-----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, QvsAX5+j19Jwa5k9/8hjhNncS6B7OmfH1mA0SYTs7ShgcMgolFAJiXpgu02ex8pV EQvRmDb402KvABZMW8tNyw== 0001068800-99-000246.txt : 19990517 0001068800-99-000246.hdr.sgml : 19990517 ACCESSION NUMBER: 0001068800-99-000246 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS WORLD AIRLINES INC /NEW/ CENTRAL INDEX KEY: 0000278327 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [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: 99623591 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 10-Q 1 TWA 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 MARCH 31, 1999 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 APRIL 30, 1999 ----------------------- ----------------- Common Stock, par value $0.01 per share 58,531,835 ========================================================================= PART I. FINANCIAL INFORMATION Item 1. Financial Statements TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED OPERATIONS For the Three Months Ended March 31, 1999 and 1998 (Amounts in Thousands Except Per Share Amounts) (Unaudited)
Three Months Ended March 31, -------------------------- 1999 1998 -------- -------- Operating revenues: Passenger $681,190 $676,443 Freight and mail 25,264 27,444 All other 58,134 61,502 -------- -------- Total 764,588 765,389 -------- -------- Operating expenses: Salaries, wages and benefits 308,841 297,784 Earned stock compensation - 26,502 Aircraft fuel and oil 72,617 92,428 Passenger sales commissions 44,605 51,540 Aircraft maintenance materials and repairs 38,292 34,661 Depreciation and amortization 37,315 39,181 Operating lease rentals 120,768 103,906 Passenger food and beverages 20,680 21,572 All other 159,056 166,522 -------- -------- Total 802,174 834,096 -------- -------- Operating loss (37,586) (68,707) -------- -------- Other charges (credits): Interest expense 24,961 30,215 Interest and investment income (3,173) (5,266) Disposition of assets, gains and losses - net (2,010) (6,997) Other charges and credits - net (31,302) (7,101) -------- -------- Total (11,524) 10,851 -------- -------- Loss before income taxes and extraordinary items (26,062) (79,558) Provision (credit) for income taxes (4,504) (25,418) -------- -------- Loss before extraordinary items (21,558) (54,140) Extraordinary items, net of income taxes - (1,380) -------- -------- Net loss (21,558) (55,520) Preferred stock dividend requirements 5,863 5,863 -------- -------- Loss applicable to common shares $(27,421) $(61,383) ======== ======== Basic earnings per share amounts: Loss before extraordinary items $ (0.42) $ (1.04) Extraordinary items - (0.02) -------- -------- Net loss $ (0.42) $ (1.06) ======== ======== See notes to consolidated financial statements
1 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1999 and December 31, 1998 (Amounts in Thousands) ASSETS
March 31, December 31, 1999 1998 --------- ------------ (Unaudited) Current assets: Cash and cash equivalents $ 211,156 $ 252,408 Receivables, less allowance for doubtful accounts, $13,918 in 1999 and $14,459 in 1998 232,475 170,492 Spare parts, materials and supplies, less allowance for obsolescence, $20,987 in 1999 and $20,554 in 1998 97,906 99,909 Prepaid expenses and other 127,988 82,605 ---------- ---------- Total 669,525 605,414 ---------- ---------- Property: Property owned: Flight equipment 441,535 414,645 Prepayments on flight equipment 70,547 69,875 Land, buildings and improvements 69,091 68,812 Other property and equipment 73,790 72,108 ---------- ---------- Total owned property 654,963 625,440 Less accumulated depreciation 149,617 136,336 ---------- ---------- Property owned-net 505,346 489,104 ---------- ---------- Property held under capital leases: Flight equipment 176,094 176,094 Land, buildings and improvements 49,431 49,431 Other property and equipment 9,094 9,093 ---------- ---------- Total property held under capital leases 234,619 234,618 Less accumulated amortization 110,980 103,692 ---------- ---------- Property held under capital leases-net 123,639 130,926 ---------- ---------- Total property-net 628,985 620,030 ---------- ---------- Investments and other assets: Investments in affiliated companies 133,789 124,429 Investments, receivables and other 159,940 149,206 Routes, gates and slots-net 350,982 356,324 Reorganization value in excess of amounts allocable to identifiable assets-net 688,732 699,220 ---------- ---------- Total 1,333,443 1,329,179 ---------- ---------- $2,631,953 $2,554,623 ========== ========== See notes to consolidated financial statements 2 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 1999 and December 31, 1998 (Amounts in Thousands Except Per Share Amounts) LIABILITIES AND SHAREHOLDERS' EQUITY March 31, December 31, 1999 1998 --------- ------------ (Unaudited) Current liabilities: Current maturities of long-term debt $ 114,414 $ 111,538 Current obligations under capital leases 38,266 37,865 Advance ticket sales 300,350 211,340 Accounts payable, principally trade 256,587 229,368 Accounts payable to affiliated companies 7,155 7,167 Accrued expenses: Employee compensation and vacations earned 143,832 159,064 Contributions to retirement and pension trusts 15,160 12,616 Interest on debt and capital leases 31,478 33,156 Taxes 14,680 11,447 Other accrued expenses 193,822 189,278 ---------- ---------- Total accrued expenses 398,972 405,561 ---------- ---------- Total 1,115,744 1,002,839 ---------- ---------- Long-term liabilities and deferred credits: Long-term debt, less current maturities 569,313 572,372 Obligations under capital leases, less current obligations 153,725 163,046 Postretirement benefits other than pensions 499,785 496,848 Noncurrent pension liabilities 24,217 24,634 Other noncurrent liabilities and deferred credits 96,305 109,562 ---------- ---------- Total 1,343,345 1,366,462 ---------- ---------- Shareholders' equity: 8% cumulative convertible exchangeable preferred stock, $50 liquidation preference; 3,869 shares issued and outstanding 39 39 9 1/4% cumulative convertible exchangeable preferred stock, $50 liquidation preference; 1,725 shares issued and outstanding 17 17 Employee preferred stock, $0.01 liquidation preference; special voting rights; shares issued and outstanding: 1999-7,163; 1998-6,347 72 63 Common stock, $0.01 par value; shares issued and outstanding: 1999-58,255; 1998-57,768 583 578 Additional paid-in capital 739,980 730,894 Accumulated deficit (567,827) (546,269) ---------- ---------- Total 172,864 185,322 ---------- ---------- $2,631,953 $2,554,623 ========== ========== See notes to consolidated financial statements
3 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Three Months Ended March 31, 1999 and 1998 (Amounts in Thousands) (Unaudited)
