-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Akh/+z+wgviU53eA7kfHwnepB38vXPfNIZbALfUtzjRhIJjpN8hd8vpV3N8+jHrL GFjIwYH/aYzGkNDyKXNvtA== 0000950153-96-000321.txt : 19960523 0000950153-96-000321.hdr.sgml : 19960523 ACCESSION NUMBER: 0000950153-96-000321 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 DATE AS OF CHANGE: 19960522 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICA WEST AIRLINES INC CENTRAL INDEX KEY: 0000706270 STANDARD INDUSTRIAL CLASSIFICATION: 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: 96568995 BUSINESS ADDRESS: STREET 1: 4000 E SKY HARBOR BLVD STREET 2: STE 2100 CITY: PHOENIX STATE: AZ ZIP: 85034 BUSINESS PHONE: 6026930800 MAIL ADDRESS: STREET 1: 4000 EAST SKY HARBOR BLVD STREET 2: STE 2100 CITY: PHOENIX STATE: AZ ZIP: 85034 10-Q 1 QUARTERLY REPORT FOR THE QUARTER ENDED 3/31/96 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 March 31, 1996 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 Identification No.) incorporation or organization) 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 44,556,379 shares of Class B Common Stock outstanding as of April 30, 1996. 2 Part I - FINANCIAL INFORMATION Item 1. Financial Statements AMERICA WEST AIRLINES, INC. Condensed Balance Sheets (in thousands except share data)
ASSETS March 31, December 31, 1996 1995 ------------ ----------- (Unaudited) Current assets: Cash and cash equivalents. . . . . . . . . . . . . $ 236,542 $ 224,367 Accounts receivable, less allowance for doubtful accounts of $2,846 in 1996 and $2,515 in 1995 . . . . . . . .. . . 98,716 69,094 Expendable spare parts and supplies, less allowance for obsolescence of $2,605 in 1996 and $2,115 in 1995 . . . . . . . 28,399 28,643 Prepaid expenses . . . . . . . . . . . . . . . . . 48,167 43,315 ------------ ------------ Total current assets. . . . . . . . . . . . . 411,824 365,419 ------------ ------------ Property and equipment: Flight equipment . . . . . . . . . . . . . . . . . 573,825 546,591 Other property and equipment . . . . . . . . . . . 109,803 104,106 Equipment purchase deposits. . . . . . . . . . . . 35,367 27,489 ------------ ------------ 718,995 678,186 Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . 95,909 76,123 ------------ ------------ Total property and equipment. . . . . . . . . 623,086 602,063 ------------ ----------- Other assets: Restricted cash . . . . . . . . . . . . . . . . . 32,264 31,694 Reorganization value in excess of amounts allocable to identifiable assets, net. . 482,495 489,045 Deferred income taxes. . . . . . . . . . . . . . . 74,700 74,700 Other assets, net . . . . . . . . . . . . . . . . 27,559 25,788 ------------ ------------ Total other assets. . . . . . . . . . . . . . 617,018 621,227 ------------ ------------ $ 1,651,928 $ 1,588,709 ============ ============
See accompanying notes to condensed financial statements. 2 3 AMERICA WEST AIRLINES, INC. Condensed Balance Sheets (in thousands except share data)
March 31, December 31, Liabilities and Stockholders' Equity 1996 1995 - - ------------------------------------ ----------- ----------- (Unaudited) Current liabilities: Current maturities of long-term debt. . . . . . . . . . . $ 48,652 $ 54,157 Accounts payable. . . . . . . . . . . . . . . . . . . . . 100,161 89,157 Air traffic liability . . . . . . . . . . . . . . . . . . 259,680 191,744 Accrued compensation and vacation benefits. . . . . . . . 22,046 41,616 Accrued taxes . . . . . . . . . . . . . . . . . . . . . . 33,929 34,359 Other accrued liabilities . . . . . . . . . . . . . . . . 23,141 24,802 ----------- ----------- Total current liabilities . . . . . . . . . . . . . . 487,609 435,835 ----------- ----------- Long-term debt, less current maturities. . . . . . . . . . . 371,588 373,964 Deferred credits and other liabilities . . . . . . . . . . . 125,576 129,438 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value. Authorized 48,800,000 shares; no shares issued . . . . . . . . . . . . . . . . - - Class A common stock, $.01 par value. Authorized 1,200,000 shares; issued and outstanding 1,200,000 shares . . . . . . . . . . . . . . . . . . . . . . . . . 12 12 Class B common stock, $.01 par value. Authorized 100,000,000 shares; issued and outstanding 44,494,973 shares at March 31, 1996 and 44,141,330 shares at December 31, 1995. . . . . . . . . . . . . . . . . . . . 445 441 Additional paid-in capital . . . . . . . . . . . . . . . . 592,879 588,927 Retained earnings. . . . . . . . . . . . . . . . . . . . . 75,359 61,632 ----------- ----------- 668,695 651,012 Less treasury stock, 112,000 shares of Class B common stock at cost. . . . . . . . . . . . . . . . . . . . . . (1,540) (1,540) ----------- ----------- Total stockholders' equity . . . . . . . . . . . . 667,155 649,472 ----------- ----------- $ 1,651,928 $ 1,588,709 =========== ===========
