FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended December 31, 1997
Commission File Number 0-11720
AIR TRANSPORTATION HOLDING COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1206400
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 488, Denver, North Carolina 28037
(Address of principal executive offices)
(704) 377-2109
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
2,650,653 Common Shares, par value of $.25 per share were outstanding as
of February 5, 1998.
<PAGE>
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Earnings
for the three and nine-month periods ended
December 31, 1997 and 1996 (Unaudited) 3
Consolidated Balance Sheets at
December 31, 1997 (Unaudited)
and March 31, 1997 4
Consolidated Statements of Cash
Flows for the nine-month periods
ended December 31, 1997 and 1996 (Unaudited) 5
Notes to Consolidated Financial
Statements (Unaudited) 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8-11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12-14
Exhibit Index 15
Exhibits 16-27
2
<PAGE>
<TABLE>
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
<CAPTION>
Three Months Ended Nine Months
Ended
December 31, December 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Operating Revenues:
Cargo $ 4,852,046 4,763,349 13,880,202 13,604,185
Maintenance 3,634,535 2,519,679 10,146,148 8,514,370
Ground equipment sales 6,367,958 - 7,920,810 -
Aircraft services and other 1,608,000 1,628,259 3,426,775 3,130,781
16,462,539 8,911,287 35,373,935 25,249,336
Operating Expenses:
Flight operations 3,498,380 3,306,428 9,876,900 9,367,683
Maintenance 4,618,683 3,993,513 12,103,188 11,132,431
Cost of ground equipment sales 4,869,276 - 6,040,056 -
General and administrative 1,931,954 1,102,440 4,328,167 3,172,792
Depreciation and amortization 162,030 95,681 384,037 317,043
Start-up & merger expense 8,766 9,000 188,521 219,000
15,089,089 8,507,062 32,920,869 24,208,949
Operating Income 1,373,450 404,225 2,453,066 1,040,387
Non-operating (Income) Expense:
Investment income (51,234) (41,769) (208,687) (161,054)
Deferred retirement obligation - - 418,000 -
Loss (gain) on asset sale & other 12,501 - 20,833 (182,359)
(38,733) (41,769) 230,146 (343,413)
Earnings Before Income Taxes 1,412,183 445,994 2,222,920 1,383,800
Provision For Income Taxes 519,667 141,414 817,267 545,370
Net Earnings $ 892,516 304,580 1,405,653 838,430
Weighted Average Shares:
Basic 2,650,653 2,611,100 2,649,246 2,620,322
Diluted 2,780,392 2,793,977 2,784,411 2,803,199
Net Earnings Per Common Share:
Basic $ 0.34 0.12 0.53 0.32
Diluted $ 0.32 0.11 0.50 0.30
<FN>
See notes to consolidated financial statements.
3
</TABLE>
<PAGE>
<TABLE>
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, 1997 March 31, 1997
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and equivalents $ 1,100,796 2,377,898
Short term investments 2,474,019 2,229,708
Accounts receivable, net 7,052,685 3,310,810
Inventory, parts and supplies 3,983,252 1,069,206
Deferred tax asset, net 424,980 344,980
Prepaid expense and other 7,853 119,828
Total Current Assets 15,043,585 9,452,430
Property and Equipment 4,190,451 3,398,636
Less accumulated depreciation (2,291,057) (1,943,020)
1,899,394 1,455,616
Intangible pension asset and other 562,606 210,365
Total Assets $ 17,505,585 11,118,411
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,465,800 809,245
Notes payable to bank 1,545,645 -
Accrued liabilities 1,854,477 1,665,046
Income taxes 420,453 389,916
Customer deposits 155,000 -
Total Current Liabilities 7,441,375 2,864,207
Deferred Retirement Obligation 718,000 -
Stockholders' Equity:
Preferred stock, $1 par value, authorized
10,000,000 shares, none issued - -
Common stock, par value $.25; authorized
4,000,000 shares; 2,650,653 and
2,651,433 shares issued 661,991 662,858
Additional paid in capital 7,078,657 7,126,294
Retained earnings 1,605,562 465,052
9,346,210 8,254,204
Total Liabilities and Stockholders' Equity $ 17,505,585 11,118,411
<FN>
See notes to consolidated financial statements.
