-----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, WGgUKSB5utPZb5/3ku/FCBaFdFQl7JGQE3Ni3YWVKsKDYGnjP+3DSSVLf85HQakG +DFFCaouwH44gRGDIrTBAQ== 0001047469-97-004448.txt : 19971113 0001047469-97-004448.hdr.sgml : 19971113 ACCESSION NUMBER: 0001047469-97-004448 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: AMEX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAWAIIAN AIRLINES INC/HI CENTRAL INDEX KEY: 0000046205 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 990212598 STATE OF INCORPORATION: HI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-08836 FILM NUMBER: 97716981 BUSINESS ADDRESS: STREET 1: 3375 KOAPAKA ST STREET 2: STE G350 CITY: HONOLULU STATE: HI ZIP: 96819 BUSINESS PHONE: 8088353700 FORMER COMPANY: FORMER CONFORMED NAME: HAL INC /HI/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: HAWAIIAN AIRLINES INC DATE OF NAME CHANGE: 19850314 FORMER COMPANY: FORMER CONFORMED NAME: INTER ISLAND AIRWAYS LTD DATE OF NAME CHANGE: 19670920 10-Q 1 FORM 10-Q 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, 1997 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-8836 HAWAIIAN AIRLINES, INC. (Exact Name of Registrant as Specified in Its Charter) Hawaii 99-0042880 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 3375 Koapaka Street, Suite G-350 Honolulu, Hawaii 96819 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (808) 835-3700 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. (X) Yes ( ) No 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. (X) Yes ( ) No As of October 20, 1997, 40,624,586 shares of Common Stock were outstanding. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Hawaiian Airlines, Inc. Condensed Balance Sheets (in thousands) (Unaudited)
SEPTEMBER 30, DECEMBER 31, 1997 1996 ------------ ------------ ASSETS Current Assets: Cash and cash equivalents............................................................... $ 32,772 $ 37,237 Accounts receivable, net................................................................ 35,493 28,022 Inventories, net........................................................................ 9,347 7,050 Assets held for sale.................................................................... 1,344 1,344 Prepaid expenses........................................................................ 5,176 4,845 ---------- ---------- Total current assets.................................................................. 84,132 78,498 ---------- ---------- Property and equipment, less accumulated depreciation and amortization of $15,251 and $10,161 in 1997 and 1996, respectively............................................................................ 57,646 45,794 Assets held for sale...................................................................... 4,195 5,083 Other assets.............................................................................. 10,584 4,362 Reorganization value in excess of amounts allocable to identifiable assets, net ("Excess Reorganization Value")................................................................................. 58,629 62,552 ---------- ---------- Total Assets.......................................................................... $ 215,186 $ 196,289 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt....................................................... $ 2,244 $ 2,247 Current portion of capital lease obligations............................................ 4,157 2,912 Accounts payable........................................................................ 26,763 26,799 Air traffic liability................................................................... 32,384 25,524 Accrued liabilities..................................................................... 16,418 12,623 ---------- ---------- Total current liabilities............................................................. 81,966 70,105 ---------- ---------- Long-Term Debt............................................................................ 4,200 6,353 Capital Lease Obligations................................................................. 11,632 7,387 Other Liabilities and Deferred Credits.................................................... 29,929 29,571 Shareholders' Equity: Common and Special Preferred Stock...................................................... 405 393 Capital in excess of par value.......................................................... 98,332 95,827 Warrants................................................................................ 3,380 1,557 Notes receivable from Common Stock sales................................................ (1,714) (1,714) Accumulated deficit..................................................................... (12,944) (13,190) Shareholders' equity.................................................................. 87,459 82,873 ---------- ---------- Total Liabilities and Shareholders' Equity............................................ $ 215,186 $ 196,289 ---------- ---------- ---------- ----------
