<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-18653
COMAIR HOLDINGS, INC.
Incorporated under the laws of Kentucky 31-1243613
(I.R.S. Employer ID No.)
P.O. Box 75021
Cincinnati, Ohio 45275
(606) 767-2550
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) or 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 ______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 8, 1996
----- -----------------------------
Common stock, no par value 44,449,316
PAGE 1
<PAGE> 2
COMAIR HOLDINGS, INC.
INDEX
PAGE NOS.
PART I. Financial Information -
Consolidated Balance Sheets - June 30, 1996
and March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . 3 - 4
Consolidated Statements of Income -
Three months ended June 30, 1996 and 1995. . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows -
Three months ended June 30, 1996 and 1995. . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . .8 - 12
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
PAGE 2
<PAGE> 3
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1996 MARCH 31, 1996
- ------ ------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $101,902,075 $111,601,283
Marketable securities
available-for-sale 38,568,719 39,860,347
Interest bearing deposits 30,000,000 --
------------ ------------
$170,470,794 $151,461,630
Accounts receivable 8,436,516 15,642,878
Inventory of expendable parts 14,797,396 13,864,258
Future tax benefits 9,217,441 8,756,848
Prepaid expenses 7,794,706 7,183,499
------------ ------------
Total current assets $210,716,853 $196,909,113
------------ ------------
Property and equipment, at cost:
Flight equipment $287,493,392 $264,254,099
Maintenance, operations and
office facilities 9,120,198 9,120,198
Other property and equipment 37,527,571 37,778,133
------------ ------------
$334,141,161 $311,152,430
Less accumulated depreciation and
amortization 101,043,277 97,769,467
Less reserve for engine overhauls and
purchase incentives 10,506,944 6,734,885
------------ ------------
$222,590,940 206,648,078
Construction in progress 927,234 692,033
Advance payments and deposits
for aircraft 20,033,855 20,027,679
------------ ------------
Net property and equipment $243,552,029 $227,367,790
------------ ------------
Other assets and deferred costs $ 5,985,257 $ 4,753,251
------------ ------------
$460,254,139 $429,030,154
============ ============
</TABLE>
PAGE 3
<PAGE> 4
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND MARCH 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY JUNE 30 1996 MARCH 31, 1996
- ------------------------------------ ------------ --------------
<S> <C> <C>
Current liabilities:
Current installments of long-term
obligations $ 9,178,515 $ 9,167,087
Accounts payable 37,403,961 39,608,872
Interline payable and deferred revenue 6,325,441 5,970,855
Accrued lease expense 20,403,111 20,298,748
Accrued wages 5,391,195 5,567,900
Accrued expenses 12,177,418 11,304,479
Accrued taxes 24,449,577 12,554,584
------------- -------------
Total current liabilities $ 115,329,218 $ 104,472,525
Long-term obligations $ 68,529,386 $ 70,745,129
------------- -------------
Deferred income taxes $ 37,203,060 $ 35,947,060
------------- -------------
Other liabilities and deferred credits $ 5,450,076 $ 4,736,236
------------- -------------
Shareholders' equity:
Common stock, no par value,
100,000,000 shares authorized,
44,443,595 and 44,438,204 issued
and outstanding, respectively $ 51,124,564 $ 51,094,753
Preferred stock, no par value,
1,000,000 shares authorized, none
issued or outstanding -- --
Net unrealized gain(loss) on marketable
securities available-for-sale 547,911 (82,419)
Retained earnings 182,069,924 162,116,870
------------- -------------
Total shareholders' equity $ 233,742,399 $ 213,129,204
------------- -------------
Total liabilities and shareholders' equity $ 460,254,139 $ 429,030,154
============= =============
</TABLE>
PAGE 4
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COMAIR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
OPERATING REVENUES:
Passenger $ 132,525,117 $ 111,110,884
Cargo and other 1,385,721 1,090,996
Non-airline operations 5,114,321 3,192,105
