-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oq+F3XtTYkA9DrwqJualX8FwFQ1N7eXw7HAJkW7b/vjq/LgLIAKeeTFiUuv69sLZ qmW3qkX8wqU8CkGqt36Dhg== /in/edgar/work/0001068800-00-500019/0001068800-00-500019.txt : 20001115 0001068800-00-500019.hdr.sgml : 20001115 ACCESSION NUMBER: 0001068800-00-500019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS WORLD AIRLINES INC /NEW/ CENTRAL INDEX KEY: 0000278327 STANDARD INDUSTRIAL CLASSIFICATION: [4512 ] IRS NUMBER: 431145889 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07815 FILM NUMBER: 766464 BUSINESS ADDRESS: STREET 1: ONE CITY CENTRE STREET 2: 515 N SIXTH ST CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3145893000 MAIL ADDRESS: STREET 1: ONE CITY CENTRE STREET 2: 515 N 6TH ST CITY: ST LOUIS STATE: MO ZIP: 63101 EX-11 1 exhib11.txt COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended September 30, ----------------------- 2000 1999 -------- -------- EARNINGS PER SHARE BEFORE EXTRAORDINARY ITEMS (b): Net loss $(34,783) $(53,690) Extraordinary items - - -------- -------- Loss before extraordinary items (34,783) (53,690) Preferred stock dividend requirements (3,515) (5,864) -------- -------- Loss before extraordinary items applicable to common for basic earnings per share calculation (38,298) (59,554) Average number of shares of common stock (a) 78,855 68,497 -------- -------- Loss per share $ (0.49) $ (0.87) ======== ======== EARNINGS PER SHARE FROM EXTRAORDINARY ITEMS (b): Extraordinary items $ - $ - Average number of shares of common stock (a) 78,855 68,497 -------- -------- Loss per share $ - $ - ======== ======== EARNINGS PER SHARE FROM NET LOSS (b): Net loss $(34,783) $(53,690) Preferred stock dividend requirements (3,515) (5,864) -------- -------- Loss applicable to common shares for basic earnings per share calculation (38,298) (59,554) Average number of shares of common stock (a) 78,855 68,497 -------- -------- Loss per share $ (0.49) $ (0.87) ======== ======== - ------ (a) Includes 6,143 and 7,648 shares of Employee Preferred Stock for the quarter ended September 30, 2000 and 1999, respectively, which, except for a liquidation preference of $.01 per share and the right to elect a certain number of directors to the Board of Directors, is the functional equivalent of Common Stock. (b) As the effects of including the incremental shares associated with options and warrants and the assumed conversion of the 8% and the 9 1/4% Preferred Stock are antidilutive, diluted earnings per share are equal to basic earnings per share and are not presented in the accompanying condensed statements of consolidated operations for the third quarter of 2000 and 1999.
EXHIBIT 11 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Nine Months Ended September 30, ------------------------ 2000 1999 --------- -------- EARNINGS PER SHARE BEFORE EXTRAORDINARY ITEMS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE (b): Net loss $(115,131) $(81,457) Extraordinary items - (866) Cumulative effect of accounting change (12,844) - --------- -------- Loss before extraordinary items and cumulative effect of accounting change (102,287) (80,591) Preferred stock dividend requirements (10,563) (17,590) --------- -------- Loss before extraordinary items and cumulative effect of accounting change applicable to common for basic earnings per share calculation (112,850) (98,181) Average number of shares of common stock (a) 75,202 66,666 --------- -------- Loss per share $ (1.50) $ (1.47) ========= ======== EARNINGS PER SHARE FROM EXTRAORDINARY ITEMS (b): Extraordinary items $ - $ (866) Average number of shares of common stock (a) 75,202 66,666 --------- -------- Loss per share $ - $ (0.01) ========= ======== EARNINGS PER SHARE FROM CUMULATIVE EFFECT OF ACCOUNTING CHANGE (b): Cumulative effect of accounting change $ (12,844) $ - Average number of shares of common stock (a) 75,202 66,666 --------- -------- Loss per share $ (0.17) $ - ========= ======== EARNINGS PER SHARE FROM NET LOSS (b): Net loss $(115,131) $(81,457) Preferred stock dividend requirements (10,563) (17,590) --------- -------- Loss applicable to common shares for basic earnings per share calculation (125,694) (99,047) Average number of shares of common stock (a) 75,202 66,666 --------- -------- Loss per share $ (1.67) $ (1.48) ========= ======== - ------ (a) Includes 6,299 and 7,581 shares of Employee Preferred Stock for the nine months ended September 30, 2000 and 1999, respectively, which, except for a liquidation preference of $.01 per share and the right to elect a certain number of directors to the Board of Directors, is the functional equivalent of Common Stock. (b) As the effects of including the incremental shares associated with options and warrants and the assumed conversion of the 8% and the 9 1/4% Preferred Stock are antidilutive, diluted earnings per share are equal to basic earnings per share and are not presented in the accompanying condensed statements of consolidated operations for the nine months ended September 30, 2000 and 1999.
10-Q 2 twa10q.txt TRANS WORLD AIRLINES FORM 10-Q ======================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-7815 TRANS WORLD AIRLINES, INC. (Exact name of registrant as specified in its charter) DELAWARE 43-1145889 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) ONE CITY CENTRE 515 N. SIXTH STREET ST. LOUIS, MISSOURI 63101 (Address of principal executive offices, including zip code) (314) 589-3000 (Registrant's telephone number, including area code) ========================= Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes /X/ No / / Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. OUTSTANDING AS OF CLASS OCTOBER 31, 2000 ----------------------- ----------------- Common Stock, par value $0.01 per share 71,896,504 ======================================================================== Part I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ------------------------- 2000 1999 2000 1999 -------- -------- ---------- ---------- Operating revenues: Passenger $881,918 $792,166 $2,479,541 $2,264,791 Freight and mail 24,399 23,030 73,999 72,354 All other 66,386 61,230 183,082 169,862 -------- -------- ---------- ---------- Total 972,703 876,426 2,736,622 2,507,007 -------- -------- ---------- ---------- Operating expenses: Salaries, wages and benefits 336,424 327,300 998,436 944,209 Costs associated with contract ratification - 33,515 - 37,768 Aircraft fuel and oil 170,947 112,026 456,272 276,620 Passenger sales commissions 32,359 49,366 100,407 144,799 Aircraft maintenance materials and repairs 34,853 38,478 89,867 111,385 Depreciation and amortization 32,104 34,245 97,439 106,529 Aircraft rent 141,272 112,030 411,494 300,695 Other rent and landing fees 48,357 51,910 145,821 148,667 All other 187,360 176,485 536,479 514,480 -------- -------- ---------- ---------- Total 983,676 935,355 2,836,215 2,585,152 -------- -------- ---------- ---------- Operating loss (10,973) (58,929) (99,593) (78,145) -------- -------- ---------- ---------- Other charges (credits): Interest expense 20,410 22,399 67,121 71,810 Interest and investment income (3,252) (4,310) (8,392) (12,222) Disposition of assets, gains and losses-net (1,041) (1,031) (3,885) 716 Other charges and credits-net (17,510) (21,741) (53,201) (58,408) -------- -------- ---------- ---------- Total (1,393) (4,683) 1,643 1,896 -------- -------- ---------- ---------- Loss before income taxes, extraordinary items and cumulative effect of accounting change (9,580) (54,246) (101,236) (80,041) Provision (credit) for income taxes 25,203 (556) 1,051 550 -------- -------- ---------- ---------- Loss before extraordinary items and cumulative effect of accounting change (34,783) (53,690) (102,287) (80,591) Extraordinary items - - - (866) Cumulative effect of accounting change - - (12,844) - -------- -------- ---------- ---------- Net loss (34,783) (53,690) (115,131) (81,457) Preferred stock dividend requirements 3,515 5,864 10,563 17,590 -------- -------- ---------- ---------- Loss applicable to common shares $(38,298) $(59,554) $ (125,694) $ (99,047) ======== ======== ========== ========== Basic earnings per share amounts: Loss before extraordinary items $ (0.49) $ (0.87) $ (1.50) $ (1.47) Extraordinary items - - - (0.01) Cumulative effect of accounting change - - (0.17) - -------- -------- ---------- ---------- Net loss $ (0.49) $ (0.87) $ (1.67) $ (1.48) ======== ======== ========== ========== See notes to consolidated financial statements
1 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 (AMOUNTS IN THOUSANDS) ASSETS
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ (UNAUDITED) Current assets: Cash and cash equivalents $ 157,062 $ 180,443 Receivables, less allowance for doubtful accounts, $14,476 in 2000 and $13,534 in 1999 245,732 155,070 Spare parts, materials and supplies, less allowance for obsolescence, $17,613 in 2000 and $17,512 in 1999 106,333 101,179 Prepaid expenses and other 79,958 53,197 ---------- ---------- Total 589,085 489,889 ---------- ---------- Property: Property owned: Flight equipment 339,864 433,710 Prepayments on flight equipment 69,034 45,810 Land, buildings and improvements 79,277 77,021 Other property and equipment 90,383 90,115 ---------- ---------- Total property owned 578,558 646,656 Less accumulated depreciation 179,033 161,153 ---------- ---------- Property owned-net 399,525 485,503 ---------- ---------- Property held under capital leases: Flight equipment 176,094 176,094 Land, buildings and improvements 52,355 50,321 Other property held under capital leases 8,598 7,096 ---------- ---------- Total property held under capital leases 237,047 233,511 Less accumulated amortization 147,944 127,845 ---------- ---------- Property held under capital leases-net 89,103 105,666 ---------- ---------- Total property-net 488,628 591,169 ---------- ---------- Investments and other assets: Investments in affiliated companies 90,276 82,901 Investments, receivables and other 139,692 133,973 Routes, gates and slots-net 170,427 181,983 Reorganization value in excess of amounts allocable to identifiable assets-net 625,802 657,267 ---------- ---------- Total 1,026,197 1,056,124 ---------- ---------- $2,103,910 $2,137,182 ========== ========== See notes to consolidated financial statements
2 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 (AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) LIABILITIES AND SHAREHOLDERS' EQUITY
