North Central Airlines Annual Report 1962

NORTH
CENTRAL
AIRLINES
1962
ANNUAL REPORT
--
North Ce tral Airlines Inc.
America's Leading Regional Airline
General Offices: 6201 Thirty-Fourth Avenue South, Minneapolis 50, Minnesota
Board of Directors
HAL N. CARR*
WERNER L. CHRISTENSEN
D. E. CROOKER
Management
G. F. DECOURSIN*
ARTHUR E. A. MUELLER*
* Executive Committee
A. JAMES MUELLER
A. L. WHEELER
K. B. WILLETT
ARTHUR E. A. MUELLER .... ... .... .. . . .. .............. . ... . .... . Chairman of the Board
HAL N. CARR . .......................... .. . . . . .. . ....... President and General Manager
R. H. BENDIO .... . ..... ... ... . ..... . .. .. ...... Vice President, Maintenance and Engineering
FRANK N. BuTTOMER ........ . ................. . ......... Vice President, Traffic and Sales
A. D. NIEMEYER .. ............. . ........................ Vice President, Flight Operations
ARTHUR E. SCHWANDT .. ..... .. . . . . ............. .. ..... Vice President, Industrial Relations
BERNARD SWEET . . . . . . ...... . ... . ................ . ......... Vice President and Treasurer
A. L. WHEELER ... . ....... . ..... . ....... .. .... . ...... . ..... . Vice President and Counsel
JOHN P. Dow .... .......... ... ....... . ........ . ....... . .. . ...... . . . ....... Secretary
CHARLOTTE G. WESTBERG . ................ . ... . .... . . . ..... . ...... .. Assistant Secretary
D. F. MAY .. . . . . . ... .. .... .. ... ... .. ... ......... . ......... . ... . .. Assistant Treasurer
L. J. KEELY .... .. .. ..... ... ..... . ... . ............. Director, Maintenance and Engineering
T. M. NEEDHAM ... .. .... . . . .... . ... .. ... .. . . .... . . . ........ Director, Ground Operations
G. F. WALLIS .. . . . ... . .... ... . . ........ ... ..... . . .. ......... Director, Flight Operations
Registrar and Stock Transfer Agent
Northwestern National Bank of Minneapolis; Minneapolis, Minnesota
To our stockholders, employees and friends:
March 12, 1963
We are pleased to report that during 1962 North Central Airlines
earn d a net profit of $534,000 on record revenues of $27,160,000.
This is the largest profit in the company's 15-year history.
North Central again set the pace for the nation's 13 regional
airlines by carrying 1,123,393 passengers. For the third consecutive
year, more than a million passengers flew the Route of the Northliners.
Cargo volume increased 13 per cent over the 1961 record, set by North
Central. The 25,346,000 pounds of cargo, including air express, freight,
and mail, carried in 1962 was over seven per cent ahead of the second-
ranking regional airline.
The company also maintained an excellent operating perform-
ance. Of the 15,000,000 miles scheduled in 1962, 99 per cent were
completed; and 81 per cent of the 1'89,000 flight arrivals were on
time. This is recognized as one of the most outstanding performance
and on-time records in the entire scheduled airline industry.
In 1962 the airline acquired eight more Convair aircraft, bringing
its fleet to 18 Convairs and 29 DC-3's. Because of the company's
strong financial position, this equipment financing was accomplished
without the assistance of the Federal Government's guaranteed loan
program.
North Central continued its aggressive route development pro-
gram and expects favorable action by the Civil Aeronautics Board
on several pending applications during the coming year. The C.A.B.'s
policy of strengthening regional airline routes by elimination of
unprofitable stops, acquisition of trunkline segments, establishm nt of
regional airports to serve adjacent cities, and relaxation of operating
restrictions will all create a favorable climate for the future growth
and development of North Central.
As management looks forward to even greater progress and profits
in the coming years, we want to acknowledge the loyalty of our
employees, the confidence of our stockholders, and the continued
support of our orth Central passengers. We appreciate the efforts of
all those who have helped make 1962 another record year for
"America's Leading Regional Airline".
ARTHUR E. A. MUELLER
Chairman of the Board
Sincerely,
HAL N. CARR
President
2
The year in review
NORTH CENTRAL AIRLINES earned record
profits in 1962 of $534,333. This is a 51 per cent
increase over 1961, previously the best financial
year in th0
company's history.
