-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, IE0VAAGc/+3pOKFUk18OhWJAYQwipDD+NInGNjQNs8tiF7EDHgHzTEPsn4lgShG3 1483mvoQq4zYkhBpTDuZiA== 0000766421-94-000017.txt : 19941116 0000766421-94-000017.hdr.sgml : 19941116 ACCESSION NUMBER: 0000766421-94-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALASKA AIR GROUP INC CENTRAL INDEX KEY: 0000766421 STANDARD INDUSTRIAL CLASSIFICATION: 4512 IRS NUMBER: 911292054 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08957 FILM NUMBER: 94558946 BUSINESS ADDRESS: STREET 1: 19300 PACIFIC HWY SOUTH CITY: SEATTLE STATE: WA ZIP: 98188 BUSINESS PHONE: 2064317040 MAIL ADDRESS: STREET 1: PO BOX 68947 CITY: SEATTLE STATE: WA ZIP: 98168-0947 10-Q 1 ALASKA AIR GROUP, INC 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 September 30, 1994. 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 1-8957 ALASKA AIR GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 91-1292054 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 19300 Pacific Highway South, Seattle, Washington 98188 (Address of principal executive offices) Registrant's telephone number, including area code: (206) 431-7040 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 X No ___ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 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_ No_ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. The registrant has 13,371,165 common shares, par value $1.00, outstanding at September 30, 1994. PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Attached are the following Alaska Air Group, Inc. (the Company or Air Group) unaudited financial statements: (i) consolidated balance sheet as of September 30, 1994 and December 31, 1993; (ii) consolidated statements of income for the quarters and nine months ended September 30, 1994 and 1993; (iii) consolidated statement of shareholders' equity for the nine months ended September 30, 1994; and, (iv) consolidated statements of cash flows for the quarters and nine months ended September 30, 1994 and 1993. Also attached are the accompanying notes to Air Group's consolidated financial statements that have changed significantly during the nine months ended September 30, 1994. These statements include all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The adjustments made were of a normal, recurring nature. Air Group is a holding company incorporated in Delaware in 1985. Its principal subsidiaries are Alaska Airlines, Inc. (Alaska) and Horizon Air Industries, Inc. (Horizon). ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Third Quarter 1994 Compared with Third Quarter 1993 The consolidated net income for the third quarter of 1994 was $24.3 million, or $1.81 per share (primary) and $1.22 per share (fully diluted). This compares with 1993's third quarter net income of $8.0 million, or $.60 per share (primary) and $.47 (fully diluted). The operating profit for the third quarter of 1994 was $52.3 million, compared to $20.7 million for the third quarter of 1993. Operating Revenues Operating revenues increased 20% from $323.4 million to $386.8 million. Passenger revenues increased 21% on a 32% increase in passenger traffic. Traffic gains were due to a 23% increase in system capacity, lower fares that stimulated traffic throughout most of the system, and improvements in market share. Load factor increased from 62.8% in 1993 to 67.2% in 1994. Passenger yields decreased 8%, reflecting fare reductions. Average revenue per passenger mile (yield) decreased 1.2 cents, from 15.2 cents in the third quarter of 1993 to 14.0 cents in the third quarter of 1994. Currently, a 1 cent change in yield affects annual revenues by approximately $80 million. Freight and mail revenues increased $2.1 million (9%) due to a military charter contract in the state of Alaska, and increased freight volumes and rates, offset by lower mail volumes. The lower mail volumes resulted from Alaska's decision to not bid on certain U.S. mail contracts and instead haul higher yielding freight. Other-net revenues were up $1.1 million (10%) due to increased revenues from Alaska's frequent flyer program and inflight liquor sales. Operating Expenses Operating expenses increased 11% to $334.5 million on a capacity increase of 23%. Operating expenses