American Airlines 2005 Annual Report Download - page 33

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30
The Credit Facility contains a covenant (the Liquidity Covenant) requiring American to maintain, as defined,
unrestricted cash, unencumbered short term investments and amounts available for drawing under committed
revolving credit facilities of not less than $1.25 billion for each quarterly period through the remaining life of the
credit facility. American was in compliance with the Liquidity Covenant as of December 31, 2005 and expects to
be able to continue to comply with this covenant. In addition, the Credit Facility contains a covenant (the
EBITDAR Covenant) requiring AMR to maintain a ratio of cash flow (defined as consolidated net income, before
interest expense (less capitalized interest), income taxes, depreciation and amortization and rentals, adjusted for
certain gains or losses and non-cash items) to fixed charges (comprising interest expense (less capitalized
interest) and rentals). AMR was in compliance with the EBITDAR covenant as of December 31, 2005 and
expects to be able to continue to comply with this covenant for the period ending March 31, 2006. However,
given the historically high price of fuel and the volatility of fuel prices and revenues, it is difficult to assess whether
AMR and American will, in fact, be able to continue to comply with the Liquidity Covenant and, in particular, the
EBITDAR Covenant, and there are no assurances that AMR and American will be able to comply with these
covenants. Failure to comply with these covenants would result in a default under the Credit Facility which - - if
the Company did not take steps to obtain a waiver of, or otherwise mitigate, the default - - could result in a default
under a significant amount of the Company’s other debt and lease obligations and otherwise adversely affect the
Company. See Note 6 to the consolidated financial statements for the required ratios at each measurement date
through the life of the Credit Facility.
Cash Flow Activity
The Company, or its subsidiaries, recorded the following debt (1) during the year ended December 31, 2005 (in
millions):
JFK Facilities Sublease Revenue Bonds, net (2) $ 491
Sale and leaseback of spare engines 133
Re-marketing of DFW-FIC Revenue Refunding Bonds,
Series 2000A, maturing 2029
198
Various debt agreements related to the purchase of
regional jet aircraft, net
319
$ 1,141
(1) The table does not include a transaction in which American purchased certain obligations due
October 2006 with a face value of $261 million at par value from an institutional investor. In
conjunction with the purchase, American borrowed an additional $245 million under an existing
mortgage agreement with a final maturity in December 2012 from the same investor.
(2) Amount shown is net of $207 million the Company will receive to fund future capital spending at JFK,
$77 million held by a trustee for future debt service on the bonds and a discount of $25 million.
See Notes 5 and 6 to the consolidated financial statements for additional information regarding the debt
issuances listed above.
During the fourth quarter of 2005, the Company issued and sold 13 million shares of its common stock. The
Company realized $223 million from the equity sale.