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, 2002.
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 AIRLINES, INC.
| Alaska (State or other jurisdiction of incorporation or organization) |
92-0009235 (I.R.S. Employer Identification No.) |
19300 Pacific Highway South, Seattle, Washington 98188
(Address of principal executive offices)
Registrant’s telephone number, including area code: (206) 431-7079
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 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 500 common shares, par value $1.00, outstanding at October 31, 2002.
1
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
BALANCE SHEETS (unaudited)
Alaska Airlines, Inc.
| Restated | ||||||||
| December 31, | September 30, | |||||||
| (In Millions) | 2001 | 2002 | ||||||
ASSETS |
||||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 490.2 | $ | 308.1 | ||||
Marketable securities |
170.4 | 354.4 | ||||||
Receivables from related companies |
71.2 | 83.9 | ||||||
Receivables — net |
67.0 | 84.6 | ||||||
Inventories and supplies — net |
37.8 | 39.3 | ||||||
Prepaid expenses and other assets |
92.4 | 87.2 | ||||||
Total Current Assets |
929.0 | 957.5 | ||||||
Property and Equipment |
||||||||
Flight equipment |
1,888.0 | 1,922.3 | ||||||
Other property and equipment |
326.7 | 362.7 | ||||||
Deposits for future flight equipment |
71.6 | 61.2 | ||||||
| 2,286.3 | 2,346.2 | |||||||
Less accumulated depreciation and amortization |
609.1 | 688.5 | ||||||
Total Property and Equipment — Net |
1,677.2 | 1,657.7 | ||||||
Goodwill |
12.5 | 12.5 | ||||||
Other Assets |
131.7 | 138.9 | ||||||
Total Assets |
$ | 2,750.4 | $ | 2,766.6 | ||||
See accompanying notes to financial statements.
2
BALANCE SHEETS (unaudited)
Alaska Airlines, Inc.
| Restated | |||||||||
| December 31, | September 30, | ||||||||
| (In Millions Except Share Amounts) | 2001 | 2002 | |||||||
LIABILITIES AND SHAREHOLDER’S EQUITY |
|||||||||
Current Liabilities |
|||||||||
Accounts payable |
$ | 96.1 | $ | 115.3 | |||||
Payables to related companies |
4.4 | 4.0 | |||||||
Accrued aircraft rent |
81.7 | 72.5 | |||||||
Accrued wages, vacation and payroll taxes |
70.1 | 75.2 | |||||||
Other accrued liabilities |
191.4 | 166.9 | |||||||
Air traffic liability |
218.7 | 232.6 | |||||||
Current portion of long-term debt and
capital lease obligations |
43.2 | 46.2 | |||||||
Total Current Liabilities |
705.6 | 712.7 | |||||||
Long-Term Debt and Capital Lease Obligations |
847.9 | 843.7 | |||||||
Other Liabilities and Credits |
|||||||||
Deferred income taxes |
188.9 | 182.7 | |||||||
Deferred revenue |
165.8 | 165.9 | |||||||
Other liabilities |
124.4 | 154.3 | |||||||
| 479.1 | 502.9 | ||||||||
Shareholder’s Equity |
|||||||||
Common stock, $1 par value
Authorized: 1,000 shares
Issued: 2001 and 2002 - 500 shares |
— | - | |||||||
Capital in excess of par value |
324.8 | 324.8 | |||||||
Accumulated other comprehensive income (loss) |
(3.1 | ) | 9.0 | ||||||
Retained earnings |
396.1 | 373.5 | |||||||
| 717.8 | 707.3 | ||||||||
Total Liabilities and Shareholder’s Equity |
$ | 2,750.4 | $ | 2,766.6 | |||||
See accompanying notes to financial statements.
3
STATEMENTS OF INCOME (unaudited)
Alaska Airlines, Inc.
| Three Months Ended September 30 | Restated | |||||||
| (In Millions) | 2001 | 2002 | ||||||
Operating Revenues |
||||||||
Passenger |
$ | 441.8 | $ | 467.1 | ||||
Freight and mail |
20.8 | 19.7 | ||||||
Other — net |
22.0 | 25.2 | ||||||
Total Operating Revenues |
484.6 | 512.0 | ||||||
Operating Expenses |
||||||||
Wages and benefits |
166.5 | 186.0 | ||||||
Contracted services |
19.0 | 19.0 | ||||||
Aircraft fuel |
71.7 | 70.7 | ||||||
Aircraft maintenance |
32.5 | 31.6 | ||||||
Aircraft rent |
33.7 | 32.1 | ||||||
Food and beverage service |
14.5 | 17.8 | ||||||
Commissions |
16.3 | 12.1 | ||||||
Other selling expenses |
26.3 | 26.1 | ||||||
Depreciation and amortization |
27.4 | 29.5 | ||||||
Loss on sale of assets |
0.6 | 0.5 | ||||||
Landing fees and other rentals |
25.9 | 30.2 | ||||||
Other |
34.0 | 39.5 | ||||||
Total Operating Expenses |
468.4 | 495.1 | ||||||
Operating Income |
16.2 | 16.9 | ||||||
Nonoperating Income (Expense) |
||||||||
Interest income |
7.9 | 6.3 | ||||||
Interest expense, net |
(10.9 | ) | (10.8 | ) | ||||
U.S. government compensation |
18.7 | 0.3 | ||||||
Other — net |
(0.3 | ) | (2.3 | ) | ||||
| 15.4 | (6.5 | ) | ||||||
Income before income tax |
31.6 | 10.4 | ||||||
Income tax expense |
(10.2 | ) | (3.2 | ) | ||||
Net Income |
$ | 21.4 | $ | 7.2 | ||||
See accompanying notes to financial statements.
