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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: March 31, 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: 1-8400
AMR CORPORATION
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 75-1825172
(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)
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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 - 75,824,591 shares outstanding as of May 10, 1994
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AMR CORPORATION
INDEX
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Page
Number
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Part I: FINANCIAL INFORMATION
Consolidated Statement of Operations for the three months
ended March 31, 1994 and 1993 1
Condensed Consolidated Balance Sheet
at March 31, 1994 and December 31, 1993 2
Condensed Consolidated Statement of Cash Flows for
the three months ended March 31, 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 2. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
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PART I
Item 1. Consolidated Financial Statements
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AMR CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited) (in millions, Three Months Ended March 31,
except per share amounts) 1994 1993
<S> <C> <C>
Revenues
Air Transportation Group:
Passenger - American Airlines, Inc. $ 3,028 $ 3,127
- AMR Eagle, Inc. 181 165
Cargo 156 152
Other 139 138
3,504 3,582
The SABRE Group 386 330
AMR Management Services Group 131 105
Less: Intergroup revenues (213) (203)
Total operating revenues 3,808 3,814
Expenses
Wages, salaries and benefits 1,368 1,312
Aircraft fuel 395 475
Commissions to agents 326 335
Depreciation and amortization 320 292
Other rentals and landing fees 211 213
Aircraft rentals 179 186
Food service 162 168
Maintenance materials and repairs 143 175
Other operating expenses 545 542
Total operating expenses 3,649 3,698
Operating Income 159 116
Other Income (Expense)
Interest income 6 18
Interest expense (152) (175)
Interest capitalized 7 17
Miscellaneous - net (18) (4)
(157) (144)
Earnings (Loss) Before Income Taxes 2 (28)
Income tax provision (benefit) 9 (6)
Net Loss (7) (22)
Preferred stock dividends 16 10
Loss Applicable to Common Shares $ (23) $ (32)
Loss Per Common Share
(Primary and Fully Diluted) $ (0.30) $(0.43)
Number of common shares
used in computations 76 75
1
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See accompanying notes.
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AMR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, December 31,
(Unaudited) (in millions) 1994 1993
<S> <C> <C>
Current Assets
Cash $ 75 $ 63
Short-term investments 669 523
Receivables, net 1,056 910
Inventories, net 700 688
Other current assets 539 506
Total current assets 3,039 2,690
Equipment and Property
Flight equipment, net 10,005 9,783
Purchase deposits for flight equipment 218 350
10,223 10,133
Other equipment and property, net 2,094 2,128
12,317 12,261
Equipment and Property Under
Capital Leases
Flight equipment, net 1,585 1,543
Other equipment and property, net 172 173
1,757 1,716
Route acquisition costs, net 1,053 1,061
Other assets, net 1,608 1,598
$ 19,774 $ 19,326
Current Liabilities
Accounts payable $ 927 $ 921
Accrued liabilities 1,626 1,726
Air traffic liability 1,587 1,460
Short-term borrowings 400 -
Current maturities of long-term debt 79 200
Current obligations under capital leases 119 110
Total current liabilities 4,738 4,417
Long-term debt 5,492 5,431
Obligations under capital leases 2,157 2,123
Deferred income taxes 314 310
Other liabilities, deferred gains,
deferred credits and postretirement benefits 2,816 2,769
Stockholders' Equity
Convertible preferred stock 1,081 1,081
Common stock 76 76
Additional paid-in capital 2,038 2,035
Retained earnings 1,062 1,084
4,257 4,276
$ 19,774 $ 19,326
See accompanying notes.
