<PAGE> 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 June 30, 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 1-12649
---------------------------------------------------------
AMERICA WEST HOLDINGS CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 86-0847214
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
51 WEST THIRD STREET TEMPE, ARIZONA 85281
- --------------------------------------------------------------------------------
(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 1,200,000 shares of Class A Common Stock and 44,731,123 shares
of Class B Common Stock outstanding as of July 31, 1997.
<PAGE> 2
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Balance Sheets
(in thousands except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 146,650 $ 137,499
Short-term investments 1,056 39,131
Accounts receivable, net 88,234 106,215
Expendable spare parts and supplies, net 21,917 21,423
Prepaid expenses 47,875 47,545
---------- ----------
Total current assets 305,732 351,813
---------- ----------
Property and equipment:
Flight equipment 730,856 669,654
Other property and equipment 120,433 107,993
Equipment purchase deposits 78,218 56,665
---------- ----------
929,507 834,312
Less accumulated depreciation and amortization 217,200 163,718
---------- ----------
Total property and equipment 712,307 670,594
---------- ----------
Other assets:
Restricted cash 29,262 26,433
Reorganization value in excess of amounts allocable to
identifiable assets, net 429,533 447,044
Deferred income taxes 74,700 74,700
Other assets, net 28,799 27,066
---------- ----------
Total other assets 562,294 575,243
---------- ----------
$1,580,333 $1,597,650
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 3
AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Balance Sheets
(in thousands except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- -----------
Liabilities and Stockholders' Equity (Unaudited)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 43,856 $ 46,238
Accounts payable 127,947 115,458
Air traffic liability 184,707 214,056
Accrued compensation and vacation benefits 28,864 30,085
Accrued taxes 65,710 72,047
Other accrued liabilities 42,251 44,836
----------- -----------
Total current liabilities 493,335 522,720
----------- -----------
Long-term debt, less current maturities 327,642 330,148
Deferred credits and other liabilities 111,928 122,029
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value. Authorized 48,800,000
shares; no shares issued -- --
Class A common stock, $.01 par value. Authorized
1,200,000 shares; issued and outstanding 1,200,000 shares 12 12
Class B common stock, $.01 par value. Authorized
100,000,000 shares; issued and outstanding 44,730,968
shares at June 30, 1997 and 44,626,056 shares at
December 31, 1996 447 446
Additional paid-in capital 564,979 577,267
Retained earnings 107,099 70,137
----------- -----------
672,537 647,862
Less: cost of Class B Common Stock in treasury, 1,353,891
shares in 1997 and 1,353,911 shares in 1996 (25,109) (25,109)
----------- -----------
Total stockholders' equity 647,428 622,753
----------- -----------
$ 1,580,333 $ 1,597,650
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Statements of Income
(in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues:
Passenger $ 450,753 $ 439,800 $ 886,293 $ 827,602
Cargo 12,054 10,991 24,810 21,748
Other 14,949 13,158 28,840 27,749
--------- --------- --------- ---------
Total operating revenues 477,756 463,949 939,943 877,099
--------- --------- --------- ---------
Operating expenses:
Salaries and related costs 102,326 97,620 203,343 192,322
Aircraft rents 55,089 49,866 110,021 97,138
Other rents and landing fees 28,862 27,264 59,678 53,831
Aircraft fuel 57,608 56,143 126,724 105,319
Agency commissions 40,452 34,607 78,764 67,206
Aircraft maintenance materials
and repairs 37,669 29,206 68,981 56,231
Depreciation and amortization 12,348 13,488 24,425 26,720
Amortization of excess
reorganization value 6,256 6,551 12,511 13,100
Other 86,563 87,121 171,450 168,831
--------- --------- --------- ---------
Total operating expenses 427,173 401,866 855,897 780,698
--------- --------- --------- ---------
Operating income 50,583 62,083 84,046 96,401
--------- --------- --------- ---------
Nonoperating income (expenses):
Interest income 2,698 3,361 5,265 6,531
Interest expense (10,349) (11,709) (20,738) (23,977)