2 Hawaiian Airlines, Inc. Condensed Statements of Operations (in thousands, except per share data) (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------- ---------------------- 1997 1996 1997 1996 --------- --------- ---------- ---------- Operating Revenues: Passenger........................................................ $ 88,799 $ 86,343 $ 254,316 $ 247,552 Charter.......................................................... 8,054 7,252 28,723 21,189 Cargo............................................................ 5,014 4,842 15,563 14,716 Other............................................................ 3,490 2,776 10,383 7,827 --------- --------- ---------- ---------- Total.......................................................... 105,357 101,213 308,985 291,284 --------- --------- ---------- ---------- Operating Expenses: Wages and benefits............................................... 28,589 26,663 86,179 82,708 Aircraft fuel, including taxes and oil........................... 18,166 19,400 59,257 54,311 Maintenance materials and repairs................................ 19,912 18,216 58,099 49,148 Rentals and landing fees......................................... 8,125 8,882 25,856 25,960 Sales commissions................................................ 3,469 3,485 10,392 10,436 Depreciation and amortization.................................... 2,584 2,054 7,848 6,169 Other............................................................ 19,259 17,921 58,606 54,460 --------- --------- ---------- ---------- Total.......................................................... 100,104 96,621 306,237 283,192 --------- --------- ---------- ---------- Operating Income................................................... 5,253 4,592 2,748 8,092 --------- --------- ---------- ---------- Nonoperating Expense: Interest expense, net............................................ (61) (543) (240) (2,462) Loss on disposition of equipment................................. (53) (111) (53) (439) Other, net....................................................... (231) (80) (816) (102) --------- --------- ---------- ---------- Total.......................................................... (345) (734) (1,109) (3,003) --------- --------- ---------- ---------- Income Before Income Taxes and Extraordinary Gain.................. 4,908 3,858 1,639 5,089 Income Tax Provision............................................... (3,469) (2,489) (1,394) (3,104) --------- --------- ---------- ---------- Net Income Before Extraordinary Gain............................... 1,439 1,369 245 1,985 Extraordinary Gain, Net of Income Taxes............................ -- -- -- 340 --------- --------- ---------- ---------- Net Income......................................................... $ 1,439 $ 1,369 $ 245 $ 2,325 --------- --------- ---------- ---------- --------- --------- ---------- ---------- Net Income Per Common Stock Share: Before extraordinary gain........................................ $ 0.03 $ 0.04 $ 0.01 $ 0.07 Extraordinary gain, net of income taxes.......................... -- -- -- 0.01 --------- --------- ---------- ---------- Net Income Per Common Stock Share.................................. $ 0.03 $ 0.04 $ 0.01 $ 0.08 --------- --------- ---------- ---------- --------- --------- ---------- ---------- Weighted Average Number of Common Stock Shares Outstanding............................................... 41,436 30,337 41,436 27,464 --------- --------- ---------- ---------- --------- --------- ---------- ----------
3 HAWAIIAN AIRLINES, INC. CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) NINE MONTHS ENDED SEPTEMBER 30, -------------------- 1997 1996 --------- --------- Cash Flows From Operating Activities: Net income............................................ $ 245 $ 2,325 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization...................... 7,848 6,169 Net periodic postretirement benefit cost........... 963 1,701 Stock option compensation.......................... -- 964 Loss on disposition of equipment................... 53 439 Extraordinary gain, net of income taxes currently payable......................................... -- (666) Income tax benefit recognized as a reduction to Excess Reorganization Value..................... 1,289 3,289 Increase in accounts receivable.................... (7,471) (5,174) Decrease (increase) in inventories................. (2,297) 238 Decrease (increase) in prepaid expenses............ (331) 1,947 Increase (decrease) in accounts payable............ (36) 1,679 Increase air traffic liability..................... 6,860 4,318 Increase (decrease) in accrued liabilities......... 3,795 (4,845) Other, net......................................... (875) 5,650 --------- --------- Net cash provided by operating activities....... 10,043 18,034 --------- --------- Cash Flows From Investing Activities: Purchase of property and equipment................. (11,499) (6,019) Net proceeds from disposition of equipment......... 