Northwest Airlines Annual Report 1950

D
NORTHWEST AIRLINES, INC.
OFFICERS AND DIRECTORS AS OF DECEMBER 31 , 1950
CROIL H
E. I. "\ HY TT .................... .................... Vice President and Comptroller
K. R . F E RG o ............ Vice President-O p rations and Engine rin a*
Lr C . GLOTZBACH ...... Vice President and A sistant to the President
C LBERT ........................................................ Vic President ales
FLOAN ................................................ Vice President and ecretary
L. S. HoL TAD . .. ...... ......... .. .... .. .... . ......... ....... .......... ..................... Treasurer
FRA K C . J DD .... .. ........... . . R egional Ti ice President-Tl e t rn R egion
D. J. Kr G ................................ R egional T ice President-O rient R gion
v\ 11.
J. ErnE ................................................... ........... Assistant Treasurer
. D. P IEPGRA ... .............................................. .. ......... Assistant Treasurer
C. L. TE\\ A RT ............. . ................................. . .............. Assistant ecretar,
s
K . R. F E RG 0 1 .......... .. ..... . V ice President- O perations and Engine nng
.Y ortlw .. est Airlines I nc.**
"\ I. T DOR GARDI TER .......... Chairman, Board of Directors I ncorporat d I nv stars .. .
Boston, A1 ass.
RoBERT M. H ARDY .... ......... .... President, unshine ~lining Co. Yakima Tl a h.
CROIL Hu TER ... ....... ..... ..... ... President, !\ orth,J.J st Airlin s I nc.
Jo EPH T. JoH 1 so ............ President, The Alili aukee Co., M ilwaukee, Tl is.
M L C0LM . MACKAY .......... pecial Partner, L aidlaw & Co. ew 1 ark, X . Y.
DR. CHARLE "\1 AYO ...... :VJ avo Clinic R ochester, A1inn.
LO zo P ETTEY .................. Vice President and Director, Farm rs tale Bank,
Brush Colorado
WILLI
Enwr
1 TERN ............. .... .. . President, D akota Tational Bank Fargo, . D .
Vh-IITE .......... .... ........ Chairman, Board of Directors Kalman & Co.
t. Paul, Minn.
E. I. HYATT ... ..................... Vice President and Comptroller, orthw st Airlines, I nc.
PRINCIP L REGI TRAR
THE CHA E N TIONAL B K OF Tr-IE CITY OF JEw Y ORK . Y.
PRI1 CIPA:::.. TRAN FER GE T
BANKERS TRUST CoMPA Y E \ YORK> . Y.
Co-REm TRAR
H ARRI TR T D A\"IJ G B A K. CHICAGO) I LLINOI
Co-TRA FER GE T
T HE FIR T ATIO AL B AN I OF CHIC GO) CHICAGO, I LLI OI
*Resigned Feb. 26, 1951.
**Re igned M ay 28, 1951.
GENERAL OFFICE 1885 "CNI\'ER ITY AvE 1 UE T . P A L 4 ,1r E OTA
. HIGHLIGHTS OF 1950
20 000,000 fl t of Stratocrui er in compl t operation coa t
to coa t, Hawaii and Ala ka.
Total operating revenue incr a ed 25.6 % over 1949.
Pa enger r venue up 18.9% over 1949.
Reduced bank loan $3,859,637.
Total freio-ht and expre revenue up 30.3 % over 1949.
Exp nded 4 559 000 in capital inv tment .
Increased n t working capital $1,602,800 over 1949.
ew high of 854 459 revenue passengers.
25TH YEAR OF EXPERIENCE
h r hold r of orth,, t Airlin
In 19.50 y ur ' p
marred by ' f ur
em d in ound epared
to tinu the the
wo1 n1aj r t wa
a year i uble-
d 'k lux pa -
enoer ti ally
toward aliz d
in 1 r.: e in the O"
into fl t. op
and _ tantial.
pro!IT provino t
cienc eet.
fter all , r th'-''' _ t ir lii
a net lo o 7 fter takino-
358~48 n ' dit appli a prior
ear It b not d that ure
refle high depr tion a ion
ha f -,87 .2+7. " hi h , 57
O"reater than for 194 . In that,. ted
net earnino of 1 357,679. '
Total op r ,. in
to 51 396.51 pa ,.
1949. fail t-
total d 7 .8 i tha
2.523 re fo t an
r venu unt 2. r
n in of .3 o,~r 1949
of 3.277. r Y nue
fro 87 942 in 19+9 to 3.1+8 -
395 in 1 -o, rea of 18. p r cent.
