<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 SEPTEMBER 30, 1994 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 1-10140
-------------------------------------------------------
AMERICA WEST AIRLINES, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 86-0418245
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4000 EAST SKY HARBOR BLVD, PHOENIX, ARIZONA 85034
- -------------------------------------------------------------------------------
(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
----- -----
<PAGE> 2
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check 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)
---- ----- ----------------
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.
The number of shares of the Company's common stock outstanding as of October
31, 1994 was:
<TABLE>
<S> <C>
Class A Common Stock 1,200,000
Class B Common Stock 43,925,000
----------
45,125,000
==========
</TABLE>
2
<PAGE> 3
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICA WEST AIRLINES, INC.
Condensed Balance Sheets
(in thousands of dollars)
<TABLE>
<CAPTION>
Reorganized | Predecessor
Company | Company
------------- | ------------
ASSETS September 30, | December 31,
------ 1994 | 1993
------------- | ------------
(Unaudited) |
<S> <C> <C>
Current assets |
Cash and cash equivalents . . . . . . . . . . . . . . . . $ 204,069 | $ 99,631
Accounts receivable, less allowance for doubtful |
accounts of $3,012 in 1994 and $3,030 in 1993 . . . . . 72,317 | 65,744
Expendable spare parts and supplies, less allowance for |
obsolescence of $120 in 1994 and $7,231 in 1993 . . . . 25,929 | 28,111
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . 36,342 | 34,939
---------- | ----------
Total current assets . . . . . . . . . . . . . . . . 338,657 | 228,425
---------- | ----------
|
Property and equipment |
Flight equipment. . . . . . . . . . . . . . . . . . . . . 440,206 | 872,104
Other property and equipment. . . . . . . . . . . . . . . 91,303 | 180,607
---------- | ----------
531,509 | 1,052,711
Less accumulated depreciation and amortization. . . . . 3,913 | 385,776
---------- | ----------
527,596 | 666,935
Equipment purchase deposits. . . . . . . . . . . . . . . 32,915 | 51,836
---------- | ----------
560,511 | 718,771
---------- | ----------
Restricted cash . . . . . . . . . . . . . . . . . . . . . . 30,578 | 46,296
Reorganization value in excess of amounts allocable to |
identifiable assets, net . . . . . . . . . . . . . . . . . 665,915 | -
Other assets, net. . . . . . . . . . . . . . . . . . . . . . 23,514 | 23,251
--------- | --------
$1,619,175 | $1,016,743
========== | ==========
</TABLE>
See accompanying notes to condensed financial statements.
3
<PAGE> 4
AMERICA WEST AIRLINES, INC.
Condensed Balance Sheets
(in thousands of dollars)
<TABLE>
<CAPTION>
Reorganized | Predecessor
Company | Company
-------------- | ------------
September 30, | December 31,
Liabilities and Stockholders' Equity (Deficiency) 1994 | 1993
------------------------------------------------- -------------- | ------------
(Unaudited) |
<S> <C> <C>
Current liabilities |
Current maturities of long-term debt. . . . . . . . . . . $ 54,110 | $ 125,271
Accounts payable . . . . . . . . . . . . . . . . . . . . . 95,364 | 62,957
Air traffic liability. . . . . . . . . . . . . . . . . . . 156,013 | 118,479
Accrued compensation and vacation benefits . . . . . . . . 13,317 | 11,704
Accrued interest . . . . . . . . . . . . . . . . . . . . . 8,598 | 8,295
Accrued taxes. . . . . . . . . . . . . . . . . . . . . . . 36,611 | 14,114
Other accrued liabilities. . . . . . . . . . . . . . . . . 25,290 | 11,980
---------- | ----------
Total current liabilities . . . . . . . . . . . . . . . 389,303 | 352,800
---------- | ----------
Estimated liabilities subject to Chapter 11 proceedings . . . - | 381,114
Long-term debt, less current maturities . . . . . . . . . . . 492,056 | 396,350
Manufacturers' and deferred credits . . . . . . . . . . . . . 120,747 | 73,592
Other liabilities . . . . . . . . . . . . . . . . . . . . . . 28,351 | 67,149
|
Commitments and contingencies |
|
Stockholders' equity (deficiency) |
Preferred stock, $.25 par value. Authorized 50,000,000 |
shares; Series C 9.75% convertible preferred stock, issued |
and outstanding 73,099 shares; $1.33 per share cumulative |
dividend (liquidation preference $1,000,000). . . . . . . - | 18
Common stock, $.25 par value. Authorized 90,000,000 shares; |
issued and outstanding 25,291,102 at December 31, 1993. . - | 6,323
Preferred stock, $.01 par value. Authorized 48,800,000 |
shares; issued and outstanding 0 at September 30, 1994 . - | -
Class A common stock, $.01 par value. Authorized 1,200,000 |
shares; issued and outstanding 1,200,000 shares at |
September 30, 1994. . . . . . . . . . . . . . . . . . . . 12 | -
Class B common stock, $.01 par value. Authorized |
100,000,000 shares; issued and outstanding 43,925,000 |
shares at September 30, 1994. . . . . . . . . . . . . . . 439 | -
Additional paid-in capital. . . . . . . . . . . . . . . . . 587,049 | 197,010
Retained earnings (deficit) . . . . . . . . . . . . . . . . 1,218 | (438,626)
---------- | ----------
588,718 | (235,275)
Less deferred compensation and notes receivable - |
employee stock purchase plans . . . . . . . . . . . . . . - | 18,987
---------- | ----------
Total stockholders' equity (deficiency) . . . . . . 588,718 | (254,262)
---------- | ----------
$1,619,175 | $1,016,743
========== | ==========
</TABLE>
See accompanying notes to condensed financial statements.
4
<PAGE> 5
AMERICA WEST AIRLINES, INC.
Condensed Statements of Operations
(in thousands of dollars except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Reorganized |
Company | Predecessor Company
-------------- | ---------------------------
Period From | Period From Three Months
August 26 to | July 1 to Ended
September 30 | August 25 September 30
-------------- | ------------ -------------
1994 | 1994 1993
-------------- | ------------ -------------
<S> <C> | <C> <C>
Operating revenues |
Passenger. . . . . . . . . . . . . . . $ 118,592 | $ 217,096 $ 315,779
Cargo. . . . . . . . . . . . . . . . . 4,258 | 6,156 9,487
Other. . . . . . . . . . . . . . . . . 4,465 | 7,161 9,847
----------- | ----------- -----------
Total operating revenues . . . . . . 127,315 | 230,413 335,113
----------- | ----------- -----------
Operating expenses |
Salaries and related costs . . . . . . 33,047 | 51,238 77,496
Rentals and landing fees . . . . . . . 25,823 | 40,875 67,416
Aircraft fuel. . . . . . . . . . . . . 15,694 | 24,852 40,572
Agency commissions . . . . . . . . . . 10,508 | 19,057 27,094
Aircraft maintenance materials |
and repairs. . . . . . . . . . . . . 4,768 | 9,207 7,718
Depreciation and amortization. . . . . 6,699 | 13,496 20,606
Other. . . . . . . . . . . . . . . . . 22,440 | 46,078 61,230
----------- | ----------- -----------
Total operating expenses . . . . . . 118,979 | 204,803 302,132
----------- | ----------- -----------
Operating income . . . . . . . . . . 8,336 | 25,610 32,981
----------- | ----------- -----------
Nonoperating income (expenses) |
Interest income. . . . . . . . . . . . 1,083 | 126 166
Interest expense . . . . . . . . . . . (6,358) | (7,930) (13,483)
Loss on disposition of property |
and equipment. (53) | (389) (1,215)
Reorganization expense, net. . . . . . - | (255,401) (3,726)
Other, net . . . . . . . . . . . . . . 35 | (7) (27)
----------- | ----------- -----------
Total nonoperating expenses, net . . (5,293) | (263,601) (18,285)
----------- | ----------- -----------
Income (loss) before income taxes and |
extraordinary item . . . . . . . . . . 3,043 | (237,991) 14,696
----------- | ----------- -----------
Income taxes . . . . . . . . . . . . . . 1,825 | 588 293
----------- | ----------- -----------
Income (loss) before extraordinary item. 1,218 | (238,579) 14,403
----------- | ----------- -----------
Extraordinary gain on elimination of debt - | 257,660 -
----------- | ----------- -----------
Net income . . . . . . . . . . . . . . . 1,218 | 19,081 14,403
|
Retained earnings (deficit) at beginning |
of period . . . . . . . . . . . . . . - | (403,315) (463,397)
Frest start adjustments . . . . . . . - | 384,234 -
----------- | ----------- ----------
Retained earnings (deficit) at end of |
period . . . . . . . . . . . . . . . $ 1,218 | $ - $ (448,994)
========== | =========== ===========
Earnings (loss) per share |
Primary |
Income (loss) before |
extraordinary item . . . . . . . . $ .03 | $ (8.43) $ .54
Extraordinary item . . . . . . . . . - | 9.12 -
----------- | ----------- -----------
Net income . . . . . . . . . . . . $ .03 | $ .69 $ .54
=========== | =========== ===========
</TABLE>
5
<PAGE> 6
AMERICA WEST AIRLINES, INC.
Condensed Statements of Operations
(in thousands of dollars except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Reorganized |
Company | Predecessor Company
-------------- | ---------------------------
Period From | Period From Three Months
August 26 to | July 1 to Ended
September 30 | August 25 September 30
-------------- | ------------ -------------
1994 | 1994 1993
-------------- | ------------ -------------
<S> <C> | <C> <C>
Fully Diluted |
Income (loss) before |
extraordinary item . . . . . . . . $ .03 | $ (5.93) $ .38
Extraordinary item . . . . . . . . . - | 6.42 -
----------- | ----------- -----------
Net income . . . . . . . . . . . . $ .03 | $ .49 $ .38
=========== | =========== ===========
|
|
Shares used for computation |
Primary . . . . . . . . . . . . . . 45,125,000 | 28,241,777 29,062,047
=========== | =========== ===========
Fully diluted . . . . . . . . . . . 45,125,000 | 40,144,231 42,040,883
=========== | =========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
6
<PAGE> 7
AMERICA WEST AIRLINES, INC.
Condensed Statements of Operations
(in thousands of dollars except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Reorganized |
Company | Predecessor Company
-------------- | ---------------------------
Period From | Period From Nine Months
August 26 to | January 1 to Ended
September 30 | August 25 September 30
-------------- | ------------ -------------
1994 | 1994 1993
-------------- | ------------ -------------
<S> <C> | <C> <C>
Operating revenues |
Passenger. . . . . . . . . . . . . . . $ 118,592 | $ 882,140 $ 919,569
Cargo. . . . . . . . . . . . . . . . . 4,258 | 27,645 28,458
Other. . . . . . . . . . . . . . . . . 4,465 | 29,243 28,601
----------- | ----------- -----------
Total operating revenues . . . . . . 127,315 | 939,028 976,628
----------- | ----------- -----------
Operating expenses |
Salaries and related costs . . . . . . 33,047 | 213,722 227,486
Rentals and landing fees . . . . . . . 25,823 | 173,710 207,971
Aircraft fuel. . . . . . . . . . . . . 15,694 | 100,646 124,125
Agency commissions . . . . . . . . . . 10,508 | 78,988 79,187
Aircraft maintenance materials |
and repairs. . . . . . . . . . . . . 4,768 | 28,109 22,337
Depreciation and amortization. . . . . 6,699 | 56,694 60,485
Other. . . . . . . . . . . . . . . . . 22,440 | 179,653 179,709
----------- | ----------- -----------
Total operating expenses . . . . . . 118,979 | 831,522 901,300
----------- | ----------- -----------
Operating income . . . . . . . . . . 8,336 | 107,506 75,328
----------- | ----------- -----------
Nonoperating income (expenses) |
Interest income. . . . . . . . . . . . 1,083 | 470 577
Interest expense, net. . . . . . . . . (6,358) | (33,998) (41,046)
Loss on disposition of property |
and equipment. (53) | (1,659) (1,828)
Reorganization expense, net. . . . . . - | (273,659) (5,618)
Other, net . . . . . . . . . . . . . . 35 | 131 (70)
----------- | ----------- -----------
Total nonoperating expenses, net . . (5,293) | (308,715) (47,985)
----------- | ----------- -----------
Income (loss) before income taxes and |
extraordinary item . . . . . . . . . . 3,043 | (201,209) 27,343
----------- | ----------- -----------
Income taxes . . . . . . . . . . . . . . 1,825 | 2,059 546
----------- | ----------- -----------
Income (loss) before extraordinary item. 1,218 | (203,268) 26,797
----------- | ----------- -----------
Extraordinary gain on elimination of debt - | 257,660 -
----------- | ----------- -----------
Net income . . . . . . . . . . . . . . . 1,218 | 54,392 26,797
|
Retained earnings (deficit) at beginning |
of period . . . . . . . . . . . . . . - | (438,626) (475, 791)
Fresh start adjustments . . . . . . . - | 384,234 -
----------- | ----------- ----------
Retained earnings (deficit) at end of |
period . . . . . . . . . . . . . . . $ 1,218 | $ - $ (448,994)
=========== | =========== ==========
</TABLE>
7
<PAGE> 8
AMERICA WEST AIRLINES, INC.