985 1,800 --------- --------- Net cash used in investing activities........... (10,514) (4,219) --------- --------- Cash Flows From Financing Activities: Proceeds from issuance of common stock............. 2,013 51,862 Repurchase of common stock......................... -- (909) Issuance of long-term debt......................... 651 7,393 Repayment of long-term debt........................ (2,807) (9,156) Repayment of capital lease obligations............. (3,851) (2,001) --------- --------- Net cash provided by (used in) financing activities................................... (3,994) 47,189 --------- --------- Net increase (decrease) in cash and cash equivalents.................................. (4,465) 61,004 Cash and cash equivalents--Beginning of Period........ 37,237 5,389 --------- --------- Cash and cash equivalents--End of Period.............. $32,772 $66,393 --------- --------- --------- --------- 4 HAWAIIAN AIRLINES, INC. STATISTICAL DATA (IN THOUSANDS, EXCEPT AS OTHERWISE INDICATED) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------------- -------------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- SCHEDULED OPERATIONS: Revenue passengers flown............................. 1,307 1,267 3,791 3,785 Revenue passenger miles ("RPM")...................... 950,239 856,422 2,689,046 2,514,581 Available seat miles ("ASM")......................... 1,206,390 1,176,425 3,556,389 3,421,991 Passenger load factor................................ 78.8% 72.8% 75.6% 73.5% Revenue ton miles.................................... 110,821 99,549 317,757 294,311 Revenue plane miles.................................. 4,826 4,789 14,261 14,289 Passenger revenue per passenger mile ("Yield")....... 9.3 CENTS 10.1 CENTS 9.5 CENTS 9.8 CENTS OVERSEAS CHARTER OPERATIONS: Revenue passengers flown............................. 54 48 195 141 RPM.................................................. 147,042 130,086 523,578 385,558 ASM.................................................. 154,474 133,399 570,594 396,160
Hawaiian Airlines, Inc. NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION In the opinion of management, the unaudited condensed financial statements included in this report contain all adjustments necessary for a fair presentation of the results of operations and cash flows for the interim periods covered and the financial condition of Hawaiian Airlines, Inc. ("Hawaiian Airlines" or the "Company") as of September 30, 1997 and December 31, 1996. The operating results for the interim period are not necessarily indicative of the results to be expected for the full fiscal year. The accompanying financial statements should be read in conjunction with the financial statements and the notes thereto contained in Hawaiian Airlines' Annual Report on Form 10-K for the year ended December 31, 1996, which are incorporated herein by reference. Certain reclassifications have been made to conform the prior year's data to the current year's presentation. 2. AIRCRAFT FUEL HEDGE CONTRACTS The Company utilizes various types of derivative and commodity contracts to manage its aircraft fuel costs. These contracts qualify for hedge accounting treatment as they reduce risk, identify firm commitments for set time periods and meet correlation criteria for effectiveness. The Company accounts for its various types of derivative and commodity contracts on a deferral basis. Initial and subsequent margin deposit requirements are reflected in prepaid expenses. Realized and unrealized gains and losses and fees and commissions are deferred and included in the measurement of the subsequent transaction. 3. INCOME TAXES The Company's reorganization and the associated implementation of fresh start reporting in September 1994 gave rise to significant items of expense for financial reporting purposes that are not deductible for income tax purposes. In large measure, it is these nondeductible expenses that result in an effective tax rate (for financial reporting purposes) significantly greater than the current United States corporate statutory rate of 35.0%. For the three and nine month periods ended September 30, 1997, estimated interperiod tax provisions of $3.5 million and $1.4 million, respectively, have been reflected in the accompanying condensed statements of operations. As the Company presently expects that its full year 1997 results will require a provision for income taxes, the estimated tax provisions recorded for the three and nine month periods ended September 30, 1997, respectively, reflect management's estimate of the annual effective tax rate. 4. WARRANTS In January 1996, AMR Corporation ("AMR"), the parent company of American Airlines, Inc. ("American"), participated in certain recapitalization efforts of the Company. As a part of its participation, AMR received, among other things, warrants which, subject to certain conditions, entitled AMR to purchase up to 