On the other id f th ratin(J"
expen e total d 51 95 266 a ,,ith
38 988,909 th ' r part
of thi in rea .5 p r
cent more at . more
revenu pa en the balan e , a
attribu tabl to f labor and mat -
rials and to th wn op ratin(J" and
rnaintenanc - ,,. trato rui er .
The balan e he t po itio r company
is ound. t De emb r 31 ino apital
totale O an in :800
over , ital a ea im-
prove oteworth 1 0
our ade an o ,000
for additio 1 "e note
pa rnent o 6 o ino- bank
loan fully paid up p di
with a di. b f 4 u
5,155 har er e t
market for $90 896 retirino- q
the company' articl of inc rp .
In pril 1950 " e borrowed the final
amount of a 21,000 000 bank loan. The
borrowing ere paid down to 17 140 .)63 at
the end of th year and h,1v ~ m b en
r du d to 16,140.33 b a 1000000 pa -
m nt made in farch 1 -1.
I\. are bl to report briefl at thi time
n two imp rtant d v 1 pment in th op ning
month f th urrent , ar 1951.
w at we xperi-
u ino month of
r d dine in air
t t four th
in th me
f r por lo for
th th in lud 1 of
i 7. 2 4 7 in v 1a t
at the end r month o t
+ 110.582 and at of fa; o t
-L287 .828. Thi ,ear we had all for
th uart r and made a of 228
in At th nd of th ou th
o amounted to 1 + nd on
th 1ation now availab lo be
fu du d by profit f
. in April of 1951 the i il ero-
nL oard fixed . air mail rate
f r our operation in p ar . The e
repla t rn rat hich ha _e
be n in fol 1p rate ppli-
ation 1 n pen n th Board
determined that uncle Id Your om-
pany had b n und rpaid app1~
oximat 1
+J02 69_ on it dom ti rout and o erpaid
0 .130.3+-l: on it int rnational r ute , a n t
und r f 1.5 72.3-1-8. In e
,.A.B. t mporary ma e
J :rnua . . \\hich are _d d
your omp 11a1l
the of approximat I
7.800.000 in 19 r both and
international route . ain t t , 810
r
1 r. it i o-ra tifyino to
o-rowth from mall
0.. .
a a maJor
thr e
o mile.
rout p tial i
exp i " ill
continue to i o ition
in 1951 and i
I " ant to tak m
appr iation to all empl ,alt
and upport they ha un the
mpan durin th ar.
By authorit of th Board of Dire tor
President and Gen ral A1a11ager
a int Paul Minn sota
Ma y 29, 1951
THE YEAR IN REVIEW
Th equipment difficultie encoun-
tered by your company in 1950 were
tho e inherent in the development and
progre of commercial air transporta-
tion. From the tandpoint of ervice to
the public and the nation's defen e,
performance exceeded that of the pre-
viou year. Revenue pas enger mile
flown on the company' domestic lines
and throughout the international sy -
t m increa d, re pectively, 21.8 and
23.9 per cent over 1949, exceeding the
comparable average performance of the
nation' 16 trunk carrier . Revenue ton
miles flown increased by 25.4 per cent.
FLEET OPERATIONS
STRATOCRUISERS
The new double-deck luxury Strato-
crui er were used in dome tic operation
and al o between the Pacific orthwe t
and Anchorage Alaska, and to Hawaii.
Their passenger appeal proved high as
did the gros revenue they produced.
Howe er, due to un ati factory perform-
ance of certain component parts, their
operating and maintenance co t were
25TH YEAR OF
greater than could have been rea onably
anticipated and their dajly utilization
wa at a minimum.
In the company' opinion the high
1950 operating costs were due to a num-
ber of the manufacturer's de ign defi-
cienci s and to its failure to comply with
ome of it contract repre entation .
Furthermore, the delay of over two year
in the delivery of the fleet riously af-
fected our comp titive po ition during
that period. A a re ult, the company
has brought uit for damage again t the
manufacturer and thi uit i now pend-
ing in the Federal Court in the State of
y\T ashington.
The problem of reducing Stratocrui er
operating expenses and improving it
utilization ha received our concentrated
attention and that of the other u, er a
well as the manufacturer. At the end of
1950 sub 'tantial progre had been
mad in regard to both expen e and per-
formance, and ju tifie the confidence
that the profit potential of the e popular
double-deck Stra to cruisers will be real-
ized.
EXPERIENCE
MARTI 202
Our tw nty Martin 202 airplan ar
out of rv1ce. Certain modification
it m r lativ ly minor in nature and in-
exp n ive to accompli h, have b n
tabli h d by the Civil A ronautic
Board, and th modification will b
mad . In th m antim the plan r -
main fully c rtificat d and in condition
to fly. At thi writing, final di po ition of
the fl t ha not been d t rmined.