Condensed Statements of Operations
(in thousands of dollars except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Reorganized |
Company | Predecessor Company
-------------- | ---------------------------
Period From | Period From Nine Months
August 26 to | January 1 to Ended
September 30 | August 25 September 30
-------------- | ---------------------------
1994 | 1994 1993
-------------- | ------------ -------------
<S> <C> | <C> <C>
Earnings (loss) per share |
Primary |
Income (loss) before |
extraordinary item . . . . . . . . $ .03 | $ (7.03) $ 1.08
Extraordinary item . . . . . . . . . - | 9.02 -
----------- | ----------- -----------
Net income . . . . . . . . . . . . $ .03 | $ 1.99 $ 1.08
=========== | =========== ===========
|
|
Fully Diluted |
Income (loss) before |
extraordinary item . . . . . . . . $ .03 | $ (4.96) $ .73
Extraordinary item . . . . . . . . . - | 6.37 -
----------- | ----------- -----------
Net income . . . . . . . . . . . . $ .03 | $ 1.41 $ .73
=========== | =========== ===========
|
|
Shares used for computation |
Primary . . . . . . . . . . . . . . 45,125,000 | 28,549,929 27,580,130
=========== | =========== ===========
Fully diluted . . . . . . . . . . . 45,125,000 | 40,452,383 42,549,786
=========== | =========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
8
<PAGE> 9
AMERICA WEST AIRLINES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)
<TABLE>
Reorganized |
Company | Predecessor Company
------------ | -------------------------
Period From | Period From Nine Months
August 26 to | January 1 to Ended
September 30 | August 25 September 30
------------ | --------------------------
1994 | 1994 1993
------------ | ----------- ------------
<S> <C> | <C> <C>
Cash flows from operating activities: |
Net income . . . . . . . . . . . . . . . . . . . . . $ 1,218 | $ 54,392 $ 26,797
Adjustments to reconcile net income to cash provided |
by operating activities: |
Depreciation and amortization . . . . . . . . . . 6,699 | 56,694 60,485
Amortization of manufacturers' and |
deferred credits. . . . . . . . . . . . . . . . (1,408) | (2,966) (3,677)
Loss on disposition of property and equipment . . 53 | 1,659 1,828
Reorganization items. .. .. . . . . . . . . . . . - | 185,226 1,690
Extraordinary gain on extinguishment of debt. . . - | (257,660) -
Other . . . . . . . . . . . . . . . . . . . . . . 298 | (383) (393)
|
Changes in operating assets and liabilities: |
Decrease (increase) in accounts receivable, net. . . 12,196 | (18,769) (12,128)
Decrease (increase) in spare parts and supplies, net (585) | 397 3,920
Decrease (increase) in prepaid expenses. . . . . . . (2,687) | 1,284 41
Decrease in other assets and restricted cash . . . . 35 | 12,971 6,595
Increase (decrease) in accounts payable. . . . . . . (10,185) | (15,557) 509
Increase in air traffic liability. . . . . . . . . . 2,205 | 30,510 42,654
Increase (decrease) in accrued compensation |
and vacation benefits. . . . . . . . . . . . . . . (14,126) | 15,739 483
Increase in accrued interest . . . . . . . . . . . . 2,978 | 4,694 6,824
Increase (decrease) in accrued taxes . . . . . . . . (4,407) | 25,999 6,922
Increase (decrease) in other accrued liabilities . . (3,871) | 67,429 (4,855)
Increase (decrease) in other liabilities . . . . . . 346 | (19,443) (9,287)
---------- | ---------- ----------
Net cash provided by (used in) operating |
activities . . . . . . . . . . . . . . . . . . . (11,241) | 142,216 128,408
|
Cash flows from investing activities: |
Purchases of property and equipment. . . . . . . . . (948) | (61,271) (38,271)
Proceeds from disposition of property. . . . . . . . 84 | 334 3,509
---------- | ---------- ----------
Net cash used in investing activities . . . . . . (864) | (60,937) (34,762)
|
Cash flows from financing activities: |
Repayment of debt. . . . . . . . . . . . . . . . . . (5,899) | (173,699) (65,811)
Issuance of long-term debt . . . . . . . . . . . . . - | 100,000 -
Issuance of common stock . . . . . . . . . . . . . . - | 114,862 -
---------- | ---------- ----------
Net cash provided by (used in) financing |
activities . . . . . . . . . . . . . . . . . . . (5,899) | 41,163 (65,811)
---------- | ---------- ----------
Net increase (decrease) in cash and cash |
equivalents. . . . . . . . . . . . . . . . . . . (18,004) | 122,442 27,835
---------- | ---------- ----------
Cash and cash equivalents at beginning of period . . 222,073 | 99,631 74,383
---------- | ---------- ----------
Cash and cash equivalents at end of period . . . . . $ 204,069 | $ 222,073 $ 102,218
========== | ========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
9
<PAGE> 10
AMERICA WEST AIRLINES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
(UNAUDITED)
On June 27, 1991, America West Airlines, Inc., D.I.P. (the "Predecessor
Company") filed a voluntary petition to reorganize under Chapter 11 of the
Federal Bankruptcy Code. On August 10, 1994, the Plan of Reorganization filed
by the Predecessor Company was confirmed and became effective on August 25,
1994. On August 25, 1994, America West Airlines, Inc., (the "Reorganized
Company" or the "Company") adopted fresh start reporting in accordance with
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
under the Bankruptcy Code" ("SOP 90-7") of the American Institute of Certified
Public Accountants. Accordingly, the Company's post-reorganization balance
sheet and statement of operations have not been prepared on a consistent basis
with such pre- reorganization financial statements. For accounting purposes,
the inception date of the Reorganized Company is deemed to be August 26, 1994.
A vertical black line is shown in the financial statements to separate the
Reorganized Company from the Predecessor Company since they have not been
prepared on a consistent basis of accounting.
The Company has prepared the accompanying financial statements without audit,
pursuant to rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of management, the accompanying unaudited financial statements contain
all adjustments necessary to present fairly its financial position as of
September 30, 1994 and the results of its operations and its cash flows for the
periods ended September 30 and August 25, 1994 and September 30, 1993.
1. Chapter 11 Reorganization
On August 10, 1994, the United States Bankruptcy Court for the
District of Arizona (the "Bankruptcy Court") confirmed the Plan of
Reorganization filed by America West Airlines, Inc., D.I.P. The Plan
became effective on August 25, 1994 (the "Effective Date").
Pursuant to the Plan, and after giving effect to various elections
made by general unsecured creditors and the exercise of certain
subscription rights by certain holders of pre-existing equity
interests, the following occurred upon the Effective Date:
* The partners of AmWest Partners, L.P. ("AmWest"), a limited
partnership which includes TPG Partners, L.P. ("TPG");
Continental Airlines, Inc. ("Continental"); and Mesa Airlines,
Inc. ("Mesa"); together with Lehman Brothers, Inc. ("Lehman")
and Fidelity Investments ("Fidelity"), as assignees of AmWest,
invested $205.3 million in consideration for the issuance of
securities by the Reorganized Company, consisting of (i)
1,200,000 shares of Class A Common Stock at a price of $7.467
per share; (ii) 12,981,636 shares of Class B Common Stock,
including 12,259,821 shares at a price of $7.467 per share and
721,815 shares at $8.889 per share (representing shares
acquired as a result of cash elections made by unsecured
creditors as described below); (iii) 2,769,231 Warrants to
purchase shares of Class B Common Stock at $12.74 per share
and (iv) $100 million principal amount of 11 1/4% Senior
Unsecured Notes, due September 1, 2001.
* The distribution agent for the payment of the claims of
general unsecured creditors of the Predecessor Company was
issued an aggregate of 26,053,185 shares of Class B Common
Stock and cash aggregating $6,416,214 (such cash representing
$8.889 per share paid to unsecured creditors electing to
receive cash in lieu of shares of Class B Common Stock).
* TPG and Fidelity, the holders of preferred equity interests of
the Predecessor Company received their pro rata share of (i)
$500,000 and (ii) 125,000 shares of Class B Common Stock
(representing shares acquired pursuant to certain subscription
rights at a price
10
<PAGE> 11
of $8.889 per share).
* The distribution agent was issued, for ultimate distribution
to the holders of common equity interests of the Predecessor
Company, 3,740,179 shares of Class B Common Stock (1,490,179
of which shares were issued in exchange for cash, aggregating
$13,246,201, provided by such equity holders upon the exercise
of rights to subscribe for such shares at a price of $8.889
per share), and 6,230,769 Warrants to purchase shares of Class
B Common Stock at $12.74 per share. The shares of Class B
Common Stock and Warrants were distributed to the equity
holders on September 15 and 16, 1994.
* In exchange for certain concessions principally arising from
cancellation of the right of Guinness Peat Aviation and/or its
affiliates ("GPA") to lease to America West 10 Airbus A320
aircraft at specified rates, GPA received (i) 900,000 shares
of Class B Common Stock; (ii) 1,384,615 Warrants to purchase
shares of Class B Common Stock at $12.74 per share; (iii) a
cash payment of approximately $30.5 million; (iv) the right to
require the Company to lease up to eight aircraft of types
operated by the Company on terms that the Company believes to
be more favorable than those previously applicable to the 10
aircraft discussed above, which right must be exercised prior
to June 30, 1999.
* Approximately $77.6 million of debtor-in-possession ("D.I.P.")
financing and a $62.7 million priority term loan were repaid
in full in cash.
* Continental, Mesa and America West entered into certain
Alliance Agreements relating to code-sharing, schedule
coordination and certain other relationships and agreements.
The agreements with Continental provide for the following:
* Access to Continental's domestic and international
destinations.
* Connections between the carriers with a single
booking.
* Shared use of select membership airport lounges.
* Certain links between frequent flyer plans.
* Opportunities for additional productivity.
With respect to Mesa Airlines, a pre-existing code share
agreement was extended to August 2004, which connects 13
destinations to the Phoenix hub and 11 destinations to the
Columbus mini-hub and also provides for coordinated flight
schedules, reservations booking and ground operations.
* The Company's Board of Directors was reconstituted to include
15 members, of which nine were designated by the partners of
AmWest, three were designated by the Official Committee of
Unsecured Creditors and one was designated by each of the
Official Committee of Equity Security Holders, GPA and the
Predecessor Company's Board of Directors.
* The Plan also provided for many other matters, including the
satisfaction of certain other prepetition claims in accordance
with negotiated settlement agreements, the disposition of the
various types of claims asserted against the Company, the
adherence to the Company's aircraft lease agreements, the
amendment of the Company's aircraft purchase agreements and
the release of the Company's employees from all obligations
arising under the Company's stock purchase plan in
consideration for the cancellation of the shares of
Predecessor Company stock securing such obligations.
11
<PAGE> 12
* On August 25, 1994, the Company executed letter agreements
with Fidelity and Lehman reflecting the principal terms
relating to the settlement of certain prepetition claims held
by Fidelity and by Lehman. Pursuant to these letters, on
October 14, 1994, the Company issued an additional $23 million
of 11 1/4% Senior Unsecured Notes, due September 1, 2001, to
Fidelity and Lehman in exchange for full satisfaction of
approximately $25.0 million of prepetition secured claims and
prepayment of a $1.3 million lease obligation. Additionally,
cash aggregating $2.1 million and $1.2 million was paid to
Fidelity and Lehman, respectively. The additional 11 1/4%
Senior Unsecured Notes were issued under the Senior Unsecured
Note Indenture with interest accruing from the Effective Date.
* In connection with the Company's emergence from Chapter 11,
reorganization success bonuses approximating $12.0 million
were paid to management and other employees which included the
issuance of 125,000 shares of the Reorganized Company's Class
B Common Stock to the Chairman of the Board.
The first distribution of the Company's Class B Common Stock to
prepetition creditors commenced on September 16, 1994. Until
September 21, 1994, the shares traded on the New York Stock Exchange
on a "when issued" basis. In order to commence distributions under
the Plan to holders of general unsecured claims promptly after the
Effective Date, the Company sought and obtained a "Reserve Order" from
the Bankruptcy Court. The Reserve Order established the denominator
that would be used in determining each creditor's pro rata
distribution based on a conservative estimate of the ultimate amount
of allowed general unsecured claims. The Reserve Order set the
estimate of ultimate allowed general unsecured claims at $345 million.
To the extent that the total allowed amount of general unsecured
claims is less than $345 million, holders of such claims will receive
a supplemental distribution.