1,897,946 shares of the Company's Common Stock (adjusted to 1,949,338 shares pursuant to applicable anti-dilution provisions). One-half of the warrants were to become exercisable only if American and the Company entered into a code sharing arrangement which would allow American to place its two letter flight designator code ("AA") on selected Interisland flights of the Company. On July, 15, 1997, the Company consummated the code share marketing agreement with American. The code share agreement will be implemented in first quarter 1998. As a result, all of the warrants will become exercisable upon implementation of the code share marketing agreement, 6 and AMR may purchase an additional 974,669 of the Company's Common Stock Shares at $1.07 per share. If not exercised, the warrants expire on September 11, 2001. The estimated fair value of the warrants approximated $2.3 million and has been reflected in the Company's condensed balance sheet as of September 30, 1997 as warrants and other assets. The amount included in other assets will be amortized on a straight-line basis over five years upon effective implementation of the code share agreement in first quarter 1998. 5. NEW ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." SFAS No. 128 is effective for both interim and annual periods ending after December 15, 1997. SFAS No. 128 requires the presentation of "Basic" earnings per share, representing income available to common shareholders divided by the weighted average number of Common Stock shares outstanding for the period, and "Diluted" earnings per share, which is similar to the current presentation of fully diluted earnings per share. SFAS No. 128 requires restatement of all prior period earnings per share data presented. Management does not expect adoption of SFAS No. 128 to have a material impact on the Company's previously reported earnings per share. In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information about Capital Structure," which lists required disclosures about capital structure that had been included in a number of previously existing statements and opinions. SFAS No. 129 is effective for periods ending after December 15, 1997. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," which establishes standards for the reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. SFAS requires reclassification of financial statements for earlier periods provided for comparative purposes. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," which establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. SFAS No. 131 requires restatement of comparative information presented for earlier periods. SFAS No. 131 is effective for periods beginning after December 31, 1997. Management does not expect adoption of SFAS No. 129, 130 or 131 to have a material impact on the Company's financial condition or results of operations. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements contained in this report that are not related to historical results, including, without limitation, statements regarding the Company's business strategy and objectives, future financial position and estimated cost savings, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act and involve risks and uncertainties. Although the Company believes that the assumptions on which any forward-looking statements are based are reasonable, there can be no assurance that such assumptions will prove to be accurate and actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed under Part I, Item I, Business of the Company's Form 10-K Annual Report for the year ended December 31, 1996 and heretofore, as well as those discussed elsewhere in this Form 10-Q. All forward-looking statements contained in this Form 10-Q are qualified in their entirety by this cautionary statement. RESULTS OF OPERATIONS During third quarter 1997, the Company generated operating income of $5.3 million versus $4.6 million in third quarter 1996. Net income for third quarter 1997 and 1996 was $1.4 million. For the nine months ended September 30, 1997, the Company generated operating and net income of $2.7 million and $245,000, respectively. This compares to $8.1 million and $2.3 million of operating and net income for the nine months ended September 30, 1996. 8 Three Month Period Ended September 30, 1997 The following table compares operating passenger revenues and statistics, in thousands, except as otherwise indicated, for the three month periods ended September 30, 1997 and 1996:
Three Months Ended September 30, ---------------------- INCREASE 1997 1996 (DECREASE) % --------- --------- ----------- --------- Interisland: Passenger revenues..................................................... $ 33,897 $ 33,963 $ (66) (0.2) Revenue passengers flown............................................... 968 973 (5) (0.5) RPM.................................................................... 129,150 129,730 (580) (0.4) ASM.................................................................... 220,029 234,895 (14,866) (6.3) Passenger load factor.................................................. 58.7% 55.2% 3.5 6.3 Yield.................................................................. 26.2CENTS 26.2CENTS 0.0CENTS 0.0 Transpacific (Transpac): Passenger revenues..................................................... $ 48,989 $ 46,136 $ 2,853 6.2 Revenue passengers flown............................................... 320 274 46 16.8 RPM.................................................................... 770,504 673,594 96,910 14.4 ASM.................................................................... 907,531 864,551 42,980 5.0 Passenger load factor.................................................. 84.9% 77.9% 7.0 9.0 Yield.................................................................. 6.4CENTS 6.8CENTS (0.4)CENTS (5.9) SouthPacific (Southpac): Passenger revenues..................................................... $ 5,913 $ 6,244 $ (331) (5.3) Revenue passengers flown............................................... 19 20 (1) (5.0) RPM.................................................................... 50,585 53,098 (2,513) (4.7) ASM.................................................................... 78,830 76,979 1,851 2.4 Passenger load factor.................................................. 64.2% 69.0% (4.8) (7.0) Yield.................................................................. 11.7CENTS 11.8CENTS (0.1)CENTS (0.8) Overseas Charter: Charter revenues....................................................... $ 8,054 $ 7,252 $ 802 11.1 Revenue passengers flown............................................... 54 48 6 12.5 RPM.................................................................... 147,042 130,086 16,956 13.0 ASM.................................................................... 154,474 133,399 21,075 15.8
Significant quarter to quarter variances were as follows: Third quarter 1997 passenger revenues totaled $88.8 million, an increase of $2.5 million or 2.8% over 1996 third quarter passenger revenues of $86.3 million. The majority of the increase was due to, quarter over quarter, approximately $2.9 million more in third quarter 1997 Transpac passenger revenues. More aggressive pricing actions by the Company to stimulate travel demand and be competitive were used to stimulate Transpac markets. These pricing strategies, combined with cooperative advertising and promotions, were targeted at Transpac markets in which the Company had increased its level of service and those in which the Company maintained code share alliances. 9 Overseas charter revenues totaled $8.1 million for the three month period ended September 30, 1997, an increase of $802,000 or 11.1% over the same period in 1996. The increase was principally due to the Company operating effective February 1997 to April 1997 and from May 1997, on average, two and one charter rotations per week, respectively, to Anchorage, Alaska. The Anchorage charters were not operated in 1996. The following table compares operating expenses per ASM by major category for the three month periods ended September 30, 1997 and 1996:
Three Months Ended September 30, ----------------------- INCREASE 1997 1996 (DECREASE) % --------- --------- ----------- --------- Wages and benefits............................................................. 2.10CENTS 2.04CENTS 0.06CENTS 2.9 Aircraft fuel, including taxes and oil......................................... 1.33 1.48 (0.15) (10.1) Maintenance materials and repairs.............................................. 1.46 1.39 0.07 5.0 Rentals and landing fees....................................................... 0.60 0.68 (0.08) (11.8) Sales commissions.............................................................. 0.25 0.27 (0.02) (7.4) Depreciation and amortization.................................................. 0.19 0.16 0.03 18.8 Other.......................................................................... 1.42 1.37 0.05 3.6 ----- ----- ----- --------- Total........................................................................ 7.35CENTS 7.39CENTS (0.04)CENTS (0.5) ------ ----- ----- --------- ------ ----- ----- ---------
All fluctuations in operating expenses were affected by an overall increase in ASM of approximately 3.9% for the three month period ended September 30, 1997. Significant quarter to quarter variances were as follows: Wages and benefits per ASM increased by 0.06 cents or 2.9% quarter over quarter. For the three months ended September 30, 1997, the Company incurred approximately $1.9 million or 7.2% in additional wages and benefits due to additional employees associated with increased flying over its long-haul routes. Aircraft fuel cost, including taxes and oil ("Aircraft Fuel") per ASM decreased in third quarter 1997 versus third quarter 1996 by 0.15 cents or 10.1%. As in previous 1997 quarters, the average cost of Aircraft Fuel continued to stabilize and decline. For