1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Period Ended June 30, 1995.
[ ]Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From to
.
Commission file number 1-8400.
AMR Corporation
(Exact name of registrant as specified in its charter)
Delaware 75-1825172
(State or other (I.R.S. Employer
jurisdiction Identification No.)
of incorporation or
organization)
4333 Amon Carter Blvd.
Fort Worth, Texas 76155
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, (817) 963-1234
including area code
Not Applicable
(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 periods that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No .
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date.
Common Stock, $1 par value - 76,314,363 as of August 7, 1995
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INDEX
AMR CORPORATION
PART I: FINANCIAL INFORMATION
Item 1. Financial Information
Consolidated Statement of Operations -- Three months ended
June 30, 1995 and 1994; Six months ended June 30, 1995 and
1994
Condensed Consolidated Balance Sheet -- June 30, 1995 and
December 31, 1994
Condensed Consolidated Statement of Cash Flows -- Six months
ended June 30, 1995 and 1994
Notes to Condensed Consolidated Financial Statements -- June
30, 1995
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
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PART 1. FINANCIAL INFORMATION
AMR CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited) (In millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Revenues
Airline Group:
Passenger
- American
Airlines, Inc. $3,395 $3,267 $6,538 $6,295
- AMR Eagle, Inc. 203 207 358 388
Cargo 178 165 336 321
Other 180 149 335 288
3,956 3,788 7,567 7,292
The SABRE Group 408 364 814 731
Management Services Group 162 158 328 315
Less: Intergroup revenues (219) (209) (432) (429)
Total operating revenues 4,307 4,101 8,277 7,909
Expenses
Wages, salaries and
benefits 1,464 1,388 2,869 2,753
Aircraft fuel 399 388 777 783
Commissions to agents 321 339 641 665
Depreciation and
amortization 318 319 633 639
Other rentals and
landing fees 218 205 432 416
Aircraft rentals 167 172 337 351
Food service 168 171 328 333
Maintenance materials
and repairs 156 149 308 292
repairs
Other operating expenses 614 569 1,218 1,117
Total operating 3,825 3,700 7,543 7,349
expenses
Operating Income 482 401 734 560
Other Income (Expense)
Interest income 14 7 27 13
Interest expense (177) (154) (358) (306)
Interest capitalized 4 4 8 11
Miscellaneous - net (2) (10) (17) (28)
(161) (153) (340) (310)
Earnings Before Income Taxes
and Extraordinary Loss 321 248 394 250
Income tax provision 129 95 164 104
Earnings Before
Extraordinary Loss 192 153 230 146
Extraordinary Loss,
Net of Tax Benefit (13) - (13) -
Net Earnings 179 153 217 146
Preferred stock dividends 1 17 2 33
Earnings Applicable to
Common Shares $ 178 $ 136 $ 215 $ 113
Continued on next page.
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AMR CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
(Unaudited) (In millions, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Earnings (Loss) Per Common
Share
Primary:
Before effect of
extraordinary loss $ 2.48 $ 1.77 $ 2.96 $ 1.48
Extraordinary loss (0.17) - (0.17) -
Net Earnings $ 2.31 $ 1.77 $ 2.79 $ 1.48
Fully Diluted:
Before effect of
extraordinary loss $ 2.23 $ 1.68 $ 2.77 $ 1.48
Extraordinary loss (0.15) - (0.15) -
Net Earnings $ 2.08 $ 1.68 $ 2.62 $ 1.48
Number of common shares
used in computations
Primary 77 76 77 76
Fully diluted 91 90 91 76
The accompanying notes are an integral part of these financial statements.
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AMR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
June 30, December
31,
1995 1994
(Unaudited) (Note)
Assets
Current Assets
Cash $ 89 $ 23
Short-term investments 810 754
Receivables, net 1,458 1,206
Inventories, net 615 678
Other current assets 520 457
Total current assets 3,492 3,118
Equipment and Property
Flight equipment, net 10,180 9,888
Purchase deposits for flight equipment 29 116
10,209 10,004
Other equipment and property, net 1,989 2,016
12,198 12,020
Equipment and Property Under Capital Leases
Flight equipment, net 1,647 1,705
Other equipment and property, net 168 173
1,815 1,878
Route acquisition costs, net 1,018 1,032
Other assets, net 1,430 1,438
$ 19,953 $ 19,486
Note: The balance sheet at December 31, 1994 has been derived
from the audited financial statements at that date but does not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements.
The accompanying notes are an integral part of these financial
statements.
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AMR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
June 30, December
31,
1995 1994
(Unaudited) (Note)
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 914 $ 920
Accrued liabilities 2,060 1,803
Air traffic liability 1,666 1,473
Current maturities of long-term debt 750 590
Current obligations under capital leases 160 128
Total current liabilities 5,550 4,914
Long-term debt, less current maturities 5,155 5,603
Obligations under capital leases, less
current obligations 2,236 2,275
Deferred income taxes 326 279
Other liabilities, deferred gains, deferred
credits and postretirement benefits 3,085 3,035
Stockholders' Equity
Convertible preferred stock 78 78
Common stock 76 76
Additional paid-in capital 2,227 2,212
Retained earnings 1,220 1,014
3,601 3,380
$ 19,953 $ 19,486
Note: The balance sheet at December 31, 1994 has been derived
from the audited financial statements at that date but does not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements.
The accompanying notes are an integral part of these financial
statements.
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AMR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) (In millions)
Six Months Ended June
30,
1995 1994
Net Cash Provided by Operating Activities $1,107 $ 994
Cash Flow from Investing Activities:
Capital expenditures (683) (612)
Net increase in short-term investments (56) (44)
Investment in Canadian Airlines
International, Ltd. - (177)
Other, net 65 7
Net cash used for investing activities (674) (826)
Cash Flow from Financing Activities:
Proceeds from issuance of long-term debt - 109
Other short-term borrowings - 200
Payments on other short-term borrowings - (200)
Payments on long-term debt and capital lease
obligations (365) (242)
Payment of preferred stock dividends (2) (33)
Net cash used for financing activities (367) (166)
Net increase in cash 66 2
Cash at beginning of period 23 63
Cash at end of period $ 89 $ 65
Cash Payments (Refunds) For:
Interest (net of amounts capitalized) $ 336 $ 294
Income taxes (56) (58)
Financing Activities not Affecting Cash:
Capital lease obligations incurred $ - $ 190
The accompanying notes are an integral part of these
financial statements.
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AMR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, these financial statements contain
all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position, results of
operations and cash flows for the periods indicated. For
further information, refer to the consolidated financial
statements and footnotes thereto included in the AMR
Corporation annual report on Form 10-K for the year ended
December 31, 1994.
2.Certain amounts from 1994 have been reclassified to conform
with 1995 presentation. Beginning January 1, 1995, the
results of two AMR units -- TeleService Resources (TSR) and
Data Management Services (DMS) -- are reported in the
Management Services Group and the results of AMR Training and
Consulting Group (AMRTCG) are reported in The SABRE Group.
Previously, the results of TSR and DMS had been included in
The SABRE Group, and the results of AMRTCG had been included
in the Management Services Group.
3.In July 1991, American entered into a five-year agreement
whereby American transfers, on a continuing basis and with
recourse to the receivables, an undivided interest in a
designated pool of receivables. Undivided interests in new
receivables are transferred daily as collections reduce
previously transferred receivables. At December 31, 1994,
receivables are presented net of approximately $112 million of
such transferred receivables. At June 30, 1995, no
receivables were transferred under the terms of the agreement.
4.Accumulated depreciation of owned equipment and property at
June 30, 1995 and December 31, 1994, was $5.7 billion and $5.5
billion, respectively. Accumulated amortization of equipment
and property under capital leases at June 30, 1995 and
December 31, 1994, was $948 million and $898 million,
respectively.
5.In April 1995, American announced an agreement to sell 12 of
its McDonnell Douglas MD-11 aircraft to Federal Express
Corporation (FedEx), with delivery of the aircraft between
1996 and 1999. In addition, American has the option to sell
its remaining seven MD-11 aircraft to FedEx with deliveries
between 2000 and 2002. At the same time the two companies
signed a separate six-year maintenance contract under the
terms of which American will perform work on FedEx's aircraft
fleet.
6.In the second quarter of 1995 AMR repurchased and retired
prior to maturity $239 million in face value of long-term
debt. The retirements resulted in an extraordinary loss of
$13 million, net of tax benefit of $8 million.
7.Included in Passenger Revenues for the three and six months
ended June 30, 1994, is a favorable adjustment of $35 million
produced by a change in the Company's estimate of the usage
patterns of miles awarded by participating companies in
American's AAdvantage frequent flyer program.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Summary AMR recorded net earnings for the three months ended
June 30, 1995, of $178 million after preferred stock dividends,
or $2.31 per common share primary, $2.08 fully diluted. This
compares with net earnings of $136 million after preferred stock
dividends, or $1.77 per common share primary, $1.68 fully
diluted for the second quarter of 1994. Included in net
earnings for the three months ended June 30, 1995, is an
extraordinary loss of $21 million ($13 million net of tax)
resulting from the repurchase and retirement of $239 million of
debt prior to scheduled maturity. AMR's operating income
improved 20.2 percent or $81 million.
AMR's improved operating results reflect better performance by
each of the Company's three business units - the Airline Group,
which includes American Airlines, Inc.'s Passenger and Cargo
Divisions and AMR Eagle, Inc.; The SABRE Group, which includes
AMR's information technology and consulting businesses; and the
Management Services Group, which includes AMR's airline
management, aviation services, and investment service
activities.
The following sections provide a discussion of AMR's results by
reporting segment. A description of the businesses in each
reporting segment is included in AMR's Annual Report on Form 10-
K for the year ended December 31, 1994.
AIRLINE GROUP
FINANCIAL HIGHLIGHTS
(Unaudited) (Dollars in millions)
Three Months Ended
June 30,
1995 1994
Revenues
Passenger - American Airlines, Inc. $3,395 $3,267
- AMR Eagle, Inc. 203 207
Cargo 178 165
Other 180 149
3,956 3,788
Expenses
Wages, salaries and benefits 1,293 1,232
Aircraft fuel 399 388
Commission to agents 321 339
Depreciation and amortization 259 262
Other operating expenses 1,329 1,280
Total operating expenses 3,601 3,501
Operating Income 355 287
Other Income (Expense) (150) (138)
Earnings Before Income Taxes $ 205 $ 149
Average number of equivalent employees 89,500 90,100
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Results of Operations (continued)
OPERATING STATISTICS
Three Months Ended
June 30,
1995 1994
American Airlines, Inc.
Passenger Division
Revenue passenger miles (millions) 26,012 24,443
Available seat miles (millions) 38,742 37,953
Passenger revenue yield per passenger mile 13.05 13.37
(cents)
Passenger revenue per available seat mile 8.77 8.61
(cents)
Operating expenses per available seat mile 8.40 8.36
(cents)
Passenger load factor 67.1% 64.4%
Breakeven load factor 60.5% 59.6%
Fuel consumption (gallons, in millions) 687 681
Fuel price per gallon (cents) 56.0 54.8
Operating aircraft at period-end 650 650
Cargo Division
Cargo ton miles (millions) 532 494
Revenue yield per ton mile (cents) 33.01 33.44
AMR Eagle, Inc.
Revenue passenger miles (millions) 645 642
Available seat miles (millions) 1,126 1,123
Passenger load factor 57.3% 57.2%
Operating aircraft at period-end 266 278
Operating aircraft at June 30, 1995, included:
Jet Aircraft: Regional Aircraft:
Airbus A300-600R 35 ATR 42 46
Boeing 727-200 81 Super ATR 33
Boeing 757-200 87 Jetstream 32 46
Boeing 767-200 8 Saab 340A 16
Boeing 767-200 Extended 22 Saab 340B 100
Range
Boeing 767-300 Extended 41 Shorts 360 25
Range
Fokker 100 75 Total 266
McDonnell Douglas DC-10-10 17
McDonnell Douglas DC-10-30 5
McDonnell Douglas MD-11 19
McDonnell Douglas MD-80 260
Total 650
87.5% of the jet aircraft fleet is Stage III, a classification of
aircraft meeting noise standards as promulgated by the Federal
Aviation Administration.
Average aircraft age is 8 years for jet aircraft and 4 years for
regional aircraft.
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Results of Operations (continued)
The Airline Group's revenues increased $168 million or 4.4
percent in the second quarter of 1995 versus the same period
last year. American's passenger revenues increased by 3.9
percent, $128 million. American's yield (the average amount one
passenger pays to fly one mile) of 13.05 cents decreased by 2.3
percent compared to the same period in 1994. Domestic yields
decreased 3.7 percent from second quarter 1994. International
yields increased 1.3 percent from second quarter 1994, due
principally to an 8.1 percent increase in Europe partially
offset by a 5.5 percent decrease in Latin America.
American's traffic or revenue passenger miles (RPMs) increased
6.4 percent to 26.0 billion miles for the quarter ended June 30,
1995. American's capacity or available seat miles (ASMs)
increased 2.1 percent to 38.7 billion miles in the second
quarter of 1995, primarily as a result of increases in jet stage
length and aircraft productivity. Jet stage length increased
10.1 percent and aircraft productivity, as measured by miles
flown per aircraft per day, increased 3.1 percent compared with
second quarter 1994. American's domestic traffic increased 4.6
percent on capacity decreases of 1.1 percent and international
traffic grew 10.9 percent on capacity increases of 10.4 percent.
The change in international traffic was driven by a 14.4 percent
increase in traffic to Latin America on capacity growth of 14.2
percent, and a 9.1 percent increase in traffic to Europe on a
capacity increase of 7.4 percent.
Passenger revenues of the AMR Eagle carriers decreased 1.9
percent, $4 million, despite a slight increase in traffic of 0.6
percent to 645 million RPMs. In the first quarter AMR Eagle
redeployed its fleet of ATR aircraft in response to the FAA's
temporary restrictions on the operation of ATR aircraft. The
fleet disruption adversely impacted AMR Eagle's results in the
first and second quarter of 1995. As of June 30, 1995, the
Eagle aircraft have returned to their original location and
operations are expected to return to normal during the third
quarter of 1995.
On April 29, 1995 a hailstorm at American's Dallas/Fort Worth
hub temporarily disabled approximately ten percent of American's
fleet and approximately nine percent of AMR Eagle's fleet,
forcing the carriers to reduce scheduled service during the
entire month of May. This adversely impacted the Airline
Group's revenue and cost performance. The combined impact of
the hailstorm and the Eagle redeployment reduced AMR's second
quarter net income by approximately $23 million.
Other revenues increased 20.8 percent, $31 million, primarily
due to contract maintenance work performed by American for other
airlines and increases in airport ground services provided by
American to other airlines.
The Airline Group's operating expenses increased 2.9 percent,
$100 million. American's Passenger Division cost per ASM
increased 0.5 percent to 8.40 cents. Wages, salaries and benefits
rose 5.0 percent, $61 million, due primarily to an increase in
provisions for profit sharing and salary adjustments for
existing employees, partially offset by a 0.7 percent reduction
in the average number of equivalent employees. Aircraft fuel
expense increased 2.8 percent, $11 million, due to a 2.3 percent
increase in American's average price per gallon and a 0.8
percent increase in gallons consumed by American. Commissions
to agents decreased 5.3 percent, $18 million, due principally to
a lower percentage of revenue subject to agent commissions
combined with a reduction in average rates paid to agents
attributable primarily to the change in commission structure
implemented in February 1995. Other operating expenses,
consisting of aircraft rentals, other rentals and landing fees,
food service costs, maintenance costs and other miscellaneous
operating expenses increased 3.8 percent, $49 million, primarily
due to increases in contract maintenance expenses and increases
in landing fee rates at certain locations.
Other Income (Expense) increased 8.7 percent or $12 million.
Interest expense (net of amounts capitalized) increased $25
million due primarily to the issuance of $1.02 billion of
convertible debentures in exchange for 2.04 million preferred
shares in 1994, and the effect of rising interest rates on
floating rate debt and interest rate swap agreements. These
increases were partially offset by decreases in interest expense
attributable to the repurchase and retirement of debt prior to
scheduled maturity. Interest income increased due to higher
average investment balances and higher average rates.
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Results of Operations (continued)
THE SABRE GROUP
FINANCIAL HIGHLIGHTS
(Dollars in millions)
Three Months Ended
June 30,
1995 1994
Revenues $ 408 $ 364
Expenses
Wages, salaries and benefits 110 98
Depreciation and amortization 43 44
Other operating expenses 153 129
Total operating expenses 306 271
Operating Income 102 93
Other Income (Expense) (2) (7)
Income Before Income Taxes $ 100 $ 86
Average number of equivalent employees 7,400 7,100
Revenues
Revenues for The SABRE Group increased 12.1 percent, $44 million,
primarily due to increased booking fee volume, which was
positively impacted by international expansion in Europe, Latin
America and India, increased sales of premium priced products and
AMR's services agreement with Canadian Airlines International,
Inc. (CAI), which was signed in April 1994.
Expenses
Wages, salaries and benefits increased 12.2 percent, $12 million,
due to wage and salary adjustments for existing employees and an
increase in the average number of equivalent employees. Other
operating expenses increased 18.6 percent, $24 million, due
primarily to costs associated with international expansion and
the CAI agreement.
MANAGEMENT SERVICES GROUP
FINANCIAL HIGHLIGHTS
(Dollars in millions)
Three Months Ended
June 30,
1995 1994
Revenues $ 162 $ 158
Expenses
Wages, salaries and benefits 60 57
Other operating expenses 76 80
Total operating expenses 136 137
Operating Income 26 21
Other Income (Expense) (10) (8)
Income Before Income Taxes $ 16 $ 13
Average number of equivalent employees 12,300 12,000
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Results of Operations (continued)
Revenues
Revenues for the AMR Management Services Group increased 2.5
percent, or $4 million. Revenues for Airline Management
Services, which was formed in 1994 to manage the Company's
service contracts with other airlines including CAI, contributed
$8 million to the increase.
Expenses
Wages, salaries and benefits increased 5.3 percent, $3 million,
due primarily to an increase in the average number of equivalent
employees. Other operating expenses decreased 5.0 percent, $4
million, due primarily to a reduction in aircraft rent
attributable to the expiration of operating leases for 18
Jetstream 32 aircraft since June 30, 1994.
AIRLINE GROUP
FINANCIAL HIGHLIGHTS
(Unaudited) (Dollars in millions)
Six Months Ended June
30,
1995 1994
Revenues
Passenger - American Airlines, Inc. $6,538 $6,295
- AMR Eagle, Inc. 358 388
Cargo 336 321
Other 335 288
7,567 7,292
Expenses
Wages, salaries and benefits 2,533 2,443
Aircraft fuel 777 783
Commission to agents 641 665
Depreciation and amortization 515 526
Other operating expenses 2,638 2,542
Total operating expenses 7,104 6,959
Operating Income 463 333
Other Income (Expense) (311) (285)
Income Before Income Taxes $ 152 $ 48
Average number of equivalent employees 89,400 90,900
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Results of Operations (continued)
OPERATING STATISTICS
Six Months Ended June
30,
1995 1994
American Airlines, Inc.
Passenger Division
Revenue passenger miles (millions) 49,846 46,822
Available seat miles (millions) 76,140 74,668
Passenger revenue yield per passenger mile 13.12 13.44
(cents)
Passenger revenue per available seat mile 8.59 8.43
(cents)
Operating expenses per available seat mile 8.46 8.51
(cents)
Passenger load factor 65.5% 62.7%
Breakeven load factor 61.3% 61.0%
Fuel consumption (gallons, in millions) 1,353 1,344
Fuel price per gallon (cents) 55.4 56.2
Operating aircraft at period-end 650 650
Cargo Division
Cargo ton miles (millions) 1,021 937
Revenue yield per ton mile (cents) 32.52 34.26
AMR Eagle, Inc.
Revenue passenger miles (millions) 1,141 1,182
Available seat miles (millions) 2,086 2,116
Passenger load factor 54.7% 55.9%
Operating aircraft at period-end 266 278
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Results of Operations (continued)
The Airline Group's revenues increased $275 million or 3.8
percent during the first six months of 1995 versus the same
period last year. American's passenger revenues increased by
3.9 percent, $243 million. American's yield (the average amount
one passenger pays to fly one mile) of 13.12 cents decreased by
2.4 percent compared to the same period in 1994. Domestic yields
decreased 4.2 percent from the first six months of 1994.
International yields increased 2.3 percent over the first six
months of 1994, due principally to a 10.1 percent increase in
Europe partially offset by a 4.6 decrease in Latin America.
American's traffic or revenue passenger miles (RPMs) increased
6.5 percent to 49.8 billion miles for the six months ended June
30, 1995. American's capacity or available seat miles (ASMs)
increased 2.0 percent to 76.1 billion miles in the first six
months of 1995, primarily as a result of increases in jet stage
length and aircraft productivity. Jet stage length increased
8.4 percent and aircraft productivity, as measured by miles
flown per aircraft per day, increased 5.5 percent compared with
the first six months of 1994. American's domestic traffic
increased 5.2 percent on capacity decreases of 0.7 percent and
international traffic grew 9.7 percent on capacity increases of
9.1 percent. The change in international traffic was driven by
a 13.6 percent increase in traffic to Latin America on capacity
growth of 12.4 percent, and a 7.1 percent increase in traffic to
Europe on a capacity increase of 6.7 percent.
Passenger revenues of the AMR Eagle carriers decreased 7.7
percent, $30 million, due principally to a reduction in traffic
of 3.5 percent to 1.14 billion RPMs. In the first quarter AMR
Eagle redeployed its fleet of ATR aircraft in response to the
FAA's temporary restrictions on the operation of ATR aircraft.
