Westjet 2001 Annual Report Download - page 58

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56
Years ended December 31, 2001 and 2000
(Tabular Amounts are Stated in Thousands of Dollars)
9. Risk management: (continued)
(d) Interest rate risk:
The Corporation has entered into fixed rate debt agreements in order to manage its interest rate
exposure on debt instruments. These agreements are described in note 4.
(e) Credit risk:
The Corporation does not believe it is subject to any significant concentration of credit risk. Most of
the Corporation’s receivables result from tickets sold to individual passengers through the use of
major credit cards and travel agents. These receivables are short-term, generally being settled shortly
after the sale. The Corporation manages the credit exposure related to financial instruments by
selecting counter parties based on credit ratings, limiting its exposure to a single counter party and
monitoring the market position of the program and its relative market position with each counter
party.
(f) Fair value of financial instruments:
The carrying amounts of financial instruments included in the balance sheet, other than long-term
debt, approximate their fair value due to their short-term to maturity.
At December 31, 2001, the fair value of the long-term debt was approximately $51.9 million, based
on market prices of debt with comparable remaining maturities.
10. Subsequent events:
a) Subsequent to year-end, the Corporation entered into a letter of intent to lease two 737-800 aircraft
for a period of seven months commencing May 1, 2002 to November 30, 2002. In addition, the
Corporation has signed agreements to exercise two of its purchase rights for 737-700 aircraft with
anticipated delivery dates of November and December 2002 as well as a letter of intent for the
acquisition of another next generation flight simulator for the total approximate consideration of
$107 million.
(b) The Corporation has also announced a stock split on the basis of three common shares for each two
common shares held. The proposed stock split is subject to shareholders’ approval and will be
considered at the Corporation’s Annual and Special Meeting.
(c) Subsequent to year-end, the Corporation entered into an Underwriting Agreement to issue 2,500,000
common shares of the Corporation for net proceeds of approximately $66 million. The Agreement
also provides the underwriters the option to purchase an additional 500,000 common shares which,
if fully exercised, would increase the net proceeds to approximately $79 million.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS