<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
FORM 10-Q/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
( ) 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 1-8836
HAWAIIAN AIRLINES, INC.
(Exact Name of Registrant as Specified in Its Charter)
HAWAII 99-0042880
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3375 Koapaka Street, Suite G-350
Honolulu, Hawaii 96819
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (808) 835-3700
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.
(X) Yes ( ) 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.
(X) Yes ( ) No
As of November 10, 1995, 6,581,133 shares of Class A Common Stock and 1,933,589
shares of Class B Common Stock of the Registrant are outstanding.
<PAGE>
EXPLANATORY NOTE
----------------
On November 14, 1995, Hawaiian Airlines, Inc. (the "Company") filed
its Form 10-Q for the quarterly period ended September 30, 1995 (the "Form
10-Q") with the Securities and Exchange Commission ("the Commission")
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended. In
connection with review of the Company's proxy statement for a Special Meeting
of Shareholders to be held on January 30, 1996, the Staff of the Commission
requested that the Company disclose its accounting for options issued under
the Company's 1994 Stock Option Plan, as amended reported in Item 1.
Financial Statements and Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. This Amendment No. 1 on
Form 10-Q/A provides the disclosure requested by the Staff of the Commission.
All other items of the Form 10-Q remain unchanged.
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
CONDENSED BALANCE SHEETS (IN THOUSANDS) (UNAUDITED)
- -------------------------------------------------------------------------------------------------------
REORGANIZED
COMPANY
-------------------------------------
SEPTEMBER 30,1995 DECEMBER 31, 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . $ 7,427 $ 3,501
Accounts receivable, net. . . . . . . . . . . . . . . . . . . 22,499 16,275
Inventories, net. . . . . . . . . . . . . . . . . . . . . . . 7,249 6,234
Assets held for sale, net . . . . . . . . . . . . . . . . . . 1,594 1,594
Prepaid expenses and other. . . . . . . . . . . . . . . . . . 4,812 6,079
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . 43,581 33,683
Property and equipment, less accumulated depreciation and
amortization of $4,004 in 1995 and $922 in 1994 . . . . . . . 40,611 37,756
Assets held for sale, net. . . . . . . . . . . . . . . . . . . . 8,166 11,789
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 5,047 9,139
Reorganization value in excess of amounts allocable to
identifiable assets, less accumulated amortization of
$3,791 in 1995 and $1,090 in 1994 . . . . . . . . . . . . . . 68,233 70,934
----------- -----------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . 165,638 163,301
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt . . . . . . . . . . . . . . 6,482 6,394
Current portion of capital lease obligations. . . . . . . . . 2,657 2,907
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . 25,157 17,529
Air traffic liability . . . . . . . . . . . . . . . . . . . . 34,065 40,382
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . 21,481 12,298
----------- -----------
Total current liabilities. . . . . . . . . . . . . . . . . 89,842 79,510
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 7,482 14,152
Capital lease obligations. . . . . . . . . . . . . . . . . . . . 10,791 12,764
Other liabilities and deferred credits . . . . . . . . . . . . . 27,598 23,026
----------- -----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . 135,713 129,452
----------- -----------
SHAREHOLDERS' EQUITY:
Class A common stock. . . . . . . . . . . . . . . . . . . . . 7 -
Class B common stock. . . . . . . . . . . . . . . . . . . . . 24 -
Capital in excess of par value. . . . . . . . . . . . . . . . 41,922 -
Unearned compensation . . . . . . . . . . . . . . . . . . . . (972) -
Warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . 900 40,000
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . (12,019) (6,151)
----------- -----------
Shareholders' equity . . . . . . . . . . . . . . . . . . . 29,925 33,849
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY. . . . . . . $ 165,638 $ 163,301
----------- -----------
----------- -----------
</TABLE>
3
<PAGE>
ITEM 1. (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS)(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
PREDECESSOR
REORGANIZED COMPANY COMPANY
-------------------------------------------
PERIOD FROM
REORGANIZATION
THREE MONTHS (SEPTEMBER 12, PERIOD FROM
ENDED 1994 TO JULY 1, 1994
SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER
1995 1994) 11,1994
-------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES:
Passenger. . . . . . . . . . . . . . . . . . . . . . . . . $ 79,796 $ 11,786 $ 68,502
Charter. . . . . . . . . . . . . . . . . . . . . . . . . . 6,711 - 11
Cargo. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,589 847 3,044
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,259 538 1,774
------------ ------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . 93,355 13,171 73,331
------------ ------------ ------------
OPERATING EXPENSES:
Flying operations. . . . . . . . . . . . . . . . . . . . . 26,515 4,589 21,110
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . 21,489 3,994 13,548
