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Page <1>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended: September 30, 1994
[ ] 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: 1-2691
AMERICAN AIRLINES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 13-1502798
(State or other jurisdiction of (IRS Employer identification No.)
incorporation or organization)
4333 AMON CARTER BLVD.
FORT WORTH, TEXAS 76155
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (817) 963-1234
(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 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.
Common Stock, $1 Par Value - 1,000 shares outstanding as of October 31, 1994
The registrant meets the conditions set forth in, and is filing
this form with the reduced disclosure format prescribed by,
General Instructions H(1)(a) and H(1)(b) of Form 10-Q.
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AMERICAN AIRLINES, INC.
INDEX
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<CAPTION>
Page
Number
Part I: FINANCIAL INFORMATION
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Consolidated Statement of Operations for the three and
nine months ended September 30, 1994 and 1993 1
Condensed Consolidated Balance Sheet
at September 30, 1994 and December 31, 1993 2
Condensed Consolidated Statement of Cash Flows for
the nine months ended September 30, 1994 and 1993 3
Notes to Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
Part II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
Signature 8
</TABLE>
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PART I
Item 1. Consolidated Financial Statements
AMERICAN AIRLINES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(Unaudited) (in millions) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues
Passenger $ 3,370 $ 3,447 $ 9,665 $ 10,058
Cargo 162 155 479 468
Other 358 310 1,017 901
Total operating revenues 3,890 3,912 11,161 11,427
Expenses
Wages, salaries and benefits 1,255 1,220 3,758 3,681
Aircraft fuel 405 450 1,160 1,392
Commissions to agents 329 386 964 1,070
Depreciation and amortization 271 283 852 828
Other rentals and landing fees 196 210 581 604
Food service 170 184 500 532
Aircraft rentals 155 161 467 479
Maintenance materials and
repairs 114 129 341 416
Other operating expenses 524 563 1,590 1,686
Total operating expenses 3,419 3,586 10,213 10,688
Operating Income 471 326 948 739
Other Income (Expense)
Interest income 3 2 4 4
Interest expense (113) (99) (302) (315)
Interest capitalized 5 10 16 40
Miscellaneous - net (8) (5) (32) (131)
(113) (92) (314) (402)
Earnings Before Income Taxes 358 234 634 337
Provision for income taxes 138 105 245 147
Net Earnings $ 220 $ 129 $ 389 $ 190
</TABLE>
See accompanying notes.
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AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31,
(Unaudited) (in millions) 1994 1993
<S> <C> <C>
Current Assets
Cash $ 27 $ 55
Short-term investments for affiliates 1,016 514
Receivables, net 999 731
Receivables from affiliates 407 223
Inventories, net 591 606
Other current assets 414 399
Total current assets 3,454 2,528
Equipment and Property
Flight equipment, net 9,279 9,192
Purchase deposits for flight equipment 101 313
9,380 9,505
Other equipment and property, net 1,882 1,964
11,262 11,469
Equipment and Property under Capital
Leases
Flight equipment, net 1,390 1,188
Other equipment and property, net 176 172
1,566 1,360
Route acquisition costs, net 1,039 1,061
Other assets, net 1,359 1,331
$18,680 $17,749
Current Liabilities
Accounts payable $ 890 $ 857
Payable to affiliates 1,033 479
Accrued liabilities 1,364 1,281
Air traffic liability 1,679 1,461
Current maturities of long-term debt 45 70
Current obligations under capital leases 129 92
Total current liabilities 5,140 4,240
Long-term debt 1,545 1,453
Long-term debt due to Parent 3,011 4,045
Obligations under capital leases 1,983 1,792
Deferred income taxes 580 338
Postretirement benefits 1,161 1,085
Other liabilities, deferred gains
and deferred credits 1,703 1,628
Stockholder's Equity
Common stock - -
Additional paid-in capital 1,699 1,699
Retained earnings 1,858 1,469
3,557 3,168
$18,680 $17,749
</TABLE>
See accompanying notes.
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AMERICAN AIRLINES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
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<CAPTION>
Nine Months Ended September 30,
(Unaudited) (in millions) 1994 1993
<S> <C> <C>
Net Cash Provided by Operating Activities $ 1,568 $ 1,305
Cash Flow from Investing Activities:
Capital expenditures (585) (1,584)
Net increase in short-term
investments for affiliates (502) (324)
Funds transferred from affiliates for
investment, net 502 324
Other, net 12 (3)
Net cash used for investing activities (573) (1,587)
Cash Flow from Financing Activities:
Proceeds from issuance of long-term debt 130 294
Net short-term borrowings (repayments) on
instruments with maturities of
90 days or less - (350)
Other short-term borrowings 200 -
Payments on other short-term borrowings (200) (29)
Payments on long-term debt and capital
lease obligations (121) (160)
Funds transferred (to) from affiliates, net (1,034) 606
Other, net 2 2
Net cash (used) provided by
financing activities (1,023) 363
Net (decrease) increase in cash (28) 81
Cash at beginning of period 55 45
Cash at end of period $ 27 $ 126
Cash Payments (Refunds) For:
Interest (net of amounts capitalized) $ 164 $ 167
Interest on intercompany note to Parent 111 105
Income taxes 26 (10)
Financing Activities Not Affecting Cash:
Capital lease obligations incurred $ 280 $ -
</TABLE>
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See accompanying notes.
