Northwest Airlines Annual Report 1953

NORTHWEST AIRLINES, INU.
I 9 5 3
NORTHWEST AIRLINES, I N C . , ~ ~
19 5 3
PROGRESS FOR THE LATEST 10 YEARS
Calendar
Total
Pa senger
Express Revenue Mail Total
Operating and Freight Pas enger Ton Plane Mile
Year
Revenue
Revenue
R evenue Miles Mile Flown
1953 $66,140,027 $48,652,465 $4 890,153 851,174 754 5 002,605 27 816,827
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 495114870 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
1,019 497 382 544 382 2 736 938 20,824 912
I
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
I
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
TO SHAREOWNERS OF NORTHWEST AIRLINES , INC .
The r port of th independ nt auditor and the finan-
ial tatem nt for 1 53 ar pr ent d her \\'ith.
EARNINGS
Net in om from op ration
pro pert di po aL amount d in
and b f r
39,503 and
r -2.
m ome from propert di po al aft ta.,
amounted to 605190 in 19- 0
.
Suh pr fit wer
1 2 3 4) 0 4 7 in 19 - 2.
Thu the total net income for 19- wa 1 94+ 69 .
Pr err d divid nd amount d to 434 211, leaving
$1 510,-1-82 or 1.8+ p r hare for th 820,933 out tand-
ing har of common to k. In 1952. the total n t
m ome 'Va~ 1 789 337 of , hi h l,0 +9 106 or l.U
per hare wa appli abl to th common to k.
, hile th op ratina re ult in 1953 r fl ct an impro e-
ment o er 1952 it hould be point d out that all of
the aain ,rn r orded in the fir t joht month . Earn-
ing in th la t four month , er belm 1952 lev 1 .
The trik in o mber 195"' ad er 1 affected oper-
atino- re ults but the tr nd of reduced earning had set
in befor No emb r.
Th compan had be n op ratino- an airlift over the
Pacific for the Unit d State Gm rnrn nt. The arrange-
ment wa terminated o mber 1 following th truce
in Kor a. It , a not po ible to liminate imrnediat 1,
all xpcn form rl b orb d b the airlift operation
and thi ontributcd to th adv re earning tr nd in
the la t quarter. Con id rabl progr m eliminating
u h exp n ha be n mad .
ff ort to r due xpcn o-en rail
ha
NET WORTH
Th n t worth of th ompan at the nd of 1953
24736702, of, hi h lh 59827 r 18.71 pr
har , a appli abl t Lh ommon to k. 1 hi r pr -
nt a ati fa t r improvement durino -3 a h0\\'11
b th follo\\ino ummary:
D c mb r 31.
1953 1952
ir r ft. buildino and th r
pr pcrty (n t) .................. ..
urr nt lia-
t in luding
Inve trncnts in pc ial Fund
r
ii c llan u a L le mi --
llan ou liabiliti
6 1+7,67"'
2+7.790
T tal ................................. . 29.0.) 1)02
Bank loan * .............................. +,2 - ,000
Balanc
to k
appli ab] all
to k ..................... .
Balan appli ab] t m-
2+) .702
, 76,87
mon St ck .............. .............. 15 827
Pr har .. ...................... 18.71
Repr nt 'd b 1
Par alue of Common t ck.. .. 8.20 "0
apital urplu ................ ........ 2,8 0,5 78
Earn d urplu ........ ............. ... +,28 19
T tel ................................ 15,.)r 827
2+.2 - 29
+.74 09
87 6" 1
6 800 36.J
, 23,.J53 305
9 525 625
13,827,680
16.8
2.8 63
2,779 4''7
1,827 80
*Of , hi h 835 000 ha in b n paid. Th balan e i
du a follow : 835,000 on th la t da of Jun eptembcr
and De emb r 195+ and March 1955. and 120 000 on June
30 1 55.
Di"idcnd a rued n Pr f r n c t ck as f D cc-mber 31,
I 953 arnoun te d to 71,900.
REVENUE PASSENGER MILES
For Latest Ten -Year Period
1
944
1
945
-
1946 ~
1947
~ !
~.~
r - - :
1
949
~
~
1
950
~~
~
-;;-1
!
