-----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, HusCmVVI3/jlRgFZEcvlumUeyxsCYLltSKky2MHoQRrdt8/5iqIZeq/3/NIs9ScL 5yXeX5qpTPwIbkkc1vaevg== 0000950153-97-000498.txt : 19970515 0000950153-97-000498.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950153-97-000498 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 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: 97604907 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 FORM 10-Q FOR PERIOD ENDED MARCH 31, 1997 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, 1997 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 1,000 shares of Class B Common Stock and 6,265,376 warrants to acquire America West Holdings Corporation Class B Common Stock outstanding as of April 30, 1997. 2 Part I - FINANCIAL INFORMATION Item 1. Financial Statements AMERICA WEST AIRLINES, INC. Condensed Balance Sheets (in thousands except share data)
March 31, December 31, ASSETS 1997 1996 ------ ---------- ------------ Current assets: (Unaudited) Cash and cash equivalents $ 136,323 $ 137,499 Short-term investments 29,385 39,131 Accounts receivable, less allowance for doubtful accounts of $3,056 in 1997 and $3,091 in 1996 95,019 106,215 Expendable spare parts and supplies, less allowance for obsolescence of $1,911 in 1997 and $1,713 in 1996 21,735 21,423 Prepaid expenses 56,917 47,545 ---------- ---------- Total current assets 339,379 351,813 ---------- ---------- Property and equipment: Flight equipment 704,346 669,654 Other property and equipment 112,749 107,993 Equipment purchase deposits 68,355 56,665 ---------- ---------- 885,450 834,312 Less accumulated depreciation and amortization 189,265 163,718 ---------- ---------- Total property and equipment 696,185 670,594 ---------- ---------- Other assets: Restricted cash 28,638 26,433 Reorganization value in excess of amounts allocable to identifiable assets, net 435,789 447,044 Deferred income taxes 74,700 74,700 Other assets, net 27,391 27,093 ---------- ---------- Total other assets 566,518 575,270 ---------- ---------- $1,602,082 $1,597,677 ========== ========== Liabilities and Stockholder's Equity ------------------------------------ Current liabilities: Current maturities of long-term debt $ 44,211 $ 46,238 Accounts payable 132,621 115,458 Air traffic liability 232,984 214,056 Accrued compensation and vacation benefits 26,269 30,085 Accrued taxes 46,470 72,047 Other accrued liabilities 45,307 44,836 ---------- ---------- Total current liabilities 527,862 522,720 ---------- ---------- Long-term debt, less current maturities 333,685 330,148 Deferred credits and other liabilities 117,153 122,029 Commitments and contingencies Stockholder's equity: Common Stock $.01 par value. Authorized, issued and outstanding; 1,000 shares -- -- Additional paid-in capital 539,301 552,643 Retained earnings 84,081 70,137 ---------- ---------- Total stockholder's equity 623,382 622,780 ---------- ---------- $1,602,082 $1,597,677 ========== ==========
See accompanying notes to condensed financial statements. 2 3 AMERICA WEST AIRLINES, INC. Condensed Statements of Income (in thousands) (unaudited)
Three Months Ended March 31, -------------------------- 1997 1996 --------- --------- Operating revenues: Passenger $ 435,540 $ 387,802 Cargo 12,756 10,757 Other 13,891 14,591 --------- --------- Total operating revenues 462,187 413,150 --------- --------- Operating expenses: Salaries and related costs 101,017 94,702 Aircraft rents 54,932 47,272 Other rents and landing fees 30,816 26,567 Aircraft fuel 69,116 49,176 Agency commissions 38,312 32,599 Aircraft maintenance materials and repairs 31,312 27,025 Depreciation and amortization 12,077 13,232 Amortization of excess reorganization value 6,255 6,549 Other 84,887 81,710 --------- --------- Total operating expenses 428,724 378,832 --------- --------- Operating income 33,463 34,318 --------- --------- Nonoperating income (expenses): Interest income 4,240 3,170 Interest expense (12,081) (12,268) Other, net 296 200 --------- --------- Total nonoperating expenses, net (7,545) (8,898) --------- --------- Income before income taxes 25,918 25,420 --------- --------- Income taxes 11,974 11,693 --------- --------- Net income $ 13,944 $ 13,727 ========= =========