See accompanying notes to condensed financial statements. 3 4 AMERICA WEST AIRLINES, INC. Condensed Statements of Income (in thousands except per share data) (unaudited)
Three Months Ended March 31, --------------------------- 1996 1995 ----------- ------------ Operating revenues: Passenger. . . . . . . . . . . . . . . . . . . . . $ 387,802 $ 323,459 Cargo. . . . . . . . . . . . . . . . . . . . . . . 10,757 11,376 Other. . . . . . . . . . . . . . . . . . . . . . . 14,591 10,955 ----------- ----------- Total operating revenues . . . . . . . . . . . . 413,150 345,790 ----------- ----------- Operating expenses: Salaries and related costs . . . . . . . . . . . . 94,702 89,180 Aircraft rents . . . . . . . . . . . . . . . . . . 47,272 41,446 Other rents and landing fees . . . . . . . . . . . 26,567 26,808 Aircraft fuel. . . . . . . . . . . . . . . . . . . 49,176 39,694 Agency commissions . . . . . . . . . . . . . . . . 32,599 28,965 Aircraft maintenance materials and repairs . . . . 27,025 12,764 Depreciation and amortization. . . . . . . . . . . 13,232 11,920 Amortization of reorganization value in excess of amounts allocable to identifiable assets. . . 6,549 8,208 Other. . . . . . . . . . . . . . . . . . . . . . . 81,710 61,910 ----------- ----------- Total operating expenses . . . . . . . . . . . . 378,832 320,895 ----------- ----------- Operating income . . . . . . . . . . . . . . . . 34,318 24,895 ----------- ----------- Nonoperating income (expenses): Interest income. . . . . . . . . . . . . . . . . . 3,170 2,874 Interest expense . . . . . . . . . . . . . . . . . (12,268) (15,879) Gain (loss) on disposition of property and equipment. . . . . . . . . . . . . . . . . . 178 (923) Other, net . . . . . . . . . . . . . . . . . . . . 22 1 ----------- ----------- Total nonoperating expenses, net . . . . . . . . (8,898) (13,927) ----------- ----------- Income before income taxes . . . . . . . . . . . . . 25,420 10,968 ----------- ----------- Income taxes . . . . . . . . . . . . . . . . . . . . 11,693 5,758 ----------- ----------- Net income . . . . . . . . . . . . . . . . . . . . . $ 13,727 $ 5,210 =========== =========== Earnings per share: Primary. . . . . . . . . . . . . . . . . . . . . . $ 0.28 $ 0.12 =========== =========== Fully diluted. . . . . . . . . . . . . . . . . . . $ 0.27 $ 0.12 =========== =========== Shares used for computation: Primary. . . . . . . . . . . . . . . . . . . . . . 49,710 45,166 =========== =========== Fully diluted. . . . . . . . . . . . . . . . . . . 50,658 45,166 =========== ===========
See accompanying notes to condensed financial statements. 4 5 AMERICA WEST AIRLINES, INC. CONDENSED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Three Months Ended March 31, -------------------------- 1996 1995 ---------- ---------- Cash flows from operating activities: Net income . . . . . . . . . . . . . . . . . . . . $ 13,727 $ 5,210 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization. . . . . . . . . . 13,232 11,920 Amortization of reorganization value in excess of amounts allocable to identifiable assets. . 6,549 8,208 Amortization of deferred overhauls . . . . . . . 6,602 859 Amortization of deferred credits . . . . . . . . (2,901) (2,642) Loss (gain) on disposition of property and equipment. . . . . . . . . . . . . . . . . . . (178) 923 Other. . . . . . . . . . . . . . . . . . . . . . 698 851 Changes in operating assets and liabilities: Increase in accounts receivable, net . . . . . . (29,622) (29,031) Decrease (increase) in spare parts and supplies, net. . . . . . . . . . . . . . . . . 244 (2,081) Increase in prepaid expenses, net. . . . . . . . (4,852) (6,332) Increase in other assets . . . . . . . . . . . . (2,341) (2,528) Increase in accounts payable . . . . . . . . . . 11,004 13,462 Increase in air traffic liability. . . . . . . . 67,936 59,954 Increase (decrease) in accrued compensation and vacation benefits. . . . . . . . . . . . . (19,570) 757 Increase (decrease) in accrued taxes . . . . . . (430) 18,288 Increase (decrease) in other accrued liabilities. . . . . . . . . . . . . . . . . . 121 (4,839) Increase (decrease) in other liabilities . . . . (1,542) 441 ---------- ---------- Net cash provided by operating activities. . . 58,677 73,420 Cash flows from investing activities: Purchases of property and equipment. . . . . . . . (32,795) (28,950) Equipment purchase deposits. . . . . . . . . . . . (102) - Proceeds from disposition of property. . . . . . . 33 312 ---------- ---------- Net cash used in investing activities. . . . . (32,864) (28,638) Cash flows from financing activities: Repayment of debt. . . . . . . . . . . . . . . . . (15,812) (13,958) Issuance of common stock . . . . . . . . . . . . . 2,174 1 ---------- ---------- Net cash used in financing activities. . . . . (13,638) (13,957) ---------- ---------- Net increase in cash and cash equivalents. . . 12,175 30,825 ---------- ---------- Cash and cash equivalents at beginning of period . . 224,367 182,581 ---------- ---------- Cash and cash equivalents at end of period . . . . . $ 236,542 $ 213,406 ========== ==========