4
</TABLE>
<PAGE>
<TABLE>
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Nine Months Ended
December 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,405,653 838,430
Adjustments to reconcile net earnings to
net cash provided by (used in) operations:
Depreciation and amortization 384,037 317,043
Change in deferred tax asset (80,000) 122,858
Change in retirement obligation 718,000 -
Gain on sale of assets - (182,359)
Charge in lieu of income taxes - 15,837
Asset and liability changes which
provided (used) cash:
Accounts receivable (4,719,768) 494,351
Parts and supplies (1,391,017) (228,000)
Prepaid expense and other (240,266) 75,008
Accounts payable 2,656,555 (300,778)
Accrued expenses 227,635 (109,532)
Income taxes payable 30,537 (21,409)
Total adjustments (2,414,287) 183,019
Net cash provided by (used in)
operating activities (1,008,634) 1,021,449
CASH FLOWS FROM INVESTING ACTIVITIES:
Business acquisition (715,981) -
Capital expenditures (540,174) (295,091)
Purchase of short term investments (960,757) (1,165,593)
Sale of short term investments 716,446 -
Proceeds from disposal of equipment - 415,000
Net cash used in investing activities (1,500,466) (1,045,684)
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable to bank 1,545,645 -
Payment of cash dividend (265,143) (218 435)
Repurchase of common stock (67,254) (508,215)
Proceeds from exercise of stock options 18,750 5,000
Net cash provided by (used in)
financing activities 1,231,998 (721,650)
NET DECREASE IN CASH & EQUIVALENTS (1,277,102) (745,885)
CASH & EQUIVALENTS AT BEGINNING OF PERIOD 2,377,898 2,213,841
CASH & EQUIVALENTS AT END OF PERIOD $ 1,100,796 1,467,956
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 3,760 491
Income/Franchise taxes 879,176 448,223
<FN>
See notes to consolidated financial statements.
5
</TABLE>
<PAGE>
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Financial Statements
The Consolidated Balance Sheet as of December 31, 1997, the Consolidated
Statements of Earnings for the three and nine-month periods ended December 31,
1997 and 1996 and the Consolidated Statements of Cash Flows for the nine-month
periods ended December 31, 1997 and 1996 have been prepared by Air
Transportation Holding Company, Inc. (the Company) without audit. In the
opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows as of December 31, 1997, and for prior periods
presented, have been made.
It is suggested that these financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended March 31, 1997. The results of
operations for the period ended December 31 are not necessarily indicative of
the operating results for the full year.
B. Acquisition
On August 29, 1997, the Company acquired the Simon Deicer Division of
Terex, Inc. for $715,000 cash. The acquisition, renamed Global Ground
Support, LLC (Global), manufactures, sells and services aircraft deice
equipment on a worldwide basis. The acquisition was accounted for using the
purchase method; accordingly, the assets and liabilities (which included
$1,522,000 inventory, $287,000 fixed assets and $3,000 accounts receivable,
net of $1,048,000 in customer deposits and $49,000 warranty obligation) of the
acquired entity have been recorded at their estimated fair value at the date
of acquisition. Global's results of operations have been included in the
Consolidated Statement of Income since the date of acquisition.
The following table presents unaudited pro forma results of operations as
if the acquisition had occurred on April 1, 1996. These pro forma results
have been prepared for comparative purposes only and do not purport to be
indicative of what would have occurred had the acquisition been made at the
beginning of fiscal 1997 or of results which may occur in the future.
Furthermore, no effect has been given in the pro forma information for
operating benefits that are expected to be realized through the combination of
the entities because precise estimates of such benefits cannot be quantified.
Nine Months Ended
December 31,
(Unaudited) 1997 1996
Operating revenues $37,109,000 31,745,000
Net earnings 1,418,000 353,000
Net basic earnings per share .53 .13
6
<PAGE>
C. Income Taxes
The tax effect of temporary differences gave rise to the Company's
deferred tax asset in the accompanying December 31, 1997 and March 31, 1997
consolidated balance sheets.
The Company has recorded a valuation allowance in order to reduce its
deferred tax asset to an amount which is more likely than not to be realized.
Changes in the valuation allowance, related to future utilization of net
operating losses, reduced the provision for income taxes by $44,000 and
$72,000, respectively, during the nine-months ended December 31, 1997 and
1996.
The income tax provisions for the three and nine-months ended December
31, 1997 and 1996 differ from the federal statutory rate primarily as a result
of state income taxes and reductions in the valuation allowance.
The Company completed the utilization of all federal net operating loss
carryforwards available for tax return purposes during the quarter ended
December 31, 1996. These carryforwards, to the extent realized, resulted in a
reduction of goodwill, until goodwill was reduced to zero in the quarter ended
June 30, 1996.
D. Net Earnings Per Share
Earnings per share has been calculated based on Statement of Accounting
Standards ("SFAS") No. 128 "Earnings Per Share" which became effective for the
quarter ended December 31, 1997. As required by SFAS No. 128, per share data
for all periods presented has been retroactively restated to conform to the
new standard.
Basic earnings per share has been compiled by dividing net earnings by
weighted average number of common shares outstanding during each period.
Shares issuable under employee stock options are considered common share
equivalents and were included in the weighted average common shares for
purposes of the diluted per share calculation.