See accompanying notes to condensed financial statements. 3 4 AMERICA WEST AIRLINES, INC. Condensed Statements of Cash Flows (in thousands) (unaudited)
Three Months Ended March 31, -------------------------- 1997 1996 --------- --------- Cash flows from operating activities: Net income $ 13,944 $ 13,727 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,077 13,232 Amortization of capitalized maintenance 14,434 6,602 Amortization of excess reorganization value 6,255 6,549 Amortization of deferred credits (2,793) (2,901) Other 1,131 520 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable, net 11,196 (29,622) Decrease (increase) in spare parts and supplies, net (312) 244 Increase in prepaid expenses (9,372) (4,852) Decrease (increase) in other assets, net 2,497 (2,341) Increase in accounts payable 17,163 11,004 Increase in air traffic liability 18,928 67,936 Decrease in accrued compensation and vacation (3,816) (19,570) benefits Decrease in accrued taxes (25,577) (430) Increase in other accrued liabilities 471 121 Decrease in other liabilities (2,564) (1,542) --------- --------- Net cash provided by operating activities 53,662 58,677 Cash flows from investing activities: Purchases of property and equipment (41,062) (32,795) Decrease in short-term investments 9,746 -- Other 91 (69) --------- --------- Net cash used in investing activities (31,225) (32,864) Cash flows from financing activities: Repayment of debt (10,271) (15,812) Repurchase of warrants (13,342) -- Issuance of common stock -- 2,174 --------- --------- Net cash used in financing activities (23,613) (13,638) --------- --------- Net increase (decrease) in cash and cash equivalents (1,176) 12,175 --------- --------- Cash and cash equivalents at beginning of period 137,499 224,367 --------- --------- Cash and cash equivalents at end of period $ 136,323 $ 236,542 ========= ========= Cash, cash equivalents, and short-term investments at end of period $ 165,708 $ 236,542 ========= =========
See accompanying notes to condensed financial statements. 4 5 AMERICA WEST AIRLINES, INC. Notes To Condensed Financial Statements March 31, 1997 1. BASIS OF PRESENTATION The unaudited condensed financial statements included herein have been prepared by America West Airlines, Inc., ("AWA" or the "Company"), a wholly-owned subsidiary of America West Holdings Corporation ("Holdings"), 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, 1996. 2. INCOME TAXES The Company recorded income tax expense as follows:
Three Months Ended March 31, --------------------- 1997 1996 ------- ------- (in thousands) Current taxes: Federal $ 544 $ 364 State 488 326 ------- ------- 1,032 690 Deferred taxes -- -- Income tax expense allocable to reorganization items 10,942 11,003 ------- ------- Income tax expense $11,974 $11,693 ======= =======
As reflected in the above table, for the three months ended March 31, 1997 and 1996, income tax expense pertains both to income from operations as well as to certain adjustments necessitated by the Company's emergence from bankruptcy in 1994 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 6 AMERICA WEST AIRLINES, INC. Notes To Condensed Financial Statements March 31, 1997 3. SUPPLEMENTAL INFORMATION TO CONDENSED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, --------------------- 1997 1996 ------- ------- (in thousands) Cash paid for interest and income taxes: Interest, net of amounts capitalized ($606 in 1996) $10,612 $13,312 Income taxes 40 16 Non-cash financing activities: Notes payable issued for equipment purchase deposits 11,690 7,814
4. WARRANTS In March 1997, the Company repurchased 1.91 million of its publicly traded warrants from TPG Partners, L.P. and certain of its affiliates for approximately $13.3 million. 5. COMMITMENTS AND CONTINGENCIES (a) Leases In February 1997, the Company entered into an agreement to lease one A320 aircraft for a term of 50 months 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 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. 6 7 AMERICA WEST AIRLINES, INC. MARCH 31, 1997 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The table below sets forth selected operating data for the Company.
