1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Period Ended March 31, 1996.
[ ]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 x No .
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date.
Common Stock, $1 par value - 76,911,973 as of April 24, 1996
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INDEX
AMR CORPORATION
PART I: FINANCIAL INFORMATION
Item 1. Financial Information
Consolidated Statement of Operations -- Three months ended March
31, 1996 and 1995
Condensed Consolidated Balance Sheet -- March 31, 1996 and December
31, 1995
Condensed Consolidated Statement of Cash Flows -- Three months
ended March 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements -- March 31,
1996
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
March 31,
1996 1995
Revenues
Airline Group:
Passenger - American Airlines, Inc. $3,287 $3,090
- AMR Eagle, Inc. 267 208
Cargo 163 158
Other 187 155
3,904 3,611
The SABRE Group 449 399
Management Services Group 157 143
Less: Intergroup revenues (202) (183)
Total operating revenues 4,308 3,970
Expenses
Wages, salaries and benefits 1,487 1,405
Aircraft fuel 441 378
Commissions to agents 315 320
Depreciation and amortization 300 315
Other rentals and landing fees 216 214
Aircraft rentals 164 170
Food service 156 160
Maintenance materials and repairs 168 152
Other operating expenses 660 604
Total operating expenses 3,907 3,718
Operating Income 401 252
Other Income (Expense)
Interest income 16 13
Interest expense (146) (177)
Miscellaneous - net (6) (16)
(136) (180)
Earnings Before Income Taxes 265 72
Income tax provision 108 35
Net Earnings $ 157 $ 37
Earnings Per Common Share
Primary $ 2.02 $ 0.48
Fully Diluted $ 1.84 $ 0.48
Number of shares used in computations
Primary 78 77
Fully Diluted 92 77
The accompanying notes are an integral part of these financial statements.
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AMR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(In millions)
March December
31, 31,
1996 1995
(Unaudited) (Note 1)
Assets
Current Assets
Cash $ 38 $ 82
Short-term investments 796 819
Receivables, net 1,378 1,153
Inventories, net 606 589
Deferred income taxes 358 357
Other current assets 166 137
Total current assets 3,342 3,137
Equipment and Property
Flight equipment, net 9,649 9,852
Other equipment and property, net 1,959 1,964
11,608 11,816
Equipment and Property Under Capital Leases
Flight equipment, net 1,559 1,588
Other equipment and property, net 160 161
1,719 1,749
Route acquisition costs, net 996 1,003
Other assets, net 1,816 1,851
$ 19,481 $ 19,556
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 880 $ 817
Accrued liabilities 1,775 1,999
Air traffic liability 1,707 1,466
Current maturities of long-term debt 148 228
Current obligations under capital leases 146 122
Total current liabilities 4,656 4,632
Long-term debt, less current maturities 4,730 4,983
Obligations under capital leases, less 1,990 2,069
current obligations
Deferred income taxes 443 446
Other liabilities, deferred gains, deferred
credits and postretirement benefits 3,766 3,706
Stockholders' Equity
Convertible preferred stock 78 78
Common stock 77 76
Additional paid-in capital 2,263 2,239
Retained earnings 1,478 1,327
3,896 3,720
$ 19,481 $ 19,556
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)
Three Months Ended
March 31,
1996 1995
Net Cash Provided by Operating Activities $ 325 $ 253
Cash Flow from Investing Activities:
Capital expenditures (107) (458)
Net decrease in short-term investments 23 270
Proceeds from sale of equipment and property 73 60
Net cash used for investing activities (11) (128)
Cash Flow from Financing Activities:
Payments on long-term debt and
capital lease obligations (379) (86)
Other 21 (1)
Net cash used for financing activities (358) (87)
Net increase (decrease) in cash (44) 38
Cash at beginning of period 82 23
Cash at end of period $ 38 $ 61
Cash Payments (Refunds) For:
Interest $ 138 $ 155
Income taxes 133 (9)
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. The balance sheet at December 31, 1995 has been derived
from the audited financial statements at that date. 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, 1995.
2.Certain amounts from 1995 have been reclassified to conform with
the 1996 presentation.
3.Accumulated depreciation of owned equipment and property at March
31, 1996 and December 31, 1995, was $6.0 billion and $5.8 billion,
respectively. Accumulated amortization of equipment and property
under capital leases at March 31, 1996 and December 31, 1995, was
$890 million and $875 million, respectively.
4.As discussed in the notes to the consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, the Miami International Airport Authority
is currently remediating various environmental conditions at Miami
International Airport (Airport) and funding the remediation costs
through landing fee revenues. Some of the costs of the remediation
effort may be borne by carriers currently operating at the Airport,
including American Airlines, Inc. (American), through increased
landing fees. The ultimate resolution of this matter is not
expected to have a significant impact on the financial position or
liquidity of AMR.
5.On April 17, 1996, the Company announced that its Board of
Directors had approved a reorganization of The SABRE Group as a
separate, wholly-owned subsidiary of AMR Corporation subject to the
receipt of a favorable tax ruling and certain other conditions.
This reorganization will involve the dividend of American's SABRE
Travel Information Network, SABRE Computer Services, SABRE
Development Services and SABRE Interactive divisions to the
Company. The reorganization should be completed sometime during
the third quarter.
The Company also continues to study, as it has in the past, other
transactions which may involve The SABRE Group, such as strategic
partnerships or an initial public offering of a portion of The
SABRE Group's stock. No decisions, however, have been made at this
time as to what, if any, transactions involving The SABRE Group may
occur after the reorganization is complete.
6.On April 19, 1996, the Company announced the call for redemption on
May 20, 1996 of all its outstanding 6 1/8% Convertible
Subordinated Quarterly Income Capital Securities due 2024. At
March 31, 1996, debentures in an aggregate principal amount of
$1,020,356,000 were outstanding. The redemption price of the
debentures is $1,042 per $1,000 principal amount of debentures,
plus accrued and unpaid interest to the redemption date. As an
alternative to redemption, holders of debentures have the option,
until May 17, 1996, to convert their debentures into AMR Common
Stock at a conversion price of $79 per share of Common Stock
(equivalent to 12.658 shares of Common Stock for each $1,000
principal amount of debentures). The Company has entered into a
standby arrangement with certain parties in which the parties have
agreed to purchase from the Company, at the Company's option, up to
the number of shares of Common Stock that would have been issuable
upon conversion of any debentures that are not surrendered for
conversion by May 17, 1996. Debentures that are redeemed rather
than converted will result in the Company recording an
extraordinary loss on early retirement of debt during the second
quarter arising from the excess of the redemption price for such
debentures over their carrying value. This differential as of
March 31, 1996 equaled approximately $231 for each $1,000 principal
amount of debentures.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7.On April 19, 1996, the Company announced the call for redemption on
May 20, 1996 of all its outstanding $500 Series A Cumulative
Convertible Preferred Stock. The redemption price for the
Preferred Stock is $521 per share of Preferred Stock, plus accrued
and unpaid dividends to the redemption date. As an alternative to
redemption, holders of the Preferred Stock have the option, until
May 17, 1996, of converting their Preferred Stock into AMR Common
Stock at a conversion price of $78.75 per share of Common Stock
(equivalent to 6.3492 shares of Common Stock for each share of
Preferred Stock).
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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 March
31, 1996, of $157 million, or $2.02 per common share ($1.84 fully
diluted). This compares to net earnings of $37 million, or $0.48 per
common share (both primary and fully diluted) for the first quarter
of 1995. AMR's operating income improved 59.1 percent or $149
million.
AMR's improved results for the first quarter 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.
On April 17, 1996, the Company announced the planned reorganization
of The SABRE Group as a separate, wholly-owned subsidiary of AMR. It
is anticipated that upon completion of the reorganization
approximately $850 million of American's debt owed to AMR will be
replaced by an equivalent amount of debt owed to AMR by The SABRE
Group, thereby reducing the Airline Group's annual interest costs --
and increasing The SABRE Group's annual interest costs -- by
approximately $50-60 million. In addition, the reorganization will
include a new marketing and services agreement between American and
The SABRE Group. Although the terms of the new agreement have not
been finalized, it is expected to increase American's revenues from
services provided to The SABRE Group (such as air travel) and
decrease American's costs for technology services provided by The
SABRE Group.
The following sections provide a discussion of AMR's results by
reporting segment, which are described in AMR's Annual Report on Form
10-K for the year ended December 31, 1995.
AIRLINE GROUP
FINANCIAL HIGHLIGHTS
(Unaudited) (Dollars in millions)
Three Months Ended
March 31,
1996 1995
Revenues
Passenger - American Airlines, Inc. $3,287 $3,090
- AMR Eagle, Inc. 267 208
Cargo 163 158
Other 187 155
3,904 3,611
Expenses
Wages, salaries and benefits 1,301 1,240
Aircraft fuel 441 378
Commissions to agents 315 320
Depreciation and amortization 252 266
Other operating expenses 1,348 1,291
Total operating expenses 3,657 3,495
Operating Income 247 116
Other Income (Expense) (134) (171)
Earnings (Loss) Before Income Taxes $ 113 $ (55)
Average number of equivalent employees 89,900 89,300
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Results of Operations (continued)
OPERATING STATISTICS
Three Months Ended
March 31,
1996 1995
American Airlines, Inc.
Jet Airline Operations
Revenue passenger miles (millions) 24,632 23,834
Available seat miles (millions) 37,554 37,398
Cargo ton miles (millions) 498 489
Passenger revenue yield per passenger mile 13.34 12.96
(cents)
Passenger revenue per available seat mile 8.75 8.26
(cents)
Cargo revenue yield per ton mile (cents) 32.26 31.99
Operating expenses per available seat mile 8.99 8.67
(cents)
Passenger load factor 65.6% 63.7%
Breakeven load factor 60.1% 60.3%
Fuel consumption (gallons, in millions) 663 666
Fuel price per gallon (cents) 63.9 54.8
Operating aircraft at period-end 632 648
AMR Eagle, Inc.
Revenue passenger miles (millions) 636 496
Available seat miles (millions) 1,137 960
Passenger load factor 56.0% 51.7%
Operating aircraft at period-end 255 267
Operating aircraft at March 31, 1996, included:
Jet Aircraft: Regional Aircraft:
Airbus A300-600R 35 ATR 42 46
Boeing 727-200 68 Super ATR 33
Boeing 757-200 86 Jetstream 32 38
Boeing 767-200 8 Saab 340A 9
Boeing 767-200 Extended 22 Saab 340B 95
Range
Boeing 767-300 Extended 41 Saab 340B Plus 14
Range
Fokker 100 75 Shorts 360 20
McDonnell Douglas DC-10-10 15 Total 255
McDonnell Douglas DC-10-30 4
McDonnell Douglas MD-11 18
McDonnell Douglas MD-80 260
Total 632
89.2% 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 $293 million or 8.1 percent.
American's passenger revenues increased by 6.4 percent, $197
million. American's yield (the average amount one passenger pays to
fly one mile) of 13.34 cents increased by 2.9 percent compared to the
same period in 1995. Domestic yields increased 4.0 percent from first
quarter 1995, while international yields were up 0.6 percent.
American's traffic or revenue passenger miles (RPMs) increased 3.3
percent to 24.6 billion miles for the quarter ended March 31, 1996.
American's capacity or available seat miles (ASMs) increased 0.4
percent to 37.6 billion miles in the first quarter of 1996, primarily
as a result of increases in jet stage length and aircraft
productivity. Jet stage length increased 8.7 percent and aircraft
productivity, as measured by miles flown per aircraft per day,
increased 2.1 percent compared with first quarter 1995. American's
domestic traffic increased 0.9 percent on capacity decreases of 1.9
percent and international traffic grew 9.4 percent on capacity
increases of 6.3 percent. The increase in international traffic was
led by a 13.4 percent increase in traffic to Europe on capacity
growth of 5.1 percent, and a 5.6 percent increase in traffic to Latin
America on capacity growth of 7.2 percent.
