts, as long-term debt on our consolidated balance sheets because we have issued a guarantee of the debt payments on the bond. This fixed
rate debt is secured by leasehold mortgages of our airport facilities. During June 2015, we prepaid the full $32 million principal outstanding on the JFK special facility revenue bonds.