Southern Airways Annual Report 1955

Southern Airways, Inc.
Axiiilyt Annual Report, 1955
NASHVILLE
JACKSON
MEMPHIS FLORENCE
SHEFFIELD
TUSCUMBIA
jMUSCLE SHOALS)
CHARLOnE
SPARTANBURG
greenvilleV
DECATUR
TUPELO
GREENVILLE
COLUMBUS>{ bIRMINGHAmV\GADSDEN ATHENS GREENWOOD
TUSCALOOSA 'ATLANTA
JACKSON
COLUMBUS
LAUREL
NATCHEZ
ALBANY
yMOULTRIE
ougeV
V BILOXI
'"^CITY
^^NEW ORLEANS i
VALDOSTA
^PANAMA CITY
JACKSONVILLE
1 ROUTES IN OPERATION
: TEMPORARILY SUSPENDED
iiiiiiiiiiiiiiii UNDER APPLICATION
Connecting the Growing
South with the world
Gr/j
Southern
Airways
Incorporatcl
EXECUTIVE OFFICES 1140BKOWNMARXBLDG. BIRMINGHAM.ALABAMA
TO
STOCKHOLDERS, EMPLOYEES ANDFRIENDSOFSOUTHERNAIRWAYS,INC.:
The year 1955 was one of continuingprogressforyourCompany. Profits
were
higher than at any time in Southern'shistory,amountingto$82,142or33cents
per
share.
.Jt,ls most gratifying to be able toreportthatwhileachievingrecord
earnings,' yont Company was able, at the sametime,toreduceitsdependenceonmail
pay
and to provide more peoplewiththebenefitsofairtransportationthaninany
year since
commencing operations. Thus, aslatershowninthisreport,wereceived
some
$160,000 less mall pay in 1955thanin1954. Thetotalpassengerscarried
increased to 168,993, 26 per cent over the133,544totalfor1954. A^comparable
increase
occurred in the revenue passengermilesoperatedbyyourCompanywhichwere
some
25 per cent higher in 1955 than in1954.
During the twelve months ended December 31, 1955,wesucceededinincreasing
our
total
commercial revenues to $1,790,541,representinga26percentincrease
over
commercial revenues during 1954. Ourtotalpermileexpensein1955roseonly
slightly over that for 1954, reflecting -yourmanagementbelieves-goodcostcontrol.
The
Increase in expenses experiencedbySouthernin1955wasconsiderablybelowthe
average
increase for the local serviceIndustry.
Regardless of the gratifIcation wehavederivedfrombetteringtrafficand
profit records, your management regardsSouthern'scontinued100percentsafety
record during 1955 as of even greater significance. TherecordachievedbySouthern
this year again qualifies us for theAviationSafetyAwardfromtheNationalSafety
Council - the sixth consecutive yearwehaveearnedtheaward.
As you were
advised in previous reports.CongresspassedandthePresident
signed
legislation during 1955directingtheCivilAeronauticsBoardtoissuecerti
ficates of unlimited duration to eachofthelocalservicecarriers. Pursuanttothis
law,
the Civil Aeronautics Board issuedtoSouthernapermanentcertificateeffective
as
of January 24, 1956. Your Companywashonoredtobetheonlylocalservicecarrier
to
receive its permanent certificate inpersonfromtheChairmanoftheCivilAero
nautics
Board, the Honorable RossRizley. MakingaspecialtriptoAtlantaforthe
purpose, Mr. Rizley presented thecertificateinimpressiveceremoniesheldinour
hangar at Atlanta in December, 1955.
Permanent
certification will result insubstantialbenefitsforyourCompany.
These
Include the ability to make long-rangeplans,moresecurityforourpersonnel,
avoidance of repeated renewal proceedingsandagreaterlikelihoodthatasuitable
airplane for local service airlineswillbeproduced. Conmunitiesonoursystem,
and
present and future businesses inourcitiesmaynowrelyuponthebenefitsof
local air
transportation service on apermanentbasis.
