annual report 1955 GENERAL OFFICES: 6201 Thirty-Fourth Avenue South, Wold-Chamberlain Field, Minneapolis 23, Minnesota rj'rr/rj'j H. N. CARR* GARNET F. DECOURSIN* A. L. WHEELER WERNER L. CHRISTENSEN ROBERT F. GROVER K. B. WILLETT ARTHUR E. A. MUELLER* ^Executive Committee ARTHUR E. A. MUELLER Chairman of the Board H. N. CARR President and General Manager FRANK N. BUTTOMER Vice-President, Traffic and Sales R. H. BENDIO, SR Vice-President, Maintenance and Engineering ALVIN D. NIEMEYER Vice-President, Operations ARTHUR E. SCHWANDT Vice-President, Industrial Relations BERNARD SWEET Seer et ary-Treasurer NORTHWESTERN NATIONAL BANK OF MINNEAPOLIS MINNEAPOLIS, MINNESOTA a e EE bd E3 iTrnran CJ mi m rl 000B9DDa n rr-sq . rtwml 'NC' N0RTH 6 " 3* AV^ somH WO'nusl3law^ESOTA ^IHHEAPOUS 2 , Match 16, ^956 '1 otv2ran& ^ ^ greaKst yea[ in SOUTH MILWAUKEE y WIUIAMSTON LANSING MASON i FARMINGTON | NORTHVILLE , JACKSON ( ^PLYMOUTH 1 ANN ARBOR\ WILLOW RUN1 WAYNE" PONTIAC J>/ORT HURON BIRMINGHAM ^^IT. CLEMENS ROYAL OAK ROSEVILLE DETROIT CITY RIVER ROUGE WYANDOTTE RENTON DETROIT --. *AroL GENEVA ^ WEST CHICAGO AURORA _ NAPERVILLE LAGRANGE LEMON Tifc<^ LOCKPORT WILMINGTON MICHIGAN CITY VALPARAISO CROWN POINT MILWAUKEE-CHICAGO Maintaining a perfect safety record, North Central Air lines has received the National Safety Council's Annual Aviation Safety Award each year since the beginning of operations. Through 1955, the "Northliner" fleet flew 25,130,175 route-miles and carried 1,273,796 revenue passengers. The company's aircraft now fly over 600,000 miles a month operating some 90 flights a day in serving 43 cities in six states. This high frequency of service entails about 600 take-offs and landings each day -- an average of one operation every one and three-quarters minutes. North Central's perfect safety record is a tribute to the outstanding efficiency and care exercised by maintenance personnel, flight crews and ground operations employees who have always placed safety ahead of all other consider ations. BALANCE SHEET DECEM 'i CURRENT ASSETS Cash $ 230,179 Accounts receivable United States Government Traffic Other $ 246,132 649,717 59,066 954,915 Inventories -- at the lower of cost (determined by fhe first-in, first-out method) or market Parts and supplies Gasoline and oil 174,246 15,041 189,287 Prepaid expenses and sundry deposits 44,446 INVESTMENTS - AT COST Capital Stock of Aeronautical Radio, Inc. and Airlines Clearing House, Inc 1,101 Revenue bonds of City of Minneapolis, Metropolitan Sports Area 1,000 2,101 OPERATING PROPERTY AND EQUIPMENT Flight equipment ( equipment costing approximately $2,335,000 pledged as security for note payable) 2,534,272 Ground equipment 386,650 Hangar building and improvements to leased property .... 105,768 Furniture and fixtures 86,196 Total --at cost 3,112,886 Less depreciation to date 1,839,298 1,273,588 DEFERRED CHARGES Route development expense 51,237 Other 19,472 70,709 $2,765,225 CURRENT LIABILITIES Notes payable Payments due within twelve months 4-M% note payable Other notes payable $ 225,000 9,934 $ 234,934 Accounts payable Trade Traffic 251,883 465,153 717,036 Taxes on income for the year ended December 31, 1955. . . 18,000 Unearned transportation revenue 58,241 Income taxes withheld from employees 39,696 Accrued liabilities Salaries and wages Taxes (other than income taxes) Other 184,177 20,738 216,553 421,468 NONCURRENT LIABILITIES 4-34% note payable, secured by pledge of flight equipment, due in monthly installments to December 10, 1957 375,000 Less payments due within twelve months 225,000 150,000 Other notes payable, secured by pledge of certain equipment, due in monthly installments 37,004 Less payments due within twelve months 9,934 27,070 6% convertible debentures, due July 31, 1964 195,300 $1,489,375 372,370 CAPITAL Common stock -- authorized, 750,000 shares of $1 par value; issued and outstanding, 316,560 shares 316,560 Paid-in in excess of par value of stock issued, less organiza tion and capital stock expense