C"T1 2.0 »» < III ;oz (1)- CIlZ ... (1) III ... ""C ;:;:O:l ~» ' • TOTAL REVENUE COMMON CARRIAGE IN MILLIONS _15 PASSENGER REVENUE _ 10 11,067,061 IN MILLIONS _ 10 _ 15 16,888,114 _ 15 11.3 11,311,549 _ 10 10,584,541 9,974,690 9,013,355 9,113,571 _10 7,960,045 8,697,980 6.1 6,150,137 5.3 5,626,476 4.0 5 _ 5 3.7 3.5 - 1.9 1.6 1.5 1.5 1.0 57 5958 60 61 61 63 64 6665 67 57 58 59 60 61 61 63 64 65 66 67 PASSENGER PERCENT OF SUBSIDY 303 ORIGINATIONS _ 15 191 TO TOTAL REVENUE _ 30% IN THOUSANDS 108,010 _ 15% _ 10 13.9 11.5 11.5 21.4 11.3 19.1 _ 20% _ 15 17.7 117,500 _ 15% 108,160 95,940 _ 10 104 75,357 77,103 _ 20% 63,383 5l,l93 6.3 48,739 - 5 37,318 41,838 - 5% 57 58 59 60 61 61 63 64 65 66 67 57 58 59 60 61 61 63 64 65 66 67 PASSENGER TON MILES -LOAD FACTOR _ 60% INMILLlONS _ 30 18,166,795 _ 15 _ 50% _ 10 _ 40% 13,313,188 13,634,059 _ 15 13,180,816 8,961,615 _ 30% 8,073,736 8,576,596 _10 6,609,437 6 5,011,957 5,135,338 ,154,177 _ 10% _ 5 57 58 59 60 61 6361 64 6665 67 57 58 59 60 61 61 63 64 6665 67 To Our Shareholders: The year 1967 in many respects was the most reduction in the fare reduced your Company's important in the 35 year history of Alaska revenues by approximately $1,200,000 during Airlines, Inc. Stockholder approval was 1967. Management is employing all possible granted for the mergers of Alaska Airlines, remedies to have the fare restored to its Inc., Cordova Airlines, Inc. and Alaska former level. Another item effecting revenues Coastal Airlines, Inc. The President of The during the past year was a $400,000 reduc United States approved the mergers and they tion in federal subsidy. To offset these became effective on February 1 and April 1, reductions the Company has initiated drastic 1968 thus Alaska Airlines for the first time in austerity programs to reduce operating costs. its history became an international airline. Recently the Civil Aeronautics Board issued The integration of the airline systems has an order establishing a permanent subsidy been completed and elsewhere in this report rate for the merged company. The order pro are listed the Officers and Directors of the vides for the payment of the following merged company. amounts, 1968-$3,166,347, 1969-$2,754,195, The Company's new route structure not 1970-$2,354,195, 1971-$2,154,195. only serves 94% of the population of Alaska, Route applications for additional serJices it also transverses the most spectacular coun have been filed with the Civil Aeronautics try in the world. We therefore anticipate a Board. These applications cover routes be sizeable increase in tourist traffic this summer tween: (a) Anchorage, Alaska and Honolulu, and through the coming years. In this con Hawaii; (b) Seattle, Washington, Portland, nection, for the first time the Company is Oregon and Honolulu and other terminal able to offer the tourist an international points in Hawaii; (c) Nome, Alaska and flavor by sightseeing in Prince Rupert, Provodenia, Siberia, U.S.S.R.; (d) Seattle, British Columbia and Dawson, Yukon Territory. An inter Washington and Irkutsk, Siberia, U.S.S.R. via the inter esting aspect this year will be the inauguration of "Flight mediate points Anchorage and Nome, Alaska; (e) Seattle, seeing Tours." These tours will be conducted by air and Washington and Chicago, Illinois via the intermediate enable the tourist to see and take pictures of glaciers and points Great Falls, Montana, East Glacier Park, Montana other interesting scenery which are otherwise inaccessible. and Minneapolis, St. Paul; (f) Anchorage, Alaska and the In order to more fully develop the tourist industry, in the co-terminal points Chicago and Minneapolis, St. Paul via newly acquired areas, the Company may have to purchase the intermediate point Juneau, Alaska; (g) the co-terminal or acquire an interest in hotels and resorts to assure aceom points San Francisco and Los Angeles and the co-terminal modationsas was previously done in thearctic and atAlyeska. points Anchorage and Fairbanks; (h) Seattle, Washington The financial data contained within this report combines and the co-terminal points San Francisco and Los Angeles, the results of the three