200 300 400 500 600 700
Mill/ON MILES
- DOMESTIC ~ INTERNATIONAL
(Includes Op t rat,01"11 10 Alo,~o. the Orient and HowouJ
PREFERRED DIVIDENDS
The Board of Directors decided to withhold payment
of the quarterly dividend due February 1 1954 and
M ay 1, 1954 on our 4.60% Cumulative Preference
stock. In the light of the operating results for the last
four months of 1953 and, with re pect to the M ay 1,
1954 dividend, the operating re ult of the first two
month of 1954, it wa felt de irable to con erve the
company' capital in view of the termination of it
participation in the Pacific airlift, the reduction of
dome tic mail pay and the need for capital in con-
nection with its equipment acquisition program. A
oon a circum tance permit, the Board of Directors
will re ume the payment of the dividends on preference
hare . Since these dividend are cumulative they mu t
be paid before any dividend can be paid on common
hare.
SIGNIFICANT DEVELOPMENTS
Four new Dougla DC-6B aircraft , ere leased from
The Flying Tiger Line Inc. under a seven year con-
tract. DC-6B touri t ervi e to H onolulu wa started on
December 1, 1953. Additional tourist service with the e
aircraft wa commenced between Iew York, Tokyo and
Manila, P. I. and between eattle and Anchorage
Ala ka on April 1, 1954.
Boeing Stratocruiser ervice between Tokyo and
Manila wa commenced April 26 1953.
We are expecting delivery of six model 1049G- uper
Con tellation aircraft during the period ovember
1954 to February 1955 under our agreement with the
Lockheed Aircraft Corporation. The purcha e of these
aircraft will be financed by term bank loan of
$15,000 000 already arranged for.
o new aircraft were purchased during the year. O ne
Douglas DC-4 wa dispo ed of and new DC-6B part
in the value of $650,000 were taken in payment. Five
TOTAL REVENUE TON MILES FLOWN
For Latest Ten-Year Period
1944
-
1945
,___
i
1946
~
-
1947
~
.------
1948 ~~
---
1949 ~~
---
1950 ~~
---
1951
~~~
-
1952
WI~~
,____
1953
W$~-
: :
0 10 20 30 40 so 60 70 BO
MILLIONS OF MILES
- DOMESTIC ~ INTERNATIONAL
(Includes Op~rot;ons to Alosko . the o ,;ent and Ho....,011)
NON-MAIL OPERATING REVENUES
For Lat es t Ten-Year Period
19.U 1945 1946 1947 1948 19 49 1950 1951 1952 195
Douola -5+G air ralt pr iou 1 1 a d fr rn th
nit d tat Governm nt and u d pnn ipall m m-
tc rna tional operation have b en returned to th GO\-
crnmenl.
MAIL RATES
During the en tir car 1953 ur ornpan p rated
und r perman nt m ail rate e tabli h d by the Civil
r nautics Board. of .January 1 195+ howc er
p.1y for ar m ti mail wa r du d from 53
p r l n p r t n mil . Thi ra te i ref rr d
to a a rvi e' or ub id -fr rat - for irline of th
Iara L cla ifi ation. Domcsti rate for all arrier
have b en r op n d by th Board a f pril 1 1954.
1-o a of Januar 1, 195~
~ our int rnational mail rat
wa p 'n d b the Ci il er nauti Board and pr -
lirninar discu ions 1 egardino- a ttl m nt of that rate
have tarted. Our m ail rate , both int rnational and
dorn tic, for the al nd r year 195 1 ar till op n and,
th r f r , arc ubjec t l 'Ltl m cnt with th ,i il Aero-
nautic B a rd. R ate. for the ar 1952 and 19 and
ror , 11 year~ J ri r to 1 5 1 nr l d.
ROUTES AND SERVICE
During 1953 th' ivil r nauLi cs B a rd grant d
your om pan authoriL lo pr idc : r b tvvc n the
w . L c a l t 'rmin als catll / T ac ma <
nd Portland
n th arne d rn - ti flio-ht nd thi I'\'l ~ \ \'
~
111-
atio-urat don pt mb r 27.
1h \\"cl h rd 111
i a r ut b tw 11
hi aa-o c. nd D e-
troi( a \
11 a auth rit to p rat loc~il flight b -
t\ n D troit and cw York. H earing on th m-
p ny 1 ng t ndin
0

le land- c" York , ppli a ti n
had been h ld a rlicr in th a r.