E. Reclassifications
Certain reclassifications have been made in the 1996 financial statements
to conform with the 1997 presentation.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Overview
The Company's most significant component of revenue is generated through
its air cargo subsidiaries, Mountain Air Cargo, Inc. (MAC) and CSA Air, Inc.
(CSA), which are short-haul express air freight carriers flying nightly
contracts for a major express delivery company out of 81 cities, principally
located in 30 states in the eastern half of the United States and in Puerto
Rico, Canada and the Virgin Islands. Under the terms of its dry-lease service
contracts (which currently cover approximately 98% of the revenue aircraft
operated), the Company passes through to its customer certain cost components
of its operations without markup. The cost of fuel, landing fees, outside
maintenance, aircraft certification and conversion, parts and certain other
direct operating costs are included in operating expenses and billed to the
customer as cargo and maintenance revenue.
In 1993, the Company organized Mountain Aircraft Services, LLC (MAS) to
engage in the sale of commercial aircraft parts and provide aircraft engine
overhaul management and component repair services. In August 1997 the Company
acquired certain assets and order backlog of Simon Deicer Company, a division
of Terex Aviation Ground Equipment, Inc. located in Olathe, Kansas. The
acquisition, renamed Global Ground Support, LLC (Global), manufactures,
services and supports aircraft deicers on a worldwide basis. Global is
operated as a subsidiary of MAS.
Results of Operations
Consolidated revenue increased $10,125,000 (40.1%) to $35,374,000 and
$7,551,000 (84.9%) to $16,463,000, respectively, for the nine and three-month
periods ended December 31, 1997 compared to their equivalent 1996 periods. The
nine and three-month current period net increase in revenue primarily resulted
from a $7,921,000 and $6,368,000 respective increase in revenue associated
with the September 2, 1997 acquisition of Global, and increases in maintenance
service, engine overhaul and parts revenue.
Operating expenses increased $8,712,000 (36.0%) to $32,921,000 for the
nine-month period ended December 31, 1997 and $6,582,000 (77.4%) to
$15,089,000 for the three-month period ended December 31, 1997 compared to
their equivalent 1996 periods. The change in operating expenses for the nine-
month period consisted of the following: cost of flight operations increased
$509,000 (5.4%), primarily as a result of additional costs associated with
flight crews and airport fees; maintenance expense increased $971,000 (8.7%),
primarily due to cost of parts required for heavy maintenance checks due on
aircraft and increased maintenance staffing; ground equipment increased
$6,040,000 (100.0%), as a result of the August 1997 Global acquisition;
depreciation and amortization increased $67,000 (21.1%) as a result of
additional depreciable assets purchased in the acquisition of Global, offset
by depreciation related to the sale of aircraft in fiscal 1997; general and
administrative expense increased $1,155,000 (36.4%) as a result of $562,000 in
G&A costs associated with the Company's operation of Global and increased
insurance, employee benefits, staffing, salary and wage rates.
8
<PAGE>
Results of Operations (cont'd)
Facility start-up expenses decreased $30,000 (13.9%) and, reflect for fiscal
1997, cost associated with the Company's start-up and relocation of
maintenance operations to Kinston, N.C. compared to proposed merger and repair
shop component start-up cost for fiscal 1998. The change in operating
expenses for the three-month periods, except for the September 1997
acquisition of Global, primarily followed the nine month changes.
As a percentage of operating revenue, operating income increased to 6.9%
for the nine-month period ended December 31, 1997 from 4.1% for the equivalent
period in 1996, and 8.3% for the three-month period ended December 31, 1997
from 4.5% for the equivalent period in 1996, primarily as a result of the
addition of Global in September 1997.The $574,000 increase in non-operating
expense was principally due to a fiscal 1998 $418,000 provision to fulfill
contractual benefits related to the death of the Company's Chairman and CEO
and a $182,000 gain on sale of aircraft which took place in fiscal 1997.
Pretax earnings increased $839,000 and $966,000 for the nine and three-
month periods ended December 31, 1997 compared to their December 31, 1996
periods. The changes were respectively due to the second and third quarter
current period profitable results of Global, which added $1,244,000 to the
Company's pretax earnings for the nine-month period, partially offset by the
above $418,000 obligation recorded in the first quarter of fiscal 1998.
The provision for income taxes increased $272,000 and $378,000 for the
nine and three-month periods ended December 31, 1997 compared to their
respective 1996 periods due to changes in taxable income and effective tax
rates.
Seasonality
Global's business has historically been highly seasonal. In general, the
bulk of Global's revenues have been recognized during the second and third
fiscal quarters, and comparatively little revenue has been recognized during
the first and fourth fiscal quarters. The Company plans to reduce Global's
seasonal fluctuation in revenues by broadening its product line to increase
revenues in the first and fourth fiscal quarters. The remainder of the
Company's business is not materially seasonal.
