Pacific Air Lines Annual Report 1961

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GENERAL OFFICES: SAN FRANCISCO INTERNATIONAL AIRPORT
SAN FRANCISCO 28, CALIFORNIA
Operating Revenues
Operating Expenses
Net Earnings (Loss) After Taxes
Net Earnings per Share .
Revenue Passenger Miles
Revenue Passenger Load Factor
Average Number of Passengers P er Mile
A
T END OF Y
EAl!r-
Working Capital
Stockholders' Equity
Book Value per Share
PAGE
2 Management
3 President's Letter
4 Financial Review
6 Source and Disposition of Funds
6 The Revenue Dollar
7 Comparative Statistics
1961 1960
. $11,095,201 $11,073,701
. $10,131,628 $11,361,883
.$
. $
.$
317,125 $ (226,745)
$ .37 NIL
98,119,000 103,374,000
48.3% 43.9%
19.6 16.9
905,486 NIL
2,692,677 $ 1,654,979
$3.16 $2.46
PAGE
8 Traffic and Sales
8 Routes
9 Route map
10 Equipment
10 Employee Relations
11 Financial Statements
STOCK TRANSFER AGENTS
STOCK REGISTRARS
DEBENTURE TRUSTEE
DEBENTURE PAYING AGENTS
2
OFFICERS AND EXECUTIVE STAFF
JOHN H. CONNELLY, President and General Manager
T. R. MITCHELL, E xecutive Vice President
C. A. MYHRE, Vice President, Finance
HARRY WHITE, Vice President, Operations
R. E. COSTELLO, Vice President, Traffic
E. ROGER DAHL, Treasurer
WALTER ROCHE, S ecretary
R. C. COUK, Director of Flight Operations
D. G. DAVISON, Director of Engineering
R. J. DIXON, Director of Sales and Advertising
W. H. LEVINGS, Director of Personnel
BOARD OF DIRECTORS
LELAND HAYWARD, Chairman
JOHN H. CONNELLY
B. F. EDWARDS, JR.
WILLIAM GOETZ
JOSEPH MARTIN, JR.
RICHARD OSBORNE
WALTER ROCHE
HARRY WHITE
The Annual Meeting of shareholders will be held at
the offices of the Company, Suite 567 First Na-
tional Bank Building, 411 North Central Avenue,
Phoenix, Arizona on June 4, 1962 at 10 :00 a.m.
Crocker-Anglo National Bank
1 Montgomery Street, San Francisco, California
Banker s Trust Company
New York 17, New York
Bank of America
300 Montgomery Street, San Francisco, California
The Chase Manhattan Bank
New York 15, New York
Bank of America
300 Montgomery Street , San Francisco, California
Bank of America
300 Montgomery Street, San Francisco, California
Bankers Trust Company
New York 17, New York
I am pleased to report that, despite the mild business
recession of 1961, combined with the transition period
of introducing jet aircraft, which affected the airline
industry in general, Pacific Air Lines had a net profit
after taxes of $317,125, or 37 cents per share. This is
the highest net earnings in the Company's history and
compares to a net loss of $226,745 in 1960. These earn-
ings and the successful underwriting of last August
are reflected in the strong financial position of the
Company. As of December 31, 1961, the accompanying
balance sheet shows cash and negotiable securities of
$1,836,014, with a working capital position of almost
$1,000,000. Book value of stock outstanding increased
to $3.16 per share at December 31, 1961, as compared
to $2.46 the previous year. Debt interest was covered
three fold.
During the latter part of 1960, following comple-
tion of Pacific's reequipment program and the costly
training involved, a comprehensive forecast of the
traffic trend for the year 1961 was completed. Manage-
ment's decision to act on this forecast analysis result-
ed in a reduction in scheduled mileage. As a result of
this decision, coupled with a stringent cost control
program, total operating costs were decreased from
$11,361,883 in 1960 to $10,131,628 in 1961, an 11 %
reduction amounting to over $1,200,000. At the same
time the passenger load factor improved from 43.9%
to 48.3% and passenger revenue increased over $200,-
000. Total revenues for 1961 exceeded 1960 even
thous-h the contract with Lockheed Missiles and Space
Division expired on June 30, 1961. Since January 2,
1962 this traffic, consisting of Lockheed and other De-
partment of Defense personnel formerly carried under
contract, has been transported over our regular sched-
uled flights under an agreement with the Military Air
Transport Service. Although this agreement expires
on June 30, 1962, we anticipate its continuance.
