Can The Financial Wizards Explain?

[eolesen]

Where can I find documented proof of this current debt load?

[post="265693"][/post]​

Depends... Not all forms of debt are reported on the 10-K -- it only shows $13B specifically as long term debt.

The total number I see referred to most frequently is approx $22B.

Presidents Conferences start next week. Might be a good question to ask Arpey directly if it isn't included in the presentation.

 

[Decision 2004]

Depends... Not all forms of debt are reported on the 10-K -- it only shows $13B specifically as long term debt.

The total number I see referred to most frequently is approx $22B.

Presidents Conferences start next week.  Might be a good question to ask Arpey directly if it isn't included in the presentation.

[post="265704"][/post]​

Did it "depend" also when AA was demanding concessions?

Surely the books show the real debt somewhere?

Or did the TWU stooges just believe what they were told?

Thanks for answering for FWAAA again.

Does anybody know the real answer, with documentation?

 

[Connected1]

Does anybody know the real answer, with documentation?

[post="265716"][/post]​

Allow me to help FM remove his foot from his mouth. 😉 Here are the liabilities on the company's balance sheet as of the end of March. Total liabilities are north of $30B:

============

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable 1,131
Accrued liabilities 2,034
Air traffic liability 3,687
Current maturities of long-term debt 709
Current obligations under capital leases 170
Total current liabilities 7,731

Long-term debt, less current maturities 12,366
Obligations under capital leases, less
current obligations 1,009
Pension and postretirement benefits 4,713
Other liabilities, deferred gains and
deferred credits 4,045

============

As a finance guy, I would not call all of these "debt." Accounts payable and accrued liabilities represent bills outstanding for things like aircraft fuel and pay that has been earned during the current pay period. Air traffic liability is the cash that AA has collected from customers who have booked their flight but not yet flown. These types of accounts really aren't debt - they are short term obligations.

The debt number comes from adding up long term debt, capital leases, and pensions. Long term debt is 12,366 + 709 = 13,075. Capital leases are 1,009 + 170 = 1,179. Pensions are 4,713 as listed above. That gets us to 13,075 + 1,179 + 4,713 = 18,967, or about $19B.

Now, regarding FM's statement...

He may have been referring to operating leases as debt that may not be on the books. This is because operating leases are no different than renting an office building. When you rent an office building, the building itself does not go on your books as an asset because you don't own it - therefore, there is no offsetting debt liability on your balance sheet. Nevertheless, you may be locked into making payments for a while so it can feel like debt.

For those who are still awake, keep reading. Capital leases are different because even though it is still a lease, accounting rules dictate that you show them as debt. At the risk of oversimplifying things, a capital lease must be recorded on your books if you are going to lease the aircraft for more than 75% of its useful life. Shorter leases than that are classified as operating leases and therefore do not appear on the books as debt.

 

[AAmech]

Did it "depend" also when AA was demanding concessions?

Surely the books show the real debt somewhere?

Or did the TWU stooges just believe what they were told?

Thanks for answering for FWAAA again.

Does anybody know the real answer, with documentation?

[post="265716"][/post]​

Gosh your Right D! Management just made ALL THIS UP!! its nothing but a hoax they used to cut our pay. Boy I wish we had Del and Amfa to protect us like they're doing at other airlines!! 🙄

 

[Decision 2004]

Gosh your Right D!   Management just made ALL THIS UP!!  its nothing but a hoax they used to cut our pay.  Boy I wish we had Del and Amfa to protect us like they're doing at other airlines!! 🙄

[post="265724"][/post]​

Don't just show us your smart ass side, please give the documentation to back your personal trust in management.

Or are you like the rest, you believe what they tell you without any proof?

Oh, and you are about to get your wish for Del and AMFA. Wait until September that is the earliest we can get a ballot.

BTW, Connected1...

Thanks for your data, where did that come from?

 

[aafsc]

Allow me to help FM remove his foot from his mouth. 😉 Here are the liabilities on the company's balance sheet as of the end of March. Total liabilities are north of $30B:

============

Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Accounts payable 1,131
Accrued liabilities 2,034
Air traffic liability 3,687
Current maturities of long-term debt 709
Current obligations under capital leases 170
Total current liabilities 7,731

Long-term debt, less current maturities 12,366
Obligations under capital leases, less
current obligations 1,009
Pension and postretirement benefits 4,713
Other liabilities, deferred gains and
deferred credits 4,045

============

As a finance guy, I would not call all of these "debt." Accounts payable and accrued liabilities represent bills outstanding for things like aircraft fuel and pay that has been earned during the current pay period. Air traffic liability is the cash that AA has collected from customers who have booked their flight but not yet flown. These types of accounts really aren't debt - they are short term obligations.

The debt number comes from adding up long term debt, capital leases, and pensions. Long term debt is 12,366 + 709 = 13,075. Capital leases are 1,009 + 170 = 1,179. Pensions are 4,713 as listed above. That gets us to 13,075 + 1,179 + 4,713 = 18,967, or about $19B.