Three Months Ended March 31, -------------------------- 1999 1998 -------- -------- Cash flows from operating activities: Net loss $(21,558) $(55,520) Adjustments to reconcile net loss to net cash used by operating activities: Employee earned stock compensation - 26,502 Depreciation and amortization 37,315 39,181 Amortization of discount and expense on debt 1,450 2,758 Amortization of deferred gain/loss on sale/leaseback of certain aircraft and engines (3,094) (49) Extraordinary loss on extinguishment of debt - 1,380 Equity in undistributed earnings of affiliates not consolidated (9,371) (4,556) Revenue from Icahn ticket program - (38,788) Net (gains) losses on disposition of assets (2,010) (6,997) Change in operating assets and liabilities: Decrease (increase) in: Receivables (62,000) (65,721) Inventories 1,559 73 Prepaid expenses and other current assets (45,383) (37,739) Other assets (6,122) 811 Increase (decrease) in: Accounts payable and accrued expenses 34,777 27,265 Advance ticket sales 89,010 85,233 Other noncurrent liabilities and deferred credits (5,092) (17,832) -------- -------- Net cash provided (used) 9,481 (43,999) -------- -------- Cash flows from investing activities: Proceeds from sales of property 5,946 12,809 Capital expenditures, including aircraft pre-delivery deposits (39,632) (26,005) Return of pre-delivery deposits related to leased aircraft 4,711 - Net decrease (increase) in investments, receivables and other (2,750) 4,626 -------- -------- Net cash used (31,725) (8,570) -------- -------- Cash flows from financing activities: Net proceeds from long-term debt and warrants issued - 144,938 Proceeds from sale and leaseback of certain aircraft and engines 1,874 43,176 Repayments on long-term debt and capital lease obligations (15,390) (21,543) Cash dividends paid on preferred stock (5,863) (6,151) Net proceeds from exercise of warrants and options 371 518 -------- -------- Net cash provided (used) (19,008) 160,938 -------- -------- Net increase (decrease) in cash and cash equivalents (41,252) 108,369 Cash and cash equivalents at beginning of period 252,408 237,765 -------- -------- Cash and cash equivalents at end of period $211,156 $346,134 ======== ======== See notes to consolidated financial statements
4 TRANS WORLD AIRLINES, INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Three Months Ended March 31, 1999 and 1998 (Amounts in Thousands) (Unaudited) SUPPLEMENTAL CASH FLOW INFORMATION
Three Months Ended March 31, ------------------------- 1999 1998 ------- ------- Cash paid during the period for: Interest $21,256 $30,215 ======= ======= Income taxes $ 5 $ 4 ======= ======= Information about noncash operating, investing and financing activities: Promissory notes issued to finance aircraft predelivery payments $10,248 $ 3,182 ======= ======= Aircraft held for sale reclassified from Property to Investments, Receivables and Other $ 8,582 $19,003 ======= ======= Property acquired and obligations recorded under new capital lease transactions $ - $ 703 ======= =======
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 MARCH 31, 1999 (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). Effective October 2, 1998, TWA's equity interest in Worldspan increased from 24.999% to 26.315%. The increase was a result of a distribution by Worldspan to certain existing owners of additional interest at no cost to the Company. 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 (the "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, 1998. The consolidated balance sheet at December 31, 1998 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 producing substantially 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. While the Company anticipates that the deseasonalization of operations affected thereby will reduce quarter to quarter fluctuations in the future, there can be no assurance that the reduction of seasonal fluctuations in financial operating results will be realized. Accordingly, the results for the three months ended March 31, 1999 should not be read as indicators of results for the full year. 2. INCOME TAXES The income tax benefits recorded for the three months ended March 31, 1999 and 1998 reflect quarterly effective tax rates and management's current expectation of full year pre-tax profits. Considering the high level of non-deductible expenses in relation to expected annual income (which results in both a high effective tax rate and the potential for significant changes in the effective rate from relatively small changes in pretax income levels), the income tax benefits recorded for the first quarters of 1999 and 1998 were based upon the quarterly allocable portion of certain non-deductible expenses, primarily amortization of reorganization value in excess of amounts allocable to identifiable assets, and statutory tax rates. 6 3. EXTRAORDINARY ITEMS In the three months ended March 31, 1998 the Company recorded extraordinary non-cash charges of $1.4 million related to the early extinguishment of a portion of the promissory notes issued to the Pension Benefit Guaranty Corporation (the "PBGC Notes") as a result of Karabu Corp. ("Karabu"), a company controlled by Carl Icahn, applying approximately $35.2 million in ticket proceeds as prepayments on the PBGC Notes. In December 1998, the PBGC Notes were paid in full. 4. LOSS PER SHARE In computing the loss applicable to common shares for the three months ended March 31, 1999 and 1998, 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 (58.0 million and 51.6 million for the three months ended March 31, 1999 and 1998, respectively) and employee preferred stock (7.6 million and 6.3 million for the three months ended March 31, 1999 and 1998, respectively) which, with the exception of certain special voting rights, is the functional equivalent of common stock. Diluted earnings per share have not been presented as the impact of stock options, warrants or potential issuances of additional common stock or employee preferred stock in the three month periods ended March 31, 1999 and 1998 would have been anti-dilutive. 5. PROPERTY AND DISPOSITION OF ASSETS Having completed the grounding of TWA's L-1011 and B-747 fleets in February 1998, the Company reclassified the net book value of its remaining owned L-1011 and B-747 aircraft fleet to Investments, Receivables and Other as such assets are currently held for sale. The amounts reclassified were $27.5 million and $19.0 million at March 31, 1999 and 1998, respectively. Net gains from the disposition of assets were $2.0 million and $7.0 million in first quarter 1999 and 1998, respectively. Recorded gains in 1999 included the sale of TWA's investment in SatoTravel, a company which provides ticketing services ("SATO"), and certain aircraft and engines. In 1998, gains recorded related to the sale of certain aircraft, engines and other surplus equipment. 7 6. SEGMENT REPORTING TWA operates one segment, that of air transportation. However, that segment is analyzed and reported in two primary geographic areas, Domestic 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. Quarters Ended March 31, ------------------------ 1999 1998 ------ ------ Operating Revenues (in millions): Domestic $690.1 $680.4 International 74.5 85.0 ------ ------ Total $764.6 $765.4 ====== ====== TWA identifies revenues to each division based on dollars generated by specific flight segment and the division in which each 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. 7. 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, SITA divested a portion of its shares in Equant N.V., a telecommunication network company, through a secondary offering. As a member of SITA, TWA indirectly participated in the sale of a portion of its holdings in Equant, resulting in a reported gain and receipt of cash of approximately $21.3 million. Additionally, Worldspan, an affiliate, also participated in the divestiture of Equant, resulting in the additional recognition of gain by TWA of approximately $2.6 million as an equity participant in the earnings of Worldspan. 