H al eondu t d n th , r n ' wal of t m-
b , , u r mp n for its int r-
p rati n. r rthw - l requc led th l rrnancnt
of it int rnati nal route rtifi. at from th '
tat t th Orient. Th h 'aring xamin r ha
r omrn nd d r n wal of the c mpan ' temp rar er-
tifi. at for it Ori -nt r ulc \i and th
l orth P ifi for a p ri d f fin' ars. thi n-
nection h
am nd d t
ha r omm nd d th.1t th ertifi. at b
in lud Taip h, F rm a, <
an inter-
m diat point bet\ n Okim1wa and :Manih1 and th;.it
th x mpti n b
Korea be ontinu d t l
b th B ard on sixt da noti
mpan
ubje t t
. Th
crv~ Pu nn,
t rrninati n
ex;.irnin r fur-
th r r - ur cornpnn ' rout e t n-
chorao- via Edm nton n t b r TI C\ cd 8 , J ;.i rt the
Orient rou te bu t that orthw t be J rrnitt d t n-
tinu to prat ' th iioninth
la ka a e. Th x min r al o r c mm nd d th .. t Pan
Am ri an \ orld Airw , In . b p rrnittcd t u.
b at Cir I r utc f r fuclino sl ps bu t
\ ithout au thorit to pick up or disch rg p;.i, cngcr at
th sc point .
LONG TERM DE BT
/11clud i119 Curren I linb// i1y Por1 io11
The ca e involving erv1ce between eattle/Tacoma/
Portland and Honolulu wa al o heard. Your company
reque ted permanent renewal of the H awaiian route
without the competition that has exi ted. The exam-
iner ha recommended that Pan American be certificated
to furni h exclusive service over thi route.
The report of the examiner constitutes a re ommenda-
tion to be considered by the Civil Aeronautics Board.
The Board in turn will consider the report, together
with exception and brief filed by the partie , and will
then make a recommendation to the Pre ident of the
United State . Ultimate decision in matter involving
international route rests in the President. Your com-
pany is filing exception to the examiner' report in ac-
cordance with Civil Aeronautic Board practice.
In the Alaska route case your company has requested
that it exi ting route to Alaska be renewed on a per-
manent ba is.
Service during the summer between Minneapolis/St.
Paul and Chicago wa increased with flights "every hour
on the hour".
Special tariff were introduced including ba eball ex-
cur ion fare ; off-sea on Ala ka-mainland reduced first
cla s fare ; touri t clas fares b tween Minneapolis/St.
Paul and Anchorage via Edmonton, a well as emigrant
fares from H ong K ong and T okyo to Canada, United
State and South America.
PERSONNEL
The management i very grateful for the co-operation
of it 5 000 trained, experienced flight and ground em-
ployee located at 40 ta tion from New York to
M anila. Of the e employee 4 500 are repre ented by
labor organization with which your company ha nego-
tiated 16 collective bargaining contracts during 1953
and 1954. The e negotiations were conducted for the
mo t part in a friendly busine slike atmosphere.
The management is proud of the in tere t and under-
standing existing among its employee . Through their
ready acceptance of new procedure and work prac-
tice , important fficiencies and economie have b en
achieved.
MANAGEMENT CHANGES
Mr. H arold R. H arri re igned as President and Di-
rector of the company on March 4, 1954. His re ig-
nation wa unanimou ly accepted by the Board of Di-
rector and Mr. M alcolm S. Mackay, Executive Vice
Pre ident, wa a igned the dutie of Chief Executive
Officer of the company. Mr. Mackay had been in
charge of your company' continental divi ion and will
continue to act as the Chief Executive Officer until the
po ition of Pre ident ha b en filled.
Mr. E. I. Whyatt, Vic President and Comptroller,
who had been with the company since 1932, resigned
a of D ecember 31 1953 to a sume a new po i tion. In
a general realignment of duties, Mr. Leonard S.
Hol tad, former Trea urer, wa elected Comptroller, and
Mr. William J. Eiden, former Assi tant Vice Pre ident
of Budget wa elected Treasurer on February 23, 1954.
It is with regret that we record that Mr.
William Tudor Gardiner, who had erved as a
Director ince October 2 1945, died in an ac-
cident Augu t 2, 1953. H e had been an in-
tere ted and faithful Director, and hi lo will
be keenly felt.