Record revenues of $27,159,551-seven per
cent ahead of last year-were attained in 1962.
Operating expenses were $25,634,479, an increase
of only five per cent, and included $1,190,630 in
depreciation charges. This resulted in an operating
profit of $1,525,072 and a net profit of $534,333
after income taxes of $655,725. It is significant
that the net earnings, together with the $1,190,630
of depreciation, developed cash flow of $1,724,963
in 1962.
The record profit was earned by North Central
after returning $316,225 in excess profits to the
Federal Government under the Class Mail Rate.
It was the second consecutive year the airline
reached this profit-sharing position through
efficiency of operation and its intensified program
of cost control.
With final settlement of the past period mail
rate in 1961 and after a full year's experience
under the new class rate, it was possible to re-
construct certain items of revenues and expenses
in order to reflect more accurately the annual
profit or loss back to the year 1952. The major
items adjusted were mail revenues, extension and
development costs, and income tax liabilities. The
net effects of these changes by years are shown in
the graph on Page 2 and the 10-Y ear Financial
Summary on Page 15.
A special offering of 85,714 shares of common
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stock was made by North Central to its share-
holders, on a pro rata basis, and to employees,
on a seniority basis, in April 1962. The offer was
fully subscribed and increased the number of
stockholders to nearly 5,000.
In the spring of 1962, the airline added three
Convair aircraft to its fleet. These planes were
put in operation for the summer schedule. In
October 1962, the company purchased five more
Convair 440 aircraft, bringing the Convair fleet
to 18, in addition to its 29 Douglas DC-3's.
Route developmen t
North Central serves 90 cities in 10 Midwest
states and Canada over its 7000-mile system. This
is one of the nation's largest airlines in number
of cities served. During 1962 the company con-
tinued to pursue its aggressive route development
program by applications to the Civil Aeronautics
Board for new routes, for acquisition of segments
and cities now served by trunk airlines, and for
greater operating flexibility on existing routes.
A summary of pending applications follows:
SIOUX CITY-NOR F OLK-DENVER-North
Central has applied for a route between the co-
terminals Sioux City, Iowa and Norfolk, Nebraska
and the terminal point Denver, Colorado. The
480-mile segment would add Denver and the
State of Colorado to the system and strengthen
the entire western portion of the airline.
OMAHA-S T . L OUIS-Still pending is the com-
pany's application for a 400-mile segment between
Omaha and St. Louis, via Chillicothe and
NET PROFIT
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1957 1958 1959 1960 1961 1962
Moberly, Missouri. This would be North Central's
first entry into Missouri, and three new cities
would be added.
OMAHA-KANSAS CITY-This application
would establish North Central service between
Omaha and Kansas City, Kansas, with stops at
Falls City, Nebraska and Atchison, Kansas. The
169-mile route would add the State of Kansas
and three cities to the airline's system.
RAPID CITY-O~AHA-During 1962 the com-
pany filed an amendment to the Omaha-Kansas
City application to include a route between Nor-
folk, Nebraska, and Rapid City, South Dakota,
with nonstop authority between Rapid City and
Omaha.
FORT WAYNE-MUNCIE AREA INVESTI-
GATION-This case includes North Central's
consolidated applications for service between
(1) Chicago and Cleveland via South Bend and
Fort Wayne, Indiana and Toledo, Ohio; (2)
Chicago and Dayton, Ohio via South Bend and
Fort Wayne; (3) Indianapolis, Indiana and
Detroit via Muncie and Fort Wayne, Indiana;
Lima and Toledo, Ohio; (4) Fort Wayne and
Grand Rapids, Michigan via Kalamazoo. The
routes would add six cities to the company's
system.
The Board will also consider whether or not
to suspend Trans World Airlines at South Bend
and Fort Wayne, Delta Air Lines at Fort Wayne
and Toledo, and to impose a long-haul restriction
on United Air Lines at its intermediate points
between Chicago and Cleveland.
A newly-acquired hangar at the Minneapolis/St. Paul
main operations base now provides over 30,000
square feet of floor space for line maintenance and
8,000 square feet of office space. A work dock, shown
at left, greatly facilitates Convair maintenance.
The case was heard by a C.A.B. examiner in
Fort Wayne in September 1962, and an initial
decision is expected in 1963.
MONTANA-NORTH DAKOTA-SOUTH
DAKOTA ROUTES-An application for routes
in Montana, North Dakota, and South Dakota
would add 1,376 route miles, 12 cities, and the
State of Montana to the orth Central system.
