0000950153-95-000225.txt : 19950816 0000950153-95-000225.hdr.sgml : 19950816 ACCESSION NUMBER: 0000950153-95-000225 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICA WEST AIRLINES INC CENTRAL INDEX KEY: 0000706270 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 860418245 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12337 FILM NUMBER: 95563889 BUSINESS ADDRESS: STREET 1: 100 WEST WASHINGTON STREET STREET 2: SUITE 2100 CITY: PHOENIX STATE: AZ ZIP: 85003 BUSINESS PHONE: 6026930800 MAIL ADDRESS: STREET 1: 400 EAST SKY HARBOR BOULEVARD CITY: PHOENIX STATE: AZ ZIP: 85034 10-Q 1 FORM 10-Q FOR THE PERIOD ENDED 6/30/95 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-Q (MARK ONE) /X/ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 1995 or ------------------------ / / 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 1-10140 ------------------------ AMERICA WEST AIRLINES, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 86-0418245 ------------------------------ ----------------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 4000 EAST SKY HARBOR BLVD, PHOENIX, ARIZONA 85034 ---------------------------------------- ---------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (602) 693-0800 -------------- N/A ------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 XX 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. Yes XX No (Not Applicable) The Company has 1,200,000 shares of Class A Common Stock and 43,966,706 shares of Class B Common Stock outstanding as of July 31, 1995. ================================================================================ 2 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AMERICA WEST AIRLINES, INC. CONDENSED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 1995 1994 ----------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents..................................... $ 279,392 $ 182,581 Accounts receivable, less allowance for doubtful accounts of 79,657 57,474 $3,930 in 1995 and $3,531 in 1994.......................... Expendable spare parts and supplies, less allowance for 27,210 24,179 obsolescence of $1,254 in 1995 and $483 in 1994............ Prepaid expenses.............................................. 42,504 29,284 ----------- ------------ Total current assets....................................... 428,763 293,518 ----------- ------------ Property and equipment: Flight equipment.............................................. 498,020 452,177 Other property and equipment.................................. 94,736 92,169 ----------- ------------ 592,756 544,346 Less accumulated depreciation and amortization............. 42,236 15,882 ----------- ------------ 550,520 528,464 Equipment purchase deposits................................ 27,489 26,074 ----------- ------------ 578,009 554,538 ----------- ------------ Restricted cash................................................. 30,019 28,578 Reorganization value in excess of amounts allocable to 609,287 645,703 identifiable assets, net...................................... Other assets, net............................................... 27,039 22,755 ----------- ------------ $ 1,673,117 $1,545,092 ========= ============
See accompanying notes to condensed financial statements. 2 3 AMERICA WEST AIRLINES, INC. CONDENSED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 1995 1994 ---------- ------------ (UNAUDITED) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt............................. $ 63,282 $ 65,198 Accounts payable................................................. 90,708 77,569 Air traffic liability............................................ 217,901 127,356 Accrued compensation and vacation benefits....................... 21,613 15,776 Accrued interest................................................. 11,991 13,109 Accrued taxes.................................................... 54,659 27,061 Other accrued liabilities........................................ 15,743 15,376 ---------- ------------ Total current liabilities..................................... 475,897 341,445 ---------- ------------ Long-term debt, less current maturities............................ 438,204 465,598 Deferred credits................................................... 112,812 116,882 Other liabilities.................................................. 24,439 25,721 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value. Authorized 48,800,000 shares; no shares issued at June 30, 1995 or December 31, 1994........... -- -- Class A common stock, $.01 par value. Authorized 1,200,000 shares; issued and outstanding 1,200,000 shares at June 30, 1995 and December 31, 1994.................................... 12 12 Class B common stock, $.01 par value. Authorized 100,000,000 shares; issued and outstanding 43,966,685 shares at June 30, 1995 and 43,936,272 at December 31, 1994...................... 440 439 Additional paid-in capital....................................... 587,384 587,149 Retained earnings................................................ 33,929 7,846 ---------- ------------ Total stockholders' equity.................................... 621,765 595,446 ---------- ------------ $1,673,117 $ 1,545,092 ========= ==========
See accompanying notes to condensed financial statements. 3 4 AMERICA WEST AIRLINES, INC. CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
REORGANIZED | PREDECESSOR REORGANIZED | PREDECESSOR COMPANY | COMPANY COMPANY | COMPANY ------------ | ------------ ----------- | ----------- THREE MONTHS | THREE MONTHS SIX MONTHS | SIX MONTHS ENDED | ENDED ENDED | ENDED JUNE 30, | JUNE 30, JUNE 30, | JUNE 30, 1995 | 1994 1995 | 1994 ------------ | ------------ ----------- | ----------- | | Operating revenues: | | Passenger.................................... $374,979 | $ 340,617 $ 698,438 | $ 665,044 Cargo........................................ 10,935 | 10,998 22,311 | 21,489 Other........................................ 14,002 | 11,736 24,957 | 22,082 -------- | --------- -------- | --------- Total operating revenues.................. 399,916 | 363,351 745,706 | 708,615 -------- | --------- -------- | --------- Operating expenses: | | Salaries and related costs................... 95,871 | 83,013 185,051 | 162,484 Rentals and landing fees..................... 69,689 | 66,576 137,943 | 132,835 Aircraft fuel................................ 42,787 | 37,862 82,481 | 75,794 Agency commissions........................... 