On January 25, 1962, the Civil Aeronautics Board
issued its Opinion and Order in the Pacific Southwest
Area Route Case, which extend the Company's routes
to Reno, Nevada; Fresno, Long Beach, San Diego, and
Inyokern, California. The Board's Order becomes ef-
fective April 24, 1962; however, Petitions for Recon-
sideration have been filed by all parties to the Case.
To date the Board has not ruled on these Petitions.
Your Board of Directors and the management rec-
ognize and appreciate the loyalty and support of all
those who have contributed to the success of the Com-
pany. In particular, we wish to express our gratitude
to our loyal employees. Through their devoted efforts
the Company was enabled to off er a higher level of
public service to its customers and improved earnings
for its shareholders.
Pacific Air Lines has the two most vital elements
necessary for success- outstanding personnel at all
levels of our organization and a sound route structure
located throughout the Pacific coastal states and Ne-
vada, the most rapidly developing area in the country.
Further, assuming that the poor traffic trend of 1961
turns upward as the general recession emerges to nor-
mal economic balance, 1962 offers encouraging prom-
ise for further improvement in earnings.
Respectfully,
JOHN H. CONNELLY, President
3
OPERATING RESULTS Operating revenues reached an all-
time high of $11,095,201 in 1961, compared with $11,-
073,701 in 1960. This level was maintained in spite of
a substantial reduction in scheduled miles flown. This
reduction was made in view of the general recession
and its possible effect upon air transportation.
INCREASE
OPERATING REVENUES 1961 1960 (DECREASE)
Passenger-
First Class $ 4,888,829 $ 4,643,193 $245,636
Coach . $ 1,500,610 $ 1,543,074 (42,464)
$ 6,389,439 $ 6,186,267 $203,172
Mail 163,647 149,993 13,654
Charter and Contract 361,455 667,905 (306,450)
Public Service
Revenues. 3,942,898 3,900,697 42,201
All Other 237,762 168,839 68,923
$11,095,201 $11,073,701 $ 21,500
Charter and contract revenues decreased from
$667,905 in 1960 to $361,455 in 1961, due to the ter-
mination, on June 30, 1961, of the contract service
with Lockheed Missiles and Space Division. Pacific
has not lost this business. An agreement was reached,
effective January 2, 1962, whereby Lockheed and De-
partment of Defense personnel will be carried on our
regularly scheduled flights. Revenues from this source
will approximate $40,000 a month. This agreement is
subject to reconsideration prior to June 30, 1962,
however, the Company is confident of its continuance.
Operating expenses declined from $11,361,883 in
1960 to $10,131,628 in 1961, a decrease of $1,230,255,
or almost 11 %-This decrease was due to the reduction
in scheduled miles flown, and a stringent cost control.
Cost savings, together with an increase in operat-
ing revenues, produced an operating profit of $963,-
573, compared with an operating loss of $288,182 in
the prior year-an improvement of $1,251,755. After
interest and taxes the net earnings were $317,125,
compared with a loss of $226,745 in 1960.
FINANCIAL POSITION On August 8, 1961 the Company
received cash of $2,364,140 through a most successful
public offering of $1,800,000 of convertible subordi-
nated debentures and 180,000 shares of common stock.
These securities were offered in units consisting of 10
shares of capital stock, plus one debenture having a
value of $100. The debentures bear interest at the rate
of 6 % per year and are convertible to common stock
at $4.50 per share between January 1, 1962 and January
1, 1964; $6 between January 1, 1964 and June 30, 1966;
and $8 thereafter. Any debentures not so converted
are due July 1, 1976 but may be redeemed at the option
of the Company after June 30, 1964. The Company is
required to make sinking fund payments to the Trus-
tee beginning June 30, 1966 and annually, thereafter.
The strong financial position of the Company at
the end of the year is reflected in the balance sheet
which shows-
-Cash and negotiable securities
-Working capital
-Property and equipment, net
-Total assets .
-Retained earnings .
-Total Stockholders' equity .
$ 1,836,014
905,486
6,660,746
10,485,839
1,390,075
2,692,677
Bank loans (including current portion) totalled
$4,220,295 at December 31, 1961, a reduction of $1,-
272,104 since the end of the previous year. All princi-
pal and interest payments have been made currently.
Interest was earned three times.
The working capital of the Company was much
improved over a year ago. Current assets were in-
creased $611,164 and current liabilities decreased by
$1,894,678. Working capital at year end was $905,486
compared with a deficiency of $1,600,356 a year ago.