Included are routes between:
Rapid City, South Dakota and Bismarck/
Mandan, North Dakota via Lemmon, South
Dakota and Dickinson, North Dakota.
REVENUES
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The venerable, reliable Douglas DC-3 made sched-
uled airline service possible. North Central operates
29 of these aircraft over its 7,000-mile system in 10
states and Canada. The DC-3 Northliner carries
26 passengers and a crew of three, and cruises at
180 miles an hour at 10,000 feet.
Bismarck/ Mandan and Billings, Montana via
Minot and Williston, North Dakota; Sidney,
Glendive, and Miles City, Montana.
Minot and Great Falls, Montana via Williston;
Sidney, Wolf Point, Glasgow, and Havre,
Montana.
Great Falls and Billings via Lewistown,
Montana.
DETROIT-TORONTO-North Central's appli-
cation for a nonstop route between Detroit and
Toronto, Ontario, Canada is still pending. A
reopening of the Bilateral Treaty between the
United States and Canada is necessary for con-
sideration of this application.
MICHIGAN POINTS INVESTIGATION
-This proceeding was instituted by the C.A.B.
to investigate service to several Michigan cities.
Included in the case is North Central's applica-
tion for a route between Saginaw / Bay City/
Midland and Chicago via Muskegon. The com-
pany has requested suspension of United Air
Lines' authority to serve Saginaw / Bay City/
Midland, Flint,. Lansing and Muskegon.
Also under consideration in this case is the
suspension of certain Michigan cities under the
Board's "use it or lose it" policy and service to
others through regional airports. A hearing in
this case will probably be held sometime in 1963.
OPERATING FLEXIBILITY APPLICA-
TIONS-Several pending applications to the
C.A.B. would allow North Central greater oper-
ating flexibility on certain existing segments while
continuing to serve the intermediate cities on
other flights.
The company seeks authorization between
Minneapolis/ St. Paul and Chicago for (1) non-
stop service; (2) one-stop via Milwaukee,
Wisconsin; (3) one-stop via Madison, Wisconsin;
and ( 4) three-stop via La Crosse, Madison and
Milwaukee. These modifications would permit
use of Convair aircraft, create more available
seats for long-haul passengers, and increase the
company's revenues.
North Central is continuing to operate nonstop
between Madison and Chicago on an interim
basis until a final C.A.B. decision is reached on
an application for permanent authority.
The company also has an application for non-
stop Chicago-Cleveland service.
usE IT OR LOSE IT'' PROCEEDINGS
-Two North Central routes and four Michigan
cities are now under investigation by the Board
under its "use it or lose it" policy.
One route is from Duluth, Minnesota/ Superior,
Wisconsin to Port Arthur / Fort William, Ontario,
Canada; and the other, from Hancock/ Houghton,
Michigan to Port Arthur / Fort William. The
hearing examiner has recommended that service
be retained on the Duluth/ Superior route and
suspended on the Hancock/ Houghton segment.
A final decision is expected later in 1963.
The Michigan cities to be considered under the
"use it or lose it" policy are Pontiac, Cadillac/
Reed City, and Port Huron. The matter is part
of the Michigan Points Investigation.
REGIONAL AIRPORT INVESTIGATIONS
-During 1962, the Civil Aeronautics Board
instituted its second Area Airport Investigation
to determine whether or not eight combinations
of cities on North Central's system should be
served through regional airports. The C.A.B.
stated in its order that "the concentration of the
services provided to an area through the use of
one airport will often improve the service offered
by both scheduled airlines and general aviation
at reduced costs." North Central was selected for
study "because its routes involve the greatest
number of adjacent points, which may be served
through a single airport, authorized to any
individual local carrier."
The following combinations of cities were
included in the Area Airport Investigation: (1)
Ashland, Wisconsin-Ironwood, Michigan; (2)
Appleton-Oshkosh, Wisconsin; (3) Clintonville-
Green Bay, Wisconsin; (4) LaCrosse, Wisconsin-
Winona, Minnesota; (5) Land O'Lakes-Rhine-
lander, Wisconsin; ( 6) Marshfield-Wausau,
Wisconsin; (7) Marshfield-Wisconsin Rapids /
Stevens Point, Wisconsin; (8) Wausau-Wisconsin
Rapids/ Stevens Point.
A hearing in this case is set for May 1963.