SEPTEMBER 30, DECEMBER 31, 2000 1999 ------------- ------------ (UNAUDITED) Current liabilities: Current maturities of long-term debt $ 175,164 $ 67,080 Current obligations under capital leases 39,814 38,664 Advance ticket sales 304,647 198,722 Accounts payable, principally trade 340,333 263,624 Accounts payable to affiliated companies 5,203 6,250 Accrued expenses: Employee compensation and vacations earned 122,288 149,701 Contributions to retirement and pension trusts 22,918 15,165 Interest on debt and capital leases 13,466 14,235 Taxes 11,438 12,111 Other accrued expenses 199,375 195,340 ----------- ---------- Total accrued expenses 369,485 386,552 ----------- ---------- Total 1,234,646 960,892 ----------- ---------- Long-term liabilities and deferred credits: Long-term debt, less current maturities 416,495 600,909 Obligations under capital leases, less current obligations 98,055 127,143 Postretirement benefits other than pensions 509,334 502,097 Noncurrent pension liabilities 16,984 17,572 Other noncurrent liabilities and deferred credits 109,171 99,479 ----------- ---------- Total 1,150,039 1,347,200 ----------- ---------- Shareholders' equity: 8% cumulative convertible exchangeable preferred stock, $50 liquidation preference; shares issued and outstanding: 2000-2,575; 1999-3,869 26 39 9 1/4% cumulative convertible exchangeable preferred stock, $50 liquidation preference; shares issued and outstanding: 2000-818; 1999-1,725 8 17 Employee preferred stock, $0.01 liquidation preference; special voting rights; shares issued and outstanding: 2000-6,105; 1999-6,712 61 67 Common stock, $0.01 par value; shares issued and outstanding: 2000-70,756; 1999-59,966 708 600 Additional paid-in capital 733,224 728,038 Accumulated deficit (1,014,802) (899,671) ----------- ---------- Total (280,775) (170,910) ----------- ---------- $ 2,103,910 $2,137,182 =========== ========== See notes to consolidated financial statements
3 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (AMOUNTS IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ------------------------ 2000 1999 --------- -------- Cash flows from operating activities: Net loss $(115,131) $(81,457) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Compensation paid in stock - 19,241 Depreciation and amortization 97,439 106,529 Amortization of discount and expense on debt 4,856 5,419 Amortization of deferred (gains) losses on sale and leaseback of certain aircraft and engines (820) (2,655) Extraordinary loss on extinguishment of debt - 866 Equity in undistributed earnings of affiliates not consolidated (29,217) (17,047) Net (gains) losses on disposition of assets (3,885) 716 Change in operating assets and liabilities: Decrease (increase) in: Receivables (90,662) (72,787) Inventories (6,106) (22) Prepaid expenses and other current assets (26,736) (10,215) Other assets (4,182) (7,920) Increase (decrease) in: Accounts payable and accrued expenses 53,357 59,364 Advance ticket sales 105,925 77,510 Other noncurrent liabilities and deferred credits 22,909 (7,690) --------- -------- Net cash provided 7,747 69,852 --------- -------- Cash flows from investing activities: Proceeds from sales of property 9,652 19,624 Capital expenditures, including aircraft pre-delivery deposits (39,569) (110,984) Return of pre-delivery deposits related to leased aircraft - 23,712 Net (increase) decrease in investments, receivables and other 19,238 (1,425) --------- -------- Net cash used (10,679) (69,073) --------- -------- Cash flows from financing activities: Proceeds from sale and leaseback of certain aircraft and engines 94,409 107,967 Repayments on long-term debt and capital lease obligations (114,858) (104,024) Cash dividends paid on preferred stock - (17,590) Net proceeds from exercise of warrants and options - 441 --------- -------- Net cash used (20,449) (13,206) --------- -------- Net decrease in cash and cash equivalents (23,381) (12,427) Cash and cash equivalents at beginning of period 180,443 252,408 --------- --------- Cash and cash equivalents at end of period $ 157,062 $ 239,981 ========= ========= See notes to consolidated financial statements
4 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (AMOUNTS IN THOUSANDS) (UNAUDITED) SUPPLEMENTAL CASH FLOW INFORMATION
NINE MONTHS ENDED SEPTEMBER 30, ---------------------- 2000 1999 ------- ------- Cash paid during the period for: Interest $57,106 $62,905 ======= ======= Income taxes $ 21 $ 16 ======= ======= Information about noncash operating, investing and financing activities: Promissory notes issued to finance aircraft acquisition $ 14 $ - ======= ======= Promissory notes issued to finance aircraft predelivery payments $23,798 $51,721 ======= ======= Property acquired and obligations recorded under new capital lease transactions $ 951 $ 245 ======= =======
ACCOUNTING POLICY For purposes of the Statements of Consolidated Cash Flows, TWA considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. See notes to consolidated financial statements 5 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (UNAUDITED) 1. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Trans World Airlines, Inc. ("TWA" or the "Company") and its subsidiaries. The results of Worldspan, L.P. ("Worldspan"), a 26.315% owned affiliate, are recorded under the equity method and are included in the Statements of Consolidated Operations in Other Charges (Credits). The unaudited consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission but do not include all information and footnotes required by generally accepted accounting principles pursuant to such rules and regulations. The consolidated financial statements include all adjustments, which are of a normal recurring nature and are necessary, in the opinion of management, for a fair presentation of the results for these interim periods. These consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The consolidated balance sheet at December 31, 1999 has been derived from the audited consolidated financial statements at that date. Certain amounts previously reported have been reclassified to conform with the current presentation. The consolidated financial results on an interim basis are not necessarily indicative of future financial results on either an interim or annual basis. TWA's air transportation business has historically experienced seasonal changes with the second and third quarters of the calendar year generally producing better operating results than the first and fourth quarters, although operational adjustments with the intent of reducing the level of seasonality have been, and continue to be, implemented. Accordingly, the results for the three months and nine months ended September 30, 2000 should not be read as indicators of results for the full year. 2. INCOME TAXES The tax provisions/benefits recorded in the third quarters of 2000 and 1999 reflect the reversal of previously recorded tax provisions/ benefits due to management's expectation of taxable losses for the full years of 2000 and 1999, and the uncertainty of realization of the benefits of any such tax losses in future periods. 3. LOSS PER SHARE In computing the loss applicable to common shares for the three months and nine months ended September 30, 2000, the net loss has been increased by dividend requirements on the 8% Cumulative Convertible Exchangeable Preferred Stock (the "8% Preferred Stock") and the 9 1/4% Cumulative Convertible Exchangeable Preferred Stock (the "9 1/4% Preferred Stock"). In computing the related net loss per share, the loss applicable to common shares has been divided by the aggregate average number of outstanding shares of common stock (72.7 million and 68.9 million for the three months and nine months ended September 30, 2000, respectively) including 2.0 million shares to be issued to IAM- represented employees as discussed in Note 8, and employee preferred stock (6.1 million and 6.3 million for the three months and nine months ended September 30, 2000, respectively) which, with the exception of certain special voting rights, is the functional 6 equivalent of common stock. Diluted earnings per share are the same as basic earnings per share for the periods presented as the impact of stock options, warrants or potential issuances of additional common stock or employee preferred stock in the three month and nine month periods ended September 30, 2000 would have been anti-dilutive. Cash dividends of $17.6 million on preferred stock were paid in the first nine months of 1999, however, the Board of Directors determined not to declare the payment of the dividend on either issue of preferred stock during the first three quarters of 2000. As of September 30, 2000, cumulative unpaid preferred stock dividends aggregated $10.6 million. The loss applicable to common shares for the three months and nine months ended September 30, 1999 have likewise been adjusted by dividend requirements on the 8% Preferred Stock and the 9 1/4% Preferred Stock. In computing the related net loss per share, the loss applicable to common shares has been divided by the aggregate average number of outstanding shares of common stock (61.5 million and 59.5 million for the three months and nine months ended September 30, 1999, respectively) including 3.0 million shares to be issued to IAM-represented employees as discussed in Note 8, and employee preferred stock (7.0 million and 7.2 million for the three months and nine months ended September 30, 1999) which, with the exception of certain special voting rights, is the functional equivalent of common stock. Diluted earnings per share are the same as basic earnings per share for the periods presented as the impact of stock options, warrants or potential issuances of additional common stock or employee preferred stock in the three month and nine month periods ended September 30, 1999 would have been anti-dilutive. 4. PROPERTY AND DISPOSITION OF ASSETS The Company has included in Investments, receivables and other the net book value of its grounded L-1011 and B-747 aircraft as such aircraft have been retired from service and are currently held for sale. The carrying value of these aircraft at September 30, 2000 and 1999 was $9.6 million and $19.7 million, respectively. During the nine months ended September 30, 2000 and 1999, disposition of assets resulted in net gains of $3.9 million and net losses of $0.7 million, respectively. The net gains in the first nine months of 2000 related primarily to the sale of 19 spare L-1011, B-767 and B-727 engines and five jetways. The 1999 net losses included a loss from the sale and leaseback of B-767 aircraft, partially offset by gains from the sale of L-1011 and B-727 aircraft and engines, spare L-1011 and DC9-10 engines, L-1011 simulator and the sale of TWA's investment in SATO Travel, a company which provides ticketing services ("SATO"). 7 5. SEGMENT REPORTING TWA operates one segment, that of air transportation. However, that segment is analyzed and reported in two primary geographic areas, Domestic (including Canada and the Caribbean) and International (the Atlantic division as reported to the Department of Transportation). Information related to revenues generated from operations within those geographic areas is presented below.