Although not quantifiable, some portion of the passenger revenue
increase is attributable to the January 1, 1996 expiration of the ten
percent federal excise tax on airline travel.
AMR Eagle passenger revenues increased 28.4 percent, $59 million, due
principally to an increase in traffic of 28.2 percent to 636 million
RPMs. The increase in traffic was due in large part to the Federal
Aviation Administration's temporary restrictions on the operation of
ATR aircraft during first quarter 1995, which contributed to a
decrease in capacity at that time.
Other revenues increased 20.6 percent, $32 million, primarily due to
contract maintenance work performed by American for other airlines.
The Airline Group's operating expenses increased 4.6 percent, $162
million. American's Jet Airline cost per ASM increased by 3.7
percent to 8.99 cents. Wages, salaries and benefits rose 4.9
percent, $61 million, due primarily to contractual wage rate and
seniority increases that are built into the Company's labor contracts
and an increase in the provision for profit sharing, partially offset
by a decrease due to the outsourcing of certain services. Aircraft
fuel expense increased 16.7 percent, $63 million, due to a 9.1 cent
increase in American's average price per gallon, which includes the
impact of the October 1995 expiration of the fuel tax exemption for
the airline industry. Other operating expenses, consisting of
maintenance costs, aircraft rentals, other rentals and landing fees,
food service costs, and miscellaneous operating expenses increased
4.4 percent, $57 million, primarily due to an increase in outsourced
services, costs associated with increased contract maintenance work
performed for other airlines, and adverse winter weather.
Other Income (Expense) decreased 21.6 percent or $37 million.
Interest expense decreased $31 million primarily due to scheduled
debt repayments and the retirement of debt prior to scheduled
maturity.
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Results of Operations (continued)
THE SABRE GROUP
FINANCIAL HIGHLIGHTS
(Unaudited) (Dollars in millions)
Three Months Ended
March 31,
1996 1995
Revenues $ 449 $ 399
Expenses
Wages, salaries and benefits 119 103
Depreciation and amortization 43 45
Other operating expenses 156 132
Total operating expenses 318 280
Operating Income 131 119
Other Income (Expense) (1) (9)
Earnings Before Income Taxes $ 130 $ 110
Average number of equivalent employees 7,900 7,300
Revenues
Revenues for The SABRE Group increased 12.5 percent, $50 million,
primarily due to higher booking fee prices and increased volumes.
Expenses
Wages, salaries and benefits increased 15.5 percent, $16 million, due
primarily to an increase in the average number of equivalent
employees. Other operating expenses increased 18.2 percent, $24
million, due primarily to increased product development costs.
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Results of Operations (continued)
MANAGEMENT SERVICES GROUP
FINANCIAL HIGHLIGHTS
(Unaudited) (Dollars in millions)
Three Months Ended
March 31,
1996 1995
Revenues $ 157 $ 143
Expenses
Wages, salaries and benefits 67 62
Other operating expenses 67 64
Total operating expenses 134 126
Operating Income 23 17
Other Income (Expense) (1) -
Earnings Before Income Taxes $ 22 $ 17
Average number of equivalent employees 13,500 12,700
Revenues
Revenues for the Management Services Group increased 9.8 percent, or
$14 million. AMR Services Corporation contributed $12.8 million to
the increase, principally due to increased airline passenger, ramp
and cargo handling services provided by its Airline Services
division.
Expenses
Wages, salaries and benefits increased 8.1 percent, $5 million, due
primarily to an increase in the average number of equivalent
employees.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities in the three month period
ended March 31, 1996, was $325 million, compared to $253 million in
1995. Capital expenditures for the first quarter of 1996 were $107
million. These capital expenditures were financed with internally
generated cash.
On April 19, 1996, the Company announced the call for redemption on
May 20, 1996 of all its outstanding 6 1/8% Convertible Subordinated
Quarterly Income Capital Securities due 2024. This will reduce the
Company's annual cash interest expense by approximately $62 million.
