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 |
|
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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)
Registrants telephone number, including area code: (206) 392-5040
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
o
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes
x No
o
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
The registrant has 500 common shares, par value $1.00, outstanding at June 30, 2003.
Cautionary Note regarding Forward-Looking Statements
In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements are those that predict or describe future events or trends and that do not relate solely to historical matters. You can generally identify forward-looking statements as statements containing the words believe, expect, will, anticipate, intend, estimate, project, assume or similar expressions, although not all forward-looking statements contain these identifying words. All statements in this report regarding our future strategy, future operations, projected financial position, estimated future revenues, projected costs, future prospects, and results that might be obtained by pursuing managements current plans and objectives are forward-looking statements. You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this report was filed with the SEC. We expressly disclaim any obligation to issue any updates or revisions to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our stockholders. Many important factors that could cause such a difference are described in Item 1, Business of our most recent Annual Report on Form 10-K, all of which you should review carefully. Please consider our forward-looking statements in light of those risks as you read this report.
PART I. FINANCIAL STATEMENTS
ASSETS
| December 31, | June 30, | |||||||
| (In Millions) | 2002 | 2003 | ||||||
Current Assets |
||||||||
Cash and cash equivalents |
$ | 268.9 | $ | 114.4 | ||||
Marketable securities |
366.8 | 606.9 | ||||||
Receivables from related companies |
126.7 | 165.9 | ||||||
Receivables - net |
81.8 | 98.4 | ||||||
Inventories and supplies - net |
38.3 | 36.5 | ||||||
Deferred income taxes |
60.2 | 74.9 | ||||||
Prepaid expenses and other current assets |
47.5 | 40.5 | ||||||
Total Current Assets |
990.2 | 1,137.5 | ||||||
Property and Equipment |
||||||||
Flight equipment |
1,945.5 | 2,150.9 | ||||||
Other property and equipment |
359.3 | 369.1 | ||||||
Deposits for future flight equipment |
64.7 | 32.8 | ||||||
| 2,369.5 | 2,552.8 | |||||||
Less accumulated depreciation and amortization |
709.4 | 763.2 | ||||||
Total Property and Equipment - Net |
1,660.1 | 1,789.6 | ||||||
Intangible Assets |
50.9 | 50.9 | ||||||
Other Assets |
49.9 | 55.3 | ||||||
Total Assets |
$ | 2,751.1 | $ | 3,033.3 | ||||
See accompanying notes to financial statements.
2
BALANCE SHEETS (unaudited)
Alaska Airlines, Inc.
LIABILITIES AND SHAREHOLDERS EQUITY
| December 31, | June 30, | ||||||||
| (In Millions) | 2002 | 2003 | |||||||
Current Liabilities |
|||||||||
Accounts payable |
$ | 118.5 | $ | 103.6 | |||||
Payables to related companies |
1.7 | 2.4 | |||||||
Accrued aircraft rent |
67.5 | 61.9 | |||||||
Accrued wages, vacation and payroll taxes |
76.3 | 73.1 | |||||||
Other accrued liabilities |
226.5 | 264.0 | |||||||
Air traffic liability |
211.1 | 297.7 | |||||||
Current portion of long-term debt and
capital lease obligations |
48.6 | 62.0 | |||||||
Total Current Liabilities |
750.2 | 864.7 | |||||||
Long-Term Debt and Capital Lease Obligations |
856.7 | 929.8 | |||||||
Other Liabilities and Credits |
|||||||||
Deferred income taxes |
153.7 | 164.7 | |||||||
Deferred revenue |
224.5 | 228.6 | |||||||
Other liabilities |
196.3 | 225.6 | |||||||
| 574.5 | 618.9 | ||||||||
Shareholders Equity |
|||||||||
Common stock, $1 par value |
|||||||||
Authorized: 1,000 shares |
|||||||||
Issued: 2001 and 2002 - 500 shares |
| | |||||||
Capital in excess of par value |
324.8 | 384.8 | |||||||
Accumulated other comprehensive income (loss) |
(82.0 | ) | (83.5 | ) | |||||
Retained earnings |
326.9 | 318.6 | |||||||
| 569.7 | 619.9 | ||||||||
Total Liabilities and Shareholders Equity |
$ | 2,751.1 | $ | 3,033.3 | |||||
See accompanying notes to financial statements.
3
STATEMENTS OF OPERATIONS (unaudited)
Alaska Airlines, Inc.
| Three Months Ended June 30 | ||||||||
| (In Millions) | 2002 | 2003 | ||||||
Operating Revenues |
||||||||
Passenger |
$ | 433.6 | $ | 460.6 | ||||
Freight and mail |
20.0 | 21.0 | ||||||
Other - net |
25.1 | 29.0 | ||||||
Total Operating Revenues |
478.7 | 510.6 | ||||||
Operating Expenses |
||||||||
Wages and benefits |
174.5 | 192.0 | ||||||
Contracted services |
19.4 | 19.7 | ||||||
Aircraft fuel |
64.2 | 69.1 | ||||||
Aircraft maintenance |
36.1 | 44.6 | ||||||
Aircraft rent |
31.8 | 31.2 | ||||||
Food and beverage service |
16.2 | 14.9 | ||||||
Commissions |
14.2 | 12.2 | ||||||
Other selling expenses |
27.8 | 23.3 | ||||||
Depreciation and amortization |
28.5 | 29.6 | ||||||
Loss on sale of assets |
0.2 | 0.2 | ||||||
Landing fees and other rentals |
28.5 | 31.2 | ||||||
Other |
37.5 | 34.3 | ||||||
Total Operating Expenses |
478.9 | 502.3 | ||||||
Operating Income (Loss) |
(0.2 | ) | 8.3 | |||||
Nonoperating Income (Expense) |
||||||||
Interest income |
6.1 | 4.5 | ||||||
Interest expense |
(11.6 | ) | (11.4 | ) | ||||
Interest capitalized |
0.4 | 0.4 | ||||||
U.S. government compensation |
0.1 | 52.8 | ||||||
Other - net |
5.1 | 5.0 | ||||||
| 0.1 | 51.3 | |||||||
Income (loss) before income tax |
(0.1 | ) | 59.6 | |||||
Income tax expense |
0.7 | 22.8 | ||||||
Net Income (Loss) |
$ | (0.8 | ) | $ | 36.8 | |||
See accompanying notes to financial statements.