Other, net (168) 55 128 255
--------- --------- --------- ---------
Total nonoperating expenses, net (7,819) (8,293) (15,345) (17,191)
--------- --------- --------- ---------
Income before income taxes and
extraordinary item 42,764 53,790 68,701 79,210
--------- --------- --------- ---------
Income taxes 19,756 24,268 31,739 35,961
--------- --------- --------- ---------
Extraordinary item, net of taxes -- (1,105) -- (1,105)
--------- --------- --------- ---------
Net income $ 23,008 $ 28,417 $ 36,962 $ 42,144
========= ========= ========= =========
Earnings per share:
Primary:
Income before extraordinary item $ .52 $ .60 $ .81 $ .87
Extraordinary item -- (.02) -- (.02)
--------- --------- --------- ---------
Net income $ .52 $ .58 $ .81 $ .85
========= ========= ========= =========
Fully diluted:
Income before extraordinary item $ .52 $ .60 $ .81 $ .86
Extraordinary item -- (.02) -- (.02)
--------- --------- --------- ---------
Net income $ .52 $ .58 $ .81 $ .84
========= ========= ========= =========
Shares used for computation:
Primary 44,519 49,231 45,521 49,470
========= ========= ========= =========
Fully diluted 44,519 49,520 45,651 50,089
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
AMERICA WEST HOLDINGS CORPORATION
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1997 1996
---- ----
<S> <C> <C>
Net cash provided by operating activities: $ 87,790 $ 142,606
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment (76,459) (76,767)
Decrease (increase) in short-term investments 38,075 (21,545)
Other (6,345) (1,722)
--------- ---------
Net cash used in investing activities (44,729) (100,034)
Cash flows from financing activities:
Repayment of debt (21,624) (55,016)
Issuance of common stock 1,056 2,882
Acquisition of treasury stock and warrants (13,342) (34,332)
--------- ---------
Net cash used in financing activities (33,910) (86,466)
--------- ---------
Net increase (decrease) in cash and cash equivalents 9,151 (43,894)
--------- ---------
Cash and cash equivalents at beginning of period 137,499 224,367
--------- ---------
Cash and cash equivalents at end of period $ 146,650 $ 180,473
========= =========
Cash, cash equivalents and short-term investments at end
of period $ 147,706 $ 202,018
========= =========
Cash paid for interest and income taxes:
Interest, net of amounts capitalized ($1,480 in 1996) $ 15,978 $ 20,508
Income taxes $ 132 $ 329
Non-cash financing activities:
Notes payable issued for equipment purchase deposits $ 16,553 $ 7,814
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
AMERICA WEST HOLDINGS CORPORATION
Notes To Condensed Consolidated Financial Statements
June 30, 1997
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements include the
accounts of America West Holdings Corporation ("Holdings" or the "Company")
and its wholly-owned subsidiary, America West Airlines, Inc. ("America
West" or "AWA"), and have been prepared 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 consolidated
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 unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated 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. AIRCRAFT REFINANCING TRANSACTION
In June 1997, America West Airlines 1997-1 Pass Through Trusts issued $93.9
million of Pass Through Trust Certificates in connection with the
refinancing of four Airbus A320 aircraft. The combined effective interest
rate on the financing is 7.41%. The proceeds of the transaction were used
to refinance the indebtedness incurred by the owners of the aircraft leased
to America West. Under the arrangements, the financial benefits of the
transactions are shared among America West, the equity investors in
leverage leases covering the aircraft and U.S. subsidiaries of GPA Group
plc ("GPA"), the original lessees under the restructured leases. Benefits
to America West include a reduction in rental expense approximating
$250,000 per year through 2013.
The Pass Through Trust Certificates were issued by separate pass through
trusts. The equipment notes are secured by a security interest in the
aircraft and engines and an assignment of America West's aircraft leases.
Neither the equipment notes nor the Pass Through Trust Certificates are
direct obligations of, or guaranteed by America West, and the corresponding
debt and interest expense are not included in America West's financial
statements.
