0000950153-95-000227.txt : 19950816
0000950153-95-000227.hdr.sgml : 19950816
ACCESSION NUMBER: 0000950153-95-000227
CONFORMED SUBMISSION TYPE: 424B3
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 19950815
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: 424B3
SEC ACT: 1933 Act
SEC FILE NUMBER: 033-55689
FILM NUMBER: 95564347
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
424B3
1
PROSPECTUS SUPPLEMENT FOR AMERICA WEST AIRLINES
1
Filed Pursuant to Rule 424(b)(3)
Registration Nos. 33-55689 and 33-54243
SUPPLEMENT DATED AUGUST 15, 1995
TO
SUPPLEMENT DATED JULY 12, 1995
TO
PROSPECTUS DATED JUNE 20, 1995
AMERICA WEST AIRLINES, INC.
1,200,000 SHARES CLASS A COMMON STOCK
18,698,704 SHARES CLASS B COMMON STOCK
5,850,016 CLASS B COMMON STOCK WARRANTS
------------------------
This Prospectus Supplement relates to (i) 1,200,000 shares of Class A
Common Stock of America West Airlines, Inc. ("America West" or the "Company"),
(ii) 18,698,704 shares of Class B Common Stock and (iii) 5,850,016 warrants,
each entitling the holder thereof to purchase one share of Class B Common Stock
for $12.74 at any time prior to August 25, 1999. Capitalized terms used but not
defined herein have the meanings assigned to such terms in the Prospectus.
This Prospectus Supplement includes information from the Company's
Quarterly Report on Form 10-Q for the period ended June 30, 1995.
RECENT DEVELOPMENTS
On August 14, 1995, the Company completed (i) the purchase of an aggregate
of $48,000,000 principal amount of its outstanding 11 1/4% Senior Unsecured
Notes due 2001 ("Existing Notes") for cash equal to the full amount thereof plus
accrued and unpaid interest to the date of purchase (the "Purchase Offer") and
(ii) the exchange of an aggregate of $75,000,000 principal amount of its 10 3/4%
Senior Unsecured Notes due 2005 (the "New Notes") for $75,000,000 principal
amount of Existing Notes (the "Exchange Offer" and with the Purchase Offer, the
"Offer"). In connection with the Offer, the Company paid a fee (the "New Note
Payment") equal to 3 5/8% of the principal amount of New Notes ($2,718,750) in
respect of the agreement by holders of Existing Notes to accept the New Notes.
The following table sets forth the capitalization of the Company at June 30,
1995 and as adjusted to reflect the consummation of the Offer. The table should
be read in conjunction with the Company's financial statements and the related
notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this Prospectus Supplement.
ACTUAL AS ADJUSTED
---------- --------------
(IN THOUSANDS)
Total debt................................................ $ 501,486 $ 452,162(1)
Stockholders' equity:
Class A Common Stock................................. 12 12
Class B Common Stock................................. 440 440
Additional paid in capital........................... 587,384 587,384
Retained earnings.................................... 33,929 32,696(2)
---------- --------
Total stockholders' equity...................... 621,765 620,532
---------- --------
Total capitalization...................................... $1,123,251 $1,072,694
========== ========
---------------
(1) Reflects the following:
(a) Write off of unamortized costs associated with the Existing Notes of
$1,995,000.
(b) Principal payments on Existing Notes of $48,000,000.
(c) Issuance of $75,000,000 of New Notes net of the New Note Payment and
estimated issuance costs totalling $3,318,750 in exchange for
$75,000,000 of Existing Notes.
(2) Reflects the extraordinary loss associated with the write off of unamortized
costs relating to Existing Notes.
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.
S-2
3
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.
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
==== ==== ==== ====
S-3
4
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
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.
S-4
5
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.
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 Existing Notes and to
exchange the remaining $75 million Existing Notes for $75 million New Notes. On
August 14, 1995, the Company completed the transactions contemplated by such
registration statement.
S-5
6
SELECTED FINANCIAL DATA
The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" for, and as of, (i) the period August
26, 1994 to December 31, 1994, the period January 1, 1994 to August 25, 1994,
and each of the years in the four-year period ended December 31, 1993, are
derived from the financial statements of the Company, which financial statements
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants and (ii) the periods ended June 30, 1995 and 1994 which are derived
from the unaudited condensed financial statements of the Company. The selected
data should be read in conjunction with the financial statements, the related
notes and the independent auditors' report, included elsewhere in the
Prospectus. The independent auditors' report for the period August 26, 1994 to
December 31, 1994, the period January 1, 1994 to August 25, 1994, and as of
December 31, 1994 contains an explanatory paragraph that states the financial
statements of the Reorganized Company reflect the impact of adjustments to
reflect the fair value of assets and liabilities under fresh start reporting. As
a result, the financial statements of the Reorganized Company are presented on a
different basis than those of the Predecessor Company and, therefore, are not
comparable in all respects.