31,360 | 30,820 60,325 | 59,931 Aircraft maintenance materials and repairs... 14,115 | 10,973 26,879 | 18,902 Depreciation and amortization................ 20,202 | 22,045 40,330 | 43,198 Other........................................ 72,935 | 67,916 134,845 | 133,575 -------- | --------- -------- | --------- Total operating expenses.................. 346,959 | 319,205 667,854 | 626,719 -------- | --------- -------- | --------- Operating income.......................... 52,957 | 44,146 77,852 | 81,896 -------- | --------- -------- | --------- Nonoperating income (expenses): | | Interest income.............................. 4,085 | 183 6,959 | 344 Interest expense (contract interest of | | $17,526 and $33,963 for the three months | | and six months ended June 30, 1994, | | respectively)............................. (15,579) | (12,893) (31,458) | (26,068) Loss on disposition of property and | | equipment................................. (302) | (728) (1,225) | (1,270) Reorganization expense, net.................. -- | (9,862) -- | (18,258) Other, net................................... 36 | 129 37 | 138 -------- | --------- -------- | --------- Total nonoperating expenses, net.......... (11,760) | (23,171) (25,687) | (45,114) -------- | --------- -------- | --------- Income before income taxes..................... 41,197 | 20,975 52,165 | 36,782 -------- | --------- -------- | --------- Income taxes................................... 20,324 | 839 26,082 | 1,471 -------- | --------- -------- | --------- Net income..................................... 20,873 | 20,136 26,083 | 35,311 Retained earnings (deficit) at beginning of | | period....................................... 13,056 | (423,451) 7,846 | (438,626) -------- | --------- -------- | --------- Retained earnings (deficit) at end of period... $ 33,929 | $ (403,315) $ 33,929 | $ (403,315) ======== | ========= ======== | ========= Earnings per share:(a) | | Primary: | | Net income................................ $ .46 | $ .74 $ .58 | $ 1.30 ======== | ========= ======== | ========= Fully Diluted: | | Net income................................ $ .45 | $ .52 $ .58 | $ .92 ======== | ========= ======== | ========= Shares used for computation: | | Primary................................... 45,167 | 28,255 45,166 | 28,704 ======== | ========= ======== | ========= Fully diluted............................. 48,085 | 40,158 48,019 | 40,607 ======== | ========= ======== | =========
--------------- (a) Historical per share data for the Predecessor Company is not meaningful since the Company has been recapitalized and has adopted fresh start reporting as of August 25, 1994. See accompanying notes to condensed financial statements. 4 5 AMERICA WEST AIRLINES, INC. CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
REORGANIZED | PREDECESSOR COMPANY | COMPANY ----------- | ---------- SIX MONTHS | SIX MONTHS ENDED | ENDED JUNE 30, | JUNE 30, 1995 | 1994 ----------- | ---------- | Cash flows from operating activities: | Net income......................................................... $ 26,083 | $ 35,311 Adjustments to reconcile net income to cash provided by operating | activities: | Depreciation and amortization................................... 23,914 | 43,198 Amortization of manufacturers' and deferred credits............. (5,350) | (2,225) Amortization of deferred overhauls.............................. 2,784 | -- Amortization of reorganization value in excess of amounts | allocable to identifiable assets............................... 16,416 | -- Loss on disposition of property and equipment................... 1,225 | 1,270 Reorganization items, net....................................... -- | 3,703 Other........................................................... 1,675 | (283) Changes in operating assets and liabilities: | Increase in accounts receivable, net............................ (21,942) | (12,463) Increase in spare parts and supplies, net....................... (3,027) | (511) Decrease (increase) in prepaid expenses......................... (13,220) | 2,051 Decrease (increase) in other assets and restricted cash......... 16,025 | (5,201) Increase in accounts payable.................................... 11,859 | 8,923 Increase in air traffic liability............................... 90,545 | 45,467 Increase in accrued compensation and vacation benefits.......... 5,837 | 821 Increase (decrease) in accrued interest......................... (1,053) | 5,130 Increase in accrued taxes....................................... 27,598 | 13,190 Increase in other accrued liabilities........................... 602 | 7,141 Decrease in other liabilities................................... (113) | (6,337) ----------- | ---------- Net cash provided by operating activities:................. 179,858 | 139,185 Cash flows from investing activities: | Purchases of property and equipment................................ (50,707) | (34,981) Long-term investment............................................... (1,750) | -- Proceeds from disposition of property.............................. 483 | 269 ----------- | ---------- Net cash used in investing activities...................... (51,974) | (34,712) Cash flows from financing activities: | Repayment of debt.................................................. (31,074) | (27,182) Exercise of warrants............................................... 1 | -- ----------- | ---------- Net cash used in financing activities...................... (31,073) | (27,182) ----------- | ---------- Net increase in cash and cash equivalents.................. 96,811 | 77,291 ----------- | ---------- Cash and cash equivalents at beginning of period..................... 182,581 | 99,631 ----------- | ---------- Cash and cash equivalents at end of period........................... $ 279,392 | $176,922 ========= | ========