See accompanying notes to condensed financial statements. 5 6 AMERICA WEST AIRLINES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 1996 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. 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, 1995. 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 reflects 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 and dilutive common stock equivalents (stock options and warrants). Fully diluted earnings per share reflects 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 Under the Incentive Equity Plan ("Incentive Plan"), up to 3,500,000 shares of Class B Common Stock may be issued to cover awards under the Incentive Plan, of which no more than 1,500,000 will be issued as restricted stock or bonus stock. As of March 31, 1996, 149,334 shares of restricted stock and options to purchase 2,140,666 shares of Class B Common Stock at the fair market value on the date of grant (which range from $7.75 to $20.875) had been granted pursuant to the Incentive Plan. Also, options to purchase 78,000 shares of Class B Common Stock at the fair market value on the date of grant (which range from $8.00 to $9.38) were issued to members of the Board of Directors who are not employees of the Company. As of March 31, 1996, 50,334 shares of restricted stock were vested and 615,000 options to purchase shares of Class B Common Stock were exercisable. 4. INCOME TAXES The Company recorded income tax expense as follows:
Three Months Ended March 31, ------------------------ 1996 1995 -------- -------- (in thousands) Current taxes: Federal $ 364 $ 10 State 326 18 -------- -------- 690 28 Deferred taxes - - Income tax expense attributable to reorganization items 11,003 5,730 -------- -------- Income tax expense $ 11,693 $ 5,758 ======== ========
6 7 As reflected in the above table, for the three months ended March 31, 1996 and 1995, income tax expense pertains both to income from operations as well as to certain adjustments necessitated by the Company's emergence from bankruptcy and the resultant fresh start adjustments to the Company's financial statements. The Company's reorganization 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 cash income tax liability (i.e., income taxes payable) is considerably lower than income tax expense shown for financial reporting purposes. 5. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS Cash paid for interest and income taxes was as follows:
Three Months Ended March 31, ---------------------------- 1996 1995 -------- -------- (in thousands) Interest (net of amounts capitalized of $606 in 1996 and $520 in 1995) $ 13,312 $ 18,317 Income taxes 16 14
In addition, the Company had the following non-cash investing and financing activities:
Three Months Ended March 31, ---------------------------- 1996 1995 -------- -------- (in thousands) Notes payable $ 7,814 $ 1,415 Accrued interest reclassified to long-term debt - 32
6. COMMITMENTS AND CONTINGENCIES (a) Leases In January 1996, the Company entered into agreements to lease two A320 aircraft. The two A320 aircraft each have a lease term of 62 months with rents payable monthly; such rents are subject to reset every six months based on the six-month LIBOR rate. In March 1996, the Company entered into an agreement to lease one A320 aircraft for two years with rents payable 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 7 8 include claims of various state and local tax authorities and certain potential contractual indemnification obligations. The Company is also a defendant in various lawsuits. Management cannot reasonably predict the outcome of the pending lawsuits and administrative and priority tax claims. However, management believes, after considering a number of factors, including the advice of outside counsel, the nature of the contingencies to which the Company is subject and its prior experience, that although the outcome of those matters could adversely affect future operating results, the resolution of these actions will not have a material adverse effect on the Company's financial condition. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Factors Affecting Company Results The Company's operating results are significantly affected by general economic conditions as well as competitive factors and other conditions affecting the airline industry. In recent periods, airlines have achieved generally improved operating results as a result of more favorable economic conditions and as carriers have focused on their areas of relative strength, eliminating service to under- performing markets and rationalizing operations, route systems and pricing strategies. America West began to achieve positive results beginning in 1993 due to an operational restructuring, combined with a gradually improving economic climate and a more rational pricing environment. As a result, the Company has achieved 13 consecutive quarters of profitability beginning with the first quarter of 1993. The Company continually evaluates performance in its existing and potential markets and has undertaken a study of the strategic deployment of its aircraft to optimize operating performance. To this end, the Company commenced in February 1996 a new growth plan and has identified additional routes through its Phoenix and Las Vegas hubs which it believes it can service profitably. The Company operates with one of the lowest cost structures among the major airlines in the United States. To the extent that other carriers are successful in reducing their operating costs, the advantage which the Company enjoys as a result of its low cost structure would be reduced. For this reason, maintaining a low cost structure is one of the Company's strategic imperatives. In May 1995, a five-year collective bargaining agreement with the Company's pilots became effective. The terms of this contract are consistent with the Company's goal of maintaining its low unit cost structure. Specifically, the agreement provides for a salary level increase at a compound annual rate of approximately 5.7% and includes provisions relating to pilot productivity which management estimates will result in productivity increases of approximately 2% per year. A significant portion of such salary level increase was effected in May 1995 in order to provide the pilots with a pay and benefits package competitive with other low cost carriers. Salary level increases after the May 1995 increase will occur through April 2000 and will increase at a compound annual rate of approximately 2.5%. Also consistent with its goal of maintaining a low cost structure, in December 1995, the Company outsourced its heavy aircraft maintenance to Tramco, a division of the B.F. Goodrich Company. Based on costs associated with the Company's maintenance operations in 1995, the Company estimates the outsourcing arrangements will save the Company approximately $35 million over the five-year term of the agreement. This outsourcing reduced the Company's workforce by approximately 500. Commencing October 1, 1995, operating costs of the Company were affected by the expiration of a 4.3 cents per gallon federal tax exemption for commercial aviation fuel. The expiration of such exemption will increase the Company's annual operating expenses by approximately $13.4 million based upon its 1995 fuel consumption levels. Recently, Congressional leaders have voiced support for the immediate repeal of the 4.3 cents per gallon federal fuels tax. Legislation has been introduced in the Senate that, if enacted, would repeal, through December 31,1996, the 4.3 cents per gallon federal fuel tax currently applicable to jet fuel used in commercial aviation. However, there can be no assurance that the jet fuel tax will be repealed, either temporarily or permanently. The Company's actual income tax liability (i.e., income taxes payable) is considerably lower than income tax expense for financial reporting purposes due in part to the utilization of net operating loss and certain tax credit carryforwards. The amortization of the excess reorganization value is not deductible for income tax purposes, in part giving rise to an effective tax rate for financial reporting purposes that is significantly greater than the current U.S. corporate statutory rate of 35 percent. 8 9 Seasonality Due to the greater demand for air travel during the summer months, revenues in the airline industry in the second and third quarters of the year tend to be greater than revenues in the first and fourth quarters of the year. Other factors that are not necessarily seasonal also significantly affect results, including the extent and nature of price and other competition from other airlines, changing levels of operations, international events, fuel prices and general economic conditions. Selected Operating Data The table below sets forth selected operating data for the Company.