per available seat mile (ASM) declined 10%, from 9.99 cents in the third quarter of 1993 to 9.00 cents for the current quarter. The lower unit costs were due to an intensive cost reduction effort and better utilization of aircraft, facilities, equipment and people as well as a 2% increase in average seats per aircraft. Alaska's daily aircraft utilization increased 21% from 9.1 hours to 11.0 hours. In addition, lower fuel prices reduced operating expenses by $3.2 million in the third quarter 1994. The table below shows the major consolidated operating expenses on a unit cost basis for the quarters ended September 30, 1994 and 1993. In addition, total unit costs for Alaska and Horizon are shown for the same periods. Operating Expenses Per ASM (In Cents) % 1994 1993 Change Change Air Group Consolidated Wages and benefits 2.94 3.15 (.21) (7) Aircraft fuel 1.14 1.33 (.19) (14) Aircraft maintenance .48 .60 (.12) (20) Aircraft rent 1.14 1.31 (.17) (13) Commissions .73 .75 (.02) (3) Depreciation & .39 .48 (.09) (19) amortization Other 2.18 2.37 (.19) (8) Air Group Total 9.00 9.99 (.99) (10) Alaska Airlines Total 7.92 8.91 (.99) (11) Horizon Air Total 20.17 21.01 (.84) (4) Wages and benefits per ASM decreased 7% primarily due to improved productivity at Alaska. The number of Alaska employees increased 5% while its capacity increased 23% and traffic increased 32%. During March 1994, Alaska and the Association of Flight Attendants concluded a new five-year contract, which was effective May 1, 1994. With a few exceptions tailored to Alaska's operations, the contract is identical to the one used at Southwest Airlines and provides flight attendants the opportunity to earn increased wages through increased flying. It also provides a lower starting rate of pay, more flexible work rules, reduced pension expenses, and has a duration of five years with a March 14, 1999 expiration date. Fuel expense per ASM decreased 14% primarily due to a 7% decrease in the cost of fuel and more fuel-efficient aircraft. The average cost per gallon was down 4.6 cents from 65.4 cents in the third quarter of 1993 to 60.8 cents in the current quarter. Currently, a 1 cent change in fuel prices affects annual fuel costs by approximately $2.4 million. Maintenance expense per ASM decreased 20% due to the replacement of older aircraft with new aircraft during the past year as well as significant improvements in maintenance programs, techniques and efficiencies. Aircraft rent per ASM decreased 13% primarily due to a substantial increase in Alaska's average fleet utilization, offset by higher rents for new aircraft acquired during the past year. Depreciation and amortization expense per ASM decreased 19% due to the retirement of essentially all of Alaska's Boeing 727-200 aircraft during 1993, and increased utilization of the remaining fleet. Other expense per ASM decreased 8% due to lower unit costs for food, advertising and personnel expenses. Other Income (Expense) Nonoperating expense was $9.4 million in the third quarter of 1994 compared to $6.7 million 1993. The increase was primarily due to higher interest rates on variable debt and higher average debt balances. Nine Months 1994 Compared with Nine Months 1993 The consolidated net income for the nine months ended September 30, 1994 was $27.6 million, or $2.07 per share (primary) and $1.57 per share (fully diluted). This compares with 1993's nine-month net loss of $10.6 million, or $.98 per share. Operating revenues for the 1994 period were $997.7 million, 17% higher than the $851.1 million posted a year ago. A 26% increase in capacity coupled with a 16% decrease in yields resulted in passenger traffic climbing 39% for the period. The reasons noted for the third quarter passenger revenue variation also apply for the nine-month period. Operating expenses increased 9% to $923.8 million, compared to $845.2 million in the first nine months of last year. Operating expenses per available seat mile (ASM) declined 13%, from 10.95 cents to 9.53 cents. The table below shows the major consolidated operating expenses on a unit cost basis for the nine months ended September 30, 1994 and 1993. In addition, total unit costs for Alaska and Horizon are shown for the same periods. Operating Expenses Per ASM (In Cents) % 