American Airlines 2009 Annual Report Download - page 36

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The Company made debt and capital lease payments of $2.4 billion in 2009. Included in this amount, AMR
retired, by purchasing with cash, the $318 million principal amount of its 4.50 percent senior convertible notes due
2024 (the 4.50 Notes). Virtually all of the holders of the 4.50 Notes exercised their elective put rights and the
Company purchased and retired these notes at a price equal to 100 percent of their principal amount. Under the
terms of the 4.50 Notes, the Company had the option to pay the purchase price with cash, stock, or a combination
of cash and stock, and the Company elected to pay for the 4.50 Notes solely with cash. Also included in total
debt payments, the Company retired, at maturity, its $255 million secured bank revolving credit facility in June
2009 and retired its $432 million term loan credit facility in September 2009.
In 2009, the Company obtained approximately $4.3 billion of cash from financing activities through the following:
$ 1.0 billion Advance sale of AAdvantage Miles to Citibank (of which $110 million is recorded as
deferred revenue and included in cash flow from operations)
$ 2.1 billion Issuance of other debt instruments
$ 412 million Issuance of equity instruments
$ 768 million Sale leaseback financings
See Notes 5, 6 and 13 to the consolidated financial statements for a detailed description of these financing
transactions.
Due to the current value of the Company’s derivative contracts, some agreements with counterparties require
collateral to be deposited by the Company. As of December 31, 2009, the cash collateral held by such
counterparties from AMR was $14 million as compared to $575 million at December 31, 2008.
In the past, the Company has from time to time refinanced, redeemed or repurchased its debt and taken other
steps to reduce its debt or lease obligations or otherwise improve its balance sheet. Going forward, depending on
market conditions, its cash positions and other considerations, the Company may continue to take such actions.
Compensation On January 19, 2010, the Company approved the 2010 Annual Incentive Plan (AIP) for
American. All U.S. based employees of American are eligible to participate in the AIP. The AIP is American's
annual bonus plan and provides for the payment of awards in the event certain financial and/or customer service
metrics are satisfied.
Working Capital AMR (principally American) historically operates with a working capital deficit, as do most other
airline companies. In addition, the Company has historically relied heavily on external financing to fund capital
expenditures. More recently, the Company has also relied on external financing to fund operating losses,
employee pension obligations and debt maturities.
Off Balance Sheet Arrangements American has determined that it holds a significant variable interest in, but is
not the primary beneficiary of, certain trusts that are the lessors under 84 of its aircraft operating leases. These
leases contain a fixed price purchase option, which allows American to purchase the aircraft at a predetermined
price on a specified date. However, American does not guarantee the residual value of the aircraft. As of
December 31, 2009, future lease payments required under these leases totaled $1.4 billion.
Certain special facility revenue bonds have been issued by certain municipalities primarily to purchase equipment
and improve airport facilities that are leased by American and accounted for as operating leases. Approximately
$1.5 billion of these bonds (with total future payments of approximately $3.3 billion as of December 31, 2009) are
guaranteed by American, AMR, or both. Approximately $177 million of these special facility revenue bonds
contain mandatory tender provisions that require American to make operating lease payments sufficient to
repurchase the bonds at various times: $112 million in 2014 and $65 million in 2015. Although American has the
right to remarket the bonds, there can be no assurance that these bonds will be successfully remarketed. Any
payments to redeem or purchase bonds that are not remarketed would generally reduce existing rent leveling
accruals or be considered prepaid facility rentals and would reduce future operating lease commitments.
In addition, the Company had other operating leases, primarily for aircraft and airport facilities, with total future
lease payments of $4.6 billion as of December 31, 2009. Entering into aircraft leases allows the Company to
obtain aircraft without immediate cash outflows.