Northwest Airlines Annual Report 1952

NORTHWEST AIRLINES, INC
NORTHWEST AIRLINES, INC., ^nnuaC Me/w'tT
I 9
OFFICERS AND DIRECTORS*
OFFICERS
CROIL H UNTER, Chairman, Board of Directors
HAROLD R. HARRIS, President and Chief Executive Officei
MALCOLM S. MACKAY. Executive I ice President
E. I. WHYATT, Vice President and Comptroller
FRANK C. JUDD. Vice President--Operations
LINUS C. GLOTZBACH, Vice President and Assistant to the President
A. E. FLOAN, J 'ice President and Secretary
L. S. HOLSTAD, 77 easurer
D. J. KING, Regional Vice President--Orient Region
J. W. MARINER, Assistant 17ce President--Sales
A. D. PIEPGRAS, Assi slant Treasurer
C. L. STEWART, Assistant Secretary
DIRECTORS
CROIL HLINTER--Chairman, Board of Directors, Northwest Airlines, Inc.
MORTON H. FRY--Partner, Riter and Company. New York City
WM. TUDOR GARDINER--Chairman, Boyird of Directors. Incorporated Investors, Boston, Mass.
ROBERT M. HARDY--President, Sunshine Mining Co., )akima, Wash.
HAROLD R. HARRIS -- President and Chief Executive Officer, Northwest Airlines, Inc.
JOSEPH T. JOHNSON--President, The Milwaukee Co., Milwaukee, Ills.
MALCOLM S. MACKAY--Executive Vice President. Northwest Airlines, Inc.
ALONZO PETTEYS-I ice President and Director, Farmers State Bank. Brush. Colorado
C. FRANK REAVIS -- Partner, Hodges. Reavis. McGrath, Pantaleoni and Downey. New York City
ALBERT G. REDPATH -- Partner, Auchincloss, Parker & Redpath, New York City
WILLIAM STERN -- President. Dakota National Bank. Fargo, N. D.
Registrar THE CHASE NATIONAL BANK OF THE CITY OF NEW YORK, N.Y.
Transfer Agent BANKERS TRUST COMPANY. NEW YORK. N.Y.
of April 77, 1953.
GENERAL OFFICES: I S $ 5 UNIVERSITY AVENUE, ST. PAUL I, MINNESOTA
1 952 OPERATING AND FINANCIAL HIGHLIGHTS
NORTHWEST AIRLINES IN 19 5 0
REDUCED bank loan by $6,340,000.
ESTABLISHED new twice weekly round-trip Stratocruiser sendee to Tokyo.
CONCLUDED an arrangement with Eastern Air Lines which will provide Northwest with
approximately 9.200.000 additional seat miles per month during our 1953
season between Chicago and the West Coast.
r-5
Total operating revenues $61,552,380 $54,685,060
Passenger revenues $41,962,758 $35,192,765
Net profit $ 1.789.337 $ 1.785.671

Net profit per common share $1.64 $1.64
(after provision for dividends on preference shares)
A WORLD OF EXPERIENCE . OVER 26 YEARS
TO SHAREOWNERS OF
FINANCIAL
For the year 1952, Northwest Airlines' net
profit after taxes amounted to $1,789,337 which
was equivalent, after provision for dividends
on the preference shares, to $1.64 per share on
the 820,858 shares of common stock outstanding.
The net profit for the year compares with the
net profit for 1951 of $1,785,671, which also
amounted to $1.64 per share of common stock.
Operating revenues for 1952 were $61,552.-
380 which was $6,867,320 more than 1951
revenues or an increase of 12.6%. This was
notwithstanding a drop of $1,021,895 in U. S.
mail pay. Operating expenses amounted to
$60,046,698 which was $8,421,877 more than
in 1951, an increase of 16.3%. Operating profit
was thus $1,505,682, as compared with an op
erating profit of $3,060,239 in 1951. This de
cline in operating profit was compensated for
by a non-operating profit of $1,595,978 result
ing chiefly from the sale of Martin 202 air
craft--removed from scheduled service in 1951
and related spare parts. This non-operating
profit may be regarded as an offset against de
preciation expense ol this type aircraft over past
years.
