<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended March 31, 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 IRS Employer ID
The Commonwealth of Kentucky No. 31-1243613
P.O. Box 75021, Cincinnati/Northern Kentucky International Airport,
Cincinnati, Ohio 45275
Phone: (606) 767-2550
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates is
$888,046,688 based on a closing price of $26.25 on May 31, 1996. As of May 31,
1996, 44,442,386 shares of no par value Common Stock were issued and
outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Annual Report to Shareholders for the fiscal year
ended March 31, 1996 furnished to the Commission pursuant to Rule 14a-3(c) and
portions of the Registrant's Proxy Statement filed with the Commission for its
1996 Annual Meeting of Shareholders are incorporated by reference in Parts I, II
and III as specified.
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COMAIR HOLDINGS, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I
Item 1 - Business .............................................. 3
Item 2 - Properties ............................................ 5
Item 3 - Legal Proceedings ..................................... 6
Item 4 - Submission of Matters to a Vote of Security Holders ... 6
Part II
Item 5 - Market for Registrant's Common Equity and Related
Shareholder Matters ................................. 6
Item 6 - Selected Financial Data ............................... 6
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 6
Item 8 - Financial Statements and Supplementary Data ........... 7
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ................. 7
Part III
Item 10 - Directors and Executive Officers of the Registrant ... 7
Item 11 - Executive Compensation ............................... 7
Item 12 - Security Ownership of Certain Beneficial Owners and
Management ......................................... 7
Item 13 - Certain Relationships and Related Transactions ....... 7
Part IV
Item 14 - Exhibits, Financial Statement Schedules and Reports
on Form 8-K ........................................ 8
</TABLE>
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PART I
ITEM 1.
BUSINESS
"Footnotes 1 and 7" on page 21 and 27 of the Registrant's Annual
Report to Shareholders for 1996 are incorporated herein by reference. The
Company considers the air transportation of passengers and cargo in scheduled
airline service by its major subsidiary, COMAIR, Inc. (COMAIR) to be its
predominant industry segment.
COMAIR operates as a "Delta Connection" carrier under a ten-year
marketing agreement with Delta Air Lines, Inc. dated and effective in October
1989. The agreement may be terminated by either party on not less than
one-hundred eighty (180) days' advance written notice. COMAIR believes that the
relationship between the two companies is satisfactory. However, any material
interruptions or modifications in this arrangement may have an adverse effect
upon COMAIR.
COMAIR's operations are primarily dependent upon business-related
travel and are not subject to wide seasonal variations. However, some seasonal
decline does occur in holiday periods during which there are fewer scheduled
flights and during portions of the winter months due to unfavorable flying
conditions. Since initiation of the "Delta Connection" program in September
1984, COMAIR's strategy has expanded to accommodate the leisure as well as the
business traveler seeking connections through Delta's hubs in Cincinnati and
Orlando.
Approximately 45% of COMAIR's business in fiscal 1996 was provided
through "interlining" arrangements with Delta under the "Delta Connection"
program. Under "interlining" arrangements, COMAIR generally provides the
short-haul portions of a longer multi-carrier trip.
COMAIR competes with other airlines and various forms of ground
transportation, and believes that the principal competitive factors affecting
decisions by travelers as to whether to fly COMAIR are customer service,
scheduling and flight connections, reliability, type of equipment and price.
COMAIR participates in the Delta frequent flyer program. Mileage
earned under this program may be redeemed for free flights on COMAIR. Any costs
associated with passengers who redeem travel awards on COMAIR are minimal and
are accounted for at the time of travel.
EMPLOYEES
As of May 1, 1996, the Company had 2,453 full-time and 416 part-time
employees consisting of 1,531 persons in aircraft operations, 1,013 in customer
service activities, 190 in its fixed base, charter and pilot training
operations and the remainder in office and sales capacities. In May 1994, a new
Collective Bargaining Agreement between COMAIR and the Air Lines Pilots
Association was ratified by COMAIR's pilots. This agreement was effective June
1, 1994, and becomes amendable in June 1998. In May 1995, a new Collective
Bargaining Agreement between COMAIR and the International Association of
Machinists and Aerospace Workers ("IAM") was ratified by COMAIR's maintenance
employees who are represented by the IAM. The agreement was effective June 1,
1995, and becomes amendable in June 1999. The Company
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<PAGE> 4
has never experienced any work stoppage and considers its employee relations to
be satisfactory. No other employee groups are represented by a union.
GOVERNMENT REGULATION
All interstate air carriers are subject to regulation by the United
States Department of Transportation and the United States Department of Justice
(collectively "DOT") and the Federal Aviation Administration ("FAA") under the
Federal Aviation Act of 1958 and the Airline Deregulation Act of 1978
(collectively the "Act"). DOT's jurisdiction extends primarily to the economic
provisions of the Act, while the FAA is primarily concerned with air safety
provisions.
In 1986, COMAIR was granted a Certificate of Public Convenience and
Necessity pursuant to Section 401 of the Federal Aviation Act. However, the
Company is subject to DOT regulations which exempt air carriers operating
aircraft of sixty (60) passenger seats or less or having a payload capacity of
18,000 pounds or less from many of the economic restrictions of the Act.
The FAA requires that the Company have operating, airworthiness and
other certificates. The FAA also must give its approval to personnel who engage
in flight activities and to the Company's training and retraining programs. The
FAA conducts regular examinations to ensure compliance with its regulations.
The Company believes it and its employees are operating in accordance
with applicable FAA regulations and hold all necessary operating and
airworthiness certificates and licenses required by the FAA. The Company's
flight operations, maintenance programs, record keeping and training programs
are conducted under FAA approved procedures.
Currently, there are a number of new regulations under consideration
by the FAA relating to operating specifications and aircraft certification.
These regulations have not been published in their final format and it is
expected that modifications will be made. Because the final regulations are
uncertain, the Company cannot definitively assess the impact on future
operating results from these new regulations.
All air carriers are subject to certain provisions of the Federal
Communications Act of 1934, as amended, because of their extensive use of radio
and other communication facilities. Management believes that the Company is in
compliance with these laws and regulations.
The Act requires that at least 75% of the voting rights of the
Company and other U.S. air carriers be owned by U.S. Citizens.
All air carriers are required to comply with federal law and
regulations pertaining to noise abatement and engine emissions. The FAA also
requires airlines to comply with certain noise restrictions. COMAIR's current
aircraft as well as all aircraft on order are in compliance with these
regulations. In addition, several state legislatures and other governmental
administrative bodies have, from time to time, considered noise reduction
measures of various sorts. At the present time, COMAIR does not provide service
to any airport to which any such noise regulations apply.
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ITEM 2.
PROPERTIES
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" beginning on page 11 of the Registrant's Annual Report
to Shareholders for 1996 are incorporated herein by reference. Certain
additional information regarding the Properties of the Company is described
below:
As of March 31, 1996, COMAIR's route structure was served by 59
turboprop aircraft and 30 jet aircraft. The following table illustrates certain
characteristics of COMAIR's fleet.
<TABLE>
<CAPTION>
NO. OF SEATING
TYPE OF AIRCRAFT AIRCRAFT CAPACITY
---------------- -------- --------
<S> <C> <C>
Canadair Jet 30 50
Saab SF340 16 33
Embraer Brasilia 40 30
Fairchild Metro III 3 19
</TABLE>
The Company occupies maintenance, operations and office facilities in
Orlando and Cincinnati, as well as terminal space at the airports it serves.
A wholly-owned subsidiary of Comair Holdings, Inc. operates a fixed
based operation at the Cincinnati/Northern Kentucky International Airport which
provides a full range of refueling, maintenance and avionics services for
commercial, private and corporate aircraft. This subsidiary also owns and
operates six aircraft in charter service.
Another wholly-owned subsidiary of Comair Holdings, Inc. operates a
flight training center located near Orlando, Florida. This subsidiary operates
53 light, single and twin engine training aircraft.
INSURANCE
The Company maintains insurance against property damage to its
facilities and aircraft which it considers adequate. The Company also maintains
liability insurance coverage which it believes is adequate.
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ITEM 3.
LEGAL PROCEEDINGS
There are no material legal proceedings pending involving the
Company, any of its subsidiaries or their property, except proceedings arising
in the ordinary course of business. The Company believes that all such legal
proceedings are adequately insured.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1996.
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED SHAREHOLDER MATTERS
"Consolidated Ten Year Summary" on page 8, "Selected Quarterly
Financial Data" on page 10 and "Stock Transfer Agent & Registrar", "Stock
Information", and "Market Makers" on the inside back cover of Registrant's
Annual Report to Shareholders for 1996 are incorporated herein by reference.
The Company currently pays quarterly cash dividends (currently $.047 per share
per quarter on a post-split basis), which it has paid continuously for each
quarter since the third quarter of fiscal 1988.
ITEM 6.
SELECTED FINANCIAL DATA
"Consolidated Ten Year Summary" on page 8 of the Registrant's Annual
Report to Shareholders for 1996 is incorporated herein by reference.
ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" beginning on page 11 of the Registrant's Annual Report
to Shareholders for 1996 is incorporated herein by reference.
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ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements of the Registrant beginning on
page 16 of its Annual Report to Shareholders for 1996, are incorporated herein
by reference:
Consolidated Balance Sheets as of March 31, 1996 and 1995.
Consolidated Statements of Income for the years ended March 31, 1996, 1995
and 1994.
Consolidated Statements of Shareholders' Equity for the years ended March
31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows for the years ended March 31, 1996,
1995 and 1994.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
The following schedule is filed herewith:
Report of Independent Public Accountants.