------------- -------------
Total operating revenues $ 139,025,159 $ 115,393,985
------------- -------------
OPERATING EXPENSES:
Salaries and related costs $ 24,019,322 $ 21,274,323
Aircraft fuel 12,210,955 8,372,200
Maintenance materials and repairs 9,524,739 10,094,432
Aircraft rent 16,388,010 13,865,796
Other rent and landing fees 4,635,753 4,204,120
Passenger commissions 11,302,510 10,834,010
Other operating expenses 17,193,930 12,884,936
Depreciation and amortization 5,812,084 5,129,711
Non-airline direct costs 3,413,740 2,521,868
------------- -------------
Total operating expenses $ 104,501,043 $ 89,181,396
------------- -------------
Operating income $ 34,524,116 $ 26,212,589
------------- -------------
NONOPERATING INCOME (EXPENSE):
Investment income $ 2,052,762 $ 2,247,894
Interest expense (1,024,515) (1,307,964)
------------- -------------
Total nonoperating income, net $ 1,028,247 $ 939,930
------------- -------------
Income before income taxes $ 35,552,363 $ 27,152,519
Income taxes 13,510,000 10,590,000
------------- -------------
Net income $ 22,042,363 $ 16,562,519
============= =============
Weighted average number
of shares outstanding 44,440,454 43,950,238
============= =============
Net income per share $ 0.50 $ 0.38
============= =============
Dividends paid per share $ .047 $ 0.036
============= =============
</TABLE>
PAGE 5
<PAGE> 6
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995 (UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 22,042,363 $ 16,562,519
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,812,085 5,129,711
Amortization and accrual of overhaul
expenses 2,829,822 2,647,291
Deferred income tax provision 795,407 3,190,786
Other, net (535,557) 1,895
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 7,206,362 5,811,250
Decrease (increase) in inventory of
expendable parts (933,138) (1,026,549)
Decrease (increase) in other current assets (611,207) 2,143,326
Increase (decrease) in accounts payable (2,204,911) 2,395,340
Increase (decrease) in other current
liabilities 13,050,176 9,186,333
------------- -------------
Net cash provided by operating activities $ 47,451,402 $ 46,041,902
------------- -------------
Cash Flows From Investing Activities:
Additions to property and equipment $ (24,064,475) $ (6,873,477)
Interest bearing deposits (30,000,000) --
Purchases and maturities of marketable
securities 231,958 228,819
Proceeds from sale of available-for-sale
marketable securities 1,690,000 6,658,940
Deferred costs 400,883 (223,603)
Other, net (1,145,163) 219,152
------------- -------------
Net cash (used in) provided by
investing activities $ (52,886,797) $ 9,831
------------- -------------
Cash Flows From Financing Activities:
Issuance of common stock $ 29,811 $ 547,251
Repurchase of common stock -- (383,063)
Payments of cash dividends and
repurchase of fractional shares (2,089,309) (1,562,688)
Repayments of long-term obligations (2,204,315) (2,751,314)
Net cash (used in) financing activities $ (4,263,813) $ (4,149,814)
------------- -------------
Net increase (decrease) in cash and
cash equivalents $ (9,699,208) $ 41,901,919
------------- -------------
Cash and cash equivalents at
beginning of period $ 111,601,283 $ 46,628,897
------------- -------------
Cash and cash equivalents at end of period $ 101,902,075 $ 88,530,816
============= =============
Cash paid during the period for interest $ 1,140,215 $ 1,367,016
============= =============
Cash paid during the period for income taxes $ 1,932,731 $ 1,964,713
============= =============
</TABLE>
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COMAIR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. These statements reflect all adjustments which are, in
the opinion of management, necessary for a fair presentation of the results for
the interim periods presented. Certain information in footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the following
disclosures are adequate to make the information presented not misleading. It is
suggested that these consolidated financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K.