8. 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, 1998 which, among other matters, described various contingencies and other legal actions against TWA, except as discussed in note 9 and Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 9. STATUS OF LABOR NEGOTIATIONS TWA has been engaged in negotiations with its flight attendants and ground employees, represented by the International Association of Machinists and Aerospace Workers ("the IAM"), on new collective bargaining agreements covering approximately 16,000 employees. The existing agreements became amendable as of August 31, 1997. 8 The Railway Labor Act, which governs collective bargaining activities of airline workers whose contracts have become amendable, requires employees to continue to work under the "status quo" (i.e., under the terms of employment existing before the amendable date) until they exhaust the Railway Labor Act's procedures. The Railway Labor Act also requires TWA and the IAM to bargain until an agreement is reached or until at least one of the parties petitions the National Mediation Board ("NMB") to appoint a mediator. If the mediator's efforts fail, the mediator must attempt to induce the parties to arbitrate the dispute. If either party refuses to arbitrate, then a thirty-day "cooling off" period is required prior to either party taking any self- help actions. At the request of the IAM, the NMB appointed a mediator with respect to both ground employees' and flight attendants' negotiations. On May 7, 1999, the NMB proffered binding arbitration to TWA and the IAM. While TWA accepted the proffer of arbitration, the IAM declined to arbitrate. On May 10, 1999, the NMB advised TWA and the IAM that the thirty-day cooling off period had begun and would end on June 10, 1999 at 12:01 a.m. (EDT). Although no assurance can be given that agreement will be reached within the thirty-day cooling off period, TWA remains committed to reaching new labor agreements that will provide immediate wage increases and progress over the life of a new contract to wage parity with workers performing similar jobs at other major airlines. 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. However, there can be no assurance that the Company will be successful in obtaining such productivity improvements or unit cost reductions. It is essential that the Company's labor costs remain favorable in comparison to its largest competitors. As the Company's financial resources are not as great as those of most of its competitors, any substantial increase in its labor costs as a result of any new labor agreements or any cessation or disruption of operations due to any strike or work action could be particularly damaging to the Company. The outcome of these labor negotiations and the terms of any contracts cannot be predicted at this time. 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, and each is subject to risks, uncertainties and assumptions that could cause actual results to differ from those in the 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. GENERAL TWA operates in an intensely competitive environment. 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 could further intensify the competitive environment. 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 that previously were served only by through- hub service. TWA's current IAM contracts limit TWA commuter affiliates from utilizing regional jets directly competing in these markets. These issues represent a competitive challenge for the Company, which has higher operating costs than many regional 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 and 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; * focusing on improved productivity; * implementing a series of revenue-enhancing marketing initiatives to attract higher-yield business travelers; * implementing a number of employee-related initiatives to reinforce the Company's focus on operational performance; and * optimizing TWA's route structure. 10 TWA faces a number of uncertainties that may adversely affect its future results of operations, including: * 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 service 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; * the outcome of certain ongoing labor negotiations; and * the adverse effects on yield of the continued implementation of a discount ticket program between TWA and Karabu, on the terms currently applied by Karabu. (TWA believes these terms are inconsistent with, and in violation of, the ticket agreement governing this program.) (See "Part II. Item 1. Legal Proceedings.") TWA is unable to predict the potential effect of any of these uncertainties upon its future results of operations. Labor Costs Wage rates for most of TWA's employees have increased recently as a result of several events. A new collective bargaining agreement between TWA and its pilots became effective September 1, 1998. As part of the new 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 also will distribute either one million shares of TWA's common stock or $11 million in cash to its pilots, in four equal quarterly payments commencing in 1999. TWA has the option to make each quarterly payment in shares or in cash. The Company has made the first quarterly distribution of 250,000 shares of common stock in April 1999. 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 will be due in three equal annual installments, the first of which was made in October 1998. The remaining obligation of $17.8 million is reflected as a liability in the consolidated financial statements. 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, and the officers of TWA who did not receive the increase. Management intends that the 4.814% salary adjustments will be part of any percentage increase that would be incorporated in contract amendments currently being negotiated. 11 There are certain issues relating to agreements with employees, the resolution of which could result in significant non-cash charges to future operating results of TWA. 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. As a result of the first two target prices being realized on February 17, 1998, and March 4, 1998, respectively, the Company issued an additional 2,377,084 shares on July 15, 1998, to satisfy the 1997 and 1998 ESIP grant amounts. In connection with such issuance, TWA recorded an aggregate non-cash charge in the first quarter of 1998 in the amount of $26.5 million. An aggregate non-cash charge of $1.0 million was recorded in the third quarter of 1998 to reflect the actual number of shares issued on July 15, 1998. If the ESIP's remaining target prices for TWA common stock are realized, the minimum aggregate non-cash charge for the years 1999 to 2002 will be approximately $103.4 million based upon these target prices and the number of shares of common stock and employee preferred stock outstanding at December 31, 1998. The non-cash charge for any year, however, could be substantially higher if the then market price of the TWA common stock exceeds certain target prices. In connection with certain wage scale adjustments afforded to non- contract