In th Michigan Points Investigation, the Board
will consider whether or not the following com-
binations of cities should receive service through
area airports: (1) Battle Creek-Kalamazoo,
Michigan; (2) Grand Rapids-Muskegon,
Michigan; (3) St. Joseph / Benton Harbor,
Michigan-South Bend, Indiana; ( 4) Jackson-
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The Convair 440 Super Northliner, luxury aircraft of the North
Central fleet, provides air conditioned, pressurized cabin com-
fort for its 44 passengers. Cruising at 289 miles an hour at
20,000 feet, the Convair is equipped with weather radar and
high-intensity Honeywell -Atkins Maximum Safety wingtip lights.
The company operates 18 Super Northliners.
Lansing, Michigan; (5) Flint-Saginaw / Bay City/
Midland, Michtgan.
In the same investigation, if service should be
suspended at Cadillac/ Reed City, Pontiac, and
Port Huron, Michigan under the " use it or lose
it" policy, then the Board will also determine if
service should be provided through regional
airports.
Traffic growth
North Central again led the nation's 13 regional
airlines by setting a new passenger traffic record
in 1962. For the third consecutive year, boardings
exceeded the million mark when 1,123,393 pas-
sengers flew the Route of the Northliners.
In August the company carried 113,069 pas-
sengers-another high in the regional airline
industry. On A,ugust 31 a new daily mark was
reached with 4,511 passengers, 226 more than the
previous high set by North Central in June 1961.
A record 25,346,399 pounds of cargo was
carried for the year. This includes 9,150,336
pounds of air freight, an increase of 20 per cent
over 1961 ; 9,468,158 pounds of air express, 14 per
cent ahead oflast year; and 6,727,905 pounds ofair
mail and surface mail, four per cent above 1961.
While continuing to set the industry traffic
pace, the company also maintained its perfect 15-
year safety record, again receiving the Award of
Honor, highest citation conferred by the National
Safety Council. Since beginning scheduled service
in 1948, North Central has carried 7,500,000
passengers and flown 1,210,000,000 passenger
miles without a single fatality or injury to passen-
gers or crew members.
Improved services
North Central's service to the traveling public
increased seven percent over 1961 with 468,244,632
seat miles being provided. In operating perform-
ance, the company maintained one of the most
outstanding records in the entire airline industry.
North Central flew 14,958,444 of its 15,164,587
scheduled miles for a completion factor of 98.6
per cent. On-time performance reached a new high
of 80. 7 per cent. Thi~ means that of the airline's
188,838 flight arrivals, 81 per cent were on time.
Aircraft utilization also remained high with
Convairs averaging six hours, 18 minutes a day;
and DC-3's six hours, 17 minutes.
Consolidation of reservations offices to reduce
costs and increase service efficiency continued
during 1962 as Madison and Beloit/] anesville
reservations were moved to Milwaukee; Duluth/
Superior to Minneapolis/ St. Paul; South Bend
to Chicago; and Kalamazoo to Battle Creek. The
Milwaukee reservations center was transferred
from General Mitchell Field to the downtown
area, increasing present space to 3,700 square feet,
and providing for future expansion to 11,000
square feet as further consolidations are made.
Downtown city ticket offices in Milwaukee,
Minneapolis, and St. Paul were moved to new
buildings and remodeled to provide better pas-
senger service at more convenient locations.
During 1962, more than 16,000 sales calls were
made over the system by North Central District
Traffic and Sales Managers and Representatives.
These personal calls were in addition to the
regular public relations and traffic responsibilities
of these sales people.
New facilities
The year saw many dramatic additions and
improvements to the company's system-wide
facilities which will provide a more efficient,
economical operation and insure North Central's
continued leadership among the regional airlines.
In January, North Central moved its Twin
Cities station and ticket counter personnel to
enlarged quarters in the new terminal building
at the Minneapolis/ St. Paul International Airport.
Flight crews and some line maintenance crews
have also been transferred to the terminal.
Early in 1962, all Chicago operations were
consolidated at O 'Hare International Airport.
North Central's newly expanded ticket counter,
station and ramp areas have greatly improved
passenger service there. The company also added
a closed circuit television at Chicago to transmit
flight information for passenger convenience and
employee efficiency.
5
6
Our 150 stewardesses are expertly trained and qual-
ified to serve North Central passengers courteously
and efficiently. They welcome the more than one
million persons who annually travel the Route of the
Northliners.