See accompanying notes to condensed financial statements. 5 6 AMERICA WEST AIRLINES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS JUNE 30, 1995 America West Airlines, Inc. (the "Predecessor Company") filed a voluntary petition on June 27, 1991 to reorganize (the "Reorganization") under Chapter 11 of the U.S. Bankruptcy Code. On August 10, 1994, the Plan of Reorganization ("Plan"), filed by the Predecessor Company, was confirmed and became effective on August 25, 1994 (the "Effective Date"). For a detailed discussion of the Company's Plan, refer to the Company's Annual Report on Form 10-K for the year ended December 31, 1994. On August 25, 1994, America West Airlines, Inc. (the "Reorganized Company" or the "Company") adopted fresh start reporting in accordance with Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7") of the American Institute of Certified Public Accountants. Accordingly, the Company's post-reorganization balance sheet and statement of operations have not been prepared on a basis consistent with such pre-reorganization financial statements and are not comparable in all respects to financial statements prior to reorganization. For accounting purposes, the inception date of the Reorganized Company is deemed to be August 26, 1994. A vertical black line is shown in the financial statements to separate the Reorganized Company from the Predecessor Company since they are not comparable. 1. BASIS OF PRESENTATION The unaudited condensed financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission but do not include all information and footnotes required by generally accepted accounting principles pursuant to such rules and regulations. In the opinion of management, the condensed financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation. Certain prior year amounts have been reclassified to conform with current year presentation. The accompanying condensed financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1994. 2. PER SHARE DATA Primary earnings per share is based upon the weighted average number of shares of common stock outstanding and dilutive common stock equivalents (stock options and warrants). Primary earnings per share reflect net income adjusted for interest on borrowings effectively reduced by the proceeds from the assumed exercise of common stock equivalents, but only if the effects of such adjustments are dilutive. Fully diluted earnings per share is based on the weighted average number of shares of common stock outstanding, dilutive common stock equivalents (stock options and warrants), and for the Predecessor Company the conversion of outstanding convertible preferred stock and the conversion of convertible subordinated debentures. Fully diluted earnings per share reflect net income adjusted for interest on borrowings effectively reduced by the proceeds from the assumed exercise of common stock equivalents, but only if the effects of such adjustments are dilutive. 3. RESTRICTED STOCK AND STOCK OPTIONS In December 1994, the Company's Board of Directors approved the America West Airlines, Inc. 1994 Incentive Equity Plan (the "Incentive Plan" or "Plan"). The stockholders of the Company approved the Incentive Plan at the Annual Meeting held in May 1995. Under the Incentive Plan, up to 3,500,000 shares of Class B Common Stock may be issued to cover awards under the Plan, of which no more than 1,500,000 will be issued as restricted stock or bonus stock. As of June 30, 1995, the Company's Board of Directors granted under the Incentive Plan 41,334 shares of restricted stock and options to purchase 1,492,000 shares of Class B Common Stock at the fair market value on the date of grant. Also, options to purchase 75,000 shares of Class B Common Stock have been granted at the fair market value on date of grant to members of the Board 6 7 of Directors who are not employees of the Company. As of June 30, 1995, 26,167 shares of restricted stock were vested and 291,000 options to purchase shares of Class B Common Stock were exercisable. 4. INCOME TAXES The Company adopted Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109) upon its emergence from bankruptcy. The Predecessor Company had adopted SFAS 109 as of January 1, 1993. INCOME TAX EXPENSE: For the periods shown below, the Company recorded income tax expense as follows:
REORGANIZED | PREDECESSOR REORGANIZED | PREDECESSOR COMPANY | COMPANY COMPANY | COMPANY ------------- | ------------- ------------------ | ------------------ SIX MONTHS | SIX MONTHS THREE MONTHS ENDED | THREE MONTHS ENDED ENDED | ENDED (IN THOUSANDS) JUNE 30, 1995 | JUNE 30, 1994 JUNE 30, 1995 | JUNE 30, 1994 ------------------ | ------------------ ------------- | ------------- | | Current taxes: | | Federal.................... $ 594 | $713 $ 604 | $ 1,163 State...................... 1,132 | 126 1,150 | 308 ------- | ---- ------- | ------ 1,726 | 839 1,754 | 1,471 Deferred taxes............... -- | -- -- | -- Income tax expense | | Attributable to | | Reorganization items....... 18,598 | N/A 24,328 | N/A ------- | ---- ------- | ------ Income tax expense........... $ 20,324 | $839 $26,082 | $ 1,471 ======= | ==== ======= | ======
For the three and six months ended June 30, 1995, income tax expense pertains both to income from continuing operations as well as certain adjustments necessitated by the effectiveness of the Plan and the resultant fresh start adjustments to the Company's financial statements. The Company's Reorganization and the associated implementation of fresh start reporting 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 (for income tax purposes) expenses that result in income tax expense (for financial reporting purposes) significantly greater than taxes computed at the current U.S. corporate statutory rate of 35 percent. Nevertheless, the Company's actual income tax liability (i.e., income taxes payable) is considerably lower than income tax expense shown for financial reporting purposes. For the three and six months ended June 30, 1994, income tax expense pertains solely to income from continuing operations. 5. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS Cash paid for interest and income taxes during the six months ended June 30, 1995 and 1994 were as follows:
REORGANIZED | PREDECESSOR COMPANY | COMPANY ------------- | ------------- SIX MONTHS | SIX MONTHS ENDED | ENDED (IN THOUSANDS) JUNE 30, 1995 | JUNE 30, 1994 ------------- | ------------- | Interest (net of amounts capitalized)...................... $26,848 | $20,615 Income taxes............................................... $ 19 | $ 1,207
7 8 In addition, during the six months ended June 30, 1995 and 1994, the Company had the following non-cash financing and investing activities:
REORGANIZED | PREDECESSOR COMPANY | COMPANY ------------- | ------------- SIX MONTHS | SIX MONTHS ENDED | ENDED (IN THOUSANDS) JUNE 30, 1995 | JUNE 30, 1994 ------------- | ------------- | Equipment acquired through capital leases.................. $ -- | $ 138 Accrued interest reclassified to long-term debt............ $ 65 | $ 4,268 Notes payable issued to seller............................. $ 1,415 | $ --
6. COMMITMENTS AND CONTINGENCIES (a) Leases At June 30, 1995, the Company was obligated to lease five aircraft under a put agreement with deliveries to start no earlier than January 1, 1996 and end by June 30, 1999. Under the agreement, new or used B737-300, B757-200, or new or "like new" A320-200 aircraft may be put to the Company at a rate of no more than two aircraft in 1996 and three aircraft per year, thereafter. In addition, no more than four used aircraft may be put to the Company, and for every new A320 aircraft put to the Company, the Company has the right to reduce deliveries under the AVSA A320 purchase contract on a one-for-one basis. During each January of the put period, the Company will negotiate the type and delivery dates for deliveries during the year beginning in the following January. The negotiation deadline for 1996 deliveries has been postponed until September 30, 1995 by mutual agreement. In July 1995, the Company entered into agreements to lease two Boeing 737-300 aircraft. Under the agreements, the leased aircraft have a term of two years with payments due monthly. (b) Contingent Legal Obligations Certain administrative and priority tax claims are pending against the Company which, if ultimately allowed by the Bankruptcy Court, would represent general obligations of the Company. Such claims include claims of various state and local tax authorities and certain contractual indemnification obligations. Management cannot predict whether or not and to what extent, if any, the pending administrative and priority tax claims will result in liabilities to the Company. Should such liabilities be incurred, future operating results could be adversely affected. However, based on information currently available, management believes that the disposition will not have a material adverse effect on the Company's financial condition. 7. REORGANIZATION EXPENSE Reorganization expense is comprised of items of income, expense, gain or loss that were realized or incurred by the Company as a result of the Reorganization. Such items consisted of the following at June 30, 1994.
THREE MONTHS SIX MONTHS ENDED ENDED (IN THOUSANDS) JUNE 30, 1994 JUNE 30, 1994 ------------------ ------------- Professional fees and other expenses................. $ 7,063 $12,127 Provision for settlement of claims................... 4,500 8,680 Interest income...................................... (1,701) (2,549) ------- ------- $ 9,862 $18,258 ======= =======
8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW On August 25, 1994, America West Airlines, Inc. (the "Company") emerged from bankruptcy protection after filing a voluntary petition to reorganize under Chapter 11 of the Federal Bankruptcy Code on June 27, 1991. In connection with its emergence from bankruptcy, the Company adopted fresh start reporting in accordance with Statement of Position 90-7 "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7") of the American Institute of Certified Public Accountants. Under fresh start reporting, the reorganization value of the Company has been allocated to its assets and liabilities on a basis substantially consistent with purchase accounting. The portion of reorganization value not attributable to specific tangible assets has been recorded as "Reorganization Value in Excess of Amounts Allocable to Identifiable Assets." Certain fresh start reporting adjustments, primarily related to the adjustment of the Company's assets and liabilities to fair market values, will have a significant effect on the Company's future statements of operations. The more significant adjustments relate to reduced depreciation expense on property and equipment, increased amortization expense relating to reorganization value in excess of amounts allocable to identifiable assets, increased interest expense and reduced aircraft rent expense. In addition, income tax expense for financial reporting purposes will generally be higher than it otherwise would be as amortization of the excess reorganization value is not deductible for income tax purposes. The Company's results of operations for the quarter ended June 30, 1995 have not been prepared on a basis of accounting consistent with its results of operations for the quarter ended June 30, 1994 due to the implementation of fresh start reporting upon the Company's emergence from bankruptcy. RESULTS OF OPERATIONS The Company realized net income of $20.9 million for the second quarter of 1995 compared to $20.1 million for the second quarter of 1994. Operating income for the quarters ended June 30, 1995 and 1994 was $53.0 million and $44.1 million, respectively. The 1994 second quarter net income included reorganization expense of $9.9 million. Income tax expense was $20.3 million for the three months ended June 30, 1995 compared to $.8 million for the 1994 second quarter due primarily to a higher level of pretax income in 1995 and the impact of a certain nondeductible expense discussed above. For the six months ended June 30, 1995 and 1994, the Company realized net income of $26.1 million and $35.3 million, respectively. Net income for the six month period of 1994 included reorganization expense of $18.3 million. Total operating revenues were $399.9 million for the quarter ended June 30, 1995 compared to $363.4 million for the comparable 1994 period, an increase of 10%. Passenger revenue increased 10.1% to $375.0 million for the 1995 second quarter compared to $340.6 million for the 1994 second quarter as a result of increases realized in both load factor and yield, as more fully discussed below. Cargo and other revenues increased 9.7% to $24.9 million for the 1995 second quarter compared to $22.7 million for the 1994 second quarter. Total operating revenues were $745.7 million for the six months ended June 30, 1995 compared to $708.6 million for the comparable period of 1994. Passenger revenues increased 5% to $698.4 million and cargo and other revenues increased 8.5% to $47.3 million for the six months ended June 30, 1995 compared to the six-month 1994 period. 9 10 The following table details certain key operating statistics for the applicable periods.