The fleet disruption adversely impacted AMR Eagle's results in
the first and second quarter of 1995. As of June 30, 1995, the
Eagle aircraft have returned to their original location and
operations are expected to return to normal during the third
quarter of 1995.
On April 29, 1995 a hailstorm at American's Dallas/Fort Worth
hub temporarily disabled approximately ten percent of American's
fleet and approximately nine percent of AMR Eagle's fleet,
forcing the carriers to reduce scheduled service during the
entire month of May. This adversely impacted the Airline
Group's revenue and cost performance. The combined impact of
the hailstorm and the Eagle redeployment reduced AMR's second
quarter net income by approximately $23 million.
Other revenues increased 16.3 percent, $47 million, primarily
due to contract maintenance work performed by American for other
airlines and increases in airport ground services provided by
American to other airlines.
The Airline Group's operating expenses increased 2.1 percent,
$145 million. American's Passenger Division cost per ASM
decreased by 0.5 percent to 8.46 cents. Wages, salaries and benefits
rose 3.7 percent, $90 million, due primarily to an increase in
provisions for profit sharing and salary adjustments for
existing employees, partially offset by a 1.7 percent reduction
in the average number of equivalent employees. Aircraft fuel
expense decreased 0.8 percent, $6 million, due to a 1.3 percent
decrease in American's average price per gallon, partially
offset by an 0.7 percent increase in gallons consumed by
American. Commissions to agents decreased 3.6 percent, $24
million, due principally to a lower percentage of revenue
subject to agent commissions combined with a reduction in
average rates paid to agents attributable primarily to the
change in commission structure implemented in February 1995.
Other operating expenses, consisting of aircraft rentals, other
rentals and landing fees, food service costs, maintenance costs
and other miscellaneous operating expenses increased 3.8
percent, $96 million, primarily due to increases in contract
maintenance expenses and increases in landing fee rates at
certain locations.
Other Income (Expense) increased 9.1 percent or $26 million.
Interest expense (net of amounts capitalized) increased $68
million due primarily to the issuance of $1.02 billion of
convertible debentures in exchange for 2.04 million preferred
shares in 1994, and the effect of rising interest rates on
floating rate debt and interest rate swap agreements. These
increases were partially offset by decreases in interest expense
attributable to the repurchase and retirement of debt prior to
scheduled maturity. Interest income increased $29 million
attributable to higher average investment balances and higher
average rates.
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Results of Operations (continued)
THE SABRE GROUP
FINANCIAL HIGHLIGHTS
(Dollars in millions)
Six Months Ended
June 30,
1995 1994
Revenues $ 814 $ 731
Expenses
Wages, salaries and benefits 216 198
Depreciation and amortization 88 88
Other operating expenses 290 255
Total operating expenses 594 541
Operating Income 220 190
Other Income (Expense) (11) (11)
Income Before Income Taxes $ 209 $ 179
Average number of equivalent employees 7,300 6,900
Revenues
Revenues for The SABRE Group increased 11.4 percent, $83 million,
primarily due to increased booking fee volume, which was
positively impacted by international expansion in Europe, Latin
America and India, increased sales of premium priced products and
AMR's services agreement with Canadian Airlines International,
Inc. (CAI), which was signed in April 1994.
Expenses
Wages, salaries and benefits increased 9.1 percent, $18 million,
due primarily to a 5.8 percent increase in the average number of
equivalent employees. Other operating expenses increased 13.7
percent, $35 million, due primarily to costs associated with
international expansion and the CAI agreement.
MANAGEMENT SERVICES GROUP
FINANCIAL HIGHLIGHTS
(Dollars in millions)
Six Months Ended
June 30,
1995 1994
Revenues $ 328 $ 315
Expenses
Wages, salaries and benefits 119 111
Other operating expenses 157 167
Total operating expenses 276 278
Operating Income 52 37
Other Income (Expense) (19) (14)
Income Before Income Taxes $ 33 $ 23
Average number of equivalent employees 12,500 11,900
14
17
Results of Operations (continued)
Revenues
Revenues for the AMR Management Services Group increased 4.1
percent, or $13 million. Revenues for Airline Management
Services, which was formed in 1994 to manage the Company's
service contracts with other airlines including CAI, contributed
$15 million to the increase.