Passenger service. . . . . . . . . . . . . . . . . . . . . 10,167 1,605 7,642
Aircraft and traffic servicing . . . . . . . . . . . . . . 13,697 2,782 11,153
Promotion and sales. . . . . . . . . . . . . . . . . . . . 10,984 2,008 8,442
General and administrative . . . . . . . . . . . . . . . . 4,688 793 3,581
Depreciation and amortization. . . . . . . . . . . . . . . 1,865 514 1,138
------------ ------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . 89,405 16,285 66,614
------------ ------------ ------------
OPERATING INCOME (LOSS) . . . . . . . . . . . . . . . . . . 3,950 (3,114) 6,717
------------ ------------ ------------
NONOPERATING INCOME (EXPENSE):
Interest expense, net. . . . . . . . . . . . . . . . . . . (844) (77) (624)
Gain (loss) on disposition of equipment. . . . . . . . . . (431) - 164
Reorganization items . . . . . . . . . . . . . . . . . . . - - (10,914)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . 202 12 99
------------ ------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . (1,073) (65) (11,275)
------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM . . . . . . . . . . 2,877 (3,179) (4,558)
EXTRAORDINARY ITEM . . . . . . . . . . . . . . . . . . . . . - - 190,063
------------ ------------ ------------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . . . $ 2,877 $ (3,179) $ 185,505
------------ ------------ ------------
------------ ------------ ------------
NET INCOME (LOSS) PER SHARE . . . . . . . . . . . . . . . . $ ***0.29 $ **(0.34) $ *N/M
------------ ------------ ------------
------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND SHARE EQUIVALENTS ***10,068 **9,400 7,137
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
* Not Meaningful - Per share data is not meaningful as the Predecessor
Company has been recapitalized and has adopted fresh start reporting as of
September 11, 1994.
** Per share data has been calculated assuming that the Reorganized Company
will issue approximately 9.4 million shares of common stock. As of
November 10, 1995, 6,581,133 shares of Class A and 1,933,589 shares of
Class B Common Stock are issued and outstanding.
*** Per share data has been calculated assuming that the Reorganized Company
will issue approximately 9.4 million shares of common stock, adjusted to
reflect assumed exercise of stock options and warrants.
4
<PAGE>
ITEM 1. (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS)(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
PREDECESSOR
REORGANIZED COMPANY COMPANY
----------------------------------------------
PERIOD FROM
REORGANIZATION
NINE MONTHS (SEPTEMBER 12, PERIOD FROM
ENDED 1994 TO JANUARY 1, 1994
SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER
1995 1994) 11, 1994
----------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES:
Passenger. . . . . . . . . . . . . . . . . . . . . . . . . $ 219,068 $ 11,786 $ 199,502
Charter. . . . . . . . . . . . . . . . . . . . . . . . . . 15,458 - 135
Cargo. . . . . . . . . . . . . . . . . . . . . . . . . . . 13,127 847 11,039
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,674 538 6,147
------------ ------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . 254,327 13,171 216,823
------------ ------------ ------------
OPERATING EXPENSES:
Flying operations. . . . . . . . . . . . . . . . . . . . . 76,376 4,589 71,768
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . 58,794 3,994 47,281
Passenger service. . . . . . . . . . . . . . . . . . . . . 29,222 1,605 25,224
Aircraft and traffic servicing . . . . . . . . . . . . . . 40,686 2,782 34,325
Promotion and sales. . . . . . . . . . . . . . . . . . . . 32,009 2,008 28,499
General and administrative . . . . . . . . . . . . . . . . 12,752 793 12,063
Depreciation and amortization. . . . . . . . . . . . . . . 5,534 514 4,085
Early retirement provision . . . . . . . . . . . . . . . . 2,000 - -
------------ ------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . 257,373 16,285 223,245
------------ ------------ ------------
OPERATING LOSS . . . . . . . . . . . . . . . . . . . . . . . (3,046) (3,114) (6,422)
------------ ------------ ------------
NONOPERATING INCOME (EXPENSE):
Interest expense, net. . . . . . . . . . . . . . . . . . . (2,798) (77) (850)
Gain (loss) on disposition of equipment. . . . . . . . . . (426) - 45
Reorganization items . . . . . . . . . . . . . . . . . . . - - (13,949)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . 402 12 501
------------ ------------ ------------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . (2,822) (65) (14,253)
------------ ------------ ------------
LOSS BEFORE EXTRAORDINARY ITEM . . . . . . . . . . . . . . . (5,868) (3,179) (20,675)
EXTRAORDINARY ITEM . . . . . . . . . . . . . . . . . . . . . - - 190,063
------------ ------------ ------------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . . . $ (5,868) $ (3,179) $ 169,388
------------ ------------ ------------
------------ ------------ ------------
NET INCOME (LOSS) PER SHARE . . . . . . . . . . . . . . . . $ **(0.62) $ ** (0.34) $ *N/M
------------ ------------ ------------
------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF SHARES . . . . . . . . . . . . . **9,400 **9,400 7,137
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
* Not Meaningful - Per share data is not meaningful as the Predecessor
Company has been recapitalized and has adopted fresh start reporting as of
September 11, 1994.
