Alaska Airlines Financial Statements

BALANCE SHEET Alaska Airlines, Inc.
ASSETS - ------------------------------------------------------------------------- ----------------- As of December 31 (In Millions) 1998 1999 - ------------------------------------------------------------------------- ----------------- CURRENT ASSETS Cash and cash equivalents $29.1 $132.3 Marketable securities 277.2 196.5 Receivables from related companies 7.0 27.1 Receivables - less allowance for doubtful accounts (1998 - $0.9; 1999 - $0.9) 66.0 70.9 Inventories and supplies 23.9 29.9 Prepaid expenses and other assets 103.5 120.5 - ------------------------------------------------------------------------- ----------------- TOTAL CURRENT ASSETS 506.7 577.2 - ------------------------------------------------------------------------- ----------------- PROPERTY AND EQUIPMENT Flight equipment 926.0 1,286.2 Other property and equipment 243.2 280.1 Deposits for future flight equipment 130.4 163.8 - ------------------------------------------------------------------------- ----------------- 1,299.6 1,730.1 Less accumulated depreciation & amortization 364.1 421.6 - ------------------------------------------------------------------------- ----------------- 935.5 1,308.5 - ------------------------------------------------------------------------- ----------------- Capital leases: Flight and other equipment 44.4 44.4 Less accumulated amortization 29.6 31.6 - ------------------------------------------------------------------------- ----------------- 14.8 12.8 - ------------------------------------------------------------------------- ----------------- TOTAL PROPERTY AND EQUIPMENT - NET 950.3 1,321.3 - ------------------------------------------------------------------------- ----------------- INTANGIBLE ASSETS 14.0 13.5 - ------------------------------------------------------------------------- ----------------- OTHER ASSETS 77.8 69.2 - ------------------------------------------------------------------------- ----------------- TOTAL ASSETS $1,548.8 $1,981.2 - ------------------------------------------------------------------------- ----------------- - ------------------------------------------------------------------------- ----------------- BALANCE SHEET Alaska Airlines, Inc. LIABILITIES AND SHAREHOLDER'S EQUITY - ------------------------------------------------------------------------- ----------------- As of December 31 (In Millions Except Share Amounts) 1998 1999 - ------------------------------------------------------------------------- ----------------- CURRENT LIABILITIES Accounts payable $63.8 $88.3 Payables to related companies 104.4 126.9 Accrued aircraft rent 62.1 68.3 Accrued wages, vacation and payroll taxes 68.9 70.7 Other accrued liabilities 88.3 89.6 Air traffic liability 177.7 183.2 Current portion of long-term debt and capital lease obligations 27.2 66.5 - ------------------------------------------------------------------------- ----------------- TOTAL CURRENT LIABILITIES 592.4 693.5 - ------------------------------------------------------------------------- ----------------- LONG-TERM DEBT & CAPITAL LEASE OBLIGATIONS 171.5 337.0 - ------------------------------------------------------------------------- ----------------- OTHER LIABILITIES AND CREDITS Deferred income taxes 98.2 143.3 Deferred income 38.1 34.2 Other liabilities 99.1 104.3 - ------------------------------------------------------------------------- ----------------- 235.4 281.8 - ------------------------------------------------------------------------- ----------------- COMMITMENTS - ------------------------------------------------------------------------- ----------------- SHAREHOLDER'S EQUITY Common stock, $1 par value Authorized: 1,000 shares Issued: 1998 and 1999 - 500 shares - - Capital in excess of par value 225.8 225.8 Retained earnings 323.7 443.1 - ------------------------------------------------------------------------- ----------------- 549.5 668.9 - ------------------------------------------------------------------------- ----------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $1,548.8 $1,981.2 - ------------------------------------------------------------------------- ----------------- - ------------------------------------------------------------------------- ----------------- STATEMENT