4
STATEMENTS OF INCOME (unaudited)
Alaska Airlines, Inc.
| Nine Months Ended September 30 | Restated | |||||||
| (In Millions) | 2001 | 2002 | ||||||
Operating Revenues |
||||||||
Passenger |
$ | 1,261.6 | $ | 1,274.9 | ||||
Freight and mail |
60.5 | 55.6 | ||||||
Other — net |
58.6 | 73.0 | ||||||
Total Operating Revenues |
1,380.7 | 1,403.5 | ||||||
Operating Expenses |
||||||||
Wages and benefits |
479.0 | 529.1 | ||||||
Contracted services |
57.0 | 59.9 | ||||||
Aircraft fuel |
219.8 | 190.1 | ||||||
Aircraft maintenance |
100.0 | 103.3 | ||||||
Aircraft rent |
104.0 | 95.7 | ||||||
Food and beverage service |
42.4 | 47.9 | ||||||
Commissions |
50.4 | 40.6 | ||||||
Other selling expenses |
78.9 | 78.8 | ||||||
Depreciation and amortization |
76.5 | 86.8 | ||||||
Loss on sale of assets |
1.8 | 0.7 | ||||||
Landing fees and other rentals |
70.7 | 82.3 | ||||||
Other |
108.4 | 114.0 | ||||||
Total Operating Expenses |
1,388.9 | 1,429.2 | ||||||
Operating Loss |
(8.2 | ) | (25.7 | ) | ||||
Nonoperating Income (Expense) |
||||||||
Interest income |
24.2 | 17.4 | ||||||
Interest expense, net |
(29.8 | ) | (33.8 | ) | ||||
U.S. government compensation |
18.7 | 0.3 | ||||||
Other — net |
(1.7 | ) | 7.0 | |||||
| 11.4 | (9.1 | ) | ||||||
Income (loss) before income tax |
3.2 | (34.8 | ) | |||||
Income tax (expense) benefit |
(0.5 | ) | 12.2 | |||||
Net
Income (Loss) |
$ | 2.7 | $ | (22.6 | ) | |||
See accompanying notes to financial statements.
5
STATEMENT OF SHAREHOLDER’S EQUITY (unaudited)
Alaska Airlines, Inc.
| Accumulated | |||||||||||||||||||||
| Capital in | Other | ||||||||||||||||||||
| Common | Excess of | Comprehensive | Retained | ||||||||||||||||||
| (In Millions) | Stock | Par Value | Income (Loss) | Earnings | Total | ||||||||||||||||
Balances at December 31, 2001: |
|||||||||||||||||||||
As previously reported |
$ | — | $ | 324.8 | $ | (3.1 | ) | $ | 368.7 | $ | 690.4 | ||||||||||
Prior period adjustment (see Note 2) |
27.4 | 27.4 | |||||||||||||||||||
As restated |
— | 324.8 | (3.1 | ) | 396.1 | 717.8 | |||||||||||||||
Net loss for the nine months
ended September 30, 2002 |
(22.6 | ) | (22.6 | ) | |||||||||||||||||
Other comprehensive income (loss): |
|||||||||||||||||||||
Related to fuel hedges: |
|||||||||||||||||||||
Change in fair value |
21.1 | ||||||||||||||||||||
Reclassification to earnings |
(4.4 | ) | |||||||||||||||||||
Income tax effect |
(6.6 | ) | |||||||||||||||||||
| 10.1 | 10.1 | ||||||||||||||||||||
Related to marketable securities: |
|||||||||||||||||||||
Change in fair value |
1.9 | ||||||||||||||||||||
Reclassification to earnings |
0.7 | ||||||||||||||||||||
Income tax effect |
(0.6 | ) | |||||||||||||||||||
| 2.0 | 2.0 | ||||||||||||||||||||
Total comprehensive loss |
(10.5 | ) | |||||||||||||||||||
Balances at September 30, 2002 |
$ | — | $ | 324.8 | $ | 9.0 | $ | 373.5 | $ | 707.3 | |||||||||||
See accompanying notes to financial statements.
6
STATEMENTS OF CASH FLOWS (unaudited)
Alaska Airlines, Inc.
| Restated | ||||||||||
| Nine Months Ended September 30 (In millions) | 2001 | 2002 | ||||||||
Cash flows from operating activities: |
||||||||||
Net loss |
$ | 2.7 | ($22.6 | ) | ||||||
Adjustments to reconcile net loss to
net cash provided by operating activities: |
||||||||||