NOTE 1: The accounts of Comair Holdings, Inc. and its wholly-owned
subsidiaries (the Company) have been consolidated in the accompanying
financial statements. Upon consolidation, all material intercompany
accounts, transactions and profits have been eliminated. The Company
considers the transportation of passengers and freight in scheduled
airline service by its major subsidiary, COMAIR, Inc., to be its
predominant industry segment. The Company's stock is traded in the
Nasdaq/National Market System under the symbol COMR.
NOTE 2: Results of operations for the interim periods are not necessarily
indicative of results to be expected for the year.
NOTE 3: During the first quarter of Fiscal 1997, the Company adopted the
Financial Accounting Standards Board issued Statement No. 121 (SFAS No.
121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be disposed of", which requires impairment losses
to be recorded on long-lived assets used in operations when indicators
of impairment are present and the undiscounted cash flows estimated to
be generated by those assets are less than the assets' carrying amount.
SFAS No. 121 also addresses the accounting for long-lived assets that
are expected to be disposed of in the future. The effect of this
adoption was not material.
NOTE 4: In October 1995, the Financial Accounting Standards Board issued
Statement No. 123 (SFAS No. 123), "Accounting for Stock-Based
Compensation", which indicates companies may recognize expense for
stock-based awards based on their fair value on the date of grant or,
at a minimum, will require pro forma disclosures in the Company's
fiscal 1997 financial statements. The Company has chosen not to adopt
the expense recognition provisions of SFAS No. 123.
NOTE 5: The Company elected to permit its agreement for the acquisition of
Spirit Airlines, Inc. to expire on June 30, 1996 in accordance with its
terms.
PAGE 7
<PAGE> 8
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMAIR, Inc. (COMAIR) is the principal subsidiary of Comair Holdings,
Inc. (with its subsidiaries, the Company), accounting for 96% of the first
quarter operating revenues and expenses. Although the following discussion and
analysis entails various aspects of the Company's financial performance, many of
the factors that affect year to year comparisons relate solely to COMAIR.
Inflation and changing prices have not had a material effect on
COMAIR's operations because revenues and expenses generally reflect current
price levels. COMAIR's market area, strong financial position and strong cost
control efforts have helped lessen the effect on the Company of price
competition and resulting low fares when compared to many others in the airline
industry. However, changes in the pricing strategies of other airlines and
increased competition of low fare carriers could impact COMAIR's ability to
recoup future cost increases through higher fares.
COMAIR operates as a "Delta Connection" carrier under a ten-year
marketing agreement with Delta Air Lines, Inc. dated and effective in October of
1989. The agreement may be terminated by either party on not less than one
hundred eighty (180) days' advance written notice. Delta owns approximately 21%
of the Company's outstanding common stock, leases reservation equipment and
terminal facilities to COMAIR, and provides certain services to COMAIR including
reservations and passenger and aircraft handling services. The Company has
historically benefitted from its relationship with Delta. However, the Company's
results of operations and financial condition may be adversely impacted by
Delta's decisions regarding routes and other operational matters, as well as,
any material interruption or modifications in this arrangement.
For the first quarter of fiscal 1997, the Company reported operating
revenues of $139.0 million, up 20% from the $115.4 million reported in the first
quarter of fiscal 1996. Operating income, net income and net income per share
for the first quarter of fiscal 1997 all increased significantly when compared
with the results reported in the first quarter of fiscal 1996. Operating income
for the quarter rose 32% to $34.5 million from $26.2 million. Net income
increased 33% to $22.0 million from $16.6 million, while earnings per share
increased 32% from $.38 per share to $.50 per share. The increase in earnings is
largely the result of higher passenger enplanements.
In the first quarter of fiscal 1997, revenue passenger miles (RPMs)
increased 30% when compared with last year's first quarter. Capacity, available
seat miles (ASMs), grew 18.5% with the acquisition of twelve 50-passenger
Canadair Jet aircraft since the first quarter of fiscal 1996. Since June 1995,
four 33-passenger Saabs and four 19-passenger Metros have been returned to
lessors.