QUARTER ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- ----------------------- 2000 1999 2000 1999 ------ ------ -------- -------- Operating Revenues (in millions): Domestic $876.4 $767.1 $2,492.1 $2,224.3 International 96.3 109.3 244.5 282.7 ------ ------ -------- -------- Total $972.7 $876.4 $2,736.6 $2,507.0 ====== ====== ======== ========
TWA identifies revenues to each division based on a proration methodology of revenues generated to specific flight segments and the division in which the flight segment operates. A major portion of the Company's long-lived assets consists of its flight equipment (aircraft), which are not assigned to a specific geographic area but rather are flown across geographic boundaries. 6. SALE OF EQUANT SHARES TWA is a long-term member of the Societe Internationale de Telecommunications Aeronautiques ("SITA"), a worldwide provider of communication services to the aviation industry. In February 1999, members of SITA divested a portion of their shares in Equant N.V. ("Equant"), a telecommunication network company, through a secondary offering. As a member of SITA, TWA indirectly participated in the partial sale of its holdings in Equant in February 1999 and December 1999. In March 2000, TWA sold its remaining interest in Equant to a third party, resulting in reported gains and receipts of cash of approximately $21.3 million, $10.7 million and $16.7 million in the first quarter of 1999, fourth quarter of 1999 and first quarter of 2000, respectively. Such gains are included in Other charges and credits-net. 7. CONTINGENCIES There has not been any significant change in the status of the contingencies reflected in the notes to consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999 which, among other matters, described various contingencies and other legal actions against TWA, except as discussed in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 8. LABOR AGREEMENTS As a result of contracts which became effective August 1, 1999 between TWA and the International Association of Machinists and Aerospace Workers ("IAM"), TWA agreed to pay increases over an 18 month period that will result in wages for TWA's ground employees and flight attendants improving by the end of the term of the contract to averages ranging from 86.5% to 91.0% of industry average as determined by wage rates in contracts in effect as of June 1999. Additionally, TWA agreed to distribute 3,500,000 shares of TWA common stock to these employees. On October 7, 1999, 500,000 shares were distributed to IAM-represented flight attendants in a manner determined by the IAM and 1,000,000 shares were likewise distributed as of July 31, 2000. The remaining 2,000,000 shares will be distributed in a manner determined by the IAM to IAM- represented employees as follows: as soon as practicable after January 31, 2001 - 1,000,000 shares and January 31, 2002 - 1,000,000 shares. In conjunction with these contracts, TWA and the IAM-represented employees agreed to withdraw all pending litigation including contempt proceedings. Additionally, all outstanding grievances regarding scope, work jurisdiction, outsourcing and compensation were withdrawn. IAM- represented flight attendant employees agreed to a payment of $25.0 million in settlement of these disputed matters, to be distributed in a manner directed by the IAM. On August 31, 1999, $11.0 million was distributed and $11.0 million was distributed on August 17, 2000. The remaining payment of $3.0 million will be distributed in August 2001. Similarly, in settlement of these disputed matters, IAM-represented ground employees will receive $10.0 million to be distributed in a manner directed by the IAM no later than the following dates: November 2, 2001 - $5.0 million, and August 1, 2002 - $5.0 million. All unpaid amounts are reflected as liabilities in the consolidated financial statements. 9. ACCOUNTING FOR SALES OF AVIATOR MILES In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements," which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. Although SAB 101 does not change existing accounting rules on revenue recognition, certain changes in accounting to apply the guidance in SAB 101 may be accounted for as a change in accounting principle. Effective January 1, 2000, the Company changed its method of accounting for the sale of Aviator miles to business partners. Previously, TWA and most other major airlines accounted for the proceeds received from the sale of affinity miles as revenue during the month of sale, net of the estimated incremental cost of providing future air travel. Under the new accounting method, that portion of the revenue from the sale of miles which is estimated to reflect the fair value of future transportation to be provided will be deferred and recognized in income when the transportation is provided. The remaining portion of the sale proceeds will continue to be recognized at the time of sale as other revenue. The Company believes the new method results in better matching of revenue with the period in which travel services are provided. The cumulative effect of this change resulted in a charge to earnings of $12.8 million in the first quarter of 2000. Prior period financial statements have not been restated. If the newly adopted policy had been applied in the prior year, the impact on net income would have been immaterial. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements made below relating to plans, conditions, objectives, and economic performance go beyond historical information and may provide an indication of future financial condition or results of operations. To that extent, they are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and each is subject to risks, uncertainties and assumptions that could cause actual results to differ from those in the forward-looking statements. The words "believe," "expect," "intend," "estimate," "anticipate," "will," and similar expressions identify forward-looking statements. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. In any event, these forward- looking statements speak only as of their dates, and the Company undertakes no obligation to update or revise any of them whether as a result of new information, future events or otherwise. The following are some of the factors and uncertainties that may adversely affect future results of operations: * insufficient levels of air passenger traffic resulting from, among other things, war, threat of war, terrorism or changes in the economy; * governmental limitations on the ability of TWA to provide service to certain airports and/or foreign markets; * regulatory requirements necessitating additional capital or operating expenditures; * pricing and scheduling initiatives by competitors; * the availability and cost of capital; * increases in fuel and other operating costs; and * the adverse effects on yield of the continued implementation of the discount ticket agreement between TWA and Karabu Corp. TWA is unable to predict the potential effect of any of these uncertainties and the other uncertainties discussed herein upon its future results of operations. GENERAL TWA operates in a highly competitive, capital-intensive industry. The Company competes with one or more major airlines on most of its routes (including all routes between major cities). The airline industry has consolidated as a result of mergers and liquidations and more recently through alliances, and further consolidation may occur in the future. This consolidation has, among other things, enabled certain of the Company's major competitors to expand their international operations and increase their domestic market presence, thereby strengthening their overall operations, by transporting passengers connecting with or otherwise traveling on the alliance carriers. Such alliances will further intensify the competitive environment in which TWA operates. The rapid growth of regional jet airline affiliates represents a significant competitive challenge for TWA due to its reliance on through-hub passenger traffic. A small regional jet can now offer direct service in markets 10 that previously were served only by through-hub service. Although TWA has signed agreements with three companies which operate regional jets, TWA's current labor agreements limit the total number of regional jets that TWA may utilize. TWA began offering regional jet service in the first quarter of 2000. These issues represent a competitive challenge for the Company, which has higher operating costs than many others carriers and fewer financial resources than many of its major competitors. Small fluctuations in revenue per available seat mile ("RASM") and cost per available seat mile ("CASM") can significantly affect TWA's financial results. The Company has experienced significant operating losses on an annual basis since the early 1990s, except in 1995 when the Company's combined operating profit was $25.1 million. TWA expects the airline industry will remain extremely competitive for the foreseeable future. The Company continues to focus on implementing several strategic initiatives to improve operational reliability, schedule integrity and overall product quality in order to attract higher-yield passengers and enhance overall productivity. Key initiatives currently in progress include: * modernizing its fleet; * reducing costs and improving productivity; * implementing revenue-enhancing marketing initiatives and schedule realignments to attract higher-yield travelers; * implementing employee-related initiatives to reinforce TWA's focus on operational performance; * optimizing TWA's route structure through the opening of "focus cities" and the use of regional jet feed into TWA's