-2-
During the year, your CompanyengagedDay,Harris,Hargrett6eWeinstein,
Inc.
of Atlanta as its advertisingagency. Specimennewspaperandmagazineads
prepared by the new agencyareshownonpage10ofthisreport. Intheearlypart
of
1955, the Civil AeronauticsBoardgrantedSouthernandtheotherlocalservice
carriers
authority to exchange$25,000oftransportationforadvertising.Wealso
obtained
additional advertisingincooperativeprogramswithcertainofthetrunk
lines.
With increased volume andimprovedqualityofadvertising,weweresuccess
ful in
developing business innewareas.
The
Company has a number of routeapplicationsonfilewiththeCivilAero
nautics
Board. The map on theinsidefrontcoverofthisreportshowsourpresent
routes as well as those for whichwehaveapplicationspending. During1955your
Company
participated in one routeproceeding. Thiswastheso-calledPanamaCity
Case
involving service betweenAtlanta,Georgia,andPanamaCity,Florida.On
March 15, 1956, the HearingExamineroftheCivilAeronauticsBoardrenderedan
Initial Decision favoring your CompanytoprovideservicebetweenAtlantaandPanama
City
via
Columbus, Georgia; Albany,Georgia;andDothan,Alabama,onanon-stopor
skip-stop basis. Your managementbelievesthattheCompanywillbeawardedthe
route by the Board in its finaldecisionandthatservicetoPanamaCitycanbe
inaugurated during the sunner of1956.
The
increased business enjoyedduring1955isproofofgreaterpublic
acceptance of Southern Airways. Acceptancebythepublichasbeenbroughtaboutto
a
considerable degree by thepolite, courteousandefficientworkingteamthatyour
Company has
developed. Southernemployeesareknownfortheircourtesyandgenuine
interest in the welfare of thetravelingpublic. Ofour435employees,144havefive
years of service with theCompany, and124havethreeyearsofservice.
Your
management views the futurewithconfidence. Shouldwebesuccessful
in
obtaining all or part ofthependingextensions,aperiodoftimewillberequired
to
integrate the new mileage intoourpresentoperationsandtodeveloptrafficover
the new
routes. During such a developmentalperiodwemaytemporarilyexperience
higher
costs.
Without anydoubt,however,therouteadditionswillintimeenable
your
Company to providemorepublicserviceand-bytheadditionofimportantnew
sources of revenue - to improve substantiallyitsfinancialposition.
Respectfully yours.
Frank W. Hulse
President
April 23, 1956
Southern Airways, tnr.
Balance Sheets
Dec. 31, 1955 Dec. 31, 1954
ASSETS
CURRENT ASSETS .... .
Cash
Accounts receivable:
$ 235,430.91 $ 242,868.61
United States Government--for mail and other
transportation
Airline traffic, air travel plans, and other
214,897.54 234,809.19
trade receivables 196,857.45 156,615.22
Inventories of repair parts and operating supplies-
at cost 91,490.91 113,374.21
Prepaid aircraft engine overhaul and insurance 106,644.57 84,884.50
TOTAL CURRENT ASSETS $ 845,321.38 $ 832,551.73
INVESTMENTS AND
OTHER ASSETS ....
5,429.92
PROPERTY AND
EQUIPMENT .... .
--at cost, less allowances
A
for depreciation and overhaul --
Note B
Hangar (located on leased land) $ 139,023.16 $ 129,381.48
Aircraft and related equipment 1,121,559.79 774,804.71
Other equipment 190,169.50 176,527.10
Improvements to rented property 17,195.36 14,017.29
$ 1,467,947.81 $ 1,094,730.58
Less allowances for depreciation and overhaul 834,288.81 788,069.33
$ 633,659.00 $ 306,661.25
DEFERRED CHARGES .... .
Unamortized cost of certificate of public convenience
and necessity and other expenses $ 5,407.73 $ 9,499.92
Route extension and development 5,272.76 -0-
$ 10,680.49 $ 9,499.92
$1,494,043.87 $1,154,142.82
LIABILITIES
CURRENT LIABILITIES .... .