North Central acquired 65,000 square feet of
additional floor space, during 1962, for expansion
of its Minneapolis/ St. Paul general offices and
main operations base. This nearly doubled the
company's work area. The extensive program of
remodeling for all departments was completed in
the fall. The airline presently occupies six build-
ings on the west side of the Minneapolis/ St. Paul
Airport.
In 1962, North Central became the world's
first scheduled airline to install the Honeywell-
Atkins Maximum Safety light on its Convairs.
Its signals are visible up to 70 miles-four times
the visibility of the present rotating anti-collision
lights. The high-intensity xenon strobe lights flash
160 times a minute forward, 80 times a minute
to the side, and 40 to the rear. Not only does the
light attract immediate attention, but pilots of
other aircraft can determine the direction of flight
by observing the flash rate.
An automatic data collection system was added
in August. This new installation collects informa-
tion daily, from the Minneapolis, Chicago, and
Detroit bases, on maintenance man-hours. A
distribution is then made showing man-hours
spent each day by aircraft, job, and individual.
Work progress reports which formerly took weeks
to prepare are now available the following day.
This system allows for scientific scheduling of
routine overhaul and line maintenance work,
immediate and efficient shifting of work loads
for non-routine jobs, and improved supervision
-all at a reduced cost. The program will be
expanded in 1963 for other data collection appli-
cations in the company.
Management development
The Board of Directors named two new company
officers following the 1962 annual stockholders'
meeting. D.F. May was elected Assistant Treasurer,
and Charlotte G. Westberg, Assistant Secretary.
During 1962, three positions in the Traffic and
Sales Department were created to improve reser-
vations efficiency. A District Supervisor of
Reservations and Ticketing was appointed for the
western region of the airline, and another for the
eastern area. These two supervisors are responsible
for system-wide administration of reservations
and ticketing procedures at the stations. Also
added was a Manager of Space Control, assigned
to the Chicago reservations office. He is responsi-
ble for determining seat availability and assign-
ment on flights over the entire system to insure
North Central is the world's first scheduled airline to install the
Honeywell-Atkins Maximum Safety light on its aircraft. The high
intensity strobe lights flash 160 times a minute forward, 80 a
minute to the side, and 40 a minute to the rear. By observing
the flash rate, pilots of other aircraft can determine direction
of flight.
maximum utilization of space and efficient pas-
senger service.
Looking to the future
North Central's 1962 revenues, a record for the
regional airline industry, are a strong indicator
of the company's potential earnings. New routes,
elimination of unprofitable segments and cities,
addition of larger aircraft, and a continuing cost
control program will contribute to a successful
future.
Management is optimistic that a stronger
system network and more profitable operation will
result from the favorable regulatory climate in
Washington. Factors in the Civil Aeronautics
Board's program for strengthening the regional
airlines' route structures are: the "use it or lose
it" policy which aims at eliminating unprofitable
cities which do not generate a minimum of five
enplaned passengers daily and segments that do
not average a minimum of seven passengers per
flight; relaxation of operating restrictions to per-
mit nonstop and skip-stop authority on existing
routes; transfer of segments and cities from trunk
airlines to the regional carriers which are able to
serve the short-haul traffic more efficiently; and
the regional airport concept aimed at encouraging
use of a single airport to serve adjacent communi-
ties. These factors will improve service and
thereby increase revenues, while reducing
operating costs.
The C.A.B.'s program of strengthening the
regional airline routes will also increase the
carriers' earnings potential-thus implementing
the Board's efforts to reduce public service
payments.
North Central's re-equipment program is pro-
gressing toward the eventual replacement of the
DC-3's with Convair 440's, or short-haul jet air-
craft, resulting in greater capacity and comfort,
reduced costs, and increased profits.
The company will continue to investigate the
possibility of mergers with other regional carriers.
North Central's leading position in the industry
insures that any future merger would benefit the
company substantially.
The future has never been brighter for the air-
line. Record revenues attained in 1962 can be
expected to increase in the years ahead through
traffic growth, system development, and the
acquisition of larger aircraft. With a continuation
of the company's intensive cost control program,
North Central can anticipate record earnings
again in 1963.

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Great Falls
Glasgow
Lewistown
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Billings
Wolf Point
Williston


Sidney
Glendive.
