UNITED STATES SECURITIES AND EXCHANGE COMMISSION
| (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, 2003.
| 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.
| Delaware (State or other jurisdiction of incorporation or organization) |
91-1292054 (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) 431-7040
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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 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 26,605,733 common shares, par value $1.00, outstanding at March 31, 2003.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONSOLIDATED BALANCE SHEETS (unaudited)
Alaska Air Group, Inc.
ASSETS
| December 31, | March 31, | |||||||
| (In Millions) | 2002 | 2003 | ||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 269.0 | $ | 205.8 | ||||
Marketable securities |
366.8 | 409.8 | ||||||
Receivables - net |
125.4 | 134.8 | ||||||
Inventories and supplies |
71.9 | 67.8 | ||||||
Deferred income taxes |
61.2 | 74.0 | ||||||
Prepaid expenses and other current assets |
82.0 | 98.1 | ||||||
Total Current Assets |
976.3 | 990.3 | ||||||
Property and Equipment |
||||||||
Flight equipment |
2,066.4 | 2,155.3 | ||||||
Other property and equipment |
430.9 | 432.9 | ||||||
Deposits for future flight equipment |
93.5 | 89.6 | ||||||
| 2,590.8 | 2,677.8 | |||||||
Less accumulated depreciation and amortization |
811.4 | 838.5 | ||||||
Total Property and Equipment - Net |
1,779.4 | 1,839.3 | ||||||
Intangible Assets |
50.9 | 50.9 | ||||||
Other Assets |
74.1 | 111.6 | ||||||
Total Assets |
$ | 2,880.7 | $ | 2,992.1 | ||||
See accompanying notes to consolidated financial statements.
2
CONSOLIDATED BALANCE SHEETS (unaudited)
Alaska Air Group, Inc.
LIABILITIES AND SHAREHOLDERS’ EQUITY
| December 31, | March 31, | |||||||||
| (In Millions) | 2002 | 2003 | ||||||||
Current Liabilities |
||||||||||
Accounts payable |
$ | 132.1 | $ | 139.5 | ||||||
Accrued aircraft rent |
76.0 | 56.2 | ||||||||
Accrued wages, vacation and payroll taxes |
87.4 | 90.0 | ||||||||
Other accrued liabilities |
222.2 | 248.3 | ||||||||
Air traffic liability |
211.6 | 257.9 | ||||||||
Current portion of long-term debt and
capital lease obligations |
48.6 | 39.9 | ||||||||
Total Current Liabilities |
777.9 | 831.8 | ||||||||
Long-Term Debt and Capital Lease Obligations |
856.7 | 979.0 | ||||||||
Other Liabilities and Credits |
||||||||||
Deferred income taxes |
157.2 | 138.2 | ||||||||
Deferred revenue |
232.0 | 233.1 | ||||||||
Other liabilities |
201.2 | 210.0 | ||||||||
| 590.4 | 581.3 | |||||||||
Shareholders’ Equity |
||||||||||
Common stock, $1 par value |
||||||||||
Authorized: 100,000,000 shares |
||||||||||
Issued: 2002 - 29,309,726 shares |
||||||||||
2003 - 29,342,020 shares |
29.3 | 29.3 | ||||||||
Capital in excess of par value |
483.3 | 483.9 | ||||||||
Treasury stock, at cost: 2002 and 2003 - 2,736,287 shares |
(62.5 | ) | (62.5 | ) | ||||||
Accumulated other comprehensive income (loss) |
(80.2 | ) | (80.2 | ) | ||||||
Retained earnings |
285.8 | 229.5 | ||||||||
| 655.7 | 600.0 | |||||||||
Total Liabilities and Shareholders’ Equity |
$ | 2,880.7 | $ | 2,992.1 | ||||||
See accompanying notes to consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Alaska Air Group, Inc.
| Three Months Ended March 31 | |||||||||
| (In Millions Except Per Share Amounts) | 2002 | 2003 | |||||||
Operating Revenues |
|||||||||
Passenger |
$ | 455.9 | $ | 475.5 | |||||
Freight and mail |
17.1 | 18.6 | |||||||
Other - net |
27.1 | 24.6 | |||||||
Total Operating Revenues |
500.1 | 518.7 | |||||||
Operating Expenses |
|||||||||
Wages and benefits |
202.9 | 227.1 | |||||||
Contracted services |
24.7 | 25.7 | |||||||
Aircraft fuel |
64.7 | 90.2 | |||||||
Aircraft maintenance |
43.2 | 46.5 | |||||||
Aircraft rent |
46.5 | 46.9 | |||||||
Food and beverage service |
14.3 | 13.4 | |||||||
Commissions |
12.4 | 3.3 | |||||||
Other selling expenses |
30.2 | 27.2 | |||||||
Depreciation and amortization |
32.3 | 32.4 | |||||||
Loss (gain) on sale of assets |
(0.6 | ) | 0.1 | ||||||
Landing fees and other rentals |
29.8 | 37.1 | |||||||
Other |
49.3 | 47.4 | |||||||
Total Operating Expenses |
549.7 | 597.3 | |||||||
Operating Loss |
(49.6 | ) | (78.6 | ) | |||||
Nonoperating Income (Expense) |
|||||||||
Interest income |
4.4 | 0.6 | |||||||
Interest expense |
(11.9 | ) | (11.1 | ) | |||||
Interest capitalized |
0.2 | 0.8 | |||||||
Other - net |
4.5 | 0.4 | |||||||
| (2.8 | ) | (9.3 | ) | ||||||
Loss before income tax and accounting change |
(52.4 | ) | (87.9 | ) | |||||
Income tax benefit |
(18.7 | ) | (31.6 | ) | |||||
Loss before accounting change |
(33.7 | ) | (56.3 | ) | |||||
Cumulative effect of accounting change |
(51.4 | ) | — | ||||||
Net Loss |
$ | (85.1 | ) | $ | (56.3 | ) | |||
Basic and Diluted Loss Per Share: |
|||||||||
Loss before accounting change |
$ | (1.27 | ) | $ | (2.12 | ) | |||
Cumulative effect of accounting change |
$ | (1.94 | ) | — | |||||
Net Loss Per Share |
$ | (3.21 | ) | $ | (2.12 | ) | |||
Shares used for computation: |
|||||||||
Basic and diluted |
26.532 | 26.582 | |||||||
See accompanying notes to consolidated financial statements.