As of October 31, 1994, distributions on $275 million in allowed
general unsecured claims had been made. Approximately 20.9 million
shares of the Company's Class B Common Stock and cash proceeds
equivalent to an additional 477,000 shares have been distributed in
settlement of these claims of which, approximately 10.8 million shares
and cash approximating an additional 450,000 shares were distributed
to the indenture trustee for three issues of subordinated debentures
of the Predecessor Company. Pursuant to the Plan of Reorganization,
the indenture trustee will make the distribution to the debenture
holders. The Company has been informed that as of October 31, 1994,
this distribution had not been made because of the need to determine a
"holdback" amount due to the filing of certain adversary proceedings
by the holders of claims for rejected aircraft leases. These
adversary proceedings seek to subordinate the claim of the debenture
holders to the claims of the aircraft lessors. The Company cannot
presently estimate when the holdback amount will be resolved and the
remaining shares and cash for electing creditors will be distributed
as claims are resolved and allowed.
Reorganization expense recorded by the Predecessor Company consisted
of the following:
<TABLE>
<CAPTION>
Period from Nine Months
January 1, 1994 Ended September 30,
to August 25, 1994 1993
------------------ -------------------
(in thousands) (in thousands)
<S> <C> <C>
Professional fees and other
expenses directly related
to the Chapter 11
proceedings $ 31,959 $ 5,443
Adjustments to fair value 166,829 -
Provisions for settlement
of claims 66,626 1,947
Reorganization success bonuses 11,956 -
Interest income (3,711) (1,772)
-------- -------
$273,659 $ 5,618
======== =======
</TABLE>
12
<PAGE> 13
2. Fresh Start Reporting
In connection with its emergence from bankruptcy on August 25, 1994,
the Company adopted fresh start reporting in accordance with SOP 90-7.
The fresh start reporting common equity value of $587.5 million was
determined by the Company with the assistance of its financial
advisors. The significant factors used in the determination of this
value were analyses of industry, economic and overall market
conditions and historical and estimated performance of the Company as
well as of the airline industry, discussions with various potential
investors and certain financial analyses.
Under fresh start reporting, the reorganization value of the entity
has been allocated to the Reorganized Company's assets and liabilities
on a basis substantially consistent with purchase accounting. The
portion of reorganization value not attributable to specific tangible
assets has been reflected as "Reorganization Value in Excess of
Amounts Allocable to Identifiable Assets" in the accompanying balance
sheet as of September 30, 1994. The fresh start reporting
adjustments, primarily related to the adjustment of the Company's
assets and liabilities to fair market values, will have a significant
effect on the Company's future statements of operations. The more
significant of these adjustments relate to reduced depreciation
expense on property and equipment, increased amortization expense
relating to reorganization value in excess of amounts allocable to
identifiable assets and increased interest expense.
The effects of the Plan and fresh start reporting on the balance sheet
at August 25, 1994 are as follows:
13
<PAGE> 14
<TABLE>
<CAPTION>
Predecessor (b) Reorganized
Company (a) Issue of (c) Company
------------- Debt Debt & Fresh Start --------------
Aug. 25, 1994 Discharge Stock Adjustments Aug. 25, 1994
------------- --------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents. . . . . . . . . . . $ 156,401 $(140,284) $205,956 $ - $ 222,073
Accounts receivable, net . . . . . . . . . . . 77,682 - 6,831 - 84,513
Expendable spare parts and supplies. . . . . . 27,715 - - (2,371) 25,344
Prepaid expenses . . . . . . . . . . . . . . . 34,540 - - (885) 33,655
---------- --------- -------- --------- ----------
Total current assets . . . . . . . . . . . . . . 296,338 (140,284) 212,787 (3,256) 365,585
Property and equipment, net. . . . . . . . . . . 702,442 - - (138,830) 563,612
Restricted cash. . . . . . . . . . . . . . . . . 30,503 - - - 30,503
Reorganization value in excess of amounts
allocable to identifiable assets . . . . . . . - - - 668,702 668,702
Other assets, net. . . . . . . . . . . . . . . . 24,497 - 1,575 (2,449) 23,623
---------- --------- -------- --------- ----------
Total assets . . . . . . . . . . . . . . . . . . $1,053,780 $(140,284) $214,362 $ 524,167 $1,652,025
========== ========= ======== ========= ==========
Liabilities and Stockholders' Equity (Deficiency)
- -------------------------------------------------
Current liabilities:
Current maturities of long-term debt . . . . . $ 119,185 $ (65,014) $ - $ - $ 54,171
Accounts payable . . . . . . . . . . . . . . . 98,080 6,500 - 969 105,549
Air traffic liability. . . . . . . . . . . . . 153,808 - - - 153,808
Accrued compensation and vacation benefits . . 27,443 - - - 27,443
Accrued interest . . . . . . . . . . . . . . . 5,620 - - - 5,620
Accrued taxes. . . . . . . . . . . . . . . . . 26,613 14,405 - - 41,018
Other accrued liabilities. . . . . . . . . . . 29,161 - - - 29,161
---------- --------- -------- -------- ----------
Total current liabilities. . . . . . . . . . . . 459,910 (44,109) - 969 416,770
Estimated liabilities subject to Chapter
11 proceedings . . . . . . . . . . . . . . . . 382,769 (382,769) - - -
Long-term debt, less current maturities. . . . . 368,939 28,934 100,000 - 497,873
Manufacturer's and deferred credits. . . . . . . 70,625 - - 51,530 122,155
Other liabilities. . . . . . . . . . . . . . . . 57,932 - - (30,205) 27,727
Stockholder's equity (deficiency)
Preferred stock. . . . . . . . . . . . . . . . 18 - - (18) -
Common stock, Predecessor Company. . . . . . . 6,432 - - (6,432) -
Common stock, Reorganized Company. . . . . . . - - 152 299 451
Additional paid in capital . . . . . . . . . . 200,058 - 114,710 272,281 587,049
Accumulated deficit. . . . . . . . . . . . . . (474,565) 257,660 (500) 217,405 -
---------- --------- -------- -------- ----------
(268,057) 257,660 114,362 483,535 587,500
Deferred compensation and notes receivable
- employee stock purchase plans. . . . . . . 18,338 - - (18,338) -
---------- --------- -------- -------- ----------
Total stockholders' equity (deficiency). . . . . (286,395) 257,660 114,362 501,873 587,500
---------- --------- -------- -------- ----------
Total liabilities & stockholders' equity
(deficiency) . . . . . . . . . . . . . . . . . $1,053,780 $(140,284) $214,362 $524,167 $1,652,025
========== ========= ======== ======== ==========
</TABLE>
(a) To record the discharge or reclassification of prepetition obligations
pursuant to the Plan of Reorganization, as well as the repayment, in
cash of $77.6 of D.I.P. financing and a $62.7 million priority term
loan.
(b) To record proceeds received from the issuance of new debt and equity
securities pursuant to the Plan of Reorganization, to record the
Preferred Stock settlement payment of $500,000 and the receipt of
approximately $1.1 million for the purchase of equity subscription
stock.
(c) To record adjustments to reflect assets and liabilities at fair market
values and to record reorganization value in excess of amounts
allocable to identifiable assets.
14
<PAGE> 15
3. SIGNIFICANT ACCOUNTING POLICIES
A. Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets
Reorganization value in excess of amount allocable to
identifiable assets is amortized on a straight line basis over
20 years. Accumulated amortization at September 30, 1994 is
approximately $2.8 million. The Company will continue to
assess the recoverability of this asset based upon expected
future undiscounted cash flows and other relevant information.
B. Deferred Credit - Operating Leases
Operating leases with respect to aircraft were adjusted to
fair market value at August 25, 1994. The net present value
of the difference between the stated lease rates and the fair
market rates has been recorded as a deferred credit in the
accompanying condensed balance sheets. The deferred credit
will be increased through charges to interest expense and
decreased on a straight-line basis as a reduction in rent
expense over the applicable lease periods. At September 30,
1994, the unamortized balance of the deferred credit was
$120.7 million.
C. Interest Capitalization - Property and Equipment
Interest capitalized was $186,000 for the period August 26
through September 30, 1994.
D. Reclassification
Certain prior period reclassifications have been made in the
Predecessor Company's financial statements to conform to the
Reorganized Company's presentation.
4. PER SHARE DATA
Primary earnings per share is based upon the weighted average number
of shares of common stock outstanding and dilutive common stock
equivalents (stock options for the Predecessor Company and warrants).
Primary earnings per share reflect net income adjusted for interest on
borrowings effectively reduced by the proceeds from the assumed
conversion of common stock equivalents.
Fully diluted earnings per share of the Predecessor Company is based
on the average number of shares of common stock and dilutive common
stock equivalents outstanding adjusted for conversion of outstanding
convertible preferred stock and convertible debentures. Fully diluted
earnings per share reflect net income adjusted for interest on
borrowings effectively reduced by the proceeds from the assumed
conversion of common stock equivalents.
5. LONG-TERM DEBT
On the Effective Date, the Company repaid approximately $77.6 million
in D.I.P. financing and $62.7 million related to a priority term loan,
15
<PAGE> 16
releasing assets secured by such credit facilities.
Also on the Effective Date, the Company issued $100 million of 11 1/4%
Senior Unsecured Notes (the "Senior Notes") at a discount of 1.575% as
part of the investment by AmWest. The notes mature on September 1,
2001 and interest is payable in arrears semi-annually commencing on
March 1, 1995. The Senior Notes may be redeemed at the option of the
Company; (i) prior to September 1, 1997; (a) at any time, in whole but
not in part, at a redemption price of 105% of the principal amount of
the Senior Notes plus accrued and unpaid interest, if any, to the
redemption date or; (b) from time to time in part from the net
proceeds of a public offering of its capital stock at a redemption
price equal to 105% of the principal amount, plus accrued and unpaid
interest, if any, to the redemption date except for amounts
mandatorily redeemed; (ii) on or after September 1, 1997 at any time
in whole or from time to time in part, at a redemption price equal to
the following percentage of principal redeemed, plus accrued and
unpaid interest to the date of redemption, if redeemed during the 12-
month period beginning:
<TABLE>
<CAPTION>
September 1, Percentage
------------ ----------
<S> <C>
1997 105.0%
1998 103.3%
1999 101.7%
2000 100.0%
</TABLE>
The Senior Notes are also subject to mandatory redemption if the
Company consummates a Public Offering Sale, as defined in the
Indenture, prior to September 1, 1997, and immediately prior to such
consummation, the Company has cash and cash equivalents, not subject
to any restriction on disposition of at least $100 million. Then the
Company shall redeem the Senior Notes at a redemption price equal to
104% of the aggregate principal amount of the Senior Notes so redeemed
plus accrued and unpaid interest to the redemption date. The
aggregate redemption price and accrued unpaid interest of the Senior
Notes to be redeemed shall equal the lessor of; (a) 50% of the net
proceeds of such Public Offering Sale and; (b) the excess if any of;
(i) $20 million and; (ii) the amount of any net offering proceeds of
any Public Offering Sale received prior to September 1, 1997. The
indenture contains a limitation on investment covenant with which
the Company was in compliance at September 30, 1994.
The Company executed letter agreements with Fidelity and Lehman
reflecting the principal terms relating to the settlement of certain
prepetition claims held by Fidelity and by Lehman. Pursuant to these
letters, on October 14, 1994, the Company issued an additional $23
million of 11 1/4% Senior Unsecured Notes, due September 1, 2001, to
Fidelity and Lehman in exchange for full satisfaction of approximately
$25.0 million of prepetition secured claims and prepayment of a $1.3
million lease obligation. Additionally, cash aggregating $2.1 million
and $1.2 million was paid to Fidelity and Lehman, respectively. The
Additional 11 1/4% Senior Unsecured Notes were issued under the Senior
Unsecured Note Indenture with interest accruing from the Effective
Date.
At September 30, 1994, the estimated maturities of long-term debt are
as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Three months ended December 31, 1994 $ 14,630
1995 63,869
1996 54,396
1997 48,871
1998 45,397
Thereafter 319,003
--------
$546,166
========
</TABLE>
16
<PAGE> 17
6. PREFERRED AND COMMON STOCK
On the Effective Date, all of the then outstanding equity securities
of the Predecessor Company were cancelled. Pursuant to the Company's
Restated Certificate of Incorporation filed August 18, 1994, the
Company is authorized to issue 1.2 million shares of Class A Common
Stock, 100 million shares of Class B Common Stock, and 48.8 million
shares of Preferred Stock.
Preferred Stock
The Company is authorized to issue 48.8 million shares of Preferred
Stock. The Company's Board of Directors by resolution may authorize
the issuance of the Preferred Stock as a class, in one or more series,
having the number of shares, designations, relative voting rights,
dividend rights, liquidation and other preferences, and limitation
that the Board of Directors fixes without any stockholder approval.