Now, regarding FM's statement...

He may have been referring to operating leases as debt that may not be on the books. This is because operating leases are no different than renting an office building. When you rent an office building, the building itself does not go on your books as an asset because you don't own it - therefore, there is no offsetting debt liability on your balance sheet. Nevertheless, you may be locked into making payments for a while so it can feel like debt.

For those who are still awake, keep reading. Capital leases are different because even though it is still a lease, accounting rules dictate that you show them as debt. At the risk of oversimplifying things, a capital lease must be recorded on your books if you are going to lease the aircraft for more than 75% of its useful life. Shorter leases than that are classified as operating leases and therefore do not appear on the books as debt.

[post="265719"][/post]​

Very good explanatory post.

 

[eolesen]

BTW, Connected1...

Thanks for your data, where did that come from?

[post="265729"][/post]​

Thanks C... Reagan was still in office when I sat thru Econ 101 and my copy of Balance Sheets for Dummies is sitting at work where it belongs....

The numbers come directly off the 10-K (annual) or 10-Q (quarterly), which you can get from http://edgar.sec.gov or off most of the financial websites like Yahoo or Marketwatch.Com, or you can go to AA.Com under Investor Relations. Hopefully three independent sources for the same data will be enough for the naysayers...

 

[Decision 2004]

Thanks C... Reagan was still in office when I sat thru Econ 101 and my copy of Balance Sheets for Dummies is sitting at work where it belongs....

The numbers come directly off the 10-K (annual) or 10-Q (quarterly), which you can get from http://edgar.sec.gov or off most of the financial websites like Yahoo or Marketwatch.Com, or you can go to AA.Com under Investor Relations. Hopefully three independent sources for the same data will be enough for the naysayers...

[post="265741"][/post]​

Oh so now we are "naysayers" for seeking confirmation of $29 Billion in debt?

Seems the truth is still not reachable.

Some say 29, some say 20, some say 22, some say 18 Billion.

Funny thing, even the company lap dogs cannot get the story straight.

 

[Bob Owens]

Depends... Not all forms of debt are reported on the 10-K -- it only shows $13B specifically as long term debt.

The total number I see referred to most frequently is approx $22B.

Presidents Conferences start next week.  Might be a good question to ask Arpey directly if it isn't included in the presentation.

[post="265704"][/post]​

So in other words the 10K is only a summary, certainly not detailed enough to come to a clear picture of the companies true health. Certainly not detailed enough to make a six year committment that includes massive concessions.

The company could be much healthier than the report implies or maybe a little sicker. However in order to not run afoul of the SEC and GAAP, the company is better off to paint a pessimistic picture with the report than an optimistic one. In this case it could not have come at a better time and was used in order to BS the workers into agreeing to unneccisary long term concessions.

9-11, high fuel costs and the claim of intense competition no doubt had a negative impact on earnings but if its going to be a bad year, or group of years, that the executives can blame on external events out of their control, why not let it be a terrible year so they can gain huge long term concessions from labor?

Why struggle to mitigate losses when in the end nothing is really gained by doing so? By letting the company slide down real low they get the added perk of getting stock options as incentives to stay with what appears to be a sick company and appreciate an even larger gain when it rebounds.

This way, they stay in business despite huge losses, radically reset labor costs, lowering them by at least 25%, then when things pick up they look like heros to the stockholders, creditors and even some of the idiot workers who believe they made the right choice by agreeing to work for less. In the end everyone else with an interest in the company or the service it provides makes out and loses nothing, except the workers who lost 25% of their income.

Oh yea, thats right, we get stock options and profit sharing, however in order for us to get back what we lost the stock would have to go to over $300/share. Profit sharing is a joke because not only is the threshold too high-$500 million, but there is a cap that ensures that we cant make back what we lost no matter how well the company does. So if the company turned around and made a trillion in profits in 2008 our income would still be lower than it was in 2002. After a certain point profits are no longer "shared".

 

[eolesen]

Oh so now we are "naysayers" for seeking confirmation of $29 Billion in debt?

Seems the truth is still not reachable.

Some say 29, some say 20, some say 22, some say 18 Billion.

Funny thing, even the company lap dogs cannot get the story straight.

[post="265783"][/post]​

Whatever, Dave.... You're always living up to my expectations, as is Bob for going off on a tangent related to profit sharing and wage cuts, none of which is really relevant to the discussion on what the debt load is.

The truth is reachable, if you bother to listen to what's being said.

Since debt is refinanced and/or paid down on an ongoing basis, it's entirely possible that $18B, $20B, and $22B were all correct answers over a span of three or four months. But based on the 3/31 financial statement, using the balance sheet definition of debt, it's $19B.

Whatever that number has grown or shrunk in the past month, it's still nowhere near $29B.