the three months ended September 30, 1997, average cost of Aircraft Fuel per gallon approximated 62.0 cents compared to 70.1 cents for the same period in 1996. Decreased average per gallon costs were offset by the Company utilizing approximately 4.9 million more gallons of fuel in third quarter 1997 due to its increased long-haul flying. On net, the Company incurred approximately $1.2 million or 6.4% less in Aircraft Fuel quarter over quarter. Maintenance materials and repairs per ASM increased by 0.07 cents or 5.0%. For the three months ended September 30, 1997, the Company experienced $1.7 million or 9.3% more in maintenance materials and repair costs than for the three months ended September 30, 1996. A majority of this increase for the three months ended September 30, 1997 was attributable to (1) approximately $1.3 million more in DC-10 maintenance expense as the Company utilized ten DC-10 aircraft during 1997 versus nine in 1996 and (2) $700,000 in additional DC-9 maintenance, primarily for airframe repairs and overhauls. Rentals and landing fees per ASM decreased by 0.08 cents or 11.8%. The Company experienced $757,000 or 8.5% less in rentals and landing fees quarter over quarter, primarily due to $422,000 in decreased landing fees. As discussed below, commencing September 1, 1997, a two-year moratorium was placed on landing fees at the Honolulu International Airport. 10 Nine Month Period Ended September 30, 1997 The following table compares operating passenger revenues and statistics, in thousands, except as otherwise indicated, for the nine month periods ended September 30, 1997 and 1996:
NINE MONTHS ENDED ---------------------------- SEPTEMBER 30, ---------------------------- INCREASE 1997 1996 (DECREASE) % ---------- ---------- ----------- ------ Interisland: Passenger revenues.................................................. $ 100,132 $ 101,655 $ (1,523) (1.5) Revenue passengers flown............................................ 2,837 2,920 (83) (2.8) RPM................................................................. 377,913 387,508 (9,595) (2.5) ASM................................................................. 653,944 697,105 (43,161) (6.2) Passenger load factor............................................... 57.8% 55.6% 2.2 4.0 Yield............................................................... 26.5 CENTS 26.2 CENTS 0.3 CENTS 1.1 Transpac: Passenger revenues.................................................. $ 139,428 $ 130,976 $ 8,452 6.5 Revenue passengers flown............................................ 908 817 91 11.1 RPM................................................................. 2,187,590 1,999,182 188,408 9.4 ASM................................................................. 2,699,398 2,513,029 186,369 7.4 Passenger load factor............................................... 81.0% 79.6% 1.4 1.8 Yield............................................................... 6.4 CENTS 6.6 CENTS (0.2)CENTS (3.0) Southpac: Passenger revenues.................................................. $ 14,756 $ 14,921 $ (165) (1.1) Revenue passengers flown............................................ 46 48 (2) (4.2) RPM................................................................. 123,543 127,891 (4,348) (3.4) ASM................................................................. 203,047 211,857 (8,810) (4.2) Passenger load factor............................................... 60.8% 60.4% 0.4 0.7 Yield............................................................... 11.9 CENTS 11.7 CENTS 0.2 CENTS 1.7 Overseas Charter: Charter revenues.................................................... $ 28,723 $ 21,189 $ 7,534 35.6 Revenue passengers flown............................................ 195 141 54 38.3 RPM................................................................. 523,578 385,558 138,020 35.8 ASM................................................................. 570,594 396,160 174,434 44.0
Significant period to period variances were as follows: Passenger revenues totaled $254.3 million for the nine month period ended September 30, 1997, an increase of $6.8 million or 2.7% over the same period in 1996. The increase was primarily due to $8.5 million more in Transpac passenger revenues being offset by a decrease in Interisland passenger revenues of $1.5 million. As previously discussed, the Company initiated various sales and marketing strategies which resulted in increased Transpac passenger revenues for the nine month period ended September 30, 1997. Interisland passenger revenues were primarily impacted by softness in the visitor market throughout the State of Hawaii in the first six months of 1997. Information from the Hawaii Visitors and Convention Bureau showed a decline of 0.6% in the 11 total number of visitors to Hawaii for the first six months of 1997, as compared to the same periods in 1996. The total number of visitors to Hawaii in third quarter 1997 remained relatively flat. Overseas charter