Notes payable, including current installments
of long-term debt:
To bank--Note B $ 190,000.00 $ 70,000.00
For equipment and supplies -0- 49,403.42
Accounts payable and accrued expenses:
Trade accounts 318,350.18 236,711.83
Pay rolls and taxes withheld therefrom 34,460.87 68,792.30
Vacation pay
Miscellaneous accounts payable and accrued
73,738.42 66,054.10
expenses 43,668.21 46,507.01
Unearned transportation revenue 25,862.59 19,772.74
Federal and state taxes on income--estimated 16,839.63 3,203.55
TOTAL CURRENT LIABILITIES $ 702,919.90 $ 560,444.95
LONG-TERM DEBT Note payable to bank (4%) --
payable in monthly
installments of $7,500.00--Note B
Less payments due within one year included in
$ 202,500.00 $ 70,000.00
current liabilities 90,000.00 70,000.00
$ 112,500.00 $ -0--
CAPITAL Common Stock, par value $3.00 a share--Note C:
Authorized 400,000 shares; Issued and
outstanding: 1955--252,400 shares, including
225 shares in treasury; 1954--250,000 shares $ 757,200.00 $ 750,000.00
Paid-in surplus 3,121.78 6,251.38
Earned-surplus deficit* 80,411.88* 162,553.51*
$ 679,909.90 $ 593,697.87
Less Common Stock in treasury--225 shares, at cost 1,285.93 -0-
$ 678,623.97 $ 593,697.87
$1,494,043.87 $1,154,142.82
See Notes fo Financial Statements.
Sovthern Airways, Inc.
Statement of Income
Year Ended December 31,
1955 1954
OPERATING REVENUES . . . . .
Transportation:
Passenger $ 1,665,015.33 $ 1,324,138.61
Mail 1,775,103.83 1,935,732.50
Express 56,477.81 37,046.86
Excess baggage 7,839.15 7,020.22
Charter 55,967.32 37,045.50
Service sales, agency service, and other revenue 5,241.20 21,177.72
TOTAL OPERATING REVENUES $3,565,644.64 $3,362,161.41
OPERATING EXPENSES . . . , . .
Flying operations $ 1,512,249.46 $ 1,454,434.01
Ground operations 570,200.41 534,229.54
Ground and indirect maintenance 279,094.89 265,217.98
Passenger service 171,244.23 144,102.40
Traffic and sales 569,341.85 494,767.76
Advertising and publicity 93,161.34 70,412.40
General and administrative 278,066.70 264,511.28
TOTAL OPERATING EXPENSES $3,473,358.88 $3,227,675.37
$ 92,285.76 $ 134,486.04
OTHER INCOME . . . . , .
Cash discounts and interest earned 6,347.30 5,598.81
Group insurance dividend for prior year 8,538.47 -0-
Reduction of rents and landing fees for prior year -0- 3,635.00
Sundry other income 4,910.38 4,615.30
$ 112,081.91 $ 148,335.15
OTHER DEDUCTIONS . . , , .
Interest expense $ 7,191.44 $ 8,353.25
Amortization of certificate renewal cost 2,836.20 2,836.20
Provision for vacation pay -0- 66,054.10
Life insurance expense and other deductions 4,096.64 3,236.83
$ 14,124.28 $ 80,480.38
INCOME BEFORE INCOME TAXES $ 97,957.63 $ 67,854.77
TAXES ON INCOME . . . , .
Provision for the year:
Federal normal income tax and surtax $ 45,716.00 $ 30,500.00
State income taxes 5,500.00 3,000.00
$ 51,216.00 $ 33,500.00
Less reduction in income taxes for the year because
of loss carried over from preceding year 35,400.00 31,000.00
TOTAL TAXES ON INCOME $ 15,816.00 $ 2,500.00
NET INCOME $ 82,141.63 $ 65,354.77
Provision for depreciation of property and overhaul
of aircraft included above:
1955 -
$ 109,591.87; 1954 -
$ 109,929.97.