Dickinson

Miles City
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O F THE
ROUTE
NORTHLINERS
O UTES
PRESENT R
PO SED ROUTES
PRO
Minot
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Lemmon
Pierre
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Devils Lake
Bismarck
Q Mandan
0 Aberdeen
Huron
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Mitchell
Q Bemidji
Brainerd Q
Hibbing, Q
Chisholm
n
Gra~d Flint
Q
Rapids
Q Q PontiacQ
Lansing
DETROIT
"ton Harbor
. Joseph Q
Battle

Indianapolis
America's Leading Regional Airline ... Continuing record of growth and progress .. . First in passengers and cargo
PASSENGERS CARGO* PASSENGERS CARGO*
In Pounds In Pounds
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A E E R E
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K y T K N C L T A R s L L y K K N T L R s L A C T
1953 1954 1955 1956 1957 1958 1959 1960 1951 1962 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962
* Includes Express, Freight and Mail * Includes Express, Freight and Mail
0 11
12
ort Ce tral Airlines, Inc.
Assets
Current Assets
Cash . . ... .
Accounts receivable
Mail .
Traffic. . . . .
Other . . . . .
Flight equipment parts, at average cost (less deterioration
reserves of $100,755) . . . . . .
Maintenance and operating supplies
Prepaid expenses and sundry deposits
Total current assets
Operating Property and Equipment-at cost
Flight equipment (Note 1) . . .
Ground equipment . . . . . .
Hangar buildings and improvements to leased property.
Furniture and fixtures . . . . .
Less accumulated depreciation
Deferred Charges
Route development and aircraft preoperating costs.
Rentals . . . . . . . . . . . . . . . .
Unamortized discount and expense on debt
Other .... .. . .... .... . .
The accompanying notes are an integral part of this statement.
Balanre he D c mbe 31, 1962
$ 996,067
2,068,557
$ 427,784
358,515 3,423,139
11,534,569
1,131,181
636,407
312,485
13,614,642
5,538 658
225,301
201 ,361
49,882
33,717
995,569
267,184
582,947
5,696,623
8 075,984
510,261
$14,282,868
L abi l ties
Current Liabilities
Current maturities of long-term debt .
Accounts payable
Trade
Traffic
Unearned transportation revenue
Taxes withheld or collected as agents
Income taxes . . . .
Accrued liabilities
Salaries and wages
Payroll and property taxes
Other . . . . .. .. .
Total current liabilities
Long-Term Debt (Note 1 and Note 2)
6% notes payable to banks . . . . . . .
Other notes payable, collateralized in part by pledge of certain
equipment, payable in monthly installments . . . . . . .
Less current maturities.
Deferred Credits
Deferred income taxes (Note 5)
Deferred Federal investment tax credit
Stockholders' Equity
Common stock-authorized, 10,000,000 shares of $.20 par value;
issued and outstanding, 8,699,421 shares; reserved on
subscription, 32,617 shares
Paid-in capital . . . . . .
Retained earnings
$ 1,404,991
1,530,433
652,651
121,811
366,326
5,716,000
510,001
6,226,001
1,090,884
96,000
22,558
1,746,407
298,548
2,044,955
695,771
$ 1,090,884
2,935,424
161,096
357,910
602,365
1,140,788
6,288,467
5,135,117
118,558
2,740,726
$14,282,868
13
14
North Central Airlines, Inc.
Statement of Earnings-Year ended December 31, 1962
TRANSPORTATION REVENUES
Passenger. . . . . . . . . . . .
U .S. Mail .. . . . . . . . . .
Public Service Revenue (after excluding $316,225 profit-sharing to
Government)
Express
Freight ... .
Excess baggage
Non-scheduled transport service
Other . . . . . . . . .
OPERATING EXPENSES
Flying operations . . . .
Flight equipment maintenance
Other maintenance . . . .
Passenger service . . . . .
Aircraft and traffic servicing
Promotion and sales
General and administrative .
Depreciation (Including $92,570 of extension and development expense) .
Operating profit . . . . . . . . . . . . . . . . . . . . .
OTHER DEDUCTIONS
Interest . . . . . . . . . . . .
Sundry . . . . . . . . . . . . .
Earnings before income taxes
INCOME TAXES
States . . . . . . . . . . . . .
Federal, less current year amortization ($2,402) of investment credit
NET EARNINGS . . . . . . . . . . . . . . . . . .
The accompanying notes are an intregal part of this statement.