By authority of the Board of Directors
~ ~
~-<-
Chairman of the Board Executi\'e Vice Pre ident
Ylarch 31 1954
a.int Paul , Minnc,ota
FIVE YEAR STATEMENT OF INCOME
(Amount hown in thousands )
NORTHWEST AIRLINES, INC.
Five years ended December 31 , 1953
OPERATI>."G R E\';--; E 1953
Pas enger ........................ ..... ................................................ $48 652
L . . . mail... .............. ............ .. ............................ .................... 6,869
Foreign mail . . . . . . . .. . . . . .. . .. . . . . . . . . . .. . . .. . . . . .. . . . . . . . . . ... . .......... .. .. . .. . . ... 496
Expre . freight, and exce baggage.................................. .. 5,373
Charter an d other tran portation.................... .............. ....... 180
Pacific airlift for . Go,ernment. .......... .... .................... +,185
R epair and ervice income, rent , ere ., net ........... ... ... 385
OPERATI>."G EXPEX E
Flying and ground operation ............................................. .
Yiaintenance and repair .... ..... ............................................. .
Pro,i ion for depreciation and amortization ........ ..... .. ........ .
Traffic, ale and adverti ing ............................................... .
A.dmini tra ti e and general, payroll ta..,e , properry taxe,
etc.
OTHER D ED CTIOX ;\ET ........ .... .... ........................ .
66,140
31,801
13,886
5,731
7,32+
4,255
62.997
3, 143
338
Per cent
I ncrea e
(D ecrea e)
1953 to 1952
15.9
1.5
(29.7)
5.0
(82.9)
(23.4)
(20.0}
7.5
12 .1
( 7.8)
( 1.5)
12.6
( .9)
4.9
108.i
8.i
I xco:-rn FROM OPERATIO'.\ BEFORE I:---C0'.\1 TAX. 2,805 134.7
I:--: c o::-.1E TAXE on income from operation_....... .. .... .............. l,+65 128.9
ET I:--: co::-.rE FROM OPERATIO:--: ............ ............... .... ...... .S 1.3+0 141 . ./-
l:'\ co:--1E FRo::--1 D1 po - AL OF PROPERTY.. .......... ................. 815
L e applicable income taxe 210
:\-ET Ixco:-IE (Lo ) FRo:-r D1 po - AL - OF PROPERTY ........ S 605
:\" ET I :--:coME FOR THE YEAR.................................................... 1,945
(52.3)
(55.8)
(51.0)
8.7
. or .-\- T axe on income were reduced as a re.ult of the carr:-forw a1 d of the 1948 operating lo
- 1949.
1952
41 963
6,767
706
5,116
1,055
28,371
15 061
5,816
6,504
311
195
35,19<;
-
' 8~
62C
4.648
30"
$25,22
11,83-
5,42~
5,48~
1,785
195
33,148
9 938
532
4.388
227
3,970
254
$52.45-
24 944
12 025
5,873
5,426
735
2 -
1949
27,874-
8,098
411
3,426
75
87
$39,971
$19,102
7,971
3,982
4,961
2,963
992
355
63 7
140
(A)
140
777
225,(1(1(~J95i u
]35.(1(1('-]950, 310,()()0
Income from the di posal of prop Tl'" ouring the ,ear: 1948 through l 50 reduced the balance of tbe opt:raung I~. c.arn-fon,ard to
195 1 by 836,48i re ulting in additional income taxes of 42 9, 0 in 1951 applicable to income from di.po.al. oJ properl' for the
prior year .
NORTHWEST (J'tie~t AIRLINES
SYSTEM MAP
Rou es Ooerc ec
Proposed Ro es
- - - - - o es Cered b~ -::, Ooe-::e-:.
- - - - - Conrecng Ar r,es
~ - - - - ' T rough P cne S-:r,ce
CHINA
/
/
/
tJ
Ju' THE PHILIPPINES
V
PE'O
'>. G
/
/ \ f- 'J r Sf ~
CANADA
,,,,,,/ 1
. ', .I L',', f~.