corporations. Alaska Airlines' portion and a number of other points in California; Oakland, Holly of the passenger revenue in 1967 amounted to $11,288,449 wood, Burbank, Orange County Airport (serving Santa Ana), which was almost double the $6,099,387 passenger revenue Dougherty Field, (serving Long Beach) Ontario, and San achieved in 1966. Similarly the Company's portion of freight Jose. In addition, the Company has applied to the Civil revenue almost doubled, which revenue amounted to Aeronautics Board to add Ketchikan and Juneau, Alaska, $1,211,396 in 1967 compared to $687,934 in 1966. as intermediate points, and make the present temporary As a result of the merger, the Company's fleet of aircraft point Sitka, Alaska, permanent points of the route between increased by 25 aircraft, consisting of 3 Convail: 240's, 18 Seattle, Washington and Anchorage, Alaska. twin engine amphibious aircraft and 4 smaller seaplanes. Further growth of your Company during the current year Five aircraft which were surplus to the Company's needs has been assured. For most of 1967 management's efforts have been sold. In line with the policy of standardizing on one were divided between operating our own expanding ,.;irline aircraft type, the Company took delivery ofthe third Boeing and affecting the merger of two (2) other airlines. The tmn 727-90C on March 7, 1968. The third 727 replaced a Convair sition is now complete. Sales and marketing efforts h:->..'e Deen 990 which had been sold in December 1967. undertaken to promote the new areas. Whereas the Compa~y Certain conditions required by the Sales Contract were enplaned almost a quarter of a million passengers last year not accomplished by December 31, 1967, therefore the the prediction for 1968 is over a half million passenger capital gain from the sale of the CV990 will not be recorded boardings. These gains coupled with operating improve until 1968. The CV990 is presently leased to a South ments already instituted indicate that the Company's for American, scheduled airline. When the sale is complete the ward view is optimistic. purchaser, a United States holding company, will in turn lease the aircraft to the same South American airline. ~ £//k//~~} The primary reason for the decline in net profit in 1967 ./ was an uneconomic passenger fare cut which was instituted by a competitor on the Seattle-Anchorage route. Your Com Charles F. Willis, Jr. pany and another airline vigorously protested the reduction President and General Manager as the fare was uneconomical. The approximate 25 per cent April 19, 1965 Alaska Airlines' new route structure, shown in two maps below, provides service to 94% of the population of Alaska plus Prince Rupert, British Columbia and Dawson, .Yukon Territory. The Nenana, an historic Alaska riverboat, is now a part of the popular Alaska Airlines Tour Program. The vessel reflects the color and excitement of its nostalgic past. Growth: Facilities, Equipment and Routes A band reception welcomed this Alaska Airlines Golden Nugget Jet in Sitka at the completion of the inaugur"l flight to the city's nelPly expanded airport Jet: facilities. Alaska Airlines' "Gay 'Nineties Gold Rush" theme has been carried throughout the advertising and merchandising programs to the architectural design of the ticket offices. Merle K. Smith, right, President of Cordova Airlines, and S. B. Simmons, center, President of Alaska Coastal Airlines, discuss with President Charles Willis the future of the two mergers with Alaska Airlines. The Boeing 727 shown in model size, will also play key roles in this promising future. The blending of Catalina seaplane and 727 jet service, accomplished by the merger, brings added versatility and service to Alaska Airlines in Southeast Alaska. The completion of the new hangar at Seattle/Tacoma International Airport, on May 1, 1967, put the Alaska Airlines family under one roof and facilitated communication within the Company. Page Four Page Five Advertising and promotional emphasis during 1967, including the Alaska Centennial campaign, continued with the "Gay .Vineties Gold Rush" corporate theme, which JET TO was introduced in 1966. Alaslr. A irlines undertook a unique and highly successful editorial ~--:.:-. ,-.