THREE MONTHS ENDED JUNE 30 --------------------------- PERCENT 1995 1994 CHANGE ----- ----- ------- Number of Aircraft (end of period).......................... 89 85 4.7 Available Seat Miles (millions)............................. 4,858 4,502 7.9 Revenue Passenger Miles (millions).......................... 3,498 3,222 8.6 Load Factor (percent)....................................... 72.0 71.6 .6 Passenger Enplanements (thousands).......................... 4,365 4,073 7.2 Average Passenger Journey Miles............................. 1,010 996 1.4 Average Stage Length (miles)................................ 690 674 2.4 Yield Per Revenue Passenger Mile (cents).................... 10.72 10.57 1.4 Revenue Per Available Seat Mile: Passenger (cents)......................................... 7.72 7.57 2.0 Total (cents)............................................. 8.23 8.07 2.0
SIX MONTHS ENDED JUNE 30 --------------------------- PERCENT 1995 1994 CHANGE ----- ----- ------- Number of Aircraft (end of period).......................... 89 85 4.7 Available Seat Miles (millions)............................. 9,493 8,804 7.8 Revenue Passenger Miles (millions).......................... 6,458 6,139 5.2 Load Factor (percent)....................................... 68.0 69.7 (2.4) Passenger Enplanements (thousands).......................... 8,185 7,814 4.7 Average Passenger Journey Miles............................. 985 988 (.3) Average Stage Length (miles)................................ 688 667 3.1 Yield Per Revenue Passenger Mile (cents).................... 10.82 10.82 -- Revenue Per Available Seat Mile: Passenger (cents)......................................... 7.36 7.55 (2.5) Total (cents)............................................. 7.86 8.05 (2.4)
Capacity, as measured by available seat miles, increased 7.9% and 7.8% for the three months and six months ended June 30, 1995, respectively, compared to the 1994 periods. These increases were the result of the addition of four aircraft to the fleet and increases in the average stage length of 2.4% and 3.1%, respectively. Revenue passenger miles increased 8.6% and 5.2% for the three months and six months ended June 30, 1995, respectively, compared to the 1994 periods. Consequently, load factor increased by .4 load factor points for the three month period but decreased by 1.7 load factor points for the six month period of 1995 compared to the comparable 1994 periods. Yield increased 1.4% for the three months ended June 30, 1995 as passenger fare increases were sustained in certain key markets and discounting of fares was less pervasive across the industry; however, yield was flat for the six months ended June 30, 1995 compared to the 1994 period. Operating expense per available seat mile increased to 7.14 cents for the second quarter of 1995 from 7.09 cents for the 1994 quarter, but decreased to 7.04 cents for the six months ended June 30, 1995 from 7.12 cents for the six month period of 1994. The table below sets forth the major categories of operating expense per available seat mile for the applicable periods. 10 11
THREE MONTHS SIX MONTHS ENDED ENDED JUNE 30 (CENTS) JUNE 30 (CENTS) --------------- --------------- 1995 1994 1995 1994 ---- ---- ---- ---- Salaries and Related Costs................................ 1.97 1.84 1.95 1.85 Rentals and Landing Fees.................................. 1.43 1.48 1.45 1.51 Aircraft Fuel............................................. .88 .84 .87 .86 Agency Commissions........................................ .65 .69 .64 .68 Aircraft Maintenance Materials & Repairs.................. .29 .24 .28 .21 Depreciation and Amortization............................. .42 .49 .43 .49 Other..................................................... 1.50 1.51 1.42 1.52 ---- ---- ---- ---- 7.14 7.09 7.04 7.12 ==== ==== ==== ====
The changes in the components of operating expense per available seat mile are explained as follows: - The increase in salaries and related costs is the result of salary increases effective January 1, 1995 under the Total Pay Program which are anticipated to increase non-executive pay by approximately $25 million annually, accruals totaling $4.5 million for the six months ended June 30, 1995 to provide for performance awards and increases in pilot salaries under the contract with the pilots' collective bargaining agent. Partially offsetting these increases were reductions in the work force arising from a strategic restructuring program. Since January 1995, reductions in the work force of approximately 1,100 positions have been realized. When fully implemented, the strategic restructuring programs are anticipated to result in the elimination of approximately 1,300 positions. - The decrease in rentals and landing fees is the result of increases in the nominal expense levels of 4.7% and 3.8% for the three month and six month periods ended June 30, 1995 over the comparable 1994 periods, which was more than offset by increases in available seat miles flown of 7.9% and 7.8% for the three month and six month periods ended June 30, 1995, respectively. Aircraft rent expense increased due to the addition of four aircraft to the fleet. - Aircraft fuel increased during the second quarter due to the increase in the average price per gallon to 55.13 cents in 1995 from 52.65 cents for 1994. For the six month period, the average price per gallon of fuel increased to 54.56 cents for 1995 from 53.66 cents for 1994. Also, fuel consumption was higher in both of the 1995 periods then in 1994 due to the increases in capacity discussed above. - Agency commissions decreased due to a change in the mix of tickets sold through travel agencies vis-a-vis direct sales to passengers through the Company's reservations system. - Aircraft maintenance materials and repairs increased largely as the result of a flight hour agreement involving certain auxiliary power units, an increase in block hours flown and a