| PREDECESSOR COMPANY
REORGANIZED COMPANY(A) | --------------------------------------------------------------------------
------------------------ | PERIOD
SIX | SIX FROM
MONTHS PERIOD FROM | MONTHS JANUARY 1
ENDED AUGUST 26 TO | ENDED TO YEARS ENDED DECEMBER 31,
JUNE 30, DECEMBER 31, | JUNE 30, AUGUST 25, -------------------------------------------------
1995 1994 | 1994 1994 1993 1992 1991 1990
---------- ------------ | ---------- ---------- ---------- ---------- ---------- ----------
| (IN THOUSANDS EXCEPT PER SHARE AND RATIO AMOUNTS)
|
STATEMENTS OF OPERATIONS |
DATA: |
|
Operating revenues......... $ 745,706 $ 469,766 | $ 708,615 $ 939,028 $1,325,364 $1,294,140 $1,413,925 $1,315,804
Operating expenses......... 667,854 430,895 | 626,719 831,522 1,204,310 1,368,952 1,518,582 1,347,435
Operating income (loss).... 77,852 38,871 | 81,896 107,506 121,054 (74,812) (104,657) (31,631)
Income (loss) before income |
taxes and extraordinary |
items.................... 52,165 19,736 | 36,782 (201,209) 37,924 (131,761) (222,016) (76,695)
Income taxes............... 26,082 11,890 | 1,471 2,059 759 -- -- --
Income (loss) before |
extraordinary items...... 26,083 7,846 | 35,311 (203,268) 37,165 (131,761) (222,016) (76,695)
Extraordinary items(b)..... -- -- | -- 257,660 -- -- -- 2,024
Net income (loss).......... 26,083 7,846 | 35,311 54,392 37,165 (131,761) (222,016) (74,671)
Earnings (loss) per |
share:(c) |
Primary: |
Before extraordinary |
items................ .58 .17 | 1.30 (7.03) 1.50 (5.58) (10.39) (4.26)
Extraordinary |
items(b)............. -- -- | -- 9.02 -- -- -- 0.11
---------- ------------ | ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... .58 .17 | 1.30 1.99 1.50 (5.58) (10.39) (4.15)
Fully diluted: |
Before extraordinary |
items.................. .58 .17 | .92 (4.96 ) 1.04 (5.58) (10.39) (4.26)
Extraordinary |
items(b)............. -- -- | -- 6.37 -- -- -- 0.11
---------- ------------ | ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... .58 .17 | .92 1.41 1.04 (5.58) (10.39) (4.15)
Shares used for |
computation: |
Primary.................. 45,166 45,127 | 28,704 28,550 27,525 23,914 21,534 18,396
Fully diluted............ 48,019 45,127 | 40,607 40,452 41,509 23,914 21,534 18,396
BALANCE SHEET DATA: |
Working capital |
deficiency............... (47,134) (47,927) | (106,760) -- (124,375) (201,567) (51,158) (94,671)
Total assets............... 1,673,117 1,545,092 | 1,100,541 -- 1,016,743 1,036,441 1,111,144 1,165,256
Long-term debt, less |
current |
maturities(d)............ 438,204 465,598 | 604,420 -- 620,992 647,015 726,514 620,701
Total stockholders' equity |
(deficiency)............. 621,765 595,446 | (215,338) -- (254,262) (294,613) (166,510) 21,141
---------------
(a) The Company filed a voluntary petition to reorganize under Chapter 11 of
the Bankruptcy Code on June 27, 1991 and operated as a debtor-in-possession
until the Effective Date. The financial statements of the Reorganized
Company are presented on a different basis of accounting than those of the
Predecessor Company and, therefore, are not comparable in all respects. The
financial statements of the Reorganized Company reflect the impact of
adjustments to reflect the fair value of assets and liabilities under fresh
start reporting.
(b) Includes extraordinary items of $257.7 million in 1994 resulting from the
discharge of indebtedness pursuant to the consummation of the Plan of
Reorganization and, $2.0 million in 1990, resulting from the purchase and
retirement of convertible subordinated debentures.
(c) 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.
(d) Includes certain balances reported as "Estimated Liabilities Subject to
Chapter 11 Proceedings" for the Predecessor Company.
S-6
7
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.
S-7
8
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.
S-8
9
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.
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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.
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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
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12
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
======= | =======
In addition, during the six months ended June 30, 1995 and 1994, the
Company had the following non-cash financing and investing activities:
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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
======= =======
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