MAIL RATES The Company has been receiving subsidy
funds (Public Service Revenues) under the "Class
Mail Rate" which was made effective January 1, 1961
by the Civil Aeronautics Board. This rate allows the
carrier to earn 9% minimum to 12.75% maximum on
investment after taxes but before interest. Earnings
in excess of 12.75% are subject to sharing and 50 to
75 % of this excess is refundable to the Board.
Many complexities were involved in the develop-
ment of the formula and the basic data in its construc-
tion was the operating results of the local carriers for
the fiscal year of July 1, 1959 to June 30, 1960. Apply-
ing the results prospectively however, has met the ma-
jor objectives of the Board-to obtain maximum serv-
ice at minimum subsidy cost and to strengthen the
finances of the local carriers.
Adjustments to the formula may be made from
time to time to maintain its intended objectives as
operating results of the carriers change. These
changes may result from route extensions as well as
service deletions and from changes in general econom-
ic conditions as they affect air line transportation.
The Company is presently considering with the
Boards mail rate staff, what adjustments, if any, may
be required in application of the present formula to
Pacific as a result of the route awards in the Pacific
Southwest Local Service Case.
TAXES The total tax bill for the year 1961 was $1,327,-
601 exclusive of taxes deducted from employees earn-
ings, as follows :
Federal transportation taxes collected
from passengers
State and Federal Fuel Taxes . .
Federal and State payroll taxes, exclud-
ing taxes deducted from earnings
$ 664,586
82,285
of employees . . $ 125,636
Federal income taxes applicable to 1961 . $ 322,457
Property and all other taxes $ 132,637
$1,327,601

5
WORKING CAPITAL AT BEGINNING OF YEAR-
Current assets .
Current liabilities . . .
Working capital (deficiency)
Additions during the year-
N et earnings (loss) before sale of
equipment . . . . . .
Retroactive subsidy income . .
Depreciation and amortization .
Sale of property and equipment
Increase future income taxes .
Net proceeds from sale of debentures
Net proceeds from sale of common stock
Sale of warrants . . . . . . . .
Used during the year-
Purchase of property and equipment, less
value of equipment traded in
Overhaul costs capitalized
Reduce long term debt
Reduce future income taxes.
Route development costs .
Other
Net increase (decrease) ) during year .
WORKING CAPITAL AT END OF YEAR-
Current assets . . . . . .
Current liabilities . . . . .
Working capital (deficiency)
6
1961
$ 2,848,386
4,448,742
$ (1,600,356)
$ 276,070
1,328,236
132,464
1,599,803
718,573
2,000
$ 4,057,146
$ 359,640
216,644
908,237
22,247
41,322
3,214
$ 1,551,304
$ 2,505,842
$ 3,459,550
2,554,064
$ 905,486
1960
$ 2,183,306
2,673,303
$ ( 489,997)
$ (282,660)
26,346
1,530,619
180,516
15,312
$ 1,470,133
$ 1,700,937
722,868
126,172
25,422
5,093
$ 2,580,492
$ (1,110,359)
$ 2,848,386
4,448,742
$ (1,600,356)
--
0 '
EXPRE .,
FRElGH
CHARTER &
CONTRACT
PUB. SER
& MAIL
SOURCE i ~(.;t)\
PASSENGER
& EX. BAG.
Passenger and excess baggage $6,424,606
Public service revenue and mail 4,106,545
Charter and contract 361,455
Freight . 108,284
Express . 54,536
Other 80,830
$11,136,256
-----
.
IN
WAGES, ETC.