system; and * better coordinating of commuter feed, turbo prop products and schedules. TWA is unable to predict whether and to what extent these initiatives will be successful. Labor Costs Wage rates for most of TWA's employees have increased recently as a result of several events. The current collective bargaining agreement between TWA and its pilots became effective September 1, 1998 and is amendable October 1, 2002. As part of the contract, TWA agreed to pay increases over four years that will result in wages for TWA's pilots improving in 2002 to 90% of the industry average as determined by wage rates in contracts in effect as of August 1998. The contract also provides for significant work rule improvements for pilots in certain areas while also granting TWA flexibility and improvements necessary to enhance its competitive position. Under the contract, TWA agreed to distribute either one million shares of TWA's common stock or $11 million in cash to its pilots at TWA's option, in four equal quarterly payments commencing in 1999. The Company made a quarterly distribution of 250,000 shares of common stock in each of April, August and November 1999 and February 2000. TWA's current agreement with the IAM for TWA flight attendant and ground employees became effective August 1, 1999 and becomes amendable on January 31, 2001. TWA agreed to salary increases over the term of the agreement that will result in wages for TWA's ground employees and flight attendants improving by the end of the term of the contract to averages ranging from 86.5% to 91.0% of industry average as determined by wage rates in contracts in effect as of June 1999. Additionally, TWA agreed to distribute 3,500,000 shares of 11 TWA common stock to these employees. On October 7, 1999, 500,000 shares were distributed to IAM-represented flight attendants in a manner determined by the IAM and 1,000,000 shares were likewise distributed as of July 31, 2000. The remaining 2,000,000 shares will be distributed in a manner determined by the IAM to IAM-represented employees as follows: as soon as practicable after January 31, 2001 - 1,000,000 shares and January 31, 2002 - 1,000,000 shares. In conjunction with these contracts, TWA and the IAM-represented employees agreed to withdraw all litigation pending as of August 1999 including contempt proceedings. Additionally, all outstanding grievances regarding scope, work jurisdiction, outsourcing and compensation were withdrawn as of that date. IAM-represented flight attendant employees agreed to a payment of $25.0 million to be distributed in a manner directed by the IAM. On August 31, 1999, $11.0 million was distributed and $11.0 million was distributed on August 17, 2000. The remaining payment of $3.0 million will occur in August 2001. Similarly, in settlement of these disputed matters, IAM-represented ground employees will receive $10.0 million to be distributed in a manner directed by the IAM by no later than the following dates: November 2, 2001 - $5.0 million, and August 1, 2002 - $5.0 million. Pursuant to the labor agreements TWA entered into in 1992, TWA agreed to pay to employees represented by the IAM a cash bonus for the amount by which overtime incurred from September 1992 through August 1995 was reduced below specified thresholds. This amount was to be offset by the failure of medical savings to meet certain specified levels during the period for the same employees. TWA and the IAM came to agreement on this obligation which was payable in three equal annual installments. The third and final installment of $9.1 million was paid on September 8, 2000. TWA also entered into agreements subsequent to the 1992 labor agreements that provide for an adjustment to existing salary rates of certain labor-represented employees based on the amount of the cash bonus for overtime to the employees represented by the IAM as described in the previous paragraph. These adjustments equated to a 4.814% increase which management made effective for all employee groups on September 1, 1998, except for pilots whose contract provided for separate increases also effective September 1, 1998. Non-contract employees of TWA additionally received a 3% increase in salary effective September 1, 1999. On October 1, 1999, a merit pay plan was put into effect which increased non-contract employee wages an average of approximately 5%. The officers of TWA did not receive either the 1998 or 1999 increases. TWA's agreements with employees could result in significant non- cash charges to future operating results. Shares granted or purchased at a discount under the Employee Stock Incentive Plan ("ESIP") will generally result in a charge equal to the fair market value of shares granted and the discount for shares purchased at the time these shares are earned or purchased. The ESIP requires TWA, from 1997 through 2002, to make grants on July 15 of each year if the average market closing price of the common stock for 30 consecutive trading days has exceeded a target price for such year. Each annual grant is cumulative. The first two target prices were realized in 1998. If the ESIP's remaining target prices (ranging from $13.10 to $17.72) for TWA common stock are realized, the minimum aggregate non-cash charge for the years 1999 to 2002 will be approximately $104.8 million based upon these target prices and the number of shares of common stock and employee preferred stock outstanding at December 31, 1999. The non-cash charge for any year, however, could be substantially higher if the then market price of TWA common stock exceeds the target prices. TWA believes it is essential to improve employee productivity as an offset to any wage increases and will continue to explore other ways to control and/or reduce operating expenses. While TWA experienced wage rate increases in 1999, it also generated 3.3% more available seat miles ("ASMs") with 4.2% fewer employees in 1999. This trend continued in the first nine months of 2000 when the Company generated 7.1% more ASMs with 2.5% fewer employees than the comparable period in 1999. On a unit cost basis (salaries, wages and benefits per ASM excluding costs associated with contract ratification), there was no increase from 1999 to 2000 reflecting an 12 overall productivity improvement in this category. However, there can be no assurance that the Company will be successful in sustaining such productivity improvements or achieving unit cost reductions. It is essential that the Company's labor costs remain favorable in comparison to its competitors. TWA's passenger traffic data, for scheduled passengers only, is shown in the table below for the indicated periods(1): 913:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, YEARS ENDED DECEMBER 31, ------------------- --------------------- ------------------------------------ 2000 1999 2000 1999 1999 1998 1997 ------ ------ ------- ------- ------- ------- -------- NORTH AMERICA Passenger revenues ($ millions) $ 800 $ 701 $ 2,276 $ 2,033 $ 2,690 $ 2,579 $ 2,526 Revenue passenger miles (millions)(2) 6,695 6,036 18,355 16,776 22,129 20,132 19,737 Available seat miles (millions)(3) 8,690 7,960 25,163 22,696 30,517 28,796 29,341 Passenger load factor(4) 77.0% 75.8% 72.9% 73.9% 72.5% 69.9% 67.3% Passenger yield (cents)(5) 11.95 cents 11.62 cents 12.40 cents 12.12 cents 12.15 cents 12.81 cents 12.80 cents Passenger revenue per available seat mile (cents)(6) 9.21 cents 8.81 cents 9.04 cents 8.96 cents 8.81 cents 8.96 cents 8.61 cents INTERNATIONAL Passenger revenues ($ millions) $ 82 $ 91 $ 204 $ 232 $ 294 $ 333 $ 412 Revenue passenger miles (millions)(2) 945 1,113 2,501 3,009 3,881 4,290 5,363 Available seat miles (millions)(3) 1,175 1,433 3,279 3,865 5,071 5,657 7,093 Passenger load factor(4) 80.5% 77.7% 76.3% 77.9% 76.5% 75.8% 75.6% Passenger yield (cents)(5) 8.65 cents 8.17 cents 8.15 cents 7.69 cents 7.58 cents 7.78 cents 7.68 cents Passenger revenue per available seat mile (cents)(6) 6.96 cents 6.35 cents 6.22 cents 5.99 cents 5.80 cents 5.90 cents 5.81 cents TOTAL SYSTEM Passenger revenues ($ millions) $ 882 $ 792 $ 2,480 $ 2,265 $ 2,984 $ 2,912 $ 2,938 Revenue passenger miles (millions)(2) 7,640 7,149 20,856 19,785 26,010 24,422 25,100 Available seat miles (millions)(3) 9,865 9,393 28,442 26,561 35,588 34,453 36,434 Passenger load factor(4) 77.5% 76.1% 73.3% 74.5% 73.1% 70.9% 68.9% Passenger yield (cents)(5) 11.54 cents 11.08 cents 11.89 cents 11.45 cents 11.47 cents 11.93 cents 11.70 cents Passenger revenue per available seat mile (cents)(6) 8.94 cents 8.43 cents 8.72 cents 8.53 cents 8.38 cents 8.45 cents 8.06 cents Operating cost per available seat mile (cents)(7) 9.72 cents 9.41 cents 9.75 cents 9.42 cents 9.50 cents 9.31 cents 8.99 cents Operating cost per available seat mile excluding fuel (cents)(7) 7.98 cents 8.22 cents 8.15 cents 8.39 cents 8.40 cents 8.25 cents 7.66 cents Average daily utilization per aircraft (hours)(8) 9.83 9.82 9.82 9.77 9.67 9.77 9.38 Aircraft in fleet being operated at end of period 189 191 189 191 183 185 185 - ------ (1) Excludes subsidiary companies. Certain revenue and unit revenue information previously reported has been reclassified to conform with the current presentation. (2) The number of scheduled miles flown by revenue passengers. (3) The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown. (4) Revenue passenger miles divided by available seat miles. (5) Passenger revenue per revenue passenger mile. (6) Passenger revenue divided by scheduled available seat miles. (7) Operating expenses, excluding special charges, other nonrecurring charges, subsidiaries and regional jet operations, divided by total available seat miles. (8) The average block hours flown per day in revenue service per aircraft.