On April 19, 1996, the Company announced the call for redemption on
May 20, 1996 of all its outstanding $500 Series A Cumulative
Convertible Preferred Stock. The redemption price for the Preferred
Stock is $521 per share of Preferred Stock, plus accrued and unpaid
dividends to the redemption date (approximately $83 million if all
the outstanding Preferred Stock is redeemed). Payments made for
shares redeemed will be made with internally generated cash.
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PART II
Item 1. Legal Proceedings
In January, 1985, American announced a new fare category, the
"Ultimate SuperSaver," a discount, advance purchase fare that carried
a 25 percent penalty upon cancellation. On December 30, 1985, a class
action lawsuit was filed in Circuit Court, Cook County, Illinois
entitled Johnson vs. American Airlines, Inc. The Johnson plaintiffs
allege that the 10 percent federal excise transportation tax should be
excluded from the "fare" upon which the 25 percent penalty is
assessed. The case has not been certified as a class action. Summary
judgment was granted in favor of American but subsequently reversed
and vacated by the Illinois Appellate court. American believes the
matter is without merit and is vigorously defending the lawsuit.
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. Currently, the plaintiffs
allege that, on that date, American implemented changes
that limited the number of seats available to participants traveling
on certain awards and established blackout dates during which
no AAdvantage seats would be available for certain awards and
that these changes breached American's contracts
with AAdvantage members. Plaintiffs seek money damages for such
alleged breach and attorneys' fees. Previously the plaintiffs also
alleged violation of the Illinois Consumer Fraud and
Deceptive Business Practice Act (Consumer Fraud Act) and sought
punitive damages, attorneys' fees and injunctive relief preventing
American from making changes to the AAdvantage program.
American originally moved to dismiss all of the claims,
asserting that they were preempted by the Federal
Aviation Act and barred by the Commerce Clause of the U.S.
Constitution.
Initially, 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, the 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 are preempted, but that
identical claims for compensatory and punitive damages are not
preempted. On February 8, 1994, American filed a 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 is 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 are not preempted by
federal law.
The U.S. Supreme Court did not determine, however, whether the
contract claims asserted by the plaintiffs are
preempted, and therefore, remanded the case to the state court for
further proceedings. Subsequently, plaintiffs filed an amended
complaint seeking damages solely for a breach of contract claim. 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.
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Legal Proceedings (Continued)
In December, 1993, American announced that the number of miles
required to claim a certain travel award under American's AAdvantage
frequent flyer program would be increased effective February 1, 1995.
On February 1, 1995 a class action lawsuit entitled Gutterman vs.
American Airlines, Inc. was filed in the Circuit Court of Cook County,
Illinois. The Gutterman plaintiffs claim that this increase in
mileage level violated the terms and conditions of the agreement
between American and AAdvantage members. On February 9, 1995, a
virtually identical class action lawsuit entitled Benway vs. American
Airlines, Inc. was filed in District Court, Dallas County, Texas.
After limited discovery and prior to class certification, a summary
judgment dismissing the Benway case was entered by the Dallas County
Court in July 1995. On March 11, 1996, American's motion to dismiss
the Gutterman lawsuit was denied. American has filed a motion for
reconsideration which is still pending. Further, American's motion
for summary judgment is still pending and will be pursued if the
motion for reconsideration is not granted. No class has been
certified in the Gutterman lawsuit and to date no discovery has been
undertaken. American believes the Gutterman complaint is without
merit and is vigorously defending the lawsuit.
On February 10, 1995, American capped travel agency commissions
for one-way and round trip domestic tickets at $25 and $50,
respectively. Immediately thereafter, numerous travel agencies, and
two travel agency trade association groups, filed class action
lawsuits against American and other major air carriers (Continental,
Delta, Northwest, United, USAir and TWA) that had independently
imposed similar limits on travel agency commissions. The suits were
transferred to the United States District Court for the District of
Minnesota, and consolidated as a multi-district litigation captioned
In Re: Airline Travel Agency Commission Antitrust Litigation. The
plaintiffs assert that the airline defendants conspired to reduce
travel agency commissions and to monopolize air travel in violation of
sections 1 and 2 of the Sherman Act. The case has been certified as a
class action on behalf of approximately 40,000 domestic travel
agencies and two travel agency trade associations. In June 1995 after
extensive, expedited discovery, the travel agents moved for a
preliminary injunction to enjoin the commission caps, and the
defendants simultaneously moved for summary judgment. On August 31,
1995, the District Court denied both motions. Pre-trial
activities against the defendants, including American, are
continuing. American is vigorously defending the lawsuit.