employees, employees previously represented by the Independent Federation of Flight Attendants ("IFFA") have asserted and won an arbitration ruling with respect to the comparability of wage concessions made in 1994 that, if sustained, would require TWA to provide additional compensation to these employees. The Eighth Circuit Court of Appeals upheld a district court ruling that affirmed the arbitrator's award. TWA has filed a motion before the District Court for the Eastern District of Missouri seeking referral of the matter to the System Board of Adjustment for determination on TWA's claim that, to the extent it was unsuccessful on the merits, actions taken by TWA following issuance of the arbitrator's award and in accordance with the arbitrator's opinion have substantially, if not totally, mitigated potential damages. Accordingly, the Company has not recorded any liability for this litigation. The IAM (now collective bargaining agent for employees formerly represented by IFFA) has filed a motion requesting the district court to hold TWA in contempt of court and to order TWA to implement the arbitration award. TWA believes that pending the district court's ruling on TWA's motion to remand, TWA is not required to implement the arbitration award and the IAM's motion is without merit. The amount, if any, due under the award is incapable of being determined pending the district court's ruling on TWA's motion and, if remanded, the decision of the System Board of Adjustment. TWA has been engaged in negotiations with its flight attendants and ground employees, represented by the IAM, on new collective bargaining agreements covering approximately 16,000 employees. The existing agreements became amendable as of August 31, 1997. The Railway Labor Act, which governs collective bargaining activities of airline workers whose contracts have become amendable, requires employees to continue to work under the "status quo" (i.e., under the terms of employment existing before the amendable date) until they exhaust the Railway Labor Act's procedures. The Railway Labor Act also requires TWA and the IAM to bargain until an agreement is reached or until at least one of the parties petitions the NMB to appoint a mediator. If the mediator's efforts fail, the mediator must attempt to induce the parties to arbitrate the dispute. If either party refuses to arbitrate, then a thirty-day "cooling off" period is required prior to either party taking any self-help actions. At the request of the IAM, the NMB appointed a mediator with respect to both ground employees' and flight attendants' negotiations. On May 7, 1999, the NMB proffered binding arbitration to TWA and the IAM. While TWA accepted the proffer of arbitration, the IAM declined to arbitrate. On May 10, 1999, the NMB advised TWA and the IAM that the thirty-day cooling off period had begun and would end on June 10, 1999 at 12:01 a.m. (EDT). Although no assurance can be given that agreement will be reached within the thirty-day cooling off period, TWA remains committed to reaching new labor agreements that will provide immediate wage increases and progress over the life of a new contract to wage parity with workers performing similar jobs at other major airlines. 12 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. However, there can be no assurance that the Company will be successful in obtaining such productivity improvements or unit cost reductions. It is essential that the Company's labor costs remain favorable in comparison to its largest competitors. As the Company's financial resources are not as great as those of most of its competitors, any substantial increase in its labor costs as a result of any new labor agreements or any cessation or disruption of operations due to any strike or work action could be particularly damaging to the Company. The outcome of these labor negotiations and the terms of any contracts cannot be predicted at this time. Seasonality Due to the greater demand for air travel during the summer months, airline industry revenues for the third quarter of the year are generally significantly greater than revenues in the first and fourth quarters of the year and moderately greater than revenues in the second quarter of the year. In the last two years, TWA has attempted to reduce the seasonal nature of its business through an acceleration of its fleet renewal program, a decrease in international operations, and the restructuring of its JFK operations, with the result that the difference between TWA's seasonal average daily peak and trough capacities relating to available seat miles ("ASMs") has dropped from 20.8% in 1996 and 16.9% in 1997 to 3.9% in 1998. TWA anticipates that the seasonal variability of its financial performance will be reduced (but not eliminated) as a result of these changes; however, there can be no assurance that this deseasonalization will occur. 13 TWA's passenger traffic data, for scheduled passengers only, are shown in the table below for the indicated periods:
THREE MONTHS ENDED MARCH 31, YEARS ENDED DECEMBER 31, ------------------- --------------------------------- 1999 1998 1998 1997 1996 ---- ---- ---- ---- ---- NORTH AMERICA Passenger revenues ($ millions) $ 622 $ 610 $ 2,562 $ 2,512 $ 2,515 Revenue passenger miles (millions) 4,899 4,793 20,132 19,737 19,513 Available seat miles (millions) 7,163 7,071 28,796 29,341 30,201 Passenger load factor 68.4% 67.8% 69.9% 67.3% 64.6% Passenger yield (cents)> 12.70 cents 12.74 cents 12.72 cents 12.73 cents 12.89 cents Passenger revenue per available seat mile (cents) 8.69 cents 8.63 cents 8.90 cents 8.56 cents 8.33 cents INTERNATIONAL Passenger revenues ($ millions) $ 59 $ 66 $ 333 $ 412 $ 563 Revenue passenger miles (millions) 821 971 4,290 5,363 7,598 Available seat miles (millions) 1,134 1,396 5,657 7,093 10,393 Passenger load factor 72.3% 69.6% 75.8% 75.6% 73.1% Passenger yield (cents) 7.18 cents 6.79 cents 7.77 cents 7.68 cents 7.41 cents Passenger revenue per available seat mile (cents) 5.19 cents 4.72 cents 5.89 cents 5.81 cents 5.42 cents TOTAL SYSTEM Passenger revenues ($ millions) $ 681 $ 676 $ 2,895 $ 2,924 $ 3,078 Revenue passenger miles (millions) 5,720 5,764 24,422 25,100 27,111 Available seat miles (millions) 8,297 8,467 34,453 36,434 40,594 Passenger load factor 68.9% 68.1% 70.9% 68.9% 66.8% Passenger yield (cents) 11.91 cents 11.74 cents 11.85 cents 11.65 cents 11.35 cents Passenger revenue per available seat mile (cents) 8.21 cents 7.99 cents 8.40 cents 8.03 cents 7.58 cents Operating cost per available seat mile (cents) 9.53 cents 9.67 cents 9.31 cents 8.99 cents 8.78 cents Average daily utilization per aircraft (hours) 9.34 9.81 9.77 9.38 9.63 Aircraft in fleet being operated at end of period 186 181 185 185 192 Excludes subsidiary companies. The number of scheduled miles flown by revenue passengers. The number of seats available for passengers multiplied by the number of scheduled miles those seats are flown. Revenue passenger miles divided by available seat miles. Passenger revenue per revenue passenger mile. Passenger revenue divided by scheduled available seat miles. Operating expenses, excluding special charges, other nonrecurring charges and subsidiaries, divided by total available seat miles. The average block hours flown per day in revenue service per aircraft.