written off 667,277 983,837 Earned surplus (deficit) 80,357* 903,480 $2,765,225 `Denotes red figure. The accompanying notes to financial statements are an integral part of this balance sheet. y/rsft'm e/t / TRANSPORTATION REVENUE Mail Passenger Express Excess baggage Non-scheduled transport service. YEAR ENDED DECEMBER 31, 1955 $1,689,890 4,933,487 126,476 30,477 28,711 $6,809,041 OPERATING EXPENSES Flying operations Flight equipment maintenance Ground operations Ground and indirect maintenance Passenger service Traffic and sales Advertising and publicity General and administrative Provision for depreciation and obsolescence Operating profit 1,959,481 845,753 1,102,295 333,608 320,195 921,705 185,111 456,193 470,169 6,594,510 214,531 OTHER INCOME Incidental revenue and cash discounts earned 8.964 223,495 OTHER DEDUCTIONS Interest 35,328 Extension and development expenses 26,995 Sundry 14,723 77,046 Earnings (before taxes on income) 146,449 TAXES ON INCOME Federal normal tax and surtax 15,900 State income taxes 2,100 18,000 NET EARNINGS The accompanying notes to financial statements are an integral part of this statement of earnings. $ 128,449 r4 YEAR ENDED DECEMBER 31, 1955 Earned surplus (deficit)--January 1, 1955 $208,806 Net earnings for the year ended December 31, 1955 128,449 EARNED SURPLUS (DEFICIT)--DECEMBER 31, 1955 $~80,357 The accompanying notes to financial statements are an integral part of this statement of earned surplus. NOTES TO FINANCIAL STATEMENTS--December 31, 1955 1. The company is operating under a permanent certificate of public convenience and necessity which was granted by the Civil Aeronautics Board in 1955. 2. Mail revenues are based on a permanent sliding scale rate as established by the Civil Aeronautics Board on December 10, 1954. 3. The provision for income taxes of $18,000 takes into consideration the availability of prior years' net losses as a reduction of current year's taxable income. Approxi mately $103,000 of loss carryovers are available for Federal tax purposes and $92,000 for State tax purposes. Accordingly Federal taxable income is approxi mately $41,000 and State taxable income is $55,000 before considering allocation. The Internal Revenue Service and the various state taxing authorities have not examined the company's prior years' income tax returns. 4. The 6% convertible debentures may be redeemed by the company, in whole, or from time to time in the amount of $1,000 or any multiple thereof, by giving at least thirty days' notice. A premium will be paid on the redemption of any debentures prior to July 31, 1959, as follows: 3% of the principal amount of the debentures redeemed from July 31, 1954 to and including July 30, 1956; 2% of the principal amount of debentures redeemed from July 31, 1956 to and including July 30, 1958; 1% of the principal amount of debentures redeemed from July 31, 1958 to and including July 30, 1959. No premium will be paid on deben tures redeemed subsequent to July 30, 1959. The debentures are convertible to common stock of the company, as follows: $3.00 principal amount of such debenture for each share of common stock con verted on or before July 30, 1959; $4.00 principal amount of such debenture con verted on or before July 30, 1961; $5.00 principal amount of such debenture for each share of common stock converted on or before July 30, 1964. During the year holders of $19,700 of debentures exercised their conversion privileges and accordingly received 6,560 shares of the capital stock of the com pany in exchange for the debentures. These transactions resulted in an increase of $6,560 in the capital stock account and $13,140 in the paid-in surplus account. 