change in the classification of the amortization expense associated with capitalized heavy engine and airframe overhauls. For the three months and six months ended June 30, 1995 amortization of capitalized maintenance totaling $1.9 million and $2.8 million, respectively, is included in aircraft maintenance materials and repairs. Amortization of capitalized maintenance totaling $9.4 million and $17.8 million for the 1994 second quarter and six month period, respectively, is included in depreciation and amortization expense. - Depreciation and amortization expense decreased due to the classification change discussed above. - Other operating expenses decreased due to reductions in advertising expense and property taxes. Nonoperating expenses (net of nonoperating income) amounted to $11.8 million and $23.2 million for the second quarter of 1995 and 1994, respectively. Interest expense for the second quarter of 1995 was $15.6 million compared to $12.9 million for the second quarter of 1994. In conformity with SOP 90-7, the Company ceased accruing and paying interest on unsecured prepetition long-term debt during the pendency of its bankruptcy proceeding. Interest expense for the second quarter of 1994 would have been $17.5 million, if the Company had accrued interest expense on such prepetition debt. The 1994 second quarter includes 11 12 reorganization expense of $9.9 million. Interest income for the second quarter of 1995 increased to $4.1 million compared to $.2 million for the second quarter of 1994 due to the significant improvement in the Company's liquidity, period over period. LIQUIDITY AND CAPITAL RESOURCES Unrestricted cash and cash equivalents increased to $279.4 million at June 30, 1995 from $182.6 million at December 31, 1994. Cash generated from operating activities for the six months ended June 30, 1995 and 1994 amounted to $179.9 million and $139.2 million, respectively. During the first six months of 1995, the Company incurred capital expenditures of $50.7 million compared to $35.0 million in 1994. The capital expenditures incurred for both the 1995 and 1994 quarters consisted largely of aircraft spare parts and heavy engine overhauls. The Company has a working capital deficiency which has decreased to $47.1 million at June 30, 1995 from $47.9 million at December 31, 1994. Despite the working capital deficiency, the Company expects to meet all of its obligations as they become due. At June 30, 1995, the Company had on order with AVSA S.A.R.L. ("AVSA") a total of 24 Airbus A320-200 aircraft, with an aggregate net cost estimated at $1.1 billion. Delivery dates of the aircraft will fall in the years 1998 through 2000 with an option to defer the 1998 deliveries. If new A320 aircraft are delivered as a result of a certain "put" agreement (and in April 1995, the Company took delivery of two new A320 aircraft under this "put" agreement), the Company will have the right to cancel on a one-for-one basis, up to a maximum of eight non-consecutive aircraft deliveries hereunder, subject to certain conditions. Additionally, the Company has the option to cancel without cause, up to an additional four of these aircraft, and the Company has the right, with that airline's concurrence, to assign all or some of these delivery positions to Continental Airlines. In December 1994, the Company entered into a support contract with International Aero Engines ("IAE") which provides for the purchase by the Company of six new V2500-A5 spare engines scheduled for delivery beginning in 1998 through 2000 for use on certain of the A320 fleet. Such engines have an estimated aggregate cost of $42.3 million. Under this contract, as amended, the Company took delivery of one additional V2500-A5 engine in June 1995. At June 30, 1995, the Company had significant capital commitments for a number of new aircraft and spare engines, as discussed above. Although the Company has arranged for financing on an "if needed" basis for up to one-half of the deliveries under the AVSA agreement, the Company will require substantial capital from external sources to meet its remaining financial commitments. The Company intends to seek additional financing (which may include public debt financing or private financing) in the future when and as appropriate. There can be no assurance that sufficient financing will be obtained for all aircraft, spare engines and other capital requirements. A default by the Company under any such commitment could have a material adverse effect on the Company. At June 30, 1995, the Company was obligated to lease five aircraft under a put agreement with deliveries to start no earlier than January 1, 1996 and end by June 30, 1999. Under the agreement, new or used B737-300, B757-200, or new or "like new" A320-200 aircraft may be put to the Company at a rate of no more than two aircraft in 1996 and three aircraft per year, thereafter. In addition, no more than four used aircraft may be put to the Company, and for every new A320 aircraft put to the Company, the Company has the right to reduce deliveries under the AVSA A320 purchase contract on a one-for-one basis. During each January of the put period, the Company will negotiate the type and delivery dates for deliveries during the year beginning in the following January. The negotiation deadline for 1996 deliveries has been postponed until September 30, 1995 by mutual agreement. Certain of the Company's long-term debt agreements contain minimum cash balance requirements, leverage ratios, coverage ratios and other financial covenants with which the Company was in compliance at June 30, 1995. 