Schedule II - Valuation and Qualifying Accounts and Reserves for the three
years ended March 31, 1996, 1995 and 1994.
All other supplemental schedules are omitted because of the absence
of conditions under which they are required or because the information is shown
in the Consolidated Financial Statements or Notes thereto.
UNAUDITED SUPPLEMENTARY DATA
"Selected Quarterly Financial Data" on page 10 of the Registrant's
Annual Report to Shareholders for 1996 is incorporated herein by reference.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
Items 10., 11., 12., and 13. of Part III are incorporated by
reference to the Registrant's Proxy Statement for its 1996 Annual Shareholders
Meeting as filed with the Commission pursuant to Regulation 14A.
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PART IV
ITEM 14.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1 and 2 - All financial statements and schedules required to be
filed by Item 8 of this Form and included in this report have been listed
previously beginning on page 7. No additional financial statements or schedules
are being filed since the requirements of paragraph (d) under Item 14 are not
applicable to the Company.
(a) 3 - Exhibits.
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT FILING STATUS
------ ---------------------- --------------
<S> <C> <C>
3.1 Articles of Incorporation of a
Comair Holdings, Inc.
3.2 By-Laws of Comair Holdings, Inc. a
3.3 Articles of Amendment to Articles of
Incorporation of Comair Holdings, Inc. e
10.1 1989 Delta Connection Agreement c
10.2 1991 Canadair Purchase Agreement d
Management Contracts and Compensation Plans
10.3 1981 Stock Option Plan b
10.4 Comair Savings and Investment Plan e
10.5 1990 Stock Option Plan c
10.6 1992 Directors' Stock Option Plan d
10.7 Deferred Incentive Compensation Plan Filed herewith
10.8 Employment Agreement with Mr. David R. Filed herewith
Mueller
10.9 Employment Agreement with Mr. David A. Filed herewith
Siebenburgen
10.10 Performance Based Incentive Bonus Plan Filed herewith
10.11 Consulting Agreement with Mr. Raymond A. Filed herewith
Mueller
11 Statement re Computation of Filed herewith
Net Income Per Share
13 Annual Report to Shareholders Filed herewith
for 1996
21 Subsidiaries of the Registrant Filed herewith
23 Consent of Arthur Andersen LLP Filed herewith
27 Financial Data Schedule Filed herewith
</TABLE>
(b)- Reports on Form 8-K. No reports on Form 8-K were filed during the
last quarter of the fiscal year.
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<PAGE> 10
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT FILING STATUS
------ ---------------------- --------------
<S> <C> <C>
a Incorporated by reference to Registration Statement
No. 33-22696 filed under the Securities Act of 1933.
b Incorporated by reference to Registration Statement
No. 2-87728 filed under the Securities Act of 1933.
c Filed as an exhibit to Form 10-K for the fiscal year ended
March 31, 1991.
d Filed as an exhibit to Form 10-K for the fiscal year ended
March 31, 1992.
e Filed as an exhibit to Form 10-K for the fiscal year ended
March 31, 1994.
</TABLE>
Note: No Exhibits are attached to this copy of Form 10-K, as permitted by Rule
14a-3(b) (10) of the Securities Exchange Act of 1934. Shareholders may obtain
copies of exhibits by writing to:
Investor Relations Department
Comair Holdings, Inc.
P.O. Box 75021
Cincinnati, OH 45275
Shareholders requesting copies will be required to pay a charge of $.25 per
page to cover the cost of copying such exhibits.
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<PAGE> 11
SIGNATURES
Pursuant to the requirements of Section 13 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.
DATE SIGNED: June 26, 1996 BY: _______________________________________
David R. Mueller, Chairman of the Board
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
- ----------------------- Chairman of the Board, June 26, 1996
David R. Mueller Chief Executive Officer
and Director
- ----------------------- President, June 26, 1996
David A. Siebenburgen Chief Operating Officer
and Director
- ----------------------- Sr. Vice President Finance June 26, 1996
Randy D. Rademacher Chief Financial Officer
(Chief Accounting Officer)
- ----------------------- Director June 26, 1996
Raymond A. Mueller
- ----------------------- Director June 26, 1996
Robert H. Castellini
- ----------------------- Director June 26, 1996
John A. Haas
</TABLE>
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Comair Holdings, Inc.:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in the Comair
Holdings, Inc. and subsidiaries 1996 annual report to shareholders incorporated
by reference in this Form 10-K, and have issued our report thereon dated May
15, 1996. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The supplemental schedule listed under Item 8
beginning on page 7 is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio
May 15, 1996.
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EXHIBIT 10.7
------------
FIRST AMENDMENT
TO THE
COMAIR HOLDINGS, INC. DEFERRED INCENTIVE COMPENSATION PLAN
----------------------------------------------------------
Pursuant to the reserved power of amendment contained in Section 11.1
of the Comair Holdings, Inc. Deferred Incentive Compensation Plan (the "Plan"),
the Plan is hereby amended effective as of March 31, 1996 in the following
respects:
1. Paragraph (a) of Section 4.1 is amended in its entirety to read as
follows:
(a) The Participant's share of Comair's deferred incentive
compensation allocation determined by the Compensation Committee (if
any). On a year-to-year basis, the Compensation Committee shall
determine which Participants (if any) are eligible to receive deferred
incentive compensation and in what amounts (if any).
2. The first sentence of Section 11.1 is amended to read as follows:
Comair reserves the right to amend or terminate the Plan in any manner
that it deems advisable, by action of the Board or the Compensation
Committee of the Board.
3. Paragraph (e) of Section 2.1 is amended to read as follows:
(e) "BOARD" means the Board of Directors of Comair.
IN WITNESS WHEREOF, Comair Holdings, Inc. has caused this First
Amendment to be executed this ______ day of June, 1996.
Comair Holdings, Inc.
By: _____________________________
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COMAIR HOLDINGS, INC.
DEFERRED INCENTIVE COMPENSATION PLAN
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 1 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 DEFINITIONS AND USAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 3 PARTICIPATION IN PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Participation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Participant Voluntary Contribution Agreement Procedure . . . . . . . . . 3
ARTICLE 4 DEFERRAL AMOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Deferred Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Crediting of Deferrals and Earnings . . . . . . . . . . . . . . . . . . 4
ARTICLE 5 PAYMENT OF BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.1 Participant's Benefit . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.2 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3 Form of Benefit Payments . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 6 DEATH OF PARTICIPANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.1 Commencement of Benefit Payments . . . . . . . . . . . . . . . . . . . . 7
6.2 Designation of Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 7 HARDSHIP DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.2 Unforeseeable Emergency . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 8 ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2 Administrative Rules . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.3 Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.4 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 9 CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.2 Denials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.3 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.4 Appeals Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.5 Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 10 CHANGE IN CONTROL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.1 Impact of Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.2 Definition of "Change in Control" . . . . . . . . . . . . . . . . . . . 10
ARTICLE 11 MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.1 Amendment and Termination . . . . . . . . . . . . . . . . . . . . . . . 11
11.2 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.5 No Guarantee of Employment . . . . . . . . . . . . . . . . . . . . . . . 11
11.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.7 Notification of Addresses . . . . . . . . . . . . . . . . . . . . . . . 12
11.8 Income Tax Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.9 Bonding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.10 Exclusive Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 12 TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12.1 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12.2 Payment of Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.3 Quarterly Valuation of Accounts . . . . . . . . . . . . . . . . . . . . 13
12.4 Contribution to Trust . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.5 Distribution of Excess Assets . . . . . . . . . . . . . . . . . . . . . 13
12.6 Trustee Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 13 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
<PAGE> 5
COMAIR HOLDINGS, INC.
DEFERRED INCENTIVE COMPENSATION PLAN
PREAMBLE
WHEREAS, Comair Holdings, Inc. ("Comair") recognizes the unique
qualifications of certain key management or highly compensated employees of
Comair and its subsidiaries and the valuable services they provide and desires
to establish a plan to defer incentive compensation for eligible employees in a
manner that aligns their interests with those of the Comair's stockholders; and
WHEREAS, Comair has determined that the implementation of such a plan
will best serve its interest in retaining and motivating key employees.
NOW, THEREFORE, Comair hereby establishes the Comair Holdings, Inc.
Deferred Incentive Compensation Plan as hereinafter provided:
ARTICLE 1
GENERAL
1.1 EFFECTIVE DATE. The provisions of the Plan shall be effective
as of April 1, 1994; provided, however, the provisions of the Plan pertaining
to Compensation deferred by a Participant pursuant to Section 3.2 shall be
effective as of April 1, 1995.
1.2 PURPOSE. The Plan is intended to be an unfunded plan
primarily for the purpose of providing deferred compensation to a select group
of management or highly compensated employees, as such group is described under
Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA.
ARTICLE 2
DEFINITIONS AND USAGE
2.1 DEFINITIONS. Wherever used in the Plan, the following words
and phrases shall have the meaning set forth below unless the context plainly
requires a different meaning:
(a) "ACCOUNTS" mean the bookkeeping accounts maintained for each
Participant pursuant to Article 4.
(b) "ADMINISTRATOR" means the person or persons described in
Article 8.
(c) "AGREEMENT" means a Deferred Compensation Agreement between
Comair and an eligible employee in accordance with Article 3.
<PAGE> 6
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(d) "BENEFIT" means the benefit of a Participant as determined
under Article 4.
(e) "BOARD" means the members of the Board of Directors of Comair.
(f) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
(g) "COMAIR" means Comair Holdings, Inc., a Kentucky corporation,
and any successor thereto.
(h) "COMPENSATION" means the total of all cash compensation, as
determined by the Compensation Committee, including wages,
salary and bonuses, which is payable as consideration for the
employee's service prior to subtracting any amounts deferred
under Section 4.1(b). Any deferred incentive compensation
amounts under Section 4.1(a) shall not be considered
Compensation.