Liquidity and Capital Resources
As of December 31, 1997 the Company's working capital amounted to
$7,602,000, an increase of $1,014,000 compared to March 31, 1997. The net
increase primarily resulted from profitable operations offset by cash required
for the Global acquisition.
The Company's secured bank financing line provides credit in the
aggregate of up to $4,000,000 through August 1998. Loans under the line of
credit bear interest at the lender's prime rate less 25 basis points.
Substantially all of the Company's accounts receivable and inventory,
have been pledged as collateral under this financing arrangement. As of
9
<PAGE>
Liquidity and Capital Resources (cont'd)
December 31, 1997 the Company was in a net borrowing position against its
credit line of $1,546,000. Management believes that funds anticipated from
operations and existing credit facilities will provide adequate cash flow to
meet the Company's financial needs for the foreseeable future.
The respective nine-month periods ended December 31, 1997 and 1996
resulted in the following changes in cash flow: operating activities used
$1,009,000 and provided $1,021,000, investing activities used $1,500,000 and
$1,046,000 and financing activities provided and used, respectively,
$1,232,000 and $722,000. Net cash decreased $1,277,000 and $746,000 for the
respective nine-month periods ended December 31, 1997 and 1996.
Cash used in operating activities was $2,030,000 more for the nine-months
ended December 31, 1997 compared to the similar 1996 period, principally due
to the change in net assets resulting from the operations of Global, partially
offset by the deferred retirement obligations booked in 1997. Cash used in
investing activities for the nine-months ended December 31, 1997 was
approximately $455,000 more than the comparable period in 1996, principally
due to expenditures related to the acquisition of Global, offset by net
decreases in purchase of short-term investments. Cash provided by financing
activities was $1,954,000 more in the 1997 nine-month period due to a note
payable to bank and a reduction in the repurchase of common stock.
During the nine months ended December 31, 1997 the Company repurchased
15,780 shares of its common stock at a total cost of $67,000. Pursuant to its
previously announced stock repurchase program, $204,000 remains available for
repurchase of common stock.
Cost associated with the Company's start-up of an FAA approved 145
component repair facility which opened at Kinston, N. C. in May 1997,
professional fees related to terminated first quarter merger discussions and
start-up cost associated with Global amounted to $189,000 for the nine-month
period ended December 31, 1997. There are currently no commitments for
significant capital expenditures. The Company paid a $.10 per share cash
dividend in June 1997. The Company's Board of Directors on August 7, 1997
adopted the policy to pay an annual cash dividend in the first quarter of each
fiscal year, in an amount to be determined by the board.
Year 2000 Issue
The Company has initiated a comprehensive review of its computer systems
to identify the systems that could be affected by the "year 2000 issue", which
is the result of computer programs being written using two digits rather than
four to define the applicable year. Like most owners of computer software,
the Company will be required to modify significant portions of its software so
that it will function properly in the Year 2000. The Company presently
believes that, with modifications to existing software and conversions to new
software, the Year 2000 problem will not pose significant operational problems
for the Company's computer systems. Management has not yet completely
assessed the year 2000 compliance expense and related potential effect on the
Company's earnings.
10
<PAGE>
Impact of Inflation
The Company believes the impact of inflation and changing prices on its
revenues and earnings is not material since the major cost components of its
operations, consisting principally of fuel, aircraft, crew and certain
maintenance costs are passed through to its customer under current contract
terms.
11
<PAGE>
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
No. Description
3.1 Certificate of Incorporation, as amended, incorporated by reference to
Exhibit 3.1 of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994
3.2 By-laws of the Company, incorporated by reference to Exhibit 3.2 of the
Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1996.
4.1 Specimen Common Stock Certificate, incorporated by reference to
Exhibit 4.1 of the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994
10.1 Aircraft Dry Lease and Service Agreement dated February 2,
between Mountain Air Cargo, Inc. and Federal Express Corporation,
incorporated by reference to Exhibit 10.13 to Amendment No. 1 on Form 10-Q/A
to the Company's Quarterly Report on Form 10-Q for the quarterly period
ended December 31, 1993
10.2 Loan Agreement among NationsBank of North Carolina, N.A., the
Company and its subsidiaries, dated January 17, 1995, incorporated by
reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q
for the period ended December 31,1994
10.3 Aircraft Wet Lease Agreement dated April 1, 1994 between Mountain Air
Cargo, Inc. and Federal Express Corporation, incorporated by reference to
Exhibit 10.4 of Amendment No. 1 on Form 10-Q/Q to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1994
10.4 Adoption Agreement regarding the Company's Master 401(k) Plan and Trust,
incorporated by reference to Exhibit 10.7 to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1993*
10.5 Form of options to purchase the following amounts of Common
Stock issued by the Company to the following executive officers
during the following fiscal years ended March 31:*
Number of Shares
Executive Officer 1993 1992 1991
J. Hugh Bingham 150,000 150,000 200,000
John J. Gioffre 100,000 100,000 125,000
William H. Simpson 200,000 200,000 300,000
incorporated by reference to Exhibit 10.8 of the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1993.