The 1952 increase in operating expenses re
sulted from rising costs of labor, materials and
services, and a substantial expansion in the
Company's volume of operations. The Com
pany had about 20% more seat miles available
(and about 14% more ton miles available) in
commercial service in 1952 than in 1951.
Record passenger revenues in 1952 totaled
$41,962,758, an increase of 19.2% over 1951.
Mail revenues from the U. S. Government were
$6,767,020, a decrease of $1,021,895 from the
NORTHWEST A I R L I N E $
1951 figure. Freight and express revenues
amounted to $5,116,171, an increase of $468,044
above 1951. Revenues of $5,463,614 from the
conduct of the Pacific Airlift for the U. S. Gov
ernment were $259,934 less than in 1951.
The financial results for the year 1952 do not,
however, tell the entire story. Operations in the
first six months of the year were affected by
certain non-recurring events. In that period the
Company showed a loss from operations of
$2,082,921. This compares with a profit from
operations of $533,442 for the first six months
of 1951. In part, this loss in 1952 was attribut
able to: 1) a severe spring flood at our main
overhaul base at Holman Field, St. Paul, which
required the expenditure of over $200,000 for
protective measures, and caused indirect losses
from interrupted operations, and; 2) a tem
porary curtailment of flight schedules neces
sitated by shortages in aviation gasoline caused
by a strike in oil refineries, which resulted in an
estimated loss of $350,000 in operating profits.
NWA Charier Flights Helped General Eisenhorver Cover
Ground During 1952 Presidential Campaign
On the other hand, operations for the last
six months of 1952 showed a substantial im
provement over the same period in 1951. Apart
from the profit on the sale of the Martins, there
was an operating profit for this period of $3,-
588,603, compared with an operating profit of
$2,526,797 for the same period of the preceding
year.
The passenger load factor--the ratio of pas
sengers carried to space available--over our
entire system was 63.75% in 1952 as against
63.91% in 1951. During 1952, however, we
had approximately 20% more space available
for sale.
On December 31, 1952 net working capital
totaled $3,073,309, a rise of $1,152,846 over
that on December 31, 1951. During 1952 $6,-
340,000 was repaid on our bank loans. The un
paid balance thereof on December 31, 1952
was $6,800,363.
FLYING EQUIPMENT
In 1952 the Company took steps to restore
the overall volume of its service which had been
substantially reduced in 1951 by the removal
from service of the Martin 202's. This was ac
complished through increased utilization of
equipment. The Company still does not have
sufficient modern equipment to handle the
available passenger and cargo business, and it
is one of its primary goals to secure such equip
ment and to further improve the utilization of
present equipment. In order to accomplish this,
Colorful Ceremonies in Japanese Capital Marked Inau
guration of Stratocruiser Service to Tokyo
we have entered into a contract with Eastern
Airlines under which, through the operation
by Northwest Airlines' personnel of an Eastern
Airlines Super Constellation between Chicago
and the West Coast, we will provide 9,200,000
additional seat miles per month in domestic
services during our 1953 season. We are now
engaged in adding eight seats to each of our
Stratocruisers. This program will be completed
by early summer 1953, and will provide about
4.000,000 additional seat miles per month. In
the Pacific, the Company extended its Strato-
cruiser service in April 1952 as far as Tokyo
and in the immediate future will increase the
frequency of this service and will extend it to
Manila.
At the end of 1952 we were operating 10
Boeing Stratocruisers, 24 Douglas DC-4?s and
8 DC-3's.
We have reached an agreement with the
Lockheed Aircraft Corporation for the purchase
of 6 Model 1049E Super Constellations to be
delivered from November 30, 1954 to Febru
ary 28, 1955. We will finance the purchase of
these planes by term loans of $15,000,000 from
our present banking group, which will also lend
to the Company the sum of $6,800,000 to refi
nance presently outstanding bank loans. The
terms of the agreement with the banks are set
forth in the proxy statement.
The purchase of modern equipment is part of
HfllSIEOfl Q1R BASE
Pusan, Korea and Taipei, Formosa, are Among the
Strategic Points in Orient Served by NWA
a program to further build Northwest Airlines.