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2
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<CAPTION>
AMR CORPPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended March 31,
(Unaudited) (in millions) 1994 1993
<S> <C> <C>
Net Cash Provided by Operating Activities $ 202 $ 256
Cash Flow from Investing Activities:
Capital expenditures (341) (719)
Net increase in short-term investments (146) (349)
Other, net 3 3
Net cash used for investing activities (484) (1,065)
Cash Flow from Financing Activities:
Proceeds from:
Issuance of long-term debt 72 53
Issuance of preferred stock - 1,081
Net short-term borrowings (repayments) with
maturities of 90 days or less 200 (204)
Other short-term borrowings 200 29
Payments on other short-term borrowings - (59)
Payments on long-term debt and capital
lease obligations (162) (58)
Payment of dividends on preferred stock (16) -
Net cash provided by financing activities 294 842
Net increase in cash 12 33
Cash at beginning of period 63 45
Cash at end of period $ 75 $ 78
Cash Payments (Refunds) For:
Interest (net of amounts capitalized) $ 144 $ 131
Income taxes (59) (122)
Financing Activities not Affecting Cash:
Capital lease obligations incurred $ 72 $ 21
See accompanying notes.
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3
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AMR CORPORATION
Notes to Financial Statements
1. In the opinion of management, these financial statements contain
all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position, results of
operations and cash flows for the periods indicated. These
financial statements and related notes should be read in
conjunction with the financial statements and notes included in
AMR's Annual Report on Form 10-K for the year ended December 31,
1993.
2. Accumulated depreciation of owned equipment and property at March
31, 1994 and December 31, 1993 was $5.0 billion and $4.9 billion,
respectively. Accumulated amortization of equipment and property
under capital leases at March 31, 1994 and December 31, 1993 was
$792 million and $760 million, respectively.
3. American has renewed a $1.0 billion credit facility which expired
in early April 1994 in the amount of $750 million. The renewal
extends the term of the facility to 1997, and borrowings thereunder
may require collateralization under certain circumstances. No
borrowings were outstanding under this facility at March 31, 1994.
4
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Item 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1994 and 1993
Summary AMR's net loss for the three months ended March 31, 1994, was
$7 million ($0.30 per common share, both primary and fully diluted).
This compares to a net loss of $22 million ($0.43 per common share,
both primary and fully diluted) for the first quarter of 1993. AMR's
operating income improved 37.1 percent or $43 million. First quarter
1994 operating revenues decreased 0.2 percent or $6 million.
AMR's performance continues to be hampered by inadequate yields in
the domestic markets, which represent over 70 percent of American's
traffic. American's domestic yields decreased 3.7 percent due to the
continuation of fare discounts of many types, while international
yields increased 5.2 percent. American's operations were also
impacted by unusually severe winter weather in the first quarter of
1994.
The following sections provide a discussion of AMR's results by
reporting segment. A description of the businesses in each reporting
segment is included in AMR's Annual Report on Form 10-K for the year
ended December 31, 1993.
AIR TRANSPORTATION GROUP
FINANCIAL HIGHLIGHTS
(in millions)
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<CAPTION> Three Months Ended March 31,
1994 1993
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Revenues
Passenger - American Airlines, Inc. $ 3,028 $ 3,127
- AMR Eagle, Inc. 181 165
Cargo 156 152
Other 139 138
3,504 3,582
Expenses
Wages, salaries and benefits 1,211 1,185
Aircraft fuel 395 475
Commission to agents 326 335
Depreciation and amortization 264 239
Other operating expenses 1,262 1,316
Total operating expenses 3,458 3,550
Operating Income 46 32
Other Income (Expense) (147) (136)
Loss Before Income Taxes $ (101) $ (104)
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Air Transportation Group's revenues decreased 2.2 percent or $78
million. American's passenger revenues decreased by 3.2 percent, $99
million. American's yield (the average amount one passenger pays to
fly one mile) of 13.53 cents decreased by 1.7 percent compared to the
same period in 1993. Domestic yields decreased 3.7 percent while
international yields increased 4.3 percent in Latin America and 4.5
percent in Europe.
5
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RESULTS OF OPERATIONS (CONTINUED)
American's traffic or revenue passenger miles (RPMs) decreased 1.5
percent to 22.38 billion miles for the quarter ended March 31, 1994.