Do GLAS DC-4
Throughout 1950 the company fl w
DC-4 in pa enger coach ervic in th
nited tat and in fir t-cla rvic
on orthwe t' Ori nt rout . Th y al o
wer flown in xclu ive fr ight ervice on
<lorn tic route , in coach rvic be-
tw nth nit d tat and Ala ka and
in military contract op ration . At th
nd of 1950 eighte n D -4 w r m
op ration.
t the pr nt time our DC-4 are
al o b ing u d to op rate om ch d-
ul form rly flown by Martin 202 .
Additional DC-4 ar b ing acquir d
for thi purpo .
KOREAN AIRLIFT
Th know-how of orthw t irlin
wa r cogniz d jn a triking mann r wh n
the ov rnment at a tim of national
m r ncy a jgned to th company a
major rol in th airlift from thi coun-
try to Tokyo and oth r point in th
Ori nt. On the ba i of xp ri nee ain d
durin World War II and furth r xp ri-
n acquir d in comm rcial rvjc to
th Ori nt, orthw t wa nam d a
pnm contractor jn thi. military air
tran port . rvic . orthw st pilot. fl w
DC-4 pr viou ly op rated by th - om-
pany jn it own comm rcial rvic and
al o D -4 of a number of oth r ub-con-
tra ting airlin s. orthw t round er ws
maintajn d th ntir fl t.
UNITED NATIONS SERVICE
In addition to th airlift as i nm nt,
orthwe t op rat d a p cial rvic for
nit d ation. involvin fli ht. b -
tw n Tokyo and point in Kor a. Thi
ROUTES
d D -3 aircraft own d by th
ation and 1 op rat d xclu-
orthw t irlin p r onn I.
no major chan
J.
in th
company' rout during 19 0. dmon-
ton, ca pita! of th Provine of lb rta and
c nt r of an xt n ive oil d v lopm nt
The anatomy of luxury flying is illustrated in this cutaway diagram of a 75-passenger double-deck Boein~ Stratocruiser. Ten of these gia.~t
high-altitude airliners make up a Northwest luxury fleet serving passengers from coast to coast and on direct routes to Alaska and Hawa11
__ ,,._.~--J:
....------
ar a wa activat d a a traffic top on
the company' route b tween the Twin
Citie and Anchorage, Ala ka. Al o dur-
ing the year orthwe t tarted serving
Formo a on it route between Tokyo
and Manila.
Formal application wa made to the
Civil Aeronautic Board for permis ion
to u p nd trunk line ervice in several
area which produce limited traffic, or
which might be more economically
served by feeder type carrier. In addi-
tion, Iorthwe t continued to eek elimi-
nation of C.A.B. re trictions on service
east of Milwaukee, under which flights
mu t originate or terminate at ew York
or Washington on the one hand and at
the Twin Citie or points west on the
other hand. These matters await action
by the C.A.B.
IMPROVEMENTS
Three large hangars comprising a new
$1,150,000 Northwest Airlines line main-
tenance base at Wold-Chamberlain
Field went into service during the year.
These facilities at the Minneapolis-St.
Paul Airport provide for efficient line
maintenance of all types of equipment
operated by the company.
OPERATIONAL DATA
The percentage increase in revenue
passenger miles from 1949 to 1950 was
greater than the related increase in pas-
enger revenues. This was a result of the
increased volume of low fare passenger
coach business done in 1950. Coach pas-
enger miles in 1950 amounted to 27.6
2 5 TH YEAR OF
per c nt of all pa enger mile , and the
revenu from coach pa senger repre-
sented 20.9 per cent of all pa senger
revenue.
Sy tern expen e per ton mile of serv-
ic offered to the public were lightly less
in 1950 than in 1949, and the percentage
of thi ervice actually sold wa some-
what higher. These gains were offset,
however, by the fact that average reve-
nue per ton mile old was down more
than 6 p r cent, largely as a result of
the increased volume of business done at
lower tariff rates.
POTENTIAL
After twenty-five year of develop-
ment, the Northwest Airlines system now
serves some of the greatest agricultural
and industrial areas and vital popula-
tion centers of America. These areas in-
clude the rapidly growing Pacific orth-
west, the Province of Alberta, center of
Canadian oil production, and an ex-
panding Alaska traffic favorably affected
by military activity but well based on ci-
vilian passenger and cargo requirements.
orthwe t' routes to Hawaii, Alaska,
and to the Orient cover areas with huge
potentials and are geographically and
strategically linked directly with our do-
me tic ystem. Japan, Okinawa, Formo-
sa, the Philippines and Hong Kong are
proving rich sources of travel and trade.