3. STOCK OPTIONS
In 1994, the Company adopted the America West 1994 Incentive Equity Plan,
("Plan"), pursuant to which the Company's Board of Directors may grant
stock options to officers and key employees. The Plan authorized grants of
options to purchase up to 3.5 million shares of authorized but unissued
Holding Class B Common Stock. In May 1997, the stockholders approved an
increase from 3.5 million to 7.5 million in the maximum number of Holdings
Class B Common Stock available under the Plan. Stock options are granted
with an exercise price equal to the stock's fair market value at the date
of grant generally become exercisable over a three-year period and expire
if unexercised at the end of 10 years.
4. SUBSEQUENT EVENTS
On August 1, 1997, Holdings' Board of Directors approved the extension of
the Company's existing stock repurchase program through December 31, 1999.
The program authorizes the purchase of up to 2.5 million shares of the
Company's Class B Common Stock and all of America West's publicly traded
warrants, in private or open market transactions as circumstances warrant.
As of June 30, 1997, 1.4 million shares of Class B Common Stock and 4.1
million warrants have been repurchased.
6
<PAGE> 7
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1997
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Holdings became the holding company for AWA effective midnight, December 31,
1996. Holdings' primary business activity is ownership of all the capital stock
of AWA. Management's Discussion and Analysis of Financial Condition and Results
of Operations presented below relates to the condensed consolidated financial
statements of Holdings. 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.
The table below sets forth selected operating data for Holding's wholly-owned
subsidiary, AWA.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Percent Ended June 30, Percent
-------------------- Change ---------------------- Change
1997 1996 1997-1996 1997 1996 1997-1996
---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Available seat miles (in millions) 5,848 5,353 9.2 11,638 10,308 12.9
Revenue passenger miles
(in millions) 4,144 3,848 7.7 8,126 7,352 10.5
Load factor (percent) 70.9 72.0 (1.1) pts 69.8 71.3 (1.5) pts
Yield per revenue passenger mile
(cents) 10.88 11.43 (4.8) 10.91 11.26 (3.1)
Revenue per available seat mile:
Passenger (cents) 7.71 8.22 (6.2) 7.62 8.03 (5.1)
Total (cents) 8.17 8.67 (5.8) 8.08 8.51 (5.1)
Passenger enplanements
(in thousands) 4,674 4,589 1.9 9,264 8,894 4.2
Average stage length (miles) 770 725 6.2 769 713 7.9
Average passenger journey (miles) 1,145 1,017 12.6 1,117 993 12.5
Aircraft (end of period) 100 99 1.0 100 99 1.0
Average daily aircraft
utilization (hours) 12.4 11.8 5.1 12.4 11.7 6.0
Average full-time equivalent
employees 9,930 9,236 7.5 9,862 9,016 9.4
Fuel price (cents per gallon) 61.70 64.89 (4.9) 68.32 62.59 9.2
Fuel consumption (gallons in
millions) 93.4 86.5 8.0 185.5 168.3 10.2
</TABLE>
The table below sets forth the major components of operating cost per available
seat mile ("CASM") for AWA.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Percent Ended June 30, Percent
-------------- Change -------------- Change
1997 1996 1997-1996 1997 1996 1997-1996
---- ---- --------- ---- ---- ---------
(in cents)
<S> <C> <C> <C> <C> <C> <C>
Salaries and related costs 1.75 1.82 (3.8) 1.75 1.87 (6.4)
Aircraft rents .94 .93 1.1 .94 .94 --
Other rents and landing fees .50 .51 (2.0) .51 .52 (1.9)
Aircraft fuel .99 1.05 (5.7) 1.09 1.02 6.9
Agency commissions .69 .65 6.2 .68 .65 4.6
Aircraft maintenance materials
and repairs .64 .55 16.4 .59 .54 9.3
Depreciation and amortization .21 .25 (16.0) .21 .26 (19.2)
Amortization of excess
reorganization value .11 .12 (8.3) .11 .13 (15.4)
Other 1.48 1.63 (9.2) 1.47 1.64 (10.4)
---- ---- ---- ---- ---- ----
7.31 7.51 (2.7) 7.35 7.57 (2.9)
==== ==== ==== ====
</TABLE>
7
<PAGE> 8
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1997
RESULTS OF OPERATIONS
Three Months Ended June 30, 1997 and 1996
For the three months ended June 30, 1997 and 1996, Holdings realized net income
(before extraordinary item) of $23 million and $29.5 million, respectively. Net
income for the three month period in 1997 included income tax expense for
financial reporting purposes of $19.8 million compared to $24.3 million in 1996.