$ 7,198,439
3,420,846
2,254,511
1,303,025
7,274,824
1,948,217
1,043,987
1,190,630
312,002
23,012
39,000
61 6,725
$16,799,514
465,482
8,526,611
378,831
563,311
142,602
130,823
152,377
27,159,551
25,634,479
1,525,072
335,014
1,190,058
655,725
$ 534,333
Statements of Retained Earnings and Paid-In Capital -
RETAINED EARNINGS
Retained earnings-December 31, 1 961
Net earnings for the year . . . . . . .
Income taxes on 1961 mail subsidy received in 1962
Retained earnings-December 31 , 1962 . . . . .
PAID-IN CAPITAL
Paid-in capital-December 31 , 1961 . . . . . . . . . . . .
Excess over par value on sale of 85,714 shares of common stock
Commission paid on sale of common stock
Paid-in capital-December 31, 1962 . . .
The accompanying notes are an integral part of this statement.
Year ended December 31, 7962
$289,213
534,333
823,546
127,775
$695,771
$ 17,085
282,856
299,941
1,393
$298,548
Notes to Financial Statements-December 31, 1962
1. FLIGHT EQUIPMENT AND LONG-TERM DEBT
During the year, the company acquired six additional
Convair 340/ 440 aircraft and entered into loan agreements
with two banks supplemental to the one dated September 15,
1961. The supplemental agreements provide for the borrow-
ing of an additional $2,326,000, which was used to pay for
two of the aircraft and related spare parts and for working
capital. The other four aircraft and related spare parts were
financed through $1,485,000 of term debt due in 1963. All
aircraft owned by the company, along with related spare
parts, are pledged as security on the loans.
A provision of the agreement requires the company to
maintain current assets in excess of current liabilities by at
least $250,000, after April 1, 1962, exclusive of amounts
due the noteholders.
2. WORKING CAPITAL
The $1,485,000 of term debt due in 1963 is classified as
long-term debt on the premise that present financing now
being negotiated will be consummated. The company antic-
ipates that the proposed financing will negate the require-
ment that this debt be presently classified as a current
liability. Should such financing not materialize, current lia-
bilities at December 31, 1962 should then be restated from
$6,288,467 to $7,773,467 and long-term debt would decrease
accordingly.
3. LONG-TERM LEASES
The company has a forty-year lease covering hangar and
terminal facilities at Chicago's O'Hare International Air-
port. A lease at Detroit's Willow Run Airport expires m
1967, and the leases for terminal and hangar facilities at
Minneapolis-St. Paul are being negotiated. Management
anticipates the cost of leased facilities at these three major
locations, including landing fees where a long-term contin-
gency exists, to approximate $600,000 annually.
4. PENSION PLAN
The company contributes annually to a Pilots' Retirement
Plan which was established in 1956. The contribution for the
year 1962 amounted to $317,862 and at December 31, 1962
substantially all unfunded past service liability was paid.
An amendment to the Plan provides that the company
assume the liability for pilots' contributions after March 31,
1962. In 1962, $94,994 of such cost is charged against op-
erations.
5. INCOME TAXES
Federal income tax returns through the year 1959 have
been reviewed by the Treasury. Returns for the three sub-
sequent years are open to review. Income tax returns re-
quired by the States of Minnesota and Wisconsin have also
been reviewed through 1959. There are no unpaid assess-
ments resulting from any examination.
Revenues for 1962 include $172,553 of mail pay subsidy
held back by the Government. This income is not report-
able, for tax purposes, until the year ended December 31,
1963, and the tax liability of approximately $96,000 is
shown as deferred income taxes on the balance sheet.
CHICAGO
NEW YORK
LOS ANGELES
ALEXANDER GRANT & COMPANY OTHER
PRINCIPAL
CITIES
Stockholders and Directors
North Central Airlines, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
312 EAST WISCONSIN AVENUE
MILWAUKEE 2 , WISCONSIN
February 1, 1963
We have examined the balance sheet of NORTH CENTRAL AIRLINES, INC. (a Wisconsin corporation) as of
December 31, 1962 and the related statements of earnings and retained earnings and paid-in capital for the year then
ended. Our examination was made in accordance with generally accepted auditing standards and accordingly included
such tests of the accounting records and such other auditing procedures as we considered necessary in the circum-
stances; it was not practicable to confirm receivables from United States Government departments and agencies but
we satisfied ourselves with respect to such receivables by means of other auditing procedures.