STATEMENT OF FINANCIAL POSITION
ASSETS
1953
CURRENT ASSETS
, h ............................................ ................... .................................................... $11,212,100
ccount rccei able. le allowance of :70000- 1953. $40,000- 1952 ... ... 4764,14]
M aintcnan and operating upplics. ;:it avcra e co t... ............. ................... 1,249,084
Pr paid in. urann.:. rent, taxes. r te ... ... .. ..... ....... .. .......... ... ....... .... .. .................. 499,55 7
TOTAL CURRENT ASSETS $17 724.882
INVESTMENTS AND OTHER ASSETS
R ela t d indu try inv tment and advanc . . at rot... ................................... $ 247,790
Cash Collat ral A ount, e urit , to long-term debt.. .................................. ___ _
$ 247)90
FLIGHT EQU IPMENT at o t- ot A .......................................................... $37 642 757
(In luding full amortiz d amount $7,939935- 1953, $8493,552- 19 2)
L -.. al l " ancc. f r depre iation and ob ol s nee ........................................ 21,727,967
$15,914 790
d ant'l' n pur ha , contra b ot E.......................... ............................ 1,066,710
$16.981 ,500
O THER EQUIPMENT, BUILDINGS, AN D LA ND a t cO"t. .............. $ 11 . 04.038
( [ncluding f ulh amortized am unt $2,974,370 1953 $2 686,982 1952)
Le-.~ c1l lm\a nc '', for dcprccic1 tion ;rnd ,1mortization......... ............................... 6,262,1 2
$ 5.041.88
DEFERRED CHARGES
Training and other :> t in conn tion with air raft nc t le. amortiza-
tion of , 485.0 8- l 53. , 36 .62 1952 .................................................... $
Oth<"t ...................... ................ ................................ .......................................... .
478,098
134,755
612,853
$
$40,608 9 11
, re accom/Jan~in.~ ote to Financial tat em en t L
NORTHWEST ~ IRLINES, INC.
December 31 1953
I
1952
$ 5,998,051
6 334,294
1 333,199
850,667
$145162 11
$ 325,741
261,890
$ 587 631
$38 858 86
l 9,700,440
$19,158,146
$19.158,146
5,631,566
$ 5.107.483
$
$
427 498
129.601
557,099
$39,926.570
LIABILITIES AND STOCKHOLDERS' EQUITY
1953
CURRENT LIABILITIES - ote B
A counts payab] ... .. ............ .... ........................................................................... $ 4,277,826
Salaries, wages, and vacation ornp n ation... ................................................. 2,584,142
Collection a ag nt- taxe , pay roll deduction , tc.. ........................... ........ 1,079,832
Air travel card deposit ... ..... ... .. . . ... .. ... . .... 81] 325
A cru d lo a] and pay roll tax s.. ................................................... ................. 377,449
r:cr 1~e
1
~:i tic~et~~j:tt~:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: l
~~~,;~~
of Jong-t rm d bt.. ... ...................................... ................... 3,340 000
TOTAL CURRENT LIABILITIES $14,917,209
LONG-TERM DEBT -secur d- ote A
4 % ote payabl to bank Ir . amount maturing within on y ar ......... .
STOCKHOLDERS' EQUITY- Note C
Cumulative Pr fer nc Stock $25 par value; authorized 600 000 . har
i uablc in s ri :
4.6% Serie ; authorized and i u d 390,000 bar s out tandin
955,000
shares 375 075- 1953, 381 ,025-1952- Not B....... 9,376,875
Common to k $10 par value authorized 3 000,000 hares; is ued and
outsta nding har s 820,933- 1953, 820,858- 1952- ote D .................. 8,20 330
Capital urplu , aft r d duction of $560 625 in pri r y ars for pa rt of
clivid nd paid on 4.6% Cumula tiv Prefer n Stock... ............. .............. 2,860, 78
Earned .-urplu. ................................................ ...................... ......... ................... . '"1,289,9 19
COMMITMENTS- Note E
.'40.608 9 11
See accompanying N ole to Financial Statem ents.
1952
$ 3.4 9,263
2,460 623
987,246
705,500
339,607
639,739
1 ,200,924
1,670,000
$11,442,902
5 130,36
9 525 625
8,208,580
2,839,663
2,779 437
$39. 26,570
STATEMENT OF INCOME
NORTHWEST AIRLINES, INC.