1994 1993 Change Change Air Group Consolidated Wages and benefits 3.12 3.56 (.44) (12) Aircraft fuel 1.13 1.38 (.25) (18) Aircraft maintenance .54 .68 (.14) (21) Aircraft rent 1.27 1.48 (.21) (14) Commissions .73 .80 (.07) (09) Depreciation & .43 .56 (.13) (23) amortization Other 2.31 2.49 (.18) (7) Air Group Total 9.53 10.95 (1.42) (13) Alaska Airlines Total 8.43 9.80 (1.37) (14) Horizon Air Total 21.05 21.94 (.89) (4) The reasons noted for the third quarter expense variations also apply for the nine-month period. Liquidity and Capital Resources The table below shows the major indicators of financial condition and liquidity at September 30, 1994 and December 31, 1993 and the changes during the nine months ended September 30, 1994. September December Change 30, 1994 31, 1993 (In millions, except ratios and per share) Cash and marketable $152.2 $101.1 $51.1 securities Working capital (deficit) (52.3) (61.3) 9.0 Total assets 1,282.2 1,135.0 147.2 Long-term debt 587.7 525.4 62.3 Shareholders' equity 195.7 166.8 28.9 Book value per common $14.63 $12.51 $2.12 share Debt/equity ratio 75%:25% 76%:24% N/A The Company's cash and marketable securities portfolio increased by $51.1 million during the first nine months of 1994. Operating activities provided $146 million of cash in the first nine months of 1994. Additional cash was provided by $104 million in new long-term debt. Cash was used for the purchase of four new MD-83 aircraft, one used B737-200C aircraft, and other capital expenditures ($143 million), debt payments ($42 million), and repayment of short-term borrowings ($20 million). Financing Arrangements In the first nine months of 1994, four MD-83 aircraft were financed with $104 million in ten-year loans at variable interest rates based on LIBOR. At September 30, 1994, Alaska had $70 million in lines of credit, none of which were being used. Commitments During the first nine months of 1994, Alaska took delivery of four new B737-400 aircraft under eight-year operating leases. In April 1994, Alaska further restructured its aircraft orders with McDonnell Douglas and replaced an order for ten MD-90s plus options with an order for four MD-83s. Two MD-83s will be delivered in 1996 and two in 1997. The net effect will reduce future capital commitments by approximately $360 million. During November 1994, Alaska announced a restructuring of its aircraft leases. Effective May 1, 1995, the agreement provides for reduced lease rates coupled with extensions of lease terms on twenty Boeing 737-400 aircraft. As part of the agreement, Alaska will purchase three of the twenty aircraft over the next three years and received options to purchase up to four more of the twenty between 1997 and 1999. As a result of the extended lease commitments, Alaska expects to save $6-7 million annually over the ten-year term of the leases. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings In December 1992, the U.S. Department of Justice filed suit against most major domestic airlines, including the Company, alleging that they violated the antitrust laws by conspiring to fix prices for domestic airline tickets in violation of Section 1 of the Sherman Act. During March 1994, six of the airlines, including the Company, entered into consent decrees with the U.S. Department of Justice. The agreement requires no refunds or monetary cost to the Company and was approved by the court in the third quarter of 1994. ITEM 6. Exhibits and Reports on Form 8-K (a)Exhibit 11 - Statement regarding computation of per-share earnings. Exhibit 27 - Financial data schedule. (b)No reports on Form 8-K were filed during the third quarter 1994. Signatures Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALASKA AIR GROUP, INC. Registrant Date: November 9, 1994 /s/ Raymond J. Vecci Raymond J. Vecci Chairman, President and Chief Executive Officer /s/ Kathleen H. Iskra Kathleen H. Iskra Controller (Principal Accounting Officer) CONSOLIDATED BALANCE SHEET Alaska Air Group, Inc. ASSETS September 30, December 31, (In Thousands) 1994 1993 Current Assets Cash and cash equivalents $30,811 $27,179 Marketable securities 121,402 73,970 Receivables - net 79,881 75,274 Inventories and supplies 41,928 41,269 Prepaid expenses and other assets 53,053 56,498 Total Current Assets 327,075 274,190 Property and Equipment Flight equipment 743,568 614,717 Other property and equipment 207,631 217,967 Deposits for future flight equipment 54,643 79,765 1,005,842 912,449 Less accum. depreciation and amort. 