(i) "COMPENSATION COMMITTEE" means the Compensation Committee of
the Board.
(j) "DEFERRED AMOUNT" means, for each Plan Year, the sum of the
amount allocated under Section 4.1(a) and the amount of
Compensation deferred pursuant to Section 4.1(b).
(k) "DISABILITY" or "DISABLED" means a total and permanent
disability or being totally and permanently disabled as
determined by the Compensation Committee.
(l) "ELIGIBLE EMPLOYEE" means an employee designated to
participate by the Compensation Committee pursuant to
Section 2.3.
(m) "EMPLOYER" means Comair and any Subsidiary.
(n) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
(o) "FINANCE COMMITTEE" means the Finance Committee of the Board.
(p) "PARTICIPANT" means an Eligible Employee of an Employer who is
participating in the Plan in accordance with Article 3.
(q) "PLAN" means Comair Holdings, Inc. Deferred Incentive
Compensation Plan.
(r) "PLAN YEAR" means the 12 consecutive month period beginning on
April 1 of each year and ending on March 31.
<PAGE> 7
- 3 -
(s) "SUBSIDIARY" means any corporation, other than Comair, in an
unbroken chain of corporations beginning with Comair, if each
of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one or more
of the other corporations in such chain.
(t) "TRUST" means the trust described in Article 12.
(u) "TRUSTEE" means the trustee of the Trust.
(v) "VALUATION DATE" means the last day of each calendar quarter.
2.2 USAGE. Except where otherwise indicated by the context, any
masculine terminology used herein shall also include the feminine and vice
versa, and the definition of any term herein in the singular shall also include
the plural and vice versa.
2.3 ELIGIBILITY. An employee of any Employer who is a member of a
select group of management or highly compensated employees, as such group is
described under Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA, and is
designated to participate by the Compensation Committee as an Eligible Employee
shall participate at such time and for such period as designated by the
Compensation Committee.
ARTICLE 3
PARTICIPATION IN PLAN
3.1 PARTICIPATION. An Eligible Employee shall automatically
become a Participant upon receiving credit to his Account for an allocation by
the Compensation Committee under Section 4.1(a). In addition, an Eligible
Employee may elect to defer a part of his Compensation by entering into an
Agreement in the manner provided in Section 3.2 and shall thereupon become a
Participant (if not already a Participant). A Participant shall continue as a
Participant until his entire Benefit has been paid.
3.2 PARTICIPANT VOLUNTARY CONTRIBUTION AGREEMENT PROCEDURE.
(a) PLAN YEAR BEGINNING APRIL 1, 1995. For the Plan Year
beginning April 1, 1995, an Eligible Employee may properly
complete, execute and deliver an Agreement to defer
Compensation (other than bonuses) otherwise payable from
December 1, 1995 through March 31, 1996. Such an Agreement
must be delivered to the Administrator no later than November
1, 1995. In addition to, or in lieu of, such an Agreement, an
Eligible Employee may complete, execute and deliver an
Agreement to defer any bonus earned for services rendered
during the Plan Year ended March 31, 1996, but otherwise
payable after March 31, 1996. Such an Agreement must be
delivered to the
<PAGE> 8
- 4 -
Administrator no later than December 31, 1995. The Agreements
shall be irrevocable.
(b) SUBSEQUENT PLAN YEARS. For any Plan Year subsequent to the
first Plan Year for which an Eligible Employee wishes to defer
Compensation under the Plan, the Agreement shall be properly
completed, executed and delivered to the Administrator 30 days
prior to the first day of such Plan Year. The Agreement
completed in accordance with the preceding sentence shall be
effec- tive with respect to:
(1) Compensation (excluding bonuses for services
rendered during a prior Plan Year) otherwise payable during
the Plan Year for which the Agreement is applicable; and
(2) Any bonus earned for services rendered during
the Plan Year but otherwise payable after the close of the
Plan Year.
An Eligible Employee who does not enter into an Agreement when
eligible to participate in the Plan shall be permitted to
enter into an Agreement for any subsequent Plan Year for which
he remains an Eligible Employee. The Agreement shall be
revocable until the beginning of the Plan Year to which it
applies, at which time it shall become irrevocable.
ARTICLE 4
DEFERRAL AMOUNTS
4.1 DEFERRED AMOUNT. The Deferred Amount of the Participant for
any Plan Year shall consist of the following:
(a) The Participant's share of Comair's deferred incentive
compensation allocation determined by the Compensation
Committee (if any). The aggregate deferred incentive
compensation will be allocated to Participants' Accounts
proportionate with the Compensation of Participants for the
Plan Year. On a year-to-year basis, the Compensation
Committee may determine which Participants are eligible to
receive deferred incentive compensation.
(b) The Compensation the Participant elects to defer under the
Agreement.
4.2 CREDITING OF DEFERRALS AND EARNINGS.
(a) Amounts deferred pursuant to Section 4.1(a) for any Plan Year
shall be credited to the Participant's Account as of the last
day of the Plan Year. Amounts deferred pursuant to Section
4.1(b) shall be credited to the
<PAGE> 9
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Participant's Account as of the time the Compensation deferred
by the Participant would otherwise be paid.
(b) There shall be credited to the Account of each Participant an
additional amount of earnings (or losses) with respect to such
Account as of the last day of the quarter equal to a rate of
return as determined by the Compensation Committee.
ARTICLE 5
PAYMENT OF BENEFIT
5.1 PARTICIPANT'S BENEFIT. The Participant's Benefit shall be
determined as of the Valuation Date following the occurrence of the earliest of
the following events:
(a) the date elected by the Participant (but not before he attains
age 55); provided, the election was made at least 2 years in advance. Upon
distribution pursuant to such an election, the Participant shall no longer
receive an allocation of deferred incentive compensation under Section 4.1(a)
or defer Compensation under Section 4.1(b);
(b) the Participant dies or becomes Disabled;
(c) the Participant experiences a hardship, as determined under
Article 7; or
(d) the Plan terminates.
The amount of the Participant's Benefit shall be his vested Account.
A Participant shall be 100% vested in his own deferrals under Section 4.1(b).
A Participant shall vest in his deferred incentive compensation under Section
4.1(a) in accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
10 years or less 0%
11 years but less than 12 years 10%
12 years but less than 13 years 20%
13 years but less than 14 years 30%
14 years but less than 15 years 40%
15 years but less than 16 years 50%
16 years but less than 17 years 60%
17 years but less than 18 years 70%
18 years but less than 19 years 80%
19 years but less than 20 years 90%
20 years or more 100%
</TABLE>
<PAGE> 10
- 6 -
Notwithstanding the foregoing, a Participant shall be fully vested upon a
Change in Control. The Compensation Committee shall determine a "Year of
Service" based upon a twelve-month period beginning on the Participant's
anniversary date of employment as modified by the Compensation Committee in its
sole discretion. Any amount not vested shall be forfeited upon payment of the
Participant's Benefit. Any amounts forfeited shall be reallocated to
Participants' Accounts proportionate with the Compensation of Participants for
the Plan Year.
5.2 PAYMENT. Except for distributions due to hardship, payment of
the Participant's Benefit shall commence within 45 days after the Valuation
Date immediately following the occurrence of the payment event pursuant to
Section 5.1(a). Distributions due to hardship shall commence within 30 days
after determination of the hardship. The Compensation Committee shall have the
right to defer payment of the Benefit as needed to receive the applicable
income tax deduction except when there is a Change in Control pursuant to
Section 10.2 but not later than 30 days after the close of the Plan Year. The
Compensation Committee shall have the discretion to accelerate the time of
payment upon a Participant's termination of employment.
5.3 FORM OF BENEFIT PAYMENTS. The Participant may elect to have
the Benefit paid in any of the following forms:
(a) single lump sum payment;
(b) single life or joint life annuity;
(c) annual installments; or
(d) monthly installments.
All Benefits shall be paid in the form of cash. All elections must be made at
the time a Participant becomes an Eligible Employee and will be effective
immediately. The election may be changed at any time by the Participant, and
any change will be effective 2 years after executed by the Participant.
Notwithstanding the foregoing, all distributions prior to age 55, other than
due to the Participant's Disability, will be paid in a lump sum. Distributions
made pursuant to a Participant's Disability will be paid pursuant to the
Participant's election. If a Participant elects payment in a form other than a
lump sum, the Compensation Committee may provide a different rate of return for
the unpaid Account than under Section 4.2, comparable to a commercial annuity
product or other similar fixed term financial product.
<PAGE> 11
- 7 -
ARTICLE 6
DEATH OF PARTICIPANT
6.1 COMMENCEMENT OF BENEFIT PAYMENTS. If a Participant dies
before commencing payment of the vested Benefit, then the vested Benefit
otherwise payable with respect to the Participant shall be paid to the
Participant's beneficiary or beneficiaries within 45 days following the
Valuation Date after the date on which the Administrator is notified of the
Participant's death. Benefits payable to a Participant's beneficiary shall be
paid in a single lump sum cash payment. If the Participant has already
commenced receiving the vested Benefit, Benefits shall continue to be paid to
the Participant's beneficiary in the form elected pursuant to Section 5.3, if
other than a lump sum.
6.2 DESIGNATION OF BENEFICIARY. A Participant may designate, on a
form provided by the Administrator one or more primary and contingent
beneficiaries to receive all of the Benefit which may be payable hereunder
following the Participant's death, and may designate the proportions in which
such beneficiaries are to receive such payments. A Participant may change such
designations from time to time by filing a new form, and the last written
designation filed with the Administrator prior to the Participant's death shall
control. If a Participant fails to specifically designate a beneficiary, or if
no designated beneficiary survives the Participant, payment shall be made by
the Administrator in the following order of priority:
(a) to the Participant's surviving spouse, or if none,
(b) to the Participant's children, per stirpes, or if none,
(c) to the Participant's estate.