Year ended December 31, 1953
1953 1952
OPERA TING REVENUES
Pa enger ............... ..................................................................................... .... . $48,652,465 $41,962,758
U . S. mail- ote F ..... .................... ................ ................................................ . 6,869,219 6,767,020
Foreign mail ....... .. ... ................................................................... ...................... . 495,843 705,712
Expre s, freigh t, and exces baggage ........................................... .............. .... . 5,373,113 5,116,171
Charter and other transportation ...................................................... ............... . 179,947 1,055,368
Pacific airlift for U. . Government- ote G ............ .................... ............... . 4,184,589 5,463,614
R epair and ervice income, rents, etc., net ...... ............................. ............... . 384,851 481,737
$66,140,027 $61,552,380
OPERATING EXPENSES
Flying and ground operation ................................................. ........... ............. . $3 1,801,108 $28,371,119
M aintenance and repair ........................... ................... ................... ..... ... .. ...... . 13,885,447 15,061,044
Provi ion for depreciation and amortization ............. ..... ..... .... ...... ................ . 5,730,820 5,815,495
Traffic, sales, and adverti ing .................................. .............. ...... ..... ... . 7,324,210 6,504,399
Admini trative and general, payroll taxe , property tax , etc .. ...... . 3,811,411 3,955,864
Employees' retirement plan ..................... .............. ....... ................................... . 444 000 338,777
$62,996,996 $60,046,698
$ 3,143,031 $ 1,505,682
OTHER DEDUCTIONS {INCOME), NET
Intere t on long-term debt ........ ............ ..... ..................................................... . $ 282,229 $ 412 814
O ther long-term debt expen e .............................................. .. .................. . 59 651 13,867
Recovery on v\Torld War II contract costs ... . .. .............................. : ....... ...... . ( 100 000)
O ther net ...................................... ............. ...................... ........ ............ . ( 3,352) ( 15.989)
338,528 $ 310 692
INCOME FROM OPERATIONS BEFORE INCOME TAXES $ 2,804 503 $ 1 194,990
INCOME TAXES,estimated federal and other taxe on income from
operation . (noexce profit tax) .................................................................... 1.465.000 640,000
- - - - - -
NET INCOME FROM OPERATIONS ........................................................ $ 1.339.503 $ 554.990
INCOME FROM DISPOSALS OF PROPERTY ..................................... S 815,190
Le applicable income taxe ............................. ......................................... 210.000
$ 1 709,347
475,000
- - -- -- - -
NET INCOME FROM DISPOSALS OF PROPERTY ......... . 1,234,347
NET INCOME FOR THE YEAR ................................................................... ,. 1.9+4.693 $ 1.789.33 7
ee accompanying otes to Finallcial tatements.
NOTES TO FINANCIAL STATEMENTS
NORTHWEST AIRLINES, INC.
December 31 , 1953
ote A- Bank Credit greement
The long-term loan was made under a Bank redit gree-
ment and was secured by chattel mortgages on certain aircraft
and flight equipment. nder certain conditions, Cash Collateral
Accounts must be maintained; however, none were required at
D ecember 31, 1953.
-nder the Agreement, the Company may borrow additional
fund, not exceeding $15,000,000, on or before May 1, 1955,
subj ect to certain conditions, including supplem ental chattel
mortgages on six Lockheed Super Constellation aircraft and
certain related flight equipment to be acquired ( ote E ). The
Company has agreed to pay a commitment fee of of 1 %
on the average daily unu ed portion of such total commitment.
The greement requires payments on monies borrowed and
to be borrowed as follows: $3,340,000 during 1954, $3,955,000
during 1955, and $3,000,000 during each ye~r 1956 through
1959. Additional payments, indeterminate m amount and
contingent upon di posal of mortgaged property and recovery
thereon, also may be required.
The Company has covenanted that, among other things,
without first having obtained the written consent of the repre-
sentative of the lending banks, (a ) it will not p ermit the
excess of current as ets over current liabilities (exclusive of
current m aturities of the loan under the Agreem ent ) at any
time to be less than $4,000,000; and (b ) it will not permit
its capital tock and surplus at any time prior to J une 30, 1955,
to be less than $19,000,000, and at any time thereafter to be
less than 135 % of the sum of all indebtedness for borrowed
money.