14 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1998 For the first quarter of 1999, TWA reported an operating loss of $37.6 million, a $31.1 million improvement over the 1998 operating loss of $68.7 million. The 1999 operating loss represented a 45.3% improvement over the first quarter 1998 loss which includes a non-cash operating expense of $26.5 million relating to a distribution made in July 1998 of TWA common stock and employee preferred stock to employee stock plans pursuant to the ESIP. The 1999 results represent a 10.9% improvement excluding the non-cash charge. The net loss of $21.6 million for the first quarter 1999 was $33.9 million better than the 1998 net loss of $55.5 million. The first quarter 1999 net loss included non-operating income of $21.3 million related to the sale of a portion of the Company's ownership interest in Equant N.V., a telecommunications network company. The first quarter 1998 net loss included an extraordinary charge of $1.4 million relating to the early retirement of debt. In the first quarter of 1999, total operating revenues of $764.6 million were $0.8 million less than the $765.4 million recorded in 1998. Passenger revenues improved $4.8 million including an adjustment of $4.0 million to reduce an estimated ticket voucher liability, which was offset by decreases in revenues for freight and mail ($2.2 million), Getaway Tour revenues ($1.2 million), and revenues from rental of facilities and equipment ($1.9 million). System-wide capacity, as measured by scheduled ASMs, decreased 2.0% during the first quarter of 1999 (reflecting an increase of 1.3% in domestic ASMs and a decrease of 18.8% in international ASMs) from the comparable period of 1998. The decrease in international capacity was primarily attributable to the ongoing replacement of B-747 aircraft with smaller B-767 and B-757 aircraft. The retirement of the last B-747 aircraft from TWA's fleet occurred in February 1998, completing the retirement of the wide-body jets. Passenger traffic volume, as measured by total revenue passenger miles in scheduled service for the three months ended March 31, 1999, decreased 0.8% reflecting an increase in domestic traffic of 2.2% and a decrease in international traffic of 15.5%. Passenger load factors were 68.9% in the first quarter of 1999 compared to 68.1% in the first quarter of 1998. The system load factor improved 1.3% during the first quarter of 1999 versus the same period in 1998 and system yield improved 1.4% from 11.74 cents to 11.91 cents quarter over quarter. There was a 2.8% improvement in RASM from 7.99 cents to 8.21 cents during the first quarter 1999 compared to the same period in 1998. CASM decreased 1.4% from 9.67 cents to 9.53 cents quarter over quarter. First quarter 1999 CASM was negatively impacted by a $14.6 million increase in aircraft rentals (0.17 cents), while first quarter 1998 CASM includes a $26.5 million charge relating to the employee stock incentive program (0.31 cents). Operating expenses decreased $31.9 million to $802.2 million in the first quarter of 1999 versus $834.1 million in the first quarter of 1998. Earned stock compensation charges of $26.5 million were included in the operating expenses for the first quarter of 1998. Other changes to operating expenses occurred in the following expense groups: * Salary, wages and benefits of $308.8 million in the first quarter of 1999 were $11.1 million (3.7%) greater than the $297.8 million recorded in the first quarter of 1998. While the average number of employees declined from 22,213 in the first quarter of 1998 to 21,167 in the first quarter of 1999, this was more than offset by the 4.815% salary increase effective September 1, 1998, the pilot 15 contract increases and the payment of $4.6 million in employee performance incentives. (see Part I. Item 2. Labor Costs) * Earned stock compensation expense of $26.5 million for the first quarter of 1998 represents the charge for incentive shares issued in July 1998 under the ESIP relative to the achievement of certain common stock target prices in February and March 1998. * Aircraft fuel and oil expense of $72.6 million for the first quarter of 1999 was $19.8 million less than the expense of $92.4 million during the first quarter of 1998. Approximately $16.9 million of the decrease was due to a reduction in the average cost of fuel to 45.0 cents per gallon in the first quarter of 1999 from 55.6 cents per gallon in the first quarter of 1998. The remaining $2.9 million decrease was due to a 3.0% reduction in gallons consumed (161.3 million gallons in the first quarter of 1999 versus 166.3 million gallons in the first quarter of 1998) resulting from the replacement of older B-747 and B-727 aircraft with more fuel efficient MD-83, B-757 and B-767 aircraft. * Passenger sales commissions expense of $44.6 million for the first quarter of 1999 was $6.9 million (13.5%) less than the comparable period of 1998 primarily due to domestic commissions being capped at a certain dollar limit during the first quarter of 1999 and a decrease of 1.4% in the number of domestic commissionable tickets sold during the first quarter of 1999 versus 1998. * Aircraft maintenance materials and repairs increased $3.6 million to $38.3 million in the first quarter of 1999 versus $34.7 million in the same period of 1998. The primary contributing factor to this increase was engine material requirements for both TWA and customer engine overhauls. * Depreciation and amortization expense was $37.3 million in the first quarter of 1999 compared to $39.2 million in the first quarter of 1998. The $1.9 million decrease resulted primarily from major improvements to certain aircraft becoming fully depreciated in 1998 in addition to the sale and leaseback of 20 owned aircraft. This was partially offset by additional depreciation expense in conjunction with the purchase of five B-767 aircraft previously leased by TWA. * Operating lease rentals of $120.8 million in the first quarter of 1999 were $16.9 million (16.2%) greater than rentals of $103.9 million in the first quarter of 1998. Reflecting TWA's continuing fleet renewal program, the increase was primarily due to an increase in the number of leased aircraft in 1999 versus 1998. Fifteen additional aircraft were added to TWA's fleet under operating leases between April 1998 and March 1999. In addition, 20 owned aircraft were sold and leased back during this period. * Passenger food and beverage expense of $20.7 million in the first quarter of 1999 represented a decrease of $0.9 million from $21.6 million during the first quarter of 1998 primarily due to a retroactive rate increase recorded in the first quarter of 1998. All other operating expenses of $159.1 million in the first quarter of 1999 decreased by $7.5 million (4.5%) from $166.5 million in the three months ended March 31, 1998, primarily represented by decreases in advertising expense associated with the launch of new TWA services during 1998 ($3.7 million), corporate liability and hull insurance resulting from lower insurance premiums during the current policy period ($2.7 million), and Getaway tours expense related to a lower volume of tour packages sold by TWA's subsidiary, Getaway Vacations ($1.2 million). 16 Other charges (credits) were a net credit of $11.5 million during the first quarter of 1999 compared to a net charge of $10.9 million for the same period in 1998. Interest expense of $25.0 million and $30.2 million in first quarter 1999 and 1998, respectively, showed a decrease of $5.2 million as a result of the retirement of certain debt in 1998. Interest and investment income decreased $2.1 million in the first quarter of 1999 primarily due to a decrease in the level of invested funds. Net gains from the disposition of assets were $2.0 million and $7.0 million in first quarter 1999 and 1998, respectively. Recorded gains in 1999 included the sale of TWA's investment in SatoTravel, a company which provides ticketing services ("SATO"), and certain aircraft and engines. In 1998, gains recorded related to the sale of certain aircraft, engines and other surplus equipment. Other charges and credits - net improved $24.2 million quarter over quarter, primarily due to a $21.3 million gain related to the sale of a portion of TWA's shares in Equant N.V., a telecommunications network company. Additionally, TWA's equity interest in Worldspan reflected its share of Worldspan's gain on the sale of Equant shares of $2.7 million. A tax benefit of $4.5 million was recorded in the first quarter of 1999 versus a benefit of $25.4 million recorded in the first quarter of 1998 (see note 2 to consolidated financial statements). As a result of the above, the Company's operating loss of $37.6 million in the first quarter of 1999 improved $31.1 million from the operating loss of $68.7 million for the first quarter of 1998. The Company had a net loss of $21.6 million in the first quarter of 1999 versus a net loss of $55.5 million in the first quarter of 1998, an improvement of $33.9 million. The first quarter of 1998 net loss included a $1.4 million non-cash extraordinary charge related to the early extinguishment of debt. 