Travel to Korea before the outbreak of
the war was substantial and any future
rebuilding of this area should again gen-
erate heavy traffic in both passengers
and cargo. Our orth Pacific route to
EXPERIENCE
the Ori nt \ia ~
\la ka and th ~
-\1 utian
ha pro\ d practical by four y ar of
out tandin op ratino- p rforman and
dependabilit and ha th adrnntao of
beino- approximat 1 2.00D mil hort r
than the Mid-Pacific rout .
The pion rin of our rout ha b en
ompli h d and w ar nm, in the pe-
riod of mor full) d \' lopino the traffic
potential.
MILITARY AND DIPLOMATIC CORPS COMMEND NWA
*' I de ir to ext nd mv co,nm ndation and
appr ciation to you and )Olli" ntir organi.:a-
tion for th s pl ndid record you ha ' achie d
i11 conductina vour contract op ration for th
D epartment ''af th A ir Force.
" F rom th time ')'Our first aircraft arri d
under contract to the Air Fore until this dat ,
I ha e not rec iu d a sina/e complaint or riti-
cism of th manner in hi h )'Ou ha adniin-
istered ')'OUT r span ibilit . Th co-op ration of
your per onnel in orking u.:ith th ,nilitar')' has
been of th hi ahest order and r pres ntati- of
a hi uhl) effici nt a11d busin s-lik organi::ation.
J am sur '.)'Ou ill be pl ased to kno that
our compan')' leads all oth r contract carriers
in effecting rapid turn-around on aircraft itall')1
n ed d for carr,ina additional cargo into
J apan.)
**('] would lik to tak this op port unit')' to
express 111)' d p appr ciation for the xc llent
scricc that .Y orfhi.u t Airlin s has afforded the
Am rican Jfi sion in Kor a durinu th past
y ars of op ratio11 in Kor a and especiall')'.
during th la-t f k. Tl ith extremely
littl no tic . in th ourse of four da) s three
xtra plan s i.C r made a ailable for this pur-
po and, a a re ult. c i.U r abl to get a con-
siderable number of per ans to Japan plus
th ir baggage. I n addition to this 0i'orth est
ha ah.ar ai n us exc llent s r- ice both in
and out ~f eoul on air-freiaht and fate D -
partm nt pouches.'
ExcERPT FRO~r L ETTER TO NoRTHWE T Am-
LIXE FRO;'.!:
*Edward H. \\ hite
Brigadier General AF Commanding
1503rd . ir Tran port \\ ing, Pacific Di Yi ion 1f A T
**John J. i\fuccio
T.:. mba ador to K orea
Ever since the outbreok of war in Korea
last summer, Northwest Airl ines, as a prime
contractor, has been operating an airlift to
the Orient. Flying its own ships and others
from sub-contracting airlines, it has carried
men and supplies to the Far East over its
regular short-cut route to Japan. Typical is
th is scene a t a west coast airport as Gls
board a Northwest plane for Tokyo.
BALANCE SHEET
ASSETS
....................................................................... ............................................. $ 4,531,805
. . Tr a ury Bill -at redemption price ( aggr gate co t
, l 248 285) .......... ...................................................................
oun t r ivable:
For trans1 orta tion (including U. Gov mm nt a -
ount of $3,459 228 ) .................. .. .................... $4,941,745
ther urr nt account ... ........................................................ .
Le. allowance for lo . e ...................................... ................... .
Inventori of repair m at rials and operating upplies-
o- nerally at lower of co t (fir t-in, fir t-out ) or replace-
816,615 $5,758,360
33,000
m nt m arket. ......................................................................................................................... .
0th r urr n t a et :
Pr pa id insuranc , ren t, tax tc ..................................... ..
Rcimbur cmcnt due from . . Government within one
y ar- cc contra deferred r dit and ote A. .................. .
R cf undabl income tax s ari ing from operating lo .
carry-ba k stima tcd ................. ..
633,917
371,352
265,563
1,249,874
5,725,360
894,444
1,270,832
T OTAL U RRE T A ET ....... ....................................................................................... $13,672,315
OTHER ET
undry r la ted bu inc invc tment ( at o t- no quoted
market), depo its, and note .................................................... $ 173,309
Le allowanc for lo e .............................................................. 2,000 171,309
E timatcd income tax . whi h will be rccoverabl upon
ettlcmcnt of war contract .............................................. .
PROPERTY PLA T A n EQUIPMENT- on the ba is of o t (in-
cludin 'a t of 9,694 010 completely am ortized to residual
amoun t of $177 123)- ot B
Cot
Land ..................................................................... $ 31,393
ir raft and re ervc equipment.......................... 38,992,81 8
Conver. ion o t on lea ed air raft...................... 1,613,036
Building. on land not owned. .............................. 3,046,263
th r building and equipm nt.......................... 5, 81,343
Improvcm nts to I a. d prop rty...................... .. 1 079,623
o t of w rk in progrcs. . .... ... . .. . ... .. ... . . ... .... ... .. ... 308,302
on-op rating property....................................... 10,006
Depreciation
and
Amortization
Allowance
$ ........ .