12 13 In June 1995, the Company acquired an interest in the limited partnership which owns, and entered into an advertising and media arrangement with, the Arizona Diamondbacks, the major league baseball franchise that will begin to play in Phoenix in 1998, which arrangement contemplates an investment by the Company of $5 million over the next three years. In July 1995, the Company filed a registration statement with the Securities and Exchange Commission relating to its proposal to utilize existing cash balances to prepay $48 million of its $123 million 11 1/4% Senior Unsecured Notes due September 2001, and to exchange the remaining $75 million of such notes for $75 million of 10 3/4% Senior Unsecured Notes due September 1, 2005. On August 14, 1995, the Company completed the transactions as contemplated by such registration statement. PART II -- OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS The 1995 Annual Meeting of Stockholders of the Company was held on May 2, 1995. The following persons were elected as proposed in the proxy statement pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, to serve as directors until the next Annual Meeting of Stockholders or until their successors are elected and qualified: William A. Franke, A. Maurice Myers, Julia Chang Bloch, Stephen F. Bollenbach, Frederick W. Bradley, Jr., James G. Coulter, John F. Fraser, John L. Goolsby, Richard C. Kraemer, John R. Power, Jr., Larry L. Risley, Frank B. Ryan, Richard P. Schifter, John F. Tierney and Raymond S. Troubh. The stockholders also approved the America West Airlines, Inc. 1994 Incentive Equity Plan and a proposal for a grant of Class B Common Stock to a tax-exempt, non-profit corporation. There were 93,157,283 votes cast in the election of directors and there were no abstentions or broker non-votes. Results by nominated director were:
VOTED FOR AUTHORITY WITHHELD ---------- ------------------- William A. Franke.............................. 92,777,771 379,512 A. Maurice Myers............................... 92,778,007 379,276 Julia Chang Bloch.............................. 92,770,731 386,552 Stephen F. Bollenbach.......................... 92,778,051 379,232 Frederick W. Bradley, Jr....................... 92,778,209 379,074 James G. Coulter............................... 92,778,650 378,633 John F. Fraser................................. 92,778,196 379,087 John L. Goolsby................................ 92,778,835 378,448 Richard C. Kraemer............................. 92,777,373 379,910 John R. Power, Jr.............................. 92,778,548 378,735 Larry L. Risley................................ 92,777,554 379,729 Frank B. Ryan.................................. 92,778,671 378,612 Richard P. Schifter............................ 92,777,639 379,644 John F. Tierney................................ 92,441,810 715,473 Raymond S. Troubh.............................. 92,777,590 379,693
There were 79,972,180 votes cast for the approval of the 1994 Incentive Equity Plan, with 3,847,793 votes against, 64,204 abstentions and 9,273,106 broker non-votes. There were 81,694,898 votes cast for the approval of a stock grant of up to 250,000 shares of Class B Common Stock to a tax exempt, non-profit corporation with 1,828,312 votes against, 239,686 abstentions and 9,394,387 broker non-votes. 13 14 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits
EXHIBIT NUMBER DESCRIPTION AND METHOD OF FILING ------- --------------------------------------------------------------------------------- 3.1 Company's Articles of Incorporation -- Incorporated by reference to the Company's Report on Form 8-K dated September 8, 1994. 3.2 Restated By-laws of America West Airlines, Inc., as amended -- Incorporated by reference to the Company's Report on Form 10-K dated December 31, 1994. *11.1 Computation of Net Income (Loss) per Share 23.2 Consent of KPMG Peat Marwick LLP -- Incorporated by reference to Company's S-4 Registration Statement dated July 18, 1995. *27 Financial Data Schedule
--------------- * Filed herewith b. Reports on Form 8-K None 14 15 SIGNATURE 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. AMERICA WEST AIRLINES, INC. By /s/ W. DOUGLAS PARKER ------------------------------------ W. Douglas Parker Senior Vice President and Chief Financial Officer DATED: August 14, 1995 15 EX-11.1 2 COMPUTATION OF NET INCOME PER COMMON SHARE 1 EXHIBIT 11.1 AMERICA WEST AIRLINES, INC. COMPUTATION OF NET INCOME PER COMMON SHARE (IN THOUSANDS EXCEPT PER SHARE AMOUNT)
REORGANIZED | PREDECESSOR COMPANY | COMPANY REORGANIZED | PREDECESSOR ----------- | ----------- COMPANY | COMPANY THREE | THREE ----------- | ----------- MONTHS | MONTHS SIX MONTHS | SIX MONTHS ENDED | ENDED ENDED | ENDED JUNE 30, | JUNE 30, JUNE 30, | JUNE 30, 1995 | 1994 1995 | 1994 ----------- | ----------- ----------- | ----------- | | Primary Earnings Per Share | | Computation for Statements of Operation: | | Net Income................................ $ 20,873 | $ 20,136 $ 26,083 | $ 35,311 Preferred dividends....................... -- | -- -- | -- Adjustment for interest on debt reduction, | | net of taxes........................... -- | 878 -- | 2,050 ----------- | ----------- ----------- | ----------- Net income applicable to common stock..... $ 20,873 | $ 21,014 $ 26,083 | $ 37,361 =========== | =========== =========== | =========== Weighted average number of common shares | | outstanding............................ 45,166,676 | 25,405,255 45,166,317 | 25,348,572 Assumed exercise of stock options and | | warrants(a)............................ -- | 2,850,027 -- | 3,355,748 ----------- | ----------- ----------- | ----------- Weighted average number of common shares | | outstanding as adjusted................ 45,166,676 | 28,255,282 45,166,317 | 28,704,320 =========== | =========== =========== | =========== Primary earnings per common share: | | Net income(b)............................. $ .46 | $ .74 $ .58 | $ 1.30 =========== | =========== =========== | =========== | | Net Income................................ $ 20,873 | $ 26,083 | Preferred dividends....................... -- | -- | Adjustment for interest on debt reduction, | | net of taxes........................... 901 | 2,069 | ----------- | ----------- | Net income applicable to common stock..... $ 21,774 | $ 28,152 | =========== | =========== | Weighted average number of common shares | | outstanding............................ 45,166,676 | 45,166,317 | Assumed exercise of stock options and | | warrants (a)........................... 2,917,927 | 2,852,951 | =========== | =========== | Weighted average number of common shares | | outstanding as adjusted................ 48,084,603 | 48,019,268 | =========== | =========== | Primary earnings per common share: | | Net income(c)............................. $ .45 | $ .59 | =========== | =========== |