- -~~ -- 1967 Sales Promotion Highlights news release program. ~\1:--' Newspapers throughout the nation and Canada with RLl:?/1,!5.q In 1967, Alaska Airlines developed and praduced combined circulation totaling ~._., .. "....._.".. the travel show, "It's Alaska," a stage and screen oC'er 5,000,000, accepted and production featuring Alaskan Eskimo and Indian printed Alaska Airlines' Color Editorial Page ... a page dancers, Broadway-type performers and musicians, ~l1. and a spectacular travel film of Alaska narrated of editorial copy and by Burl lvI's. Original music for the show was beautiful color pictures of ~ Alaska with special emphasis composed by Elizabeth (Mrs" Charles F.) Willis and SITKA - arranged by Harry Simeone. "It's Alaska," an on those cities in Alaska hour and forty-five minutes of delightful family served by Alaska Airlines. entertainment, promoted travel to Alaska . .. on Alaska Airlines. Also during 1967, Alaska Airlines "Introduced Sitka" to the world. Sitka, because of its new runway, became a new destination for Alaska Airlines Golden Nugget Fan Jet service, and the new "Gateway to Southeast Alaska." The promotional theme was "Stop over in Sitka on your way to the Alaskan Centennial celebrations and see where it all began." Sitka is the historical site of the official ceremonies that made A laska part of the United States in 1867. Russia sold Alaska for $7,200,000. t MUSH ... (,. .. 1 X~l~~,-~:I THIS WINTER ~='!.';:~:::=":;:E ¥.S"~:i:~gif':~ . E"I~§£=':= ::-";''''::':'.:::'::'::::'::-:'- . Alaska Airlines' award-winning "Jet Van" began its nation-wide tours in 1967. The "Jet Van" is a large, van-type truck containing a portion of the interior mock-up of an Alaska Airlines 727 Golden Nugget Fan Jet. Making appearances at travel agencies, airline offices, and travel shows, Alaska Airlines sales personnel Alaska Airlines' movie, "Let's Go Each year, and "specially in 19.67, and stewardesses show the "Gay Nineties To Alaska," is the newest and most A laska A irlines placed heavy Gold Rush" jet decor, serue the spectacular Alaskan travel film. emphasis on promotion of its two-day "passengers" coffee and refreshments in the It takes the audience on a "tour" of "Arctic Adventure" tours to Nome same manner as they would he served Alaska showing the scenic grandeur, and Kotzebue. Also, late in 1967, in an actual flight, and then present a film history, culture, and people of Alaska Airlines developed a new and short talk on Alaska. The "Jet Van" Alaska. Burl lvI's' narration Arctic Winter Tour program which won the 1967 National Association of reflects his true love for the has proved that the Alaska tourist Travel Organizations' (NATO) award for "Great Land." seaSOn can be extended outstanding airline promotions. year 'round. \ :" Statement of Operations Year Ended December 31, 1967 1966 Operating revenues: Transportation: Passengers, freight and express. $22,753,741 $17,222,252 Mail service pay-Note B 1,153,071 944,824 Federal subsidy-Note B 3,567,145 3,938,479 27,473,957 22,105,555 Service and other incidental revenue 286,216 302,954 27,760,173 22,408,509 Operating expenses: Flying operations 9,574,450 6,692,791 Maintenance and repairs 6,068,813 5,139,729 Aircraft and traffic servicing. 4,187,133 2,953,419 Passenger service 1,560,771 922,250 Selling and advertising 2,421,952 1,390,563 General and administrative 2,986,388 2,755,583 Depreciation and amortization 1,461,491 1,225,099 28,260,998 21,079,434 OPERATING INCOME (LOSS) ( 500,825) 1,329,075 Other expenses (income) - net: Interest. 782,407 537,678 Amortization of financing expense 17,030 42,618 Net loss (gain) from disposition of equipment. 