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PART II
Item 6. Exhibits and Reports on Form 8-K
The following exhibits are included herein:
10.1 Performance Share Program for the years 1996 to 1998 under the
1988 Long-term Incentive Program.
11 Statement re: computation of earnings
per share
On April 17, 1996, AMR filed a report on Form 8-K relative to the
planned reorganization of The SABRE
Group.
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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: April 29, 1996 BY: /s/ Gerard J. Arpey
Gerard J. Arpey
Senior Vice President and
Chief Financial Officer
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17 Exhibit
10.1
1996-1998 PERFORMANCE SHARE PROGRAM
DEFERRED STOCK AWARD AGREEMENT
This AGREEMENT made as of (DATE), by and between AMR
Corporation, a Delaware corporation (the "Corporation"), and (FI).
(LN) (the "Employee"), employee number (Emp).
WHEREAS, the stockholders of the Corporation have approved
the 1988 Long Term Incentive Plan, as amended (the "1988 Plan"); and
WHEREAS, pursuant to the Performance Share Program (the
"Program") adopted by the Board of Directors of the Corporation (the
"Board"), the Board has determined to make a Program grant to the
Employee of Deferred Stock (subject to the terms of the l988 Plan and
this Agreement), as an inducement for the Employee to remain an
employee of the Corporation (or a Subsidiary or Affiliate thereof),
and to retain and motivate such Employee during such employment.
NOW, THEREFORE, the Corporation and the Employee hereby
agree as follows:
l. Grant of Award. The Employee is hereby granted as of
(DATE), (the "Grant Date") a Deferred Stock Award (the "Award"),
subject to the terms and conditions hereinafter set forth, with
respect to (PS) shares of Common Stock, $l.00 par value, of the
Corporation ("Stock"). The shares of Stock covered by the Award shall
vest in accordance with Schedule A.
2. Vesting. (a) The Award will vest, if at all, in
accordance with Schedule A, attached hereto and made a part of this
Agreement.
(b) In the event of the termination of
Employee's employment with the Corporation (or a Subsidiary or
Affiliate thereof) prior to the end of three year measurement period
set forth in Schedule A (the "Measurement Period") due to the
Employee's death, Disability, Retirement or termination not for Cause
(each an "Early Termination") the Award will vest, if at all, on a
prorata basis and will be paid to the Employee (or, in the event of
the Employee's death, the Employee's designated beneficiary for
purposes of the Award, or in the absence of an effective beneficiary
designation, the Employee's estate) as soon as practicable after the
end of the Measurement Period. The prorata share will be a percentage
where the denominator is 36 and the numerator is the number of months
from January 1, 1996 through the month of the Early Termination,
inclusive.
1
(c) In the event of the termination of Employee's
employment with the Corporation (or any Subsidiary or Affiliate
thereof) for Cause, or if the Employee terminates his employment with
the Corporation (or any Subsidiary or Affiliate thereof) prior to the
distribution of any Award hereunder, the Award shall be forfeited in
its entirety.
(d) In the event of a Change in Control or Potential Change
in Control of the Corporation, the Award shall vest in accordance with
the l988 Plan.
3. Payment in Cash. Upon a determination by the Board, an
Award may be paid in cash or other consideration in accordance with a
formula as adopted by the Board.
4. Elective Deferrals. At any time at least 12 months
prior to the end of the Measurement Period, the Employee may elect in
writing, subject to Board approval, to voluntarily defer the receipt
of the Stock for a specified additional period beyond the end of the
Measurement Period (the "Elective Deferral Period"). Any Stock
deferred pursuant to this Section 3 shall be issued to the Employee
within 60 days after the end of the Elective Deferral Period. In the
event of the death of the Employee during the Elective Deferral
Period, the Stock so deferred shall be issued to the Employee's
designated Beneficiary (or to the Employee's estate, in the absence of
an effective beneficiary designation) within 60 days after the
Corporation receives written notification of death.