revenues totaled $28.7 million for the nine month period ended September 30, 1997. This represents a $7.5 million increase above overseas charter revenues for the nine month period ended September 30, 1996. The increase is primarily attributable to increased charter activity in the first half of 1997 versus the first half of 1996. During the first six months of 1997, the Company operated eight charters per week to Las Vegas, Nevada and effective February 1997 to April 1997 and from May 1997, on average, two and one charter rotations per week, respectively, to Anchorage, Alaska. During the first six months of 1996 the Company operated six charter rotations per week solely to Las Vegas. The following table compares operating expenses per ASM by major category for the nine month periods ended September 30, 1997 and 1996:
NINE MONTHS ENDED ----------------------- 1997 1996 (DECREASE) % ---------- ---------- ------------ --------- Wages and benefits............................ 2.09 CENTS 2.17 CENTS (0.08) CENTS (3.7) Aircraft fuel, including taxes and oil........ 1.44 1.42 0.02 1.4 Maintenance materials and repairs............. 1.41 1.29 0.12 9.3 Rentals and landing fees...................... 0.63 0.68 (0.05) (7.4) Sales commissions............................. 0.25 0.27 (0.02) (7.4) Depreciation and amortization................. 0.19 0.16 0.03 18.8 Other......................................... 1.42 1.43 (0.01) (0.7) ---- ---- ----- ---- Total..................................... 7.43 CENTS 7.42 CENTS 0.01 CENTS 0.1 ---- ---- ----- ---- ---- ---- ----- ----
All fluctuations in operating expenses were affected by an overall increase in ASM of approximately 8.1% for the nine month period ended September 30, 1997. Significant period to period variances were as follows: Wages and benefits per ASM decreased by 0.08 cents or 3.7%. The dilutive effect of increased ASM was offset by increased wages and benefits of $3.5 million or 4.2% for the nine months ended September 30, 1997. As mentioned above, the Company incurred additional wages and benefits primarily due to additional headcounts associated with increased long-haul flying. Maintenance materials and repairs per ASM increased by 0.12 cents or 9.3% in the nine month period ended September 30, 1997 over the nine month period ended September 30, 1996. For the nine months ended September 30, 1997, the Company experienced $9.0 million or 18.2% in additional maintenance primarily due to (1) $5.4 million more in DC-10 maintenance expense as the Company utilized ten DC-10 aircraft during 1997 versus on average, eight to nine in 1996 and (2) $3.6 million more in DC-9 airframe and engine repairs. Rentals and landing fees per ASM were primarily affected by decreased landing fees as a result of a two-year moratorium placed on landing fees at the Honolulu International Airport commencing September 1, 1997. The Company had averaged approximately $500,000 per month in landing fees at the Honolulu International Airport prior to the moratorium. 12 LIQUIDITY AND CAPITAL RESOURCES The Company believes that it has various options available to meet its capital, debt and operating commitments, including cash on hand at September 30, 1997 of $32.8 million, internally generated funds and a credit facility with total availability of $12.5 million as of September 30, 1997, with aggregate term loans and letters of credit outstanding in the amounts of $5.2 million and $100,000, respectively. The Company will continue to consider various borrowing or leasing options to supplement its cash requirements. As of September 30, 1997, the Company had working capital of $2.2 million, representing a $6.2 million decrease from $8.4 million of working capital at December 31, 1996. Cash and cash equivalents for the nine month period ended September 30, 1997 decreased by $4.5 million. Operating activities for the nine month period ended September 30, 1997 provided $10.0 million in cash and cash equivalents. Through the nine month period ended September 30, 1997, the Company expended $11.5 million of its $19.2 million in planned capital expenditures for 1997, approximately $3.5 million of which has been recorded in other assets. Capitalized portions of scheduled DC-9 checks and overhauls, consolidation of the Company's overseas passenger and baggage processing operations into the Honolulu Interisland Terminal and continued investments in improved software, related hardware and implementation costs represent a majority of these capital expenditures. Effective March 1, 1997, the Company entered into petroleum derivative and commodity hedging contracts to provide some short-term protection against the possible future increase in aircraft fuel costs. The Company employs a strategy whereby petroleum derivative and commodity hedging contracts are used to cover approximately 35% to 45% of the Company's anticipated aircraft fuel needs for the next eight to twelve months. At September 30, 1997, the Company had