Note B-4.6% Cumulative Preference Stock Series
Thi tock Series is entitled upon liquidation (voluntary) or
redemption to $25.25 p er share, plus accumulated unpaid
dividends: is convertible per share into one and one half shares
of Comm~n tock to J anuary 1, 1957; and is subj ect to retire-
me"nt through market or sinking fund provisions. At D ecember
31, 1953, 14,925 share had been_permanently re tired through
market fund purchases or conver 10n.
o long as any of this tock eries i out tan ding, th~ Com-
pany is re qui red to set a ide on or before ~arch 31 m each
year to and including 195 7 a non-cumulat1 e fund for the
purchase of hares of_ such Stock on the market at not exceeding
25 per hare exclus1 e of brokerage charges and taxe . On or
before _ larch 31, 1954, $1 38,340 will be required to be set
aside for thi purpo e. fter 1957, other, and cumula ti e,
inking fund provi ions become applicable.
During any period while the Company is in default with
respect to paym ent of di idend on the Cumulative Preference
tock the Company may no t purchase a ny of such tock
excep't pursuant to an offer to a ll holders th reof and may not
red em !es than all of uch tock th en out tanding. The
dividend accruing for the quarter ended February 1 1 54, h ad
not been declar d or pai d up to - farch 8 1954.
ote C--Re triction on Dividends and Earned Surplus
nder provisions of the Bank Credit greement ( ote A ),
$1,155,023 of the earned surplus at D ecember 31, 1953, was
free for dividends on 4.6% Cumulative Preference Stock. with-
out prior written consent of the lending banks, dividends ( other
than dividends payable in capital stock ) could not be declared
or paid or other distributions made, on the Common tock
out of earned surplus at D ecember 31, 1953.
The terms of the Cumula tive Preference Stock also contain
restrictions relative to dividends on and repurchase of Common
tock which are less limiting than those provided in the Bank
Credit Agreement at December 31, 1953.
Note D-Comrnon tock R eservation and Options
Of the 2,179,067 shares of unissued Common Stock at
December 31, 1953: (a ) 562,61 2 shares were reserved for
conversion of the 4.6 % Cumulative Preference Stock; (b )
40,147 shares were subj ect to outstanding option at price
which approximated, or were higher than, market a t the time
of grant. Options for 30,147 shares were exercisable a t D ecem-
ber 31, 1953. Options: for 5,1 47 shares (at $1 0 per sha re
expired J anuary 10, 1954; for 10 000 hares (at $11.25 p er
share ) will expire in October, 1955; and for 25,000 shares (at
$1 4.37 p er share ), including 10,000 hare which will become
exercisable during 1954 and 1955, will expire in :vfarch, 1955;
and (c ) 50,000 shares were reserved for options which may be
granted in the future to officer and emplo,ee.
ote E--Comrnitment
The Company had on order six Lockheed Super Con tellation
aircraft to be delivered beginning _ T
ovember, 1954. These
aircraft and related flight equipment will co t approxima tely
16,200,000. Advance payments of $1,066,710 had been m ade
to D ecember 31, 1953. Future paym ents of approx.imaely
$8,393,290 will be required in 1954, $6,500 000 in 1955, an d
240,000 in 1956. R eference is made to the Bank Credit
Agreement (:'\ote A with respect to borrowing to fin an ce
the transaction.
Note F-Mail Transportation ompen ation
The Company' mail rate for all year through 1953 excep t
1951, have been settled and made p ermanent. The effect of
the Civil Aeronautic Board' ultimate determination for 195 1
i not knO\vn at this time.
~ ote G-Renegotiation of Profi
Operation of the Company for 1951, 1952, an d 1953 in-
cluded tran action u nder fi xed p rice contract with the G .
Go ernmen which provide for renegotiation of profits. It i
anticipated that no refund will b required upon completion
of proceeding .
STATEMENT OF SURPLUS
NORTHWEST AIRLINES, INC.
Year ended December 31, 1953
1953 1952
CAPITAL SURPLUS ( after deduction of $560,625 in prior years for part
of dividend paid on 4.6% Cumulative Preference Stock)
Balance at beginning of year ................. .................... .... .................................... . $ 2,839,663 $ 2,821,033
Add:
Exce of par value over co t of 4.6% Cumulative Preference Stock
permanently retired through mark,et fund purchases .... ................ ..... . 20,415 18,630
Exce of par value of 4.6% Cumulative Preference Stock, upon con-
version, over par value of Common Stock. ............................................ . 500
Balance at end of year ............... .......................... .............................................. . $ 2,860,578 $ 2,839,663
EARN ED SURPLUS
Balance at beginning of year ........................................................................... . $ 2,779,437
Add:
et income from operations .............................. .................................... ....... . $ 1,339,503
et income from di posal of property ........... .............. .................. ............ . 605,190
et income for the year ..... ........ .............. ............ ........ .... ............... ............. . $ 1,944,693
$ 4,724,130
Deduct dividend on 4.6% Cumulative Preference Stock:
Year ended November 1, 1953-$1.15 per share .......... ............................. . 434,211
Three quarters ended ovember 1, 1952-86 cents per share ............. .