Passenger revenues for America West increased $11 million or 2.5 percent to
$450.8 million during the three months ended June 30, 1997 due primarily to a
7.7 percent increase in revenue passenger miles. Yield decreased 4.8 percent to
10.88 cents from 11.43 cents due to a 6.2 percent increase in stage length, the
reimposition in March 1997 of the federal air transportation excise tax, and
aggressive competitive pricing. Capacity, as measured by available seat miles
("ASMs"), increased 9.2 percent in the 1997 second quarter as compared to 1996
due to the net addition of two aircraft to the airline's fleet and increased
utilization of aircraft, both as part of America West's strategic growth plan
initiated in February 1996. Load factor decreased 1.1 points to 70.9 percent.
Passenger revenue per available seat mile ("RASM") decreased to 7.71 cents from
8.22 cents. Cargo and other revenues increased 11.8 percent to $27 million for
the second quarter of 1997 as a result of higher available capacity.
CASM decreased 2.7 percent to 7.31 cents in the second quarter of 1997 from 7.51
cents for the comparable 1996 period. The changes in the components of operating
expense per ASM are explained as follows:
- - Salaries and related costs per ASM decreased 3.8 percent due to
continued improvement in productivity as average full-time equivalent
headcount increased 7.5 percent versus a 9.2 percent increase in ASMs.
- - Aircraft fuel expense per ASM decreased 5.7 percent due to a 4.9
percent decrease in the average price per gallon of fuel from 64.89
cents in the 1996 quarter to 61.70 cents in the 1997 quarter.
- - Agency commissions expense per ASM increased 6.2 percent due primarily
to a higher mix of commissionable revenue.
- - Aircraft maintenance materials and repairs expense per ASM increased
16.4 percent or $8.5 million due primarily to an increase in
capitalized maintenance cost which increased capitalized maintenance
amortization expense by $7.3 million for the second quarter of 1997
compared with the comparable period in 1996.
- - Depreciation and amortization expense per ASM decreased 16 percent due
in part to certain ramp equipment being depreciated to net realizable
value in 1996.
- - Amortization of excess reorganization value per ASM decreased 8.3
percent primarily due to the 9.2 percent increase in ASMs.
- - Other operating expenses per ASM decreased 9.2 percent to 1.48 cents
from 1.63 cents primarily due to the 9.2 percent increase in ASMs.
Net nonoperating expenses were relatively unchanged in the second quarter of
1997 from the comparable period in 1996.
Income tax expense for financial reporting purposes for the three months ended
June 30, 1997 decreased to $19.8 million from $24.3 million for the 1996 second
quarter primarily due to lower pre-tax income in the 1997 quarter.
Six Months Ended June 30, 1997 and 1996
For the six months ended June 30, 1997 and 1996, Holdings realized net income
(before extraordinary item) of $37 million and $43.2 million, respectively.
Income taxes for the six month periods in 1997 and 1996 were $31.7 million and
$36 million, respectively.
Total operating revenue for America West was $939.9 million for the six months
ended June 30, 1997, up 7.2 percent from the comparable period in 1996.
Passenger revenues were $886.3 million, an increase of 7.1 percent over the 1996
period. Cargo and other revenues increased 8.4 percent to $53.7 million. Other
revenues consist primarily of alcoholic beverage sales, contract service sales
and service charges.