13,816,338
1,613,036
655,316
2,478,057
920,978
2,594
66,000
Balance
31,393
25,176,480
2,390,947
3,103,286
158,645
308,302
7,41 2
, 50,662,784 $19,486,319 $31,176,465
DEFERRl-:0 1 HARGES
Training and other co t. in c nn tion with th Bo ing fle t, le
a umulat d amortizati n ( ov r life of fie t ) of , ] 39, 778 ........................ $
Long-term r ntal prepayments.. .................. .. ................................. ..
thcr def err cl harg ..................................................................................... .
657,346
68,642
28,467
237,309
31,176,465
754,455
$45,840 544
December 3 1 / 1 9 5 0
NORTHWEST AIRLINES, INC.
LIABILITIES
CURRENT LIABILITJE
Ac aunt payable and a cru d expen e :
Trade account. .......................................................................................... $ 3,008,858
alari , wage , and vacation compen a tion.............................................. 1,751,349
ir trav I contract d po it -gro ............................................................ 486,625
Pay roll taxe and taxe withheld from mployce ' wage ...................... 461,967
R etirem ent plan contribution , including amount withh Id from
mployce ' wage - Note C ..................................................................... .
aving bond and other deduction from employc ' wag ................... .
A rued local tax ................................................................... ..... ..... ..
cru d rent and int re t. .......................................................................... .
nearned tran portation revenue- es tima ted ............................................. .
Federal and tate tax on incom -e tima ted ............................................. .
Curr n t m a turitie of long-t rm d bt, le 1,000,000 due J nua ry 1,
195 l, paid in D ecember, 1950 .................................................................. .
TOTAL RRE T LrABILITIE ................................................................ .
Lo c-TERM ] EBT- c u red- ate B
ate payable to bank under Credit Agrcement-47'0- 1,000,000
payabl on the fir t day of J anuary, A] ril, July and O ctober of
each year, Jc current maturitie of $3,000 000 .................................... ..
DEFERRED CREDIT
R eimbur emcnt du from . . Governm nt-
CAPITAL TOCI A o URPL - Not B and D
apital tock :
contra and ote A ....
4.6 % cumulative p rcfcrcnc sto k, par valu $25 p r hare; entitl d
upon liquida tion r r d mption to $26.2 per hare at D ecember
31, 1950, reducing to , 25.25 per h are after M ay 1, 1953, plu
accumulated unpaid divid nd.; convertibl in to common tock to
D ecember 31 1956, a t the rate of one har of common for each
, 16 of the par value f the 4.6 :, cumulative prefer nee to k :
uthorized 600 000 hare , le ,. ,155 hare permanently retir d
under mark t fund purcha c. ; ou t ta nding 384 845 hare ............
Common tock par value$ ] 0 per har :
u thorized 3,000,000 h are ; uni ued 2. 179 142 hares of "'(hich
5 77,267 hares arc re erved for convcr. ion of 4.6% cumulativ
pr fercnce stock, 10,000 hare ar r :erv d for option at $11.25
per hare, 5 147 hare arc re erv d for option at , 10 per hare,
and 14 800 h are arc reserved for i su ancc in onn tion with
fu tu re OD ti on whi h may b granted t officer and employ ;
out tanding 820,858 hare .................................................................... ..
apita l urplu (after accu mula ted deduction of, 560,625 for di idcnd.
paid on 4.6 % cumulative pr f r nee to k) ............................................... .
82,497
62,485
351,543
32,560
,621125
8,208,580
2,821,033
20,650 738
Earn d urplu ...................................................................................................... 662,67
Co TINGENT LrABILITIE - ote E
COMMITMENT - ate F
ee a ompanying not to financial . tatem nt
, 6,237,884
540,605
236,926
3 000 000
10,015,415
14,140 363
371,3 2
l
45 840,544
PROFIT AND LOSS STATEMENT
Year Ended December 31, 1950
NORTHWEST AIRLINES, INC.
Operating revenue :
Tran portation:
Pa enger ................................................................................................... .
M ail- ote A ........................................................................................... .
Expres , freight, and exce baggage ..... ................................................ .
Charter and other ................................................................................... .
Pacific airlift for the U. S. Government ..................................................... .
Repair and ervic income, rent , etc.,-net ............................................... .
TOTAL OPERATING REYE UES ............................ .. .......... ................. .