Three Months Ended March 31, --------------------------------- Percent Change 1996 1995 1996-1995 ------- -------- --------- Available seat miles (in millions) 4,955 4,635 6.9 Revenue passenger miles (in millions) 3,504 2,960 18.4 Load factor (percent) 70.7 63.9 10.6 Yield per revenue passenger mile (cents) 11.07 10.93 1.3 Revenue per available seat mile: Passenger (cents) 7.83 6.98 12.2 Total (cents) 8.34 7.46 11.8 Passenger enplanements (in thousands) 4,305 3,820 12.7 Average stage length (miles) 700 687 1.9 Average passenger journey (miles) 968 957 1.1 Aircraft (end of period) 95 88 8.0 Average daily aircraft utilization (hours) 11.5 11.2 2.7 Full-time equivalent employees (end of period) 8,932.8 10,280.4 (13.1) Fuel price (cents per gallon) 60.2 54.0 11.5 Fuel consumption (gallons in millions) 81.8 73.6 11.1
9 10 The table below sets forth the major components of operating expense per available seat mile ("ASM") for the Company.
Three Months Ended March 31, ----------------------------- Percent Change 1996 1995 1996-1995 ---- ---- --------- (in cents) Salaries and related costs 1.91 1.92 (.5) Aircraft rents .95 .89 6.7 Other rents and landing fees .54 .58 (6.9) Aircraft fuel .99 .86 15.1 Agency commissions .66 .62 6.5 Aircraft maintenance materials and repairs .55 .28 96.4 Depreciation and amortization .27 .25 8.0 Amortization of reorganization value in excess of amounts allocable to identifiable assets .13 .18 (27.8) Other 1.65 1.34 23.1 ---- ---- 7.65 6.92 10.5 ==== ====
Results of operations For the three months ended March 31, 1996 and 1995, the Company realized net income of $13.7 million and $5.2 million, respectively. Net income for the three month period in 1996 included income tax expense for financial reporting purposes of $11.7 million compared to $5.8 million for the three month period in 1995. Total operating revenues were $413.2 million for the three months ended March 31, 1996 compared to $345.8 million in the 1995 period. Passenger revenues increased 19.9% to $387.8 million during the three months ended March 31, 1996. Cargo and other revenues increased 13.5% to $25.3 million for the first quarter of 1996. The balance of other revenues includes revenues generated primarily from alcoholic beverage sales, contract service sales and service charges. Capacity, as measured by ASMs, increased 6.9 percent for the three months ended March 31, 1996 compared to the 1995 period, primarily due to an increase in the fleet size to 95 aircraft from 88 aircraft. Revenue passenger miles increased 18.4 percent for the three months ended March 31, 1996 compared to the 1995 period. Load factor increased by 6.8 points, on higher available capacity, and yield increased 1.3 percent for the three months ended March 31, 1996 compared to the 1995 period. Operating expense per ASM increased to 7.65 cents for the three months ended March 31, 1996 from 6.92 cents for the 1995 period. The changes in the components of operating expense per ASM for the comparable three month period are explained as follows: - - - Salaries and related costs per ASM have remained relatively constant. The new pilot pay contract which became effective May 1, 1995 increased pilot salaries by approximately $6.9 million for the 1996 first quarter, while the Company's outsourcing of its heavy aircraft maintenance in December 1995 reduced salaries by approximately $4.4 million during the same period. - - - Aircraft rents per ASM increased 6.7 percent due principally to the addition of seven aircraft to the fleet since the first quarter of 1995 at higher average rates. - - - Other rents and landing fees per ASM decreased primarily due to the 6.9 percent increase in ASMs. - - - The average price per gallon of aircraft fuel increased 11.5 percent to 60.2 cents for the 1996 quarter from 54.0 cents for 1995. Also, fuel consumption was higher for the quarter due to the increase in fleet size. 10 11 - - - Agency commission expense per ASM increased primarily due to the 12 percent increase in passenger revenues per ASM in 1996. - - - Aircraft maintenance materials and repairs expense per ASM increased 96.4 percent or $14.3 million due primarily to the $67.2 million increase in capitalized maintenance since the 1995 first quarter which increased capitalized maintenance amortization expense for the first quarter of 1996 by $6.6 million. In addition, outsourcing of the Company's aircraft maintenance work has increased maintenance expense in the 1996 first quarter however, such increase in cost is offset by a reduction in maintenance payroll expense