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AMERICAN AIRLINES, INC.
Notes to Financial Statements
1. American Airlines, Inc. (American) is a wholly-owned subsidiary
of AMR Corporation (AMR). In the opinion of management, these
financial statements contain all adjustments necessary to
present fairly the financial position, results of operations and
cash flows for the periods indicated. Such adjustments are of a
normal recurring nature except as disclosed. These financial
statements and related notes should be read in conjunction with
the financial statements and notes contained in American's
Annual Report on Form 10-K for the year ended December 31, 1993.
2. Passenger revenues for the nine months ended September 30, 1994,
include a $49 million favorable adjustment ($29 million after
tax) produced by a change in the Company's estimate of the usage
patterns of miles sold to participating companies in American's
AAdvantage frequent flyer program. Passenger Revenues for the
nine months ended September 30, 1993, reflect a $115 million
favorable adjustment ($67 million net of related commission
expense and taxes) resulting from a change in estimate relating
to certain earned passenger revenues.
3. Included in Miscellaneous - net for the nine months ended
September 30, 1993, is a $125 million charge ($79 million after
tax) related to the retirement of 31 DC-10 aircraft. The charge
represents the Company's best estimate of the expected loss
based upon the anticipated method of disposition. However,
should the ultimate method of disposition differ, the actual
loss could be different than the amount estimated.
4. Accumulated depreciation of owned equipment and property at
September 30, 1994 and December 31, 1993, was $5.1 billion and
$4.7 billion, respectively. Accumulated amortization of
equipment and property under capital leases at September 30,
1994 and December 31, 1993, was $793 million and $707 million,
respectively.
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Page <7>
Item 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
RESULTS OF OPERATIONS
American's results for the nine months ended September 30, 1994,
reflected the improved performance of the Company's Passenger and
SABRE Travel Information Network (STIN) divisions. The Company's
plan to maximize Passenger division revenue per available seat mile
(ASM) by reducing capacity and optimizing the deployment of flight
assets resulted in a 1.1 percent reduction in passenger traffic on a
6.3 percent decline in ASMs. As a result, passenger load factor
increased 3.4 points and revenue per ASM improved by 2.7 percent.
Average stage length increased approximately 6.3 percent,
contributing to a decline in Passenger division yield since fares on
longer trips tend to be lower on a per ASM basis. In addition,
yields continued to be hampered by competitive fare actions and the
impact of low fare carriers in certain domestic markets. STIN's
improved performance resulted from increased booking volumes and an
increase in the average fee per booking.
Operating costs decreased 4.4 percent, driven primarily by the
impact of reduced capacity and a decline in fuel prices.
The results for the nine months ended September 30, 1994, include a
$49 million favorable adjustment ($29 million after tax) to
passenger revenues produced by a change in the Company's estimate of
the usage patterns of miles sold to participating companies in
American's AAdvantage frequent flyer program.
The results for the nine months ended September 30, 1993, included a
$125 million charge ($79 million after tax) for the retirement of 31
McDonnell Douglas DC10 aircraft and a positive $115 million
adjustment ($67 million net of related commission expense and taxes)
to passenger revenues for a change in estimate related to certain
earned passenger revenues.
For the Nine Months Ended September 30, 1994 and 1993
American recorded net earnings of $389 million for the nine months
ended September 30, 1994. For the same period in 1993, American
recorded net earnings of $190 million. Operating income was $948
million in the 1994 nine months compared to $739 million in the 1993
nine months.
Passenger revenues decreased 3.9 percent, $393 million, in the first
nine months of 1994. Passenger revenue yield per passenger mile
decreased 2.8 percent to 13.09 cents in 1994.. Domestic yields
dropped 4.2 percent while international yields increased 1.1
percent. Revenue passenger miles decreased 1.1 percent while
available seat miles (ASMs) fell 6.3 percent, resulting in an
improvement of 3.4 points in the passenger load factor. As a
result, passenger revenue per available seat mile increased by 2.7
percent.
The decrease in ASMs is the result of retiring 56 aircraft (23
McDonnell Douglas DC-10 and 33 Boeing 727 aircraft) and leasing two
McDonnell Douglas MD-11 aircraft, partially offset by the addition
of 27 new aircraft (17 Fokker F100, seven Boeing 757, and three
Boeing 767 aircraft) since September 30, 1993.