** Per share data has been calculated assuming that the Reorganized Company
will issue approximately 9.4 million shares of common stock. As of
November 10, 1995, 6,581,133 shares of Class A and 1,933,589 shares of
Class B Common Stock are issued and outstanding.
5
<PAGE>
ITEM 1. (CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS)(UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
PREDECESSOR
REORGANIZED COMPANY COMPANY
----------------------------------------------
PERIOD FROM
REORGANIZATION
NINE MONTHS (SEPTEMBER 12, PERIOD FROM
ENDED 1994 TO JANUARY 1, 1994
SEPTEMBER 30, SEPTEMBER 30, TO SEPTEMBER
1995 1994) 11, 1994
----------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . . . . $ (5,868) $ (3,179) $ 169,388
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization. . . . . . . . . . . . . . 5,800 277 4,488
Net periodic postretirement benefit cost . . . . . . . . 2,628 - 1,988
Loss (gain) on disposition of property and equipment . . 426 - (45)
Extraordinary gain . . . . . . . . . . . . . . . . . . . - - (190,063)
Decrease (increase) in accounts receivable . . . . . . . (5,466) 2,267 (5,801)
Decrease (increase) in inventories . . . . . . . . . . . (1,015) (78) 497
Decrease (increase) in prepaid expenses and other. . . . 1,267 (3,581) (1,133)
Increase (decrease) in accounts payable. . . . . . . . . 7,431 (4,077) 5,774
Increase (decrease) in accrued liabilities . . . . . . . 9,183 1,628 (734)
Increase (decrease) in air traffic liability . . . . . . (6,317) 75 10,602
Other, net . . . . . . . . . . . . . . . . . . . . . . . 8,168 5,231 336
------------ ------------ ------------
Net cash provided by (used in) operations before
reorganization items . . . . . . . . . . . . . . . . . 16,237 (1,437) (4,703)
Reorganization items . . . . . . . . . . . . . . . . . . - - 10,799
------------ ------------ ------------
Net cash provided by (used in) operating activities. . 16,237 (1,437) 6,096
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment. . . . . . . . . . . . (6,544) (379) (3,682)
Net proceeds from disposition of property and equipment. . 2,875 - 817
Issuance of security deposits. . . . . . . . . . . . . . . - - (3,007)
------------ ------------ ------------
Net cash used in investing activities. . . . . . . . . (3,669) (379) (5,872)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt . . . . . . . . . . . . . . 1,474 2,000 -
Repayment of debt . .. . . . . . . . . . . . . . . . . . . (7,893) (242) (689)
Principal payments under capital lease obligations . . . . (2,223) - (1,345)
------------ ------------ ------------
Net cash provided by (used in) financing activities. . . (8,642) 1,758 (2,034)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . 3,926 (58) (1,810)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . 3,501 2,463 4,273
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . $ 7,427 $ 2,405 $ 2,463
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
6
<PAGE>
ITEM 1. (CONTINUED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
OPERATING STATISTICS (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------
1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SCHEDULED OPERATIONS:
Revenue passengers . . . . . . . . . . . . . . . . 1,218 1,267 3,567 3,414
Revenue passenger miles *. . . . . . . . . . . . . 855,459 825,191 2,327,459 2,187,098
Available seat miles * . . . . . . . . . . . . . . 1,132,989 1,072,492 3,106,753 2,950,751
Passenger load factor. . . . . . . . . . . . . . . 75.5 % 76.9 % 74.9 % 74.1 %
Revenue ton miles *. . . . . . . . . . . . . . . . 98,417 91,422 266,881 243,172
Revenue plane miles *. . . . . . . . . . . . . . . 4,712 4,498 12,982 11,946
Passenger revenue per passenger mile . . . . . . . 9.3 CENTS 9.7 CENTS 9.4 CENTS 9.7 CENTS
OVERSEAS CHARTER OPERATIONS:
Revenue passengers . . . . . . . . . . . . . . . . 46 - 108 -
Revenue passenger miles * . . . . . . . . . . . . 127,720 21 297,430 526
Available seat miles * . . . . . . . . . . . . . . 132,675 27 305,656 827
</TABLE>
* In thousands
7
<PAGE>
ITEM 1. (CONTINUED)
In the opinion of management, the unaudited condensed financial statements
included in this report contain all adjustments necessary for a fair
presentation of the results of operations and cash flows for the interim periods
covered and the financial condition of Hawaiian Airlines, Inc. ("Hawaiian
Airlines" or the "Company" or the "Reorganized Company") as of September 30,
1995 and December 31, 1994. The operating results for the interim periods are
not necessarily indicative of the results to be expected for the full fiscal
year.