Operating xpen e :
33,148,395
9,409,526
4,388,119
227,007
Flying operations .......................................................................................... $15,654, 788
Ground operation ........................................................................................ 6,385,189
Maintenance and repair .............................................................................. 12,024,822
Pa enger ervice ..................................... ..................................................... 2,903,744
Traffic and ale ............................................................................................ 3,984,494
dverti ing and publicity............................................................................ 1,442,156
dmini trative and general, pay roll taxe , property taxe , etc............... 3,301,899
Provi ion for depreciation and amortization.............................................. 5,873,247
Provi ion for doubtful account adju tment , recoveries, etc................. 24,927
0PERATI a Loss ... ...... .. ..... .. ...... .... .. ....... .... ...... ............. .. .. ....... .... .... .
Other income and credit :
Intere t on marketable ecuritie ................................................................ $ 7,235
Di count and other intere t earned ........................................................... . 70,529
Profit from di posal of depreciable a ets ..................... ............................ . 129,850
Profit from ale of urplus inventorie ....................................................... . 69,430
R eduction in re erve on U . . Government war contract , less appli-
cable recoverable income tax of 20,000 ............................................... . 33,396
undry ........................................................................................................... . 51,714
Income deduction :
Intere t and debt expen e:
Intere ton long-term debt ........................................................................ $ 772,026
Other long-term debt expen e ............................................................... . 71,380
$ 843,406
Other intere t expen e ........................................... .................................... .. . 13 803
Route exten ion and development ............................................................. . 5,905
undry ........................................................................................................... . 59,809
Loss BEFORE INCOME TAX CREDIT ................................................. .
Income tax recoverable on operating lo carry-back- ote A ................... .
FOR THE YEAR .... .......... ........ ......... ... ... ... .. .... ........ ....... .. .
pecial credit-additional mail pay compen ation for prior period , le
related f deral income taxe of $223,956- ote A. .................................. .
ET Lo LE PECIAL CREDIT .. ......... ................. ... .. ...... ..... ... ...... .
*Indicate red figure.
e accompanying note to financial tatements.
$47,173,047
3,969,670
253,794
$51,396,511
$
$
51,595,266
198,755*
362,154
163,399
922,923
759 524*
265,563
493 961 *
358,483
135 478*
Year Ended December 31, 1950
CAPITAL
s URPL u s
Balance at January 1, 1950, after accumulated deduction of $560,625
for dividends paid on 4.6% cumulative preference stock ...................... .. $ 2,782,992
Add:
Exce of par value over purchase price of 5,155 hares of 4.6%
cumulative preference tock which was r tired pursuant to
market fund provi ion of that stock .................................................... .. 37,979
Exce of ca h received over par value of 50 share of common tock
sold from trea ury ............................................................................... .... . 62
Balance at December 31, 1950, after accumulated deduction of
$560,625 for dividends paid on 4.6% cumulative preference tock ...... . . 2,821,033
EARNED SURP LUS
Balance at January 1, 1950 .............. ..... .................................................... ............................... $ 1,242,207
Deduct balance tran ferred from tatement of Profit and Lo :
et lo for the year .................................................................................... 493,961
Special credit- additional mail pay compensation for prior period ,
le related federal income taxe of $223,956- Iote A ..................... . 358,483 135,478
1,106,729
D educt ca h dividends on 4.6 1
o cumulative preference tock- 1.15
per hare for the four quarter ending ovember 1, 1950 ( dividend
payable February 1 1951, have not been declared or paid) ................ .. 444 053
Balance at December 31, 1950 ..................................... .................................. . 662,676
See accompanying note to financial tatement .
Note A- The Civil Aeronautics Board ha retro-
actively adjusted the Company's temporary rates of
mail pay for the period September 26, 1946, to
December 31 1950 on international routes and for
the period D ~cembe~ 8, 1947, to December 31, 1950,
on domestic route , and awarded net additional mail
pay aggregating $1,572,348 for those periods. The
temporar rates so adjusted will become final rates
upon the completion of formal proceedings by the
Board and the Company.
It is e timated that this adjustment less related federal
income taxes of $137,856 affected the Company's net
income as follows: six months ended December 31,
1946--decrease $25,500, year 1947- increase $211,-
670, year 1948- decrease $140,683, year 1949- in-
crease $312,996, and year 1950- increase $1,076,009.
In the accompanying financial statements, the adjust-
ments for 1950 have been included in their respective
categories, and the adjustments applicable to prior
years aggregating $358,483 have been shown as a
special credit a the la t item in the Statement of
Profit and Los .
