Exhibit 99.3
Consolidated Balance Sheets
December 31, 2003 and 2002
ASSETS | ||||||||
(in millions) | 2003 | 2002 | ||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 2,710 | $ | 1,969 | ||||
Restricted cash | 207 | 134 | ||||||
Accounts receivable, net of an allowance for uncollectible accounts of $38 at December 31, 2003, and $33 at December 31, 2002 | 662 | 292 | ||||||
Income tax receivable | — | 319 | ||||||
Expendable parts and supplies inventories, net of an allowance for obsolescence of $183 at December 31, 2003 and 2002 | 202 | 164 | ||||||
Deferred income taxes | 293 | 251 | ||||||
Prepaid expenses and other | 476 | 356 | ||||||
Total current assets | 4,550 | 3,485 | ||||||
PROPERTY AND EQUIPMENT: | ||||||||
Flight equipment | 21,008 | 20,295 | ||||||
Accumulated depreciation | (6,497 | ) | (6,109 | ) | ||||
Flight equipment, net | 14,511 | 14,186 | ||||||
Flight and ground equipment under capital leases | 463 | 439 | ||||||
Accumulated amortization | (353 | ) | (297 | ) | ||||
Flight and ground equipment under capital leases, net | 110 | 142 | ||||||
Ground property and equipment | 4,477 | 4,270 | ||||||
Accumulated depreciation | (2,408 | ) | (2,206 | ) | ||||
Ground property and equipment, net | 2,069 | 2,064 | ||||||
Advance payments for equipment | 62 | 132 | ||||||
Total property and equipment, net | 16,752 | 16,524 | ||||||
OTHER ASSETS: | ||||||||
Investments in associated companies | 21 | 174 | ||||||
Goodwill | 2,092 | 2,092 | ||||||
Operating rights and other intangibles, net of accumulated amortization of $179 at December 31, 2003, and $172 at December 31, 2002 | 95 | 102 | ||||||
Restricted investments for Boston airport terminal project | 286 | 417 | ||||||
Other noncurrent assets | 2,143 | 1,509 | ||||||
Total other assets | 4,637 | 4,294 | ||||||
Total assets | $ | 25,939 | $ | 24,303 | ||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
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Consolidated Balance Sheets
December 31, 2003 and 2002
LIABILITIES AND SHAREOWNERS’ (DEFICIT) EQUITY | ||||||||
(in millions, except share data) | 2003 | 2002 | ||||||
CURRENT LIABILITIES: | ||||||||
Current maturities of long-term debt | $ | 1,002 | $ | 666 | ||||
Current obligations under capital leases | 19 | 27 | ||||||
Accounts payable, deferred credits and other accrued liabilities | 1,709 | 1,846 | ||||||
Air traffic liability | 1,308 | 1,270 | ||||||
Taxes payable | 498 | 445 | ||||||
Accrued salaries and related benefits | 1,285 | 1,365 | ||||||
Accrued rent | 336 | 344 | ||||||
Total current liabilities | 6,157 | 5,963 | ||||||
NONCURRENT LIABILITIES: | ||||||||
Long-term debt | 10,962 | 9,576 | ||||||
Long-term debt issued by Massachusetts Port Authority (Note 6) | 498 | 498 | ||||||
Capital leases | 78 | 100 | ||||||
Postretirement benefits | 2,253 | 2,282 | ||||||
Accrued rent | 701 | 739 | ||||||
Pension and related benefits | 4,886 | 3,242 | ||||||
Other | 204 | 93 | ||||||
Total noncurrent liabilities | 19,582 | 16,530 | ||||||
DEFERRED CREDITS: | ||||||||
Deferred gains on sale and leaseback transactions | 426 | 478 | ||||||
Deferred revenue and other credits | 158 | 175 | ||||||
Total deferred credits | 584 | 653 | ||||||
COMMITMENTS AND CONTINGENCIES (Notes 3, 4, 6, 7, 8 and 9) | ||||||||
EMPLOYEE STOCK OWNERSHIP PLAN PREFERRED STOCK: | ||||||||
Series B ESOP Convertible Preferred Stock, $1.00 par value, $72.00 stated and liquidation value; 5,839,708 shares issued and outstanding at December 31, 2003, and 6,065,489 shares issued and outstanding at December 31, 2002 | 420 | 437 | ||||||
