American Airlines 2003 Annual Report Download - page 25

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23
Credit Facility Covenants
American has a fully drawn $834 million bank credit facility that expires December 15, 2005, which contains a
liquidity covenant and an EBITDAR (generally, earnings before interest, taxes, depreciation, amortization and
rentals, adjusted for certain non-cash items) to fixed charges (generally, interest and total rentals) ratio covenant.
The required EBITDAR to fixed charges ratio is 1.1 to 1.0 for the three-month period ending March 31, 2004, and
increases on a quarterly basis up to 1.5 to 1.0 for each four consecutive quarters ending after December 31, 2004.
The liquidity covenant requires American to maintain a minimum level of $1.0 billion of unrestricted cash and short-
term investments. The Company expects to be able to continue to comply with these covenants. However, it
cannot be sure that it will continue to be able to do so through the expiration of the facility. Failure to do so would
result in a default under this facility and a significant amount of American’s other debt.
Financing Activity
The Company, or its subsidiaries, issued the following debt during the year ended December 31, 2003 (in
millions):
Enhanced equipment trust certificates (3.86% interest)
(final maturity 2010) $ 255
4.25% senior convertible notes due 2023 300
AA/Ft. Worth HQ securitization (7.2% effective interest)
(final maturity 2010) 98
Various debt agreements related to the purchase of jet
aircraft (effective interest rates ranging from 7.93% to
9.12%) (various maturities through 2013) 554
Various debt agreements related to the purchase of
regional jet aircraft (effective interest rates ranging
from 4.25% to 6.73%) (various maturities through
2020) 473
$ 1,680
See Note 6 to the consolidated financial statements for additional information regarding the debt issuances listed
above.
In February 2004, American issued $180 million of Fixed Rate Secured Notes due 2009. These notes are
secured by certain spare parts and bear interest at 7.25 percent. Also in February 2004, AMR issued, and
American guaranteed, $324 million of 4.5 percent senior convertible notes due 2024.
Other Operating and Investing Activities
The improved revenue environment and the effects of the Company’s cost savings initiatives resulted in improved
cash flow from operating activities in 2003. Net cash provided by operating activities during the year ended
December 31, 2003 was $601 million, an increase of $1.7 billion over 2002. Included in net cash provided by
operating activities in 2003 was the receipt of a $572 million federal tax refund and the receipt of $358 million from
the U.S. government under the Emergency Wartime Supplemental Appropriations Act, 2003 (the Act), offset by
$521 million of redemption payments under operating leases for special facility revenue bonds. Included in net
cash provided (used) by operating activities during 2002 was the receipt of an approximately $658 million federal
tax refund as a result of the utilization of the Company’s 2001 net operating losses (NOLs). The Company does not
expect to receive significant additional federal tax refunds.
Capital expenditures during 2003 were $1.4 billion, $735 million of which were seller financed, and included the
acquisition of nine Boeing 767-300ERs, two Boeing 777-200 ERs, 16 Embraer 140s, six Embraer 145s and 11
Bombardier CRJ-700 aircraft.