ARTICLE 7
HARDSHIP DISTRIBUTIONS
7.1 DISTRIBUTION. Subject to the approval of the Administrator, a
Participant may withdraw all or a portion of his vested Benefit in the event of
a hardship. A request for a hardship distribution shall be made in the form of
a written application. A hardship distribution shall only be made in the event
of an unforeseeable emergency that would result in severe financial hardship to
the Participant if hardship distributions were not permitted. Withdrawals of
amounts because of an unforeseeable emergency shall only be permitted to the
extent reasonably needed to satisfy the emergency need.
7.2 UNFORESEEABLE EMERGENCY. For purposes of this Article, an
unforeseeable emergency is defined as severe financial hardship to the
Participant resulting from a sudden and unexpected illness or accident of the
Participant or a dependent of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and unforesee-
<PAGE> 12
- 8 -
able circumstances arising as a result of events beyond the control of the
Participant. The circumstances that will constitute an unforeseeable emergency
will depend upon the facts of each case, but, in any case, payment may not be
made to the extent that such hardship is or may be relieved (i) through
reimbursement or compensation by insurance or otherwise or (ii) by liquidation
of the Participant's assets, to the extent the liquidation of such assets would
not itself cause severe financial hardship.
ARTICLE 8
ADMINISTRATION
8.1 GENERAL. The Administrator shall be the Compensation
Committee of the Board, or such other person or persons as designated by the
Board. Except as otherwise specifically provided in the Plan, the
Administrator shall be responsible for administration of the Plan. The
Administrator shall be the "named fiduciary" within the meaning of Section
402(c)(2) of ERISA.
8.2 ADMINISTRATIVE RULES. The Administrator may adopt such rules
of procedure as it deems desirable for the conduct of its affairs, except to
the extent that such rules conflict with the provisions of the Plan.
8.3 DUTIES. The Administrator shall have the following rights,
powers and duties:
(a) The decision of the Administrator in matters within its
jurisdiction shall be final, binding and conclusive upon
Comair and upon any other person affected by such decision,
subject to the claims procedure hereinafter set forth.
(b) The Administrator shall have the duty and authority to
interpret and construe the provisions of the Plan, to
determine eligibility for benefits, to decide any question
which may arise regarding the rights of employees,
Participants, and beneficiaries, and the amounts of their
respective interests, to adopt such rules and to exercise such
powers as the Administrator may deem necessary for the
administration of the Plan, and to exercise any other rights,
powers or privileges granted to the Administrator by the terms
of the Plan.
(c) The Administrator shall maintain full and complete records of
its decisions. Its records shall contain all relevant data
pertaining to the Participant and his rights and duties under
the Plan. The Administrator shall maintain the Account
records of all Participants, or shall cause the Trustee to
maintain such records.
(d) The Administrator shall cause the principal provisions of the
Plan to be communicated to the Participants, and a copy of the
Plan and other
<PAGE> 13
- 9 -
documents shall be available at the principal office of Comair
for inspection by the Participants at reasonable times
determined by the Administrator.
(e) The Administrator shall periodically report to the Board with
respect to the status of the Plan.
8.4 FEES. No fee or compensation shall be paid to any person for
services as the Administrator.
ARTICLE 9
CLAIMS PROCEDURE
9.1 GENERAL. A Participant or beneficiary ("claimant") who
believes that his Benefit has not been paid in full shall file such objection
on the form prescribed for such purpose with the Administrator.
9.2 DENIALS. The Administrator shall review such filing and
provide a notice of the decision regarding such filing to the claimant within a
reasonable period of time after receipt of the notice by the Administrator.
9.3 NOTICE. Any claimant whose objection to a payment of his
Benefit is denied shall be furnished written notice setting forth:
(a) the specific reason or reasons for the denial;
(b) specific reference to the pertinent provision of the Plan upon
which the denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the objection; and
(d) an explanation of the claim review procedure under the Plan.
9.4 APPEALS PROCEDURE. In order that a claimant may appeal a
denial of his objection to the amount of his Benefit, the claimant or the
claimant's duly authorized representative may:
(a) request a reconsideration by written application to the
Administrator, or its designee, no later than 60 days after
receipt by the claimant of written notification of denial of
his objection;
(b) review pertinent documents; and
<PAGE> 14
- 10 -
(c) submit issues and comments in writing.
9.5 REVIEW. A decision on review of a denied objection shall be
made by the Administrator not later than 60 days after receipt of a request for
review, unless special circumstances require an extension of time for
processing, in which case a decision shall be rendered within a reasonable
period of time, but not later than 120 days after receipt of a request for
review. The decision on review shall be in writing and shall include the
specific reason(s) for the decision and the specific reference(s) to the
pertinent provisions of the Plan on which the decision is based.
ARTICLE 10
CHANGE IN CONTROL PROVISIONS
10.1 IMPACT OF EVENT. In the event of a "Change in Control" as
defined in Section 10.2, (i) the Plan will be deemed terminated and (ii) a
Participant's Benefit shall be paid as soon as practical, but in no event later
than 60 days after the effective date of the Change in Control.
10.2 DEFINITION OF "CHANGE IN CONTROL". For purposes of Section
10.1 a "Change in Control" means the occurrence of any of the following:
(a) When any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than Comair or a Subsidiary, or any
Employer's employee benefit plan (including any trustee of
such plan acting as trustee) becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly of securities of Comair representing 50% or more of
the combined voting power of Comair's then outstanding
securities;
(b) Any transaction or event relating to any Employer required to
be described pursuant to the requirements of Item 6(e) of
Schedule 14A of the Securities and Exchange Commission under
the Exchange Act (as in effect on the effective date of this
Plan), whether or not the Employer is then subject to such
reporting requirement;
(c) When, during any period of 2 consecutive years during the
existence of the Plan, the individuals who, at the beginning
of such period, constitute the Board, cease for any reason
other than death to constitute at least a two-thirds (2/3)
majority thereof; provided, however, that a director who was
not a director at the beginning of such period shall be deemed
to have satisfied the two-year requirement if such director
was elected by, or on the recommendation of, at least
two-thirds (2/3) of the directors who were
<PAGE> 15
- 11 -
directors at the beginning of such period (either actually or
by prior operation of this Subsection 10.2(c)); or
(d) The occurrence of a transaction requiring shareholder approval
for the acquisition of Comair by an entity other than an
Employer through purchase of assets, by merger, or otherwise.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 AMENDMENT AND TERMINATION. Comair reserves the right to amend
or terminate the Plan in any manner that it deems advisable, by a resolution of
the Board. Notwithstanding the preceding, no amendment or termination of the
Plan shall (i) reduce or adversely affect the Benefit of any Participant or
beneficiary hereunder entitled to receive a Benefit under the Plan, (ii) reduce
or adversely affect the right of any other Participant to receive upon his
termination of employment from an Employer the Benefit he would have received
if such termination had occurred immediately prior to any such amendment or
termination of the Plan, or (iii) modify the provisions of Article 10 after a
Change in Control has occurred, except as necessary to comply with any federal
or state law.
11.2 NO ASSIGNMENT. The Participant shall not have the power to
pledge, transfer, assign, anticipate, mortgage or otherwise encumber or dispose
of in advance any interest in amounts payable hereunder or any of the payments
provided for herein, nor shall any interest in amounts payable hereunder or in
any payments be subject to seizure for payments of any debts, judgments,
alimony or separate maintenance, or be reached or transferred by operation of
law in the event of bankruptcy, insolvency or otherwise.
11.3 SUCCESSORS AND ASSIGNS. The provisions of the Plan are
binding upon and inure to the benefit of any Employer, its successors and
assigns, and the Participant, his beneficiaries, heirs, legal representatives
and assigns.
11.4 GOVERNING LAW. The Plan shall be subject to and construed in
accordance with the laws of the Commonwealth of Kentucky to the extent not
preempted by the provisions of ERISA.
11.5 NO GUARANTEE OF EMPLOYMENT. Nothing contained in the Plan
shall be construed as a contract of employment or deemed to give any
Participant the right to be retained in the employ of any Employer or any
equity or other interest in the assets, business or affairs of an Employer. No
Participant hereunder shall have a security interest in assets of any Employer
used to make contributions or pay benefits.
11.6 SEVERABILITY. If any provision of the Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Plan,
<PAGE> 16
- 12 -
but the Plan shall be construed and enforced as if such illegal or invalid
provision had never been included herein.
11.7 NOTIFICATION OF ADDRESSES. Each Participant and each
beneficiary shall file with the Administrator, from time to time, in writing,
the post office address of the Participant, the post office address of each
beneficiary, and each change of post office address. Any communication,
statement or notice addressed to the last post office address filed with the
Administrator (or if no such address was filed with the Administrator, then to
the last post office address of the Participant or beneficiary as shown on
Employer's records) shall be binding on the Participant and each beneficiary
for all purposes of the Plan and neither the Administrator nor the Employer
shall be obliged to search for or ascertain the whereabouts of any Participant
or beneficiary.
11.8 INCOME TAX PAYMENT. No later than the date as of which an
amount received pursuant to this Plan first becomes includable in the gross
income of an individual for federal income tax purposes, the individual shall
pay to Comair, or make arrangements satisfactory to the Committee regarding the
payment of, any federal, state, or local taxes of any kind required by law to
be withheld with respect to such amount. The obligations of Comair under the
Plan shall be conditional on such payment or arrangements. Comair shall have
the right to deduct any taxes from any payment of any kind otherwise due to the
individual.