Three Months Ended March 31, Percent ----------------------- Change 1997 1996 1997-1996 -------- -------- --------- Available seat miles (in millions) 5,791 4,955 16.9 Revenue passenger miles (in millions) 3,982 3,504 13.6 Load factor (percent) 68.8 70.7 (2.7) Yield per revenue passenger mile (cents) 10.94 11.07 (1.2) Revenue per available seat mile: Passenger (cents) 7.52 7.83 (4.0) Total (cents) 7.98 8.34 (4.3) Passenger enplanements (in thousands) 4,590 4,305 6.6 Average stage length (miles) 768 700 9.7 Average passenger journey (miles) 1,088 968 12.4 Aircraft (end of period) 101 95 6.3 Average daily aircraft utilization (hours) 12.4 11.5 7.8 Average full-time equivalent employees 9,792 8,796 11.3 Fuel price (cents per gallon) 75.03 60.15 24.7 Fuel consumption (gallons in millions) 92.1 81.8 12.6
The table below sets forth the major components of operating cost per available seat mile ("CASM") for the Company.
Three Months Percent Ended March 31, Change 1997 1996 1997-1996 ---- ---- --------- (in cents) Salaries and related costs 1.74 1.91 (8.9) Aircraft rents .95 .95 - Other rents and landing fees .53 .54 (1.9) Aircraft fuel 1.19 .99 20.2 Agency commissions .66 .66 - Aircraft maintenance materials and repairs .54 .55 (1.8) Depreciation and amortization .21 .27 (22.2) Amortization of excess reorganization value .11 .13 (15.4) Other 1.47 1.65 (10.9) ---- ---- 7.40 7.65 (3.3) ==== ====
7 8 AMERICA WEST AIRLINES, INC. MARCH 31, 1997 RESULTS OF OPERATIONS For the three months ended March 31, 1997 and 1996, the Company realized net income of $13.9 million and $13.7 million, respectively. Net income for the three month period in 1997 included income tax expense for financial reporting purposes of $12.0 million compared to $11.7 million in 1996. The Company's results of operations for interim periods are not necessarily indicative of such results for an entire year due to seasonal factors as well as competitive and general economic conditions. Passenger revenues increased $47.7 million or 12.3 percent to $435.5 million during the three months ended March 31, 1997 due primarily to a 13.6 percent increase in revenue passenger miles. Yield decreased 1.2 percent to 10.94 cents from 11.07 cents due primarily to a 9.7 percent increase in stage length. Capacity, as measured by available seat miles ("ASMs"), increased 16.9 percent in the 1997 first quarter as compared to 1996 due to the effect of the Company's strategic growth plan which was initiated in February 1996. Load factor decreased by 1.9 points to 68.8 percent. Passenger revenue per available seat mile ("RASM") decreased to 7.52 cents from 7.83 cents. Cargo and other revenues increased 5.1 percent to $26.6 million for the first quarter of 1997 as a result of higher available capacity. CASM decreased 3.3 percent to 7.40 cents in the first quarter of 1997 from 7.65 cents for the 1996 period, despite a 24.7 percent increase in the average price per gallon of fuel. Excluding fuel and related taxes, CASM declined 6.7 percent when compared with the first quarter of 1996. The changes in the components of operating expense per ASM are explained as follows: - - Salaries and related costs per ASM decreased 8.9 percent due to continued improvement in productivity as full-time equivalent headcount increased 11.3 percent versus a 16.9 percent increase in ASMs. - - Aircraft fuel expense per ASM increased 20.2 percent due to a 24.7 percent increase in the average price per gallon of fuel from 60.15 cents in the 1996 quarter to 75.03 cents in 1997. - - Depreciation and amortization expense per ASM decreased 22.2 percent due in part to lower 1997 depreciation expense as certain ramp equipment was depreciated to net realizable value in 1996. - - Amortization of excess reorganization value per ASM decreased 15.4 percent primarily due to the 16.9 percent increase in ASMs. - - Other operating expenses per ASM decreased 10.9 percent to 1.47 cents from 1.65 cents as increases in passenger traffic-related costs such as CRS booking fees, catering costs, and credit card discount fees, and fuel taxes were more than offset by the 16.9 percent increase in ASMs. Net nonoperating expenses decreased $1.4 million to $7.5 million in the first quarter of 1997 from $8.9 million in 1996. Excluding interest income and expense associated with inter-company notes, the year-over-year change was primarily due to a net decrease in interest expense as the Company reduced outstanding debt by $42.3 million. Income tax expense for financial reporting purposes for the three months ended March 31, 1997 was relatively unchanged when compared to the 1996 quarter. LIQUIDITY AND CAPITAL RESOURCES Unrestricted cash and cash equivalents and short-term investments decreased to $165.7 million at March 31, 1997 from $176.6 million at December 31, 1996 primarily due to the repurchase of 1.91 million AWA warrants for approximately $13.3 million by AWA. (See Note 4, "Warrants" in Notes to Condensed Financial Statements.) Net cash provided from operating activities decreased to $53.2 million for the quarter 8 9 AMERICA WEST AIRLINES, INC. MARCH 31, 1997 ended March 31, 1997 from $58.7 million in 1996 due principally to the payment in 1997 of approximately $43 million in federal air transportation excise taxes. Net cash used in investing activities decreased to $31.2 million for the first quarter of 1997 period from $32.9 million for the 1996 period. Net cash used in financing activities was $23.1 million for the first quarter compared to $13.6 million in the 1996 period primarily due to the warrant repurchase. The Company has a working capital deficiency which increased to $188.5 million at March 31, 1997 from $170.9 million at December 31, 1996. 