No shares of Preferred Stock have been issued.
Common Stock
Each share of Class A Common Stock is entitled to 50 votes per share
and each share of Class B Common Stock is entitled to one vote per
share. The Class A Common Stock is convertible into an equal number
of Class B shares at any time at the election of the holder of the
Class A stock.
The Restated Certificate of Incorporation defines "Foreign Ownership
Restrictions" and, as such, restrictions currently require that no
more than 25% of the voting stock of the Company be owned or
controlled, directly or indirectly, by persons who are not U.S.
citizens and that the Company's president and at least two-thirds of
its directors be U.S. citizens.
Warrants
The Company has approximately 10.4 million outstanding warrants to
purchase Class B Common Stock with an exercise price of $12.74 per
share. The warrants are exercisable by the holders anytime before
August 25, 1999 and 10.4 million shares of Class B Common Stock have
been reserved for the exercise of these warrants.
7. INCOME TAXES
The Company follows the Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes (SFAS 109). The Predecessor
Company had adopted SFAS 109 as of January 1, 1993. Under SFAS 109,
deferred tax assets (subject to a possible valuation allowance) and
liabilities are recognized for the expected future tax consequences of
events that are reflected in the Company's financial statements or tax
returns.
Income tax expense:
For the periods shown below, the Company recorded income tax expense
as follows:
<TABLE>
<CAPTION>
Period from Period from
August 26th through July 1, 1994 through
September 30, 1994 August 25, 1994
------------------ --------------------
(in thousands)
<S> <C> <C>
Current Taxes:
Federal $1,717 $534
State 108 54
------ ----
Total $1,825 $588
====== ====
Deferred Taxes: $ - $ -
====== ====
</TABLE>
For the period beginning July 1, 1994 and ending August 25, 1994,
income tax expense pertains solely to income from continuing
operations. No
17
<PAGE> 18
income tax expense was recognized with respect to the extraordinary
gain resulting from the cancellation of indebtedness that occurred in
connection with the effectiveness of the Company's Plan of
Reorganization as such gain is not subject to income taxation.
With respect to the period beginning August 26, 1994 and ending
September 30, 1994, income tax expense pertains both to income from
continuing operations as well as certain adjustments necessitated by
the effectiveness of the Company's Plan of Reorganization and the
resultant "Fresh Start" adjustments to the Company's financial
statements. A reconciliation of taxes at the federal statutory rate
("expected taxes") to those reflected in the financial statements (the
"effective rate") is as follows:
<TABLE>
<CAPTION>
Period from Period from
August 26th through July 1, 1994 through
September 30, 1994 August 25, 1994
------------------ --------------------
(in thousands)
<S> <C> <C>
Taxes at U.S. Statutory Rate $1,065 $6,884
Benefit of Loss Carryforwards (323) (6,350)
State Taxes 108 54
Amortization of Reorganization Value
in excess of amounts allocable
to identifiable assets 975 -
------ ------
Total $1,825 $ 588
====== ======
</TABLE>
As of September 30, 1994, the Company has available net operating
loss, business tax credit and alternative minimum tax credit
carryforwards for Federal income tax purposes of approximately $555.8
million, $12.7 million and $.57 million, respectively. The net
operating loss carryforwards expire during the years 1999 through 2009
while the business credit carryforwards expire during the years 1997
through 2006. However, such carryforwards are not fully available to
offset federal (and in certain circumstances, state) alternative
minimum taxable income. Further, as a result of a statutory
"ownership change" (as defined for purposes of Section 382 of the
Internal Revenue Code) that occurred as a result of the effectiveness
of the Company's Plan of Reorganization, the Company's ability to
utilize its net operating loss and business tax credit carryforwards
may be restricted. The alternative minimum tax credit may be carried
forward without expiration and is available to offset future income
tax payable.
Composition of Deferred Tax Items:
The Company has not recognized any net deferred tax items for the
periods ended August 25, 1994 and September 30, 1994, respectively.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax assets
and liabilities are a result of the temporary differences related to
the items described as follows:
<TABLE>
<CAPTION> Net Deferred Items
(in thousands)
September 30, 1994 August 25, 1994
------------------ ---------------
<S> <C> <C>
Deferred income tax liabilities:
Property and equipment,
principally depreciation and
"fresh start" differences $ (74,242) $ (70,367)
--------- ---------
Deferred tax assets:
Aircraft leases 65,023 65,787
Reorganization expenses 32,654 32,654
Net operating loss carryforwards 214,312 210,939
Tax credit carryforwards 13,272 13,272
Other 13,884 13,809
--------- ---------
Total deferred tax assets 339,145 336,461
Valuation allowance (264,903) (266,094)
--------- ---------
Net deferred items
$ - $ -
========= =========
</TABLE>
18
<PAGE> 19
SFAS 109 requires a "more likely than not" criterion be applied when
evaluating the realizability of a deferred tax asset. Given the
Company's history of losses for income tax purposes, the volatility of
the industry within which the Company operates and certain other
factors, the Company has established a valuation allowance principally
for the portion of its net operating loss and other carryforwards that
may not be available due to expirations or other limitations after
consideration of net reversals of future taxable and deductible
amounts. In this context, the Company has taken into account prudent
and feasible tax planning strategies. After application of the
valuation allowance, the Company's net deferred tax assets and
liabilities are zero. If the Company, in future tax periods, were to
recognize additional tax benefits related to the net operating loss
and other carryforwards of the Predecessor Company, any such benefit
would be applied to reduce reorganization value in excess of amounts
allocable to identifiable assets to zero.
8. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
Cash paid for interest and income taxes during the period January 1,
1994 through August 25, 1994, August 26 through September 30, 1994 and
the nine months ended September 30, 1993 was as follows:
<TABLE>
Reorganized |
Company | Predecessor Company
-------------- | ---------------------------
Period From | Period From Nine Months
August 26 to | January 1 to Ended
September 30 | August 25 September 30
-------------- | ---------------------------
1994 | 1994 1993
-------------- | ------------ -------------
<S> <C> | <C> <C>
Interest (net of amounts |
capitalized) $ 2,405 | $ 29,253 $ 30,421
Income taxes $ 416 | $ 1,237 $ 62
</TABLE>
In addition, during the period January 1, 1994 through August 25,
1994, August 26 through September 30, 1994 and the nine months ended
September 30, 1993, the Company had the following non-cash financing
and investing activities:
<TABLE>
<CAPTION>
Reorganized |
Company | Predecessor Company
-------------- | ---------------------------
Period From | Period From Nine Months
August 26 to | January 1 to Ended
September 30 | August 25 September 30
-------------- | ---------------------------
1994 | 1994 1993
-------------- | ------------ -------------
<S> <C> | <C> <C>
Equipment acquired through |
capital leases $ - | $ 138 $ 509
Conversion of long-term debt to |
common stock $ - | $ - $ 1,938
Accrued interest reclassified to |
long-term debt $ - | $ 5,563 $ -
Notes payable issued to seller $ - | $ - $ 818
Notes payable issued for |
administrative claims $ - | $ - $ 4,742
</TABLE>
19
<PAGE> 20
9. EXTRAORDINARY ITEM
The extraordinary gain recorded in the period July 1 through August
25, 1994 includes $257.7 million from the discharge of indebtedness
pursuant to the consummation of the Plan of Reorganization.
10. COMMITMENTS AND CONTINGENCIES
(a) Leases
As of September 30, 1994, the Company had 66 aircraft under
operating leases with remaining terms ranging from one year to
25 years. The Company has options to purchase most of the
aircraft at fair market value at the end of the lease term.
Certain of the agreements require security deposits and
maintenance reserve payments. The Company also leases certain
terminal space, ground facilities and computer and other
equipment under noncancelable operating leases.
At September 30, 1994, the scheduled future minimum cash
rental payments under noncancelable operating leases with
initial terms of more than one year are as follows:
<TABLE>
<CAPTION> (in thousands)
<S> <C>
Three months ended December 31, 1994 $ 52,103
1995 192,922
1996 185,893
1997 180,723
1998 175,949
Thereafter 1,387,556
----------
$2,175,146
==========
</TABLE>
Rent expense (excluding landing fees) was approximately $177.5
million and $186.0 million for the combined nine months ended
September 30, 1994 and the nine months ended September 30,
1993.
Collectively, the operating lease agreements require security
deposits with lessors of $10.7 million and bank letters of
credit of $17.7 million. The letters of credit are
collateralized by $17.6 million in restricted cash.
(b) Revenue Bonds
Special facility revenue bonds issued by a municipality have
been used to fund the acquisition of leasehold improvements at
the Phoenix Sky Harbor airport which have been leased by the
Company. Under the operating lease agreements, which
commenced in 1990, the Company is required to make rental
payments sufficient to pay principal and interest when due on
the bonds. The Company ceased rental payments in June 1991.
In October 1993, the Company and the bondholder agreed to
reduce the balance of the bonds from $40.7 million to $22.5
million with the remaining balance of $18.2 million being
allowed treatment under the Plan of Reorganization as a
prepetition unsecured claim.
On August 25, 1994, the Company entered into a Restated and
Amended Trust Indenture in which the Series 1989 and Series
1990 Bonds were retired contemporaneously with the issuance of
the Series 1994A and Series 1994B Bonds. Pursuant to the
agreement, payment of principal and interest at 8.3% on the
Series 1994A Bonds commences on October 1, 1994 and ends on
January 1, 2006 while payment of principal and interest at
8.2% on the Series 1994B Bonds commences on October 1, 1994
and ends on January 1, 1999. At September 30, 1994, the
outstanding balance was $21.8 million.
20
<PAGE> 21
(c) Aircraft Acquisitions
At September 30, 1994, the Company had on order a total of 24
Airbus A320-200 aircraft with an estimated aggregate cost of
approximately $1 billion.
As part of the investment by AmWest, the A320 purchase
agreement with AVSA was amended to provide the Company with
greater flexibility and reduced pricing. Under the modified
terms, delivery dates of the aircraft will fall in the years
1998 through 2000 with an option to further defer deliveries.
In addition, if new A320 aircraft are delivered as a result of
the renegotiated put agreement (see below), the Company will
have the right to cancel on a one-for-one basis, up to a
maximum of eight non-consecutive aircraft deliveries
hereunder, subject to certain conditions.
In June 1994, the Company renegotiated a put agreement for ten
A320 aircraft. The new agreement reduced the number of put
aircraft from ten to eight and rescheduled the deliveries to
start not earlier than June 30, 1995 and end on June 30, 1999.
Under the new agreement, new or used A320-200 aircraft,
B737-300 or B757-200 aircraft may be put to the Company but at
a rate of no more than two in 1995, and with respect to each
ensuing year during the put period, of no more than three. In
addition, no more than five used aircraft may be put to the
Company and for every new A320 aircraft put to the Company,
the Company has the right to reduce the AVSA A320 purchase
contract on a one-for- one basis. During each January of the
put period, the Company will negotiate the type and delivery
dates of the put aircraft for that year. The puts will
require 150-day notice and will be leased at fair market rates
for terms ranging from three to eighteen years, depending on
the type and condition of the aircraft. As part of the
renegotiated agreement, certain cash payments and securities
were issued to the put holder pursuant to the Plan of
Reorganization (see Note 1).
In June 1994, the Company reached a settlement for the
cancellation of the right by a former D.I.P. lender to put
four aircraft to the Company. The settlement called for cash
payment of $4.5 million of which $2.5 million was paid in June
1994 and $2.0 million was paid on the Effective Date of the
Plan of Reorganization.
With respect to the various aircraft purchase contracts with
Boeing, the Company reached a settlement in which the purchase
contracts were rejected and equipment purchase deposits were
kept by Boeing in full settlement of the rejection damages.
In addition, the Company and Boeing agreed that should they
enter into a new aircraft purchase agreement, Boeing would
reinstate approximately $6 million of purchase deposits
towards the new agreement.
In addition to the aircraft commitment discussed above, the
Company currently anticipates acquiring during the fourth
quarter of 1994 one B757 aircraft and one B737-300 aircraft
under operating lease arrangements. Such aircraft will be
utilized to provide additional service on existing routes in
which the Company experiences high demand.
(d) Concentration Of Credit Risk
The Company does not believe it is subject to any significant
concentration of credit risk. At September 30, 1994,
approximately 82 per cent of the Company's receivables related
to tickets sold to individual passengers through the use of
major credit cards or to tickets sold by other airlines and
used by passengers on America West. These receivables are
short-term, generally being settled shortly after sale or in
the month
21
<PAGE> 22
following usage. Bad debt losses, which have been minimal in
the past, have been considered in establishing allowances for
doubtful accounts.