We hope to supplement this by other arrange
ments under which additional available seat
miles can be furnished to the public. We are
confident that, without affecting the safety or
the quality of service offered by the Company,
operating expenses per unit can be reduced.
Progress has already been made in this respect.
PROPOSED MERGER DROPPED
The proposed merger of Northwest Airlines
with Capital Airlines was terminated as a result
of the failure of shareowners at their annual
meeting held May 19, 1952 to approve it by
the required affirmative vote.
MAIL RATES
The temporary rates previously set by the
Civil Aeronautics Board for domestic mail serv
ice for the period December 8, 1947 to Decem
ber 31, 1950 were made final in 1952. Also, a
reduced rate covering domestic mail service was
made effective as of January 1, 1952. This new
rate is 53c per ton mile of mail carried, the
"service" or subsidy-free rate for airlines of our
classification.
In February 1953, the Civil Aeronautics
Board action made final the rates previously
agreed upon for the carriage of international
mail for the period between the inception of
this service on September 26, 1946 and De
cember 31, 1950. Also, new future rates from
Conferences of NWA Sales Executives Concentrate
On Staff Training and New Selling Techniques
and after January 1, 1952 were established.
As a result of the above orders of the Civil
Aeronautics Board, we are now conducting our
current mail service under permanent rates;
all past periods are covered by permanent rates,
except for the calendar year 1951. In regard
to this year, the Company has had informal
conferences with the Civil Aeronautics Board.
It is expected that these will be resumed or that
formal hearings will be entered into in the near
future.
In comparison with the Company's U. S.
mail revenue of $6,767,020. it should be noted
that the major taxes paid by the Company, or
collected by it, for 1952 total $7,026,692. We
paid $647,015 in Federal gasoline and oil taxes,
$323,516 in Federal payroll taxes, accrued $1,-
090,000 for Federal income taxes, and. on be
half of the Federal Government, collected $4,-
373,510 in transportation taxes from our pas
sengers and shippers. Also, we paid direct State
and local taxes amounting to $592,651. In ad
dition, we paid indirect taxes of many kinds.
ROUTES
During 1952, your Company's service at
Duluth. Minnesota, and La Crosse and Eau
Claire, Wisconsin, was suspended and the Com
pany has applications pending for suspension
of its sen-ice at a number of other local points
on its certificate which have not yet been set
TOTAL REVENUE TON MILES FLOWN
For Latest Ten-Year Period
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
0 10 20 30 40 50
MILLIONS OF MILES
60 70
H INTERNATIONAL
(Includes Operations to Alaska, the Orient and Hawaii)
Also during 1952, hearing was completed
before an Examiner of the Civil Aeronautics
Board on our application for authorization of
service between Seattle and Portland. The Ex
aminer has recommended that the Board grant
this application. Adoption of the recommenda
tion will improve the Company's West Coast
service and the efficiency and economy of its
operations.
During 1953 hearings will be held on applica
tions of the Company covering the following
routes: Cleveland-New York; Chicago-Detroit;
Chicago-New York and Detroit-Buffalo-New
York. Hearings will also be held on the renewal
of its certificate for overseas and foreign routes
covering service between the United States and
Alaska, Seattle-Portland and Honolulu, and
trans-Pacific service between the United States-
Tokyo, Manila and other points in the Orient.
In addition, requests have been made for au
thority to serve Hong Kong, Bangkok, Calcutta
and other points in southeast Asia.
KOREAN AIRLIFT
Throughout 1952, Northwest continued to
serve as a prime contractor to the U. S. Govern
ment in the operation of the Korean military
airlift. At the end of 1952 more than 1,000
round trips in this vital airlift had been com
pleted by the Company.
Maintenance Crews of NWA
Work Round the Clock Keeping Operating
Equipment in Perfect Condition
JAPANESE AIR LINES
For one year ending October 24, 1952, North
west Airlines co-operated with the intra-Japan
airline, Nippon Koku Kabushiki Kaisha, in the
establishment and conduct of its operations and
in training Japanese personnel to take over an
increasing proportion of operations functions.
PERSONNEL
In 1952, we paid $27,638,706 in salaries and
wages. At the end of the year we employed
5,709 persons.
