Question

This exercise involves creating a pro forma Balance Sheet and a pro forma Income Statement for JetBlue Inc. To assist you in this endeavor, a worksheet containing JetBlue’s 2011 Income Statement and Balance Sheet has been provided. Develop the two pro forma financial statements for 2012 based upon the following assumptions.
The company plans to increase sales by an additional 10 percent in 2012 due to minor price increases. In addition,the firm plans to launch a massive marketing campaign in the far west. The campaign is anticipated to cost $10,000,000 and to add an additional $300,000,000 in sales during 2012.
     The company plans to invest an additional $50,000,000 in additional general and administrative costs in 2012. New plant and equipment (in the form of 10 new aircraft) is projected to cost $500,000,000, and will be depreciated over 20 years. (Note: Assume the plant and equipment comes on line the first day of 2012). Salaries for new employees are estimated at $50,000,000 for 2012.
     The company plans to finance construction of the new aircraft by taking on $500,000,000 in long-term debt. The terms of the transaction include a 10-year loan balloon at 5 percent interest. Interest payments are due on December 31 for each of the next ten years.
     The company anticipates issuing 10,000,000 new shares of common stock. The firm currently has 181,160,000 outstanding shares of common stock. The new shares are expected to sell for $10 per share. The new offering is expected to occur on January 1, 2012.

JetBlue Airways Income Statement	12/31/11	12/21/12
(Values in $ Thousands)
Total Revenue	2,842,000
Cost of Revenue, Total	1,987,000
Gross Profit	855,000
Operating Expenses
Selling, General and Administrative Expenses	510,000
Other	176,000
Operating Income or Loss	169,000
Income from Continuing Operations
Total Other Income/Expenses Net	54,000
Earnings Before Interest and Taxes	223,000
Interest Expense	182,000
Income Before Tax	41,000
Income Tax Expense	23,000
Net Income	18,000
Dividends	0
Net Income Applicable To Common Shares	18,000

JetBlue Balance Sheet	12/31/11	12/31/12
(Values in $ Thousands)
Assets
Current Assets
Cash and Equivalents	190,000
Short Term Investments	644,000
Net Receivables	92,000
Inventory	26,000
Other Current Assets	164,000
Total Current Assets	1,116,000
Long Term Investments
Property, Plant and Equipment, Gross	4,246,000
Depreciation	0
Intangible Assets	21,000
Other Assets	215,000
Total Non-Current Assets	4,482,000
Total Assets	5,598,000
Liabilities and Shareholders' Equity
Current Liabilities
Accounts Payable	796,000
Short/Current Long Term Debt	460,000
Other Current Liabilities*	0
Total Current Liabilities	1,256,000
Non-Current Liabilities
Long Term Debt	2,588,000
Other Liabilities	526,000
Deferred Long Term Liability Charges	192,000
Total Non-Current Liabilities	3,306,000
Total Liabilities	4,562,000
Shareholders' Equity
Common Stock Equity	2,000
Retained Earnings	162,000
Capital Surplus	853,000
Other Stockholder Equity	19,000
Total Stockholders' Equity	1,036,000
Total Liabilties & Stockhlders Equity	5,598,000

Answer 1