89,803) 72,713 Miscellaneous expense (income) -net 78,753) 45,624 630,881 698,633 INCOME (LOSS) BEFORE INCOME TAXES (1,131,706) 630,442 Income taxes and provisions in lieu thereof: Provision for federal and state income taxes of an acquired business 12,600 129,875 Provision in lieu of federal and state income taxes 161,000 12,600 290,875 Less investment credit 12,600 170,013 120,862 NET INCOME (LOSS) $ (1,131,706) $ 509,580 Net income (loss) per share: Based on average shares outstanding after giving effect to the mergers-Note A $ (.72) $.35 Based on average shares outstanding after giving effect to the mergers and to pro forma adjustments which assume the conversion of debentures (.45) .37 See notes to financial statements. Alaska Airlines Balance Sheet December 31, December 31, December 31, December 31, 1967 1966 1967 1966 Assets Liabilities CURRENT ASSETS-Note C CURRENT LIABILITIES Cash (including time deposits of $2,000,000 in 1967 and $550,000 in 1966) $ 2,979,852 $ 1,569,406 Notes payable-Note C $ 246,251 $ 565,501 Accounts receivable: Accounts payable . 4,492,390 3,640,015 Airline traffic and other receivables 2,738,749 2,138,295 Salaries, wages, payroll taxes, and amounts withheld from payroll. 1,231,643 998,432 Less allowance for doubtful accounts . 78,011 56,877 Accrued interest 103,607 80,858 2,660,738 2,081,418 Accrued contribution to retirement plans 617,983 556,944 United States Government. 1,154,154 1,589,893 Other accrued expenses 511,266 406,724 3,814,892 3,671,311 Unearned transportation re\·enue 134,046 166,377 Expendable parts and supplies-principally at average cost, less allowances Payments due within one year on long-term debt-Note C 1,945,653 1,047,867 (1967-$41,436; 1966-$17,436) for obsolescence ...... 400,305 385,151 Federal and state income taxes. 114,049 Prepaid rentals, insurance and other expenses. 728,302 688,143 ---- TOTAL CURRENT LIABILITIES 9,282,839 7,576,767 Deposits (including approximately $1,384,000 in 1967 0f equipment purchase deposits to be refunded-Notes E and J). ... 1,403,350 139,677 LONG-TERM DEBT-less payments d'.le within one year, TOTAL CURRENT ASSETS 9,326,701 6,453,688 classified as current liability--Note C 13,719,375 9,409,826 OTHER ASSETS Funds and deposits for purchase and lease of propeny and RESERVES equipment-Note E 1,121,815 4,125,248 For overhaul of leased jet airframes 233,991 Other deposits and miscellaneous assets 238,778 244,399 For self insurance . 59,031 53,923 1,360,593 4,369,647 293,022 53,923 PROPERTY AND EQUIPMENT-on the basis of cost CAPITAL STOCK AND SURPLUS-Note A Flight equipment . 14,404,352 7,495,291 Common Stock, par value $1 a share-Note C Other property and equipment 4,997,970 4,353,942 Authorized 3,000,000 shares 19,402,322 11,849,233 Issued: 1967-1,710,980 shares; 1966-1,501,784 shares 1,710,980 1,501,784 Less allowances for depreciation and amortization 5,257,006 4,389,131 Less 26 shares in treasury 26 26 14,145,316 7,460,102 Nonoperating equipment and parts, at cost, less allowances 1,710,954 1,501,758 (1967-$297,302; 1966-$342,085) for depreciation and obsolescence. 200,775 329,071 Capital surplus-Notes A, E and I 3,614,065 2,081,080 14,346,091 7,789,173 Earned surplus (deficit) which for 1967 includes $1,187,834 deficit DEFERRED CHARGES since December 31, 1966-Notes A and I (1,112,005) 75,829 Preoperating and route modification costs 1,019,844 991,500 4,213,014 3,658,667 Financing expenses 480,677 412,928 Expenses attributable to lease of equipment 583,740 431,256 Other 390,603 250,990 2,474,864 2,086,674 CERTIFICATED ROUTES 1 1 $27,508,250 $20,699,183 $27,508,250 $20,699,183 See notes to financial statements. Page Eight Page Nine Statements of Surplus Year Ended December 31, 1967 1966 CAPITAL SURPLUS-Note A Balance at beginning of year $ 2,081,080 $ 858,081 Amount of common stock and capital surplus of companies acquired in pooling of interests transactions over par value of the Company's Common Stock 481,843 Excess of principal amount of debentures converted over par value of Common Stock issued therefore (1967-209,196 shares; 1966-503,786 shares), less unamortized debenture expense and other expenses applicable to conversions (1967-$140,819; 1966-$411,078)-Note C. 1,532,985 2,362,136 Amount attributable to stock options granted to lessors 153,000 3,614,065 3,855,060 Transfer to earned-surplus deficit at December 31, 1966, as a result of quasi-reorganization-Note I (1,773,980) BALANCE AT END OF YEAR $ 3,614,065 $ 2,081,080 EARNED-SURPLUS DEFICIT-Note A Balance (deficit) at beginning of year $ 75,829 $ (2,337,580) Balances of companies acquired in pooling of interests transactions 353,781 75,829 (1,983,799) Net income (loss) (1,131,706) 509,580 (1,055,877) (1,474,219) Elimination of earned-surplus deficit at December 31, 1966 as a result of quasi-reorganization-Note I 1,773,980 Dividends declared by pooled business prior to acquisition: Cash dividends 56,128) ( 62,276) Stock dividend. ( 161,656) BALANCE (DEFICIT) AT END OF YEAR $ (1,112,005) $ 75,829 See notes to financial statements. Page Ten Notes to Financial Statements December 31, 1967 In response to this petition the Civil Aero monthly installments totalling nautics Board awarded the Company temporary $30,944annually,includinginterest. In March 1967, the Company entered into increased subsidy of $220,000 for 1964. Effective Additional principal payments are merger agreement.s with Cordova Airlines, Inc. July 1, 1966 the Civil Aeronautics Board reduced required in the amount of 35% of and Alaska Coastal Airlines, Inc., which are local the Company's temporary subsidy from an annual the net annual income, as defined, air carriers primarily within the State of Alaska. level of approximately $2,000,000 to an annual from certain operations of the Following consent by the Civil Aeronautics Board, level of not to exceed $1,383,184. The final rate, Company in Nome, Alaska. The stockholders, and certain creditors, Cordova and when determined, will be retroactive to January note is collateralized by a first Alaska Coastal were merged into the Company. 7, 1964, and may be lower than temporary sub mortgage on the Nugget Inn prop effective February 1, 1968 and April 1, 1968, sidy amounts received in each of the years 1964 erties in Nome, Alaska and by respectively. Pursuant to the merger agreements, through 1966. personal guarantee of an officer the Company issued 62,000 shares of its Common In April 1968 the Civil Aeronautics Board shareholder 186,622 issued an order fixing final future rates which will Stock in exchange for all of the Common Stock of 8% note to bank, payable $6,000 or Cordova and 261,784 Rhares of its Common Stock provide the Company with an annual subsidy of approximately $3,150,000 for 1968, $2,750,000 more monthly, including interest, in exchang"e for all of the Common Stock of Alaska with balance in full On or before Coastal. The Company also executed employment for 1969, $2,350,000 for 1970, and $2,150,000 thereafter. July 30, 1970, collateralized by contracts with certain officers of Cordova and mortgages on certain flight equip Alaska Coastal (see Note E). As required by the ment 383,035 Civil Aeronautics Board, the aforementioned acquisitions have been accounted for as pooling 6l1% note to supplier, payable of interest transactions and accordingly the A summary of notes payable at December 31, $5,000 monthly including intel'est, accounts of Cordova and Alaska Coastal have 1967 which arc clas£ified as current liabilities is as collateralized by mortgage on been included in the financial stat.ements for 1967 follows: Convair 240 aircraft, engines and propellers and the 1966 statements have been restated on a Notes payable to bank, collateralized 211,308 comparable basis. Considering that the primary by prepaid insurance premiums 5},1% note to bank, principal pay reason for the mergers was the acquisition and approximating $223,000. $ 145,500 able $7,500 quarterly, collatera resulting extension of the Company's routes 5% note to supplier, collateralized lized by a mortgage on Juneau within Alaska, management intends to pursue the land, hangar and other facilities 267,500 question of whether the purchase basis of account by mortgages, some of which are ing should be used rather than the pooling of subject to prior liens, on certain 6l1% note to bank, principal pay interest basis. flight and ground equipment, pay- able $35,000 quarterly, collatera In 1966, the Company, in accordance with able in monthly installments of lized by mortgages on aircraft 635,000 $13,890 through March 1968. 