256,506 247,145 749,336 665,304 Capital leases Flight and other equipment 44,381 44,381 Less accumulated amortization 20,660 19,079 23,721 25,302 Total Property and Equipment - Net 773,057 690,606 Intangible Assets - Subsidiaries 66,181 67,711 Other Assets 115,864 102,447 Total Assets $1,282,177 $1,134,954 See accompanying notes to consolidated financial statements. CONSOLIDATED BALANCE SHEET Alaska Air Group, Inc. LIABILITIES AND SHAREHOLDERS' EQUITY September 30, December 31, (In Thousands) 1994 1993 Current Liabilities Accounts payable $52,991 $45,582 Accrued aircraft rent 36,602 39,119 Other accrued liabilities 77,110 46,679 Accrued wages and related 44,691 40,192 Short-term borrowings - 20,000 Air traffic liability 125,579 108,360 Current portion of long-term debt and capital lease obligations 42,437 35,575 Total Current Liabilities 379,410 335,507 Long-Term Debt and Capital Lease Obligations 587,706 525,418 Other Liabilities and Credits Deferred income taxes 35,926 20,998 Deferred income 23,715 25,827 Other liabilities 59,758 60,371 119,399 107,196 Shareholders' Equity Common stock, $1 par value Authorized: 30,000,000 shares Issued: 1994 - 16,524,754 shares 1993 - 16,495,210 shares 16,525 16,495 Capital in excess of par value 152,306 152,017 Treasury stock, at cost: 1994-3,153,589 sh; 1993-3,153,589 sh (71,807) (71,807) Deferred compensation (4,934) (5,813) Retained earnings 103,572 75,941 195,662 166,833 Total Liabilities and Shareholders' Equity $1,282,177 $1,134,954 See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENT OF INCOME Alaska Air Group, Inc. Quarter Ended September 30 (In Thousands) 1994 1993 Operating Revenues Passenger $349,707 $289,468 Freight and mail 24,833 22,773 Other - net 12,261 11,145 Total Operating Revenues 386,801 323,386 Operating Expenses Wages and benefits 109,397 95,583 Aircraft fuel 42,598 40,189 Aircraft maintenance 17,727 18,154 Aircraft rent 42,623 39,837 Commissions 27,148 22,844 Depreciation and amortization 14,475 14,522 Other 80,552 71,570 Total Operating Expenses 334,520 302,699 Operating Income 52,281 20,687 Other Income (Expense) Interest income 2,426 1,731 Interest expense (11,985) (9,280) Interest capitalized 83 112 Gain (loss) on sale of assets (320) 98 Other - net 427 656 (9,369) (6,683) Income before income tax 42,912 14,004 Income tax expense 18,649 5,976 Net Income $24,263 $8,028 Earnings Per Common Share: Primary - Net income $24,263 $8,028 Average shares outstanding (000) 13,386 13,348 Earnings per common share $1.81 $0.60 Fully Diluted - Net income $26,581 $10,558 Average shares outstanding (000) 21,801 22,254 Earnings per common share $1.22 $0.47 See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENT OF INCOME Alaska Air Group, Inc. Nine Months Ended September 30 (In Thousands) 1994 1993 Operating Revenues Passenger $892,173 $760,526 Freight and mail 67,428 59,456 Other - net 38,057 31,129 Total Operating Revenues 997,658 851,111 Operating Expenses Wages and benefits 302,526 275,581 Aircraft fuel 109,940 106,230 Aircraft maintenance 52,397 52,530 Aircraft rent 123,135 114,525 Commissions 70,799 61,736 Depreciation and amortization 41,678 43,379 Other 223,339 191,207 Total Operating Expenses 923,814 845,188 Operating Income 73,844 5,923 Other Income (Expense) Interest income 5,561 5,470 Interest expense (33,672) (28,396) Interest capitalized 281 333 Gain (loss) on sale of assets (822) 97 Other - net 4,310 1,929 (24,342) (20,567) Income (loss) before income tax 49,502 (14,644) Income tax expense (credit) 21,871 (4,050) Net Income (Loss) $27,631 $(10,594) Earnings (Loss) Per Common Share: Primary - Net income (loss) $27,631 $(10,594) Preferred stock dividends - (2,525) Income (loss) applicable to common shares $27,631 $(13,119) Average shares outstanding (000) 13,371 13,339 Earnings (loss) per common share $2.07 $(0.98) Fully Diluted - Net income $34,668 Average shares outstanding (000) 22,040 Anti- Earnings per common share $1.57 Dilutive See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Alaska Air Group, Inc.