13 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1999 During the third quarter of 2000, TWA reported an operating loss of $11.0 million compared to a third quarter 1999 operating loss of $58.9 million, a favorable change of $47.9 million. The 1999 operating loss included a non-recurring charge of $33.5 million related to the ratification on July 22, 1999 of the labor agreements for employees represented by the IAM. The Company reported a third quarter 2000 pre- tax loss of $9.6 million, which was a decrease of $44.6 million from the 1999 pre-tax loss of $54.2 million. The net loss of $34.8 million in the third quarter of 2000, which included a non-operating pre-tax gain of $10.4 million from TWA's share of a favorable litigation judgment awarded to Worldspan, represented an $18.9 million decrease from the net loss of $53.7 million in the third quarter of 1999, which included a $16.0 million non-operating pre-tax gain from the sale of TWA's warrants in Priceline.com. Total operating revenues were $972.7 million in the third quarter of 2000, a $96.3 million increase from operating revenues of $876.4 million for the comparable period of 1999. Passenger revenue for the third quarter of $881.9 million improved $89.7 million over passenger revenue of $792.2 million in the third quarter of 1999 largely due to more efficient utilization of its revitalized fleet and changes in its route structure. In the first quarter of 2000, the Company introduced the first regional jets into its route structure through code-sharing agreements that contributed to both the increase in passenger revenue and the $5.2 million increase in all other revenues in the third quarter 2000. System-wide capacity, as measured by scheduled ASMs, increased 5.0% in the third quarter of 2000 over the comparable period of 1999. Domestic ASMs increased 9.2% while international ASMs decreased 18.0%. Revenue passenger miles (RPMs) in scheduled service for the quarter were 7,640.4 million compared with 7,148.5 million RPMs in the third quarter of 1999 representing a 6.9% increase. The system passenger load factor increased 1.4 percentage points in the third quarter of 2000 versus the same period in 1999 to 77.5% from 76.1% resulting from a greater increase in RPMs than ASMs. System yield increased 4.2% to 11.54 cents in the third quarter of 2000 compared to 11.08 cents in 1999 reflecting higher overall industry fare levels and improvements in TWA's domestic front cabin yield partly in response to increased marketing efforts in support of TWA's special FirstUp fare. RASM increased year over year to 8.94 cents in the third quarter of 2000 from 8.43 cents in the third quarter of 1999. Since September 1999, TWA has taken delivery of 27 new aircraft of which 14 aircraft were delivered in 1999 and 13 aircraft were delivered in the first nine months of 2000. CASM increased 3.3% to 9.72 cents from 9.41 cents for the third quarter of 1999. The CASM increase was heavily impacted by increased fuel costs and the increase in aircraft rental expense resulting from the replacement of older aircraft with new more modern equipment. Operating expenses increased $48.4 million during the third quarter of 2000 to $983.7 million from $935.3 million during the third quarter of 1999, representing a net change in the following expense groups: * Salaries, wages and benefits were $336.4 million during the third quarter of 2000 compared to $327.3 million during the third quarter of 1999, an increase of $9.1 million. The average number of full-time equivalent employees decreased 2.6% to 20,432 in the third quarter of 2000 versus 20,982 in the third quarter of 1999. This headcount reduction was more than offset by August 1, 1999 and 2000 salary increases to IAM-represented employees, September 1, 1999 and 2000 increases in pilot salary as provided in their current contract, and a 3% salary increase granted to non-contract employees effective September 1, 1999. On October 1, 1999, a merit pay plan was put into effect which increased non- contract employee wages an average of approximately 5%. Additionally, TWA's third quarter 2000 costs for its trust plans contributed $5.4 million to the overall increase due to the new IAM Pension Fund effective January 2000. 14 * Costs associated with contract ratification were $33.5 million during the third quarter of 1999 which represented the net charge for non-recurring costs related to the ratification on July 22, 1999, of the labor agreements for employees represented by the IAM. These costs included $35.0 million in litigation settlement costs, $16.0 million for common stock to be issued to IAM-represented employees, and $1.4 million for union advisory costs reimbursed by the Company, net of amounts previously accrued. The contracts became effective August 1, 1999. There were no similar charges in the third quarter 2000. * Aircraft fuel and oil expense of $170.9 million for the third quarter of 2000 was $58.9 million greater than $112.0 million recorded in the third quarter of 1999 due to an increase in the average cost per gallon to 97.0 cents in 2000 from 62.6 cents in 1999. * Passenger sales commission expense of $32.4 million in the third quarter of 2000 was $17.0 million less than the expense recorded in the third quarter of 1999 primarily due to a 13% decrease in the percentage of commissionable tickets sold and an overall 34% reduction in commission rates. The standard commission rates generally decreased in 2000 to 5% from 8% in 1999 while standard commission rates increased in certain selected markets in order to meet competition. * Aircraft maintenance material and repairs expense of $34.9 million for the third quarter of 2000 represents a decrease of $3.6 million from $38.5 million during the same period of 1999. The primary factor contributing to this decrease was a reduction in engine material requirements and the effect of adding new, lower maintenance B-757, B-767, B-717 and MD- 80 aircraft to the fleet. * Depreciation and amortization expense decreased $2.1 million to $32.1 million in the third quarter of 2000 from $34.2 million in the third quarter of 1999. The decrease resulted primarily from the write-off of the carrying value of international routes in the fourth quarter of 1999 and a reduction in expense for ground equipment. * Aircraft lease rentals increased $29.3 million to $141.3 million in the third quarter of 2000 from $112.0 million in the third quarter of 1999. This increase includes rentals on 41 new aircraft delivered during and since the third quarter 1999, in addition to the sale and leaseback of B-767 and B-757 aircraft as part of TWA's aggressive fleet renewal plan. * Other rent and landing fees were $48.3 million in the third quarter of 2000 versus $51.9 million in the third quarter of 1999, a decrease of $3.6 million. The decrease resulted primarily from the closure of terminal six at JFK in December 1999 and reduced space rental at LAX. * All other operating expenses of $187.4 million in the third quarter of 2000 were $10.9 million more than the $176.5 million recorded in the third quarter of 1999, primarily represented by increases in computerized reservation system fees ($5.4 million) and expenses related to the Trans World Express regional jet code-sharing agreements ($13.3 million), partially offset by a reduction in consulting fees ($3.3 million). Other charges (credits) were a net credit of $1.4 million during the third quarter of 2000 compared to a net credit of $4.7 million for the third quarter of 1999. Interest expense decreased $2.0 million in the third quarter of 2000 from the same period in 1999 as a result of the retirement of certain debt in 1999 and 2000. Interest and investment income decreased $1.0 million in the third quarter of 2000 primarily due to a decrease in the level of invested funds. Net gains from the disposition of assets were approximately the same during the third quarters of 2000 and 1999, respectively. Other charges and credits - net decreased $4.3 million in the third 15 quarter of 2000 compared to the third quarter of 1999 primarily due to the 1999 gain of $16.0 million from the sale of warrants to purchase 312,500 shares of Priceline.com stock with no comparable transaction in 2000. Also contributing to this net change was an increase of $10.6 million in TWA's share of estimated earnings in Worldspan in the third quarter of 2000, which included $10.4 million from a favorable litigation judgment awarded to Worldspan, as compared to the earnings recorded in the comparable period of 1999. A tax provision of $25.2 million was recorded in the third quarter of 2000 compared to a tax benefit of $0.5 million in the third quarter of 1999 (see Note 2 to Consolidated Financial Statements). The Company had a net loss of $34.8 million in the third quarter of 2000 compared to a net loss of $53.7 million in the same period of 1999. RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 1999 For the first nine months of 2000, TWA reported an operating loss of $99.6 million compared to a prior year operating loss of $78.2 million, an unfavorable change of $21.4 million. The 1999 operating loss included a non-recurring charge of $37.8 million related to the ratification on July 22, 1999 of the labor agreements for employees represented by the IAM. The Company reported a pre-tax loss of $101.2 million in the first nine months of 2000, which included non-operating gains of $10.4 million from TWA's share of a favorable litigation judgment awarded to Worldspan and $16.7 million from sale of TWA's remaining holdings in Equant. This pre-tax loss represented an increase of $21.1 million over the 1999 pre-tax loss of $80.1 million, which included gains from the sales of the Company's interests in Equant and Priceline.com aggregating $37.3 million. The net loss of $115.1 million in the first nine months of 2000 represented a $33.6 million increase over the net loss of $81.5 million for the comparable period of 1999. The net loss for the first nine months of 2000 included a charge of $12.8 million for the cumulative effect of accounting change related to a change in method of accounting for the sale of Aviator miles to business partners in the Company's frequent flyer program. Total operating revenues were $2,736.6 million in the first nine months of 2000, a $229.6 million increase over operating revenues of $2,507.0 million for the comparable period of 1999. Passenger revenue for the first nine months of $2,479.5 million improved $214.7 million over passenger revenue of $2,264.8 million from the prior year period largely due to more efficient utilization of its revitalized fleet and changes in its route structure. In the first quarter of 2000, the Company introduced the first regional jets into its route structure through code-sharing agreements that contributed to both the increase in passenger revenue and the $13.3 million increase in all other revenues. System-wide capacity, as measured by scheduled ASMs, increased 7.1% in the first nine months of 2000 over the comparable period of 1999. Domestic ASMs increased 10.9% while international ASMs decreased 15.2%. Revenue passenger miles (RPMs) in scheduled service for the quarter were 20,855.5 million compared with 19,785.1 million RPMs in the first nine months of 1999 representing a 5.4% increase. The system passenger load factor decreased 1.2 percentage points in the first nine months of 2000 versus the same period in 1999 to 73.3% from 74.5% resulting from a greater increase in ASMs than RPMs. System yield increased 3.8% to 11.89 cents in the first nine months of 2000 compared to 11.45 cents in 1999 reflecting higher overall industry fare levels and improvements in TWA's domestic front cabin yield partly in response to increased marketing efforts in support of TWA's special FirstUp fare. RASM increased year over year to 8.72 cents in the first nine months of 2000 from 8.53 cents in the first nine months of 1999. Since September 1999, TWA has taken