Unearned compensation under employee stock ownership plan | (145 | ) | (173 | ) | ||||
Total Employee Stock Ownership Plan Preferred Stock | 275 | 264 | ||||||
SHAREOWNERS’ (DEFICIT) EQUITY: | ||||||||
Common stock, $1.50 par value; $450,000,000 authorized; 180,915,087 shares issued at December 31, 2003, and 180,903,373 shares issued at December 31, 2002 | 271 | 271 | ||||||
Additional paid-in capital | 3,272 | 3,263 | ||||||
Retained earnings | 844 | 1,639 | ||||||
Accumulated other comprehensive loss | (2,338 | ) | (1,562 | ) | ||||
Treasury stock at cost, 57,370,142 shares at December 31, 2003, and 57,544,168 shares at December 31, 2002 | (2,708 | ) | (2,718 | ) | ||||
Total shareowners’ (deficit) equity | (659 | ) | 893 | |||||
Total liabilities and shareowners’ (deficit) equity | $ | 25,939 | $ | 24,303 | ||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
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Consolidated Statements of Operations
For the years ended December 31, 2003, 2002 and 2001
(in millions, except per share data) | 2003 | 2002 | 2001 | |||||||||
OPERATING REVENUES: | ||||||||||||
Passenger: | ||||||||||||
Mainline | $ | 10,393 | $ | 10,749 | $ | 11,848 | ||||||
Regional affiliates | 2,629 | 2,049 | 1,116 | |||||||||
Cargo | 467 | 458 | 506 | |||||||||
Other, net | 598 | 610 | 409 | |||||||||
Total operating revenues | 14,087 | 13,866 | 13,879 | |||||||||
OPERATING EXPENSES: | ||||||||||||
Salaries and related costs | 6,342 | 6,165 | 6,124 | |||||||||
Aircraft fuel | 1,938 | 1,683 | 1,817 | |||||||||
Depreciation and amortization | 1,230 | 1,164 | 1,283 | |||||||||
Contracted services | 886 | 1,003 | 1,016 | |||||||||
Contract carrier arrangements | 784 | 561 | — | |||||||||
Landing fees and other rents | 858 | 834 | 780 | |||||||||
Aircraft maintenance materials and outside repairs | 630 | 711 | 801 | |||||||||
Aircraft rent | 727 | 709 | 737 | |||||||||
Other selling expenses | 479 | 539 | 616 | |||||||||
Passenger commissions | 211 | 322 | 540 | |||||||||
Passenger service | 325 | 372 | 466 | |||||||||
Restructuring, asset writedowns, pension settlements and related items, net | 268 | 439 | 1,119 | |||||||||
Appropriations Act reimbursements | (398 | ) | — | — | ||||||||
Stabilization Act compensation | — | (34 | ) | (634 | ) | |||||||
Other | 592 | 707 | 816 | |||||||||
Total operating expenses | 14,872 | 15,175 | 15,481 | |||||||||
OPERATING LOSS | (785 | ) | (1,309 | ) | (1,602 | ) | ||||||
OTHER INCOME (EXPENSE): | ||||||||||||
Interest expense | (757 | ) | (665 | ) | (499 | ) | ||||||
Interest income | 36 | 36 | 89 | |||||||||
Gain (loss) from sale of investments, net | 321 | (3 | ) | 127 | ||||||||
Gain (loss) on extinguishment of debt, net | — | (42 | ) | — | ||||||||
Fair value adjustments of SFAS 133 derivatives | (9 | ) | (39 | ) | 68 | |||||||
Miscellaneous income (expense), net | 5 | 20 | (47 | ) | ||||||||
Total other income (expense) | (404 | ) | (693 | ) | (262 | ) | ||||||
LOSS BEFORE INCOME TAXES | (1,189 | ) | (2,002 | ) | (1,864 | ) | ||||||
INCOME TAX BENEFIT | 416 | 730 | 648 | |||||||||
NET LOSS | (773 | ) | (1,272 | ) | (1,216 | ) | ||||||
PREFERRED STOCK DIVIDENDS | (17 | ) | (15 | ) | (14 | ) | ||||||
NET LOSS AVAILABLE TO COMMON SHAREOWNERS | $ | (790 | ) | $ | (1,287 | ) | $ | (1,230 | ) | |||
BASIC AND DILUTED LOSS PER SHARE | $ | (6.40 | ) | $ | (10.44 | ) | $ | (9.99 | ) | |||
The accompanying notes are an integral part of these Consolidated Financial Statements.
