Western Air Express Corporation and Subsidiary ANNUAL REPORT 1 935 WESTERN AIR EXPRESS CORPORATION OFFICERS President ,., ,., ,., ,., ,., ALVIN P. ADAMS Vice--President ,., ,., ,., ,., ,., ,., C. N. JAMES Secretary and Treasurer,.,,.,,., L. H. DwERLKOTTE Ass't. Secretary ,., ,., ,., ,., E. H. BROWN ALVIN p. ADAMS w. G. BURHENN DIRECTORS L. H. DWERLKOTTE HAROLD P. FABIAN C. N. JAMES REGISTRAR Citizens National Trust & Savings Bank, Los Angeles, California STOCK TRANSFER AGENT Security--First National Bank of Los Angeles, California AUDITORS Peat, Marwick, Mitchell & Co. GENERAL OFFICES Union Air Terminal, Burbank, California March 10, 1936 To the Stockholders: There is submitted herewith consolidated profit and loss statement of your company for the calendar year 1935, together with a consolidated balance sheet of the company and its subsidiary as of December 31, 1935, to which is appended the report of Messrs. Peat, Marwick, Mitchell & Company, the accountants for your company. Operations for the year resulted in a net loss of $8,188.41 after depreciation charges of $71,108.82 and taxes. This compares with a net loss in 1934 of $153,509.70 after depreciation charges of $62,348.54 and taxes. The 1935 profit and loss statement reflects the absorption of substantial charges of a non~recurring nature. The improved operating statement is principally accounted for by three factors: First, air mail revenues showed a substantial gain, increasing from $172,007.21 in 1934 to $289,763.45 in 1935. This resulted from the authorization by the Post Office Department of a second schedule between Los Angeles and Salt Lake City on February 15, 1935; and from an increase on March 1, 1935 in air mail rates by the Interstate Commerce Commission, from 24c per mile under the contract rate to approximately 33~ 1/3c per mile. Second; passenger revenues over the San Diego~Los Angeles~Salt Lake City route broke all previous records, totaling $269,367.51 for 1935, as compared with $182,777.23 in 1934, and with $226,912.16 in 1933, the previous high record. This improvement for the past year resulted from (a) an increase in air travel generally; (b) the standardization of our service with that of United Air Lines both as regards flying equipment and passenger service, in order to offer a through standard service CoasMo~Coast; (c) an intensive traffic solicitation and advertising program; (d) the scheduling of daylight flights over Boulder Dam; (e) considerably faster services inaugurated during the year by your company and United Air Lines; (f) the addition of a third round trip passenger and express schedule during the summer months; and ( g) institution of schedules better adapted to meet the needs of the traveling public. Third; in spite of an increase of 24.5% in revenue miles flown from 974,432 in 1934 to 1,213,724 in 1935, operating expenses increased only $35,611.11, or 6.7%. As a result, operating costs per mile were reduced to 46.6c from 54.5c. It is interesting to note that although passenger and express revenue increased $90,445.95, or 45.1%, traffic and advertising costs increased only $2,034.95, or 6.4%. A saving in General and Administrative expenses in 1935 was effected of $41,832.56 from 1934, a total of 42%. Since the first of the year notes payable in the amount of $48,568.46, representing the unpaid balance on equipment purchases, have been paid. The following operating statistics reflecting the improvement in business over the previous year are of interest: Revenue Miles Flown ___ _ _________ _ % of Scheduled Miles Flown Revenue Passengers Carried _ __ _ Revenue Seat Miles _____ _________ _ _ Mail Pounds Carried ______________ _ Express Pounds Carried _______ _ _ _ 1935 1,213.274 99.09% 13,736 4,915,129 298,287 198,389 1934 974,432 94.65% 7,401 3,336,738 208,197 73,158 % Increase 24.51 4.69 85.60 47.30 43.27 171.18 Your management is looking forward to further improvements in 1936. An additional gain in air passenger travel in general is anticipated. By improvement in service and additional selling features, it is hoped your company will be able to participate materially in this development. Respectfully yours, AL VIN P. ADAMS President WESTERN AIR EXPRESS CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEET As at December 31, 1935 ASSETS Current Assets: Cash in Banks and on Hand_____ ___ ____________ ______________ ______ ______ ______ $ 82,400.07 Notes Receivable ____ ______________________ ______________ _________________ ____ _ _ __________ _ Accounts Receivable, less Reserve of $5,098.17 _________ _____ _______ _ Accounts Receivable from United States Post Office Department under old Air Mail Contract __________ _ _ 1,854.70 48,219.60 50,711.43 Total Current Assets -------------------------------------------------- 183,185.80 Inventory of Parts and Supplies, less Reserve of $5,875.93 ________ ___ _ Prepaid Expenses ------------------------------------------------------------------------------ United States Government Bonds and Notes ( Par Value $35,000.00) deposited with United States Post Office Department -------------------------------------------------------------------------------- Miscellaneous Stocks and Bonds ---------------------------------------------------- Properties and Equipment-at Cost: Land -------------------------------------------------------------------- $ 13,256.95 Hangars, Buildings, Airplanes, Engines and Other Equipment -------------------------------------- 353,878.36 367.135.31 Less Reserve for Depreciation_ _ _________ ___ _ _ _ ___ ________ 131,688.29 235,447.02 Unimproved Real Estate ---------------------------------- 147,876.85 Airport Leases and Rights not used in Operations ------------------------------------------------- 35,975.00 16,765.48 9,442.46 35,054.34 1,387.42 Other Property not used in Operations (Net) 8,702.65 428,001.52 Total ---------------------------------------------------------------------------- $673,837.02 LIABILITIES Current Liabilities: Notes Payable for Airplane Purchases__________ _____________ _ _ ________ ___ $ 48,568.46 Accounts Payable ---------------------------------------------------------------------- 20,536.09 Accrued Expenses ---------------------------------------------------------------------- 12,691.10 Total Current Liabilities ------------------------------- 81,795.65 Capital Stock: Authorized, 500,000 Shares of $1.00 each Issued, 222,645 Shares ------------------- $222,645.00 Capital Surplus ---------------------------------------------------- 413,887.12 Operating Deficit ------------------------------------------------------ Contingent Liabilities: Proposed Additional Assessment of Federal Income Tax in-- eluding Interest for the Tax.- able Year 1933 _________ _ _ _______ __ $ 20.000_00 636,532.12 44 .490. 75 592,041.37 Total ---------------------------------------------------------------------------- $673,837.02 WESTERN AIR EXPRESS CORPORATION AND SUBSIDIARY CONSOLIDATED PROFIT AND LOSS ACCOUNT For the Year ended December 31, 1935 Gross Revenue: Mail ........ .................................................................................... . Passenger ................................................................................... . Express and Freight ................................................................... . Other Airplane Earnings ............................................................ . Sale of Parts, Supplies, Labor, etc .............................................. . Gross Revenue ............................................................. . Operating and General Expenses.............................. $495,295.20 Depreciation ................................................................ 71,108.82 Net Operating Income ............................................. . Miscellaneous Charges: Legal Expenses re old Airmail Contract ....... . Loss on Airplane Crash ..................................... . Trustee's Expense re Dividend Distributions ... . Amortization of Airport Leases and Rights ..... . Investment in Santa Fe, New Mexico Airport written off ..................................... . Interest Charges ............................................... . Sundry ................................................................ . Less Miscellaneous Income: Profit on Sale of Equipment.......... $4,644.23 Interest Earned .............................. 1,239.59 Sundry ............................................. 1,500.91 Miscellaneous Charges 13,068.16 7,650.51 4,245.66 3,300.00 1,296.88 1,885.55 4,710.99 36,157.75 7,384.73 (Net) ................................................................. . Loss ............................................................................. . OPERATING DEFICIT ACCOUNT $289,763.45 269,367.51 18,934.64 2,791.95 6,131.08 586,988.63 566,404.02 20,584.61 28,773.02 $ 8,188.41 Balance, as at December 31, 1934.................................................... $ 41,302.34 Loss for the Year ended December 31, l 935.................................... 8,188.41 49,490.75 Less Unused Reserve for Loss on Disposition of Wasp Engines provided in 1934.............................................. 5,000.00 Balance, as at December 31, 1935.................................................... $ 44,490.75 To the Board of Directors of WESTERN AIR EXPRESS CORPORATION We have made an examination of the Consolidated Balance Sheet of Western Air Express Corporation and its wholly owned subsidiary, Western Air Express, Inc., as at December 31, 1935 and of the Consolidated Profit and Loss and Operating Deficit Accounts for the year 1935. In connection therewith, we examined or tested accounting records of the Companies and other support-- ing evidence and obtained information and explanations from officers and employees of the Companies; we also made a general review of the accounting methods and of the operating and income accounts for the year, but we did not make a detailed audit of the transactions. In our opinion, based upon such examination, the accompany-- ing Consolidated Balance Sheet and related Profit and Loss and Operating Deficit Accounts fairly present, in accordance with ac-- cepted principles of accounting consistently maintained by the Companies during the year under review, their consolidated posi-- tion at December 31. 1935, and the results of their operations for the year. Los Angeles, California, February 20, 1936. PEAT., MARWICK, MITCHELL & Co.