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 1999 consist primarily of principal amortization of notes payable secured by certain of the Company's aircraft. Such maturities are $36 million, $38.4 million and $46.2 million, respectively, for the remainder of 1997, 1998, and 1999. Management expects to fund these requirements with cash from operations. At March 31, 1997, Holdings had net operating loss carryforwards ("NOL") and general business tax credit carryforwards of approximately $471.8 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 issuance of certain common stock by the Company pursuant to the plan of reorganization and emergence from bankruptcy in 1994 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, 1997, the Company had firm commitments to AVSA S.A.R.L., an affiliate of Airbus Industrie ("AVSA"), for a total of 17 Airbus A320-200 aircraft with delivery beginning in 1999. The aggregate net cost of such aircraft is based on formulae that include certain price indices (including indices for various aircraft components such as metal products) for periods preceding the various delivery dates. Based on an assumed 5 percent annual price escalation, the Company estimates such aggregate net cost to be approximately $850 million. The Company has arranged for financing for up to one-half of the commitment relating to such aircraft and will require substantial capital from external sources to meet 9 10 AMERICA WEST AIRLINES, INC. MARCH 31, 1997 its remaining financial commitment. There can be no assurance that the Company will be able to obtain such capital in sufficient amounts or on acceptable terms and a default by the Company under the AVSA agreement or any such commitment could have a material adverse effect on the Company. As of March 31, 1997, the Company's fleet consisted of 101 aircraft of which 20 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 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 quarters ended March 31, 1997 and 1996 were approximately $41 million and $32.8 million, respectively. Included in these amounts are capital expenditures for capitalized maintenance of approximately $22.4 million for the first quarter of 1997 and $11.6 million for the first quarter of 1996. 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, 1997. The federal air transportation excise taxes, which expired December 31, 1996, have been reenacted effective March 7, 1997 through September 30, 1997. Such taxes (a 10% domestic ticket tax, a 6.25% air cargo tax and a $6.00 international departure tax) generate a substantial portion of funding for the Federal Aviation Administration. A coalition of the seven largest U.S. airlines is proposing a user fee as a replacement for the excise taxes. A fuel tax is also being considered. The National Aviation Civilian Review Commission (the "Review Commission") has announced its intention to conduct an independent review of possible funding mechanisms to replace the excise taxes and is scheduled to release a report in September 1997. Implementation by Congress of a user fee as proposed by the seven airlines which would favor AWA's larger competitors, or other proposals recommended by the Review Commission, could significantly increase the cost of AWA's airline operations and could have a material adverse impact on the Company's operating results. This report contains various forward-looking statements and information that are based on management's beliefs as well as assumptions made by and information currently available to management. Whether such forward-looking statements and information ultimately prove to be accurate depends on various uncertainties and future developments that cannot be predicted. For a discussion of certain of the principal risks and uncertainties that may affect the Company's business and future operating results, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, which is on file with the Securities and Exchange Commission. 10 11 Part II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits EXHIBIT NUMBER DESCRIPTION AND METHOD OF FILING ------- -------------------------------- *27 Financial Data Schedule *Filed herewith b. Reports on Form 8-K None 11 12 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 14, 1997 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 0000706270 AMERICA WEST AIRLINES, INC. 1 US DOLLAR 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 136323 29385 98075 3056 21735 339379 885450 189265 1602082 527862 0 0 0 0 623382 1602082 0 462187 0 428724 0 750 12081 25918 11974 13944 0 0 0 13944 0 0
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