TWA - As Cramer would say, "Wrong!"
Wrong on two counts, IMO...
1) Positive cash flow?
<<Despite the quarterly losses, the Company has had significant positive cash flow the last several quarters, meaning that it has been able to meet its obligations. This is similar to the broadcasting companies that constantly have net losses but positive cash flow.>>
Wrong. Net cash flow from operations (unaudited) for the first nine months of 1998 was <$38.249 MM>. Net cash flow from operations for the last published Q (9/30/98) was also negative.
From the Q...
"The consolidated financial results on an interim basis are not necessarily indicative of future financial results on either an interim or annual basis. TWA's air transportation business has historically experienced seasonal changes with the second and third quarters of the calendar year producing substantially better operating results than the first and fourth quarters, although operational adjustments with the intent of reducing the level of seasonality have been, and continue to be, implemented. While the Company anticipates that the deseasonalization of operations affected thereby will reduce quarter to quarter fluctuations in the future, there can be no assurance that the reduction of seasonal fluctuations in financial operating results will be realized. Accordingly, the results for the three months and nine months ended September 30, 1998 should not be read as indicators of results for the full year."
<snip!>
"Due to the greater demand for air travel during the summer months, airline industry revenues for the third quarter of the year are generally significantly greater than revenues in the first and fourth quarters of the year and moderately greater than revenues in the second quarter of the year. In the past, given the Company's historical dependence on summer leisure travel, TWA's results of operations have been particularly sensitive to such seasonality. While the Company, through an acceleration of its fleet renewal program and, among other things, the restructuring of its JFK operations, anticipates that the deseasonalization of operations affected thereby will reduce quarter to quarter fluctuations in the future, there can be no assurance that the reduction of seasonal fluctuations in financial operating results will be realized."
<snip!>
"The Company's ability to continue to improve its financial position and meet its financial obligations will depend upon a variety of factors, including but not limited to: significantly improved operating results, favorable domestic and international airfare pricing environments, the cost of aircraft fuel, absence of adverse general economic conditions, more effective operating cost controls and efficiencies, the Company's ability to achieve higher revenue yields, the Company's ability to finance or lease suitable replacement aircraft at reasonable rates and the Company's ability to attract new capital and maintain adequate liquidity. No assurance can be given that the Company will be successful in generating the operating results or attracting new capital required for future viability."
<snip!>
"Liquidity
The Company's consolidated cash and cash equivalents balance at September 30, 1998 was $314.6 million, a $76.8 million increase from the December 31, 1997 balance of $237.8 million. The net increase in cash and cash equivalents during the first nine months of 1998 was due, in large part, to cash provided by financing activities of $147.5 million in 1998 versus cash used of $38.5 million in 1997. Sources of cash generated by financing activities included proceeds from the sale of notes of $144.9 million and $255.2 million from the sale and leaseback of certain aircraft and engines in the first nine months of 1998 versus proceeds of $47.2 million from notes and warrants issued and $12.0 million from the sale and leaseback of certain aircraft in 1997. These proceeds were partially offset by the repayment of long-term debt and capital lease obligations of $236.5 million in 1998 versus $92.9 million in 1997. Cash used by operating activities was $38.2 million in the first nine months of 1998 versus $21.0 million in 1997. While the net loss improved by $38.3 million in the nine months ended September 30, 1998 versus the same period in 1997, changes in operating assets and liabilities reflected a $20.2 million use of cash in the nine months ended September 30, 1998, as compared to a $32.9 million source of cash in the nine months ended September 30, 1997. During the respective periods, cash was used by an increase in receivables partially offset by a related increase in advance ticket sales and cash was generated from an increase in accounts payable and accrued expenses primarily due to the timing of payables and certain obligations."
2) Asset sales as an emergency source of cash?
<<The Company can sell of a plane or two in its vast fleet if it needed cash in an emergency.>>
Wrong again. The planes are pledged as collateral against the debt, therefore almost all cash from asset sales must generally be applied to reducing the debt first. This acts to severely constrain their options.
From the Q...
"Capital Resources
TWA generally must satisfy all of its working capital expenditure requirements from cash provided by operating activities, from external capital sources or from the sale of assets. A substantial portion of TWA's assets have been pledged to secure various issues of outstanding indebtedness of the Company. To the extent that the pledged assets are sold, the applicable financing agreements generally require the sale proceeds to be applied to repay the corresponding indebtedness. To the extent that the Company's access to capital is constrained, the Company may not be able to make certain capital expenditures or to continue to implement certain other aspects of its strategic plan, and the Company may therefore be unable to achieve the full benefits expected therefrom."
JMHO, of course.
Razor |