delivery of 27 new aircraft of which 14 aircraft were delivered in 1999 and 13 aircraft were delivered in the first nine months of 2000. Operating expenses per available seat mile (CASM) increased 3.5% to 9.75 cents from 9.42 cents for the 16 first nine months of 1999. The CASM increase was heavily impacted by increased fuel costs and the increase in aircraft rental expense resulting from the replacement of older aircraft with new, modern equipment. Operating expenses increased $251.0 million during the first nine months of 2000 to $2,836.2 million from $2,585.2 million during the first nine months of 1999, representing a net change in the following expense groups: * Salaries, wages and benefits were $998.4 million during the first nine months of 2000 compared to $944.2 million during the first nine months of 1999, an increase of $54.2 million. The average number of full-time equivalent employees decreased 2.5% to 20,537 in the first nine months of 2000 versus 21,068 in the first nine months of 1999. This headcount reduction was more than offset by August 1, 1999 and 2000 salary increases to IAM-represented employees, September 1, 1999 and 2000 increases in pilot salary as provided in their current contract, and a 3% salary increase granted to non-contract employees effective September 1, 1999. On October 1, 1999, a merit pay plan was put into effect which increased non-contract employee wages an average of approximately 5%. Additionally, TWA's first nine months of 2000 costs for its trust plans contributed $20.2 million to the overall increase when compared to the first nine months of 1999 primarily due to the new IAM Pension Fund effective January 2000. * Costs associated with contract ratification were $37.8 million during the nine months ended September 30, 1999 which represented the net charge for non-recurring costs related to the ratification on July 22, 1999, of the labor agreements for employees represented by the IAM. These costs included $35.0 million in litigation settlement costs, $16.0 million for common stock to be issued to IAM- represented employees, and $1.4 million for union advisory costs reimbursed by the Company, net of amounts previously accrued. The contracts became effective August 1, 1999. There were no similar charges in the nine months ended September 30, 2000. * Aircraft fuel and oil expense of $456.3 million for the first nine months of 2000 was $179.7 million greater than $276.6 million recorded in the first nine months of 1999 due to an increase in the average cost per gallon to 90.0 cents in 2000 from 53.8 cents in 1999. * Passenger sales commission expense of $100.4 million in the first nine months of 2000 was $44.4 million less than the expense recorded in the first nine months of 1999 primarily due to a 12% decrease in the percentage of commissionable tickets sold and an overall 33% reduction in commission rates. The standard commission rates generally decreased in 2000 to 5% from 8% in 1999 while standard commission rates increased in certain selected markets in order to meet competition. * Aircraft maintenance material and repairs expense of $89.9 million for the first nine months of 2000 represents a decrease of $21.5 million from $111.4 million during the same period of 1999. The primary factor contributing to this decrease was a reduction in engine material requirements and the effect of adding new lower maintenance B-757, B-767, B-717 and MD-80 aircraft to the fleet. * Depreciation and amortization expense decreased $9.1 million to $97.4 million in the first nine months of 2000 from $106.5 million in the first nine months of 1999. The decrease resulted primarily from the sale and leaseback of five B-767 aircraft and the write-off of the carrying value of international routes in the fourth quarter of 1999. 17 * Aircraft lease rentals increased $110.8 million to $411.5 million in the first nine months of 2000 from $300.7 million in the first nine months of 1999. This increase includes rentals on 52 new aircraft delivered during and since the first nine months of 1999, in addition to the sale and leaseback of B-767 and B-757 aircraft as part of TWA's aggressive fleet renewal plan. * Other rent and landing fees were $145.8 million in the first nine months of 2000 versus $148.7 million in the first nine months of 1999, a decrease of $2.9 million. The decrease resulted primarily from the closure of terminal six at JFK in December 1999, partially offset by an increase in space rentals at certain airports during 2000 compared to the first nine months of 1999. * All other operating expenses of $536.5 million in the first nine months of 2000 were $22.0 million more than the $514.5 million recorded in the first nine months of 1999, primarily represented by increases in computerized reservation system fees and expenses related to the Trans World Express regional jet code-sharing agreement, partially offset by a reduction in consulting fees. Other charges (credits) were a net charge of $1.6 million during the first nine months of 2000 compared to a net charge of $1.9 million for the first nine months of 1999. Interest expense decreased $4.7 million in the first nine months of 2000 from the same period in 1999 as a result of the retirement of certain debt in 1999 and 2000. Interest and investment income decreased $3.8 million in the first nine months of 2000 primarily due to a decrease in the level of invested funds. Net gains from the disposition of assets were $3.9 million during the first nine months of 2000 compared to a loss of $0.7 million in 1999. The net gains in the first nine months of 2000 included the sale of 19 spare L- 1011, B-767 and B-727 engines and five jetways. The net losses in 1999 included a loss from the sale and leaseback of B-767 aircraft, partially offset by gains from the sale of L-1011 and B-727 aircraft and engines, spare L-1011 and DC9-10 engines, L-1011 simulator and the sale of TWA's investment in SATO. Other charges and credits - net showed an unfavorable decline of $5.2 million in the first nine months of 2000 compared to the first nine months of 1999 due to the following factors: (i) a 1999 gain of $16.0 million from the sale of warrants to purchase 312,500 shares of Priceline.com stock with no comparable transaction in 2000; (ii) the 2000 gain from the sale of TWA's remaining holdings in Equant ($16.7 million) which was less than a similar gain recorded in the comparable period of 1999 ($21.3 million); and (iii) an increase of $12.2 million in TWA's share of estimated earnings in Worldspan, which included $10.4 million from a favorable litigation judgment awarded to Worldspan, as compared to the earnings recorded in the comparable period of 1999. A tax provision of $1.1 million was recorded in the first nine months of 2000 compared to a provision of $0.5 million in the first nine months of 1999 (see Note 2 to Consolidated Financial Statements). In December 1999, the Securities and Exchange Commission issued SAB No. 101, "Revenue Recognition in Financial Statements" which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. Although SAB 101 does not change existing accounting rules on revenue recognition, certain changes in accounting to apply the guidance in SAB 101 may be accounted for as a change in accounting principle. Effective January 1, 2000, the Company changed its method of accounting for the sale of Aviator miles to business partners. Previously, TWA and most other major airlines accounted for the proceeds received from the sale of affinity miles as revenue during the month of sale, net of the estimated incremental cost of providing future air travel. Under the new accounting method, that portion of the revenue from the sale of miles which is estimated to reflect the fair value of future transportation to be provided will be deferred and recognized in income when the transportation is provided. The remaining portion of the sale proceeds will continue to be recognized at the time of sale as other revenue. The Company believes the new method results in better matching of revenue with the period in which travel services are provided. The cumulative effect of this change resulted in a charge to earnings of $12.8 million in the first quarter of 2000. Prior period financial 18 statements have not been restated. If the newly adopted policy had been applied in the prior year, the impact on net income would have been immaterial. The Company had a net loss of $115.1 million in the first nine months of 2000 compared to a net loss of $81.5 million in the same period of 1999. The 1999 results include an extraordinary charge of $0.9 million related to the premium on the early retirement of 11 3/8% Notes and 10 1/4% Notes which were redeemed to comply with the requirements of the indentures for such notes in order to permit TWA to sell a portion of the collateral securing the 11 3/8% Notes and all of the collateral securing the 10 1/4% Notes. LIQUIDITY AND CAPITAL RESOURCES The following is a discussion of the impact of significant factors affecting TWA's liquidity position and capital resources. These comments should be read in conjunction with, and are qualified in their entirety by, the Consolidated Financial Statements and Notes thereto and many of these comments also are forward-looking statements within the meaning of Section 21E of the Exchange Act (see the first paragraph of this Item 2). Liquidity The Company's consolidated cash and cash equivalents balance at September 30, 2000 was $157.1 million, a $23.3 million decrease from the December 31, 1999 balance of $180.4 million. Operating activities provided $7.7 million in cash in the first nine months of 2000 versus cash provided of $69.9 million in 1999. The decrease in cash provided from operations resulted from an increased net loss of $33.7 million in the first nine months of 2000 as compared to the same period in 1999. In 2000, TWA's share of the estimated earnings in Worldspan, included $10.4 million from a favorable litigation judgment awarded to Worldspan, as compared to the earnings recorded in the comparable period of 1999. Both 1999 and 2000, however, include gains from the sale of shares in Equant, $21.3 million and $16.7 million, respectively. Finally, a 1999 gain of $16.0 million from the sale of warrants to purchase 312,500 shares of Priceline.com stock had no comparable transaction in 2000. Cash used by investing activities decreased to $10.7 million in the first nine months of 2000 versus $69.1 million in the first nine months of 1999. Capital expenditures (including aircraft predelivery deposits) during the first nine months of 2000 amounted to $39.6 million. This compared to $83.9 million during the first nine months of 1999 after excluding cash used to purchase one B-767-200 aircraft and related engines for $27.1 million. Asset sales during both periods were primarily limited to retired, widebody aircraft, engines and other surplus equipment. Additionally, approximately $23.7 million was provided in 1999 primarily due to the return of predelivery deposits relating to two new B-757-200 aircraft delivered in March and May 1999, which were immediately sold to and leased back under operating leases from an aircraft lessor. Cash used by financing activities was $20.4 million in the first nine months of 2000 versus $13.2 million in the same period of 1999. Proceeds from the sale and leaseback of certain aircraft were $94.4 million in the first nine months of 2000 relating to the sale and leaseback of two B-757 aircraft versus $108.0 million in the comparable period in 1999 primarily relating to the sale and leaseback of five B-767-200 and one B-757 aircraft. Repayments of long-term debt and capital lease obligations were $114.8 million in the first nine months of 2000, including $72.6 million of debt associated with the sale and leaseback of two B-757 aircraft, compared to $104.0 million in the first nine months of 1999, including $57.6 million of debt associated with the sale and leaseback of