as noted under "Salaries and related costs" above. - - - Amortization of reorganization value in excess of amounts allocable to identifiable assets per ASM decreased due to a reduction in the unamortized balance of excess reorganization value due to, i) utilization of tax attributes of the pre-reorganization Company, including net operating loss carryforwards, such reduction amounting to $50 million in 1995 and $11.9 million in 1994 and ii) recognition of a deferred income tax asset of $74.7 million in 1995. - - - Depreciation and amortization per ASM increased 8 percent primarily due to the 8.2 percent increase in property and equipment in the first quarter of 1996 as compared to the first quarter of 1995. - - - Other operating cost per ASM increased 23.1 percent to 1.65 cents from 1.34 cents. The increase in cost is primarily attributed to a 4.3 cents per gallon federal fuel tax for which the Company became liable commencing October 1, 1995, and the increase in passenger traffic-related cost such as CRS fees, catering costs, credit card discount fees, interrupted trip expense related to the bad weather experienced on the East Coast and advertising costs. - - - The first class installation program that was completed in December 1995, reduced ASM's by 2.6 percent which had the effect of increasing operating cost per ASM for the 1996 first quarter. Net nonoperating expenses decreased $5 million to $8.9 million for the three months ended March 31, 1996 from $13.9 million for 1995. This resulted from a net decrease in interest expense of $3.6 million due to reduced levels of debt and lower interest rates and an increase in interest income of $0.3 million due to higher cash and cash equivalent balances in 1996. Income tax expense for financial reporting purposes for the three months ended March 31, 1996 increased to $11.7 million from $5.8 million in 1995 primarily due to higher pretax earnings. LIQUIDITY AND CAPITAL RESOURCES - - ------------------------------- Unrestricted cash and cash equivalents increased to $236.5 million at March 31, 1996 from $224.4 million at December 31, 1995. Net cash provided from operating activities decreased to $58.7 million for the three months ended March 31, 1996 from $73.4 million for the three months ended March 31, 1995, a decrease of $14.7 million. The decrease was primarily due to the distribution in the 1996 first quarter of performance bonuses (AWArd Pay) to employees for achieving 1995 operating income targets. Net cash used in investing activities increased to $32.9 million for the three months ended March 31, 1996 from $28.6 million for the 1995 period, an increase of $4.3 million primarily related to increased expenditures for capitalized overhauls. Net cash used in financing activities was $13.6 million for the three months ended March 31, 1996 compared to $14.0 million net cash provided for the 1995 period. The Company has a working capital deficiency which has increased to $75.8 million at March 31, 1996 from $70.4 million at December 31, 1995. Operating with a working capital deficiency is typical in the airline industry as tickets sold for transportation which has not yet been provided are classified as a current liability while the related income producing assets, the aircraft, are classified as non-current. Despite the working capital deficiency, the Company expects to meet all of its obligations as they become due. The Company's long-term debt maturities through 1998 consist primarily of principal amortization of notes payable secured by certain of the Company's aircraft. Such maturities are $38.4 million, $46.2 million and $43.2 million, respectively, for the remainder of 1996, 1997, and 1998. Management expects to fund these requirements with cash from operations. At March 31, 1996, the Company had net operating loss carryforwards ("NOL") and general business tax credit carryforwards of approximately $515.4 million and $12.7 million, respectively. Under Section 382 of the Internal Revenue Code of 1986, as amended, if a loss corporation has an "ownership change" within a designated testing period, its ability to use its NOL and tax credit carryforwards is subject to certain limitations. The Company is a loss corporation within the meaning of Section 382. The 11 12 issuance of certain common stock by the Company pursuant to the plan of reorganization resulted in an ownership change within the meaning of Section 382. This ownership change has resulted in an annual limitation (the "Section 382 Limitation") upon the Company's ability to offset any post-change taxable income with pre-change NOL. Should the Company generate insufficient taxable income in any post-change taxable year to fully utilize the Section 382 Limitation of that year, any excess limitation will be carried forward for use in subsequent tax years, provided the pre-change NOL has not been exhausted nor has the carryforward period expired. 