12
<PAGE>
10.6 Premises and Facilities Lease dated November 16, 1995 between Global
TransPark Foundation, Inc. and Mountain Air Cargo, Inc., incorporated by
reference to Exhibit 10.5 to Amendment No. 1 on form 10-Q/A to the
Company's Quarterly Report on Form 10-Q for the period ended December 31,
1995.
10.7 Employment Agreement dated January 1, 1996 between the Company,
Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and
William H. Simpson, incorporated by reference to Exhibit 10.8 to the
Company's Annual Report Form 10-K for the fiscal year ended March 31,
1996.*
10.8 Employment Agreement dated January 1, 1996 between the Company,
Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and John J.
Gioffre, incorporated by reference to Exhibit 10.9 to the Company's Annual
Report Form 10-K for the fiscal year ended March 31, 1996.*
10.9 Employment Agreement dated January 1, 1996 between the Company,
Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and J. Hugh
Bingham, incorporated by reference to Exhibit 10.10 to the Company's Annual
Report Form 10-K for the fiscal year ended March 31, 1996.*
10.10 Employment Agreement dated September 30, 1997 between Mountain Aircraft
Services, LLC and J. Leonard Martin.
11.1 Computation of Primary and Fully Diluted Earnings per Common Share
21.1 List of subsidiaries of the Company, incorporated by reference to
Exhibit 21.1 to the Company's Quarterly Report on Form 10-Q for the
period ended September 30, 1997.
27.1 Financial Data Schedule (For SEC use only)
* Management compensatory plan or arrangement required to be filed as an
exhibit to this report.
b. Reports on form 8-K
No Current Reports on Form 8-K were filed in the third quarter of fiscal
1997.
13
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIR TRANSPORTATION HOLDING COMPANY, INC.
(Registrant)
Date: February 10, 1998 /s/ Walter Clark
Walter Clark, Chief Executive Officer
Date: February 10, 1998 /s/ John Gioffre
John J. Gioffre, Chief Financial Officer
14
<PAGE>
AIR TRANSPORTATION HOLDING COMPANY, INC.
EXHIBIT INDEX
Exhibit
PAGE
10.10 Employment agreement dated September 30, 1997 between
Mountain Aircraft Services, LLC
And J. Leonard Martin.............................16-26
11.1 Computation of Primary and Fully Diluted
Earnings Per Common Share........................... 27
15
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<TABLE>
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
Exhibit 11.1
Computation for Primary and Fully Diluted Earnings Per Common Share
<CAPTION>
Three Months Ended Nine Months Ended
December 31 December 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET EARNINGS $892,516 $304,580 $1,405,653 $838,430
WEIGHTED AVERAGE COMMON SHARES:
Basic:
Weighted average shares
outstanding 2,650,653 2,611,100 2,649,246 2,620,322
Diluted:
Weighted average shares
outstanding 2,650,653 2,611,100 2,649,246 2,620,322
Dilutive stock options 129,739 182,877 135,165 182,877
2,780,392 2,793,977 2,784,411 2,803,199
NET EARNINGS PER COMMON SHARE:
Basic $0.34 $0.12 $0.53 $0.32
Diluted $0.32 $0.11 $0.50 $0.30
<FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from Air
Transportation Holding Company, Inc. SEC Form 10-Q for period ended December
31, 1997 (identify specific financial statements) and is qualified in its
entirety by reference to such financial statements."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 1100796
<SECURITIES> 2474019
<RECEIVABLES> 7052685
<ALLOWANCES> 0
<INVENTORY> 3983252
<CURRENT-ASSETS> 15043585
<PP&E> 4190451
<DEPRECIATION> 2291057
<TOTAL-ASSETS> 17505585
<CURRENT-LIABILITIES> 7441375
<BONDS> 0
0
0
<COMMON> 661991
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17505585
<SALES> 35373935
<TOTAL-REVENUES> 35373935
<CGS> 0
<TOTAL-COSTS> 32920869
<OTHER-EXPENSES> 230146
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2222920
<INCOME-TAX> 817267
<INCOME-CONTINUING> 1405653
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1405653
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.50
</TABLE>
J. LEONARD MARTIN
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of the 30th day of September, 1997, by and among
MOUNTAIN AIRCRAFT SERVICES, LLC, a North Carolina limited
liability company ("Employer"); and J. LEONARD MARTIN , an
individual having an address at 2518 Reynolds Drive, Winston-
Salem, North Carolina 27104 ("Employee").