8
<PAGE> 9
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1997
Capacity, as measured by ASMs, increased 12.9 percent for the six months ended
June 30, 1997 compared with the comparable 1996 period primarily due to the net
addition of four aircraft to the fleet since June 30, 1996 and increased
utilization of the fleet. Revenue passenger miles increased 10.5 percent for the
six months ended June 30, 1997 compared with the comparable 1996 period. Load
factor for the 1997 six month period decreased 1.5 points on 12.9 percent higher
capacity while yield decreased 3.1 percent when compared with the same period in
1996 primarily due to a 7.9 percent increase in stage length, the reimposition
of the federal air transportation excise tax, and aggressive competitive
pricing.
CASM decreased to 7.35 cents or 2.9 percent for the six months ended June 30,
1997 compared with the same period in 1996. The changes in components of
operating expense per ASM are explained as follows:
- - Salaries and related costs per ASM decreased 6.4 percent primarily due
to the 12.9 percent increase in ASMs and an increase in productivity as
average full-time equivalent headcount increased 9.4 percent.
- - Other rents and landing fees per ASM decreased 1.9 percent primarily
due to the 12.9 percent increase in ASMs.
- - Aircraft fuel expense per ASM increased 6.9 percent as the average
price per gallon of aircraft fuel increased 9.2 percent to 68.32 cents
for the six months ended June 30, 1997 compared with the comparable
period for 1996.
- - Agency commission expense per ASM increased 4.6 percent primarily due
to a higher mix of commissionable revenue.
- - Aircraft maintenance materials and repairs expense per ASM increased
9.3 percent or $12.8 million due primarily to the increase in
capitalized maintenance cost which has increased capitalized
maintenance amortization expense by $15.1 million in the 1997 period
compared to the comparable period in 1996.
- - Depreciation and amortization expense per ASM in 1997 decreased 19.2
percent due to certain ramp equipment being depreciated to net
realizable value in 1996.
- - Other operating expense per ASM decreased 10.4 percent to 1.47 cents
from 1.64 cents due primarily to an increase in passenger
traffic-related costs such as catering costs, credit card discount
fees, fuel taxes, and crew related costs which were more than offset by
the effect of the 12.9 percent increase in ASMs.
Net nonoperating expenses decreased $1.8 million to $15.3 million for the six
months ended June 30, 1997 as compared with the comparable period for 1996. The
10.7 percent decrease in cost resulted primarily from a net decrease in interest
expense of $3.2 million due to reduced levels of debt and lower interest rates
as compared with 1996.
Income tax expense for financial reporting purposes for the six months ended
June 30, 1997 decreased to $31.7 million from $36 million for the comparable
period in 1996 primarily due to the lower pretax income in the 1997 period.
For the six months ended June 30, 1996, the Company incurred an extraordinary
charge of $1.1 million net of income tax benefit of $.9 million for the
prepayment of $25 million of its $75 million 10 3/4 percent Senior Unsecured
Notes.
LIQUIDITY AND CAPITAL RESOURCES
Unrestricted cash, cash equivalents and short-term investments for Holdings
decreased to $147.7 million at June 30, 1997 from $176.6 million at December 31,
1996 due to the payment in 1997 of approximately $43 million in federal air
transportation excise taxes which were collected in 1996. Net cash provided by
operating activities decreased to $87.8 million for the six months ended June
30, 1997 from $142.6 million for the comparable period in 1996 due principally
to the excise tax payment. Net cash used in investing activities decreased to
$44.7 million for the 1997 period from $100 million for the 1996 period
primarily due to the $38 million decrease in short-term investments. Net cash
used in financing activities was $33.9 million for the 1997 period compared to
$86.5 million in the 1996 period primarily due to a higher level of equity
purchases and a $25 million debt prepayment in 1996.
9
<PAGE> 10
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1997
The Company has a working capital deficiency which increased to $187.6 million
at June 30, 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.
Long-term debt maturities through 1999 consist primarily of principal
amortization of notes payable secured by certain of AWA's aircraft. Such
maturities are $24.6 million, $43.2 million and $77.5 million, for the 1997
remainder, 1998 and 1999, respectively. Management expects to fund these
requirements with cash from operations.