Common Stock Capital in Treasury Deferred $1 Par Excess of Stock Compen- Retained (In Thousands) Value Par Value at Cost sation Earnings Balances at December 31, 1993 $16,495 $152,017 ($71,807) ($5,813) $75,941 Net income for the nine months ended September 30, 1994 27,631 Stock issued under stock plans 30 289 Employee Stock Ownership Plans shares allocated 879 Balances at September 30, 1994 $16,525 $152,306 ($71,807) ($4,934) $103,572 See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS Alaska Air Group, Inc. Quarter Ended September 30 (In Thousands) 1994 1993 Cash and cash equivalents at beginning of quarter $48,718 $14,416 Cash flows from operating activities: Net income 24,263 8,028 Adjustments to reconcile net income to cash: Depreciation and amortization 14,475 14,522 Amortization of airframe and engine overhauls 5,089 8,301 Loss (gain) on disposal of assets and debt retirement 320 (476) Deferred income taxes Decrease (increase) in accounts receivable 3,395 (1,005) Decrease (increase) in other current assets (1,901) 1,312 Decrease in air traffic liability (27,666) (19,500) Increase in other current liabilities 16,625 1,625 Interest on zero coupon notes 2,521 2,522 Leased aircraft return payments and other-net (3,270) (6,143) Net cash provided by operating activities 46,030 15,167 Cash flows from investing activities: Proceeds from disposition of assets 1,190 2,706 Purchases of marketable securities (127,600) (141,750) Sales and maturities of marketable securities 84,248 136,914 Restricted deposits (255) (1,386) Flight equipment deposits returned Additions to flight equipment deposits (135) (192) Additions to property and equipment Payments received on loans to ESOPs 1,313 1,527 Net cash used in investing activities Cash flows from financing activities: Long-term debt and capital lease payments (10,477) (10,567) Proceeds from issuance of common stock 45 - Gain on debt retirement - 378 Net cash used in financing activities (10,432) (10,189) Net decrease in cash and cash equivalents (17,907) (2,696) Cash and cash equivalents at end of quarter $30,811 $11,720 Supplemental disclosure of cash paid during the quarter for: Interest (net of amount capitalized) $7,917 $7,359 Income taxes 1,300 - Noncash investing and financing activities None None See accompanying notes to consolidated financial statements. CONSOLIDATED STATEMENT OF CASH FLOWS Alaska Air Group, Inc. Nine Months Ended September 30 (In Thousands) 1994 1993 Cash and cash equivalents at beginning of period $27,179 $6,880 Cash flows from operating activities: Net income (loss) 27,631 (10,594) Adjustments to reconcile net income (loss) to cash: Depreciation and amortization 41,678 43,379 Amortization of airframe and engine overhauls 15,357 23,026 Gain on disposition of assets and debt retirement (723) (1,061) Deferred income taxes Decrease (increase) in accounts receivable (4,607) 6,160 Decrease in other current assets 2,786 1,239 Increase in air traffic liability 17,219 21,812 Increase in other current liabilities 39,822 3,780 Interest on zero coupon notes 7,610 7,359 Leased aircraft return payments and other-net (15,589) (10,117) Net cash provided by operating activities 146,112 78,522 Cash flows from investing activities: Proceeds from disposition of assets 4,691 3,468 Purchases of marketable securities (399,100) (400,475) Sales and maturities of marketable securities 351,668 389,729 Restricted deposits (5,509) (3,681) Flight equipment deposits returned Additions to flight equipment deposits (961) (571) Additions to property and equipment (141,566) (25,421) Payments received on loans to ESOPs 1,313 1,527 Net cash used in investing activities (185,886) (33,833) Cash flows from financing activities: Repayment of short-term borrowings (20,000) - Proceeds from sale and leaseback transactions - 17,500 Proceeds from issuance of long-term debt 104,000 - Long-term debt and capital lease payments (42,458) (22,693) Proceeds from issuance of common stock 319 184 Repurchase of preferred stock - (33,375) Cash dividends - (2,429) Gain on debt retirement 1,545 964 Net cash provided by (used in) financing activities 43,406 (39,849) Net increase in cash and cash equivalents 3,632 4,840 Cash and cash equivalents at end of period $30,811 $11,720 Supplemental disclosure of cash paid during the period for: Interest (net of amount capitalized) $28,813 $21,218 Income taxes (refunds) (5,415) (18,554) Noncash investing