W escern Air Express Corporation and Subsidiary ANNUAL REPORT 1936 - WESTERN AIR EXPRESS CORPORATION -----~ - ..... '\ OFFICERS President ,. :-- ,. ,. ... ,. ,. A:r.NIN P. ADAMS Vice..-President- Operations ...... ,. ... ALLAN A. BARRIE Vice--President- Traffic ,. ,. ,. ,. ,. ,. ,. ,. Tims. \iVoLFE Secretary and Treasurer ,. ... ,. ,. ,. L. H. DwERLKOTTE Ass't. Secretary ,. ,. ,. ,. ,. E. H. BROWN DIRECTORS ALVIN P. ADAMS ALLAN A. BARRIE w. G. BURHENN L. H. DwERLKOTTE HAROLD p. FABIAN THOS. WOLFE RALPH WAYCOTT 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 To the Stockholders: March 19, 1937. There is submitted herewith Consolidated Profit and Loss Statement of your Company for the calendar year 1936, together with a Consolidated Balance Sheet of the company and its sub- sidiary as of December 31, 1936, 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 profit of $50,697.44, after all taxes and charges, including provision for depreciation amounting to $95,638.69. The net profit is equivalent to 22.8c per share on the outstanding 222,645 shares of the capital stock of the Company. In com- parison, 1935 operations resulted in a net loss of $8,188.41, after all charges including depreciation provisions of $71,108.82. The Profit and Loss Statement, in both 1936 and 1935, reflect absorp~ tion of substantial non-recurring charges. The improved operating statement lai:gely reflects a substantial increase in passenger revenue and a careful control of operating costs. It will be noted that the passenger revenue amounted to $363,554.87, .an increase of $94,187.36 over the previous year. This is a gain of 34.97%. This was the second successive year that record revenues were derived from this source. Air mail revenue increased in 1936 a total of $40,434.86 or 13.95%. This largely reflects a full year's operation under the new rates of pay which went into effect March 1, 1935, together with authorization on March 15, 1936 by the Post Office Department for pay on our second air mail schedule on Sundays and holidays. Air express moving over the lines of your Company was the greatest in its history. Revenues from this source totaled $37,038.35, an increase of $18,103.71 or 95.61%, over the $18,934.64 in 1935. As the result of the above revenue increases, gross revenue for the Company was $740,984.00 an increase of $153,995.38 or 26.23% over the $586,988.63 reported in 1935. It is interesting to note that in spite of an increase of $153,995.38 or 26.23% in gross rev- enue, operating costs rose only $85,912.09 or 15.17%. The increase in costs largely reflects an increase of 26.38% in revenue miles flown in 1936 over 1935. It will be seen that the increase of 320,082 revenue miles flown was' performed at a total cost of $85,912.00 or 26.8c per mile. The total operating costs for the year amounted to 42.54c per revenue mile as compared with 46.76c per revenue mile during the year 1935. The following operating figures reflect the improvement in business and operations of the Company in 1936 over the previous two years: Passenger Revenue_---- Mail Revenue ... --: .. ___ ..... _ ..... . Express------------------- Other Revenue-------- GROSS REVE~E ...... ---- Operating & Gen. Exp.enses----- Depreciation_------- TOTAL OPER: EXPENSE .. Net Operating Income----- Misc. Charges and Income--- Net Income before Federal Income Tax--------- Revenue Miles Flown--------- Revenue Passengers Carried--- 1 Revenue Seat Miles----~ ---- Mail Poundage_------------ Express Poundage_------ ..... - )-Denotes Re~ Figures. 1936 $363,555 330,198 37,038 10,193 740,984 556,677 95,639 652,316 88,668 30,370 $58,298 1,533,356 20,242 . 7,473,774 506,448 475,274 1935 $269,368 289,763 18,935 8,923 586,989 495,295 71,109 566,404 20,585 28,773 (8,188) 1,213,274 13,736 4.915,129 298,287 198,389 1934 $182,777 172,007 13,789 10,636 379,209 468,444 62,349 530,793 (151,584) ( 1,926) (153,510) 974,432 7,401 3,336,738 208,197 73,158 % Gain 1936 over 1935 34.97% 13.95% 95.61% 14.23% 26.23% 12.39<'/o 34.50% 15.17% 26.38% 47.36% 52.06% 70.46% 139.57% % Gain 1935 over 1934 47.37% 68.46% 37.32% (16.10%) 54.79% 5.73% 14.05% 6.71% 24.51% 85.60% 47.30% 43.27% 171.18% In the fall of 1936 your Company contracted to purchase two Douglas sle~per type air- planes, which it is expected will be used in conjunction with the fleet of new Douglas planes recently ~cquired by United Air Lines to materially improve the service over the Los Angeles- New York mid-continent airway. It is belieyed that this new equipment, which should be in oper.ation within the next two or three months, should increase traffic and improve service materially. Respectfully yours, AL VIN P. ADAMS, President. WESTERN AIR EXPRESS CORPORATION AND SUBSIDIARY ASSETS Current Assets: CONSOLIDATED BALANCE SHEET As at December 31, 1936 LIABILITIES Current Liabilities: Cash in Banks and on Hand...................................................... $180,292.71 Accounts Receivable: q ll Accounts Payable........................................................................ $ 40,331.08 United States Post Office Department under Air Mail Contract........................................ $ 40,873.73 Insurance Claims.............................................. 29,836.17 Sundry Accounts, less Reserve of $5,098.17 .. 46,965.89 117,675.79 Total Current Assets ................................................. . 297,968.50 Inventory of Parts and Supplies, less Reserve of $4,591.88 ........... . 15,385.80 Advance Payment on Airplane Purchases ( See Note) ................... . 1,000.00 Prepaid Expenses ............................................................................... . 