At June 30, 1997, AWA 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, AWA
estimates such aggregate net cost to be approximately $850 million. AWA 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
its remaining financial commitment. There can be no assurance that AWA will be
able to obtain such capital in sufficient amounts or on acceptable terms and a
default by AWA under the AVSA agreement or any such commitment could have a
material adverse effect on the Company.
In June 1997, America West Airlines 1997-1 Pass Through Trusts issued $93.9
million of Pass Through Trust Certificates in connection with the refinancing of
four Airbus A320 aircraft. The combined effective interest rate on the financing
is 7.41%. The proceeds of the transaction were used to refinance the
indebtedness incurred by the owners of the aircraft leased to America West.
Under the arrangements, the financial benefits of the transactions are shared
among America West, the equity investors in leverage leases covering the
aircraft and U.S. subsidiaries of GPA Group plc ("GPA"), the original lessees
under the restructured leases. Benefits to America West include a reduction in
rental expense approximating $250,000 per year through 2013.
The Pass Through Trust Certificates were issued by separate pass through trusts.
The equipment notes are secured by a security interest in the aircraft and
engines and an assignment of America West's aircraft leases. Neither the
equipment notes nor the Pass Through Trust Certificates are direct obligations
of, or guaranteed by America West, and the corresponding debt and interest
expense are not included in America West's financial statements.
As of June 30, 1997, AWA's fleet consisted of 100 aircraft. Of these aircraft,
20 fail to meet the FAA's 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 AWA 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 AWA will be able to obtain such
capital in sufficient amounts or on acceptable terms.
Capital expenditures for the six months ended June 30, 1997 and 1996 were
approximately $76.5 million and $76.8 million, respectively. Included in these
amounts are capital expenditures for capitalized maintenance of approximately
$47.3 million for the 1997 period and $47.6 million for the 1996 period.
Certain of AWA's long-term debt agreements contain minimum cash balance
requirements, leverage ratios, coverage ratios and other financial covenants
with which AWA was in compliance at June 30, 1997.
10
<PAGE> 11
AMERICA WEST HOLDINGS CORPORATION
JUNE 30, 1997
The federal air transportation excise taxes, which expired December 31, 1996,
have been reenacted effective March 7, 1997 through September 30, 1997. On
August 5, 1997, President Clinton signed into law new aviation ticket taxes as
part of larger tax legislation designed to balance the nation's budget and
lower taxes. Included in the new law is a phase in over six years of a
replacement of the current federal air transportation excise tax structure
with a system that includes: a domestic excise tax starting at 9%, declining to
7.5% by 1999; a domestic segment tax starting at $1.00 and increasing to $3.00
by 2003 and an increase in international taxes from $6 per international
departure to an arrival and departure tax starting at $12 (each way) indexed
for inflation starting January 1, 1999. Due to America West's predominantly
domestic system, it is anticipated that the new domestic segment fees will have
a more adverse impact on operating results than the reduction in excise tax.
In February 1997 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"). This
Statement simplifies the standards for computing earnings per share (EPS) and
replaces the presentation of primary and fully diluted EPS pursuant to
Accounting Principles Board Opinion No. 15 "Earnings Per Share" with a
presentation of basic and diluted EPS, as defined. This Statement is effective
for financial statements issued for periods ending after December 15, 1997,
including interim periods. Under SFAS 128, the Company's basic EPS and diluted
EPS was $.52, and $.50, for the 1997 three month period, and $.84, and $.81, for
the six months ended June 30, 1997, respectively.
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.
11
<PAGE> 12
Part II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDER
a. The 1997 Annual Meeting of Stockholders of the Company was held on May
2, 1997. Fifteen persons were elected as proposed in the proxy
statement pursuant to Regulation 14A of the Securities Exchange Act of
1934, as amended, to serve as directors until the next annual meeting
of Stockholders or until their successors are elected and qualified.
