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 , ,,t Planes are ,, nne i US N-ofrl Uf" MUitarv ^ and A Carried on Northw< In of ,es Officcs in r f ,h'c`>^Most cZZTst l;' a +2^7 Structures l 0 T Formosa N--- ';he offioV^s'o- ^ Mr'ine NWA is ltl'- Sr , ving Formosa w unl ^y of * cr A" NORTHWEST AIRLINES ACTIVITIES HKAI& u r,ane on Alaska- uniercial All-Freigh -Orient Route- t Trans-Pacific \odic rhau\ Shops Undergo And and Vn t A Act! lnspect the hh Orient Run Navigation Ah Rigid Along Northwest s as to Flight in Use on Modern Ai Loran Many NORTHWEST AIRLINES NATIONAL ADVERTISING y'< flu high &bo\ 've the, ea ootnf0tt *ORTH ",#r *, 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.