DISPOSITION FUELS & . RE: T
SSER~~P-
Wages and employee benefits $ 4,531,616
Rents, supplies and services . 1,747,328
Fuel and Oil for aircraft 1,092,663
Parts and supplies for aircraft 1,094,463
Depreciation and reserve provisions 1,010,659
Taxes 663,016
Insurance 364,742
Interest . 314,644
Retained in the business 317,125
$11,136,256
57.7
36.9
3.2
1.0
.5
.7
100.0
40.7
15.7
9.8
9.8
9.1
6.0
3.3
2.8
2.8
- -
100.0
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1961 1960 1959 1958 1957
REVENUE AIRPLANE MILES FLOWN
Scheduled service. 5,010,206 6,117,367 5,456,087 5,058,016 4,313,468
Charter and contract service . 287,071 535,792 554,237 326,033 238,248
Total revenue miles flown 5,297,277 6,653,159 6,010,324 5,384,049 4,551,716
SCHEDULED SERVICES
Available seat miles (000) 203,092 235,646 190,304 165,226 139,593
Revenue passenger miles ( 000) 98,119 103,374 93,636 78,332 70,000
Revenue passengers . 424,319 451,472 421,813 351,982 319,276
Average number of passengers per mile 19.6 16.9 17.2 15.5 16.2
Average length of trip (miles) 231 229 222 223 219
Passenger load factor 48.3 % 43.9 % 49.2 % 47.4 % 50.1 %
Passenger revenues per passenger mile 6.5 6.0 6.2 5.9 5.4i
Available ton miles 19,945,837 22,655,560 17,728,993 15,837,711 13,395,737
Revenue ton miles :
Passengers . 9,321,311 9,820,529 8,895,385 7,441,507 6,649,979
U.S. Mail 201,510 196,837 174,320 135,624 113,555
Freight . 114,022 106,908 99,024 87,322 78,992
Express. 54,481 53,891 56,276 57,215 54,949
Excess baggage 43,774 42,677 38,838 31,564 24,530
9,735,098 10,220,842 9,263,843 7,753,232 6,922,005
Miles of route at end of year 2,257 2,260 2,260 1,983 1,983
Number of airports served at end of year . 23 25 25 25 24
Number of aircraft operated at end of year 21 23 22 17 18
Number of employees at end of year 658 698 668 560 470
Number of common shares outstanding
at end of year . 851,410 671,410 671,410 671,410 671,410
Book value per share at end of year . $3.16 $2.46 $2.76 $2.65 $2.56
Net earnings per share . $0.37 NIL $ .03 $ .09 $ .06
7
8
Among the local service carriers in 1961 your Com-
pany ranked first in-
-Passenger load factor . 48.3%
-Average number of passengers
per mile . .
-Average revenue load
19. 6 passengers
1.96 tons
-Average number of passengers
boarded per employee 693 passengers
Although the available seat miles flown were de-
creased by almost 14 per cent, the passenger miles
flown dropped only 5 per cent, as compared with 1960.
As a result, the passenger load factor increased to
48.3% from 43.9% in 1960.
INCREASE
1961 1960 (DECREASE)
Scheduled miles flown . 5,010,206 6,117,367 (1,107,161)
Available seat miles flown
(thousands) 203,092 235,646 (32,554)
Passenger miles flown
(thousands) 98,119 103,374 5,255)
Passenger load factor . 48.3% 43.9% 4.4%
Average passengers per mile 19.6 16.9 2.7
Passenger revenues per
passenger miles flown . 6.5 6.0 .5
During 1960 the Civil Aeronautics Board approved
a passenger fare increase applicable to passengers
traveling interstate; early in 1961 the State of Cali-
fornia approved this increase for California intra-
state passengers. This fare increase raised the passen-
ger yield (passenger revenues per passenger mile) ap-
proximately 8 per cent, from 6.0 cents a mile to 6.5
cents.
An inter-state freight increase was also granted
by the Board early in 1961 and the State has recently
approved the increase for intra-state freight.
On January 25, 1962 the Civil Aeronautics Board
decision in the Pacific Southwest Local Service Case
authorized the extension of Pacific's route to Reno,
Nevada, and to Fresno, San Diego, Long Beach and
Inyokern, California. This case was instituted by the
Board on August 19, 1958.
In addition to the route extensions, the Board
granted some additional operating flexibility and one-
stop authority between most major terminals. A peti-
tion for reconsideration has been filed with the Board,
however, protesting the award of additional trunk
line service in the Reno-San Francisco market, the
Sacramento-Los Angeles market, and the San Fran-
cisco-Las Vegas market and also the denial of our ap-
plication for non-stop authority in the Burbank-Las
Vegas and San Francisco-Los Angeles markets. To
date, the Board has not ruled on the petition.
Other route cases pending before the Board in-
clude The Southern Rocky Mountain Area Local
Service Case, and the Boise-Las Vegas Case.
The Company also has on file an application to ex-
tend our route from Portland, Oregon to Seattle,
Washington.
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PACIFIC [
AH~t i 1'd$
10
At the end of the year our fleet of aircraft totaled
21 and consisted of 6 Fairchild F-27 turbo-prop air-
craft, 8 Martin 404's, 2 Martin 202's, and 5 Douglas
DC-3 aircraft. Two of the five DC-3's were sold
early in 1962.