Background Statement
Employee is the current President and Chief Operating
Officer of Employer along with being the Chief Executive Officer
of Global Ground Support, LLC ("Global") and a Vice President of
Air Transportation Holding Company, Inc. ("AirT"). Employee has
been instrumental in successfully developing, expanding and
increasing the business and earnings of Employer, AirT and
Global. Employer desires to ensure that the services of Employee
will continue to be available to it on a mutually satisfactory
basis. In the course of his employment with Employer, Employee
will have access to trade secrets and proprietary information of
Employer. Accordingly, Employee has and will continue to acquire
the knowledge and ability to compete with Employer. Employer has
offered Employee an employment agreement on the terms and
pursuant to the conditions hereof, including the stability and
security provided to Employee by the arrangement provided for
herein. The parties agree that the execution and delivery of
this Agreement is a condition precedent to the benefits extended
to Employee hereunder. Employee agrees that the benefits
provided for herein are adequate and sufficient consideration for
the covenants made by Employee hereunder, including, without
limitation, the covenant not to compete.
NOW, THEREFORE, for valuable consideration, the receipt of
which is hereby acknowledged, the mutual duties and obligations
set forth herein, and intending to be legally bound, the parties
hereto agree as follows:
1. Employment. Employer hereby agrees to employ Employee
and Employee hereby agrees to serve Employer upon the terms and
conditions set forth in this Agreement in the capacity set forth
on Exhibit A attached hereto, with the duties and
responsibilities of such positions to be determined from time to
time by the President and/or Chief Executive Officer of AirT.
2. Term.
(a) Statement of Term. The term of this Agreement shall
begin on October 1, 1997, and end on September 30, 1999, or on
such later date to which the term of this Agreement may be
extended pursuant to the provisions of this Paragraph 2.
(b) Automatic Extension. Subject to subparagraph (c) of
this Paragraph 2, the term of this Agreement shall be extended
automatically for one year effective on the 1st day of December,
1997, and on the 1st day of each succeeding December.
(c) Termination of Automatic Extensions. Employee or
Employer, by written notice delivered to the other, may at any
time elect to terminate the automatic extension provisions of
subparagraph (b) of this Paragraph 2. Such election shall apply
only to extensions that would otherwise become effective after
delivery of such notice and shall not apply to extensions that
have theretofore become effective.
3. Compensation, Incentives and Employee Benefits.
(a) Base Salary. Employer shall pay to the Employee for
his performance of services hereunder a base salary ("Base
Salary") at the rate of not less than One Hundred Fifteen
Thousand and No/100 ($115,000.00) per year for the period of this
Agreement. The Employee's Base Salary rate shall be reviewed by
Employer annually. From and after the effective date of any such
change the increased rate shall become the Base Salary rate
applicable thereafter. Base Salary shall be paid in bi-weekly
installments and shall be prorated for any partial months of
employment.
(b) Incentive Compensation. Employer shall pay to Employee
incentive compensation ("Incentive Compensation") equal to 2
percent (2%) of Employer's and Global's yearly earnings before
income taxes or extraordinary items. Amounts payable under this
subparagraph, if any, shall be paid within fifteen (15) days
after AirT files its Annual Report on Form 10-K with the
Securities and Exchange Commission. Amounts otherwise payable
hereunder shall be prorated for a partial year's employment in
the event Employee's employment is terminated by Employer during
the course of its fiscal year.
(c) Employee Benefit Plans. In addition to the Base Salary
and Incentive Compensation provided for above, Employer shall
provide to the Employee the opportunity to participate in all
life insurance, medical, dental, optical, disability, and other
employee benefit plans (collectively, "Employee Benefit Plans")
sponsored from time to time by Employer and covering its
employees generally or a particular group of its employees of
which the Employee is a member (including participation by the
Employee's dependents to the extent they are eligible under the
terms of such plans), subject to the terms and conditions of such
benefit plans.
(d) Reimbursement of Expenses. Employer shall pay or
reimburse Employee for all reasonable travel and other expenses
incurred by him in performing his obligations under this
Agreement. Such expenses shall be appropriately submitted and
approved in accordance with the policies approved by Employer.
(e) Vacation. Employee shall be entitled to four weeks
paid annual vacation in accordance with the normal policies of
Employer.
(f) Automobile Allowance. Employee shall be entitled to an
automobile allowance of $400.00 per month.
4. Duties. During the term hereof, Employee shall devote
all of his business time, attention, skills and efforts to the
business of Employer and the faithful performance of his duties
hereunder; provided, however, that (i) nothing contained herein
shall prevent Employee from making outside investments consistent
with the provisions contained herein and (ii) with the approval
of the Board of Directors of AirT, from time to time Employee may
serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or
organizations which, in the AirT Board of Directors' judgment,
will not present any conflict of interest with Employer, or
materially affect the performance of Employee's duties pursuant
to this Agreement.