There were 98,440,732 votes cast in the election of directors and there
were no abstentions and broker non-votes. The voting regarding each
nominee was as follows: William A. Franke (for: 97,573,152 / withheld:
867,580); Julia Chang Bloch (for: 97,576,752 / withheld: 863,980);
Stephen F. Bollenbach (for: 97,364,135 / withheld: 1,076,597);
Frederick W. Bradley, Jr. (For: 97,577,284 / withheld: 863,448); James
G. Coulter (for: 97,364,473 / withheld: 1,076,259); John F. Fraser
(for: 97,363,390 / withheld: 1,077,342); Richard R. Goodmanson (for:
97,577,208 / withheld: 863,524); John L. Goolsby (for: 97,577,107 /
withheld: 863,625); Richard C. Kraemer (for: 97,577,239 / withheld:
863,493); John R. Power, Jr. (for: 97,577,408 / withheld: 863,324);
Larry L. Risley (for: 97,576,522 / withheld: 864,210); Frank B. Ryan
(for: 97,576,198 / withheld: 864,534); Richard P. Schifter (for:
97,577,328 / withheld: 863,404); John F. Tierney (for: 97,577,369 /
withheld: 863,363); and Raymond S. Troubh (for: 97,576,023 / withheld:
864,709).
b. Also at the 1997 Annual Meeting of Stockholders of the Company, the
amendment to increase the number of shares available under the 1994
Incentive Equity Plan from 3.5 million to 7.5 million shares was
approved with 82,276,151 votes for; 9,864,272 votes against; 376,502
votes abstained and 5,923,807 broker non-votes.
Item 5. OTHER INFORMATION
In June 1997, the Transportation Workers Union filed an application
with the National Mediation Board ("NMB") seeking to become the
collective bargaining representative for AWA's approximately 1,950
fleet service employees. The NMB has scheduled a representation
election in respect to the workforce. Ballots will be mailed on August
27, 1997 and are expected to be tabulated in early October 1997.
In November 1995, a group of individuals who are current or former
employees of Continental Airlines, commenced a lawsuit in the Federal
District Court for the Western District of Washington against
Continental and AWA, alleging that the plaintiffs were wrongfully
discharged from their employment. The court certified a class action of
approximately 230 plaintiffs. In May 1997, the court approved a
settlement between the plaintiffs and AWA. All of AWA's obligations
under that settlement were covered by insurance.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
EXHIBIT
NUMBER DESCRIPTION AND METHOD OF FILING
------ --------------------------------
*11.1 Computation of Earnings Per Share
*27 Financial Data Schedule
----------
*Filed herewith
b. Reports on Form 8-K
None
12
<PAGE> 13
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 HOLDINGS CORPORATION
By /s/ W. Douglas Parker
----------------------------
W. Douglas Parker
Senior Vice President and
Chief Financial Officer
DATED: August 14, 1997
13
<PAGE> 1
AMERICA WEST HOLDINGS CORPORATION
Computation of Net Income Per Common Share
(in thousands except per share amount) Exhibit 11.1
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
1997 1996 1997 1996
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Primary Earnings Per Share:
Computation for Statements of Income:
Income before extraordinary items ...... $ 23,008 $ 29,522 $ 36,962 $ 43,249
Extraordinary items .................... -- (1,105) -- (1,105)
----------- ------------ ----------- ------------
Net income applicable to common stock .. $ 23,008 $ 28,417 $ 36,962 $ 42,144
=========== ============ =========== ============
Weighted average number of common shares
outstanding .......................... 44,518,975 45,234,356 44,239,207 45,407,584
Assumed exercise of stock options and
warrants (a) ........................... -- 3,996,975 -- 4,062,908
----------- ------------ ----------- ------------
Weighted average number of common shares
outstanding as adjusted ................ 44,518,975 49,231,331 44,239,207 49,470,492
=========== ============ =========== ============
Primary earnings per common share:
Income before extraordinary items ...... $ 0.52 $ 0.60 $ 0.84 $ 0.87
Extraordinary item ..................... -- (0.02) -- (0.02)
----------- ------------ ----------- ------------
Net income ............................. $ 0.52 $ 0.58 $ 0.84 $ 0.85
=========== ============ =========== ============
Income before extraordinary items ...... $ 23,008 $ 36,962
Extraordinary item ..................... -- --
Adjustment for interest on debt reduction,