41,630 generally accepted accounting principles, recorded 6% notes to former preferred stock additional deferred financinl( expense of $926,955 Miscellaneous title retention pur holders of Alaska Coastal Airlines, with a corresponding credit to capital surplus. chase contracts for equipment, Inc., due on or before June 1, 1973, Such amount was measured as the value of the payable monthly, and other miscel collateralized by a first mortgage convertible feature of the 6720/(1 convertible de laneous notes 59,121 on real property 173,443 bentures issued in 1966 and due November 1, 1986 (see Note C). In 1968, the Company was directed $ 246,251 Miscellaneous title-retention pur by the Civil Aeronautics Board to terminate the chase contract for land, payable use of the aforementioned accounting policy and Long-term debt at December 31, 1967 is sum monthly, and other notes .... 54,767 to retroactively adjust its accounts by eliminating marized as follows: such deferred financing expense and its effect on 10,353,922 other accounts. Accordingly, the accompanying Collateralized: Non-interest bearing obligation to a 1966 financial statements have been restated. 'I he Notes to bank, collateralized by broker, payable $11,250 quarterly effect on operations for 1966 and 1967 was not mortgages on two Lockheed 382B through May 1970 112,500 material. In addition, capital surplus and deferred Hercules aircraft, related engines financinl{ expenses were each reduced by $026,955. and spare parts, and 90% guaran Amount due employees' retirement The Company has further restated its previ teed by the U.S. Department of trust, payable in each of the years ously reported balance sheet as of December 31, Transportation: 1972, 1977, and 1982 in amounts 1966 to reflect, as a noncurrent asset, earmarked ranging from $27,000 to $33,000 87,606 funds totalling $1,908,887 which previously were 5 %'7c, principal payable $33,750 classified and reported as a current asset. Such monthly through March 1973 $ 2,122,074 10,554,028 funds were part of the proceeds from the sale in 6 %%, principal payable $32,200 1966 of convertible debentures in the principal monthly through March 1974 2,413,034 Less payments on long-term debt due amount of $4,500,000 and were required for the within one year, classified as cur 7% revolving credit loan, due July rent liability 1,945,653 completion of the acquisition program set forth 15, 1969, collateralized by assign- in the debenture offering. ment of accounts receivable (ex- 8,608,375 cepting approximately $498,000) and cash of $23,570. 500,000 Convertible Subordinated Debentures: The Company (including the merged airlines), Equipment purchase notes payable as a certificated air carrier, is entitled to receive 6l1%, due November 1, 1986 (semi $9,720 monthly through 1970, col- annual sinking fund payments from its certificated route operations its break lateralized by mortgages on ground amounting to $225,000, less credits even need plus a reasonable return on its invest equipJnent and also by personal ment (excluding nonoperating property) after for the amount of debentures con guarantee (to the extent of verted, are required beginning May income taxes. The amount is established by the $191,000) of an officer-shareholder 332,271 Civil Aeronautics Board andpaid to t.he Company 1977) 2,611,000 in the form of mail pay and subsidy. The Com 6% aircraft purchase note collaLera- 6 Ys%, due December 1,1987 (semi pany operated under a final mail rate and subsidy lized by a mortgage on the Convair annual sinking fund payments order issued on October 12, 1960 by the Civil 990 aircraft and spare engines, prin- amounting to $125,000, less credits Aeronautics Board until January 7, 1964. On cipal payable $170,826 quarterly for the amount of debentures con that date the Company filed a petition challeng through May 1972 3,074,868 verted, are required beginning ing the adequacy of the 1960 rate, and requested 8% note io a bank participating June 1978) 2,500,000 that a new rate be fixed, retroactive to January 7, with the Small Business Admini- 1964. stration, due May 1976, payable in LONG-TERM DEBT $13,719,375 Pal!e Eleven Certain current assets and substantially all of len years sLarting with delivery in March 1968 the Company's property and