Balance at end of year .................................. ......... ....................................... ..... . $ 4,289,919
See accompanying Notes to Financial Statements.
Board of Directors
Northwest Airlines, Inc.
Saint Paul, Minn esota
ACCOUNTANTS' REPORT
$ 1,320,7.87
$ 554,990
1,234,347
$ 1,789,337
$ 3,110,124
330,687
$ 2,779.437
We have examined the statement of financial position of ORTHWEST AmLI Es, I c. as of
D ecember 31, 1953, and the related statements of income and surplus for the year then ended. O ur
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 re-
ceivable from certain U. S. Government departm~nts and agencies, as to which accounts we satisfied
ourselves by other auditing procedures.
In our opinion, the accompanying statement of financial position and statements of income
and surplus pres~nt fairly the financial po6ition of NORTHWEST AIRLINES, ! Ne. at D ecember 31,
1953, and the results of it6 operations for the year then ended, in conformity with generally accepted
accounting principles applied on a basis consistent with that of the preceding year.
aint Paul, Minnesota
March 8, 1954
ER ST & ERNST
Certified Public Accountants
NORTHWEST AIRLINES, INC., ~f!Re/w;d
OFFICERS AND DIRECTORS*
s
CROIL HUNTER, Chairman) Board of Directors
MALCOLM S. MACK Y Executi e Vic President
FRANK C. JUDD Vice President-O perations
LINUS C. GLOTZBACH, Vice President-Personnel
JAMES W. MARINER, Vice President- ales
LAWRENCE B. KINPORTS, Vice President-Orient R egion
A. E. FLOAN, Vice President and ecretary
LEONARD S. HOLSTAD, Comptroller
WM. J. EIDEN, T reasurer
ALROY D. PIEPGRA , Assistant Comptroller
DONALD H. HARDESTY, Assistant Treasurer
FRANK J. SCOTT, Assistant Secretary
DALE MERRICK Assistant Vice President-Pro pertie
C. L. STEWART, Assistant Vic President-Plan
DIPECTORS
I 9
CROIL HU TER- Chairman Board of Directors orthwest Airlines) I nc.
5 3
JAMES H. BI T
GER -Vice President Minneapolis-Honeywell R egulator Co.) M inneapolis) Minn.**
MORTO H. FRY- Partner R iter and Company) ew York City
ROBERT M. HARDY- President) unshine Minina Co.) Yakima) Wash.
L. G. JACQ ES- President and General Manager Motor Products Corporation) Detroit) Mich.
JOSEPH T. JOHNSO - President The Milwaukee Co.) Milwaukee) Wis.
M LCOLM . M KAY-Executive Vice Pr- ident) orthwest Airlines) I nc.
LO ZO PETTEY -Vice President and Director Farmers tate Bank Brush Colo.
C. FRA K RE VI - Partner H od!!,e R ea is M cGrath Pantaleoni & Doi ney ei } ark City
LBERT G. REDP TH- Partner Auchinclo s Parker & R edpath) ew York City
WILLIAM STER T
- President Dakota ~ ational Bank Fargo . D.
LBERT F. TEGE - President General Public tilities or poration ew York City
LYM E. WAKEFIELD, JR.-Vice Pre ident) First 1
Y at20nal Bank of Minneapolis Minneapolis) 1inn.
ALBERT J. WE THERHE D JR.- President The TVeath rhead Compan'y Cleveland Ohio
, HEELOCK HIT EY- Director and )If ember of Executive Committee Truax-Traer Coal Company Chicago Ill.
R egistrar THE TIO L B K OF THE ITY OF E, YORK . Y.
Transfer A aent B KER TRU T 1P Y E" YORK, . Y.
*As of March 31 1954
** ubject to approval of Civil Aeronautics Board
GE ERAL OFFICES: 1885 UNIVERSITY AVENUE, ST. PAUL 1, MINNESOTA
~
NORTHWEST AIRLINES, INC.