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 expenses that result in an effective tax rate (for financial reporting purposes) significantly greater than 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. This difference in financial expense compared to actual income tax liability is in part attributable to tax attributes (including NOLs, subject to certain limitations) of the pre-reorganization Company that serve to reduce the Company's actual income tax liability. To the extent the tax attributes of the pre-reorganization Company reduce the Company's actual income tax liability below the amount of expense reflected in the financial statements, that difference is applied to reduce the carrying balance of the Company's Reorganization Value in Excess of Amounts Allocable to Identifiable Assets. At March 31, 1996, the Company was obligated to lease five aircraft under a put agreement with GPA (the "GPA 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 (discussed below) on a one-for-one basis. The Company is currently negotiating with GPA for the lease of one new Airbus A320-200 aircraft for delivery in May 1996. If the negotiations are successfully completed, the Company will receive credit for one aircraft under the GPA Put Agreement (and the number of aircraft that GPA will be entitled to put to the Company will be reduced to four) and the Company will be entitled to reduce the deliveries (see below) under the AVSA A320 purchase agreement by one additional aircraft. At March 31, 1996, the Company had commitments to AVSA S.A.R.L., an affiliate of Airbus Industrie ("AVSA"), for a total of 24 Airbus A320-200 aircraft with delivery dates that fall in the years 1999 through 2001. The aggregate net cost of such aircraft is based on formulae that include certain prices indices (including indices for various aircraft components such as metal products) for periods preceding the various delivery dates. Based on an assumed 5% escalation, the Company estimates such aggregate net cost to be approximately $1.2 billion. The Company has the option to cancel without cause up to four of these aircraft. In addition, if new A320 aircraft are delivered as a result of the GPA Put Agreement, the Company has the right to cancel on a one-for-one basis, up to a maximum of seven non-consecutive aircraft deliveries under the AVSA agreement, subject to certain conditions. In April 1995, the Company took delivery of two new A320 aircraft under the GPA Put Agreement. If the Company were to exercise its existing rights to cancel six aircraft under the AVSA agreement, the aggregate net cost (based upon the assumptions described above) of commitments under such agreement would be reduced to approximately $900 million. The Company has arranged for financing from AVSA for up to one-half of the deliveries under the AVSA agreement, although the Company intends to seek financing on more favorable terms from other sources. Additionally, the Company will require capital from external sources to meet the balance of its financial commitments for aircraft and other equipment orders. The Company intends to seek such financing in the future when and as appropriate. There can be no assurance that the Company will be able to obtain such capital in sufficient amounts or on terms acceptable to the Company. A default by the Company under any such commitment could have a material adverse effect on the Company. In addition, pursuant to the Company's growth plan, the Company expects to expand its fleet, increase frequencies to existing cities and add destinations to its route system. This expansion will require the lease or purchase of additional aircraft. There can be no assurance that the Company will be able to negotiate such leasing or purchase arrangements in sufficient quantities or on terms acceptable to the Company. As of March 31, 1996, the Company's fleet consisted of 95 aircraft of which 21 aircraft meet the FAA's Stage II (but not Stage III) noise reduction requirements and must be retired or significantly modified prior to the year 2000. Management is currently considering its options regarding such aircraft. If 12 13 the Company determines to modify such aircraft