equipment are at an annual rental of approximately $720,000. mortgaged, or otherwise encumbered, as collateral The Company has an option to exlend t.he lease As permilled by F '.' '. to notes and contracts payable as shown in the for an addit.ional two years at an annual rental of l~xecuLve Comrnii..tee - ,.' preceding summary. $300,000 during the extended term. In connection 3. quasi-reorganization oi . Ll The 5 %% note and the 6 %% note to a bank with the assignment and lease, one-half of the lion of a resolution provin, are subject to the terms ofloan agreements which, $1,580,000 purchase deposit, previously made, :apital surplus be applied b) among other things, restrict the payment of was reimbursed to the Company in 1967 and t.he 3Ul'plus deficit of $1,773,980 dividends and limit the acquisition of property remainder was either applied to the first semi and equipment. The 5% note payable to a supplier annual rental period or was reimbursed to the is subject to a loan agreement which provides, Company in 1968. among other things, that cash dividends shall not In December 19f. ..J.lY exe· be paid. The 7 % bank revolving credit loan agree Rentals: noninterest bearing Lv. _ ...... lo 00 sell, subject to ment provides that working capital (as defined) certain conditions, its Convair 990 aircraft for a shall be maintained. Annual renLals for the year ended December lotal price of $5,700,000 payable in semimonthly Convertible Subordinated Debentures issued 31, 1968 under current lease agreements for facili installments of $59,270. For reasons beyond the by the Company in 1966 and 1967, as summarized ties and equipment, including those described control of the Company, a required approval from below, are unsecured and subordinated to all under aircraft leases, are estimat.ed in t.he amount the aircraft mortgage holder could not be ob senior indebtedness as defined in the indenture, of $3,000,000. tained and consequently a lease of the aircraft and are convertible, except as provided in case of was then entered into in March 1968 with the redemption, into Common Stock of the Company. Employment Contract.s: user, which the Company considers an interim Among other covenants the indentures provide Ten corporate officers are employed under the step to accomplish the sale. The Company for certain adjustments in the conversion price lerms of contracts, most. of which expire in 1972, expects to remove the need for the aforementioned and impose limitations on the payment of calli~g for annual salaries totalling $240,000. approval and therefore intends to consummate the dividends. sale in 1968 with a resullant gain of approximately Face Conversion $1,000,000. Description Amount Hate On March I, 1968 the Company c".,celled, The Company is defendant in certain lawsuits without penalty, its agreements to purchase one 6 Yz% Convertible Sub and claims arising in t.he usual course of business, Boeing 747 aircraft and spare engines. Purch;'!.;:' ordinated Debentures, from which adverse decisions in material amounts deposit.s, approximating $594,000 at Dpf...... due November I, 1986 $4,500,000 $9 a share are not expecled. ' 31, 1967, were refunded to the (:0'''''' 6 Ys% Convertible Sub- current with the cancellations. ordinated Debentures, ( ) '1 1 ( due December I, 1987 $2,500,000 $11 a share In evaluat.ing the future utilization of the Lock At December 31, 1967, $1,889,000 of the 6 Yz% heed 382B Hercules aircraft, the Company, debentures had been converted into Common effective January I, 1967, revised its estimate of Stock. thei.t useful lives from seven to t.en years, and increased the period over which pl'eoperating costs are being amortized from three t.o five years. The effect of this change was to decrease deprecia The Company has retirement plans covering tion and amort.ization expense for the year by substantially all of its employees. The retirement approximately $224,000. expense provided for the year ended Decembel' 31, 1967 was approximately $359,000, includinl( provisions for past-service costs. Unrecorded past-service costs as of December 31,1967 approx Authorized but unissued shares of Common imate $523,000, of which $398,000 will be charged Stock reserved for stock options and conversion ERNST & ERNST to income over a remaining period of approxi privileges were as follows at December 31, 1967: mately fifteen years, and the balance, applicable to employees of one of the merged airlines, will be Stock Option Plan for salaried officers charged to income in future years as such amounts and employees-$10.625 a share are paid in accordance with terms of the retire (see below) . 