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News today from U. <<US Airways to Repurchase Stock, Retire Debt, Redeem
All Outstanding Preferred Stock
ARLINGTON, Va., Feb. 3 /PRNewswire/ -- US Airways Group, Inc. said today that its
board of directors has authorized the repurchase of up to $500 million in stock, the redemption
of the last of the company's outstanding preferred shares and the retirement of certain debt
obligations as part of a wide-ranging plan to enhance shareholder value.
''US Airways has made enormous strides in the past two years in its operational and financial
performance. With approximately $2 billion in cash on hand, we now are in a position to take
steps to underscore our focus on both shareholder value and improving our balance sheet,''
said US Airways Chairman Stephen M. Wolf.
Included in the stock repurchase and debt rationalization program are:
The repurchase from time to time in open market and privately
negotiated transactions of up to $500 million of the company's common
stock, which closed today on the New York Stock Exchange at $62.125 per
share.
The previously announced repurchase of 2.3 million shares of common
stock, to be effected from time to time in the open market or privately
negotiated transactions. This earlier program was authorized in
connection with the agreement with the Air Line Pilots Association to
issue options on 2.3 million common shares in 1998 to its members. This
repurchase program is in addition to the $500 million repurchase program
announced today.
The call for redemption of $358 million in Series H convertible
preferred stock currently held by affiliates of Berkshire Hathaway Inc [NYSE:BRKa -
news].
The stock, which is mandatorily redeemable on August 7, 1999, is
convertible into 9.24 million shares of US Airways common stock at a
conversion price of $38.74 per share. This step will save the company
$33 million in preferred dividends on an annualized basis.
Retirement of $379.2 million in debt obligations, including the
$300 million 10% Senior Notes and $79.2 million secured debt. Annual
interest expense associated with this debt is approximately $37 million.
There will be a one-time extraordinary expense of $15 million associated
with premiums paid for debt retirement.
''When this process is completed, US Airways will have reduced its debt and preferred stock
since May of 1997 by $1.35 billion and reduced its annual dividend and interest expense by
approximately $115.9 million on an annualized basis, including the effect of earlier series of
preferred stock retired during the past year,'' Wolf said.
''Warren Buffett has been a respected shareholder for a number of years -- and we are
pleased that he has received appropriate value for his patience,'' Wolf added.
Taking into account the stock repurchase and debt rationalization program, US Airways
estimates that by the end of 1998 it will have significantly more than $1 billion in cash, assuming
a full $500 million share repurchase.
Wolf and US Airways President Rakesh Gangwal are expected to outline these stock and debt
measures to the Society of Airline Analysts in New York on Wednesday morning, along with
an overview of US Airways' prospects and plans for 1998.
Among other items, they are expected to tell the analysts that capacity for 1998 is expected to
be down by about 2.4 percent while unit costs are expected to increase about 2.0 percent as
compared to 1997. They also are expected to project operating income, based on the
company's current forecast for the full year 1998, higher than that for 1997.
For the near term, they are expected to say that capacity for the first quarter will be down by 5
percent and that unit costs will be up about 3 percent to 3.5 percent, as compared to the same
quarter of 1997.
In outlining US Airways' fleet projections, they are expected to tell the analysts that the fleet at
the end of 1998 will total 384, including six new Airbus aircraft and the retirement of 10
aircraft. At the end of 1999, the fleet is projected at 391 aircraft, including 20 more new
Airbus aircraft and the retirement of 13 additional aircraft. In the year 2000, the fleet total is
projected at 411, including 32 more new Airbus aircraft and the retirement of 12 additional
aircraft.
US Airways has an agreement with Airbus for 124 firm deliveries of A319, A320 and A321
aircraft. In addition, the company has options and orders to be reconfirmed, bringing the total
order to up to 400 aircraft. US Airways also is expected to announce a decision on new
widebody aircraft for its transatlantic service in the near future. Aircraft under consideration
include the Airbus A330 and the Boeing 777. |