11. RELATED PARTY TRANSACTIONS
In exchange for certain concessions principally arising from
cancellation of the right of Guinness Peat Aviation and/or its
affiliates ("GPA") to lease to America West 10 Airbus A320 aircraft at
specified rates, GPA received (i) 900,000 shares of Class B Common
Stock; (ii) 1,384,615 Warrants to purchase shares of Class B Common
Stock at $12.74 per share; (iii) a cash payment of approximately $30.5
million; (iv) the right to require the Company to lease up to eight
aircraft of types operated by the Company on terms that the Company
believes to be more favorable than those previously applicable to the
10 aircraft discussed above, which right must be exercised prior to
June 30, 1999.
The Company has entered into various aircraft acquisitions and leasing
arrangements with this stockholder at terms comparable to those
obtained from third parties for similar transactions. The Company
leases 16 aircraft from this stockholder and the rental payments for
such leases amount to $47.3 million and $47.3 million for the nine
months ended September 30, 1993 and 1994, respectively. As of
September 30, 1994, the Company was obligated to pay approximately $1
billion under these leases through the year 2013.
As part of the Reorganization, both Continental Airlines and Mesa
Airlines made an investment in the Company. In addition, the Company
entered into Alliance agreements with Continental and Mesa Airlines.
Pursuant to a code-sharing agreement with Mesa Airlines entered into
in December 1992 (which was prior to Mesa Airlines becoming a
significant stockholder), the Company collects a per-passenger charge
for facilities, reservations and other services from Mesa Airlines for
enplanements in Phoenix on the Mesa system. Such payments by Mesa
Airlines to the Company totaled $1.3 million and $1.9 million for the
nine months ended September 30, 1993 and 1994, respectively.
On October 14, 1994, the Company issued an additional $23.0 million of
11 1/4% Senior Unsecured Notes to Fidelity and Lehman in exchange for
full settlement of certain prepetition unsecured claims. In addition,
cash aggregating $2.1 million and $1.3 million was paid to Fidelity
and Lehman, respectively.
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<PAGE> 23
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
On June 27, 1991, America West Airlines, Inc., D.I.P. (the "Predecessor
Company") filed a voluntary petition to reorganize under Chapter 11 of the
Federal Bankruptcy Code. On August 10, 1994, the Plan of Reorganization filed
by the Predecessor Company was confirmed by the Bankruptcy Court and became
effective August 25, 1994 (the "Effective Date"). On August 26, 1994, America
West Airlines, Inc. (the "Reorganized Company") commenced operations.
Pursuant to the Plan, and after giving effect to various elections made by
general unsecured creditors and the exercise of certain subscription rights by
certain holders of pre-existing equity interests, the following occurred upon
the Effective Date:
* The partners of AmWest Partners, L.P. ("AmWest"), a limited
partnership which includes TPG Partners, L.P. ("TPG"); Continental
Airlines, Inc. ("Continental"); and Mesa Airlines, Inc. ("Mesa");
together with Lehman Brothers, Inc. ("Lehman") and Fidelity
Investments ("Fidelity"), as assignees of AmWest, invested $205.3
million in consideration for the issuance of securities by the
Reorganized Company, consisting of (i) 1,200,000 shares of Class A
Common Stock at a price of $7.467 per share; (ii) 12,981,636 shares of
Class B Common Stock, including 12,259,821 shares at a price of $7.467
per share and 721,815 shares at $8.889 per share (representing shares
acquired as a result of cash elections made by unsecured creditors as
described below); (iii) 2,769,231 Warrants to purchase shares of Class
B Common Stock at $12.74 per share; (iv) $100 million principal amount
of 11 1/4% Senior Unsecured Notes, due September 1, 2001.
* The distribution agent for the payment of the claims of general
unsecured creditors of the Predecessor Company was issued an aggregate
of 26,053,185 shares of Class B Common Stock and cash aggregating
$6,416,214 (such cash representing $8.889 per share paid to unsecured
creditors electing to receive cash in lieu of shares of Class B Common
Stock).
* TPG and Fidelity, the holders of preferred equity interests of the
Predecessor Company received their pro rata share of (i) $500,000 and
(ii) 125,000 shares of Class B Common Stock (representing shares
acquired pursuant to certain subscription rights at a price of $8.889
per share).
* The distribution agent was issued, for ultimate distribution to the
holders of common equity interests of the Predecessor Company,
3,740,179 shares of Class B Common Stock (1,490,179 of which shares
are to be issued in exchange for cash, aggregating $13,246,201,
provided by such equity holders upon the exercise of rights to
subscribe for such shares at a price of $8.889 per share), and
6,230,769 Warrants to purchase shares of Class B Common Stock at
$12.74 per share. The shares of Class B Common Stock and Warrants
were distributed to the equity holders on September 15 and 16, 1994.
* In exchange for certain concessions principally arising from
cancellation of the right of Guinness Peat Aviation and/or its
affiliates ("GPA") to lease to America West 10 Airbus A320 aircraft
at specified rates, GPA, received (i) 900,000 shares of Class B Common
Stock; (ii) 1,384,615 Warrants to purchase Class B Common Stock at
$12.74 per share; (iii) a cash payment of approximately $30.5 million;
(iv) the right to require the Company to lease up to eight aircraft of
types operated by the Company on terms that the Company believes to be
more favorable than those previously applicable to the 10 aircraft
discussed above, which right must be exercised prior to June 30, 1999.
* Approximately $77.6 million of debtor-in-possession ("D.I.P.")
financing and a $62.7 million priority term loan were repaid in full
in cash.
* Continental, Mesa and America West entered into certain Alliance
23
<PAGE> 24
Agreements relating to code-sharing, schedule coordination and certain
other relationships and agreements.
The agreements with Continental provide for the following:
* Access to Continental's domestic and international
destinations.
* Connections between the carriers with a single booking.
* Shared use of select membership airport lounges.
* Certain links between frequent flyer plans.
* Opportunities for additional productivity.
With respect to Mesa Airlines, a pre-existing agreement was extended
to August 2004, which connects 13 destinations to the Phoenix hub and
11 destinations to the Columbus mini-hub and also provides for
coordinated flight schedules, reservations booking and ground
operations.
* The Company's Board of Directors was reconstituted to include 15
members, of which nine were designated by the partners of AmWest,
three were designated by the Official Committee of Unsecured Creditors
and one was designated by each of the Official Committee of Equity
Security Holders, GPA and the Predecessor Company's Board of
Directors.
* The Plan also provided for many other matters, including the
satisfaction of certain other prepetition claims in accordance with
negotiated settlement agreements, the disposition of the various types
of claims asserted against the Company, the adherence to the Company's
aircraft lease agreements, the amendment of the Company's aircraft
purchase agreements and release of the Company's employees from all
obligations arising under the Company's stock purchase plan in
consideration for the cancellation of the shares of Predecessor
Company stock securing such obligations.
* On August 25, 1994, the Company executed letter agreements with
Fidelity and Lehman reflecting the principal terms relating to the
settlement of certain prepetition claims held by Fidelity and by
Lehman. Pursuant to these letters, on October 14, 1994, the Company
issued an additional $23 million of 11 1/4% Senior Unsecured Notes,
due September 1, 2001, to Fidelity and Lehman in exchange for full
satisfaction of approximately $25.0 million of prepetition secured
claims and pre-payment of a $1.3 million lease obligation.
Additionally, cash aggregating $2.1 million and $1.2 million was paid
to Fidelity and Lehman, respectively. The additional 11 1/4% Senior
Unsecured Notes were issued under the Senior Unsecured Note Indenture
with interest accruing from the Effective Date.
* In connection with the Company's emergence from Chapter 11,
reorganization success bonuses approximating $12.0 million were paid
to management and other employees which included the issuance of
125,000 shares of the Reorganized Company's Class B Common Stock to
the Chairman of the Board.
The first distribution of the Company's Class B Common Stock to prepetition
creditors commenced on September 16, 1994. Until September 21, 1994, the
shares traded on the New York Stock Exchange on a "when issued" basis. In
order to commence distributions under the Plan to holders of general unsecured
claims promptly after the Effective Date, the Company sought and obtained a
"Reserve Order" from the Bankruptcy Court. The Reserve Order established the
denominator that would be used in determining each creditor's pro rata
distribution based on a conservative estimate of the ultimate amount of allowed
general unsecured claims. The Reserve Order set the estimate of ultimate
allowed general unsecured claims at $345 million. To the extent that the total
allowed amount of general unsecured claims is less than $345 million, holders
of such claims will receive a supplemental distribution.
As of October 31, 1994, distributions on $275 million in allowed general
unsecured claims had been made. Approximately 20.9 million shares of the
Company's Class B Common Stock and cash proceeds equivalent to an additional
24
<PAGE> 25
477,000 shares have been distributed in settlement of these claims of which
approximately 10.8 million shares and cash approximating an additional 450,000
shares were distributed to the indenture trustee for three issues of
subordinated debentures of the Predecessor Company. Pursuant to the Plan of
Reorganization, the indenture trustee will make the distribution to the
debenture holders. The Company has been informed that as of October 31, 1994,
this distribution had not been made because of the need to determine a
"holdback" amount due to the filing of certain adversary proceedings by the
holders of claims for rejected aircraft leases. These adversary proceedings
seek to subordinate the claim of the debenture holders to the claims of the
aircraft lessors. The Company cannot presently estimate when the holdback
amount will be resolved. The remaining shares and cash for electing creditors
will be distributed as claims are allowed.
In connection with its emergence from bankruptcy, the Company adopted fresh
start reporting in accordance with Statement of Position 90-7 of the American
Institute of Certified Public Accountants. Under fresh start reporting, the
reorganization value of the Company has been allocated to its assets and
liabilities on a basis substantially consistent with purchase accounting. The
portion of reorganization value not attributable to specific tangible assets
has been recorded as "Reorganization Value in Excess of Amounts Allocable to
Identifiable Assets". Certain fresh start reporting adjustments, primarily
related to the adjustment of the Company's assets and liabilities to fair
market values, will have a significant effect on the Company's future
statements of operations. The more significant adjustments relate to reduced
depreciation expense on property and equipment, increased amortization expense
relating to reorganization value in excess of amounts allocable to identifiable
assets and increased interest expense.
RESULTS OF OPERATIONS
The Company realized net income of $1.2 million ($0.03 per common share) for
the period from August 26 to September 30, 1994 and the Predecessor Company
realized net income of $19.1 million ($0.69 per common share) for the period
from July 1 to August 25, 1994. These results continue a trend of profitable
operations which have now produced seven consecutive quarters of earnings.
This positive trend is attributable to several factors including improved
economic and competitive fare conditions, the continuation of relatively low
fuel prices, benefits derived from the reduction in fleet size from 104 to 85
aircraft, the implementation of numerous cost reduction and revenue enhancement
programs, the elimination of the Company's internally operated commuter
operation and the introduction of three code sharing agreements with other
carriers. During the period from July 1 to August 25, 1994, the Predecessor
Company incurred reorganization expenses of $255.4 million, however, it also
realized an extraordinary gain of $257.7 million from the discharge of certain
prepetition indebtedness under the Plan of Reorganization. For the third
quarter of 1993, the Predecessor Company reported net income of $14.4 million
($.54 per common share) which included reorganization expenses of $3.7 million.
On a year to date basis, the Company realized net income of $1.2 million ($0.03
per common share) for the period from August 26 to September 30, 1994 and the
Predecessor Company realized net income of $54.4 million ($1.99 per common
share) for the period from January 1 to August 25, 1994. During the period
from January 1 to August 25, 1994, the Predecessor Company incurred
reorganization expenses of $273.7 million and realized an extraordinary gain of
$257.7 million. For the nine months ended September 30, 1993, the Predecessor
Company realized net income of $26.8 million ($1.08 per common share) which
included reorganization expenses of $5.6 million.
Passenger revenues totaled $118.6 million and $217.1 million for the periods
August 26 to September 30, 1994 and July 1 to August 25, 1994, respectively.
On a combined basis, passenger revenues for the two accounting periods which
comprise the 1994 third quarter amounted to $335.7 million, an increase of
25
<PAGE> 26
6.3% over the $315.8 million of passenger revenues reported for the three
months ended September 30, 1993. The increase in passenger revenues realized
in the 1994 periods over the 1993 quarter is attributable to a higher level of
traffic, as measured by revenue passenger miles, which more than offset a
slight decline in passenger yield. This increase in passenger revenues is
attributable in part to the Company's strategy of pursuing the appropriate
balance of yield and load factor which produces the maximum passenger revenue
per departure rather than to focus on maximizing load factor or yield as
individual performance measures. Load factor was flat, period over period, as
available seat miles and revenue passenger miles both increased by 6.9% over
the 1993 levels. The increase in available seat miles is significant in that
it was accomplished through higher utilization and a change in the composition
of the existing fleet since no incremental aircraft were added during the 1994
periods (although an A320 was removed from the fleet and replaced with a B757
in June 1994).