At the end of the year the Company provided em-
ployment for 698 employees, of whom almost 25 per
cent have been employed for five years or more.
These employees earned more than $4,530,000 in
wages and employee benefits during the year.
Continuous classroom training is maintained for
all personnel.
The satisfactory relationship with employees is
indicated by the fact that there has been no service
interruption due to employees since the inception of
the airline. Their loyalty and dependability is directly
reflected in the outstanding record your Company ac-
complished for the year.
OPERATING REVENUES :
Passenger
Mail . . . .
Charter and contract operations. .
Express, freight and excess baggage . .
Other . . . . . . .
Public service revenue .
OPERATING EXPENSES:
Flying operations .
Maintenance
Passenger service
Aircraft and traffic servicing
Promotion and sales . . . .
General and administrative .
Depreciation
OPERATING INCOME (loss)
OTHER INCOME AND (expenses) :
Interest . . . . . . .
Amortization of route extension and development expenses
and pre-operating costs . . .
Net gain on disposition of assets .
Other, net . . . . . . . . .
ESTIMATED FEDERAL INCOME TAXES . . .
FEDERAL INCOME TAX CREDIT . . . . . .
Net earnings (loss) for the year .
SPECIAL CREDIT ( net of federal income taxes thereon) -
retroactive subsidy for 1959 . . . . .
EARNINGS RETAINED FOR USE IN THE BUSINESS:
Balance, beginning of year .
Balance, end of year . . . . . .
$
YEAR ENDED DECEMBER 31
1961 1960
6,389,439
163,647
361,455
197,987
39,775
7,152,303
3,942,898
11,095,201
2,869,775
2,504,009
398,597
1,827,365
958,199
744,089
829,594
10,131,628
963,573
(314,644)
(44,251)
41,055
(6,151)
(323,991)
639,582
(322,457)
317,125
1,072,950
$1,390,075
$ 6,186,267
149,993
667,905
138,582
30,257
7,173,004
3,900,697
11,073,701
3,351,219
2,867,977
561,358
1,974,551
1,060,727
813,841
732,210
11,361,883
(288,182)
(279,723)
(33,198)
55,915
(8,244)
(265,250)
(553,432)
326,687
(226,745)
26,346
1,273,349
$1,072,950
11
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12
ffi ~ ~ rn: lJ ~ DECEMBER 31
CURRENT ASSETS :
Cash (1961 includes time deposit of $500,000)
Sacramento Redevelopment Agency Preliminary Loan Notes, 1.46 % due
June 29, 1962 . . . . . . . . . . . . . . . . . .
Accounts receivable:
United States Government:
Mail, passenger and other
Refundable federal income taxes
Traffic and agents . . . . .
Miscellaneous, less allowance for possible losses (1961-$6,800;
1960-$10,000) . . . . . . . . . . . . . . . .
Inventories of materials and supplies, at approximate cost, not in excess of
market. . .
Prepaid expenses
PROPERTY AND EQUIPMENT, at cost-pledged under notes payable:
Flight equipment . . . .
Ground and other equipment . .
Less-Accumulated depreciation and amortization
Construction in progress . . . .
INVESTMENTS, at cost
DEFERRED CHARGES, less amortization:
Route extension and development expense
Pre-operating cost of new flight equipment
Debt discount and expense . . .
1961 1960
$ 1,336,014
500,000
572,876
380,195
84,810
478,929
106,726
3,459,550
9,397,669
968,099
10,365,768
3,797,010
6,568,758
91,988
6,660,746
12,628
88,799
53,374
210,742
352,915
$10,485,839
$ 226,753
1,112,745
205,000
446,912
100,177
465,262
291,537
2,848,386
9,520,000
937,431
10,457,431
3,049,520
7,407,911
51,945
7,459,856
9,414
68,436
76,666
10,545
155,647
$10,473,303
CURRENT LIABILITIES :
Notes payable-current instalments .
Accounts payable . . . . . .
Taxes collected or withheld from others .
Accrued expenses . . . . . .
Transportation sold, not yet used or refunded .
Estimated federal income taxes .
LONG TERM DEBT:
Notes payable to bank (Note A)
6 % convertible subordinated debentures, due July 1, 1976 (Note B)
PROVISION FOR FEDERAL INCOME TAXES OF FUTURE YEARS . . . . . . . .