OF INCOME Alaska Airlines, Inc. - --------------------------------------------------------------------- -------------- --------------- Year Ended December 31 (In Millions) 1997 1998 1999 - --------------------------------------------------------------------- -------------- --------------- OPERATING REVENUES Passenger $1,297.0 $1,410.4 $1,519.6 Freight and mail 82.9 83.7 80.0 Other - net 68.0 72.2 81.2 - --------------------------------------------------------------------- -------------- --------------- TOTAL OPERATING REVENUES 1,447.9 1,566.3 1,680.8 - --------------------------------------------------------------------- -------------- --------------- OPERATING EXPENSES Wages and benefits 435.9 485.8 523.9 Contracted services 42.5 48.7 55.6 Aircraft fuel 199.7 162.3 205.2 Aircraft maintenance 67.4 77.6 96.0 Aircraft rent 148.5 158.9 157.2 Food and beverage service 46.7 49.1 49.1 Commissions 100.8 94.4 91.0 Other selling expenses 63.9 75.2 82.2 Depreciation and amortization 56.9 61.9 67.9 Loss (gain) on disposition of assets (1.2) 1.0 0.4 Landing fees and other rentals 53.1 59.4 66.5 Other 99.4 98.0 109.5 - --------------------------------------------------------------------- -------------- --------------- TOTAL OPERATING EXPENSES 1,313.6 1,372.3 1,504.5 - --------------------------------------------------------------------- -------------- --------------- OPERATING INCOME 134.3 194.0 176.3 - --------------------------------------------------------------------- -------------- --------------- NONOPERATING INCOME (EXPENSE) Interest income 12.2 23.2 21.7 Interest expense (25.0) (17.4) (16.3) Interest capitalized 3.4 5.1 8.3 Other - net 2.5 (14.4) 6.4 - --------------------------------------------------------------------- -------------- --------------- (6.9) (3.5) 20.1 - --------------------------------------------------------------------- -------------- --------------- Income before income tax 127.4 190.5 196.4 Income tax expense 51.4 74.0 77.0 - --------------------------------------------------------------------- -------------- --------------- NET INCOME $76.0 $116.5 $119.4 - --------------------------------------------------------------------- -------------- --------------- - --------------------------------------------------------------------- -------------- --------------- STATEMENT OF SHAREHOLDER'S EQUITY Alaska Airlines, Inc. - ------------------------------------------------------------------------------------------------------------------- Capital in Common Excess of Retained (In Millions) Stock Par Value Earnings Total - ------------------------------------------------------------------------------------------------------------------- Balances at December 31, 1996 $ - $225.8 $131.2 $357.0 1997 net income 76.0 76.0 - ------------------------------------------------------------------------------------------------------------------- Balances at December 31, 1997 - 225.8 207.2 433.0 1998 net income 116.5 116.5 - ------------------------------------------------------------------------------------------------------------------- Balances at December 31, 1998 - 225.8 323.7 549.5 1999 net income 119.4 119.4 - ------------------------------------------------------------------------------------------------------------------- BALANCES AT DECEMBER 31, 1999 $ - $225.8 $443.1 $668.9 - ------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS Alaska Airlines, Inc. - ------------------------------------------------------------------------------ ---------------- ----------------- Year Ended December 31 (In Millions) 1997 1998 1999 - ------------------------------------------------------------------------------ ---------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $76.0 $116.5 $119.4 Adjustments to reconcile net income to cash: Depreciation and amortization 56.9 61.9 67.9 Amortization of airframe and engine overhauls 29.6 34.7 43.5 Loss (gain) on sale of assets (1.2) 1.0 0.4 Increase in deferred income taxes 6.6 26.0 45.1 Decrease (increase) in accounts receivable 90.1 (3.2) (25.0) Increase in other current assets (7.6) (14.2) (23.0) Increase in air traffic liability 4.0 11.7 5.5 Increase in other current liabilities 66.2 35.6 56.3 Other-net 2.6 2.4 4.4 - ------------------------------------------------------------------------------ ---------------- ----------------- Net cash provided by operating activities 323.2 272.4 294.5 - ------------------------------------------------------------------------------ ---------------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposition of assets 4.5 0.6 0.3 Purchases of marketable securities (443.6) (323.4) (137.8) Sales and maturities of marketable securities 385.9 156.3 218.5 Restricted deposits (3.2) (1.6) 5.6 Additions to flight equipment deposits (56.4) (143.4) (149.2) Additions to property and equipment (236.6) (276.7) (333.6) - ------------------------------------------------------------------------------ ---------------- ----------------- Net cash used in investing activities (349.4) (588.2) (396.2) - ------------------------------------------------------------------------------ ---------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term borrowings 56.4 - - Repayment of short-term borrowings (103.4) - - Proceeds from sale and leaseback transactions 124.2 288.0 - Proceeds from issuance of long-term debt 28.0 - 232.0 Long-term debt and capital lease payments (25.9) (45.4) (27.1) - ------------------------------------------------------------------------------ ---------------- ----------------- Net cash provided by financing activities 79.3 242.6 204.9 - ------------------------------------------------------------------------------ ---------------- ----------------- Net increase (decrease) in cash and cash equivalents 53.1 (73.2) 103.2 Cash and cash equivalents at beginning of year 49.2 102.3 29.1 - ------------------------------------------------------------------------------ ---------------- ----------------- Cash and cash equivalents at end of year $102.3 $29.1 $132.3 - ------------------------------------------------------------------------------ ---------------- ----------------- - ------------------------------------------------------------------------------ ---------------- ----------------- Supplemental disclosure of cash paid during the year for: Interest (net of amount capitalized) $21.9 $13.1 $7.0 Income taxes 26.6 48.5 34.9 Noncash investing and financing activities: 1999 - A flight simulator was transferred to Alaska Air Group Leasing in exchange for an $8.8 million note receivable and a $2.2 million reduction in its payable to Alaska Air Group. 1998 - A $54.0 million note payable to Alaska Air Group was exchanged for a non-interest bearing payable. ALASKA AIRLINES FINANCIAL AND STATISTICAL DATA Quarter Ended December 31 Year Ended December 31 --------------------------------------- ---------------------------------------- % % FINANCIAL DATA (IN MILLIONS): 1998 1999 Change 1998 1999 Change ----- ----- ------ ----- ----- ------ Operating Revenues: Passenger $333.5 $362.5 8.7 $1,410.4 $1,519.6 7.7 Freight and mail 19.8 19.4 (2.0) 83.7 80.0 (4.4) Other - net 19.4 22.3 14.9 72.2 81.2 12.5 ------------------------ ------------------------- Total Operating Revenues 372.7 404.2 8.5 1,566.3 1,680.8 7.3 ------------------------ ------------------------- Operating Expenses: Wages and benefits 115.0 131.1 14.0 466.1 505.5 8.5 Employee profit sharing 3.7 2.3 (37.8) 19.7 18.4 (6.6) Contracted services 11.8 14.9 26.3 48.7 55.6 14.2 Aircraft fuel 39.1 61.0 56.0 162.3 205.2 26.4 Aircraft maintenance 17.2 26.9 56.4 77.6 96.0 23.7 Aircraft rent 41.2 36.7 (10.9) 158.9 157.2 (1.1) Food and beverage service 12.5 12.1 (3.2) 49.1 49.1 0.0 Commissions 22.5 17.8 (20.9) 94.4 91.0 (3.6) Other selling expenses 18.9 20.5 8.5 75.2 82.2 9.3 Depreciation and amortization 15.9 18.7 17.6 61.9 67.9 9.7 Loss on sale of assets 0.6 0.0 NM 1.0 0.4 NM Landing fees and other rentals 14.8 14.8 0.0 59.4 66.5 12.0 Other 24.9 28.6 14.9 98.0 109.5 11.7 ------------------------ ------------------------- Total Operating Expenses 338.1 385.4 14.0 1,372.3 1,504.5 9.6 ------------------------ ------------------------- Operating Income 34.6 18.8 (45.7) 194.0 176.3 (9.1) ------------------------ ------------------------- Interest income 6.8 5.4 23.2 21.7 Interest expense (4.0) (5.2) (17.4) (16.3) Interest capitalized 1.5 2.5 5.1 8.3 Other - net (0.1) 3.4 (14.4) 6.4 ------------------------ ------------------------- 4.2 6.1 (3.5) 20.1 ------------------------ ------------------------- Income Before Income Tax $38.8 $24.9 (35.8) $190.5 $196.4 3.1