For the combined nine months ended September 30, 1994, passenger revenues
increased 8.8% over the $919.6 million reported for the comparable period of
1993. Load factor for the 1994 periods increased 4.5 points as the result of a
12.3% increase in revenue passenger miles and a 5% increase in available seat
miles. Passenger revenue per available seat mile increased by 3.8% in the 1994
periods over the 1993 level as the increases realized in passenger traffic, as
evidenced by the load factor increase, more than offset a 3.1% decline in
average passenger yield. Revenues from sources other than passenger fares have
increased 15.0% in the 1994 periods over the $57.1 million reported for the
nine months ended September 30, 1993. The increases realized are primarily
attributable to increased freight and mail activity.
The following table details certain key operating statistics for the applicable
periods:
<TABLE>
<CAPTION>
Percentage
Reorganized Predecessor Predecessor Increase or
Company Company Company (Decrease)
----------- ----------- Combined ------------ Three Month
Period from Period from Three Months Three Months Period to
8/26/94 to 7/1/94 to Ended Ended Three Month
9/30/94 8/25/94 9/30/94 9/30/93 Period
----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
No. Aircraft (End of Period) 85 85 85 85 -
ASMs (millions) 1,803 2,832 4,635 4,334 6.9
RPMs (millions) 1,099 2,123 3,222 3,012 6.9
Load Factor (%) 61.0 75.0 69.5 69.5 -
Yield (cents/RPM) 10.79 10.23 10.42 10.48 (.6)
Revenue Per ASM (cents):
Passenger 6.58 7.67 7.24 7.29 (.7)
Total 7.06 8.14 7.72 7.73 (.1)
</TABLE>
<TABLE>
<CAPTION>
Percentage
Reorganized Predecessor Predecessor Increase or
Company Company Company (Decrease)
----------- ----------- Combined ----------- Nine Month
Period from Period from Nine Months Nine Months Period to
8/26/94 to 1/1/94 to Ended Ended Nine Month
9/30/94 8/25/94 9/30/94 9/30/93 Period
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
No. Aircraft (End of Period) 85 85 85 85 -
ASMs (millions) 1,803 11,636 13,439 12,802 5.0
RPMs (millions) 1,099 8,261 9,360 8,336 12.3
Load Factor (%) 61.0 71.0 69.6 65.1 6.9
Yield (cents/RPM) 10.79 10.68 10.69 11.03 (3.1)
Revenue Per ASM (cents):
Passenger 6.58 7.58 7.45 7.18 3.8
Total 7.06 8.07 7.93 7.63 3.9
</TABLE>
Operating expense per ASM increased slightly to 6.99 cents for the combined
accounting periods comprising the 1994 third quarter compared to 6.97 cents for
the 1993 period. On a year-to-date basis, operating expense per ASM on a
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<PAGE> 27
combined basis amounted to 7.07 cents in 1994 compared to 7.04 cents for the
nine months ended September 30, 1993. The table below sets forth the major
categories of operating expense per ASM for the applicable periods.
<TABLE>
<CAPTION>
Reorganized Predecessor Predecessor
Company Company Company
----------- ----------- Combined ------------
Period from Period from Three Months Three Months
8/26/94 to 7/1/94 to Ended Ended
(in cents/ASM) 9/30/94 8/25/94 9/30/94 9/30/93
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Salaries & Related Costs 1.83 1.81 1.82 1.79
Rentals & Landing Fees 1.43 1.44 1.44 1.55
Aircraft Fuel .87 .88 .87 .94
Agency Commissions .58 .67 .64 .62
Aircraft Maintenance
Materials & Repairs .27 .32 .30 .18
Depreciation & Amortization .37 .48 .44 .48
Other 1.25 1.63 1.48 1.41
---- ---- ---- ----
6.60 7.23 6.99 6.97
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Reorganized Predecessor Predecessor
Company Company Company
----------- ----------- Combined ------------
Period from Period from Nine Months Nine Months
8/26/94 to 1/1/94 to Ended Ended
(in cents/ASM) 9/30/94 8/25/94 9/30/94 9/30/93
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Salaries & Related Costs 1.83 1.84 1.84 1.78
Rentals & Landing Fees 1.43 1.49 1.48 1.63
Aircraft Fuel .87 .87 .87 .97
Agency Commissions .58 .68 .67 .62
Aircraft Maintenance
Materials & Repairs .27 .24 .24 .17
Depreciation & Amortization .37 .49 .47 .47
Other 1.25 1.54 1.50 1.40
---- ---- ---- ----
6.60 7.15 7.07 7.04
==== ==== ==== ====
</TABLE>
The changes in the components of operating expense per available seat mile are
explained as follows:
* Approximately $5.0 million of the increase in salaries and related
costs which occurred during the combined three months ended September
30, 1994 is attributable to the program which commenced April 1, 1994
under which employees' base wages were increased from 2% to 8%
depending upon length of service. This increase is partially offset
by the distribution during the third quarter of 1993 of approximately
$3.3 million in performance and employment awards under the
Predecessor Company's transition pay program which did not recur in
the 1994 periods. Additionally, the Company reinstated its matching
contribution under the America West 401(k) Plan to its pre-bankruptcy
level which increased costs by approximately $.6 million. The
remaining increase is attributable to higher costs associated with
medical claims and a higher staffing level. For the combined nine
month period of 1994, salaries and related costs have generally
increased for the same reasons as those which affected the combined
three month period.
* Rentals and landing fees have decreased for both the combined three
month and nine month periods of 1994 due to reductions in airport rent
expense at New York's JFK and Phoenix's Sky Harbor International and
the return of certain administrative office space as part of the
Company's facilities consolidation program.
* Aircraft fuel expense decreased during the combined 1994 periods as
the average price per gallon approximated 54.7 cents for the three
months ended September 30, 1994 compared to 58.5 cents for the 1993
quarter.
* Agency commissions increased for the combined three months ended
September 30, 1994 as a result of increases in the percentage of
passenger revenues generated through sales by America West Vacations,
which pay a higher percentage commission; as well as increases in
override commissions to certain travel agencies which have performed
27
<PAGE> 28
well. For the combined nine months ended September 30, 1994, agency
commissions have increased primarily as a result of increases in
passenger revenue per ASM to 7.45 cents for 1994 from 7.18 cents for
1993.
* The level of aircraft maintenance materials and repairs expense has
increased primarily as a result of higher aircraft utilization.
Average daily utilization has increased to 11.2 hours per day for the
combined nine months ended September 30, 1994 compared to 10.6 hours
per day for the comparable 1993 period. This higher level of aircraft
utilization has resulted in increases to engine and component repair
expense and to increases in line maintenance materials usage. Also,
certain component repairs, especially with respect to the A320 fleet,
have caused the expense level to increase.
* The decrease in depreciation and amortization expense for the combined
three months ended September 30, 1994 is the result of a decrease in
depreciation expense arising from the re-valuation of property and
equipment under fresh start reporting which was only partially offset
by an increase in amortization expense arising from the amortization
of the reorganization value in excess of identifiable assets.
* The increase in other operating expense for both the combined three
month and nine month periods of 1994 is primarily due to increased
advertising costs and other expenses related to increased passenger
traffic such as credit card discount fees, booking fees, catering
expenses and supplies.
Nonoperating expenses (net of nonoperating income) on a combined basis amounted
to $268.9 million and $314.0 million for the three months and nine months ended
September 30, 1994, respectively, compared to $18.3 million and $48.0 million
for the comparable periods of 1993. The 1994 Predecessor Company periods are
affected by reorganization expense of $255.4 million and $273.7 million,
respectively whereas the 1993 periods include reorganization expense of $3.7
million and $5.6 million, respectively. The 1994 reorganization expense
amounts consist of the following:
<TABLE>
<CAPTION>
July 1 to January 1 to
August 25, 1994 August 25, 1994
--------------- ---------------
<S> <C> <C>
Adjustments to fair value $166,829 $166,829
Provisions for settlement of
claims 57,947 66,626
Professional fees and other
expenses directly related
to the Chapter 11 proceedings 19,831 31,959
Reorganization success bonuses 11,956 11,956
Interest income (1,162) (3,711)
-------- --------
$255,401 $273,659
======== ========
</TABLE>
In connection with its emergence from bankruptcy, the Company entered
into a certain Alliance Agreement with Continental Airlines which goes into
effect on October 1, 1994. On that date, the two airlines will begin joint
marketing of certain flights, known as code-sharing, which will expand the
destinations each carrier serves by eight. In effect, the agreement creates
eight new destinations for Continental and eight new destinations for America
West. Supporting the code share agreement are programs to coordinate
scheduling and to facilitate customer service through expedited interline
baggage transfers. In addition, the agreement offers members of the airlines'
frequent flyer plans new opportunities for mileage accrual as well as shared
use of select membership airport lounges.
28
<PAGE> 29
On September 15, 1994, the Company announced that its flight attendants voted
in favor of collective bargaining representation by the Association of Flight
Attendants (AFA). Negotiations to arrive at initial collective bargaining
agreements are pending and the Company is unable to estimate at this time the
impact, if any, that such initial collective bargaining agreements may have on
its operating expenses.
On October 3, 1994, the Company announced that it is seeking approval from the
Department of Transportation to commence scheduled service to Los Cabos and
Mazatlan, Mexico from its Phoenix hub. Subject to regulatory approval, the
Company intends to begin service to Mazatlan on December 17, 1994 and to Los
Cabos on December 18, 1994 with three weekly flights to each city.
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficiency of $50.6 million at
September 30, 1994 while the Predecessor Company had a working capital
deficiency of $124.4 million at December 31, 1993. The decline in the
deficiency is the result of the investments made and the financial
reorganization which accompanied the Company's emergence from Chapter 11
protection. On the Effective Date, the Company received approximately $205.3
million in consideration for the issuance of common stock by the Company and
$100 million principal amount of 11 1/4% Senior Unsecured Notes, due September
1, 2001. The Senior Unsecured Notes contains a limitation on investment
covenant with which the Company was in compliance at September 30, 1994. In
addition, the Company fully repaid in cash $77.6 million of D.I.P. financing
and a $62.7 million priority term loan such that as of September 30, 1994
unrestricted cash and cash equivalents have increased to $204.1 million from
$99.6 million at December 31, 1993 and current maturities of long-term debt
have been reduced to $54.1 million as of September 30, 1994 from $125.3 million
at December 31, 1993. Long term debt, less current maturities has increased to
$492.1 million as of September 30, 1994 compared to $396.4 million at December
31, 1993 as a result of the issuance of $100 million of 11 1/4% Senior
Unsecured Notes. On October 14, 1994, the Company issued an additional $23
million of 11 1/4% Senior Unsecured Notes as settlement of certain prepetition
unsecured claims. Finally, stockholders' equity has increased to $588.7 million
as of September 30, 1994 compared to a deficit of $254.3 million at December
31, 1993.
Cash generated from operating activities for the combined nine months ended
September 30, 1994 and 1993 amounted to $131.0 million and $128.4 million,
respectively. During the combined nine months of 1994, the Company incurred
capital expenditures of $62.2 million compared to $38.3 million in 1993.
The capital expenditures for 1994 and 1993 consisted largely of aircraft spare
parts and heavy engine overhauls.
Effective April 1, 1994, employee base wages were increased between two percent
to eight percent depending on the employee's length of service with the
Company. Generally, each employee whose anniversary date occurs between April
and December 1994 will also receive an additional increase on such date
approximating 4 percent with certain exceptions. The Chairman of the Board and
the President will not participate in the salary increase program. Due to the
current collective bargaining process with the representatives of the pilots,
increase in pilots' salaries will not be fully paid but will be accrued. The
final distribution, if any, of such potential increases in pilots' salaries
will be determined through the collective bargaining discussions. The Company
is currently in the process of revising its entire compensation program with
the assistance of a consulting firm and anticipates implementing such program
effective January 1, 1995.
Effective April 1, 1994, matching contributions by the Company under the
America West 401(k) Plan were increased from 25 percent to 50 percent of the
first six percent contributed by the employees, subject to certain limitations.
This increase restores the Company's matching contribution to the level that
existed prior to the Chapter 11 filing.
The Company estimates that the implementation of the increases in pay and the
401(k) matching contributions will result in increased costs of approximately
$6 million during the last three months of 1994.
29
<PAGE> 30
At December 31, 1993, the Company had net operating loss ("NOL") and general
business tax credit carryforwards of approximately $530 million and $12.7
million, respectively. Under Section 382 of the Internal Revenue Code of 1986,
if a loss corporation has an "ownership change" within a designated testing
period, its ability to use its NOL and credit carryforwards is subject to
certain limitations. The Company is a loss corporation within the meaning of
Section 382. The issuance of certain common stock by the Company pursuant to
the Plan of Reorganization has resulted in an ownership change within the
meaning of Section 382. This ownership change will impose an annual limitation
(the Section 382 Limitation) upon the Company's ability to offset any
post-change taxable income with pre-change NOL. Should the Company generate
insufficient taxable income in any post-change taxable year to fully utilize
the Section 382 Limitation of that year, any excess limitation will be carried
forward to use in subsequent tax years, provided the pre-change NOL has not
been exhausted nor has the carryforward period expired.