net of taxes ......................... -- --
----------- -----------
Net income applicable to common stock .. $ 23,008 $ 36,962
=========== ===========
Weighted average number of common shares
outstanding .......................... 44,518,975 44,239,207
Assumed exercise of stock options and
warrants (a) ......................... 1,278,387 1,282,191
----------- -----------
Weighted average number of common shares
outstanding as adjusted .............. 45,797,362 45,521,398
=========== ===========
Primary earnings per common share:
Income before extraordinary item ....... $ 0.50 $ 0.81
Extraordinary item -- --
----------- -----------
Net income ............................. $ 0.50 (b) $ 0.81
=========== ===========
</TABLE>
14
<PAGE> 2
AMERICA WEST HOLDINGS CORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands except per share amount) Exhibit 11.1
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ------------------------------
1997 1996 1997 1996
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Fully Diluted Earnings Per Share:
Computation for Statements of Operations:
Income before extraordinary items ........ $ 23,008 $ 29,522 $ 36,962 $ 43,249
Extraordinary item ....................... -- (1,105) -- (1,105)
Adjustment for interest on debt reduction,
net of taxes ........................... -- -- -- --
----------- ------------ ----------- ------------
Net income applicable to common stock .... $ 23,008 $ 28,417 $ 36,962 $ 42,144
=========== ============ =========== ============
Weighted average number of common shares
outstanding ............................ 44,518,975 45,234,356 44,239,207 45,407,584
Assumed exercise of stock options and
warrants (a) ........................... -- 4,285,921 -- 4,681,372
----------- ------------ ----------- ------------
Weighted average number of common shares
outstanding as adjusted ................ 44,518,975 49,520,277 44,239,207 50,088,956
=========== ============ =========== ============
Fully diluted earnings per common share:
Income before extraordinary item ......... $ 0.52 $ 0.60 $ 0.84 $ 0.86
Extraordinary item ....................... -- (0.02) -- (0.02)
----------- ------------ ----------- ------------
Net income ............................... $ 0.52 $ 0.58 $ 0.84 $ 0.84
=========== ============ =========== ============
Fully Diluted Earnings Per Share:
Computation for Statements of Operations:
Income before extraordinary items ........ $ 23,008 $ 36,962
Extraordinary item ....................... -- --
Adjustment for interest on debt reduction,
net of taxes ........................... -- --
----------- -----------
Net income applicable to common stock .... $ 23,008 $ 36,962
=========== ===========
Weighted average number of common shares
outstanding ............................ 44,518,975 44,239,207
Assumed exercise of stock options and
warrants (a) ........................... 1,278,387 1,411,980
----------- -----------
Weighted average number of common shares
outstanding as adjusted ................ 45,797,362 45,651,187
=========== ===========
Fully diluted earnings per common share:
Income before extraordinary item ......... $ 0.50 $ 0.81
Extraordinary item -- --
----------- -----------
Net income ............................... $ 0.50 (b) $ 0.81
=========== ===========
</TABLE>
(a) The stock options and warrants are included only in the periods in
which they are dilutive.
(b) The calculation is submitted in accordance with Securities Exchange Act
of 1934 Release No. 9083 although not required by footnote 2 to
paragraph 14 of APB Opinion No. 15 because it results in dilution of
less than 3 percent.
15
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<NAME> AMERICA WEST HOLDINGS CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
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<CURRENT-ASSETS> 305732
<PP&E> 929507
<DEPRECIATION> 217200
<TOTAL-ASSETS> 1580333
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<BONDS> 0
0
0
<COMMON> 459
<OTHER-SE> 646969
<TOTAL-LIABILITY-AND-EQUITY> 1580333
<SALES> 0
<TOTAL-REVENUES> 939943
<CGS> 0
<TOTAL-COSTS> 855897
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<LOSS-PROVISION> 1500
<INTEREST-EXPENSE> 20738
<INCOME-PRETAX> 68701
<INCOME-TAX> 31739
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<EPS-PRIMARY> .81
<EPS-DILUTED> .81
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