In our opinion, except for the effect of the classification of certain liabilities as long-term debt, as described in
Note 2 of Notes to Financial Statements, the accompanying balance sheet and statements of earnings and retained
earnings and paid-in capital present fairly the financial position of North Central Airlines, Inc. at December 31, 1962
and the results of its operations for the year then ended, in conformity with generally accepted accounting principles
applied on a basis consistent with that of the preceding year.
Milwaukee, Wisconsin Alexander Grant & Company
10-YEAR FINANCIAL SUMMARY
Operating Revenues 1962 1961 1960 1959 1958 1957 1956 1955 1954
Passenger .................... . . $16,799,514 $15,631,735 $12,660,869 $11,388,135 $ 8,702,455 $ 7,372,333 $6,137,216 $4,933,487 $3,351,782
Mail and Public Service Revenue . ... 8,992,093 8,466,678 8,054,111 6,239,756 3,698,395 2,839,163 1,538,215 1,689,890 2,328,921
Other ... . ...... . . . . . . . . . . . . . . . . 1,367,944 1,112,046 886,554 790,090 657,961 504,017 324,910 194,628 148,622
TOTAL. 4 ... $27,159,551 $25,210,459 $21,601,534 $18,417,981 $13,058,811 $10,715,513 $8,000,341 $6,818,005 $5,829,325
Operating Expenses
$ 4,811,661 $3,538,274 $2,853,134 $2,448,640
Direct Expenses .............. . . .. ......... $12,873,796 $12,405,644 $10,815,675 $ 7,924,030 $ 5,849,305
Indirect Expenses . . ........... . ............ 11,570,053 10,766,044 9,653,514 9,315,951 6,550,910 5,426,616 4,020,375 3,271,207 2,702,111
Depreciation ................. . . . . . 1,098,060 1,021,474 787,177 859,102 583,174 452,993 301,161 470,169 535,557
TOTAL. .... ..... . ............ . ........... .. $25,541,909 $24,193,162 $21,256,366 $18,099,083 $12,983,389 $10,691,270 $7,859,810 $6,594,510 $5,686,308
Net Operating Profit (or Loss). . .......... . .. $ 1,617,642 $ 1,017,297 $ 345,168 $ 318,898 $75,422 $ 24,243 $ 140,531 $ 223,495 $ 143,017
Amortization of Route
Development Expense ................... (92,570) (88,924) (100,866) (98,295) (16,869) (17,124) (48,055) (57,540) (7,665)
Non-operating Income and
Expenses, Net. . . . . . . . . . . . . . . . . . . . . . . . . . . (335,014) (269,483) (229,282) (183,364) (43,472) (54,709) (36,085) (50,051) (55,130)
Net Profit (or Loss) Before Taxes ..... ... ... . $ 1,190,058 $ 658,890 15,020 $ 37,239 $15,081 (47,590) $ 56,391 $ 115,904 $ 80,222
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 655,725 305,776 -0- 4,542 -0- (60,103) 45,700 18,000 -0-
Net Profit (or Loss) After Taxes ............. $ 534,333 $ 353,114 15,020 32,697 $ 15,081 12,513 $ 10,691 $ 97,904 $ 80,222
1953
$2,303,738
2,468,685
114,974
$4,887,397
$2,104,078
2,399,016
428,308
$4,931,402
$ (44,005)
(15,397)
(59,965)
$ (119,367)
-0-
$ (119,367)
15
Growth of the North Central fleet
1948 1953 1958
SIX LOCKHEED 10-A's 18 DOUGLAS DC-3's 32 DC-3's
16
This chart shows the dramatic growth of the North Central fleet from the first year of operation through
1962. With six nine-passenger Lockheed 10-A's in 1948, the fleet has grown steadily until it now
includes 29 Douglas DC-3's and 18 Convairs. Equipment plans call for the eventual replacement of
the DC-3 with Convairs or short-haul jet aircraft.
1962
18 CONVAIRS
29 DC-3's
NORTH CENTRAL AIRLINES, INC.
olf OVTSfAlf0IN6
North Central has maintained a perfect
15-year safety record and, every year of
its operation, has been awarded a cita-
tion by the National Safety Council. Since
starting scheduled service in 1948, the
airline has carried 7,500,000 passengers
and flown 1,210,000,000 passenger
miles without a single fatality or injury
to passengers or crew members.
NORTH CENTRAL AIRLINES, INC.
6201-34 AVENUE SOUTH
MINNEAPOLIS 50, MINNESOTA