At September 30, 1994, the Company had on order a total of 24 Airbus A320-200
aircraft, with an estimated aggregate cost of approximately $1 billion. As
part of the investment by AmWest, the A320 purchase agreement with AVSA was
amended to provide the Company with greater flexibility and reduced pricing.
Under the modified terms, delivery dates of the aircraft will fall in the years
1998 through 2000 with an option to further defer deliveries. In addition, if
new A320 aircraft are delivered as a result of the renegotiated put agreement
(see below), the Company will have the right to cancel on a one-for-one basis,
up to a maximum of eight non-consecutive aircraft deliveries hereunder, subject
to certain conditions.
In June 1994, the Company renegotiated a put agreement for ten A320 aircraft.
The new agreement reduced the number of put aircraft from ten to eight and
rescheduled the deliveries to start no earlier than June 30, 1995 and end on
June 30, 1999. Under the new agreement, new or used A320-200 aircraft,
B737-300 or B757-200 aircraft may be put to the Company but at a rate of no
more than two in 1995, and with respect to each ensuing year during the put
period, of no more than three. In addition, no more than five used aircraft
may be put to the Company and for every new A320 aircraft put to the Company,
the Company has the right to reduce the AVSA A320 purchase contract on a
one-for-one basis. During each January of the put period, the Company will
negotiate the type and delivery dates of the put aircraft for that year. The
puts will require 150-day notice and will be leased at fair market rates for
terms ranging from three to 18 years, depending on the type and condition of
the aircraft. As part of the renegotiated agreement, certain cash payments and
securities were issued to the put holder pursuant to the Plan of Reorganization
(see Note 1).
In June 1994, the Company reached a settlement for the cancellation of the
right of a former D.I.P. lender to put four aircraft to the Company. The
settlement called for cash payments of $4.5 million of which $2.5 million was
paid in June 1994 and $2.0 million was paid on the Effective Date of the Plan
of Reorganization.
With respect to the various aircraft purchase contracts with Boeing, the
Company reached a settlement in which the purchase contracts were rejected and
equipment purchase deposits were kept by Boeing in full settlement of the
rejection damages. In addition, the Company and Boeing agreed that should they
enter into a new aircraft purchase agreement, Boeing would reinstate
approximately $6 million of purchase deposits towards the new agreement.
In addition to the aircraft commitments discussed above, the Company currently
anticipates acquiring during the fourth quarter of 1994 one B757 aircraft and
one B737-300 aircraft under operating lease arrangements. Such aircraft will
be utilized to provide additional service on existing routes in which the
Company experiences high demand.
30
<PAGE> 31
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On June 27, 1991, the Company filed a voluntary petition in the United
States Bankruptcy Court for the District of Arizona to reorganize
under Chapter 11 of Title 11 of the United States Bankruptcy Court.
The Bankruptcy Court confirmed the Company's Plan of Reorganization on
August 10, 1994 and the Plan became effective on August 25, 1994.
On August 25, 1994, the Bankruptcy Court granted motions approving the
payment of reorganization bonuses and success fees of (i) $9.3 million
to be paid to non-officer employees, (ii) $1.2 million to be paid to
officers and other members of management and (iii) 125,000 shares of
the Company's Class B Common Stock paid to the Chairman and Chief
Executive Officer of the Company.
On October 14, 1994, the Bankruptcy Court approved the issuance of an
additional $23 million of 11 1/4% Senior Unsecured Notes in
satisfaction of certain prepetition claims against the Company.
Item 2. CHANGES IN SECURITIES
Pursuant to the Plan of Reorganization, all of the then outstanding
debt and equity securities of the Predecessor Company were cancelled
on the Effective Date, subject to the rights of the holders of such
securities to receive distributions under the Plan. See Notes to
Unaudited Condensed Financial Statements.
Item 3. DEFAULT UPON SENIOR SECURITIES
As a result of the Chapter 11 filing, substantially all of the
Predecessor Company's debt and lease obligations were in default. The
defaults were cured on the Effective Date in connection with the
Company's emergence from Chapter 11. See Notes to Unaudited Condensed
Financial Statements.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
On October 26, 1993, the Air Line Pilots Association (ALPA) was
certified by the NMB as the collective bargaining representative of
America West's pilots. Negotiations with ALPA pursuant to the Railway
Labor Act as amended commenced on April 19, 1994. Proposals for
certain sections of a future collective bargaining agreement have been
exchanged. Negotiations are continuing.
On April 15, 1994, the NMB advised the Company that it had instituted
an investigation in case number R-6277 to determine whether the
Company's Fleet Service employees should be represented for collective
bargaining purposes by the Transport Workers Union of America. The
NMB has not yet determined which employees would be eligible as
members of the class or craft of Fleet Service employees. The NMB
has, however, determined that a sufficient number of authorization
cards have been submitted to constitute a "showing of interest" within
the meaning of the NMB's Representation Manual.
31
<PAGE> 32
On August 1, 1994, the NMB notified America West that the International
Brotherhood of Teamsters had filed an application with the NMB for
representation of mechanics and related personnel. America West filed
its eligibility list on this same date. The NMB has determined that a
sufficient number of authorization cards have been submitted to
constitute a "showing of interest" within the meaning of the NMB's
Representation Manual.
On September 15, 1994, the Association of Flight Attendants (AFA), was
certified by the NMB as the collective bargaining representative of
America West's inflight CSR's (flight attendants). The Company and
the AFA will commence negotiations pursuant to the Railway Labor Act,
as amended in December 1994.
On September 28, 1994, the NMB notified America West that the
International Brotherhood of Teamsters had filed an application with
the NMB in NMB Case No. R-6325 seeking certification as collective
bargaining representative for a group of about fifteen employees in
the craft or class of flight simulator technicians. The NMB has not
formally determined whether the employees are eligible for inclusion
in the craft or class, nor has the NMB determined whether a sufficient
number of authorization cards have been submitted to constitute a
"showing of interest" within the meaning of the NMB's Representation
Manual.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION AND METHOD OF FILING
------- --------------------------------
<S> <C>
+ 1.1 The Company's Plan of Reorganization under Chapter 11 of the Bankruptcy Code, as amended.
+ 3.1 Restated Certificate of Incorporation of America West Airlines, Inc.
+ 3.2 Restated By-laws of America West Airlines, Inc.
+ 4.1 Indenture for $100,000,000 11 1/4% Senior Notes due 2001 dated August 25, 1994, of America West
Airlines, Inc. and American Bank National Association, as trustee.
+ 4.2 Form of Senior Note (included as Exhibit A to Exhibit 4.1 above).
+ 4.3 Warrant Agreement dated August 25, 1994 between America West Airlines, Inc. and First Interstate
Bank of California, N.A., as Warrant Agent.
+ 4.4 Form of Warrant (included as Exhibit A to Exhibit 4.3 above).
+ 4.5 Stockholders' Agreement for America West Airlines, Inc. dated August 25, 1994 among America West
Airlines, Inc., AmWest Partners, L.P., GPA Group plc and certain other Stockholder
Representatives.
+ 4.51 First Amendment to Stockholders' Agreement for America West Airlines, Inc. dated September 6, 1994
among America West Airlines, Inc., AmWest Partners, L.P., GPA Group plc and certain other
Stockholder Representatives.
</TABLE>
32
<PAGE> 33
<TABLE>
<S> <C>
+ 4.6 Registration Rights Agreement dated August 25, 1994 among America West Airlines, Inc., AmWest
Partners, L.P. and other holders.
+ 4.7 Registration Rights Agreement dated August 25, 1994 between America West Airlines, Inc. and GPA
Group plc.
+10.12 Alliance Agreement dated August 25, 1994 between America West Airlines, Inc. and Continental
Airlines, Inc. including the Master Ground Handling Agreement, the Reciprocal Frequent Flyer
Participation Agreement, the Code Sharing Agreement, the Cargo Special Pro-Rate Agreement, the
Reciprocal Club Usage Agreement and the Memorandum of Understanding Concerning Technology
Transfers.
+10.13 Alliance Agreement as amended on August 25, 1994 between America West Airlines, Inc. and Mesa
Airlines, Inc.
11.1 Computation of Earnings per Share.
27.0 Financial Data Schedules - Omitted pursuant discussions with SEC Staff and response dated
November 8, 1994.
---------
</TABLE>
+ Incorporated by reference to the Company's current report on
Form 8-K dated August 25, 1994.
b. Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated August
25, 1994 to report the Effective Date of the Company's Plan of
Reorganization and the Company's alliance agreement with
Continental Airlines, Inc.
33
<PAGE> 34
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 AIRLINES, INC.
By /s/ RAYMOND T. NAKANO
_____________________________
Raymond T. Nakano
Vice President and Controller
DATED: November 14, 1994
34
<PAGE> 1
<TABLE>
<CAPTION> Exhibit 11.1
AMERICA WEST AIRLINES, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands of dollars except per share amount)
REORGANIZED |
COMPANY | PREDECESSOR COMPANY
------------ | -----------------------------
Period From | Period From Three Months
August 26 to | July 1 to Ended
September 30 | August 25 September 30
------------ | ----------------------------
1994 | 1994 1993
------------ | ----------- -------------
<S> <C> | <C> <C>
Primary Earnings Per Share |
Computation for Statements of Operation: |
Income (loss) before extraordinary item . . $ 1,218 | $ (238,579) $ 14,403
Preferred dividends . . . . . . . . . . . - | - -
----------- | ----------- -----------
Income (loss) before extraordinary |
item . . . . . . . . . . . . . . . . . 1,218 | (238,579) 14,403
Extraordinary item . . . . . . . . . . . - | 257,660 -
----------- | ----------- -----------
Net income applicable to common stock. . $ 1,218 | $ 19,081 $ 14,403
=========== | =========== ===========
Weighted average number of common shares |
outstanding. . . . . . . . . . . . . . . 45,125,000 | 25,715,499 24,222,964
=========== | =========== ===========
Primary earnings per common share: |
Income (loss) before extraordinary |
item . . . . . . . . . . . . . . . . . $ 0.03 | $ (9.28) $ 0.59
Extraordinary item. . . . . . . . . . . . - | 10.02 -
----------- | ----------- -----------
Net income. . . . . . . . . . . . . . . . $ 0.03 | $ 0.74 $ 0.59
=========== | =========== ===========
|
Income (loss) before extraordinary item . . $ 1,218 | $ (238,579) $ 14,403
Preferred dividends . . . . . . . . . . . - | - -
Adjustment for interest on debt reduction, |
net of taxes. . . . . . . . . . . . . . 21 | 534 1,424
----------- | ----------- -----------
|
Income (loss) applicable to common stock |
before extraordinary item . . . . . . . 1,239 | (238,045) 15,827
Extraordinary item. . . . . . . . . . . . - | 257,660 -
----------- | ----------- -----------
Net income applicable to common stock . . $ 1,239 | $ 19,615 $ 15,827
=========== | =========== ===========
Weighted average number of common shares |
outstanding . . . . . . . . . . . . . . 45,125,000 | 25,715,499 24,222,964
Assumed exercise of stock options and |
warrants (a). . . . . . . . . . . . . . 1,359,615 | 2,526,278 4,839,083
----------- | ----------- -----------
Weighted average number of common |
shares outstanding as adjusted. . . . . 46,484,615 | 28,241,777 29,062,047
=========== | =========== ===========
Primary earnings per common share: |
Income (loss) before extraordinary item . $ 0.03 | $ (8.43) $ 0.54
Extraordinary item. . . . . . . . . . . . - | 9.12 -
----------- | ----------- -----------
Net income. . . . . . . . . . . . . . . . $ 0.03(b) | $ 0.69 $ 0.54
=========== | =========== ===========
</TABLE>
35
<PAGE> 2
<TABLE>
<CAPTION> Exhibit 11.1
AMERICA WEST AIRLINES, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands of dollars except per share amount)
REORGANIZED |
COMPANY | PREDECESSOR COMPANY
------------ | ---------------------------