The unaudited financial statements at September 30, 1995 have been prepared on a
going concern basis which assumes continuity of operations and realization of
assets and liquidation of liabilities in the ordinary course of business. As
discussed herein, the Company has continued to experience net and operating
losses. Furthermore, there can be no assurance that the Company will succeed in
solving its liquidity problems or that the Company will have sufficient cash
resources to support its continued operations. Because of the Company's
liquidity shortage, an adverse change in events and circumstances could result
in the Company being unable to meet its financial obligations. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts, or the amounts and classification of
liabilities that might be necessary as a result of the outcome of the
uncertainties discussed herein. Management recognizes that the continuation of
the Company as a going concern is dependent upon a return to profitable,
positive cash flow operations and the generation of adequate funds to meet its
ongoing obligations.
In March 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards (the "SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of." This SFAS No. 121 is effective for years beginning after December 15, 1995
and applies to long-lived assets and certain identifiable intangible assets
whether held and used or to be disposed of, and goodwill.
SFAS No. 121 requires that a review be made of long-lived assets and certain
identifiable intangible assets for determination of possible impairment
adjustments whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. If the future cash flows
expected to result from use of the asset (undiscounted and without interest
charges) are less than the carrying amount of the asset, an impairment loss is
recognized. Such impairment loss is measured as the amount by which the
carrying amount of the asset exceeds the fair value of the asset. In instances
where goodwill is identified with assets that are subject to an impairment loss,
such goodwill should be allocated to the assets tested for recoverability on a
pro rata basis using the relative fair values of the assets acquired in the
transaction generating the goodwill.
SFAS No. 121 also requires that long-lived assets and certain identifiable
intangible assets to be disposed of be reported at the lower of the asset
carrying amount or fair value, less cost to sell.
The Company plans to adopt SFAS No. 121 in 1996. Restatement of previously
issued financial statements is not permitted. The Company has not estimated the
impact that adoption of the Statement is expected to have on its financial
statements.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes a new, fair value based method of
accounting for stock-based compensation, but does not require an entity to adopt
the new method for purposes of preparing its basic financial statements. For
entities not adopting the new method, SFAS No. 123 requires that they disclose
in their footnotes pro forma net income and
8
<PAGE>
earnings per share information as if the fair value based method had been
adopted. The disclosure requirements of SFAS No. 123 are effective for
financial statements for fiscal years beginning after December 15, 1995. The
Company plans to either adopt the new, fair value based method or the disclosure
requirements of SFAS No. 123 in its financial statements for 1996.
Certain reclassifications have been made to conform prior period's data to
current period's presentation.
As disclosed in the Supplemental Financial Information, Unaudited Quarterly
Financial Information contained in Hawaiian Airlines' Annual Report on Form 10-K
for the year ended December 31, 1994 (the "1994 Form 10-K"), certain significant
quarterly adjustments for calendar year 1994 were recorded. The results for the
appropriate quarters of 1994 have been restated to reflect those adjustments.
All period-to-period comparisons contained in Management's Discussion and
Analysis of Financial Condition and Results of Operations refer to the restated
1994 results.
The accompanying financial statements should be read in conjunction with the
financial statements and the notes thereto contained in the 1994 Form 10-K,
which are incorporated herein by reference.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
On September 21, 1993, Hawaiian Airlines together with HAL, INC., Hawaiian
Airlines' parent company, and West Maui Airport, Inc., another wholly owned
subsidiary of HAL, INC., (collectively the "Debtors" or "Predecessor") commenced
reorganization cases by filing voluntary petitions for relief under Chapter 11,
Title 11 ("Chapter 11") of the United States (the "U.S.") Code in the U.S.