5. Termination.
(a) Termination By Employer Without Cause. The parties
recognize (i) that Employer has the duty to use its judgment in
the best interests of Employer in determining whether to
terminate Employee's employment under this Agreement even though
there may be no legal cause therefor, and (ii) that any action or
inaction of Employer pursuant to clause (i) shall not prejudice
the rights of Employee under this Agreement. Accordingly, the
parties agree that, subject to all other provisions of this
Paragraph 6, Employer shall have the right at any time during the
term of this Agreement to terminate this Agreement without cause.
Termination of this Agreement shall be deemed to occur on the
date Employee is notified thereof.
(b) Termination by Employee. Employee may terminate his
employment with Employer, for any reason or without reason,
during the term hereof. Such termination must be accompanied by
the delivery of at least 30 days' written notice delivered to
Employer.
(c) Termination Payments. If Employer terminates
Employee's employment hereunder pursuant to Paragraph 5(a) hereof
for any reason other than for "Cause", as defined herein, then
immediately upon the effectiveness of the termination Employer
shall make a lump sum cash payment to Employee in an amount equal
to one (1) year of Base Salary.
(d) Disability. If the Employee is unable to perform his
duties hereunder for a period of three (3) consecutive months due
to disability (as defined by the primary disability insurance
carrier then providing such insurance coverage for the Employer's
executive officers), this Agreement may be terminated at
Employer's discretion by giving to the Employee written notice
specifying a termination date subsequent thereto and also
subsequent to the end of said three (3) month period.
(e) No Mitigation. Employee shall have no obligation to
seek other employment in the event of termination of his
employment and no compensation or other benefits received by
Employee from any other employment shall reduce or limit
Employer's obligation to make payment under this entire Paragraph
6.
(f) Definitions. Termination for "Cause" shall mean
termination because of conviction by a court of competent
jurisdiction of theft from Employer, conviction by a court of
competent jurisdiction of embezzlement of the Employer's funds,
conviction by a court of competent jurisdiction of falsification
of the Employer's records, conviction by a court of competent
jurisdiction of fraud committed against Employer, conviction by a
court of competent jurisdiction of a felonious criminal act
involving Employer or while engaged in conduct of Employer's
business, incompetence due to the use of or reporting to work
under the influence of alcohol, narcotics, other unlawful drugs
or controlled substances, legal incapacity, insanity, act or acts
involving dishonesty or misconduct which have or may reasonably
be expected to have a material adverse effect on the business or
reputation of Employer, breach of fiduciary duty to Employer,
willful and substantial failure to perform stated duties or
lawful directives of Employer, or material breach of any
provision of this Agreement.
6. Confidential Information. Employee shall not, at any
time during or following his employment by Employer regardless of
the reason for such termination of employment, furnish, divulge,
communicate, use to the detriment of Employer or for the benefit
of any business, firm, person, partnership, trust or corporation,
or otherwise, any of Employer's confidential information, data,
trade secrets, sales methods, names of customers, advertising
methods, financial affairs or methods of procurement, or take
with him any document or paper relating to the foregoing, it
being acknowledged that Employee received or obtained all of the
above in confidence and as a fiduciary of Employer.
7. Non-Competition. Employee agrees that, during
Employee's employment with Employer and for a period of one (1)
year thereafter, whether Employee leaves voluntarily or
involuntarily:
(a) Employee will not directly or indirectly,
individually or as a partner, employee, stockholder,
consultant, agent, officer, director, advisor or in any
other capacity, solicit any of the customers of Employer for
the purpose of selling any service or product similar to
those provided by Employer, or in any manner attempt to
induce any of Employer's customers or suppliers to withdraw,
reduce or divert any of their business from Employer or
otherwise interfere or attempt to interfere with any
business relationship between Employer and its customers or
suppliers. For the purposes of this Paragraph 7(a),
customers shall mean (i) any client, account or customer of
the Employer that has transacted any business with or been
contacted by Employer within the twelve months preceding the
date hereof, and (ii) any other client, account or customer
of Employer that has done business with Employer within two
years of the date of such separation or termination;
(b) Employee will not in any manner induce or attempt
to induce any of Employer's employees to leave the
employment of Employer to become associated with any
business operation engaged in the air cargo or air freight
business;
(c) Employee will not directly or indirectly, either
as principal, agent, manager, employee, owner (if the
percentage of ownership exceeds one percent (1%) of the net
worth of the business), partner (general or limited),
director, officer, consultant or in any other capacity,
participate in any business operation engaged in the
aircraft deicer, air cargo or air freight business;
8. Limitations on Scope. Because of the present and
contemplated future operations of Employer in the geographic
areas hereinafter set forth, it is further understood and agreed
by the parties hereto that the restriction set forth in Paragraph
7(c) shall apply to a business engaged in the aircraft deicer,
air cargo, air freight, aircraft maintenance or aircraft parts
brokering business or businesses in the following geographic
areas:
(i) The State of Kansas;
(ii) The State of Illinois;
(iii) The State of North Carolina;
(iv) The State of Florida;
(v) Any State contiguous with the State of
Kansas;
(vi) Any State contiguous with the State of
Illinois;
(vii) Any State contiguous with the State of
North Carolina;
(viii) Any State contiguous with the State of Florida;
(ix) Any State east of the Mississippi River;
(x) Any State west of the Mississippi River;
(xi) Any State of the United States of America;
and
(xii) Any location in the World.