11.9 BONDING. The Administrator and all agents and advisors
employed by it shall not be required to be bonded, except as otherwise required
by ERISA.
11.10 EXCLUSIVE USE. The principal of the Trust, and any earnings
thereon shall be held separate and apart from other funds of Comair and shall
be used exclusively for the uses and purposes of Participants and general
creditors as herein set forth. Participants and their beneficiaries shall have
no preferred claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plan shall be mere unsecured
contractual rights of Participants and their beneficiaries against Comair. Any
assets held by the Trust will be subject to the claims of Comair's general
creditors under federal and state law in the event of insolvency.
ARTICLE 12
TRUST
12.1 TRUST. The Trust shall be known as the Comair Holdings, Inc.
Deferred Incentive Compensation Trust. The Trust shall be established by the
execution of a trust agreement with one or more Trustees and is intended to be
maintained as a "grantor trust" under Section 677 of the Code. The assets of
the Trust will be held and disposed of by the Trustee, in accordance with the
terms of the Trust, for the purpose of providing Benefits for the Participants.
The Finance Committee shall direct the investment of Trust assets.
Notwithstanding any provision of the Plan or the Trust to the contrary, the
assets of the
<PAGE> 17
- 13 -
Trust shall at all times be subject to the claims of Comair's general creditors
in the event of insolvency or bankruptcy.
12.2 PAYMENT OF BENEFITS. All Benefits under the Plan and expenses
chargeable to the Plan, to the extent not paid directly from the Trust, shall
be paid by Comair. Notwithstanding the foregoing, Comair shall pay any fees
charged by the Trustee to act as a fiduciary of the Trust.
12.3 QUARTERLY VALUATION OF ACCOUNTS. Within 30 days following the
end of each Valuation Date, the Administrator shall determine the value of all
Accounts maintained under the Plan. Thereafter, a statement of account shall
be provided to each Participant reflecting the current value of that
Participant's Accounts.
12.4 CONTRIBUTION TO TRUST. If as of any Valuation Date the
Administrator determines that the value of the Accounts maintained for all
Participants under the Plan exceeds the assets held under the Trust, then
Comair shall contribute sufficient assets to the Trust so that the assets of
the Trust are equal to or greater than the value of all Accounts under the
Plan. Such contribution shall be made within 90 days following the Valuation
Date for which the deficit was determined.
12.5 DISTRIBUTION OF EXCESS ASSETS. If as of any Valuation Date
prior to the occurrence of a Change in Control the assets of the Trust exceed
the value of all Accounts maintained under the Plan, Comair may request that
such excess assets be distributed by the Trustee to Comair. Comair's request
to receive excess assets due to forfeiture or otherwise must be in writing and
must be accompanied by a written certification from the Administrator
specifying the amount of the excess assets in the Trust.
12.6 TRUSTEE DUTIES. The powers, duties and responsibilities of
the Trustee shall be as set forth in the Trust agreement and nothing contained
in the Plan, either expressly or by implication, shall impose any additional
powers, duties or responsibilities upon the Trustee.
ARTICLE 13
INDEMNIFICATION
Comair shall indemnify and hold harmless the members of the Board and
the members of the Committee from and against any and all liabilities, costs,
and expenses incurred by such persons as a result of any act, or omission to
act, in connection with the performance of such persons' duties,
responsibilities and obligations under this Plan, other than such liabilities,
costs and expenses as may result from the gross negligence or criminal acts of
such persons.
<PAGE> 18
- 14 -
The undersigned, pursuant to the approval of the Board on October 20,
1995, does herewith execute on behalf of Comair this Comair Holdings, Inc.
Deferred Incentive Compensation Plan.
COMAIR HOLDINGS, INC.
BY: _________________________________
ITS: ________________________________
<PAGE> 1
EXHIBIT 10.8
AMENDMENT
This Amendment ("Amendment") entered into this ________ May, 1991, by
and between Comair Holdings, Inc., a Kentucky corporation ("Company") and David
R. Mueller ("Mueller").
WITNESSETH:
WHEREAS, Comair, Inc. and Mueller have entered into a Restated
Employment Agreement dated as of June 1, 1988;
WHEREAS, Comair, Inc. assigned the Restated Employment Agreement
("Agreement") to the Company; and
WHEREAS, Company and Mueller desire to amend the Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto agree as follows:
1. Section 9 is hereby amended in its entirety to read as follows:
"9. EARLY TERMINATION.
a. Notwithstanding anything to the contrary herein, the Company
shall have the right at any time, at its sole option, to terminate
Mueller's employment hereunder without cause upon thirty (30) days prior
written notice; provided, however, if Mueller's employment is terminated
pursuant to this Section 9, Company shall pay Mueller, and Mueller shall
accept in full satisfaction of Company's obligations under this
Agreement, an amount equal to the base salary in effect at the
termination date computed for a period of three (3) years, payable in a
lump sum payment within fifteen (15) days following termination;
provided, further, in the event of a "change of control" of the Company
(as hereinafter defined), this Agreement shall be deemed terminated as
of the date of the change of control, and the Company shall pay to
Mueller the payment required under this Section; provided, further,
Mueller shall have the right to waive the termination and payment due
hereunder upon execution of a revised Employment Agreement with the
Company, in form and substance satisfactory to Mueller. "Change in
Control" shall be deemed to occur if any person or affiliated group
acquires more than Twenty-Five Percent of the outstanding common stock
of the Company. Mueller hereby acknowledges that as a condition of his
right to receive the payments provided for in this Section
<PAGE> 2
2
9, he will be required and hereby agrees to execute and deliver
to Company a form of release and any other documents reasonably
requested by Company to acknowledge full satisfaction by Mueller
of Company's obligations under this Agreement.
"b. If Mueller's employment is terminated due to death, Company
shall, thereafter, pay to the estate or legal representative of Mueller
an amount equal to the payment due under Section 9(a) hereof upon
termination of this Agreement."
2. The Company and Mueller here ratify the terms and provisions of the
Agreement which shall remain in full force and effect except as herein
modified.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
COMAIR HOLDINGS, INC.
By:
- ---------------------------------- ----------------------------------
Witness
- ---------------------------------- -------------------------------------
Witness David R. Mueller
<PAGE> 3
RESTATED EMPLOYMENT AGREEMENT
THIS RESTATED EMPLOYMENT AGREEMENT ("Agreement") is dated as of June 1,
1988 by and between COMAIR, INC. an Ohio corporation ("Company") and DAVID R.
MUELLER ("Mueller")
W I T N E S S E T H:
WHEREAS, the Company and Mueller entered into an Employment Agreement
dated December 23, 1983 which they desire to amend and restate; and
WHEREAS, Company desires to continue to employ Mueller as President and
Chief Executive Officer, and Mueller desires to continue to perform such duties;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
3. EMPLOYMENT. The Company does hereby continue to employ Mueller,
subject to the terms and conditions hereinafter contained, as an executive
employee with the title of President and Chief Executive Officer or such other
executive title or titles as determined by the Board of Directors of Company,
and Mueller accepts such employment upon the terms and conditions herein
contained.
4. TERM. The term of this Agreement shall be for three (3) years,
which shall commence on June 1, 1988, and shall terminate on May 31, 1991,
unless sooner terminated in accordance with the provisions hereof; provided,
however, on May 31 of each year during the term commencing in 1989, this
Agreement shall be extended for an additional year unless either party shall
give thirty (30) days prior written notice not to automatically extend the
terms for an additional year.
5. DUTIES AND RESPONSIBILITIES.
a. Mueller agrees during the term of his employment hereunder to use his
best efforts, skills and abilities to promote Company's business and interests
and to perform such duties consistent with his appointment as President and
Chief Executive Officer as may be assigned to him by the Board of Directors of
Company or the Executive Committee of the Board of Directors. Mueller shall
maintain communication with the Chairman and the Board of Directors of Company
concerning his areas of responsibility and shall supply it with written reports,
business plans, budgets, forecasts and other studies concerning the business of
Company as he shall prepare from time to time during his
<PAGE> 4
2
employment by the Company hereunder, which reports, plans, budgets, forecasts
and other studies shall be implemented only with the approval of the Board of
Directors.
b. Mueller agrees to abide by any and all rules and regulations
governing the transaction of business as the Board of Directors of Company may
from time to time adopt or approve.
6. ELECTION AS DIRECTOR AND OFFICER. It is contemplated that Mueller
will continue to be elected as a member of the Board of Directors and as Chief
Executive Officer of Company and will be retained in such posts throughout his
employment by Company.
7. COMPENSATION. Company shall pay Mueller in full payment for any
and all services rendered by him hereunder, including, without limitation, all
services as an officer or Director or both of Company, its subsidiaries or
affiliates, at an annual rate of Two Hundred Fifteen Thousand Dollars
($215,000), subject to increase at the sole discretion of the Board of
Directors and payable in accordance with the customary payroll practices of
Company (but not less often than monthly). If Mueller's salary is increased by
the Board of Directors, such increased salary shall become the minimum amount
of compensation payable to Mueller under this Agreement, and will not be
reduced thereafter. Mueller shall also remain a participant in the Company's
Management incentive Compensation Plan (the "Plan"), and shall be eligible to
receive bonuses thereunder in accordance with the terms of the Plan.
8. ADDITIONAL EMPLOYMENT BENEFITS. Mueller shall be entitled to
participate in all benefits made generally available by Company to its
Executive Offices during the period covered by this Agreement, including,
without limitation, vacations, pension plans, profit sharing plans,
hospitalization insurance, health and accident insurance, disability insurance,
group term life insurance, and all other fringe benefits which may be provided
by Company for its Executive Officers during the term of employment.