This decrease is primarily due to reductions in capacity. Year over
year for the first quarter 1994, American's domestic traffic
decreased 2.6 percent on capacity reductions of 7.0 percent and
international traffic grew 1.1 percent on a capacity reduction of 5.2
percent. The change in international traffic was driven by an 11.2
percent growth in Latin America with capacity growth of 2.9 percent,
offset by a 9.1 percent decrease in traffic to Europe primarily
driven by a capacity reduction of 14.0 percent.
Passenger revenues of the AMR Eagle carriers increased 9.7 percent,
$16 million, primarily due to the expansion of regional operations
into larger markets. Traffic on the AMR Eagle carriers increased
21.1 percent to 540 million RPMs, while capacity grew 10.8 percent to
993 million available seat miles (ASMs).
Cargo revenues increased 2.6 percent, $4 million, driven by an 8.0
percent increase in American's domestic and international cargo
volumes, partially offset by decreasing yields brought about by
strong price competition resulting from excess industry capacity.
American's capacity or ASMs decreased 6.3 percent to 36.72 billion
miles in the first quarter of 1994 primarily as a result of the
retirement of 29 DC-10 aircraft and 30 Boeing 727 aircraft partially
offset by the addition of 43 new aircraft: 28 Fokker F100s, seven
Boeing 757s, six Boeing 767s and two McDonnell Douglas MD11 aircraft
since March 31, 1993. Air Transportation Group's operating expenses
decreased 2.6 percent, $92 million. Because capacity decreased more
rapidly than expenses, American's passenger division cost per ASM
increased by 3.1 percent to 8.66 cents. Wages, salaries and benefits rose
2.2 percent, $26 million, due primarily to salary adjustments for
existing employees, partially offset by a 3.3 percent reduction in
the average number of equivalent employees. Aircraft fuel expense
decreased 16.8 percent, $80 million, due to a 9.6 percent decrease in
American's average price per gallon, combined with an 8.5 percent
decrease in gallons consumed by American. Commissions to agents
decreased 2.7 percent, $9 million, due principally to decreased
passenger revenues. New aircraft acquisitions and other capital
improvements raised depreciation and amortization costs 10.5 percent,
$25 million. Other operating expenses, consisting of aircraft
rentals, other rentals and landing fees, food service costs,
maintenance costs and other miscellaneous operating expenses
decreased 4.1 percent, $54 million, primarily due to reductions in
food service costs and landing fees as a result of capacity
reductions and lower maintenance expenses realized upon the
retirement of older DC-10 and Boeing 727 aircraft as well as
operating efficiencies.
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RESULTS OF OPERATIONS (CONTINUED)
THE SABRE GROUP
FINANCIAL HIGHLIGHTS
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(in millions) Three Months Ended March 31,
1994 1993
<S> <C> <C>
Revenues $ 386 $ 330
Expenses
Wages, salaries and benefits 120 101
Depreciation and amortization 45 44
Other operating expenses 118 110
Total operating expenses 283 255
Operating Income 103 75
Other Income (Expense) (4) (2)
Income Before Taxes $ 99 $ 73
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Revenues
Revenues for The SABRE Group increased 17.0 percent, $56 million,
primarily due to increased booking fee revenues resulting from growth
in booking volumes, increases in average fees per booking collected
from participating vendors and the introduction of a premium priced
product.
Expenses
Wages, salaries and benefits increased 18.8 percent, $19 million, due
to wage and salary increases and a 4.5 percent increase in the average
number of equivalent employees. Other operating expenses increased
7.3 percent, $8 million, due to higher incentive payments to travel
agents and costs associated with international expansion.
AMR MANAGEMENT SERVICES GROUP
FINANCIAL HIGHLIGHTS
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(in millions)
Three Months Ended March 31,
1994 1993
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Revenues $ 131 $ 105
Expenses
Wages, salaries and benefits 37 26
Other operating expenses 84 70
Total operating expenses 121 96
Operating Income 10 9
Other Income (Expense) (6) (6)
Income Before Income Taxes $ 4 $ 3
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7
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RESULTS OF OPERATIONS (CONTINUED)
Revenues
Revenues for the AMR Management Service Group increased 24.8 percent
or $26 million. AMR Services' revenues increased 18.3 percent, $13
million, primarily as a result of strong domestic fuel and deicing
service sales, expansion of European operations, and the acquisition
of an additional domestic fixed-base operator in November 1993.