9,070.87 United States Government Treasury Notes ( Par Value $11,000.00) deposited with United States Post Office Department ................................................................................. . 11,127.13 Miscellaneous Stocks and Bonds ....................................................... . 1,687.42 Properties and Equipment-at Cost: Land ................................................................... . 13,256.95 Hangars, Buildings, Airplanes, Engines and Other Equipment.............................................. 303,974.62 317,231.57 Less Reserve for Depreciation............................ 189,294.23 127,937.34 Unimproved Real Estate.................................... 147,876.85 Airport Leases and Rights not used in Operations ..................................................... . 32,675.00 Other Property not used in Operations (Net) .. 7,814.77 316,303.96 Total ............................................................................ $652,543.68 I ,J Accrued Expenses ....................................................................... . Reserve for Federal Income Taxes ........................................... . Total Current Liabilities ............................................. . Capital Stock: Authorized, 500,000 Shares of $1.00 each Issued, 222,645 Shares........................................ $222,645.00 Capital Surplus............................................................ 413,887.12 636,532.12 10,035.04 7,600.00 57,966.12 Operating Deficit ....................................................... . 41,954.56 594,577.56 Contingent Liabilities: Proposed Additional Assessment of Federal Income Tax for the Tax-- able Year, 1933, including Interest $21,500.00 Total ............................................................................ $652,543.68 Notei-The Corporation has contracted to purchase three airplanes at a total cost of $236,202.26, said airp~anes to be delivered on or before April 15, 1937. WESTERN AIR EXPRESS CORPORATION AND SUBSIDIARY CONSOLIDATED PROFIT AND LOSS ACCOUNT For the Year ended December 31 , 1936 Gross Revenue: Mail ............................................................................................. . Passenger ................................................................................... . Express and Freight ................................................................... . Other Airplane Earnings ........................................................... . Sales of Parts, Supplies, etc ...................................................... . Gross Revenue ........................................................... . Operating and General Expenses.............................. $556,677.42 Depreciation ................................................................ 95,638.69 Net Operating Income ............................................... . Miscellaneous Charges: Loss and Expenses in connection with Airplane Accidents ......................................... . Amortization of Airport Leases and Rights ..... . Sundry ............................................................... . Less Miscellaneous Income ............................... . 24,832.41 3,300.00 4,315.68 32,448.09 2,077.63 Miscellaneous Charges (Net) ................................... . Net Income, before Provision for Federal Income Tax ............................................... . Provision for Federal Income Tax ................................................... . Net Income ............. - CONSOLIDATED OPERATING DEFICIT ACCOUNT $330,198.31 363,554.87 37,038.35 4,015.39 6,177.09 740,984.01 652,316.11 88,667.90 30,370.46 58,297.44 7,600.00 $ 50,697.44 Balance as at December 31, 1935...................................................... $ 44,490.75 Deduct: Net Income for the Year ended December 31, 1936.......................................... $ 50,697.44 Excessive Accrual for Legal Expenses Applicable to the Year 1935 ......................... . 7,500.00 58,197.44 Less Cash Dividend Paid- $.25 per Share........ 55,661.25 2,536.19 Balance as at December 31, 1936...................................................... $ 41,954.56 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 Subsidiary as at December 31, 1936, and of the Consolidated Profit and Loss and Operating Deficit Accounts for the year 1936. In connection therewith, we examined or tested accounting records of the Com .... panies and other supporting 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. Western Air Express, Inc . a wholly owned subsidiary, was non .... operating during the year under review and is to be dissolved subsequent to December 31. 1936. During the year under review the Company reduced the per-- centage rates used in providing for depreciation of airplane engines and certain of its airplanes, and as a result thereof the provision for depreciation for the year 1936 was $22,718.75 less than would have been the case had the rates used in previous years been applied. In our opinion, based upon such examination, and subject to the foregoing comment with reference to the change in depreciation provisions, the accompanying Consolidated Balance Sheet and related Consolidated Profit and Loss and Operating Deficit Ac .... counts fairly present, in accordance with accepted principles of accounting consistently maintained by the Companies during the year under review, their consolidated position at December 31, 1936, and the results of their operations for the year. Los Angeles, California, March 3, 1937. PEAT, MARWICK, MITCHELL & Co.