MANAGEMENT CHANGES
In January 1953, Mr. Croil Hunter, who had
been President and General Manager of the
Company since 1937, resigned from this position
and became Chairman of the Board of Direc
tors. To succeed him, Mr. Harold R. Harris
was elected President and Chief Executive Of
ficer. Prior to assuming the office with North
west, Mr. Harris was Vice President of the
Atlantic Division of Pan American World Air
ways and before that he had a long experience
as an executive in commercial and military air
transportation.
It is the intention of the executives of your
Company to exert their full efforts to provide
an efficient operation, while stressing safety and
attention to the needs of our customers. We
wish to express our gratification at the high
quality of the personnel of the Company and
our appreciation for their diligence in working
for the Company's advancement.
By authority of the Board of Directors,
April 17, 1953
Saint Paul, Minnesota
PROGRESS FOR THE LATEST 10 YEARS
Calendar
Total
Passencrpr
Express Revenue Mail Total
Year
Operating
Revenue
Revenue
and Freight
Revenue
Passenger
Miles
Ton
Miles
Plane Miles
Flown
1952 $61,552,380 $41,962,758 $4,781,081 720,046.264 5,017,993 23,210,634
1951 54,685,060 35,192,765 4.371,533 602,220,853 4,571,276 19,531,632
1950 52,456,700 33,148,395 4,122,222 613,446.244 4,987,561 26,868,177
1949 39.970.747 27,873,942 3,163,278 495,114,870 4,722,800 25,908,552
1948 34,369.835 24,074,778 2,072,362 386,509,809 4,026,074 22,288,002
1947 26.800,428 20,520,631 1,019,497 382,544,382 2,736,938 20,824,912
1946 19.976.204 18,062,492 553.875 385.858,473 2,049,659 19,304,234
1945 12,196,652 10,060,619 409,613 218.469,773 2,698.378 12,870,714
1944 7.923.865 6,073,967 246,030 120,475,305 2,450,401 7,523,146
1943 5.194,775 3,139,713 297,941 63.787,683 2,001,532 4,584,766
Colorful City of Hong Kong and its Busy Harbor--
Served by NWA in conjunction with Hong Kong Airways
HAWAII
Or BALANCE SHEET a of DECEMBER 31, 1952
ASSETS
CURRENT ASSETS
Cash
Accounts receivable:
For transportation (including U. S. Government ac
counts of $2,493,605)
Other current accounts
$ 4.908,049
1,466,245 $ 6,374,294
$ 5,998,051
Less allowance for losses 40,000 6,334,294
Inventories of repair materials and operating supplies---
at average cost
Prepaid insurance, rent, taxes, etc
1,333,199
850.667
TOTAL CURRENT ASSETS $14,516,211
OTHER ASSETS
Cash Collateral Account--security to long-term debt,
less amounts ($180,966) released during 1953 for prior
property expenditures (as defined)--Note A
Sundry related business investments (at cost--no quoted
market), deposits, advances, etc
$ 261.890
325,741 587,631
PROPERTY, PLANT, AND EQUIPMENT--on the basis of cost
(including $11,409,828 amortized to residual amount of
$229.294)--Note A
Depreciation and
Amortization
Cost Allowances Balance
Land $ 38,595
Aircraft and reserve equipment 35.700.437
Conversion costs on leased aircraft 1.774,933
Buildings on land not owned 3.105.476
Other buildings and equipment 6.155.182
Improvements to leased property 1.151.563
Work in progress 546.928
Non-operating propertv 1,124,521
$17,310,049
1.735.972
988.273
3,571.887
1,067,052
658.773
$ 38.595
18.390.388
38.961
2.117.203
2.583.295
84.511
546.928
465,748
$49,597,635 $25,332,006 $24,265,629 24,265,629
DEFERRED CHARGES
Training and other costs in connection with the Boeing
fleet, less accumulated amortization (over life of fleet)
of $369,626
Long-term rental prepayments
Other deferred charges
$ 427,498
125.506
4,095 557,099
$39,926,570
See accompanying Notes to Financial Statements.