18
5. Transfer Restrictions. This Award is non-transferable
otherwise than by will or by the laws of descent and distribution, and
may not otherwise be assigned, pledged or hypothecated and shall not
be subject to execution, attachment or similar process. Upon any
attempt by the Employee (or the Employee's successor in interest after
the Employee's death) to effect any such disposition, or upon the levy
of any such process, the Award may immediately become null and void,
at the discretion of the Board.
6. Miscellaneous. This Agreement (a) shall be binding upon
and inure to the benefit of any successor of the Corporation, (b)
shall be governed by the laws of the State of Texas and any applicable
laws of the United States, and (c) may not be amended without the
written consent of both the Corporation and the Employee. No contract
or right of employment shall be implied by this Agreement. If this
Award is assumed or a new award is substituted therefore in any
corporate reorganization, employment by such assuming or substituting
corporation or by a parent corporation or subsidiary or affiliate
thereof shall be considered for all purposes of this Award to be
employment by the Corporation.
2
7. Securities Law Requirements. The Corporation shall not
be required to issue Stock pursuant to this Award unless and until (a)
such shares have been duly listed upon each stock exchange on which
the Corporation's Stock is then registered; and (b) a registration
statement under the Securities Act of 1933 with respect to such shares
is then effective.
The Board may require the Employee to furnish to the
Corporation, prior to the issuance of the Stock in connection with
this Award, an agreement, in such form as the Board may from time to
time deem appropriate, in which the Employee represents that the
shares acquired by him under the Award are being acquired for
investment and not with a view to the sale or distribution thereof.
8. Incorporation of l988 Plan Provisions. This Agreement
is made pursuant to the l988 Plan and is subject to all of the terms
and provisions of the l988 Plan as if the same were fully set forth
herein. Capitalized terms not otherwise defined herein (inclusive of
Schedule A) shall have the meanings set forth for such terms in the
l988 Plan.
IN WITNESS HEREOF, the Employee and the Corporation have executed this
Performance Share Grant as of the day and year first above written.
EMPLOYEE AMR CORPORATION
_____________________________ By: _____________________
Charles D. MarLett
Corporate Secretary
3
19
Schedule A
The Award hereunder is granted contingent upon the
Corporation's attainment of predetermined cash flow objectives (the
"Objectives") over a three year period beginning January 1, 1996 and
ending December 31, 1998 (the "Measurement Period"). The Objectives
will be determined by the Corporation's cumulative operating cash flow
to gross assets over the Measurement Period, as determined by the
General Auditor of American Airlines, Inc. and as verified by the
Corporation's independent public accountants. Unless otherwise
required, the sources for the financial data needed in any calculation
will be the applicable Annual Report(s) on Form 10K as filed by the
Corporation. The amount, if any, of the Award to be paid following
the Measurement Period will be dependent upon the actual Objective for
the Measurement Period and the Corporation's standing with respect to
the Objective relative to four competitors (United, Delta, Southwest
and USAir, or such substitute as may be designated by the Board or any
committee thereof).
AMR Relative Standing
Comparative Airlines Percent of Award Earned
1st 75% 100% 125% 150% 175%
2nd 50% 75% 100% 125% 150%
3rd 25% 50% 75% 100% 125%
4th 0% 25% 50% 75% 100%
5th 0% 0% 0% 0% 0%
Objective Attained <5.25% 5.25%- 6.75%- 8.25% >9.25%
6.749% 8.249% 9.249%
For purposes of calculating the Objectives, the following definitions
will control:
"Adjusted Earnings/(Loss) Applicable to Common Shares" is defined as
the sum of the Corporation's Consolidated earnings/(loss) applicable
to common shares and American Airlines Inc. ("American") aircraft
rental expense - net of the Related Tax Impact, less: Calculated
Interest on Operating Leases - net of the Related Tax Impact, and
Calculated Amortization of Operating Leases - net of the Related Tax
Impact.