4
STATEMENTS OF OPERATIONS (unaudited)
Alaska Airlines, Inc.
| Six Months Ended June 30 | ||||||||
| (In Millions) | 2002 | 2003 | ||||||
Operating Revenues |
||||||||
Passenger |
$ | 807.6 | $ | 847.6 | ||||
Freight and mail |
35.9 | 38.4 | ||||||
Other - net |
47.4 | 51.6 | ||||||
Total Operating Revenues |
890.9 | 937.6 | ||||||
Operating Expenses |
||||||||
Wages and benefits |
340.2 | 380.0 | ||||||
Contracted services |
41.2 | 40.4 | ||||||
Aircraft fuel |
119.4 | 146.0 | ||||||
Aircraft maintenance |
71.7 | 82.5 | ||||||
Aircraft rent |
63.6 | 61.7 | ||||||
Food and beverage service |
30.1 | 27.8 | ||||||
Commissions |
28.4 | 20.4 | ||||||
Other selling expenses |
52.7 | 45.2 | ||||||
Depreciation and amortization |
56.7 | 58.1 | ||||||
Loss on sale of assets |
0.2 | 0.5 | ||||||
Landing fees and other rentals |
52.1 | 59.9 | ||||||
Other |
73.8 | 68.4 | ||||||
Total Operating Expenses |
930.1 | 990.9 | ||||||
Operating Loss |
(39.2 | ) | (53.3 | ) | ||||
Nonoperating Income (Expense) |
||||||||
Interest income |
11.1 | 5.7 | ||||||
Interest expense |
(23.5 | ) | (22.7 | ) | ||||
Interest capitalized |
0.5 | 1.1 | ||||||
U.S. government compensation |
0.1 | 52.8 | ||||||
Other - net |
9.2 | 5.4 | ||||||
| (2.6 | ) | 42.3 | ||||||
Loss before income tax and accounting change |
(41.8 | ) | (11.0 | ) | ||||
Income tax benefit |
(14.1 | ) | (2.7 | ) | ||||
Loss before cumulative effect of accounting change |
(27.7 | ) | (8.3 | ) | ||||
Cumulative effect of accounting change |
(12.5 | ) | | |||||
Net Loss |
$ | (40.2 | ) | $ | (8.3 | ) | ||
See accompanying notes to financial statements.
5
STATEMENTS OF SHAREHOLDERS 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, 2002 |
$ | | $ | 324.8 | $ | (82.0 | ) | $ | 326.9 | $ | 569.7 | |||||||||||
Net loss for the six months
ended June 30, 2003 |
(8.3 | ) | (8.3 | ) | ||||||||||||||||||
Other comprehensive income (loss): |
||||||||||||||||||||||
Related to marketable securities: |
||||||||||||||||||||||
Change in fair value |
(3.1 | ) | ||||||||||||||||||||
Reclassification to earnings |
4.3 | |||||||||||||||||||||
Income tax effect |
(0.4 | ) | ||||||||||||||||||||
| 0.8 | 0.8 | |||||||||||||||||||||
Related to fuel hedges: |
||||||||||||||||||||||
Change in fair value |
8.9 | |||||||||||||||||||||
Reclassification to earnings |
(12.6 | ) | ||||||||||||||||||||
Income tax effect |
1.4 | |||||||||||||||||||||
| (2.3 | ) | (2.3 | ) | |||||||||||||||||||
Total comprehensive loss |
(9.8 | ) | ||||||||||||||||||||
Capital contribution from Air Group |
60.0 | 60.0 | ||||||||||||||||||||
Balances at June 30, 2003 |
$ | | $ | 384.8 | $ | (83.5 | ) | $ | 318.6 | $ | 619.9 | |||||||||||
See accompanying notes to financial statements.
6
STATEMENTS OF CASH FLOWS (unaudited)
Alaska Airlines, Inc.
| Six Months Ended June 30 | ||||||||||
| (In Millions) | 2002 | 2003 | ||||||||
Cash flows from operating activities: |
||||||||||
Net loss |
$ | (40.2 | ) | $ | (8.3 | ) | ||||
Adjustments to reconcile net loss to
net cash provided by operating activities: |
||||||||||
Cumulative effect of accounting change |
12.5 | | ||||||||
Depreciation and amortization |
56.7 | 58.1 | ||||||||
Amortization of airframe and engine overhauls |
29.6 | 27.8 | ||||||||
Loss (gain) on marketable securities |
0.2 | (0.8 | ) | |||||||
Changes in derivative fair values |
(6.8 | ) | (0.4 | ) | ||||||
Loss on sale of assets |
| 0.5 | ||||||||
Decrease in deferred income taxes |
(11.0 | ) | (2.7 | ) | ||||||
Increase in accounts receivable - net |
(41.5 | ) | (55.8 | ) | ||||||
Decrease in prepaid expenses and other current assets |
2.8 | 3.8 | ||||||||
Increase in air traffic liability |
67.3 | 86.7 | ||||||||
Increase in other current liabilities |
0.9 | 14.6 | ||||||||
Increase in deferred revenue and other-net |
16.9 | 34.4 | ||||||||