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. Liquidity The Company's consolidated cash and cash equivalents balance at March 31, 1999 was $211.2 million, a $41.2 million decrease from the December 31, 1998 balance of $252.4 million. The net decrease in cash and cash equivalents during the first quarter of 1999 was due, in large part, to cash used by financing activities of $19.0 million in 1999 versus cash provided of $160.9 million in 1998. Sources of cash generated by financing activities included proceeds of $1.9 million from the sale and leaseback of certain aircraft and engines in the first quarter of 1999 versus $43.2 million from the sale and leaseback of certain aircraft in 1998. Additionally, during the first quarter of 1998, TWA received proceeds of $144.9 million from notes issued while no such proceeds were received in the first quarter of 1999. The aforementioned proceeds were offset by the repayment of long-term debt and capital lease obligations of $15.4 million in the first quarter of 1999 versus $21.5 million in 1998. The favorable change in cash provided by operating activities reflects a decrease in the net loss from 1998 to 1999 of $33.9 million. This includes a first quarter 1999 gain of $21.3 million related to the sale of a portion of TWA's shares of Equant N.V., a telecommunications network company. Additionally, net discounted sales from tickets sold under the Karabu ticket program agreement between the Company and Karabu have been excluded from cash flows from operating activities in first quarter 1998 as the related amounts were applied to reduce certain loans to the Company provided by Karabu (the "Icahn Loans") and the PBGC Notes. On December 30, 1997, TWA repaid the outstanding balance of the Icahn Loans out of the 17 proceeds of a receivables securitization offering by the Company. In the first quarter of 1998, the proceeds applied to reduce the PBGC Notes were $35.2 million. In December 1998, the PBGC Notes were paid in full primarily with the proceeds from tickets sold under the Karabu ticket agreement. Accordingly, proceeds from the sales of tickets under the Karabu ticket agreement are now paid directly to TWA. During the first quarter of 1999, $34.2 million of these proceeds were paid directly to TWA. Additionally, during the first quarter of 1998, TWA recorded an aggregate non-cash charge of $26.5 million relating to the issuance of employee stock under terms of the ESIP. Cash used by investing activities was $31.7 million in the first quarter of 1999 compared to $8.6 million in the first quarter of 1998. Components of cash used in the first quarter of 1999 include the purchase of one Boeing 767-200 aircraft and related engines for $27.1 million and capital expenditures of $12.5 million. Comparatively, cash used in the first quarter of 1998 included capital expenditures of $21.9 million, which included approximately $10.9 million related to standardization of aircraft fleet additions, and pre-delivery deposits of $4.1 million. There were no aircraft purchases made during the 1998 first quarter. Gross proceeds from assets sold during 1999 were $5.9 million primarily from the sale of retired, wide-body aircraft, engines and other surplus equipment while 1998 proceeds from the sale of like equipment was $12.8 million. Additionally, approximately $4.7 million was provided in the first quarter of 1999 primarily due to the return of pre-delivery deposits relating to a new Boeing 757-231 aircraft delivered in March 1999 which was immediately sold to and leased back under an operating lease from an aircraft lessor. Capital Resources TWA generally must satisfy all of its working capital expenditure requirements from cash provided by operating activities, from external capital sources or from the sale of assets. However, TWA has pledged a substantial portion of its assets to secure various issues of outstanding debt. TWA's financing agreements generally require TWA to apply the sale proceeds from the sale of any pledged assets to repay the corresponding debt. If TWA is unable to obtain additional capital, the Company may not be able to make certain capital expenditures or to continue to implement certain other aspects of its strategic plan, and TWA may therefore be unable to achieve the full benefits expected from the plan. Commitments TWA entered into an agreement in February 1996 with Boeing for the purchase of ten B-757-231 aircraft and related engines, spare parts and equipment for an aggregate purchase price of approximately $500 million. As of December 31, 1998, TWA had taken delivery of six aircraft and had four on firm order. Five of the six aircraft already delivered were originally manufacturer-financed and one was leased. In separate transactions in June, July and October 1998, these five manufacturer- financed aircraft were sold to, and leased back from, an aircraft lessor. The four remaining aircraft are scheduled to be delivered in 1999. The first of these aircraft was delivered in March 1999 and was immediately sold to, and leased back under an operating lease from an aircraft lessor. TWA has obtained commitments for debt financing for approximately 80% of the cost of acquiring two of the remaining three aircraft and commitments for 100% lease financing of the cost of acquiring the remaining aircraft. In September 1998, TWA entered into an agreement with Boeing to acquire four additional B-757-231 aircraft to be delivered during 1999. TWA has obtained commitments for debt financing for approximately 80% of the cost of acquiring these aircraft. The Company has entered into an agreement for the operating lease for one additional B-767-300ER and three additional B-757-200 aircraft. These aircraft are scheduled to be delivered in 1999, excluding one B-757-200 that is scheduled for delivery in January 2000. 18 The Company has granted to a major financial institution the option to purchase and leaseback to TWA, under substantially the same terms and conditions as another B-757 aircraft previously leased to TWA in 1998, four of the eight B-757-231 aircraft to be delivered by Boeing during 1999. However, such institution did not exercise its option to purchase the first two of these aircraft. In 1989, TWA entered into agreements with AVSA, S.A.R.L. ("Airbus") and Rolls-Royce plc relating to the purchase of ten A330-300 twin-engine wide-body aircraft and related engines, spare parts and equipment for an aggregate purchase price of approximately $1.0 billion. The agreements, as amended, require the delivery of the aircraft in 2001 and 2002 and provide for the purchase of up to ten additional aircraft. TWA has not yet made arrangements for the permanent financing of the purchases subject to the agreements. In the event of cancellation, predelivery payments of approximately $18 million may be subject to forfeiture. In 1996, TWA entered into an agreement to acquire from Boeing 15 new MD-83s, to be financed by long-term leases. As of March 31, 1999, TWA had taken delivery of all the MD-83 aircraft. In April 1998, TWA entered into an agreement with Boeing to acquire 24 additional new MD-83 aircraft, with deliveries in 1999. The Company has obtained commitments for long-term debt and lease financing for these aircraft. The first of these aircraft was delivered on May 12, 1999. In December 1998, TWA announced that it had signed letters of intent to acquire an additional 125 new aircraft: 50 Boeing 717-200 aircraft for delivery beginning in 2000, 50 Airbus A318 aircraft for delivery beginning in 2003 and 25 Airbus "A320 Family" aircraft for delivery beginning in 2005. In addition to these 125 firm orders, TWA has taken options on an additional 50 Boeing 717s and an additional 75 "A320 Family" aircraft. The letter of intent provides for financing for all firm order aircraft. The terms of the purchase orders and the related financing are subject to further negotiation and the signing of definitive agreements. These new aircraft would primarily replace B- 727, DC-9 and older MD-80 aircraft currently in TWA's fleet. TWA elected to comply with the transition requirements of the Noise Act by adopting the Stage 2 aircraft phase-out/retrofit option, which required that 50% of its base level (December 1990) Stage 2 fleet be phased-out/retrofitted by December 31, 1996. To comply with the 1996 requirement, the Company retrofitted, by means of engine hush-kits, 30 of its DC-9 aircraft at an aggregate cost of approximately $55.5 million, most of which was financed by lessors with repayments being facilitated through increased rental rates or lease term extensions. TWA complied with the transition requirements for December 31, 1998, by having 75% of its fleet meet Stage 3 requirements through the grounding of older Stage 2 aircraft in combination with the acquisition of Stage 3 aircraft. By December 31, 1999, 100% of the fleet must meet Stage 3 requirements. In April 1999, TWA sold and leased back four Boeing 767-200 aircraft and agreed to a sale/leaseback in July 1999 of a fifth such aircraft which will subsequently be returned to the lessor in 1999 and 2000 and replaced with three Boeing 767-300 aircraft from the same aircraft lessor. In connection with this transaction, the Company purchased $28.8 million total principal amount of its outstanding 11 3/8% Senior Secured Notes due April 15, 2003 and all of its outstanding 10 1/4% Senior Secured Notes due June 15, 2003 which totaled $14.5 million. 