NORTHWEST AIRLINES, I N C . Q
LIABILITIES
CURRENT LIABILITIES--Note B
Accounts payable and accrued expenses:
Trade accounts $ 3,832,826
Salaries, wages, and vacation compensation 2,460,623
Air travel contract deposits--gross 705,500
Pay roll taxes and taxes withheld from employees' wages 482,447
Retirement plan contributions, including amounts withheld from em
ployees' wages 73,047
Savings bond and other deductions from employees' wages 131,576
Accrued local taxes 246.220
Unearned transportation revenue--estimated
Federal and state taxes on income--estimated
Current maturities of long-term debt, less prepayments for January 1
and April 1, 1953, aggregating $1,670,000
$ 7,932,239
639,739
1,200,924 y
1,670,000
TOTAL CURRENT LIABILITIES $11,442,902
LONG-TERM DERT--secured--Note A
4% Notes payable to banks under Credit Agreement, less current maturi
ties of $1,670,000 5,130,363
CAPITAL STOCK AND SURPLUS--Note D
Capital stock:
Cumulative Preference Stock, par value $25.00 per share; authorized
600,000 shares issuable in series:
4.6% Cumulative Preference Stock Series; authorized and issued
390,000 shares; entitled upon liquidation (voluntary) or redemp
tion to $25.75 per share to May 1, 1953, thereafter to $25.25 per
share, plus accumulated unpaid dividends; convertible to January
1, 1957, into one and one-half shares of Common Stock for each
share of 4.6% Cumulative Preference Stock--Note B:
Outstanding 381.025 shares after deducting 8,975 shares per
manently retired through market fund purchases $ 9,525,625
Common Stock, par value $10.00 per share--Note E:
Authorized 3,000,000 shares; issued and outstanding 820,858 shares .... 8,208,580
Capital surplus (after deduction of $560,625 for part of dividends paid
in prior years on 4.6% Cumulative Preference Stock) 2.839,663
$20,573,868
Earned surplus 2,779,437 23,353,305
CONTINGENT LIABILITIES--Note F
$.39,926,570
See accompanying Notes to Financial Statements.
U? PROFIT AND LOSS STATEMENT for years ended DECEMBER 31,1932 and 1
NORTHWEST AIRLINES, IN
OPERATING REVENUES 1952 1951
Transportation:
Passengers
U. S. mail--Note C
Foreign mail
Express, freight, and excess baggage
Charter and other
Pacific airlift for the U. S. Government--Note G
Repair and service income, rents, etc.---net
$41,962,758
6,767,020
705,712
5,116,171
1,055,368
5,463.614
481,737
$35,192,765
7,788.915
619.764
4,648,127
305,159
5,723,548
406.782
OPERATING EXPENSES
Flving operations
Ground operations
Maintenance and repairs
Passenger service
Traffic and sales
Advertising and publicity
Administrative and general, pav roll taxes, property taxes, etc
Provision for depreciation and amortization
Provision for doubtful accounts, adjustments, recoveries, etc
$61,552,380
$17,133,826
7,718.824
15,061,044
3,518,469
4,888.213
1,616,186
4,226,206
5,815,495
68,435
$54,685,060
$15,109,156
6.734,534
11.837,319
3,382,318
4.200.676
1,281,198
3.623,099
5.428.598
27.923
$60,046,698 $51,624,821
OPERATING PROFIT $ 1,505,682 $ 3,060.239
OTHER INCOME
Profit from disposals of property--net
Profit from sale of surplus parts inventories
Discounts and interest earned
Recovery on WW II contract costs
Interest on marketable securities
Sundry
$ 1.595.978
113'369
94,250
100,000
12,387
$ 481.055
111.281
77,921
126
10,126
$ 1,915,984 $ 680,509
$ 3,421.666 $ 3,740.748
OTHER DEDUCTIONS
Interest and debt expense:
Interest on long-term debt
Other long-term debt expense
$ 412.814
13,867
$ 619.971
33.625
Other interest expense
$ 426.681
2.202
$ 653.596
127
2.314
99,040
Route extension and development
Sundry
3,545
84,901
$ 517,329 $ 755.077
PROFIT BEFORE TAXES ON INCOME $ 2.904,337 $ 2,985.671
TAXES ON INCOME
Estimated federal and state taxes on income (no excess profits taxes
required)
Reduction in taxes on income arising from carry-forward of operating
loss of prior vear
$ 1,115,000 $ 1,425,000
225.000
$ 1,115,000 $ 1.200.000
NET PROFIT $ 1,789,337 $ 1.785.671
See accomfianying Notes to Financial Statements.