PAGE 8
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COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
CAPACITY AND TRAFFIC ANALYSIS
QUARTER ENDED
06/30/96 06/30/95
Passengers 1,202,041 973,510
ASMs (000s) 672,541 567,490
RPMs (000s) 392,293 301,699
Load factor 58.3% 53.2%
Breakeven load factor 43.8% 40.9%
Yield (cents) 33.8 36.8
Cost per ASM (cents) 14.9 15.2
The following table shows the expense categories for COMAIR for the first
quarter of the last two fiscal years.
EXPENSE CATEGORIES
<TABLE>
<CAPTION>
QTR Ended Cents QTR Ended Cents
06/30/96 per ASM 06/30/95 per ASM
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Salaries and Related Costs $24,019,322 3.6 $21,274,323 3.8
Aircraft Fuel 12,210,955 1.8 8,372,200 1.5
Maintenance Materials
and Repairs 9,524,739 1.4 10,094,432 1.8
Aircraft Rent 16,388,010 2.4 13,865,796 2.5
Other Rent and Landing
Fees 4,635,753 0.7 4,204,120 0.7
Passenger Commissions 11,302,510 1.7 10,834,010 1.9
Other Operating Expenses 17,142,179 2.5 12,836,195 2.2
Depreciation and
Amortization 5,139,477 0.8 4,668,883 0.8
----------- ---- ----------- ----
$100,362,945 14.9 $86,149,959 15.2
=========== ==== =========== ====
</TABLE>
PAGE 9
<PAGE> 10
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Salaries and related costs have risen from the first quarter of fiscal 1996
as a result of the additional personnel to support the new Canadair Jet service.
Expenses related to incentive compensation plans were also higher due to the
increased pretax earnings. However, increased capacity generated by the
additional jet equipment has caused these costs on a unit basis to decrease.
Aircraft fuel price per gallon for the first quarter of fiscal 1997 was
approximately ten cents higher than in the first quarter of last year. The
higher price per gallon was due to higher supply prices accompanied by the 4.3
cents per gallon transportation tax on fuel used in domestic commercial
transportation which was imposed by the Omnibus Budget Reconciliation Act of
1993. This tax became effective October 1, 1995. Total aircraft fuel costs also
increased due to the addition of the new Canadair Jets.
Maintenance material and repair costs decreased on a total and unit cost
basis. The decrease in cost per ASM is related to lower maintenance costs
associated with the turboprop aircraft. In last year's first quarter, Comair
experienced an increased number of engine overhauls and unscheduled engine
repairs, primarily in the Brasilia fleet.
Aircraft rent expense increased from the addition of twelve Canadair Jets
since the first quarter of fiscal 1996, but was slightly lower on a unit cost
basis.
Other rent and landing fees increased on a total basis as a result of
the addition of the larger Canadair jets, but due to the additional capacity
generated by the jet equipment, remained the same on a unit cost basis.
Travel agency and credit card commissions have increased as a result of
higher passenger revenues resulting from higher passenger load factors than last
year=s first quarter. However, unit cost was lower due to the commission cap
that was instituted by many of the airlines in the fourth quarter of fiscal 1995
which more than offset the costs associated with the higher unit revenues.
Other operating expenses increased on a total and unit cost basis due
to the growth in traffic and the costs associated with the Canadair Jet service.
Depreciation and amortization increased on a total basis but remained
the same on a unit basis due to the additional capacity generated by the twelve
jet aircraft acquired through operating leases since the first quarter of 1996.
PAGE 10
<PAGE> 11
Investment income in the first quarter of fiscal 1997 was lower than last
year's first quarter. In fiscal 1996, the Company recognized a higher gain on
the sale of certain marketable securities than in fiscal 1997. This gain,
however, was offset, in part, by income from higher cash and cash equivalent
balances this year.