Bankruptcy Court for the District of Hawaii (the "Bankruptcy Court").
Concurrently therewith, the Debtors filed a Consolidated Plan of Reorganization
dated September 21, 1993 (as amended through the most recent amendment dated
April 20, 1995 the "Plan"). On August 30, 1994, the Bankruptcy Court entered an
order confirming the Plan and with the satisfaction of certain conditions, the
Plan became effective on September 12, 1994 (the "Effective Date").
Pursuant to the Plan, on the Effective Date, first West Maui Airport, Inc. and
then HAL, INC. were merged with and into Hawaiian Airlines with Hawaiian
Airlines being the sole surviving corporation. On the Effective Date, all of
the outstanding equity securities of the Company, HAL, INC., and West Maui
Airport, Inc. were cancelled, including without limitation, all outstanding
common, preferred and preference stock of HAL, INC.
Under the Plan, the Company is to issue and distribute 9,400,000 shares of its
common stock to all of the unsecured creditors with claims allowed under the
Plan. The Company's common stock consists of two classes, one with full voting
rights, Class A Common Stock, and the other with limited voting rights, Class B
Common Stock. On June 19, 1995, the Company commenced distribution of its Class
A and Class B Common Stock and as of November 10, 1995, 6,581,133 shares of
Class A and 1,933,589 shares of Class B Common Stock are issued and outstanding.
The Company anticipates distributing a majority of the remaining 885,278 shares
of Class A Common Stock and Class B Common Stock by the end of the fiscal year.
Included in the amount not yet distributed is an estimated 335,141 shares of
Class A Common Stock for resolution of claims still being disputed with general
unsecured creditors. As disputed claims are finally resolved, the creditor
holding such claim will receive a distribution of stock. Any shares withheld in
excess of the amount distributed to such creditor will be held until all
disputed claims have been resolved. Upon resolution of all disputed claims,
there will be a final distribution of any remaining withheld shares to all
general unsecured creditors on a pro rata basis.
Pursuant to the Plan, the Company has granted warrants to purchase an additional
989,011 shares of its Class A Common Stock, none of which have been exercised.
Pursuant to the terms of the Plan, 600,000 shares of the Company's Class A
Common Stock have been reserved for issuance under a 1994 Stock Option Plan.
The Company's Class A Common Stock began trading on the American Stock Exchange
and the Pacific Stock Exchange on June 21, 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1995, the Company had a net working capital deficit of $46.3
million, representing a $500,000 increase from the net working capital deficit
of $45.8 million at December 31, 1994. Principally, the increase in the working
capital deficit resulted from a net increase in accounts payable, accrued
liabilities and air traffic liability of $10.5 million being offset by an
aggregate increase in cash and accounts receivable of $10.2 million. The
Company continues to experience liquidity shortages.
10
<PAGE>
Effective April 13, 1995, the Company and American Airlines, Inc. ("American")
executed Amendment No. 2 (the "April Amendment") to the long-term Aircraft Lease
Agreement (the "Aircraft Lease Agreement") providing for the deferral of payment
of approximately $11.1 million of delinquent lease rents and maintenance
payments. The April Amendment provides that the Company is to remit periodic
payments (generally on a weekly basis) to American commencing March 31, 1995 and
ending December 22, 1995, in amounts ranging from approximately $25,000 to
$950,000, including interest at 10.0% per annum, plus payments for the basic
rent of aircraft. Maintenance payments will also be payable weekly, but in the
same aggregate amounts as set forth in the original terms of the Aircraft Lease
Agreements. Thereafter, commencing January 5, 1996, the Company is required to
pay, weekly in advance, the basic rent payments owed for the aircraft and
maintenance payments in respect of the aircraft. The Company paid to American
the first five weekly payments of deferred amounts due under the April
Amendment, in an aggregate amount of approximately $4.2 million, leaving a
balance due of $6.9 million. However, the Company failed to make deferred and
basic rent payments to American of $600,000 and $986,000, respectively,
commencing May 8, 1995.