50,000 ment insurance contracts. Stock options included in aircraft lease a"arrdlnqly lnclud~t practleac.le to confirn' a",Ounts due h"'" certain l!~ited and a security depositofapproximately $1,122,000. Tot.al Shares Reserved, 617,384 Statu G(>vtrMe~t agend.,. by c""",un!eatlon ..\th the",. b Paae Twelve 111111111\ \\1111111111111111111111111111111111\1\ \\1111 11\ III III 3 9352 04359364 9 Board of Directors Executive Staff As of April 1, 1968 As of April 1, 1968 CHARLES F. WILLIS, JR. JOHN E. AMBERG President and General Manager President, John E. Amberg Co., L. PRESTON BLATTER Distributor Household Appliances, Seattle, Executive Vice President, Washington Administration and Treasurer ROBERT B. ATWOOD LERoy H. PETERSON Editor and Publisher, Anchorage Times, Executive Vice President, Anchorage, Alaska Operations and Maintenance O.F.BENECKE O. F. BENECKE Vice President, Properties, Alaska Airlines, Vice President, Properties Inc., Seattle, Washington G. A. BODDING L. PRESTON BLATTER Vice President, Operations (Ketchikan Executive Vice President, Administration Region) and Treasurer, Alaska Airlines, Inc., ROBERT GIERSDORF Seattle, Washington Vice President, Traffic and Sales WILLIAM M. BURKE HUNT GRUENING President, Burke and Thomas, Inc., Vice President, Operations (S.E. Alaska) Seattle, Washington S. B. SIMMONS VERNON D. FORBES Vice President and General Manager President and Chairman of the Board, (S.E. Alaska) Mt. McKinley Mutual Savings Bank, MERLE K. SMITH Fairbanks, Alaska Vice President FRANCOIS DE GUNZBURG HENRY W. BIERDS Officer and Director of several Seagram Co. Secretary subsidiaries in Paris, France JOHN BILLINGS BRUCE F. HARRIS Assistant Vice President, Cargo and President, Sanford-Harris Lumber Company, Charter Sales Inc., Pittsburgh, Pa. ROBERT V. DODD LAURENCE W. LEVINE Assistant Vice President, Operations and Partner in law firm of Walsh and Levine, Maintenance (Alaska) New York, New York FRANK S. FEEMAN, JR. RICHARD MAASS Assistant Vice President, Agency and Partner, Reredel Associates, White Plains, Interline Sales New York (Investment Partnership) RICHARD H. GARVIN HENRY MARGOLIS Assistant Vice President, Sales (Anchorage) Chairman, Board of Directors, Aero-Flow WAYNE JENSEN Dynamics, Inc. Assistant Vice President, Traffic ROBERT J. MCNEALY DENNIS KELLEY Partner in law firm of Pollock, Josephson Assistant Vice President, Ground Operations and McNealy, Anchorage, Alaska KENNETH SMITH MERLE K. SMITH Assistant Vice President, General Sales Vice President, Alaska Airlines, Inc., Manager Anchorage, Alaska WILLIAM V. CHEEK S. B. SIMMONS Assistant Secretary and General Counsel Vice President and General Manager EDWARD A. WEBER (S.E. Alaska) Assistant Treasurer JAMES S. RUSSELL Admiral, U.S.N. (Ret.) JOSEPH WALKER, JR. Vice President and Director, Walker, Hart and Company, Investment Bankers, New York, New York Principal place of transacting business, CHARLES F. WILLIS, JR. Fairbanks, Alaska. President and General Manager, General offices, Seattle-Tacoma Alaska Airlines, Inc., Seattle, Washington International Airport, Seattle, Washington 98158. Washington counsel, Shanley and Fisher, Washington, D.C. Listing of securities, American Stock Exchange, Pacific Coast Stock Exchange. Transfer Agent and Registrar, The Chase Manhattan Bank, New York, New York. Trustee Under Indenture (due November 1, 1986), United States Trust Company of New York. Trustee Under Indenture (due November 1, 1987), Chemical Bank New York Trust Company. t~:~~~+==------ . . RLRSKR .~~:::. 1=1 I R LI IV IE:; : NUGGET : ~------Il.:O--'~"e!l..'l'nD.-'" ____ _ • •••••JETS • L
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