4
"Net Cash Flow" is defined as the sum of Adjusted Earnings (Loss)
Applicable to Common Shares, the Corporation's depreciation and
amortization expense, Calculated Amortization of Operating Leases, and
any accounting adjustments or extraordinary or unusual items (net of
the Related Tax Impact) which may be added or deducted at the
discretion of the Committee.
"Plan Average Net Cash Flow" is defined as the sum of the Net Cash
Flow amounts for all of the fiscal years in the Measurement Period
divided by three.
"Adjusted Assets" is defined as the Corporation's consolidated total
assets plus the Capitalized Value of Operating Leases, minus cash and
short-term investments.
"Capitalized Value of Operating Leases" is defined as the initial
present value of the lease payments required under American's aircraft
operating leases over the initial stated lease term, calculated using
a discount rate of Prime plus one percent, net of accumulated
amortization.
"Prime" is defined as the base rate on Corporate Loans posted by at
least 75% of the 30 largest U.S. banks which is published daily in the
Wall Street Journal.
20
"Calculated Interest on Operating Leases" is defined as the interest
expense allocable to American's operating leases and is determined by
applying the interest rate used in determining the Capitalized Value
of Operating Leases to the average obligation balance of such leases
(calculated as the remaining obligation balance at the end of the
fiscal year plus the remaining obligation balance at the end of the
prior fiscal year, divided by two.
"Calculated Amortization of Operating Leases" is defined as the
amortization expense associated with Capitalized Value of Operating
Leases and is determined by the straight line method of amortization
over the lease term.
"Related Tax Impact" of an adjustment made in determining Adjusted Net
Income or Net Cash Flow is defined as the amount of that adjustment
multiplied by the Corporation's estimated marginal tax rate for the
relevant year.
"Average Adjusted Assets" is Average Adjusted Assets as of December 31
of a given year during the Measurement Period, plus Average Adjusted
Assets as of December 31 of the prior fiscal year, divided by two.
"Plan Average Adjusted Assets" is the sum of Average Adjusted Assets
for each of the years during the Measurement Period divided by three.
"Cash Flow Return on Assets" is defined as Plan Average Net Cash Flow
divided by Plan Average Adjusted Assets.
"Comparison Airlines" shall consist of UAL Corp., Delta Airlines Inc.,
Southwest Airlines Inc., and USAir Group.
5
21 EXHIBIT 11
AMR CORPORATION
Computation of Earnings Per Share
(In millions, except per share amounts)
Three Months Ended
March 31,
1996 1995
Primary:
Earnings applicable to common shares $ 157 $ 37
Average shares outstanding 77 76
Add shares issued upon assumed conversion of
dilutive options, stock appreciation rights
and
warrants and shares assumed issued for 3 3
deferred
stock granted
Less assumed treasury shares purchased (2) (2)
Total primary shares 78 77
Primary earnings per share $ 2.02 $ 0.48
Fully diluted:
Earnings applicable to common shares $ 157 $ 37
Adjustments:
Add interest upon assumed conversion
of 6.125% convertible subordinated
debentures, net of tax 11 -
Add dividends upon assumed
conversion of convertible preferred
stock 1 -
Earnings, as adjusted $ 169 $ 37
Average shares outstanding 77 76
Add shares issued upon:
Assumed conversion of 6.125%
convertible subordinated debentures 13 -
Assumed conversion of preferred stock 1 -
Assumed conversion of dilutive options,
stock appreciation rights and warrants
and shares assumed issued for
deferred stock granted 3 3
Less assumed treasury shares purchased (2) (2)
Total fully diluted shares 92 77
Fully diluted earnings per share $ 1.84 $ 0.48
5
1,000,000
3-MOS
DEC-31-1996
MAR-31-1996
38
796
1,389
11
606
3,342
20,207
6,880
19,481
4,656
0
77
78
0
3,741
19,481
0
4,308
0
3,907
0
0
149
265
108
157
0
0
0
157
2.02
1.84