4
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (unaudited)
Alaska Air Group, Inc.
| Accumulated | |||||||||||||||||||||||||||||
| Common | Capital in | Treasury | Other | ||||||||||||||||||||||||||
| Shares | Common | Excess of | Stock, | Comprehensive | Retained | ||||||||||||||||||||||||
| (In Millions) | Outstanding | Stock | Par Value | at Cost | Income (Loss) | Earnings | Total | ||||||||||||||||||||||
Balances at December 31, 2002 |
26.573 | $ | 29.3 | $ | 483.3 | $ | (62.5 | ) | $ | (80.2 | ) | $ | 285.8 | $ | 655.7 | ||||||||||||||
Net loss for the three months
ended March 31, 2003 |
(56.3 | ) | (56.3 | ) | |||||||||||||||||||||||||
Other comprehensive income (loss): |
|||||||||||||||||||||||||||||
Related to marketable securities: |
|||||||||||||||||||||||||||||
Change in fair value |
2.9 | ||||||||||||||||||||||||||||
Reclassification to earnings |
(0.1 | ) | |||||||||||||||||||||||||||
Income tax effect |
(1.1 | ) | |||||||||||||||||||||||||||
| 1.7 | 1.7 | ||||||||||||||||||||||||||||
Related to fuel hedges: |
|||||||||||||||||||||||||||||
Change in fair value |
6.2 | ||||||||||||||||||||||||||||
Reclassification to earnings |
(9.1 | ) | |||||||||||||||||||||||||||
Income tax effect |
1.2 | ||||||||||||||||||||||||||||
| (1.7 | ) | (1.7 | ) | ||||||||||||||||||||||||||
Total comprehensive loss |
(56.3 | ) | |||||||||||||||||||||||||||
Stock issued under stock plans |
0.033 | 0.6 | 0.6 | ||||||||||||||||||||||||||
Balances at March 31, 2003 |
26.606 | $ | 29.3 | $ | 483.9 | $ | (62.5 | ) | $ | (80.2 | ) | $ | 229.5 | $ | 600.0 | ||||||||||||||
See accompanying notes to consolidated financial statements.
5
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Alaska Air Group, Inc.
| Three Months Ended March 31 (In Millions) | 2002 | 2003 | ||||||||
Cash flows from operating activities: |
||||||||||
Net loss |
$ | (85.1 | ) | $ | (56.3 | ) | ||||
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities: |
||||||||||
Cumulative effect of accounting change |
51.4 | — | ||||||||
Depreciation and amortization |
32.3 | 32.4 | ||||||||
Amortization of airframe and engine overhauls |
15.5 | 15.2 | ||||||||
Loss (gain) on marketable securities |
1.0 | (1.7 | ) | |||||||
Changes in derivative fair values |
(3.5 | ) | 1.2 | |||||||
Loss on sale of assets |
(0.6 | ) | 0.1 | |||||||
Decrease in deferred income taxes |
(10.0 | ) | (31.7 | ) | ||||||
Increase in accounts receivable |
(21.0 | ) | (9.5 | ) | ||||||
Increase in other current assets |
(34.0 | ) | (11.0 | ) | ||||||
Increase in air traffic liability |
50.3 | 46.3 | ||||||||
Increase (decrease) in other current liabilities |
(36.1 | ) | 13.2 | |||||||
Increase (decrease) in deferred revenue and other-net |
12.0 | (3.0 | ) | |||||||
Net cash used in operating activities |
(27.8 | ) | (4.8 | ) | ||||||
Cash flows from investing activities: |
||||||||||
Proceeds from disposition of assets |
1.9 | 0.8 | ||||||||
Purchases of marketable securities |
(117.7 | ) | (171.8 | ) | ||||||
Sales and maturities of marketable securities |
22.2 | 131.6 | ||||||||
Property and equipment additions: |
||||||||||
Aircraft purchase deposits |
— | (9.3 | ) | |||||||
Capitalized overhauls |
(11.9 | ) | (22.5 | ) | ||||||
Aircraft |
— | (59.3 | ) | |||||||
Other flight equipment |
(8.3 | ) | (10.9 | ) | ||||||
Other property |
(7.2 | ) | (5.5 | ) | ||||||
Aircraft deposits returned |
21.9 | 1.2 | ||||||||
Restricted deposits and other |
(2.2 | ) | (22.4 | ) | ||||||
Net cash used in investing activities |
(101.3 | ) | (168.1 | ) | ||||||