The Company and American have subsequently deferred the due date for the
repayment of the remaining $6.9 million of delinquent lease rents and
maintenance payments on three occassions. Amendment No. 3 dated June 1, 1995
deferred the due date until August 22, 1995. Amendment No. 4 dated August 22,
1995 deferred the due date until October 6, 1995. The most recent amendment,
Amendment No. 5 dated October 6, 1995 (the "October Amendment") defers the due
date until November 20, 1995. By November 20, 1995, the amount of interest
accrued on the delinquent $6.9 million brings the total amount due to $7.1
million. The October Amendment provides that if the Company remits to American
payments of approximately $6.9 million on or before November 20, 1995, the
Company will pay (generally on a weekly basis) to American the remaining
$226,000 of the $7.1 million deferred rent commencing November 22, 1995 and
ending December 22, 1995, in amounts ranging from approximately $25,000 to
$125,000. In addition, the Company will remit to American periodic payments
(generally on a weekly basis) commencing May 1, 1995 through and including
December 31, 1995 for the basic rent of aircraft. Thereafter, commencing
January 1, 1996, the Company will be required to pay, weekly in advance, the
basic rent payments owed for the aircraft and maintenance payments in respect of
the aircraft.
The Company is current with respect to its payments for basic rent of aircraft
under the October Amendment and maintenance payments under the Aircraft Lease
Agreement. As of September 30, 1995, approximately $7.1 million of deferred
lease rents and maintenance payments is outstanding. The failure of the Company
to timely make payment in full of $6.9 million due on or before November 20,
1995 would permit American to exercise remedies available to it, which include,
but are not limited to, termination of the lease, repossession of certain
aircraft and engines, recovery of damages and drawings under the letters of
credit provided by the Company with respect to the Aircraft Lease Agreement.
The ability of the Company to satisfy its obligations with respect to making the
payment due to American by November 20, 1995 will depend on the Company's
ability to obtain additional debt or equity financing. There can be no
assurance that American will agree to a further extension, or that the Company
will be able to make the payment by November 20, 1995 or any extended due date
or that a favorable resolution of the matter will occur.
The Company has made credit facility borrowings under a financing arrangement
with CIT Group/Credit Finance, Inc. ("CIT"). The financing arrangement consists
of a credit facility of up to $8.15 million consisting of a secured revolving
credit facility including up to $3.0 million of letters of credit (the
"Financing"). Available credit is subject to reduction determined by
recalculation of the borrowing base and repayments arising from disposition of
collateral. As
11
<PAGE>
of the date of this report, the amount of the facility had been effectively
reduced to approximately $5.0 million, which amount was fully drawn in the form
of $2.9 million in borrowings and $2.1 million in letters of credit.
The Company currently does not have access to other unutilized credit facilities
and does not have any unencumbered assets. Accordingly, its access to
additional sources of liquidity remains limited. The Company has engaged an
investment bank to assist in obtaining additional financing. A series of
discussions with potential investors to solicit interest in providing additional
capital in return for shares representing an equity interest have been held.
The Company has also presented a proposal to its pilots, flight attendants,
ground crews and clerical staff to amend their current collective bargaining
agreements to, among other things, extend the existing agreements beyond their
current terms.
As a result of and following the discussions with potential investors, on
November 6, 1995, the Company signed a letter of intent with a private investor
group to provide $20.0 million of new equity capital to the Company in exchange
for 18,181,818 shares of Hawaiian Airlines Class A Common Stock. The letter of
intent also contemplates a rights offering to the Company's existing
shareholders, to take place at some point during 1996, at a substantial discount
from the then current market price. The transaction, which will result in the
investor group having six of the current eleven Board of Director seats, is
subject to numerous conditions, including the negotiation and execution of
definitive agreements and certain modifications to the agreements with the
Company's unions and certain of its creditors. If the conditions are satisfied,
it is contemplated that the definitive agreements will be signed in early
December 1995, with closing scheduled as soon as possible thereafter. Unless it
is successful in these efforts, there are likely to be liquidity shortages in
the future.
See discussion with respect to preparation of financial statements on a going
concern basis in Part I, Item 1, Financial Statements, above.
12
<PAGE>
RESULTS OF OPERATIONS
The Company believes that the operating revenues and expenses of the Reorganized
Company for the three and nine months ended September 30, 1995 have been
presented on a basis which is in all material respects consistent with the
presentation of the operating revenues and expenses of the Predecessor for the
three and nine months ended September 30, 1994.
The Company generated operating and net income of $4.0 million and $2.9 million,
respectively, during the third quarter of 1995. This represents an increase of
$347,000 in operating income and a decrease of $179.5 million in net income from
the third quarter of 1994.