I exect C1's answer to be a lot closer to being correct than mine. He's a finance guy.

Now, if you want to know how many customers connecting thru MIA or DFW with a window seat on their first leg and an aisle seat on their second on a given day have 'T' as the second and last letters of their last name, or how many Code 22 delays occur when the average taxi time is less than 10 minutes, I'll be more than happy to provide you that with 99.9% accuracy.

 

[Bob Owens]

Since debt is refinanced and/or paid down on an ongoing basis, it's entirely possible that $18B, $20B, and $22B were all correct answers over a span of three or four months. But based on the 3/31 financial statement, using the balance sheet definition of debt, it's $19B.

And it could vary by how they define the debt too couldnt it? When I bought my house I borrowed $100,000, however over the term of the loan I would have to pay them over $300,000. So I could state that I owe $100,000 or that I have to pay back over $300,000. Both statements are true however one makes it appear, absent the prior clarification of what was actually borrowed, that I have a lot more debt than I actually do.

Whatever that number has grown or shrunk in the past month, it's still nowhere near $29B.

I exect C1's answer to be a lot closer to being correct than mine. He's a finance guy.

Now, if you want to know how many customers connecting thru MIA or DFW with a window seat on their first leg and an aisle seat on their second on a given day have 'T' as the second and last letters of their last name, or how many Code 22 delays occur when the average taxi time is less than 10 minutes, I'll be more than happy to provide you that with 99.9% accuracy.

Who cares?

 

[Decision 2004]

Whatever, Dave.... You're always living up to my expectations, as is Bob for going off on a tangent related to profit sharing and wage cuts, none of which is really relevant to the discussion on what the debt load is.

The truth is reachable, if you bother to listen to what's being said.

Since debt is refinanced and/or paid down on an ongoing basis, it's entirely possible that $18B, $20B, and $22B were all correct answers over a span of three or four months. But based on the 3/31 financial statement, using the balance sheet definition of debt, it's $19B.

Whatever that number has grown or shrunk in the past month, it's still nowhere near $29B.

I exect C1's answer to be a lot closer to being correct than mine. He's a finance guy.

Now, if you want to know how many customers connecting thru MIA or DFW with a window seat on their first leg and an aisle seat on their second on a given day have 'T' as the second and last letters of their last name, or how many Code 22 delays occur when the average taxi time is less than 10 minutes, I'll be more than happy to provide you that with 99.9% accuracy.

[post="265895"][/post]​

OK so how does AMR reduce the debt from $22 Billon to $19 Billion and increase cash on hand by $2 Billion all the while claiming record losses quarter by quarter?

Excuse my ignorance but I just struggle with the logic of this type of accounting.

Maybe if I reach an understnanding of how this works then I will learn to trust a little more. Right now, I am more skeptical than ever.

 

[FWAAA]

Oh so now we are "naysayers" for seeking confirmation of $29 Billion in debt?

Seems the truth is still not reachable.

Some say 29, some say 20, some say 22, some say 18 Billion.

Funny thing, even the company lap dogs cannot get the story straight.

[post="265783"][/post]​

As others have pointed out, it depends on your definition of debt.

AMR's Q1 10-Q shows over $29 billion of liabilities offsetting over $29 billion of assets (amounts in millions of dollars):

$ 7,731 in current liabilities (paid within one year)
$12,366 in long-term debt (due more than a year out)
$ 1,009 in obligations under capital leases, less current obligations
$ 4,713 in Pension and postretirement benefits
$ 4,045 in Other liabilities, deferred gains and deferred credits

http://www.shareholder.com/aa/EdgarDetail....05-27&SID=05-00

Total of $29.864 billion in total liabilities. I'm not going to play semantics games over GAAP definitions of LT debt - for me, the total is what it is. It's about $10 billion higher than this time four years ago.

 

[Decision 2004]

FWAAA,

Thank you for informative answers.

 

[eolesen]

Excuse my ignorance but I just struggle with the logic of this type of accounting.

Maybe if I reach an understnanding of how this works then I will learn to trust a little more. Right now, I am more skeptical than ever.

[post="265952"][/post]​

If corporate finance were easy to understand, there wouldn't be a need for people with four year degrees in finance... To me, it's no more confusing than trying to figure out a Good Faith Estimate of closing costs on a home loan....


An accountant, an engineer, and a teacher all die and go before St. Peter.

St. Peter asks the teacher "what's 1 + 2?"

The teacher, having taught math to the specifications of the Texas Assessment of Knowledge and Skills test for 20 years, says "3".

St. Peter says, "Sorry, you need to go over to the down escalator to your right."

Next, he asks the engineer "what's 1 + 2?"

The engineer, believing fully in the infallability of math, says "3".

St. Peter says, "Sorry... go join the teacher on the down escalator."

Last, he asks the accountant "what's 1 + 2?"

The accountant thinks about it, and responds "what do you want it to be?"