Statements of Paid-In Surplus
and Earned-Surplus Deficit*
Year Ended December 31,
1955 1954
^^ID-IN SURPLUS . . ., , .
Amount at beginning of year
Less excess of cost of treasury stock sold over
$ 6,251.38 $ 6,251.38
proceeds 3,129.60 -0-
AMOUNT AT END OF YEAR $ 3,121.78 $ 6,251.38
EARNED-SURPLUS
DEFICIT* . . . .
Deficit at beginning of year $ 162,553.51* $ 227,908.28
Credit net profit for the year 82,141.63 65,354.77
DEFICIT AT END OF YEAR $ 80,411.88* $ 162,553.51
See Notes to Financial Statements.
Notes to Financial Statements
Note A--The Company is engaged in air transportation with respect to persons, property, and mail. On November 25,
1955, the Civil Aeronautics Board issued to the Company a Permanent Certificate of Public Convenience and Necessity
effective January 24, 1956, in lieu of the temporary certificate previously granted.
Note B--Notes payable to bank for money borrowed are secured by twelve aircraft and substantially all of the related
equipment, hangar located on land leased until January 11, 1959 (with option of renewal for five years), station and
office furniture and equipment, automotive equipment, insurance policies for $150,000.00 on life of an officer, and lease
under which the Company is lessee of the land on which the hangar is located.
Under terms of the loan agreement with the bank, the Company has agreed, among other things, (1) to maintain
net current assets of $300,000.00 (computed without inclusion of the unpaid balance of the loans as a current liability)
or 10% of operating expenses (exclusive of depreciation) for the preceding twelve months, whichever is greater; (2) to
pay no dividends while the notes are outstanding; and (3) to maintain a net worth of one and one-fourth times the
unpaid principal amount of the notes; otherwise the entire balance of the loans may be called by the bank.
Note C--At December 31, 1955, restricted options to purchase Common Stock of the Company were held by officers.
as follows:
Number of Shares Price Per Share Expiration Date
10,000 $6.05 May 1, 1960
10,000 $4,671/2 May 1, 1965
AKRON
ATLANTA
BALTIMORE
BIRMINGHAM
BOSTON
BUFFALO
CANTON
CHICAGO
CINCINNATI
CLEVELAND
COLUMBUS
DALLAS
DAYTON
DENVER
DETROIT
ERIE
FORT WORTH
GRAND RAPIDS
HOUSTON
INDIANAPOLIS
KALAMAZOO
KANSAS CITY
LOS ANGELES
LOUISVI LLE
MEM PHIS
MIAMI
MILWAUKEE
MINNEAPOLIS
ERNST & ERNST
ACCOUNTANTS AND AUDITORS
SYSTEM SERVICE
ATLANTA
N EW O R LEANS
N EW YORK
PHILADE LPHIA
PITTSBURGH
PORTLAND, ME.
PROVIDENCE
READING
RICH MON
ROCH EST
ST. LOUIS
ST. PAUL
SAN ANTONIO
SAN FRANCI.SCO
SEATTLE
TOLEDO
WASH INGTON
WINSTON-SALEM
YOUNGSTOWN
FIRST NATIONAL BANK BLDG.
DELIVERY ZONE 3
TORONTO, CANADA
CORRESPONDENT AT
LONDON
CABLE ADDRESS
"ERNSTAUDIT" N. Y.
Board of Directors
Southern Airways, Inc.
Birmingham, Alabama
We have examined the balance sheet of
Southern Airways, Inc. as of December 31> 1955) and the
related statements of income and surplus-deficit 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.
In our opinion, the accompanying balance
sheet and statements of income and surplus-deficit present
fairly the financial position of Southern Airways, Inc. at
December 31? 1955) and the results of its operations for
the year then ended, in conformity with generally accepted
accounting principles applied on a basis consistent with
that of the preceding year.
Certified Public Accountants
Atlanta. Georgia
March 16, 1956
OvT certificate or report upon an audit or examination is delivered to client irith the distinct understanding that any advertisement,
publication, or copy therefrom, in full or in part, of such certificate or report, shall be in the form to be approved by us. ^
As a preventive against fraud; attention is directed to the fact that all pages in this report should bear our water mark.