16 2 EXHIBIT 11.1 AMERICA WEST AIRLINES, INC. COMPUTATION OF NET INCOME PER COMMON SHARE (IN THOUSANDS EXCEPT PER SHARE AMOUNT)
REORGANIZED | PREDECESSOR REORGANIZED | PREDECESSOR COMPANY | COMPANY COMPANY | COMPANY ------------ | ------------ ---------- | ---------- THREE MONTHS | THREE MONTHS SIX MONTHS | SIX MONTHS ENDED | ENDED ENDED | ENDED JUNE 30, | JUNE 30, JUNE 30, | JUNE 30, 1995 | 1994 1995 | 1994 ------------ | ------------ ---------- | ---------- | | Fully Diluted Earnings Per Share | | Computation for Statements of | | Operations: | | Net Income............................ $ 20,873 | $ 20,136 $ 26,083 | $ 35,311 Adjustment for interest on debt | | reduction, net of taxes............ 579 | 852 1,676 | 1,988 Preferred dividends................... -- | -- -- | -- ----------- | ----------- ----------- | ----------- Net income applicable to common | | stock.............................. $ 21,452 | $ 20,988 $ 27,759 | $ 37,299 =========== | =========== =========== | =========== Weighted average number of common | | shares outstanding................. 45,166,676 | 25,405,255 45,166,317 | 25,348,572 Assumed exercise of stock options and | | warrants(a)........................ 2,917,927 | 2,850,027 2,852,951 | 3,355,748 ----------- | ----------- ----------- | ----------- Weighted average number of common | | shares outstanding as adjusted..... 48,084,603 | 28,255,282 48,019,268 | 28,704,320 =========== | =========== =========== | =========== Fully diluted earnings per common share: | | Net income(b)......................... $ .45 | $ .74(d) $ .58 | $ 1.30(d) =========== | =========== =========== | =========== Additional Fully Diluted Computation: | | Additional adjustment to net income as | | adjusted per fully diluted computation | | above: | | Net Income............................ $ 20,873 | $ 20,136 $ 26,083 | $ 35,311 Add interest on debt reduction, net | | of taxes........................... 579 | 852 1,676 | 1,988 ----------- | ----------- ----------- | ----------- Net income applicable to common | | stock.............................. $ 21,452 | $ 20,988 $ 27,759 | $ 37,299 =========== | =========== =========== | ===========
17 3 EXHIBIT 11.1 AMERICA WEST AIRLINES, INC. COMPUTATION OF NET INCOME PER COMMON SHARE (IN THOUSANDS EXCEPT PER SHARE AMOUNT)
REORGANIZED | PREDECESSOR REORGANIZED | PREDECESSOR COMPANY | COMPANY COMPANY | COMPANY ------------ | ------------ ----------- | ----------- THREE MONTHS | THREE MONTHS SIX MONTHS | SIX MONTHS ENDED | ENDED ENDED | ENDED JUNE 30, | JUNE 30, JUNE 30, | JUNE 30, 1995 | 1994 1995 | 1994 ------------ | ------------ ----------- | ----------- | | Fully Diluted Earnings Per Share | | Additional adjustment to weighted | | average number of shares outstanding | | Weighted average number of shares | | outstanding as adjusted per fully | | diluted computation above............ 48,084,603 | 28,255,282 48,019,268 | 28,704,320 Additional dilutive effect of | | outstanding options and warrants..... -- | -- -- | -- Additional dilutive effect of assumed | | conversion of preferred stock: | | Series C 9.75%....................... -- | 73,099 -- | 73,099 Additional dilutive effect of assumed | | conversion of 7.75% subordinated | | debenture............................ -- | 2,257,558 -- | 2,257,558 Additional dilutive effect of assumed | | conversion of 7.5% subordinated | | debenture............................ -- | 2,264,932 -- | 2,264,932 Additional dilutive effect of assumed | | conversion of 11.5% subordinated | | debenture............................ -- | 7,306,865 -- | 7,306,865 ----------- | ----------- ----------- | ----------- Weighted average number of common shares | | outstanding as adjusted.............. 48,084,603 | 40,157,736 48,019,268 | 40,606,773 =========== | =========== =========== | =========== Fully diluted earnings per common share: | | Net income (b).......................... $ .45 | $ .52 $ .58 | $ .92 =========== | =========== =========== | ===========
--------------- (a) The stock options and warrants are included only in the periods in which they are dilutive. (b) Historical per share data for the Predecessor Company is not meaningful since the Company has been recapitalized and has adopted fresh start reporting as of August 25, 1994. (c) The calculation is submitted in accordance with Regulation S-K Item 601(b)(ii) although not required by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in a dilution of less than 3%. (d) The calculation is submitted in accordance with Regulation S-K Item 601 (b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an antidilutive result. 18 EX-27 3 FINANCIAL DATA SCHEDULE
5 0000706270 AMERICA WEST AIRLINES, INC. 1 US DOLLARS 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1 279,392 0 83,587 3,930 27,210 428,763 592,756 42,236 1,673,117 475,897 438,204 452 0 0 621,765 1,673,117 0 745,706 0 667,854 0 1,550 31,458 52,165 26,082 26,083 0 0 0 26,083 .58 .58 America West Airlines, Inc. emerged from Chapter 11 on August 15, 1994 and adopted fresh start reporting in accordance with statement of Position 90-7. Accordingly, the Company's post-reorganization balance financial statements have not been prepared on a consistent basis with such pre-reorganization financial statements and are not comparable in all respects to financial statements prior to reorganization.