9. INDEMNIFICATION. Company shall indemnify and hold Mueller harmless
for any actions taken or decisions made by him in good faith while performing
services in his capacity as President, Chief Executive Officer or Director of
Company during the term of this Agreement. To the extent permitted by law,
Company shall pay, indemnify, and hold Mueller harmless from any liability,
cost or expense (including, without limitation, reasonable attorneys' fees)
incurred by him in the defense of any claim, proceeding or action arising out
of his performance of services for Company, or out of his status as an Officer
or Director of Company. Company will use its best efforts to obtain coverage
for Mueller under any insurance
<PAGE> 5
3
now in force or hereafter obtained during the term of this Agreement covering
any employee, officer or director of Company. Notwithstanding the foregoing,
Company does not intend to and shall not indemnify Mueller for any act or
omission by him constituting fraud or willful misconduct.
10. TERMINATION. Mueller's rights under this Agreement shall continue
until expiration of the term under Section 9 hereof, unless prior thereto: (i)
Mueller dies; (ii) Mueller is dismissed without cause pursuant to Section 9
hereof; (iii) Mueller is dismissed for cause as defined in Section 10 hereof;
or (iv) Company determines that Mueller has become disabled, as provided in
Section 11 hereof.
11. EARLY TERMINATION.
a. Notwithstanding anything to the contrary herein, the Company
shall have the right at any time, at its sole option, to terminate Mueller's
employment hereunder without cause upon thirty (30) days' prior written notice;
provided, however, if Mueller's employment is terminated pursuant to this
Section 9 Company shall pay Mueller, and Mueller shall accept in full
satisfaction of Company's obligations under this Agreement, an amount equal to
the base salary in effect at the termination date for a period of two (2)
years, payable in a lump sum payment within fifteen (15) days following
termination; provided further in the event of a "change of control" of the
Company (as hereinafter defined), this Agreement shall be deemed terminated as
of the date of the change of control, and the Company shall pay to Mueller the
payment required under this Section; provided, further, Mueller shall have the
right to waive the termination and payment due hereunder upon execution of a
revised Employment Agreement with the Company, in form and substance
satisfactory to Mueller. "Change in control" shall be deemed to occur if any
person or affiliated group acquires more than Twenty-Five Percent of the
outstanding common stock of the Company. Mueller hereby acknowledges that as a
condition of his right to receive the payments provided for in this Section he
will be required and hereby agrees to execute and deliver to Company a form of
release and any other documents reasonably requested by Company to acknowledge
full satisfaction by Mueller of Company's obligations under this Agreement.
b. If Mueller's employment is terminated due to death, Company
shall, thereafter, pay to the estate or legal representative of Mueller an
amount equal to the payment due under Section 9(a) hereof upon termination of
this Agreement.
<PAGE> 6
4
12. TERMINATION FOR CAUSE.
a. Anything herein to the contrary notwithstanding, Company shall
have the right to terminate Mueller's employment hereunder for cause, as such
terms are defined in the following section.
b. For the purpose of this Section 10, the term "cause" means
(i) fraud, misappropriation, embezzlement, intentional and material damage to
the property of Company; or (ii) material breach of any of the provisions of
this Agreement described in Section 12.
c. Upon termination of Mueller's employment for cause pursuant
to this Section 10, Mueller shall not be entitled to receive any further
compensation other than accrued benefits under profit sharing or pension plans,
if any, and shall be completely relieved of his position as an officer of
Company, its subsidiaries and affiliates, and Mueller covenants and agrees to
deliver at the termination date all resignations necessary to effect the
foregoing.
13. DISABILITY.
a. If, during the term of this Agreement, Mueller contracts an
illness or other disability which prevents performance by him of his duties as
an Executive Officer for a consecutive period of six (6) months or more, then
Company at its option, may at any time thereafter terminate this Agreement by
serving thirty (30) days written notice thereof on Mueller and this Agreement
shall terminate and come to an end upon the date set forth in said notice as if
such date were the termination date of this Agreement. If prior to the date
specified in such notice, Mueller's illness or incapacity shall have been
terminated and he is physically and mentally able to perform his duties as an
Executive Officer and shall have taken up and is performing such duties on a
full time basis, he shall be entitled to resume employment hereunder as though
such notice had not been given.
b. During any period of disability and prior to the termination
of this Agreement as in this Section provided, Mueller shall continue to be
paid in full by Company in accordance with the provisions of Section 5, except
that Company shall deduct from Mueller's compensation as herein provided an
amount equal to any disability insurance payments received by Mueller for such
period pursuant to disability insurance policies paid for and maintained by
Company for the benefit of Mueller.
<PAGE> 7
5
c. If there should be any dispute between the parties as to
Mueller's physical or mental disability at any time, such questions shall be
settled by the majority opinion of three impartial, reputable physicians, one
of whom shall be selected by Company, another by Mueller, and the third by the
two physicians selected by Company and Mueller. The certificate of two such
physicians as to the matter in dispute shall be final and binding on the
parties.
14. CONFIDENTIALITY AND NON-COMPETITION.
a. Mueller will not at any time during the term of this Agreement
or thereafter, except as authorized by Company, divulge, furnish or make
accessible to any person, firm, corporation or other entity, any such
confidential and sensitive information and any other information not otherwise
publicly available which he presently possesses or which he may obtain during
the course of his employment with respect to the business, customers and affairs
of Company or any subsidiary or affiliate of Company or trade secrets,
developments, know-how methods or other information and data pertaining to
practices, equipment, developments or any confidential or secret aspect of the
business of Company or any subsidiary or affiliate of Company, and that all such
matters and information shall be kept strictly and absolutely confidential.
Mueller, upon termination of his employment, irrespective of the time, manner or
cause of termination, will surrender and deliver to Company all lists, books,
records and data of every kind relating to or in connection with the business of
Company or any subsidiary or affiliate of Company, and all property belonging to
Company and any subsidiary or affiliate of Company.
b. During the term of this Agreement and, in the event that
Mueller's employment with Company is terminated for any reason other than a
change in control as defined in Section 9 hereof, for a period of two (2) years
after such termination, Mueller shall not, directly or indirectly, engage in or
contract with others to engage in any business enterprise, line of work,
consulting contract, joint venture or other arrangement which conducts a
business or businesses substantially similar to the business conducted by
Company in any area in which Company or any of its affiliates or subsidiaries
provides or plans to provide air transportation to the public. Mueller
acknowledges that the geographic area covered hereby, and the period and nature
of the agreed restrictions are reasonable and necessary for the protection of
the business of Company. All provisions of this paragraph concerning
non-competition are severable; and while it is the intention of the parties that
all of said provisions shall be enforceable, if any one of the same shall be
held to be
<PAGE> 8
6
unenforceable in whole or in part, the remainder shall continue to be in full
force and effect.
15. IRREPARABLE INJURY. Mueller acknowledges that his compliance with
his duties and obligations under Section 12 is necessary to protect the goodwill
and other proprietary interests of Company and the purposes and essence of this
Agreement. Mueller acknowledges that a breach of his duties and obligations
under Section 12 will result in irreparable and continuing damage to Company for
which there will be no adequate remedy at law; and agrees that, in the event of
any breach of any of the aforesaid duties and obligations, Company and its
successors and assigns shall be entitled to injunctive or other equitable relief
and to such other and further relief as may be proper.
16. ASSIGNMENT AND SUCCESSORS IN INTEREST. To the extent that the
obligations provided for herein require the personal performance of Mueller,
Mueller's rights, interests and obligations as provided herein may not be
assigned. Except as otherwise provided in the immediately preceding section of
this sentence, all rights privileges and obligations of the parties hereto shall
inure to the benefit of and be binding upon their respective successors,
assigns, heirs, executors, administrators and estates.
17. NOTICE. Any notice required or permitted hereunder shall be given
in writing and delivered to the other party by U. S. registered or certified
mail; if to Company, at Post Office Box 75021, Greater Cincinnati International
Airport, Cincinnati, Ohio 45275; if to Mueller, at P. O. Box 18728, Erlanger,
Kentucky, 41018, or such other address as either party may specify in a written
notice to the other party.
18. ENTIRE AGREEMENT AND AMENDMENT. This Agreement embodies the
entire agreement between the parties and supersedes all prior agreements,
whether written or oral, relating to the object matter herein. Any amendment
hereto shall be in writing and executed by the duly authorized representatives
of each party.
19. CHOICE OF LAW. This Agreement shall be construed in accordance
with the laws of the State of Ohio.
20. SEVERABILITY. If any portion of this Agreement shall be held
unenforceable for any reason, the same shall not affect the validity or
enforceability of the remaining provisions contained herein.
<PAGE> 9
7
21. HEADINGS. The section headings used in this Agreement are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WITNESS: COMAIR, INC.
/s/ RANDY D. RADEMACHER BY: /s/ DAVID A. SIEBENBURGEN
- ----------------------- -----------------------------
/s/ RANDY D. RADEMACHER /s/ DAVID R. MUELLER
- ----------------------- -----------------------------
DAVID R. MUELLER
<PAGE> 1
EXHIBIT 10.9
RESTATED EMPLOYMENT AGREEMENT
THIS RESTATED EMPLOYMENT AGREEMENT ("Agreement") is dated as of June 1,
1988 by and between COMAIR, INC., an Ohio corporation ("Company") and DAVID A.
SIEBENBURGEN ("Siebenburgen").