Expenses
Wages, salaries and benefits increased 7.2 percent, $8 million,
due primarily to an increase in the average number of equivalent
employees. Other operating expenses decreased 6.0 percent, $10
million, due primarily to a reduction in aircraft rent
attributable to the expiration of operating leases for 18
Jetstream 32 aircraft since June 30, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities in the six month
period ended June 30, 1995, was $1.1 billion, compared to $994
million in 1994. Capital expenditures for the first six months
of 1995 were $683 million, and included the acquisition of six
Boeing 757-200 and four Boeing 767-300 aircraft by American and
the acquisition of eight Super ATR turboprop aircraft by AMR
Leasing. These capital expenditures, as well as the expansion
of certain airport facilities, were funded with internally
generated cash.
15
18
PART II
Item 1. Legal Proceedings
American has been sued in two class action cases that have been
consolidated in the Circuit Court of Cook County, Illinois, in
connection with certain changes made to American's AAdvantage
frequent flyer program in May, 1988. (Wolens, et al v. American
Airlines, Inc., No. 88 CH 7554, and Tucker v. American Airlines,
Inc., No. 89 CH 199.) In both cases, the plaintiffs seek to
represent all persons who joined the AAdvantage program before
May 1988. The complaints allege that, on that date, American
implemented changes that limited the number of seats available to
participants traveling on certain awards and established holiday
blackout dates during which no AAdvantage seats would be
available for certain awards. The plaintiffs allege that these
changes breached American's contracts with AAdvantage members and
were in violation of the Illinois Consumer Fraud and Deceptive
Business Practice Act (Consumer Fraud Act). Plaintiffs seek
money damages of an unspecified sum, punitive damages, costs,
attorneys fees and an injunction preventing the Company from
making any future changes that would reduce the value of
AAdvantage benefits. American moved to dismiss both complaints,
asserting that the claims are preempted by the Federal Aviation
Act and barred by the Commerce Clause of the U.S. Constitution.
The trial court denied American's preemption motions, but
certified its decision for interlocutory appeal. In December
1990, the Illinois Appellate Court held that plaintiffs' claims
for an injunction are preempted by the Federal Aviation Act, but
that plaintiffs' claims for money damages could proceed. On
March 12, 1992, the Illinois Supreme Court affirmed the decision
of the Appellate Court. American sought a writ of certiorari
from the U.S. Supreme Court; and on October 5, 1992, that Court
vacated the decision of the Illinois Supreme Court and remanded
the cases for reconsideration in light of the U.S. Supreme
Court's decision in Morales v. TWA, et al, which interpreted the
preemption provisions of the Federal Aviation Act very broadly.
On December 16, 1993, the Illinois Supreme Court rendered its
decision on remand, holding that plaintiffs' claims seeking an
injunction were preempted, but that identical claims for
compensatory and punitive damages were not preempted. On
February 8, 1994, American filed petition for a writ of
certiorari in the U.S. Supreme Court. The Illinois Supreme Court
granted American's motion to stay the state court proceeding
pending disposition of American's petition in the U.S. Supreme
Court. The matter was argued before the U.S. Supreme Court on
November 1, 1994, and on January 18, 1995, the U.S. Supreme Court
issued its opinion ending a portion of the suit against American.
The U.S. Supreme Court held that a) plaintiffs' claim for
violation of the Illinois Consumer Fraud Act was preempted by
federal law -- entirely ending that part of the case and
eliminating plaintiffs' claim for punitive damages; and b)
certain breach of contract claims would not be preempted by
federal law. The Court did not determine, however, whether the
contract claims asserted by the plaintiffs in Wolens were
preempted, and therefore remanded the case to the state court for
further proceedings. In the event that the plaintiffs' breach of
contract claim is eventually permitted to proceed in the state
court, American intends to vigorously defend the case.
16
19
PART II
Item 4 Submission of Matters to a vote of Security Holders
The owners of 63,168,098 shares of common stock, or 83 percent
of shares outstanding, were represented at the annual meeting of
stockholders on May 17, 1995 at The Drake Hotel, 140 East Walton
Place, Chicago, Illinois.
Elected as directors of the Corporation, each receiving a minimum of
62,949,860 votes were:
Howard P. Allen Earl G. Graves
David L. Boren Dee J. Kelly
Edward A. Brennan Ann D. McLaughlin
Armando M. Codina Charles H. Pistor, Jr.
Robert L. Crandall Joe M. Rodgers
Christopher F. Edley Maurice Segall
Charles T. Fisher, III Eugene F. Williams, Jr.
Stockholders ratified the appointment of Ernst & Young LLP as
independent auditors for the Corporation for 1995. The vote was
62,979,468 in favor; 49,843 against; and 138,787 abstaining.