to comply with Stage III, the required capital expenditures for such modifications are currently estimated to be approximately $2 million per aircraft. There can be no assurance that the Company will be able to obtain such capital in sufficient amounts or on favorable terms. Capital expenditures for the quarter ended March 31, 1996 and 1995 were approximately $32.8 million and $29.0 million, respectively. Included in these amounts are capital expenditures for deferred overhauls of approximately $11.6 million for the first quarter of 1996 and $13.9 million for the first quarter of 1995. In April 1996, the Company under the authorization granted by the Board of Directors in September 1995, repurchased 425,000 shares of Class B Common Stock on the open market at per share prices ranging from $19.75 to $21.88. 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 March 31, 1996. Part II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- a. Exhibits EXHIBIT NUMBER DESCRIPTION AND METHOD OF FILING ------- -------------------------------- *11.1 Computation of Earnings Per Share *27 Financial Data Schedule *Filed herewith b. Reports on Form 8-K None 13 14 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: May 15, 1996 14 EX-11.1 2 COMPUTATION OF NET INCOME PER COMMON SHARE 1 AMERICA WEST AIRLINES, INC. COMPUTATION OF NET INCOME PER COMMON SHARE (in thousands except per share amount) Exhibit 11.1
Three Months Ended March 31, ---------------------------- 1996 1995 ----------- ------------ Primary Earnings Per Share: Computation for Statements of Income: Net income. . . . . . . . . . . . . . . . . . . $ 13,727 $ 5,210 Adjustment for interest on debt reduction, net of taxes. . . . . . . . . . . . . . . . . - - ----------- ----------- Net income applicable to common stock . . . . . $ 13,727 $ 5,210 =========== =========== Weighted average number of common shares outstanding . . . . . . . . . . . . . . . . . 45,580,812 45,165,959 Assumed exercise of stock options and warrants (a). . . . . . . . . . . . . . . . . . 4,128,841 - ----------- ----------- Weighted average number of common shares outstanding as adjusted . . . . . . . . . . . . 49,709,653 45,165,959 =========== =========== Primary earnings per common share: Net income. . . . . . . . . . . . . . . . . . . $ 0.28 $ 0.12 =========== =========== Net income. . . . . . . . . . . . . . . . . . . $ 5,210 Adjustment for interest on debt reduction, net of taxes. . . . . . . . . . . . . . . . . 1,168 ----------- Net income applicable to common stock . . . . . $ 6,378 =========== Weighted average number of common shares outstanding . . . . . . . . . . . . . . . . . 45,165,959 Assumed exercise of stock options and warrants (a). . . . . . . . . . . . . . . . . 2,787,975 ----------- Weighted average number of common shares outstanding as adjusted . . . . . . . . . . . 47,953,934 =========== Primary earnings per common share: Net income. . . . . . . . . . . . . . . . . . . $ 0.13 (b) ===========
2 AMERICA WEST AIRLINES, INC. COMPUTATION OF NET INCOME PER COMMON SHARE (in thousands except per share amount) Exhibit 11.1
Three Months Ended March 31, --------------------------- 1996 1995 ----------- ----------- Fully Diluted Earnings Per Share: Computation for Statements of Operations: Net income. . . . . . . . . . . . . . . . . . . $ 13,727 $ 5,210 Adjustment for interest on debt reduction, net of taxes. . . . . . . . . . . . . . . . . - 1,097 ----------- ----------- Net income applicable to common stock . . . . . $ 13,727 $ 6,307 =========== =========== Weighted average number of common shares outstanding . . . . . . . . . . . . . . . . . 45,580,812 45,165,959 Assumed exercise of stock options and warrants (a). . . . . . . . . . . . . . . . . 5,076,824 2,787,975 ----------- ----------- Weighted average number of common shares outstanding as adjusted . . . . . . . . . . . 50,657,636 47,953,934 =========== =========== Fully diluted earnings per common share: Net income. . . . . . . . . . . . . . . . . . . $ 0.27 $ 0.13 =========== ===========
(a) The stock options and warrants are included only in the periods in which they are dilutive. (b) 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. EX-27 3 FINANCIAL DATA SCHEDULE
5 0000706270 AMERICA WEST AIRLINES, INC. 1 U.S. DOLLARS 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1 236,542 0 101,562 2,846 28,399 411,824 683,628 95,909 1,651,928 487,609 371,588 0 0 457 666,698 1,651,928 0 413,150 0 378,832 0 750 12,268 25,420 11,693 13,727 0 0 0 13,727 .28 .27
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