SURPLUS
NORTHWEST
ACCOUNT STATEMENT for year ended DECEMBER 31, 1952
AIRLINES, INC.
CAPITAL SURPLUS
Balance at January 1, 1952 (after deduction of $560,625 for part of dividends
paid in prior years on 4.6% Cumulative Preference Stock) $ 2.821.033
Add excess of par value over cost of 3,820 shares of 4.6% Cumulative Preference
Stock permanently retired through market fund purchases 18.630
Balance at December 31, 1952 (after deduction of $560,625 for part of dividends
paid in prior years on 4.6% Cumulative Preference Stock) $ 2,839,663
EARNED SURPLUS
Balance at January 1, 1952 $ 1,320,787
Add net profit for the year 1,789.337
$ 3,110,124
Deduct cash dividends on 4.6% Cumulative Preference Stock--86.25 cents per
share for the three quarters ending November 1, 1952 (dividends payable Feb
ruary 1, 1953 were declared January 5, 1953) 330,687
Balance at December 31, 1952 $ 2,779,437
See accompanying Notes to Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
A-Bank Credit Agreement
The Credit Agreement with banks (with which Reconstruc
tion Finance Corporation has agreed upon request of the lend
ing banks to purchase a participation in the loan) requires
annual fixed payments of $3,340,000 in equal installments on
the first days of each calendar quarter. Additional payments,
indeterminate in amount and contingent upon happenings
specified in the Agreement, also may be required.
The loan is secured (a) by chattel mortgages on certain flight
equipment which at December 31, 1952, was carried in the
accounts at a depreciated cost of $15,027,560; (b) by mort
gages on certain hangars and other improvements at airports at
Minneapolis, Minnesota, and Seattle, Washington, carried in
the accounts at December 31, 1952, at a depreciated cost of
$1,143,167: and (c) by a Cash Collateral Account of $442,856.
Under certain conditions, monies in the Cash Collateral Account
may be released to the Company upon the replacement of the
released property.
Under the Credit Agreement, the Company also is required
to maintain as additional security for the payment of principal
of and interest on the loan, a Cash Collateral Account, which
at all times, shall be equal to the excess of the unpaid balance
of the loan over 80% of the depreciated cost of all flight
equipment. At December 31, 1952, no amount was required
as such collateral.
The Company has covenanted that, among other things, it
will not permit the excess of current assets over current liabili
ties (exclusive of current maturities of long-term debt) at any
time to be less than $4,000,000.
B-Market Fund for 4.6% Cumulative Preference Stock
So long as any of the 4.6% Cumulative Preference Stock is
outstanding, the Company is required to set aside on or before
March 31st in each year to and including 1957, an amount
equal to 10% of its net earnings (as defined) for the preceding
calendar year, but not more than 3'% of the par value of such
Stock theretofore issued. Such funds are to be used to pur
chase such Stock on the market at a price not exceeding $25
per share exclusive of brokerage charges and taxes. Any funds
not so applied during the twelve months period following the
date of having been set aside will revert to the Company.
After 1957, other, and cumulative, sinking fund provisions
become applicable.
Pursuant to the above provisions, the Company set aside
$76,875 on March 31, 1952, and purchased 3,820 shares of the
4.6% Cumulative Preference Stock at an aggregate cost of
$76,871, returning $4 to the general funds of the Company.
Pursuant to the foregoing provisions, the Company is re
quired to set aside $127,114 on or before March 31, 1953.
During any period while the Company is in default with
respect to payment of dividends on the Cumulative Preference
Stock, the Company shall not purchase any of such Stock
except pursuant to an offer to all holders thereof and shall
not redeem less than all of such Stock then outstanding.