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Consolidated Statements of Cash Flows
For the years ended December 31, 2003, 2002 and 2001
(in millions) | 2003 | 2002 | 2001 | |||||||||||||
Cash Flows From Operating Activities: | ||||||||||||||||
Net loss | $ | (773 | ) | $ | (1,272 | ) | $ | (1,216 | ) | |||||||
Adjustments to reconcile net loss to cash provided by operating activities: | ||||||||||||||||
Asset and other writedowns | 47 | 287 | 339 | |||||||||||||
Depreciation and amortization | 1,230 | 1,181 | 1,283 | |||||||||||||
Deferred income taxes | (416 | ) | (411 | ) | (648 | ) | ||||||||||
Fair value adjustments of SFAS 133 derivatives | 9 | 39 | (68 | ) | ||||||||||||
Pension, postretirement and postemployment expense in excess of payments | 532 | 177 | 419 | |||||||||||||
(Gain) loss on extinguishment of debt, net | — | 42 | — | |||||||||||||
Dividends (less than) in excess of equity income | 30 | (3 | ) | 51 | ||||||||||||
(Gain) loss from sale of investments, net | (321 | ) | 3 | (127 | ) | |||||||||||
Changes in certain current assets and liabilities: | ||||||||||||||||
Decrease (increase) in receivables | 317 | (243 | ) | 47 | ||||||||||||
Increase in current restricted cash | (73 | ) | (134 | ) | — | |||||||||||
(Increase) decrease in prepaid expenses and other current assets | (90 | ) | (35 | ) | 60 | |||||||||||
Increase (decrease) in air traffic liability | 38 | 46 | (215 | ) | ||||||||||||
(Decrease) increase in other payables, deferred credits and accrued liabilities | (276 | ) | 600 | 274 | ||||||||||||
Other, net | 199 | 8 | 37 | |||||||||||||
Net cash provided by operating activities | 453 | 285 | 236 | |||||||||||||
Cash Flows From Investing Activities: | ||||||||||||||||
Property and equipment additions: | ||||||||||||||||
Flight equipment, including advance payments | (382 | ) | (922 | ) | (2,321 | ) | ||||||||||
Ground property and equipment, including technology | (362 | ) | (364 | ) | (472 | ) | ||||||||||
Decrease (increase) in restricted investments related to the Boston airport terminal project | 131 | 58 | (485 | ) | ||||||||||||
Decrease in short-term investments, net | — | 5 | 238 | |||||||||||||
Proceeds from sales of flight equipment | 15 | 100 | 66 | |||||||||||||
Proceeds from sales of investments | 325 | 24 | 286 | |||||||||||||
Other, net | 13 | (10 | ) | (8 | ) | |||||||||||
Net cash used in investing activities | (260 | ) | (1,109 | ) | (2,696 | ) | ||||||||||
Cash Flows From Financing Activities: | ||||||||||||||||
Payments on long-term debt and capital lease obligations | (802 | ) | (1,113 | ) | (173 | ) | ||||||||||
Cash dividends | (19 | ) | (39 | ) | (40 | ) | ||||||||||
Issuance of long-term obligations | 1,774 | 2,554 | 2,335 | |||||||||||||
Issuance of long-term debt by Massachusetts Port Authority | — | — | 498 | |||||||||||||
(Payments on) proceeds from short term obligations and notes payable, net | — | (765 | ) | 701 | ||||||||||||
Make-whole payments on extinguishment of ESOP Notes | (15 | ) | (42 | ) | — | |||||||||||
Payment on termination of accounts receivable securitization | (250 | ) | — | — | ||||||||||||
Other, net | (140 | ) | (12 | ) | (15 | ) | ||||||||||
Net cash provided by financing activities | 548 | 583 | 3,306 | |||||||||||||
Net (Decrease) Increase In Cash and Cash Equivalents | 741 | (241 | ) | 846 | ||||||||||||
Cash and cash equivalents at beginning of year | 1,969 | 2,210 | 1,364 | |||||||||||||
Cash and cash equivalents at end of year | $ | 2,710 | $ | 1,969 | $ | 2,210 | ||||||||||
Supplemental disclosure of cash paid (refunded) for: | ||||||||||||||||
Interest, net of amounts capitalized | $ | 715 | $ | 569 | $ | 490 | ||||||||||
Income taxes | $ | (402 | ) | $ | (649 | ) | $ | (103 | ) | |||||||
Non-cash transactions: | ||||||||||||||||
Aircraft delivered under seller-financing | $ | 718 | $ | 705 | $ | 77 | ||||||||||
Aircraft capital leases from sale and leaseback transactions | $ | — | $ | 52 | $ | — |
The accompanying notes are an integral part of these Consolidated Financial Statements.