W I T N E S S E T H:
WHEREAS, the Company and Siebenburgen entered into an Employment
Agreement dated June 30, 1986 which they desired to amend and restate; and
WHEREAS, Company desires to employ Siebenburgen as Executive Vice-
President and Chief Operating Officer, and Siebenburgen desires to perform such
duties;
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
1. EMPLOYMENT. The Company does hereby employ Siebenburgen, subject
to the terms and conditions hereinafter contained, as an executive employee
with the title of Executive Vice-President and Chief Operating Officer or such
other executive title or titles hereafter determined by the Board of Directors
of Company, and Siebenburgen accepts such employment upon the terms and
conditions herein contained.
2. TERM. The term of this Agreement shall be for three (3) years,
which shall commence on June 1, 1988, and shall terminate on May 31, 1991,
unless sooner terminated in accordance with the provisions hereof; provided,
however, on May 31 of each
<PAGE> 2
- 2 -
year during the term commencing in 1989, this Agreement shall be extended for
an additional year unless either party shall give thirty (30) days prior
written notice not to automatically extend the term for an additional year.
3. DUTIES AND RESPONSIBILITIES.
(a) Siebenburgen agrees during the term of his employment hereunder to
use his best efforts, skills and abilities to promote the Company's business and
interests and to perform such duties consistent with his appointment as
Executive Vice President and Chief Operating Officer as may be assigned to him
by the Chief Executive Officer, Board of Directors or the Executive Committee of
the Board of Directors of the Company. Siebenburgen shall maintain communication
with the Chairman, Chief Executive Officer and the Board of Directors of Company
concerning his areas of responsibility and shall supply them with written
reports, business plans, budgets, forecast and other studies concerning the
business of Company as he shall prepare from time to time during his employment
by the Company hereunder, which reports, plans, budgets, forecast and other
studies shall be implemented only with the approval of the Board of Directors.
(b) Siebenburgen agrees to abide by any and all rules and regulations
governing the transaction of business as the Board of Directors of Company from
time to time adopt or approve.
<PAGE> 3
- 3 -
4. ELECTION AS OFFICER. It is contemplated that Siebenburgen will
continue to be appointed Chief Operating Officer of Company and will be
retained in such post throughout his employment by Company.
5. COMPENSATION. Company shall pay Siebenburgen in full payment for
any and all services rendered by him hereunder, including, without limitation,
all services as an officer of Company, its subsidiaries or affiliates, a salary
at an annual rate of One Hundred Fifty Thousand Dollars ($150,000), subject to
increase at the sole discretion of the Board of Directors and payable in
accordance with the customary payroll practices of Company (but not less often
than monthly). If Siebenburgen's salary is increased by the Board of Directors,
such increased salary shall become the minimum amount of compensation payable
to Siebenburgen under this Agreement, and will not be reduced thereafter.
Siebenburgen shall also remain a participant in the Company's Management
Incentive Compensation Plan (the "Plan"), and shall be eligible to receive
bonuses thereunder in accordance with the terms of the Plan.
6. ADDITIONAL EMPLOYMENT BENEFITS. Siebenburgen shall be entitled to
participate in all benefits made generally available by Company to its
Executive Officers during the period covered by this Agreement, including,
without limitation, vacations, pension plans, profit sharing plans,
hospitalization insurance, health and
<PAGE> 4
- 4 -
accident insurance, disability insurance, group term life insurance, and all
other fringe benefits which may be provided by Company for its Executive
Officers during the term of employment.
7. INDEMNIFICATION. Company shall indemnify and hold Siebenburgen
harmless for any actions taken or decisions made by him in good faith while
performing services in his capacity as Executive Vice-President and Chief
Operating Officer of Company during the term of this Agreement. To the extent
permitted by law, Company shall pay, indemnify, and hold Siebenburgen harmless
from any liability, cost or expense (including, without limitation, reasonable
attorneys' fees) incurred by him in the defense of any claim, proceeding or
action arising out of his performance of services for Company, or out of his
status as an Office of Company. Company will use its best efforts to obtain
coverage for Siebenburgen under any insurance now in force or hereafter obtained
during the term of this Agreement covering any employee or officer of Company.
Notwithstanding the foregoing, Company does not intend to and shall not
indemnify Siebenburgen for any act or omission by him constituting fraud or
wilful misconduct.
8. TERMINATION. Siebenburgen's rights under this Agreement shall
continue until expiration of the term under Section 2 hereof, unless prior
thereto: (1) Siebenburgen dies; (ii) Siebenburgen is dismissed without cause
pursuant to Section 9 hereof; (iii) Siebenburgen is dismissed for cause as
defined in
<PAGE> 5
- 5 -
Section 10 hereof; or (iv) Company determines that Siebenburgen has become
disabled, as provided in Section 11 hereof.
9. EARLY TERMINATION.
a. Notwithstanding anything to the contrary herein, the Company
shall have the right at any time, at its sole option, to terminate
Siebenburgen's employment hereunder without cause upon thirty (30) days' prior
written notice; provided, however, if Siebenburgen's employment is terminated
pursuant to this Section 9, Company shall pay Siebenburgen, and Siebenburgen
shall accept in full satisfaction of Company's obligations under this Agreement,
an amount equal to the base salary in effect at the termination date for a
period of two (2) years, payable in a lump sum payment within fifteen (15) days
following termination; provided, further, in the event of a "change in control"
of the Company (as hereinafter defined), this Agreement shall be deemed
terminated as of the date of the change of control, and the Company shall pay to
Siebenburgen the payments required under this Section; provided, further,
Siebenburgen shall have the right to waive the termination and payments due
hereunder upon execution of a revised Employment Agreement with the Company, in
form and substance satisfactory to Siebenburgen. "Change in control" shall be
deemed to occur if any person or affiliated group acquires more than Twenty Five
Per Cent (25%) of the outstanding common stock of the Company. Siebenburgen
hereby acknowledges that as a condition of his right to receive the
<PAGE> 6
- 6 -
payments provided for in this Section 9, he will be required and hereby agrees
to execute and deliver to Company a form of release and any other documents
reasonably requested by Company to acknowledge full satisfaction by
Siebenburgen of Company's obligations under this Agreement.
(b) If Siebenburgen's employment is terminated due to death,
Company shall, thereafter, pay to the estate or legal representative of
Siebenburgen an amount equal to the payment due under Section 9(a) hereof upon
termination of this Agreement.
10. TERMINATION FOR CAUSE.
(a) Anything herein to the contrary notwithstanding, Company
shall have the right to terminate Siebenburgen's employment hereunder for
cause, as such terms are defined in the following section.
(b) For the purpose of this Section 10, the term "cause" means
(i) fraud, misappropriation, embezzlement, intentional and material damage to
the property of Company; or (ii) material breach of any of the provisions of
this Agreement described in Section 12.
(c) Upon termination of Siebenburgen's employment for cause
pursuant to this Section 10, Siebenburgen shall not be entitled to receive any
further compensation other than accrued benefits under profit sharing or
pension plans, if any, and shall be completely relieved of his position as an
officer of Company, its subsidiaries and affiliates, and Siebenburgen covenants
and
<PAGE> 7
- 7 -
agrees to deliver at the termination date all resignations necessary to effect
the foregoing.
11. DISABILITY.
(a) If, during the term of this Agreement, Siebenburgen contracts
an illness or other disability which prevents performance by him of his duties
as an Executive Officer for a consecutive period of six (6) months or more,
then Company at its option, may at any time thereafter terminate this Agreement
by serving thirty (30) days written notice thereof on Siebenburgen and this
Agreement shall terminate and come to an end upon the date set forth in said
notice as if such date were the termination date of this Agreement. If prior to
the date specified in such notice, Siebenburgen's illness or incapacity shall
have been terminated and he is physically and mentally able to perform his
duties as an Executive Officer and shall have taken up and is performing such
duties on a full time basis, he shall be entitled to resume employment
hereunder as though such notice had not been given.
(b) During any period of disability and prior to the termination
of this Agreement as in this Section provided, Siebenburgen shall continue to
be paid in full by Company in accordance with the provisions of Section 5,
except that Company shall deduct from Siebenburgen's compensation as herein
provided an amount equal to any disability insurance payments received by
Siebenburgen for such period pursuant to disability insurance
<PAGE> 8
- 8 -
policies paid for and maintained by Company for the benefit of Siebenburgen.
(c) If there should be any dispute between the parties as to
Siebenburgen's physical or mental disability at any time, such questions shall
be settled by the majority opinion of three impartial, reputable physicians,
one of whom shall be selected by Company, another by Siebenburgen, and the
third by the two physicians selected by Company and Siebenburgen. The
certificate of two such physicians as to the matter in dispute shall be final
and binding on the parties.
12. CONFIDENTIALITY AND NON-COMPETITION.
(a) Siebenburgen will not at any time during the term of this
Agreement or thereafter, except as authorized by Company, divulge, furnish
or make accessible to any person, firm, corporation or other entity, any such
confidential and sensitive information and any other information not otherwise
publicly available which he presently possesses or which he may obtain
during the course of his employment with respect to the business, customers and
affairs of Company, or any subsidiary or affiliate of Company, or trade
secrets, developments, know-how methods or other information and data
pertaining to practices, equipment, developments or any confidential or secret
aspect of the business of Company or any subsidiary or affiliate of Company,
and that all such matters and information shall be kept strictly and absolutely
<PAGE> 9
- 9 -
confidential. Siebenburgen, upon termination of his employment, irrespective of
the time, manner or cause of termination, will surrender and deliver to Company
all lists, books, records and data of every kind relating to or in connection
with the business of Company or any subsidiary or affiliate of Company, and all
property belonging to Company and any subsidiary or affiliate of Company.