OPERATING REVENUES
The following table compares third quarter 1995 operating revenues to those in
third quarter 1994, in thousands, by service type:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
Increase
1995 1994 (Decrease)
- ---------------------------------------------------- ------------
<S> <C> <C> <C>
Interisland:
Passenger . . . . . . . . $ 30,248 $ 32,200 $ (1,952)
Charter . . . . . . . . . 11 8 3
Cargo . . . . . . . . . . 1,603 1,608 (5)
Other . . . . . . . . . . 1,481 1,529 (48)
----------- ----------- -----------
33,343 35,345 (2,002)
----------- ----------- -----------
Transpacific:
Passenger . . . . . . . . 43,841 42,287 1,554
Cargo . . . . . . . . . . 2,560 1,889 671
Other . . . . . . . . . . 747 746 1
----------- ----------- -----------
47,148 44,922 2,226
----------- ----------- -----------
South Pacific:
Passenger . . . . . . . . 5,707 5,801 (94)
Cargo . . . . . . . . . . 426 392 34
Other . . . . . . . . . . 31 39 (8)
----------- ----------- -----------
6,164 6,232 (68)
----------- ----------- -----------
Overseas Charter:
Passenger . . . . . . . . 6,700 3 6,697
Other . . . . . . . . . . - - -
----------- ----------- -----------
6,700 3 6,697
----------- ----------- -----------
Total . . . . . . . . . $ 93,355 $ 86,502 $ 6,853
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
13
<PAGE>
The following table compares applicable third quarter 1995 operating and
financial passenger revenue statistics to those in third quarter 1994:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------
Increase
1995 1994 (Decrease) %
- -------------------------------------------------- ---------------------
<S> <C> <C> <C> <C>
Interisland:
Revenue passengers* . . . 927 995 (68) (6.8)
Revenue passenger miles*. 121,955 129,528 (7,573) (5.8)
Available seat miles* . . 250,561 237,333 13,228 5.6
Passenger load factor . . 48.7% 54.6% (5.9)% (10.8)
Yeild . . . . . . . . . .24.8 CENTS 24.9 CENTS (0.1) CENTS (0.4)
Transpacific:
Revenue passengers* . . . 272 251 21 8.4
Revenue passenger miles* 682,642 640,307 42,335 6.6
Available seat miles* . . 813,069 766,435 46,634 6.1
Passenger load factor . . 84.0% 83.5% 0.5% 0.6
Yield . . . . . . . . . . 6.4 CENTS 6.6 CENTS (0.2) CENTS (3.0)
South Pacific:
Revenue passengers* . . . 19 21 (2) (9.5)
Revenue passenger miles* 50,862 55,356 (4,494) (8.1)
Available seat miles* . . 69,359 68,724 635 0.9
Passenger load factor . . 73.3% 80.5% (7.2)% (8.9)
Yield . . . . . . . . . .11.2 CENTS 10.5 CENTS 0.7 CENTS 6.7
Overseas Charter:
Revenue passengers* . . . 46 - 46 100.0
Revenue passenger miles* 127,720 21 127,699 100.0
Available seat miles* . . 132,675 27 132,648 100.0
</TABLE>
* In thousands
Operating revenues totalled $93.4 million during the third quarter of 1995,
compared to $86.5 illion during the same period in 1994, an increase of $6.9
million or 8.0%.
Revenues from Interisland passenger service totalled $30.2 million during third
quarter 1995, a ecrease of $2.0 million or 6.1% from third quarter 1994. Large
volume promotional fare ticket programs used by Interisland competitors in the
third quarter of 1995 had a direct effect in decreasing the number of
Interisland passengers carried by the Company and revenue passenger miles period
over period by 6.8% and 5.8%, respectively. Also, Interisland yield decreased
by 0.1CENTS or 0.4% due to the prevalence of such promotional fare ticket
programs in the Interisland market.
Revenues from Transpacific passenger operations amounted to $43.8 million during
the third quarter of 1995 compared to $42.3 million in the third quarter of
1994, an increase of $1.6 million or 3.7%. Increases of 8.4% and 6.6% in
revenue passengers carried and revenue passenger miles, respectively, were
offset by a decrease of 0.2CENTS or 3.0% in Transpacific yield. Increased
frequency to Los Angeles, California, Las Vegas, Nevada and Portland, Oregon
14
<PAGE>
resulted in increased revenue passengers carried, revenue passenger miles and
available seat miles. The decrease in yield was primarily caused by continued
downward pressure on fares due to heavy pricing competition in the Transpacific
market.
Overseas charter revenues of $6.7 million were earned in the third quarter of
1995 due to the commencement of charter operations between Honolulu, Hawaii and
Las Vegas, Nevada in 1995.