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Consolidated Statements of Shareowners’ (Deficit) Equity
For the years ended December 31, 2003, 2002 and 2001
Accumulated | ||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||
Common | Paid-In | Retained | Comprehensive | Treasury | ||||||||||||||||||||
(in millions, except share data) | Stock | Capital | Earnings | Income (Loss) | Stock | Total | ||||||||||||||||||
Balance at December 31, 2000 | $ | 271 | $ | 3,264 | $ | 4,176 | $ | 360 | $ | (2,728 | ) | $ | 5,343 | |||||||||||
Comprehensive loss: | ||||||||||||||||||||||||
Net loss | — | — | (1,216 | ) | — | — | (1,216 | ) | ||||||||||||||||
Other comprehensive loss | — | — | — | (335 | ) | — | (335 | ) | ||||||||||||||||
Total comprehensive loss (See Note 13) | (1,551 | ) | ||||||||||||||||||||||
Dividends on common stock ($0.10 per share) | — | — | (12 | ) | — | — | (12 | ) | ||||||||||||||||
Dividends on Series B ESOP Convertible Preferred Stock allocated shares | — | — | (14 | ) | — | — | (14 | ) | ||||||||||||||||
Issuance of 126,299 shares of common stock under dividend reinvestment and stock purchase plan and stock options ($38.10 per share(1)) | — | 5 | — | — | — | 5 | ||||||||||||||||||
Transfers and forfeitures of 105,995 shares of common from Treasury under stock incentive plan ($37.10 per share(1)) | — | (4 | ) | — | — | 4 | — | |||||||||||||||||
Other | — | 2 | (4 | ) | — | — | (2 | ) | ||||||||||||||||
Balance at December 31, 2001 | 271 | 3,267 | 2,930 | 25 | (2,724 | ) | 3,769 | |||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||
Net loss | — | — | (1,272 | ) | — | — | (1,272 | ) | ||||||||||||||||
Other comprehensive loss | — | — | — | (1,587 | ) | — | (1,587 | ) | ||||||||||||||||
Total comprehensive loss (See Note 13) | (2,859 | ) | ||||||||||||||||||||||
Dividends on common stock ($0.10 per share) | — | — | (12 | ) | — | — | (12 | ) | ||||||||||||||||
Dividends on Series B ESOP Convertible Preferred Stock allocated shares | — | — | (15 | ) | — | — | (15 | ) | ||||||||||||||||
Issuance of 13,017 shares of common stock under stock purchase plan and stock options ($15.70 per share(1)) | — | — | — | — | — | — | ||||||||||||||||||
Forfeitures of 82,878 shares of common to Treasury under stock incentive plan ($27.31 per share(1)) | — | — | — | — | (2 | ) | (2 | ) | ||||||||||||||||
Transfer of 183,400 shares of common from Treasury under stock incentive plan ($47.11 per share(1)) | — | (5 | ) | — | — | 8 | 3 | |||||||||||||||||
Other | — | 1 | 8 | — | — | 9 | ||||||||||||||||||
Balance at December 31, 2002 | 271 | 3,263 | 1,639 | (1,562 | ) | (2,718 | ) | 893 | ||||||||||||||||
Comprehensive loss: | ||||||||||||||||||||||||
Net loss | — | — | (773 | ) | — | — | (773 | ) | ||||||||||||||||
Other comprehensive loss | — | — | — | (776 | ) | — | (776 | ) | ||||||||||||||||
Total comprehensive loss (See Note 13) | (1,549 | ) | ||||||||||||||||||||||
SAB 51 gain related to Orbitz, net of tax (See Note 17) | — | 18 | — | — | — | 18 | ||||||||||||||||||
Dividends on common stock ($0.05 per share) | — | — | (5 | ) | — | — | (5 | ) | ||||||||||||||||
Dividends on Series B ESOP Convertible Preferred Stock allocated shares | — | — | (17 | ) | — | — | (17 | ) | ||||||||||||||||
Issuance of 11,715 shares of common stock under stock purchase plan ($30.64 per share(1)) | — | — | — | — | — | — | ||||||||||||||||||
Forfeitures of 44,100 shares of common to Treasury under stock incentive plan ($11.97 per share(1)) | — | — | — | — | — | — | ||||||||||||||||||
Transfer of 144,874 shares of common from Treasury under stock incentive plan and stock purchase plan ($47.22 per share(1)) | — | (6 | ) | — | — | 7 | 1 | |||||||||||||||||
Transfer of 73,252 shares of common from Treasury under ESOP ($47.20 per share(1)) | (3 | ) | — | — | 3 | — | ||||||||||||||||||
Balance at December 31, 2003 | $ | 271 | $ | 3,272 | $ | 844 | $ | (2,338 | ) | $ | (2,708 | ) | $ | (659 | ) | |||||||||
(1) | Average price per share |
The accompanying notes are an integral part of these Consolidated Financial Statements.
5