5. The company's stock option plan, adopted on February 19, 1953, provides that 60,000 shares of authorized but unissued $1.00 par value common stock be made available for purchase by employees. Options for such purchase at $2.8125 per share are to be granted from time to time by the Board of Directors. The plan will terminate on the day of the annual stockholders' meeting in 1959. On January 21, 1955 the Board of Directors approved options to two Officers to purchase 10,000 shares each and on November 19, 1955 the Board approved options to five Officers to purchase 1,000 shares each. During 1955 one Officer purchased 10,000 shares at the option price. This sale resulted in an increase of $10,000 in the capital stock account and $18,125 in the paid-in surplus account. In January, 1956, five Officers exercised their cations and purchased 1,000 shares each. 6. As security for the loan from Northwestern National Bank the company has pledged eighteen DC-3 aircraft. Pursuant to the loan agreement, the company agrees that it will maintain current assets that are equal to or in excess of its current liabilities; however, for the purpose of this computation liabilities will not include any indebtedness to the bank under this loan agreement. 7. The company has an agreement to purchase 80,054 shares or approximately 96% of the capital stock of Lake Central Airlines, Inc. The contemplated acquisition is awaiting approval of the Civil Aeronautics Board. 8. The company has contracted for the purchase of one DC-3 aircraft for approxi mately $102,000. It is anticipated that this purchase will be financed by a bank loan of $100,000 to be repaid in monthly installments with the last payment expected to be made in December, 1957. Operating Revenues 1955 1954 1953 1952 1951 1950 1949 1948 Passenger $4,933,487 $3,351,782 $2,303,738 $1,470,536 $ 860,599 $ 427,278 $ 271,576 $ 113,648 Mail 1,689,890 2,328,921 2,468,685 1,681,542 1,181,596 1,355,145 1,036,243 580,968 Express 126,476 75,630 68,117 55,861 45,173 18,637 8,364 5,963 Excess Baggage 30,477 20,975 15,739 12,783 5,643 2,419 1,519 1,012 Non-Scheduled Transport Service . 28,711 46,734 25,436 -0- -0- -0- -0- -0- TOTAL $6,809,041 $5,824,042 $4,881,715 $3,220,722 $2,093,011 $1,803,479 $1,317,702 $ 701,591 Operating Expenses Flying Operations $1,959,481 $1,654,155 724,209 $1,378,220 $ 910,779 $ 591,245 $ 459,643 $ 350,180 $ 190,630 Flight Equipment Maintenance . . . 845,753 690,589 483,292 275,469 267,105 229,946 127,966 Ground Operations 1,102,295 941,297 854,545 631,216 417,329 418,594 321,057 201,762 Ground and Indirect Maintenance . 333,608 365,761 362,024 288,407 153,248 133,142 110,236 50,414 Passenger Service 320,195 252,160 207,489 137,652 80,589 14,161 6,791 3,294 Traffic and Sales 921,705 651,665 557,885 313,470 182,929 38,139 26,964 16,750 Advertising and Publicity 185,111 139,796 116,451 60,030 65,295 30,069 20,303 15,683 General and Administrative 456,193 392,661 335,891 277,638 198,235 161,234 138,424 94,069 Depreciation and Obsolescence . . . 470,169 535,557 428,308 205,192 143,722 120,329 99,599 54,645 TOTAL $6,594,510 $5,657,261 $4,931,402 $3,307,676 $2,108,061 $1,642,416 $1,303,500 $ 755,213 Net Operating Income (or Loss) . . Amortization of Route Development 214,531 166,781 (49,687) (86,954) (15,050) 161,063 14,202 (53,622) Expense (26,995) (5,227) (10,618) -0- -0- (65,015) (86,292) (73,525) Other Income or Expenses, Net. . . (41,087) (49,847) (54,283) (36,439) 21,317 (3,935) (3,793) (897) Net Income or (Loss) Before Taxes 146,449 111,707 (114,588) (123,393) 6,267 92,113 (75,883) (128,044) Income Taxes 18,000 -0- -0- -0- -0- -0- - 0- -0- Net Income or (Loss) $ 128,449 $ 111,707 (114,588) (123,393) $ 6,267 $ 92,113 (75,883) (128,044) Y Me `oEl| CONS/N Bf^rt/ { Sectors rth Central A; r V^e , " '"C' ^:irh d ^C ZT ^TTHC z:^ other au y/ indUC,ed s^h tL^^ a"ditin Was r^sp'^-zS^, merits of' 0p'0'0n, tl,e necsafy '""""v wStof its Z'ZZs- ^ ^ fini 'ta"'^==SsStt Mil*aukee Xv/- f'b'"'y 15, Zr`n A/eXander Grat Via South Bend, Kalamazoo, Battle Creek and Jackson Now 900 Employees -- 125 Supervisory and Clerical Personnel . . . Daily Service to 43 Cities in Six States Serving America's Northern Playground 350 Station Employees. . . 200 in Maintenance . . . 225 Stewardesses and Pilots DC-3 Northliners Loading at Milwaukee's New Terminal