five B-767-200 aircraft. Cash dividends of $17.6 million on preferred stock were paid in the first nine months of 19 1999, however, the Board of Directors determined not to declare the payment of the dividend on either issue of preferred stock during the first three quarters of 2000. The Company's ability to improve its operating results and financial position will depend on a variety of factors, several of which are described below, and some of which are outside of management's control. The Company will face higher full year labor costs in 2000 as a result of new labor contracts entered into in 1999 and scheduled increases in 2000, offset, in part, by an anticipated reduction in head count achieved primarily through attrition. In addition, jet fuel costs have increased substantially in 2000. The Company has not hedged the costs of any of its future fuel requirements and, accordingly, until such prices abate or unless the fuel surcharges previously imposed by the Company are sufficient to cover such higher costs, such additional costs will continue to adversely affect its operating results. The Company's ability to maintain adequate liquidity to assure viability will depend on its ability to improve its operating results by generating increased revenues and controlling costs or, if insufficient, on its ability to attract new capital and, if necessary, sell or finance assets such as its interest in Worldspan. Capital Resources TWA has no unused credit lines and must satisfy all of its working capital and capital expenditure requirements from cash provided by operating activities, from external borrowings or from sales of assets. Substantially all of TWA's strategic assets, including its owned aircraft, ground equipment, gates and slots have been pledged to secure various issues of outstanding indebtedness of the Company. Sales of such assets which are not replaced would, under the terms of the applicable financing agreements, generally require payment of the proceeds from such dispositions or payment of the indebtedness secured thereby. TWA has relatively few non-strategic assets which it could monetize, many of such assets being subject to various liens and security interests which would restrict and/or limit the ability of TWA to realize any significant proceeds from the sale thereof. The Company believes that its 26.315% interest in Worldspan has substantial value, net of certain encumbrances. The Company is currently considering various alternatives to monetize this asset. Should the Company require additional liquidity and be unable to monetize its holdings in Worldspan in a timely manner and should its access to capital from outside sources be constrained, the Company may not be able to make certain capital expenditures or implement certain other aspects of its strategic plan, and the Company may therefore be unable to achieve the full benefits expected therefrom. This could adversely affect TWA's operations and future viability. The outstanding balance of the Company's 9.8% Airline Receivable Asset Backed Notes, aggregating $100 million, mature beginning in January 2001 and would require repayment within 60 days unless their maturity date is extended or is refinanced. The Company intends to extend or refinance this obligation, although no assurance can be given that it will be successful in this regard. However, these Asset Backed Notes are secured by collateral with an average value in 1999 of over $175 million which the Company believes should be sufficient to allow such financing. Commitments TWA finalized the terms of the purchase orders for 50 B-717-200 aircraft in June of 1999 and the terms of options for an additional 50 B-717-200 aircraft. Financing agreements on these B-717-200 aircraft were also finalized in June of 1999. The first B-717-200 aircraft was delivered in February 2000 and eight additional 20 aircraft were delivered by September 2000. During the fourth quarter of 2000, TWA expects to take delivery of six additional aircraft of which two of these aircraft were delivered in October 2000. In December 1999, TWA finalized the terms of the purchase orders for 38 A318 aircraft and the terms of options for an additional 75 "A320 Family" aircraft. Predelivery payments were made by TWA in December 1999 and January 2000 for A318 aircraft, totaling approximately $8.9 million; no further predelivery payments will be required until 2002. Deliveries of the 38 aircraft are scheduled to commence in 2004. Financing agreements on 25 of these A318 aircraft were also finalized in December of 1999. Should Airbus fail to provide or arrange for financing for any of the remaining 13 A318 aircraft, TWA would have the right to terminate the purchase order for those aircraft. In June, 2000, TWA finalized the terms of purchase orders for 25 A319 aircraft in addition to the A318 aircraft and "A320 aircraft" options described above. Predelivery payments totaling $4.0 million have been made by TWA and approximately $3.0 million will be due in June 2001. Financing agreements on 16 of these A319 aircraft were also finalized in June 2000. Five of the A319 aircraft are subject to cancellation by TWA. Should Airbus fail to provide or arrange for financing for any of the remaining four aircraft, TWA would have the right to terminate the purchase order for those aircraft. These aircraft will primarily replace DC-9 and MD-80 aircraft currently in TWA's fleet. Both the B-717 and the Airbus 318 and A319 financing commitments are subject to a "material adverse change" clause. Those provisions are comparable to those contained in prior agreements for the acquisition of B-757 and MD-80 aircraft. Such provisions generally allow the manufacturer to withdraw the financing commitment on one or more undelivered aircraft in the event there is a material adverse change in the financial condition of TWA which would adversely affect TWA's ability to perform under the purchase order, financing documentation or any related transaction. In the event Boeing or Airbus withdraws its financing commitment with respect to one or more of the aircraft, TWA has a comparable right to terminate the purchase order for those aircraft. In April 1999, TWA sold and leased back four B-767-200 aircraft and completed a sale/leaseback in July 1999 of a fifth such aircraft. In connection with this transaction, the Company purchased $28.8 million total principal amount of its outstanding 11 3/8% Notes and all of its outstanding 10 1/4% Senior Secured Notes due June 15, 2003 which totaled $14.5 million. These five B-767-200 aircraft were replaced with three B-767-300 aircraft from the same aircraft lessor. As of September 30, 2000, four B-767-200 aircraft had been returned and the fifth aircraft will be returned during the fourth quarter of 2000. Certain Other Capital Requirements TWA generally does not commit to expenditures for facilities and equipment, other than aircraft, before purchase and, therefore, no such significant commitments exist at the present time. TWA's ability to finance these expenditures will depend in part on TWA's financial condition at the time of the proposed expenditure. Restructuring Liabilities At December 31, 1998, TWA established a provision related to the restructuring of its international operations and the closure of the Los Angeles Reservation Office. The Company recorded a special charge of approximately $17.6 million primarily related to employee severance liabilities. During 1999, the Company incurred approximately $4.2 million of expenditures related to these provisions. Management's initial estimates of the 1998 restructuring costs were reduced by $6.8 million due to international regulatory involvement which precluded the Company from carrying out its original restructuring plan. The Company continues to expect 21 severance costs of $4.4 million to be paid to the affected respective employees during the remainder of 2000 due to these changes in operations. During 1999, the plans related to restructuring international operations were overtaken by the serious deterioration in performance on the JFK to Madrid, Barcelona, and Rome routes. In the fourth quarter of 1999, the decision was made by the Board of Directors to close these three routes. TWA established a provision related to these closures of approximately $91.6 million which included $79.3 million write-off of the value of the routes, and $12.3 million primarily related to government-mandated employee severance for approximately 200 operational, management and administrative employees. The Company has concluded settlement of expected severance costs for the restructuring in Spain and Rome, Italy. The Company continues to expect the $5.9 million remaining route closure costs will be paid during the remainder of 2000 and into the first quarter of 2001. The 1998 special charges include:
ACCRUAL AT PAID THROUGH ACCRUAL AT DECEMBER 31, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 2000 ----------------- ------------------ ------------------ Severance $6.6 $2.2 $4.4 ==== ==== ====
The 1999 special charges include:
ACCRUAL AT PAID THROUGH ACCRUAL AT DECEMBER 31, 1999 SEPTEMBER 30, 2000 SEPTEMBER 30, 2000 ----------------- ------------------ ------------------ Severance $11.4 $6.4 $5.0 Other costs 0.9 - 0.9 ----- ---- ---- $12.3 $6.4 $5.9 ===== ==== ====
Availability of NOLs TWA estimates that it had, for federal income tax purposes, net operating loss carryforwards ("NOLs") amounting to approximately $1,128 million at December 31, 1999. Such NOLs expire in 2008 through 2019 if not utilized before then to offset taxable income. Section 382 of the Internal Revenue Code of 1986, as amended, and regulations issued thereunder impose limitations on the ability of corporations to use NOLs if the corporation experiences a more than 50% change in ownership during certain periods. Changes in ownership in future periods could substantially restrict the Company's ability to utilize its tax net operating loss carryforwards. The Company believes that no such ownership change has occurred subsequent to the 1995 reorganization. There can be no assurance, however, that such an ownership change will not occur in the future. In addition, the NOLs are subject to examination by the Internal Revenue Service ("IRS") and, thus, are subject to adjustment or disallowance resulting from any such IRS examination. For financial reporting purposes, the tax benefits related to the utilization of the tax net operating loss carryforwards generated prior to the 1995 reorganization of approximately $491 million will, to the extent realized in future periods, have no impact on the Company's operating results, but instead be applied to reduce reorganization value in excess of amounts allocable to identifiable assets. 22 New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments and all hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities at their fair values. Accounting for changes in the fair value of a derivative depends on its designation and effectiveness. For derivatives that qualify as effective hedges, the change in fair value will have no impact on earnings until the hedged item affects earnings. For derivatives that are not designated as hedging instruments, or for the ineffective portion of a hedging instrument, the change in fair value will affect current period earnings. With the deferral of the effective date of Statement No. 133, the Company will adopt this standard during its first quarter of fiscal 2001 and does not presently believe that it will have a significant effect on its results of operations or cash flows. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The risk inherent in the Company's market risk sensitive instruments and positions is the potential loss arising from adverse changes in those factors. TWA is susceptible to certain risks related to changes in the cost of jet fuel, changes in interest rates and foreign currency exchange rate fluctuations. The Company does not purchase or hold any derivative financial instruments for trading purposes. Aircraft Fuel Airline operators are inherently dependent upon energy to operate and, therefore, are impacted by changes in jet fuel prices. Jet fuel and oil consumed in the first nine months of 2000 represented approximately 16.1% of TWA's operating expenses. TWA endeavors to acquire jet fuel at the lowest prevailing prices possible. TWA's earnings are affected by changes in the price and availability of aircraft fuel. The Company hedges its exposure to jet fuel price market risk only on a limited basis. The fair value of outstanding derivative commodity instruments (primarily commodity swap agreements) related to the Company's jet fuel price market risk during the first nine months of 2000 and at September 30, 1999 was immaterial. A one cent change in the average cost of jet fuel would impact TWA's aircraft fuel expense by approximately $6.8 million per year, based upon consumption during the first nine months of 2000. 23 Interest Rates Airline operators are also inherently capital intensive, as the vast majority of assets are aircraft, which are long lived. TWA's exposure to market risk associated with changes in interest rates relates primarily to its debt obligations. The Company does not have significant exposure to changes in cash flows resulting from changes in interest rates as substantially all its long-term debt carries fixed rates of interest. The nature of fixed rate obligations does expose the Company to the risk of changes in the fair value of these instruments. The Company has outstanding debt of $592 million, net of unamortized discounts and including current maturities at September 30, 2000. The contractual maturities of long-term debt and the associated average interest rates are as follows:
CONTRACTUAL AMOUNTS WEIGHTED AVERAGE MATURITY DATE IN THOUSANDS INTEREST RATE ------------- ------------ ---------------- 2000 $ 35,269 9.20% 2001 169,779 9.42% 2002 66,270 11.56% 2003 31,618 10.72% 2004 141,975 11.55% Thereafter 154,118 11.07%
Foreign Currency Exchange Rates Airline operators who fly internationally are exposed to the effect of foreign exchange rate fluctuations on the U.S. dollar value of foreign currency-denominated operating revenues and expenses. While international operations generated 8.2% of TWA's operating revenues in the first nine months of 2000, a substantial portion of these related ticket sales are denominated in U.S. dollars. Additionally, no single foreign currency is a material portion of that amount. The Company does not have significant exposure to fluctuations in these currency rates because of the short-term nature of maturities of receivables and payables related to these operations. The Company has not undertaken additional actions to cover this currency risk and does not engage in any other currency risk management activity. 24 PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION The Company's Board of Directors did not declare the dividend payments on either the 8% Preferred Stock or the 9 1/4% Preferred Stock which were due on March 15, June 15 and September 15, 2000, in the total amounts of $5.2 million, $1.9 million and $3.5 million, respectively. If the dividends on the 8% and 9 1/4% Preferred Stock were to continue in arrears and if the arrears were to aggregate in an amount equal to at least six quarterly dividends on either issue, the holders of the 8% Preferred Stock and the 9 1/4% Preferred Stock voting separately as a class without regard to the series, will be entitled to elect at the next annual or special meeting of the shareholders of the Company, two directors to serve until all dividends accumulated and unpaid have been paid or declared and funds set aside to provide for payment in full. As of October 31, 2000, 1,391,840 shares of 8% Preferred Stock had been converted into 3,433,665 shares of TWA common stock, leaving 2,477,160 shares of 8% Preferred Stock outstanding. Each share of 8% Preferred Stock is convertible into 2.467 shares of TWA common stock. As of October 31, 2000, 1,046,825 shares of 9 1/4% Preferred Stock had been converted into 6,625,348 shares of TWA common stock, leaving 678,175 shares of 9 1/4% Preferred Stock outstanding. Each share of 9 1/4% Preferred Stock is convertible into 6.329 shares of TWA common stock. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS *2.1 - Joint Plan of Reorganization, dated May 12, 1995 (Appendix B to the Registrant's Registration Statement on Form S-4, Registration Number 33-84944, as amended) *2.2 - Modification to Joint Plan of Reorganization, dated July 14, 1995 and Supplemental Modifications to Joint Plan of Reorganization dated August 2, 1995 (Exhibit 2.5 to 6/95 10-Q) *2.3 - Findings of Fact, Conclusions of Law and Order Confirming Modified Joint Plan of Reorganization, dated August 4, 1995, with Exhibits A-B attached (Exhibit 2.6 to 6/95 10-Q) *2.4 - Final Decree, dated December 28, 1995, related to the 1995 Reorganization (Exhibit 2.7 to 12/31/95 Form 10-K) *3(i) - Third Amended and Restated Certificate of Incorporation of the Registrant (Exhibit 3(i) to the Registrant's Registration Statement on Form S-4, Registration Number 333-26645) *3(ii) - Amended and Restated By-Laws of Trans World Airlines, Inc., effective September 28, 1999 (Exhibit 3(ii) to 9/99 10-Q) *4.1 - Voting Trust Agreement, dated November 3, 1993, between TWA and LaSalle National Trust, N.A. as trustee (Exhibit 4.3 to 9/93 10-Q) *4.2 - IAM Trans World Employees' Stock Ownership Plan and related Trust Agreement, dated August 31, 1993, between TWA, the IAM Plan Trustee Committee and the IAM Trustee (Exhibit to 9/93 10-Q) *4.3 - IFFA Trans World Employees' Stock Ownership Plan and related Trust Agreement, dated August 31, 1993, between TWA, the IFFA Plan Trustee Committee and the IFFA Trustee (Exhibit 4.5 to 9/93 10-Q) *4.4 - Trans World Airlines, Inc. Employee Stock Ownership Plan, dated August 31, 1993, First Amendment thereto, dated October 31, 1993, and related Trust Agreement, dated August 31, 1993, between TWA and the ESOP Trustee (Exhibit 4.6 to 9/93 10-Q) *4.5 - ALPA Stock Trust, dated August 31, 1993, between TWA and the ALPA Trustee (Exhibit 4.7 to 9/93 10-Q) *4.6 - Stockholders Agreement, dated November 3, 1993, among TWA, LaSalle National Trust, N.A., as Voting Trustee and the ALPA Trustee, IAM Trustee, IFFA Trustee and Other Employee Trustee (each as defined therein), as amended by the Addendum to Stockholders dated November 3, 1993 (Exhibit 4.8 to 9/93 10-Q) 25 *4.7 - Registration Rights Agreement, dated November 3, 1993, between TWA and the Initial Significant Holders (Exhibit 4.9 to 9/93 10-Q) *4.8 - Indenture between TWA and Harris Trust and Savings Bank, dated November 3, 1993 relating to TWA's 8% Senior Secured Notes Due 2000 (Exhibit 4.11 to 9/93 10-Q) *4.9 - Indenture between TWA and American National Bank and Trust Company of Chicago, N.A., dated November 3, 1993 relating to TWA's 8% Secured Notes Due 2001 (Exhibit 4.12 to 9/93 10-Q) *4.10 - The TWA Air Line Pilots 1995 Employee Stock Ownership Plan, effective as of January 1, 1995 (Exhibit 4.12 to 9/95 10-Q) *4.11 - TWA Air Line Pilots Supplemental Stock Plan, effective September 1, 1994 (Exhibit 4.13 to 9/95 10-Q) *4.12 - TWA Air Line Pilots Supplemental Stock Plan Trust, effective August 23, 1995 (Exhibit 4.14 to 9/95 10-Q) *4.13 - TWA Air Line Pilots Supplemental Stock Plan Custodial Agreement, effective August 23, 1995 (Exhibit 4.15 to 9/95 10-Q) *4.14 - Form of Indenture relating to TWA's 8% Convertible Subordinated Debentures due 2006 (Exhibit 4.16 to Registrants Registration Statement on Form S-3, No. 333-04977) *4.15 - Indenture dated as of March 31, 1997 between TWA and First Security Bank, National Association relating to TWA's 12% Senior Secured Notes due 2002 (Exhibit 4.15 to Registrant's Registration Statement on Form S-4, No. 333-26645) *4.16 - Form of 12% Senior Secured Note due 2002 (contained in Indenture filed as Exhibit 4.15) *4.17 - Registration Rights Agreement dated as of March 31, 1997 between the Company and the Initial Purchaser relating to the 12% Senior Secured Notes due 2002 and the warrants to purchase 126.26 shares of TWA Common Stock (Exhibit 4.17 to Registrant's Registration Statement on Form S-4, No. 333-26645) *4.18 - Warrant Agreement dated as of March 31, 1997 between the Company and American Stock Transfer & Trust Company, as Warrant Agent, relating to warrants to purchase 126.26 shares of TWA Common Stock (Exhibit 4.18 to Registrant's Registration Statement on Form S-4, No. 333-26645) *4.19 - Form of Indenture relating to TWA's 9 1/4% Convertible Subordinated Debentures due 2007 (Exhibit 4.19 to Registrant's Registration Statement on Form S-3, No. 333-44689) 26 *4.20 - Registration Rights Agreement dated as of December 2, 1997 between the Company and the Initial Purchasers (Exhibit 4.20 to Registrant's Registration Statement on Form S-3, No. 333-44689) *4.21 - Indenture dated as of December 9, 1997 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11 1/2% Senior Secured Notes due 2004 (Exhibit 4.21 to Registrant's Registration Statement on Form S-4, No. 333-44661) *4.22 - Form 11 1/2% Senior Secured Note due 2004 (contained in Indenture filed as Exhibit 4.21) *4.23 - Registration Rights Agreement dated as of December 9, 1997 among the Company and Lazard Freres & Co. LLC and PaineWebber Incorporated, as initial purchasers, relating to TWA's 11 1/2% Senior Secured Notes due 2004 (Exhibit 4.23 to Registrant's Registration Statement on Form S-4, No. 333-44661) *4.24 - Sale and Service Agreement dated as of December 30, 1997 between TWA and Constellation Finance LLC, as purchaser, relating to TWA's receivables (Exhibit 4.24 to Registrant's Registration Statement on Form S-4, No. 333-44661) *4.25 - Registration Rights Agreement dated as of March 3, 1998 between the Company and the Initial Purchaser (Exhibit 4.25 to Registrant's Registration Statement on Form S-4, No. 333-59405) *4.26 - Indenture dated as of March 3, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11 3/8% Senior Notes due 2006 (Exhibit 4.26 to Registrant's Registration Statement on Form S-4, No. 333-59405) *4.27 - Aircraft Sale and Note Purchase Agreement dated as of April 9, 1998 among TWA, First Security Bank, National Association, as Owner Trustee and Seven Sixty Seven Leasing, Inc. (Exhibit No. 4.27 to Registrant's Registration Statement on Form S-4, No. 333-59405) *4.28 - Indenture dated as of April 21, 1998 by and between TWA and First Security Bank, National Association, as Trustee, relating to TWA's 11 3/8% Senior Secured Notes due 2003 (Exhibit No. 4.28 to Registrant's Registration Statement on Form S-4, No. 333-59405) *4.29 - Form of 11 3/8% Senior Secured Notes due 2003 (contained as Exhibit 1 to Rule 144A/Regulation S Appendix to Indenture in Exhibit 4.28) *4.30 - Registration Rights Agreement dated as of April 21, 1998 between the Company, Lazard Freres & Co. LLC and First Security Bank, National Association relating to the 11 3/8% Senior Secured Notes due 2003 (Exhibit 4.31 to Registrant's Registration Statement on Form S-3, No. 333-56991) 27 11 - Statement of computation of per share earnings 27 - Financial Data Schedule (b) REPORTS ON FORM 8-K No reports on Form 8-K were filed during the third quarter of 2000. [FN] - ------ *Incorporated by reference 28 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRANS WORLD AIRLINES, INC. Dated: November 14, 2000 By: /s/ Michael J. Palumbo ------------------------ Michael J. Palumbo Executive Vice President and Chief Financial Officer 29 EX-27 3 ex27.xfd FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 1,000 9-MOS Jan-01-2000 Dec-31-2000 Sep-30-2000 157,062 0 260,208 14,476 106,333 589,085 815,605 326,977 2,103,910 1,234,646 514,550 0 95 708 (281,578) 2,103,910 0 2,736,622 0 2,836,215 0 2,579 67,121 (101,236) 1,051 (102,287) 0 0 (12,844) (115,131) (1.67) (1.67)
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