Americas Ground Services, which began operations in the second
quarter of 1993, contributed $6 million in revenues. AMR Training
and Consulting Group, which began operations in the first quarter of
1993 improved to approximately $7 million in revenues in the first
quarter of 1994.
Expenses
Wages, salaries and benefits increased 42.3 percent, $11 million, due
primarily to a 37.3 percent increase in the average number of
equivalent employees. Other operating expenses increased 20.0
percent, $14 million, due primarily to the startup of operations for
Americas Ground Services and AMR Training and Consulting Group and
the expansion of AMR Services.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities in the three month period
ended March 31, 1994 was $202 million compared to $256 million in
1993. Capital expenditures for the first quarter of 1994 were $341
million and included the acquisition of 11 passenger aircraft by
American: two Boeing 757-200 and nine Fokker 100s. Also AMR Eagle
acquired five turboprop aircraft, three Super ATRs and two SAAB
340Bs. These capital expenditures as well as expansion of airport
facilities were financed through the issuance of long-term debt and
internally generated cash.
OTHER
In April 1994 AMR signed a comprehensive 20-year services agreement
with Canadian Airlines International (CAI). Among the services AMR
will provide CAI are accounting, data processing and communications
operations, operations planning, pricing and yield management,
international services, passenger services procedures training, and
U. S. originating reservations activity. Revenues from the contract
are expected to exceed $100 million in the first full year and exceed
$2.0 billion over the 20-year contract. In April 1994 AMR also made
a $177 million investment in CAI, giving it approximately a one-third
economic interest in the company.
8
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PART II
Item 2. Legal Proceedings
In December 1992, the U.S. Department of Justice filed an antitrust
lawsuit in the U.S. District Court for the District of Columbia under
Section 1 of the Sherman Act against several airlines, including the
Company, alleging price fixing based upon the industry's exchange of
fare information through the Airline Tariff Publishing Company. In
March 1994, the Company and the remaining defendants in the case
agreed to settle the lawsuit without admitting liability by entering
into a stipulated final judgment that prohibits or restricts certain
pricing practices including the announcement of fare increases before
their effective date. The proposed final judgment is subject to
approval by the Court following a public notice and comment period
prescribed by statute. The Company does not anticipate a material
financial impact from the settlement or compliance with the stipulated
judgment. Private class action claims with similar allegations were
settled by the Company and other airlines which became final in March
1993. Prior to the private class action settlement becoming final,
the Company and several other airlines voluntarily altered certain
pricing practices at issue in the lawsuits to avoid exposure to
additional claims.
American has been sued in two class action cases that have been
consolidated in the Circuit Court of Cook County, Illinois, in
connection with certain changes made to American's AAdvantage frequent
flyer program in May, 1988. (Wolens, et al v. American Airlines,
Inc., No. 88 CH 7554, and Tucker v. American Airlines, Inc., No. 89 CH
199.) In both cases, the plaintiffs seek to represent all persons who
joined the AAdvantage program before May 1988. The complaints allege
that, on that date, American implemented changes that limited the
number of seats available to participants traveling on certain awards
and established holiday blackout dates during which no AAdvantage
seats would be available for certain awards. The plaintiffs allege
that these changes breached American's contracts with AAdvantage
members and were in violation of the Illinois Consumer Fraud and
Deceptive Business Practices Act (Consumer Fraud Act). Plaintiffs
seek money damages of an unspecified sum, punitive damages, costs,
attorneys fees and an injunction preventing the Company from making
any future changes that would reduce the value of AAdvantage benefits.
American moved to dismiss both complaints, asserting that the claims
are preempted by the Federal Aviation Act and barred by the Commerce
Clause of the U.S. Constitution.