petroleum hedging contracts outstanding with an aggregate notional value of $6.9 million. During third quarter 1997, various events occurred which could affect the Company in the future. Management cannot currently estimate the impact, if any, of these events on its results of operations, liquidity or capital resources: 1) As mentioned in Note 4 to Condensed Financial Statements, effective July 15, 1997, the Company consummated a code share agreement with American which will be implemented in first quarter 1998. Further, in July 1997, the Company entered into a marketing alliance with Continental Airlines, Inc. and Continental Micronesia, Inc. that will make the Company the primary Interisland carrier for the two international airlines; 2) On July 25, 1997, a competitor in the Interisland market, Mahalo Air, Inc. ("Mahalo") filed a voluntary petition for relief under Chapter 11, Title 11 of the United States Code. On September 2, 1997, Mahalo suspended its flight operations. On October 20, 1997, a continuance was allowed in order to ascertain the effect of a liquidation on the possible sale of Mahalo's operating license for recovery of monies for creditors. On November 10, 1997, the Bankruptcy Court ruled that should Mahalo not accumulate sufficient funds within 14 days, no financial reorganization would occur under Chapter 11 and all of Mahalo's remaining assets will be sold to pay creditors; 3) In an attempt to boost tourism, effective September 1, 1997, a two-year moratorium was placed on aircraft landing fees at the Honolulu International Airport by the Governor of the State of Hawaii. The Governor has reserved the right, however to reinstate the landing fee charges before the two-year period ends. Based on 13 current flight schedules, the Company anticipates that it could save up to $6.0 million per year as a result of the moratorium; 4) Effective October 1, 1997, a new law was enacted to replace the Federal passenger excise tax which expired September 30, 1997. The new legislation includes a gradual reduction in the 10% airline ticket tax to 7.5% by the year 2002, a phasing in of a $3 "head tax" per domestic flight segment, an increase in round-trip international departure and arrival taxes from $6 to $24 per passenger and a tax on the purchase of frequent flier miles. The Company has and will adjust its fares accordingly due to these enacted tax changes based upon prevailing market conditions. Although not quantifiable, management believes a significant portion of the activity in air traffic liability, cash and cash equivalents and accounts receivable to be attributable to increased sales activity made in advance of the effective date of the aforementioned excise taxes. 14 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS No material developments in matters previously reported or reportable events arising in the three or nine months ended September 30, 1997 were noted. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Material Contracts to be listed under Item 6(a). None. Exhibit 11 Statements regarding computation of per share earnings. Exhibit 27 Financial Data Schedule. Reports on Form 8-K None. 15 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. HAWAIIAN AIRLINES, INC. November 14, 1997 By /s/ John L. Garibaldi --------------------- John L. Garibaldi Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 16 EX-11 2 EXHIBIT-11 Exhibit 11 Hawaiian Airlines, Inc. Statements Regarding Computation of Per Share Earnings for the Three and Nine Month Periods Ended September 30, 1997 (in thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 1997 SEPTEMBER 30, 1997 ------------------ ------------------ Weighted average Common Stock shares outstanding..................................... 40,238* 40,238* Incremental Common Stock shares issuable upon exercise of outstanding warrants and stock options (treasury stock method).............................................................. 1,198 1,198 ------------------ ------------------ Weighted average Common Stock shares and Common Stock share equivalents....................................................... 41,436 41,436 ------------------ ------------------ ------------------ ------------------ Net income for per share computations................................................ $ 1,439 $ 245 ------------------ ------------------ ------------------ ------------------ Net income per Common Stock share.................................................... $ 0.03 $ 0.01 ------------------ ------------------ ------------------ ------------------
* Includes shares reserved for issuance under the consolidated Plan of Reorganization dated September 21, 1993, as amended. 17 EX-27 3 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 32,772 0 35,993 500 9,347 84,132 72,897 15,251 215,186 81,966 15,832 0 0 405 87,504 215,186 308,985 308,985 306,237 306,237 816 53 240 1,639 1,394 245 0 0 0 245 0.01 0.01
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