and financing activities: 1994 - None 1993 - The preferred stock was repurchased in exchange for a $27 million note payable and a $33.4 million cash payment. See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THAT HAVE CHANGED SIGNIFICANTLY DURING THE NINE MONTHS ENDED SEPTEMBER 30, 1994 Alaska Air Group, Inc. Note 1. Long-Term Debt (See Note 3 to Consolidated Financial Statements at December 31, 1993) In the first nine months of 1994, four MD-83 aircraft were financed with $104 million in ten-year loans at variable interest rates based on LIBOR. At September 30, 1994, Alaska had $70 million in lines of credit, none of which were being used. At September 30, 1994, under the most restrictive loan provisions, Alaska had $32.3 million of net worth in excess of the minimum. Note 2. Commitments (See Note 5 to Consolidated Financial Statements at December 31, 1993) During the first nine months of 1994, Alaska took delivery of four new B737-400 aircraft under eight-year operating leases. In April 1994, Alaska further restructured its aircraft orders with McDonnell Douglas and replaced an order for ten MD-90s plus options with an order for four MD-83s. Two MD-83s will be delivered in 1996 and two in 1997. The net effect will reduce future capital commitments by approximately $360 million. During November 1994, Alaska restructured its twenty Boeing 737-400 aircraft leases. Alaska will purchase three of the twenty aircraft during the next three years. This will increase the present value of capital lease payments by approximately $55 million at December 31, 1994. Lease rates will be reduced and leases extended. Based on this restructuring and the effect of other aircraft leased during 1994, future minimum payments under aircraft operating leases as of September 30, 1994 are as follows: 1995 - $167 million, 1996 - $151 million, 1997 - $134 million, 1998 - $126 million, thereafter - $749 million. Note 3. Fuel Hedge Agreement (See Note 11 to Consolidated Financial Statements at December 31, 1993) The Company enters into hedge agreements to reduce its exposure to fluctuations in the price of jet fuel. The agreements establish a ceiling and floor fuel price. The Company records income or loss if the average cost of fuel, as determined by an index, exceeds the ceiling fuel price or falls below the floor price, respectively. The fuel hedges had no material effect on the first nine months of 1994 operating results. At September 30, 1994, the Company had fuel hedge agreements in place with a ceiling price of 65 cents covering approximately 50% of the expected fuel usage through July 1995, and a floor price of 44 cents covering approximately 57% of the expected fuel usage through July 1995. EX-11 2 Alaska Air Group, Inc. EXHIBIT 11 Computation of Earnings Per Common Share (In thousands, except per share)
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------- 1994 1993 1994 1993 ------ ------ ------ ------ Primary - Net income $24,263 $8,028 $27,631 ($10,594) Deduct dividends on preferred shares - - - (2,453) Deduct preferred stock accretion - - - (72) ------ ------ ------ ------ Income applicable to common shares $24,263 $8,028 $27,631 ($13,119) ====== ====== ====== ====== Average number of shares outstanding 13,370 13,342 13,359 13,339 Assumed exercise of stock options 16 6 12 - ------ ------ ------ ------ Average shares as adjusted 13,386 13,348 13,371 13,339 ====== ====== ====== ====== Earnings per common share $1.81 $0.60 $2.07 ($0.98) ====== ====== ====== ====== Fully Diluted - Net income $24,263 $8,028 $27,631 ($10,594) After tax interest on convertible securities 2,318 2,530 7,037 7,514 ------ ------ ------ ------ Income applicable to common shares $26,581 $10,558 $34,668 ($3,080) ====== ====== ====== ====== Average number of shares outstanding 13,370 13,342 13,359 13,339 Common stock equivalents 19 5 15 12 Common stock reserved for conversion 8,412 8,907 8,666 9,001 ------ ------ ------ ------ Average shares as adjusted 21,801 22,254 22,040 22,352 ====== ====== ====== ====== Earnings per Common Share $1.22 $0.47 $1.57 ($0.14) ====== ====== ====== ====== * * Anti-dilutive
EX-27 3
5 1000 9-MOS DEC-31-1994 SEP-30-1994 30,811 121,402 79,881 0 41,928 327,075 1,005,842 256,506 1,282,177 379,410 587,706 16,525 0 0 179,137 1,282,177 997,658 997,658 923,814 923,814 0 0 33,672 49,502 21,871 27,631 0 0 0 27,631 2.07 1.57
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