In determining the a forementioned mail pay adju t-
ment the Board included $361,526 in partial reim-
burs: ment for lo s of profits and additional co t
resulting from the temporary withdrawals from ervice
of the M artin fleet in 1949 and 1950. As to the
remaining balan e of uch los of profits and addi-
tional cot tated in the Board's order at 1,39+ 315,
the Board has agreed to reimbur e the Compan in
separate monthly payment in accordance with the
December 31, 1950
following schedule, or until such time as it may be
determined by the Board that the Company should
not receive mail pay in excess of a service rate:
M onthly payments ID 1951 $ 371,352
do 1952 371,352
do 1953 371,35 2
do 1954 222,591
do 1955 57,668
TOTAL .......................... $1 ,394,315
The remaining balance of $1,394,3 15 has not been
reflected in the a ccompanying financial statements as
either a credit to earnings or to earned surplus ; how-
ever, the monthly payments receivable in 1951 ,
aggregating $371,352, have been included in the
Balance Sheet in contra accounts under the captions
"Other Current A sets" and "D eferred Credits," since
in the opinion of the M anagement, the Company
will be entitled to receive mail pay in excess of a
service rate for at least tha t period of time.
t the same proceedings before the Board, temporary
rates of mail pa for the year 1951 were determined
which are e timated to produce mail pay compensa-
tion of approximately $7,417,722 for 1951 exclusive
of reimbur ement relating to temporary withdrawal
of aircraft from er ice. Thi compare v,ith $8,509,-
847 awarded for the ear 1950, exclu ive of reim-
bur ements relating to temporary withdrawal of air-
craft from service. T he fin al rates for 1951 may be
NOTES (Continued)
either high r or lower than the t mporary rate which
have been pre ently et by the Board.
B- t D ecember 31, 1950, the loan under the Credit
greement with certain bank (with which the R e-
con truction Finance Corporation has a participation
agreement) were ecured by a chattel mortgage on
all Dougla D C-4, Martin 202, and Boeing 377 flight
equipment con i ting of complete aircraft and spare
engine , propeller , major a semblie and parts, hav-
ing a depreciated cot of $21,758,910, and mortgage
on it hangar and other improvement located at
airport at Minneapoli , Minne ota, and eattle,
Wahington, having a depreciated co t of $1,314,598.
A total of 3,859,637 ha been repaid under term
of the Credit greement of which $859,637 ha been
applied to note in inver e order of due dates.
Under term of the Credit Agreement applicable to
the e loan , the Company ha agreed, among other
thing :
(a) to maintain a ca h collateral account a ecurity
for the payment of principal and intere t of the
loan which hall at all time be equal to that
amount by which the unpaid balance of the loans
exceed 80 % of the depreciated co t of all flight
equipment;
(b ) to maintain current a et in exce of current
liabilitie ( exclu ive of current maturitie owing
on the principal of the loan under the Credit
Agreement) in the amount of $3,500,000 from
July 1, 1950, to July 1, 1951 ; and 4,000,000
thereafter ;
( c) to encumber or mortgage a ecurity for the loan
under the Credit greement, uch other proper-
tie a the bank or R econ truction Finance
Corporation hall elect;
( d ) to limit additional borrowing , mortgage and
lien , capital expenditure and commitment ,
lea ing of propertie , inve tment in and guar-
antee and endor ement for other (all a set
forth in the Credit greement) ; not to enter into
any merger or con olidation or to ell or other-
wi e di po e of ub tantially all of it a et ; and
( e) not to declare or pay any dividend ( other than
tock dividend ) on it capital tock and not to
purcha e, retire or redeem any of its capital
tock except that (a) 4.6 % cumulative pref-
erence tock may be retired under the provi ion
of the Amended Articles of Incorporation, and
(b ) dividend on 4.6% cumulative preference
tock may be declared and paid to the extent
that the net improvement in earned urplus ince
March 31, 1949, exceed 224,250. At D ecem-
ber 31, 1950, uch improvement in earned ur-
plu amounted to $1,812,618.
C-The Company provides for an unin ured em-
ployee ' retirement plan which i contributory on the
part of both the employee and the Company. Charge
to profit and lo on the part of the Company for
ACCOUNTANTS' REPORT
Board of Director , :Northwe t Airline , Inc.
aint Paul inne ota
pa t ervice and future ervice benefit for the year
ended D ecember 31, 1950, aggregate $289,470 of
which $271,440 wa for future ervice benefits. The
actuarie ' report a of September 30, 1950, the end of
the fourth plan year, indicate a maximum aggregate
liability of the Compan for unfunded past service
benefit e timated at $652,777 which may be paid at
the discretion of the Company in variable amounts
each year and which i presently being funded over
a period e timated not to exceed twenty-five years
from October 1, 1946, the effective date of the plan.
D-The Company' Amended Articles of Incorpo-
ration provide for the retirement of it 4.6% cumu-
lative preference tock under market and sinking
fund provi ion .