The Company's effective tax rate, which includes federal, state and
local taxes, approximated the statutory rate in the first quarter of fiscal
1997.
LIQUIDITY AND CAPITAL RESOURCES
In the first three months of fiscal 1997, the Company generated cash from
operating activities of $47.5 million. During the first quarter, the Company
invested $30.0 million in a short-term interest bearing deposit with an aircraft
manufacturer. The Company repaid long-term obligations of $2.2 million and paid
cash dividends of $2.1 million. Total working capital increased to $95.4 million
from $92.5 million at March 31, 1996, while the current ratio decreased from
1.88 to 1.83. The Company's long-term debt to equity position was 23% debt, 77%
equity at June 30, 1996, as compared to 25% debt, 75% equity at March 31, 1996.
In fiscal 1995, the Board of Directors authorized the Company to
repurchase up to 9.3 million shares of common stock from time to time as market
conditions dictate. As of June 30, 1996, the Company has purchased 4.5 million
shares of this authorization at a cost of $37.2 million.
On July 23, 1996, the Board of Directors declared a $.047 per share
cash dividend for shareholders of record on August 5, 1996, payable August 14,
1996.
COMAIR acquired five new generation, 50-passenger Canadair Jet aircraft
through June 1996 using interim financing provided by the manufacturer bringing
the total Canadair Jet fleet to 35. For 20 of these aircraft, the manufacturer
agreed to arrange the lease financing, including the right to return the
aircraft after seven years with no cost to COMAIR other than normal and
customary return provisions related to the condition of the aircraft. Five
aircraft were financed with debt, the other 5 aircraft were financed through
operating leases with terms up to 16.5 years.
As of June 30, 1996, COMAIR had scheduled delivery positions for 15
Canadair Jets to be delivered by June 1997. The aggregate cost of these
aircraft, including support equipment and estimated escalation, will be
approximately $255 million. COMAIR also has options for 25 additional jet
aircraft, valued at approximately $450 million, including support equipment and
estimated escalation, which could be available for delivery in fiscal 1998
through fiscal 2000.
PAGE 11
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COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
COMAIR expects to finance the aircraft described above through a
combination of working capital and lease, equity and debt financing, utilizing
manufacturers' assistance and government guarantees to the extent possible.
COMAIR believes that financing will be available at acceptable rates. If COMAIR
is unable to obtain acceptable financing terms, it could be required to modify
its expansion plans.
The Company elected to permit its agreement for the acquisition of
Spirit Airlines, Inc. to expire on June 30, 1996 in accordance with its terms.
In fiscal 1997, additional capital for repayment of long-term
obligations, planned dividend payments and other capital expenditures are
expected to be provided by operations.
The Company has a $5 million bank line of credit at prime. The line of
credit has not been used since 1985.
PAGE 12
<PAGE> 13
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
SIGNATURE
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.
COMAIR HOLDINGS, INC.
August 1, 1996 BY:
-----------------------------
Randy D. Rademacher
Senior Vice President Finance
Chief Financial Officer
PAGE 13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000835344
<NAME> COMAIR HOLDINGS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 101,902,075
<SECURITIES> 38,568,719
<RECEIVABLES> 8,436,516
<ALLOWANCES> 0
<INVENTORY> 14,797,396
<CURRENT-ASSETS> 210,716,853
<PP&E> 334,141,161
<DEPRECIATION> 101,043,277
<TOTAL-ASSETS> 460,254,139
<CURRENT-LIABILITIES> 115,329,218
<BONDS> 68,529,386
<COMMON> 51,124,564
0
0
<OTHER-SE> 182,617,835
<TOTAL-LIABILITY-AND-EQUITY> 460,254,139
<SALES> 0
<TOTAL-REVENUES> 139,025,159
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 104,501,043
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,024,515
<INCOME-PRETAX> 35,552,363
<INCOME-TAX> 13,510,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,042,363
<EPS-PRIMARY> .50
<EPS-DILUTED> 0
</TABLE>