The trial court denied American's preemption motions, but certified
its decision for interlocutory appeal. In December 1990, the Illinois
Appellate Court held that plaintiffs' claims for an injunction are
preempted by the Federal Aviation Act, but that plaintiffs' claims for
money damages could proceed. On March 12, 1992, the Illinois Supreme
Court affirmed the decision of the Appellate Court. American sought a
writ of certiorari from the U.S. Supreme Court; and on October 5,
1992, that Court vacated the decision of the Illinois Supreme Court
and remanded the cases for reconsideration in light of the U.S.
Supreme Court's decision in Morales v. TWA, et al, which interpreted
the preemption provisions of the Federal Aviation Act very broadly.
On December 16, 1993, the Illinois Supreme Court rendered its decision
on remand, holding that plaintiffs' claims seeking an injunction were
preempted, but that identical claims for compensatory and punitive
damages were not preempted. On February 8, 1994, American filed
petition for a writ of certiorari in the U.S. Supreme Court. The
Illinois Supreme Court granted American's motion to stay the state
court proceeding pending disposition of American's petition in the
U.S. Supreme Court. On April 4, 1994 the Supreme Court granted
American's writ of certiorari.
AMR and American are vigorously defending all of the above claims.
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PART II
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed with this report:
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Part I - Exhibit 11(a): Computation of primary loss
per common share for the three
months ended March 31, 1994 and
1993.
Part I - Exhibit 11(b): Computation of loss per
common share assuming full
dilution for the three months
ended March 31, 1994 and 1993.
Part I - Exhibit 12:Computation of ratio of earnings
to fixed charges for the three
months ended March 31, 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.
AMR CORPORATION
BY: /s/ Donald J. Carty
Donald J. Carty
Executive Vice President and
Chief Financial Officer
DATE: May 12, 1994
11
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PART I - EXHIBIT 11 (a)
AMR CORPORATION
Computation of Primary Loss Per Share
(in millions, except per share amounts)
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Three Months Ended March 31,
1994 1993
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Loss, as adjusted:
Net Loss $ (7) $ (22)
Less: Preferred dividend requirements 16 10
Loss applicable to common shares $ (23) $ (32)
Shares, as adjusted:
Average number of shares outstanding 76 75
Add shares issued upon assumed exercise
of dilutive options, stock appreciation
rights and warrants and shares assumed
issued for deferred stock granted - -
Less assumed treasury shares purchased - -
Shares, as adjusted 76 75
PRIMARY LOSS PER SHARE $(0.30) $(0.43)
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PART I - EXHIBIT 11 (b)
AMR CORPORATION
Computation of Loss Per Share
Assuming Full Dilution
(in millions, except per share amounts)
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<CAPTION>
Three Months Ended March 31,
1994 1993
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Loss, as adjusted:
Net Loss $ (7) $ (22)
Less: Preferred dividend requirements 16 10
Loss applicable to common shares $ (23) $ (32)
Shares, as adjusted:
Average number of shares outstanding 76 75
Add shares issued upon assumed exercise
of dilutive options, stock appreciation
rights and warrants and shares assumed
issued for deferred stock granted - -
Less assumed treasury shares purchased - -
Shares, as adjusted 76 75
LOSS PER SHARE, ASSUMING FULL DILUTION $ (0.30) $ (0.43)
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PART I - EXHIBIT 12
AMR CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
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<CAPTION>
Three Months Ended March 31,
1994 1993
(in millions)
<S> <C> <C>
Earnings:
Earnings (loss) before income taxes and
cumulative effect of accounting changes $ 2 $ (28)
Add: Total fixed charges (per below) 318 343
Less: Interest capitalized 7 17
Total earnings $ 313 $ 298
Fixed charges:
Interest $ 152 $ 175
Portion of rental expense representative
of the interest factor 164 166
Amortization of debt expense 2 2
Total fixed charges $ 318 $ 343
Ratio of earnings to fixed charges - -
Coverage deficiency $ 5 $ 45
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