Pur uant to the above provi ions, the Company set
aide 90,918 on March 31, 1950, and purchased
5,155 hare of 4.6o/c cumulative preference stock at
an aggregate co t of $90,896, returning $22 to the
general funds of the Company.
o amount i required to be et a ide on or before
March 31, 1951.
The term of the cumulative preference stock al o
contain certain re triction relative to dividend on
and repurcha e of common tock in addition to such
prohibition under the Credit Agreement summarized
in Tote B of ote to Financial tatements.
E-The Compan i involved in a number of law uits
which are outlined briefly as follow : (a) those in
which any claim paid by the Company will be fully
reimbursed by the U. S. Government under the terms
of variou war contract ; (b) tho e in which any
claims paid by the Company will be fully reimbursed
under insurance contract : and ( c) other mi cella-
neou claim of approximately $623,200 in excess of
in urance coverages and approximately $136,000
which are not covered by in urance or other indemni-
fication which the Company believes will be settled
without material effect on it financial po ition. In
view of the circum tance outlined, no provision has
been made for any portion of the amount involved.
Provi ion ha been made in the financial statements
for all known liabilities for taxe on income. The
Company' federal and tate income tax return , how-
ever, may be ubject to adju tment for the periods
from June 30, 1942, to D ecember 31, 1949. R eview
by the Bureau of Internal R evenue is pre ently in
progress.
Operation of the Company include fixed price con-
tract with the U. S. Government which are ubject
to renegotiation of profit .
F-The Company' commitment for capital expendi-
tures at D ecember 31, 1950, amounted to approxi-
mately $940,000 of which approximately $832,000
wa for spare part and a emblie for flight equip-
ment. The Company ha no material long-term lease
commitment .
We have examined the balance heet of ORTHWE T IRLI ES, I C., as of D ecember 31, 1950,
and the related . tatement of profit and lo and urplu for the year then ended . Our examination wa
made in accordance with generally accepted auditing tandard , and accordingly included uch te t of
accountin record and uch other auditing procedure a we con idered nece ary in the circum tance .
In our opinion the accompanying balance heet and tatement of profit and lo and surplu pre ent
fairly the financial po ition of ORTHWE T . IRLI TE , I C., at December 31, 1950, and the re ult
of it operation for the ear then ended, in conformity with generally accepted accounting principle applied
on a ba i con i tent with that of the pre~eding year.
aint Paul. Minne ota
pril 11, 1951
ER. T & ER T
Certified Public Accountants
A RECORD OF
l 1950 $9,409,526 $33,148,395 $4,122,222 613,446,244 9,975,120,154 26,868,177
1949 9,039,154 27,873,942 3,163,278 495,114,870 9,445,597,392 25,908,552
1948 8,444,106 24,074,778 2,072,362 386,509,809 8,052,148,614 22,288,002
1947 4,018,340 20,520,631 1,019,497 382,544,382 5,473,873,894 20,824,912
1946 1,254,257 18,062,492 553,875 385,858,473 4,099,317,238 19,304,234
1945 1,649,575 10,060,619 409,613 218,469,773 5,396,757,098 12,870,714
1944 1,500,874 6,073,967 246,030 120,834,296 4,900,802,947 7,523,146
1943 1,353,822 3,139,713 297,941 63,787,683 4,005,180,807 4,584,766
1942 1,850,601 2,410,512 240,800 52,061 ,159 I 2,528,042,954 4,931,815
1941 1,955,826 2,526,721 118,885 59,659,145 1,871 ,311,191 6,353,659
1940 1,769,735 2,151,311 79,531 51,175,254 1,370,076,043 6,079,669
1939 1,763,288 1,324,728 61 ,186 34,749,246 1,166,518,244 5,399,024
1938 1,286,549 829,554 41 ,625 21 ,153,258 1,116,975,430 5,310,015
1937 1,076,293 761 ,839 33,768 16,685,852 841,274,933 4,462,439
1936 1,050,639 759,981 27,318 16,528,401 671,011 ,789 3,699,818
1935 629,724 481 ,528 12,388 10,342,834 315,817,803 2,841,198
1934 ' 251 ,133 199,074 4,319 4,301,145 44,034,248 1,643,127
1933 762,208 188,966 1,873 4,108,313 82,613,032 1,823,850
1932 884,719 200,984 343 4,127,800 77,867,566 1,639,015
1931 917,635 205,164 575 3,934,093 89,706,330 1,434,555
1930 648,799 119,349 146 2,129,600 Not Avail. 1,032,340
1929 495,708 121,075 Not Avail. 1,956,400 II 736,664
1928 195,315 24,890 II 402,400 II 314,496
1927 76,029 8,663 II 126,000 II 211 ,667
3 Months, 1926 11,790 -o- II -o- II 47,397
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NORTHWEST AIRLINES
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