OPERATING EXPENSES
The following table compares operating expenses for the third quarter of 1995
with the third quarter of 1994 by major category, in thousands of dollars:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------
Increase
1995 1994 (Decrease)
- ---------------------------------------------------------------- ----------
<S> <C> <C> <C>
Wages and benefits . . . . . . . . . . . . $ 27,837 $ 26,581 $ 1,256
Maintenance materials and repairs. . . . . 17,054 12,714 4,340
Aircraft fuel, including taxes and oil . . 14,527 12,986 1,541
Purchased services . . . . . . . . . . . . 5,058 5,477 (419)
Aircraft rentals . . . . . . . . . . . . . 4,265 5,204 (939)
Sales commissions. . . . . . . . . . . . . 3,831 3,601 230
Passenger food . . . . . . . . . . . . . . 2,709 2,567 142
Rentals other than aircraft and engines. . 2,310 2,460 (150)
Landing fees and services. . . . . . . . . 2,231 2,088 143
Advertising and promotion. . . . . . . . . 2,067 1,229 838
Depreciation and amortization. . . . . . . 2,003 1,714 289
Reservation fees and services. . . . . . . 1,731 1,694 37
Personnel expenses . . . . . . . . . . . . 959 922 37
Interrupted trips. . . . . . . . . . . . . 497 388 109
Other. . . . . . . . . . . . . . . . . . . 2,326 3,274 (948)
-------- -------- -------
Total . . . . . . . . . . . . . . . . . $ 89,405 $ 82,899 $ 6,506
-------- -------- -------
-------- -------- -------
</TABLE>
Operating expenses totalled $89.4 million in the third quarter of 1995, an
increase of $6.5 million or 7.8% over the third quarter of 1994.
Wages and benefits in third quarter 1995 increased by $1.3 million or 4.7%
from third quarter 1994. The increase was principally caused by 1) the
recognition of $1.9 million in compensation expense under the provisions of a
1994 Stock Option Plan for officers and key employees of the Company; and 2)
a $700,000 decrease in workers' compensation premiums and related expenses
for the period as the Company changed its workers' compensation insurance
carrier and policy in the third quarter of 1995. The remaining $972,000 of
compensation cost under the 1994 Stock Option Plan has been reflected as
Unearned compensation in the accompanying balance sheet and will be amortized
ratably over the next four months.
15
<PAGE>
Maintenance materials and repairs period over period increased by $4.3 million
or 34.1%. The increase was primarily caused by 1) $2.5 million in additional
maintenance costs associated with the use of eight DC-10-10 aircraft in third
quarter 1995 versus five DC-10-10 aircraft and one L-1011 aircraft in third
quarter 1994; and 2) $2.3 million in increased engine repairs associated with
the Company's DC-9-50 aircraft.
Aircraft fuel, including taxes and oil, increased by $1.5 million or 11.9% in
third quarter 1995 over third quarter 1994. Due to increased frequencies
quarter over quarter, the Company consumed approximately 3.0 million or 14.0%
more gallons of aircraft fuel. Increased fuel usage was offset by a decrease in
the average cost per gallon in the third quarter of 1995 versus the third
quarter of 1994 by 1.1CENTS or 1.9%. The Company anticipates further increases
in its aircraft fuel costs as a 4.3CENTS per gallon surcharge tax will become
effective October 1, 1995.
Aircraft rentals decreased by $939,000 or 18.0% in 1995. The decrease was
primarily caused by $1.0 million less in DC-9-50 aircraft and engine rents due
to such rents being restructured on the Effective Date.
Advertising and promotion increased by $838,000 or 68.2%, a direct result of
efforts to increase the Company's exposure in the Interisland and West Coast
markets through advertising and telecommunications media.
The decrease in other operating expenses is principally due to the reversal of
$1.8 million in preconfirmation contingency accruals initially provided for on
the Effective Date.
REORGANIZATION ITEMS
Reorganization items of $10.9 million were recorded in the third quarter of 1994
representing reorganization legal and professional fees, certain transactions as
contemplated under the Plan and the revaluation of assets and liabilities on the
Effective Date.
EXTRAORDINARY ITEM
An extraordinary item of $190.1 million was recorded in the third quarter of
1994 primarily due to the extinguishment of prepetition liabilities.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Rule 12b-15 under 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.
HAWAIIAN AIRLINES, INC.
January 15, 1996 By /s/ C.J. David Davies
------------------------------------
C.J. David Davies
Senior Vice President-Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
17