Period From | Period From Three Months
August 26 to | July 1 to Ended
September 30 | August 25 September 30
------------ | ---------------------------
1994 | 1994 1993
------------ | ----------- ------------
<S> <C> | <C> <C>
Fully Diluted Earnings Per Share |
Computation for Statements of Operations: |
Income (loss) before extraordinary |
item . . . . . . . . . . . . . . . . . $ 1,218 | $ (238,579) $ 14,403
Adjustment for interest on debt |
reduction, net of taxes . . . . . . . . 21 | 532 1,424
Preferred dividends . . . . . . . . . . . - | - -
----------- | ----------- -----------
Income (loss) applicable to common stock |
before extraordinary item . . . . . . . 1,239 | (238,047) 15,827
Extraordinary item. . . . . . . . . . . . - | 257,660 -
----------- | ----------- -----------
Net income applicable to common stock . . $ 1,239 | $ 19,613 $ 15,827
=========== | =========== ===========
Weighted average number of common |
shares outstanding. . . . . . . . . . . 45,125,000 | 25,715,499 24,222,964
Assumed exercise of stock options |
and warrants (a). . . . . . . . . . . . 1,359,615 | 2,526,278 4,839,083
----------- | ----------- -----------
Weighted average number of common |
shares outstanding as adjusted. . . . . 46,484,615 | 28,241,777 29,062,047
=========== | =========== ===========
Fully diluted earnings per |
common share: |
Income (loss) before extraordinary |
item . . . . . . . . . . . . . . . . . . $ 0.03 | $ (8.43) 0.54
Extraordinary item . . . . . . . . . . . - | 9.12 -
----------- | ----------- -----------
Net income. . . . . . . . . . . . . . . . $ 0.03(b) | $ 0.69 $ 0.54
=========== | =========== ===========
Additional Fully Diluted Computation: |
Additional adjustment to net income as |
adjusted per fully diluted computation above |
Income (loss) before extraordinary item |
as adjusted per fully diluted |
computation above . . . . . . . . . . . $ 1,218 | $ (238,579) $ 14,403
Add - Interest on 7.75% subordinated |
debenture, net of taxes . . . . . . . . - | - -
Add - Interest on 7.5% subordinated |
debenture, net of taxes . . . . . . . . - | - -
Add - Interest on 11.5% subordinated |
debenture, net of taxes . . . . . . . . - | - -
Add interest on debt reduction, |
net of taxes. . . . . . . . . . . . . . 21 | 532 1,424
----------- | ----------- -----------
Income (loss) before |
extraordinary item as adjusted. . . . 1,239 | (238,047) 15,827
Extraordinary item. . . . . . . . . . . . - | 257,660
----------- | ----------- -----------
Net income applicable to common stock . . $ 1,239 | $ 19,613 $ 15,827
=========== | =========== ===========
</TABLE>
36
<PAGE> 3
<TABLE>
<CAPTION> Exhibit 11.1
AMERICA WEST AIRLINES, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands of dollars except per share amount)
REORGANIZED |
COMPANY | PREDECESSOR COMPANY
------------ | ----------------------------
Period From | Period From Three Months
August 26 to | July 1 to Ended
September 30 | August 25 September 30
------------ | ----------------------------
1994 | 1994 1993
------------ | ------------ -------------
<S> <C> | <C> <C>
Fully Diluted Earnings Per Share |
Additional adjustment to weighted |
average number of shares |
outstanding |
Weighted average number of shares |
outstanding as adjusted per fully |
diluted computation above . . . . . . . 46,484,615 | 28,241,777 29,062,047
Additional dilutive effect of outstanding |
options and warrants. . . . . . . . . . - | - -
Additional dilutive effect of assumed |
conversion of preferred stock: |
Series A 9.75% . . . . . . . . . . . - | - -
Series B 10.5% . . . . . . . . . . . - | - 1,075,985
Series C 9.75% . . . . . . . . . . . - | 73,099 73,099
Additional dilutive effect of assumed |
conversion of 7.75% subordinated |
debenture . . . . . . . . . . . . . . . - | 2,257,558 2,257,558
Additional dilutive effect of assumed |
conversion of 7.5% subordinated |
debenture . . . . . . . . . . . . . . . - | 2,264,932 2,265,102
Additional dilutive effect of assumed |
conversion of 11.5% subordinated |
debenture . . . . . . . . . . . . . . . - | 7,306,865 7,307,092
----------- | ----------- -----------
Weighted average number of common shares |
outstanding as adjusted . . . . . . . . 46,484,615 | 40,144,231 42,040,883
=========== | =========== ===========
Fully diluted earnings per common share: |
Income (loss) before extraordinary |
item . . . . . . . . . . . . . . . . . . $ 0.03 | $ (5.93) $ 0.38
Extraordinary item. . . . . . . . . . . . - | 6.42 -
----------- | ----------- -----------
Net income. . . . . . . . . . . . . . . . $ 0.03(b) | $ 0.49 $ 0.38
=========== | =========== ===========
</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 Regulation
S-K Item 601 (b)(11) although not required by footnote 2
to paragraph 14 of APB Opinion No. 15 because it results
in dilution of less than 3%.
37
<PAGE> 4
<TABLE>
<CAPTION> Exhibit 11.1
AMERICA WEST AIRLINES, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands of dollars except per share amount)
REORGANIZED |
COMPANY | PREDECESSOR COMPANY
------------ | ---------------------------
Period From | Period From Nine Months
August 26 to | January 1 to Ended
September 30 | August 25 September 30
------------ | ---------------------------
1994 | 1994 1993
------------ | ------------ ------------
<S> <C> | <C> <C>
Primary Earnings Per Share |
Computation for Statements of Operation: |
Income (loss) before extraordinary item . . $ 1,218 | $ (203,268) $ 26,797
Preferred dividends . . . . . . . . . . . - | - -
----------- | ----------- -----------
Income (loss) before extraordinary |
item . . . . . . . . . . . . . . . . . . 1,218 | (203,268) 26,797
Extraordinary item. . . . . . . . . . . . - | 257,660 -
----------- | ----------- -----------
Net income applicable to common stock . . $ 1,218 | $ 54,392 26,797
=========== | =========== ===========
Weighted average number of common shares |
outstanding . . . . . . . . . . . . . . . 45,125,000 | 25,470,671 24,209,436
=========== | =========== ===========
Primary earnings per common share: |
Income (loss) before extraordinary |
item . . . . . . . . . . . . . . . . . . $ 0.03 | $ (7.98) $ 1.11
Extraordinary item. . . . . . . . . . . . | 10.12 -
----------- | ----------- -----------
Net income. . . . . . . . . . . . . . . . $ 0.03 | $ 2.14 $ 1.11
=========== | =========== ===========
|
Income (loss) before extraordinary item . . $ 1,218 | $ (203,268) $ 26,797
Preferred dividends . . . . . . . . . . . - | - -
Adjustment for Interest on debt reduction, |
net of taxes. . . . . . . . . . . . . . 21 | 2,584 2,859
----------- | ----------- -----------
Income (loss) applicable to common stock |
before extraordinary item . . . . . . . 1,239 | (200,684) 29,656
Extraordinary item. . . . . . . . . . . . - | 257,660 -
----------- | ----------- -----------
Net Income applicable to common stock . . $ 1,239 | $ 56,976 $ 29,656
=========== | =========== ===========
Weighted average number of common shares |
outstanding . . . . . . . . . . . . . . . 45,125,000 | 25,470,671 24,209,436
Assumed exercise of stock options and |
warrants (a). . . . . . . . . . . . . . 1,359,615 | 3,079,258 3,370,694
----------- | ----------- -----------
Weighted average number of common |
shares outstanding as adjusted. . . . . 46,484,615 | 28,549,929 27,580,130
=========== | =========== ===========
Primary earnings per common share: |
Income (loss) before extraordinary |
item . . . . . . . . . . . . . . . . . . $ 0.03 | $ (7.03) $ 1.08
Extraordinary item. . . . . . . . . . . . - | 9.02 -
----------- | ----------- -----------
Net income. . . . . . . . . . . . . . . . $ 0.03(b) | $ 1.99 $ 1.08
=========== | =========== ===========
</TABLE>
38
<PAGE> 5
<TABLE>
<CAPTION> Exhibit 11.1
AMERICA WEST AIRLINES, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands of dollars except per share amount)
REORGANIZED |
COMPANY | PREDECESSOR COMPANY
------------ | ----------------------------
Period From | Period From Nine Months
August 26 to | January 1 to Ended
September 30 | August 25 September 30
------------ | ----------------------------
1994 | 1994 1993
------------ | ------------ -------------
<S> <C> | <C> <C>
Fully Diluted Earnings Per Share |
Computation for Statements of Operations: |
Income (loss) before extraordinary |
item . . . . . . . . . . . . . . . . . . $ 1,218 | $ (203,268) $ 26,797
Adjustment for interest on debt reduction |
net of taxes. . . . . . . . . . . . . . 21 | 2,520 4,338
Preferred dividends . . . . . . . . . . . - | - -
----------- | ----------- -----------
Income (loss) applicable to common stock |
before extraordinary item . . . . . . . 1,239 | (200,748) 31,135
Extraordinary item. . . . . . . . . . . . - | 257,660 -
----------- | ----------- -----------
Net income applicable to common stock . . $ 1,239 | $ 56,912 $ 31,135
=========== | =========== ===========
Weighted average number of common |
shares outstanding. . . . . . . . . . . 45,125,000 | 25,470,671 24,209,436
Assumed exercise of stock options |
and warrants (a). . . . . . . . . . . . 1,359,615 | 3,079,258 5,256,969
----------- | ----------- -----------
Weighted average number of common |
shares outstanding as adjusted. . . . . 46,484,615 | 28,549,929 29,466,405
=========== | =========== ===========
Fully diluted earnings per |
common share: |
Income (loss) before extraordinary |
item . . . . . . . . . . . . . . . . . . $ 0.03 | $ (7.03) $ 1.06
Extraordinary item. . . . . . . . . . . . - | 9.02 -
----------- | ----------- -----------
Net income. . . . . . . . . . . . . . . . $ 0.03(b) | $ 1.99 $ 1.06
=========== | =========== ===========
Additional Fully Diluted Computation: |
Additional adjustment to net income as |
adjusted per fully diluted computation above |
Income (loss) before extraordinary item as |
adjusted per fully diluted computation |
above . . . . . . . . . . . . . . . . $ 1,218 | $ (203,268) $ 26,797
Add - Interest on 7.75% subordinated |
debenture, net of taxes . . . . . . . . - | - -
Add - Interest on 7.5% subordinated |
debenture, net of taxes . . . . . . . . - | - -
Add - Interest on 11.5% subordinated |
debenture, net of taxes . . . . . . . . - | - -
Add interest on debt reduction, |
net of taxes. . . . . . . . . . . . . . 21 | 2,520 4,338
----------- | ----------- -----------
Income (loss) before extraordinary |
item as adjusted. . . . . . . . . . . . 1,239 | (200,748) 31,135
Extraordinary item. . . . . . . . . . . . - | 257,660
----------- | ----------- -----------
Net income applicable to common stock . . $ 1,239 | $ 56,912 $ 31,135
=========== | =========== ===========
</TABLE>
39
<PAGE> 6
<TABLE>
<CAPTION> Exhibit 11.1
AMERICA WEST AIRLINES, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
(in thousands of dollars except per share amount)
REORGANIZED |
COMPANY | PREDECESSOR COMPANY
------------ | ----------------------------
Period From | Period From Nine Months
August 26 to | January 1 to Ended
September 30 | August 25 September 30
------------ | ----------------------------
1994 | 1994 1993
------------ | ------------- ------------
<S> <C> | <C> <C>
Fully Diluted Earnings Per Share |
Additional adjustment to weighted |
average number of shares |
outstanding |
Weighted average number of shares |
outstanding as adjusted per fully |
diluted computation above . . . . . . . 46,484,615 | 28,549,929 29,466,405
Additional dilutive effect of outstanding |
options and warrants. . . . . . . . . . - | -
Additional dilutive effect of assumed |
conversion of preferred stock: |
Series A 9.75% . . . . . . . . . . . - | - -
Series B 10.5% . . . . . . . . . . . - | - 1,135,059
Series C 9.75% . . . . . . . . . . . - | 73,099 73,099
Additional dilutive effect of assumed |
conversion of 7.75% subordinated |
debenture . . . . . . . . . . . . . . . - | 2,257,558 2,264,823
Additional dilutive effect of assumed |
conversion of 7.5% subordinated |
debenture . . . . . . . . . . . . . . . - | 2,264,932 2,275,086
Additional dilutive effect of assumed |
conversion of 11.5% subordinated |
debenture . . . . . . . . . . . . . . . - | 7,306,865 7,335,314
----------- | ----------- -----------
Weighted average number of common shares |
outstanding as adjusted . . . . . . . . 46,484,615 | 40,452,383 42,549,786
=========== | =========== ===========
Fully diluted earnings per common share: |
Income (loss) before extraordinary |
item . . . . . . . . . . . . . . . . . . $ 0.03 | $ (4.96) $ 0.73
Extraordinary item. . . . . . . . . . . . - | 6.37 -
----------- | ----------- -----------
Net income. . . . . . . . . . . . . . . . $ 0.03(b) | $ 1.41 $ 0.73
=========== | =========== ===========
</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
Regulation S-K Item 601 (b)(11) although not required
by footnote 2 to paragraph 14 of APB Opinion No. 15
because it results in dilution of less than 3%.
40