Stockholders rejected a proposal relating to cumulative voting.
The vote was 17,883,312 in favor; 29,418,358 against; and
8,882,174 abstaining.
A stockholder proposal relating to the Corporation's Rights to
Purchase Preferred Shares Plan was withdrawn by the stockholder.
Stockholders rejected a proposal relating to pension benefits
for outside directors. The vote was 17,677,600 in favor;
36,446,619 against; and 2,059,245 abstaining.
Stockholders rejected a proposal relating to smoking on American
Airlines flights. The vote was 2,800,970 in favor; 49,478,370
against; and 3,904,124 abstaining.
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
10 (ppp) AMR Corporation Amended Bylaws
11 Statement re: computation of earnings per share
12 Statement re: computation of ratio of earnings to fixed
charges
The Company did not file any reports on Form 8-K during the
three months ended June 30, 1995.
17
20
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMR CORPORATION
Date: August 10, 1995 BY: /s/ Gerard J. Arpey
Gerard J. Arpey
Senior Vice President and Chief
Financial Officer
18
47 EXHIBIT 11
AMR CORPORATION
Computation of Earnings (Loss) Per Share
(In millions, except per share amounts)
Three Months Six Months Ended
Ended June 30,
June 30,
1995 1994 1995 1994
Primary:
Average shares outstanding 76 76 76 76
Add shares issued upon
assumed
conversion of
dilutive options, stock
appreciation rights 3 3 3 2
and warrants and
shares assumed issued
for deferred
stock granted
Less assumed treasury (2) (3) (2) (2)
shares purchased
Totals 77 76 77 76
Earnings $ 179 $ 153 $ 217 $ 146
Less: Preferred dividend
requirements (1) (17) (2) (33)
Earnings applicable to
common shares $ 178 $ 136 $ 215 $ 113
shares
Per share amount $ 2.31 $ 1.77 $ 2.79 $ 1.48
Fully diluted:
Average shares outstanding 76 76 76 76
Add shares issued upon:
Assumed conversion of
6.125% convertible
subordinated debentures 13 - 13 -
Assumed conversion of
preferred stock 1 14 1 (a)
Assumed conversion of
dilutive options,
stock appreciation
rights and warrants
and shares assumed
issued for deferred
stock granted 3 3 3 2
Less assumed treasury
shares purchased (2) (3) (2) (2)
Totals 91 90 91 76
Earnings $ 179 $ 153 $ 217 $ 146
Less: Preferred dividend (1) (17) (2) (33)
requirements
Earnings applicable to
common shares 178 136 215 113
Adjustments:
Add interest upon
assumed conversion
of 6.125% convertible
subordinated debentures,
net of tax 10 - 21 -
Add dividends upon
assumed conversion
of convertible preferred
stock 1 17 2 (a)
Earnings as adjusted $ 189 $ 153 $ 238 $ 113
Per share amount $ 2.08 $ 1.68 $ 2.62 $ 1.48
(a) Conversion not assumed as results would be anti-dilutive.
19
48
Exhibit 12
AMR CORPORATION
Computation of Ratio of Earnings to Fixed Charges
(Dollars in millions)
Six Months
Year Ended December 31, Ended June
30,
1990 1991 1992 1993 1994 1994 1995
Earnings:
Earnings (loss) before
income taxes,
extraordinary loss,
and cumulative
effect of accounting
changes $(34) $(340) $(697) $(113) $370 $250 $394
Add: Total fixed 734 1,028 1,285 1,339 1,289 632 683
charges (per below)
Less: Interest
capitalized 116 159 101 51 22 11 8
Total earnings $584 $529 $487 $1,175 $1,637 $871 $1,069
Fixed charges:
Interest $338 $508 $651 $668 $637 $306 $358
Portion of rental
expense representative
of the interest factor 394 513 627 663 645 322 322
Amortization of debt
expense 2 7 7 8 7 4 3
Total fixed charges $734 $1,028 $1,285 $1,339 $1,289 $632 $683
Ratio of earnings to
fixed charges - - - - 1.27 1.38 1.57
Coverage deficiency $150 $499 $798 $164 $ - $ - $ -
20
5
1,000,000
6-MOS
DEC-31-1995
JUN-30-1995
89
810
1,475
17
615
3,492
20,651
6,638
19,953
5,550
0
2,303
0
78
1,220
19,953
0
8,277
0
7,543
0
0
358
394
164
230
0
(13)
0
217
2.79
2.62