C-Mail Transportation Compensation
As determined through proceedings conducted before the
Civil Aeronautics Board, the Companys mail pay for the year
(NOTES CONTINUED)
1950 and prior periods (as previously reported) and for the
year 1952 are final.
The Company's mail rates for the year 1951 are temporary.
The effect of the Board's ultimate determination for that year
is not known at this time.
D-Restrictions on Dividends
Under provisions of the Credit Agreement (Note A) the
Company may not, without the prior written consent of the
representative of the lending banks and the Reconstruction
Finance Corporation, pay dividends (other than stock divi
dends) on, or purchase, retire, or redeem any of its capital
stock except that (a) 4.6% Cumulative Preference Stock may
be retired through market fund purchases (Note B) ; and (b)
dividends on such class of Stock may be declared and paid to
the extent that the net improvement at the date of the declara
tion thereof in the earned surplus since March 31, 1949, ex
ceeds $224,250. At December 31, 1952, such improvement
in earned surplus amounted to $3,929,379. However, under
the covenant to maintain not less than $4,000,000 net current
assets (Sec Note A) the amount free for dividends on 4.6%
Cumulative Preference Stock at December 31, 1952, was
$743,309, the excess of net current assets at that date over the
amount required to be maintained.
The terms of the Cumulative Preference Stock also contain
restrictions relative to dividends on and repurchase of Common
Stock which are less limiting than those contained in the
Credit Agreement.
E-Common Stock Reservations and Options
Of the 2,179,142 shares of unissued Common Stock:
(a) 571,537)/2 shares were reserved for conversion of the
4.6% Cumulative Preference Stock;
(b) 14,800 shares were reserved for options which may be
granted in the future to officers and employees; and
(c) 15,147 shares were subject to outstanding options (at
prices approximately market at the time the options
were granted) as follows:
(i) 5,147 shares at $10 per share to January 10, 1954;
(ii) 10,000 shares at $11.25 to October 23, 1955.
F-Contingent Liabilities
The Company is involved in a number of lawsuits arising
from the ordinary course of business. Claims exceed insurance
coverages by approximately $507,000 and claims approximating
$50,000 are not covered by insurance or other indemnification.
The Company believes these matters will be settled without
material effect on its financial position.
G-Renegotiotion of Profits
Operations of the Company for 1950, 1951, and 1952 in
cluded transactions under fixed price contracts with the U. S.
Government which provide for price redetermination and re
negotiation of profits. Price redeterminations have been settled
through December 31, 1952. The effect of renegotiation of
profits is indeterminable at this time.
REPORT of INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Northwest Airlines, Inc.
Saint Paul, Minnesota
We have examined the balance sheet of NORTHWEST AIRLINES, INC. as of December 31, 1952,
and the related statements of profit and loss and surplus 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
circumstances. It was not possible to confirm by communication accounts receivable from certain U. S.
Government departments and agencies, as to which accounts we satisfied ourselves by other auditing
procedures.
In our opinion, the accompanying balance sheet and related statements of profit and loss and sur
plus present fairly the financial position of NORTHWEST AIRLINES, INC. at December 31, 1952, and
the results of its operations for the year then ended, in conformity with generally accepted account
ing principles applied on a basis consistent with that of the preceding year.
Saint Paul, Minnesota
March 10, 1953
ERNST & ERNST
Certified Public Accountants
NORTHWEST AIRLINES ACTIVITIES
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NORTHWEST AIRLINES ACTIVITIES
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NORTHWEST AIRLINES NATIONAL ADVERTISING
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The key portion of Northwest Air
lines' advertising program is carried
by a select group of national magazines
whose combined readership represents
the best potential market for air car
rier service. Steady increases in the
company's passenger and cargo traffic,
attest to the effectiveness of the sales
messages which are placed before this
vast group of readers, calculated to be
around 25,000,000. This phase of the
program is supplemented by daily
newspaper advertising in major on
line cities, as well as by ads in trade
publications, and in magazines and
newspapers in the Orient. NWA sales
promotion also employs radio, televi
sion, and motion pictures, direct mail,
tour folders, displays and special pres
entations, national and local publicity
--all designed to make the company
known from coast to coast as one of
the world's major airlines.