COMPARATIVE OPERATING STATISTICS BY CALENDAR YEARS
1955 1954 1953 1952 1951
Revenue Plane Miles 3,263,651 3,098,658 3,022,365 3,330,568 3,070,576
Revenue Passengers 168,993 133,544 112,328 121,065 96,572
Revenue Passenger Miles 28,082,260 22,396,921 19,286,489 20,670,139 17,186,342
Passenger Load Factor 40.97 34.84 30.49 29.54 27.19
Mail Ton Miles 98,025 83,690 80,050 86,387 86,011
Express Ton Miles 133,941 83,001 73,507 88,403 79,359
% Scheduled Miles Completed 98.28 98.98 97.68 98.47 97.54
HOW OUR DOLLARS WERE DIVIDED IN 1955
Employees--salaries and wages, insurance benefits, and payroll taxes .
Aircraft fuel and oil
Material, supplies and outside repairs
Rents and services
Depreciation and aircraft overhaul
Advertising
Taxes--other than payroll
Insurance
AMOUNT PERCENT
$1,989,055 . . .
55.78%
471,213 . . .
13.22
290,653 . . .
8.15
276,258 . . .
7.75
109,591 . . .
3.07
85,233 . . .
2.39
69,386 . . .
1.95
40,508 . . .
1.14
151,606 . . .
4.25
82,142 . . .
2.30
$3,565,645 100.00%
TOTAL NON MAIL REVENUE
Cents Per Revenue Plane Mile % Increase
Over
Previous
Year
55.74
14.90
6.76
15.28
19.18
Samples of Our Current Advertising
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FILE
Southern Airways
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ATtANTA
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DETROIT
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CHARtfStON W VA
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Management
Frank W. Hulse
President
C. M. Britt
Vice President--Sales
W. S. Magill
Vice-President--Operations
Ike F. Jones
Vice President
George F. Estey
Secretary-Treasurer
C. H. D. Tarrer
Assistant Treasurer
Cecil A. Beasley, Jr. W. B. White, Jr.
Assistant Secretary Assistant Secretary
EXECUTIVE COMMITTEE
Frank W. Hulse Henry P. Johnston
Ivan Allen, Jr. Elton B. Stephens
W. B. White, Jr.
DIRECTORS
Ivan Allen, Jr.
Ivan Allen Co.
Atlanta, Ga.
J. Murrey Atkins
R. S. Dickson & Co.
Charlotte, N. C.
Cecil A. Beasley, Jr.
Kilpatrick, Ballard & Beasley
Washington, D. C.
Frank W. Hulse
Southern Airways, Inc.
Birmingham, Ala.
Alton F. Irby, Jr.
A. F. Irby & Co., Inc.
Atlanta, Ga.
Henry P. Johnston
Birmingham News Company
Birmingham, Ala.
R. Eugene Orr
Knight, Orr & Co., Inc.
Jacksonville, Fla.
W. Herbert Smith
W. Herbert Smith Co.
Clover, S. C.
Elton B. Stephens
Elton B. Stephens & Assoc.
Birmingham, Ala.
Edward U. Beneke
The Beneke Corporation
Columbus, Miss.
Ike F. Jones W. B. White, Jr.
Ga.-Carolina Paper & Sup. Co. White, Bradley, Arant, All & Rose
Augusta, Ga. Birmingham, Ala.
Alexander J. Brunini
Brunini, Everett, Grantham & Quin
Vicksburg, Miss.
G. Gunby Jordan
The Jordan Company
Columbus, Ga.
Gen. Ralph H. Wooten
Mid-South Chemical Co.
Memphis, Tenn.
Stock Transfer Agent
THE FIRST NATIONAL BANK OF BIRMINGHAM
Executive Office: Brown-Marx Building, Birmingham, Alabama
General Offices: Atlanta Airport, Atlanta, Georgia
Saluting Monroe, ia.
Vital Link in Southern Service