19 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 the first quarter of 1999, the Company had approximately $0.7 million of expenditures related to these provisions. The Company continues to expect severance costs to be paid to the respective employees during 1999 due to these changes in operations. Year 2000 TWA utilizes software and related computer technologies essential to its operations that use two digits rather than four to specify the year, which will result in a date recognition problem in the year 2000 and thereafter unless modified. TWA has completed an assessment to determine the changes needed to make its computer systems, internal operating systems and equipment year 2000 compliant and is executing a plan to implement these changes. The Company currently expects that it will complete the necessary changes and testing for its mission critical systems in the third quarter of 1999. TWA estimates that the total cost to complete the remediation of its information technology systems is approximately $19.3 million, which is approximately 20% of the Company's total information technology budget for the project duration period. As of March 31, 1999, the Company estimates that approximately 54% of the cost to complete the remediation of its computer systems had been incurred. As of March 31, 1999, approximately 71% of the systems had been remediated. TWA has substantially completed assessments and begun remediation for the non- information technology related systems. The Company currently estimates the remediation costs related to infrastructure and facilities enhancements necessary to prepare its systems for the year 2000 will range from $2 million to $4 million, which it plans to fund through operating cash flows. The costs of the Company's year 2000 project and the date on which it will be completed are based on management's best estimates and include assumptions regarding modification plans of third parties. However, there can be no assurance that these estimates will be achieved and actual results could differ materially from those anticipated. TWA has also reviewed software that was purchased from outside vendors and has evaluated its reliance on other third parties (e.g. the FAA, the DOT, airport authorities, data providers and suppliers) to determine and minimize the extent to which its operations may be dependent on these third parties to remediate the year 2000 issues in their systems. Outside vendors and other third parties have either provided TWA with year 2000 compliant versions of their products, or informed TWA that all mission critical systems from such parties are in process of being remediated. To help insure compliance, TWA is continuing to set up and perform independent testing with these systems. Although the Company currently has day-to-day operational contingency plans, management is in the process of reviewing and modifying these plans for each mission critical system for possible year 2000-specific operational requirements. TWA's emphasis in this process is on passenger safety, and then on business continuity. Further, TWA has been actively participating in the industry 20 reviews led by the Air Transport Association and the International Air Transport Association. TWA's business, operating results and financial condition could be materially adversely affected by the failure of its systems or those of other parties to operate properly beyond 1999. Fuel Hedging TWA is party to future jet fuel fixed price swaps with respect to a minor portion of its fuel requirements during 1999 to provide a hedging mechanism against significant increases in jet fuel prices. Reorganization During the period from 1992 through 1995, TWA underwent two separate Chapter 11 bankruptcy reorganizations, the first in 1992-93, and the second in 1995. In connection with the 1995 reorganization, TWA applied fresh start reporting in accordance with generally accepted accounting principles, which resulted in the creation of a new reporting entity for accounting purposes and TWA's assets and liabilities being adjusted to reflect fair values on the effective date of the 1995 reorganization. As a result of the application of fresh start reporting, substantial values were assigned to routes, gates and slots ($458.4 million) and reorganization value in excess of amounts allocable to identifiable assets ($839.1 million). TWA has evaluated its future cash flows and notwithstanding the operating losses experienced since the 1995 reorganization, expects that the carrying value of the intangibles at December 31, 1998, will be recovered. However, the achievement of these improved future operating results and cash flows are subject to considerable uncertainties. In future periods, TWA will evaluate these intangibles for recoverability based upon estimated future cash flows. If TWA does not achieve these expectations, it may be required to charge future operations for impairment of these assets, and these charges could be material. Availability of NOLs TWA estimates that it had, for federal income tax purposes, net operating loss carryforwards ("NOLs") amounting to approximately $975 million at December 31, 1998. Such NOLs expire in 2008 through 2018 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. 21 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. The Company will adopt Statement No. 133 during its first quarter of fiscal 2000 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 quarter of 1999 represented approximately 9.1% 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 quarter 1999 and at March 31, 1999 was immaterial. A one cent change in the average cost of jet fuel would impact TWA's aircraft fuel expense by approximately $1.6 million per quarter, based upon consumption in the first quarter of 1999. 22 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 $683.7 million, net of unamortized discounts and including current maturities at March 31, 1999. 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 ------------- ------------ ---------------- 1999 $110,525 9.07% 2000 17,367 10.22% 2001 141,355 9.58% 2002 70,024 11.51% 2003 67,761 10.92% Thereafter 290,000 11.44% 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 9.7% of TWA's operating revenues in the first quarter of 1999, 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. 23 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Icahn Litigation On June 14, 1995, TWA signed the Extension and Consent Agreement with Karabu to extend the term of certain financing provided by Karabu (the "Icahn Loans"). In consideration of, among other things, the extension of the Icahn Loans, TWA and Karabu entered into a 99-month ticket agreement, which permitted Karabu to purchase two categories of discounted tickets: (1) "domestic consolidator tickets," which are subject to a cap of $610 million, based on the full retail price of the tickets ($120 million in the first 15 months and $70 million per year for the next seven consecutive years through the term of the ticket agreement), and (2) "system tickets," which are not subject to any cap throughout the term of the ticket agreement. Tickets sold by TWA to Karabu pursuant to the ticket agreement are priced at levels intended to approximate current competitive discount fares available in the airline industry. TWA believes that applicable provisions of the ticket agreement do not allow Karabu to market or sell system tickets through travel agents or directly to the general public. Karabu, however, has been marketing system tickets through travel agents and directly to the general public. TWA has demanded that Karabu cease doing so, and Karabu has stated that it disagrees with TWA's interpretation concerning sales through