STOCKHOLDERS' EQUITY (Notes A, Band C) :
Common stock:
Authorized 40,000,000 shares of 50<t par value per share
Outstanding 1961-851,410 shares, 1960-671,410 shares
Paid-in surplus (Note F)
Earnings retained for use in the business, per accompanying statement .
See notes to Balance Sheet on page 14
$
DECEMBER 31
1961 1960
818,404
809,581
169,616
170,026
116,437
470,000
2,554,064
3,401,891
1,800,000
5,201,891
37,207
425,705
876,897
1,390,075
2,692,677
$ 1,182,271
2,552,664
212,783
265,273
110,455
125,296
4,448,742
4,310,128
4,310,128
59,454
335,705
246,324
1,072,950
1,654,979
$10,485,839 $10,473,303
14
NOTE A-Notes payable:
DUE IN 1962
5 % , payable in monthly in-
stalments of $38,550 to
February 1969 . $462,600
51/2 % , payable in monthly in-
stalments of $16,700 to
May 1963 245,400*
6 % , payable in monthly instal-
ments of $5,583 to July 1967 67,000
6 % , payable in monthly instal-
ments of $3,617 to
October 1965. 43,404
$818,404
DUE AFTER 1962
$2,911,900
69,150
301,500
119,341
$3,401.891
*Includes $45,000 which became payable in 1962 because of the
sale of an airplane during December 1961.
All of the Company's equipment is pledged as secu-
rity under chattel mortgages for the secured loans.
The Civil Aeronautics Board, under agreements
dated December 1, 1958 and May 9, 1960, guaranteed
90 % of the principal amount and 100 % of the interest
on the 5 % and 6 % loans.
Under the terms of the loan agreements, the Com-
pany has agreed that ( 1) it will not, without the prior
consent of bank, pay any dividends ( except in stock)
or purchase, redeem or otherwise acquire for value
any of its outstanding shares, and (2) it will main-
tain current assets at least equal to current liabilities;
for the purpose of this computation, current instal-
ments under the loan agreements may be excluded
from current liabilities.
NOTE B-Debentures: Under the terms of the indenture
dated July 1, 1961 relating to the 6 % convertible
subordinated debentures, annual sinking fund pay-
ments of $90,000 each, commencing in 1966, are re-
quired. The debentures are convertible into common
stock of the Company at conversion prices per share
of $4.50 to December 31, 1963, $6.00 from January 1,
1964 to June 30, 1966 and $8.00 after June 30, 1966.
400,000 shares of unissued common stock are reserved
for the conversion of the 61/2 % debentures.
The terms of the indenture restrict the payment
of cash dividends and the purchase or redemption of
common stock by the Company to the sum of $100,000
plus 66-2/ 3 % of the earnings of the Company accu-
mulated subsequent to December 31, 1960. (See Note
A for restrictions on payment of dividends imposed
by bank loan agreements.)
NOTE C-Warrants: 40,000 shares of unissued common
stock are reserved for the exercise of outstanding war-
rants for the purchase of such shares at prices rang-
ing from $4.75 to $5.25 until August 1964.
NOTE D-Pension plans: Under contributory pension plans
for employees, income was charged with $166,723 dur-
ing 1961 representing the Company's share of current
and past service pension cost.
As at December 31, 1961 the estimated unfunded
portion of past service costs under the retirement
plan for pilots, payable over the next five years,
amounted to approximately $108,000.
NOTE E-Commitments: The Company's long-term lease
commitments as at December 31, 1961 required annual
payments of approximately $55,000 to 1964, $18,000
in 1965, and $15,000 from 1966 to 1980.
NOTE F-Paid-in surplus: The increase in paid-in surplus
represents the excess of the-net proceeds from the sale
of 180,000 shares of common stock over the par value
thereof.
PnICJ~ W.A'J.'F.RHousE & Co.
120 MONTGOMERY STREET
SAN FRANCISC O 4 March 14, 1962
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
PACIFIC AIR LINES, INC.
In our opinion, the accompanying statements pre-
sent fairly the financial position of Pacific Air Lines,
Inc. at December 31, 1961 and the results of its opera-
tions for the year, in conformity with generally ac-
cepted accounting principles applied on a basis con-
sistent with that of the preceding year. Our examina-
tion of these statements was made in accordance with
generally accepted auditing standards and accord
ingly included such tests of the accounting records
and such other auditing procedures as we considered
necessary in the circumstances. Certain receivables
from the United States Government selected for tests
were not confirmed by direct correspondence, but we
satisfied ourselves as to these amounts by means of
other auditing procedures.
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