The parties intend the above geographical areas to be
completely severable and independent, and any invalidity or
unenforceability of this Agreement with respect to any one area
shall not render this Agreement unenforceable as applied to any
one or more of the other areas.
9. Severability. If any provision contained in this
Agreement shall for any reason be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Agreement but this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been
contained herein. The parties agree that in the event a court
should determine that this Agreement or any of the covenants
contained herein is unreasonable, void or invalid, for any reason
whatsoever, then in such event, the parties hereto agree that the
duration, geographical or other limitation imposed herein should
be as the court, or jury, if applicable, should determine to be
fair and reasonable, it being the intent of each of the parties
hereto to be subject to an agreement that protects the legitimate
competitive interests of Employer and does not unreasonably
curtail the rights of the Employee.
10. Employee's Representation. Employee represents that
his experience and capabilities are such that the provisions of
Paragraphs 7 and 8 will not prevent him from earning a
livelihood.
11. Employer's Right to Obtain an Injunction. Employee
acknowledges that Employer will have no adequate means of
protecting its rights under Paragraphs 7 and 8 of this Agreement
other than securing an injunction. Accordingly, Employee agrees
that Employer is entitled to enforce this Agreement by obtaining
a preliminary and permanent injunction and any other appropriate
equitable relief in a court of competent jurisdiction. Employee
acknowledges that the recovery of damages by Employer will not be
an adequate means to redress a breach of this Agreement. Nothing
contained in this Paragraph, however, shall prohibit Employer
from pursuing any remedies in addition to injunctive relief,
including recovery of damages.
12. General Provisions.
(a) Entire Agreement. This Agreement contains the entire
understanding between the parties hereto relating to the
employment of Employee by Employer and supersedes any and all
prior employment, compensation or retirement agreements between
Employer or any predecessors of Employer or any of its
subsidiaries and Employee.
(b) Nonassignability. Neither this Agreement nor any right
or interest hereunder shall be assignable by Employee, his
beneficiaries or legal representatives, without the prior written
consent of Employer; provided, however, that nothing shall
preclude (i) Employee from designating a beneficiary to receive
any benefit payable hereunder upon his death, or (ii) the
executors, administrators or other legal representatives of
Employee or his estate from assigning any rights hereunder to the
person or persons entitled thereunto.
(c) Binding Agreement. This Agreement shall be binding
upon, and inure to the benefit of, Employee and Employer and
their respective permitted successors and assigns.
(d) Amendment or Modification of Agreement. This Agreement
may not be modified or amended except by an instrument in writing
signed by the parties hereto.
(e) Insurance. Employer, at its discretion, may apply for
and procure in their own name and for its own benefit, life
insurance on Employee in any amount or amounts considered
advisable; and Employee shall have no right, title or interest
therein, and further, Employee agrees to submit to any medical or
other examination and to execute and deliver any applications or
other instruments in writing as may be reasonably necessary to
obtain such insurance.
(f) Notices. All notices under this Agreement shall be in
writing and shall be deemed effective when delivered in person
(in the case of Employer, to its Chief Executive Officer) or when
mailed, if mailed by certified mail, return receipt requested.
Notices mailed shall be addressed, in the case of Employee, to
him at his residential address currently on file with Employer,
and in the case of Employer, to its corporate headquarters,
attention of the President, or to such other address as Employer
or Employee may designate in writing at any time or from time to
time to the other party. In lieu of notice by deposit in the
U.S. mail, a party may give notice by telegram or telex.
(g) Waiver. No delay or omission by either party hereto in
exercising any right, power or privilege hereunder shall impair
such right, power or privilege, nor shall any single or partial
exercise of any right, power or privilege preclude any further
exercise thereof or the exercise of any other right, power or
privilege. The provisions of this Paragraph 12(g) cannot be
waived except in writing signed by both parties.
(h) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of North
Carolina, exclusive of its choice of law provisions.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
Employer:
MOUNTAIN AIRCRAFT SERVICES, LLC
By: ____________________________
Its: ___________
Employee:
______________________________
J. LEONARD MARTIN
EXHIBIT A
1. President and Chief Operating Officer of Mountain Aircraft
Services, LLC.
2. Chief Executive Officer of Global Ground Support, LLC.
3. Vice President of Air Transportation Holding Company, Inc.