For the first nine months of 1994 compared to the same period in
1993, domestic traffic decreased 2.6 percent on capacity reductions
of 7.1 percent and international traffic grew 2.7 percent on a
capacity reduction of 4.3 percent. The change in international
traffic was driven by a 7.4 percent growth in Latin America with
capacity decrease of 0.1 percent, offset by a 1.1 percent decrease
in traffic to Europe primarily driven by a capacity reduction of 9.0
percent.
Cargo revenues increased 2.4 percent, $11 million, reflecting an 8.5
percent increase in cargo ton miles offset by a 6.0 percent decrease
in revenue yield per ton mile. Growth in cargo ton miles is
primarily attributable to our Europe and Latin America markets,
combined with steady increases in postal volumes.
Other revenues increased 12.9 percent, $116 million primarily as a
result of the improved performance of STIN and increased revenues
from aircraft rental and maintenance contracts.
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Page <8>
RESULTS OF OPERATIONS (CONTINUED)
Capacity or available passenger seat miles (ASMs) decreased 6.3
percent to 114.4 billion miles in the first nine months of 1994.
Operating expenses decreased 4.4 percent, $475 million from the nine
months ended September 30, 1993, to the same period in 1994.
Passenger division cost per ASM increased 1.5 percent to 8.36 cents.
Wages, salaries and benefits rose 2.1 percent, $77 million,
resulting from salary adjustments for existing employees offset by
headcount reductions. Aircraft fuel expense decreased 16.7 percent,
$232 million, due to an 8.4 percent decrease in gallons consumed and
an 8.9 percent decrease in American's average price per gallon.
Commissions to agents decreased 9.9 percent, $106 million, due
principally to decreased passenger revenues and a reduction in the
percentage of revenues subject to commissions. Additions of new
aircraft and the acquisitions of other capital equipment raised
depreciation and amortization 2.9 percent, $24 million. Maintenance
materials and repairs costs decreased 18.0 percent, $75 million
reflecting the retirement of older jet aircraft and increased
operational efficiencies as well as a more vigorous maintenance
warranty recovery effort. Other operating expenses decreased 5.7
percent, $96 million primarily due to the decrease in capacity.
Interest expense decreased 4.1 percent, $13 million due primarily to
a decrease in rates on external debt and a decrease in the
outstanding balance of intercompany debt due to parent partially
offset by an increase in rates on variable rate debt. Included in
Miscellaneous - net for the nine months ended September 30, 1993, is
a charge of $125 million related to the retirement of 31 McDonnell
Douglas DC10 aircraft.
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Page <9>
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
Part I - Exhibit 12: Computation of ratio of
earnings to fixed charges for
the nine monthe ended September
30, 1994 and 1993
(b) Reports on Form 8-K:
None
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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.
AMERICAN AIRLINES, INC.
BY: /s/ Michael J. Durham
Michael J. Durham
Senior Vice President and
Chief Financial Officer
DATE: November 3, 1994
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PART I -
EXHIBIT 12
AMERICAN AIRLINES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
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<CAPTION>
Nine Months Ended
September 30,
1994 1993
(in millions of dollars)
<S> <C> <C>
Earnings:
Earnings before income taxes $ 634 $ 337
Add: Total fixed charges (per below) 740 764
Less: Interest capitalized 16 40
Total earnings $ 1,358 $ 1,061
Fixed charges:
Interest $ 302 $ 315
Portion of rental expense
representative of the interest factor 435 446
Amortization of debt expense 3 3
Total fixed charges $ 740 $ 764
Ratio of earnings to fixed charges 1.84 1.39
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C> <C> <C>
<PERIOD-TYPE> QTR-3 9-MOS OTHER
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994 DEC-31-1994
<PERIOD-END> SEP-30-1994 SEP-30-1994 SEP-30-1994
<CASH> 0 0 27
<SECURITIES> 0 0 1016
<RECEIVABLES> 0 0 1414
<ALLOWANCES> 0 0 8
<INVENTORY> 0 0 592
<CURRENT-ASSETS> 0 0 3454
<PP&E> 0 0 18747
<DEPRECIATION> 0 0 5919
<TOTAL-ASSETS> 0 0 18680
<CURRENT-LIABILITIES> 0 0 5140
<BONDS> 0 0 0
<COMMON> 0 0 1699
0 0 0
0 0 0
<OTHER-SE> 0 0 1858
<TOTAL-LIABILITY-AND-EQUITY> 0 0 18680
<SALES> 0 0 0
<TOTAL-REVENUES> 3890 11161 0
<CGS> 0 0 0
<TOTAL-COSTS> 3419 10213 0
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 113 302 0
<INCOME-PRETAX> 358 634 0
<INCOME-TAX> 138 245 0
<INCOME-CONTINUING> 220 389 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 220 389 0
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
</TABLE>