travel agents or directly to the general public. In December 1995, TWA filed a lawsuit against Karabu, Mr. Icahn, and certain affiliated companies seeking damages and to enjoin further violations of the ticket agreement. Mr. Icahn countered by threatening to file his own lawsuit and to declare a default on the loans from entities related to Mr. Icahn, which financing was then secured by certain receivables and flight equipment. Mr. Icahn's position was based upon a variety of claims related to his interpretations of the security agreement, as well as, with respect to certain alleged violations of the ticket agreement by TWA. The parties negotiated a series of standstill agreements pursuant to which TWA's original lawsuit was withdrawn, while TWA and Mr. Icahn endeavored to negotiate a settlement of their differences and respective claims. On March 20, 1996, TWA filed a petition in the Circuit Court for St. Louis County, Missouri, commencing a lawsuit against Mr. Icahn, Karabu and certain other entities affiliated with Mr. Icahn. The TWA petition alleged that the defendants are violating the ticket agreement and otherwise tortiously interfering with TWA's business expectancy and contractual relationships, by among other things, marketing and selling tickets purchased under the ticket agreement to the general public. The TWA petition sought a declaratory judgment finding that the defendants have violated the ticket agreement, and also sought liquidated, compensatory and punitive damages, in addition to TWA's costs and attorney's fees. On May 7, 1998 the court denied the TWA petition and dismissed the defendants' counterclaims. The court concluded that the defendants could sell discount tickets under the ticket agreement to any person who actually uses the ticket, including non-business travelers, and that the defendants had not breached the ticket agreement. No damages were assessed in respect to either plaintiff's or defendants' petitions. The court's ruling could have an adverse effect on revenue, which could be significant but the impact of which will depend on a number of factors, including yield, load factors and whether any resulting incremental sales by the defendants will be to passengers that would not otherwise have flown on TWA. The defendants moved to amend or modify the court's ruling to include a declaratory judgment that the defendants are permitted to sell tickets to any person for any purpose, which could include use by the purchaser's family members or friends. TWA opposed the motion and requested that 24 the court clarify the ruling to limit its scope consistent with the reasoning set forth in the decision, specifically so that the person purchasing the ticket must use the ticket (with certain enumerated exceptions) and may not purchase a ticket for any other person. The court denied both motions on June 25, 1998. TWA has appealed the denial of its motion for clarification and the court's original ruling. Although TWA intends to press its claims vigorously, it is possible that Karabu's interpretation of the ticket agreement regarding system discount ticket sales by the defendants through travel agents or directly to the general public could be determined, either by a court or otherwise, to be correct. In such event, unless TWA took appropriate action to mitigate the effect of these sales, TWA could suffer loss of revenue and reduced overall passenger yields on a continuing basis during the term of the ticket agreement. Additional disputes have arisen between TWA and the entities affiliated with Mr. Icahn as to the meanings of various provisions of the ticket agreement. These include disputes as to the scope of the advertising restrictions in the ticket agreement; whether the Icahn entities are entitled to discounts under the ticket agreement based on special fares offered by TWA on the Internet; whether the Icahn entities can sell discounted tickets to travel agencies; and whether the Icahn entities are complying with certain tax provisions of the ticket agreement. The disputes have resulted in a new suit filed by the Icahn entities against TWA on May 3, 1999 in the District Court for Clark County, Nevada, in which the Icahn entities allege that TWA has tortiously interfered with their ability to complete a proposed public offering of a company controlled by Mr. Icahn and in which they seek a declaratory judgment with respect to their disputes. TWA will file an answer to the complaint in late May. ITEM 5. OTHER INFORMATION TWA has been engaged in negotiations with its flight attendants and ground employees, represented by the IAM, on new collective bargaining agreements covering approximately 16,000 employees. The existing agreements became amendable as of August 31, 1997. The Railway Labor Act, which governs collective bargaining activities of airline workers whose contracts have become amendable, requires employees to continue to work under the "status quo" (i.e., under the terms of employment existing before the amendable date) until they exhaust the Railway Labor Act's procedures. The Railway Labor Act requires TWA and the IAM to bargain until an agreement is reached or until at least one of the parties petitions the NMB to appoint a mediator. If the mediator's efforts fail, the mediator must attempt to induce the parties to arbitrate the dispute. If either party refuses to arbitrate, then a thirty-day "cooling off" period is required prior to either party taking any self-help actions. At the request of the IAM, the NMB appointed a mediator with respect to both ground employees' and flight attendants' negotiations. On May 7, 1999, the NMB proffered binding arbitration to TWA and the IAM. While TWA accepted the proffer of arbitration, the IAM declined to arbitrate. On May 10, 1999, the NMB advised TWA and the IAM that the thirty-day cooling off period had begun and would end on June 10, 1999 at 12:01 a.m. (EDT). Although no assurance can be given that agreement will be reached within the thirty- day cooling off period, TWA remains committed to reaching new labor agreements that will provide immediate wage increases and progress over the life of a new contract to wage parity with workers performing similar jobs at other major airlines. 25 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 May 24, 1996 (Exhibit 3(ii) to 12/31/98 10-K) 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) 26 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) 27 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) 28 11 - Statement of computation of per share earnings 27 - Financial Data Schedule (B) REPORTS ON FORM 8-K A report on Form 8-K dated March 16, 1999 was filed in the first quarter 1999 by the Company. The filing reported the election of William F. Compton, currently President and Chief Operating Officer, as Chief Executive Officer to be effective at the annual meeting of shareholders on May 25, 1999. [FN] - ------------ Incorporated by reference 29 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: May 14, 1999 By: /s/ Michael J. Palumbo ------------------------------ Michael J. Palumbo Executive Vice President and Chief Financial Officer 30 EX-11 2 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 March 31, ---------------------- 1999 1998 -------- -------- ADJUSTMENTS TO NET LOSS: Loss before extraordinary items $(21,558) $(54,140) Preferred stock dividend requirements (5,863) (5,863) -------- -------- Loss before extraordinary items applicable to common stock for basic earnings per share calculation (27,421) (60,003) Extraordinary items - (1,380) -------- -------- Net loss applicable to common stock for earnings per share calculation $(27,421) $(61,383) ======== ======== OUTSTANDING SHARES: Average number of shares of common stock for basic earnings per share calculation 65,630 57,889 ======== ======== BASIC EARNINGS PER SHARE AMOUNTS: Loss before extraordinary items $ (0.42) $ (1.04) Extraordinary items $ - $ (0.02) Net loss $ (0.42) $ (1.06) - ---------- Includes 7,641 shares for the three months ended March 31, 1999 and 6,309 shares for the three months ended March 31, 1998 of Employee Preferred Stock 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. 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 not presented in the accompanying condensed statements of consolidated operations for the first quarter of 1999 or 1998.
EX-27 3 FINANCIAL DATA SCHEDULE
5 This 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 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 211,156 0 246,393 13,918 97,906 669,525 889,582 260,597 2,631,953 1,115,744 723,038 0 128 583 172,153 2,631,953 0 764,588 0 802,174 0 1,151 24,961 (26,062) (4,504) (21,558) 0 0 0 (21,558) (0.42) (0.42)
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