(b) During the term of this Agreement and, in the event that
Siebenburgen's employment with Company is terminated for any reason other than
a change in control as defined in Section 9 hereof, for a period of two (2)
years after such termination, Siebenburgen shall not, directly or indirectly,
engage in or contract with others-to engage in any business enterprise, line of
work, consulting contract, joint venture or other arrangement which conducts a
business or businesses substantially similar to the business conducted by
Company in any area in which Company or any of its affiliates or subsidiaries
provides or plans to provide air transportation to the public. Siebenburgen
acknowledges that the geographic area covered hereby, and the period and nature
of the agreed restrictions are reasonable and necessary for the protection of
the business of Company. All revisions of this paragraph concerning
non-competition are severable; and while it is the intention of the parties
that all of said provisions shall be enforceable, if any one of the same shall
be held to be unenforceable in whole or in part, the remainder shall continue
to
<PAGE> 10
- 10 -
be in full force and effect.
13. IRREPARABLE INJURY. Siebenburgen acknowledges that his compliance
with his duties and obligations under Section 12 is necessary to protect the
goodwill and other proprietary interests of Company and the purposes and
essence of this Agreement. Siebenburgen acknowledges that a breach of his
duties and obligations under Section 12 will result in irreparable and
continuing damage to Company for which there will be no adequate remedy at law;
and agrees that, in the event of any breach of any of the aforesaid duties and
obligations, Company and its successors and assigns shall be entitled to
injunctive or other equitable relief and to such other and further relief as
may be proper.
14. ASSIGNMENT AND SUCCESSORS IN INTEREST. To the extent that the
obligations provided for herein require the personal performance of
Siebenburgen, Siebenburgen's rights, interests and obligations as provided
herein may not be assigned. Except as otherwise provided in the immediately
preceding section of this sentence, all rights, privileges and obligations of
the parties hereto shall inure to the benefit of and be binding upon their
respective successors, assigns, heirs, executors, administrators and estates.
15. NOTICE. Any notice required or permitted hereunder shall be given
in writing and delivered to the other party by U.S. registered or certified
mail; if to Company, at Post Office Box
<PAGE> 11
- 11 -
75021, Greater Cincinnati International Airport, Cincinnati, Ohio 45275; if to
Siebenburgen, at 7582 Squirrel Creek, Cincinnati, Ohio 45247, or such other
address as either party may specify in a written notice to the other party.
16. ENTIRE AGREEMENT AND AMENDMENT. This Agreement embodies the
entire agreement between the parties and supersedes all prior agreements,
whether written or oral, relating to the subject matter herein. Any amendment
hereto shall be in writing and executed by the duly authorized representatives
of each party.
17. CHOICE OF LAW. This Agreement shall be construed in accordance
with the laws of the State of Ohio.
18. SEVERABILITY. If any portion of this Agreement shall be held
unenforceable for any reason, the same shall not affect the validity of
enforceability of the remaining provisions contained herein.
19. HEADINGS. The section headings used in this Agreement are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WITNESS: COMAIR, INC.
/s/ RANDY D.RADEMACHER BY: /s/ DAVID R. MUELLER
- ---------------------------------- -----------------------------------
/s/ RANDY D.RADEMACHER /s/ DAVID A. SIEBENBURGEN
- ---------------------------------- -----------------------------------
DAVID A. SIEBENBURGEN
<PAGE> 1
EXHIBIT 10.10
COMAIR HOLDINGS, INC.
PERFORMANCE BASED INCENTIVE BONUS PLAN
The Comair Holdings, Inc. Performance Based Incentive Bonus Plan is a plan
available to certain employees, as designed by the Compensation Committee of
the Board of Directors. The Plan is designed to link the bonuses awarded to the
plan participants to the Company's current performance.
Performance is defined in terms of financial, operating and management
development goals for which each person is responsible, in addition to overall
Company financial goals. All performance goals, which include pre-tax profits,
quality of passenger service measurements, various unit revenue and cost
objectives and operating goals such as flight completion and on-time percentage,
are set by the Compensation Committee. These goals are set each year based on
an operating plan the Committee believes to be challenging in the then current
operating environment. In making its awards, the Committee insures that the
threshold levels have all been met and then awards specific bonuses based on
its analysis of the achievement of performance goals as established by the
Committee.
<PAGE> 1
EXHIBIT 10.11
AMENDMENT
THIS AMENDMENT ("Amendment") entered into this 5th day of June, 1990,
by and between Comair Holdings, Inc., a Kentucky corporation ("Company") and
Raymond A. Mueller ("Mueller").
W I T N E S S E T H
WHEREAS, Comair, Inc. and Mueller have entered into a Consulting
Agreement dated December 23, 1983 ("Agreement") providing for continued
compensation for consulting services to Mueller upon retirement;
WHEREAS, the Company and Comair, Inc. ("Comair") have entered into an
Assignment dated November 1, 1988 whereby Comair assigned to Company, and the
Company assumed all of Comair's rights and duties under and pursuant to the
Agreement effective as of November 1, 1988;
WHEREAS, the Company and Mueller desire to amend certain terms of the
Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto agree as follows:
1. Section 3(a) of the Agreement is hereby amended in its entirety to
read as follows:
"(a) Upon Mueller's retirement from full-time employment with
Company as provided in Section 1 hereof, Company shall pay Mueller
annually, in equal monthly installments, and as full and complete
compensation for any and all services which Mueller may render to
the Company, the sum of One Hundred Fifty Thousand Dollars
($150,000)."
<PAGE> 2
- 2 -
2. Section 7, SALE OR MERGER OF COMPANY, of the Agreement is hereby
amended in its entirety to read as follows:
"7. SALE OR MERGER OF COMPANY. In the event of any consolidation
or merger of Company into or with another firm or corporation, or the
sale of all or substantially all of the assets of Company to another
firm or corporation, the acquiring firm or corporation shall assume this
Consulting Agreement and become obligated to perform all the terms and
conditions herein set forth to be performed on the part of the Company,
and Mueller's obligations hereunder shall continue in favor of such
acquiring firm or corporation, except the Company shall have the option
of prepaying the balance of compensation, if any, owed to the estate or
legal representative of Mueller under Section 3(b) hereof at the time of
such sale, consolidation or merger.
Notwithstanding the foregoing, in the event of sale, consolidation
or merger of the Company, or a "change in control" of the Company (as
hereinafter defined), Mueller may, at his sole option, elect to
terminate this Agreement, in which event Company's obligations to make
future payments hereunder for the remaining term of this Agreement shall
be discounted to present worth at a discount rate equal to the
Applicable Federal Rate, as such term is used in Section 1274(d) of the
Internal Revenue Code of 1986, as amended, or any successor provision,
and shall become immediately due and payable in a lump sum payment upon
such sale, consolidation, merger or change in control. "Change in
control" shall be deemed to occur if any person, as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934, other
than a trustee or other fiduciary holding securities under an employee
benefit plan of Company, is or becomes the beneficial owner, as defined
in Rule 3d-3 of such Act directly or indirectly of securities
representing thirty percent (30%) or more of the combined voting power
of the Company's then outstanding securities. Mueller hereby
acknowledges that as a condition of his right to receive the payments
provided for in this Section 7, he will be required and hereby agrees to
execute and deliver to Company a form of release and any other documents
reasonably requested by Company to acknowledge full satisfaction by
Mueller of Company's obligations under this Agreement."
<PAGE> 3
- 3 -
3. The Company and Mueller hereby ratify the terms and provisions of the
Agreement which shall remain in full force and effect except as
herein modified.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
WITNESS:
/s/RANDY D. RADEMACHER /s/RAYMOND A. MUELLER
- ------------------------- ------------------------
RAYMOND A. MUELLER
COMAIR HOLDINGS, INC.
/s/RANDY D. RADEMACHER BY: /s/DAVID R. MUELLER
- ------------------------ ------------------------
DAVID R. MUELLER, President
<PAGE> 4
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT, made this 23rd day of December, 1983, by and
between Raymond A. Mueller ("Mueller") and Comair, Inc., an Ohio corporation
("Company").
W I T N E S S E T H:
WHEREAS, the services of Mueller, his experience and knowledge of the
business affairs of Company, and his reputation and contacts in the air
transportation industry, especially in the operation of a regional air carrier,
are extremely valuable to company; and
WHEREAS, Company desires to retain Mueller in its services after his
retirement from full-time employment with Company and desires to receive the
benefit of his knowledge, experience and reputation, and is willing to offer
Mueller incentive to do so in the form of this Consulting Agreement by
providing compensation and certain other benefits.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, it is agreed by and between Mueller and company as follows:
1. CONSULTATION SERVICES. Commencing on the date of Mueller's
retirement from full-time employment with company, which date shall be at the
sole discretion of Mueller on or after his sixty-fifth (65th) birthday but in
no event shall exceed Mueller's seventieth birthday, and ending on the death of
Mueller, Mueller will render to Company such services of an advisory or
consultative nature as may be mutually agreeable to Mueller and Company in order
<PAGE> 5
- 2 -
for Company to enjoy the benefit of his experience and knowledge of Company's
business affairs and the air transportation industry. Mueller agrees to provide
written notice of this retirement date to the Board of Directors of Company at
least six (6) months prior to such date. Further, Mueller agrees to be
available, at times he deems reasonable, to render advice and counsel to
officers and directors of Company by telephone or in person at the offices of
Company located at 100 Airpark Drive, Greater Cincinnati International Airport,
Cincinnati, Ohio 45275. Company desires to retain the services of Mueller and
prevent them from being availed of by its competitors and considers that this
fact is sufficient consideration for the continued payment of consultive fees
as provided herein. Mueller's failure to render such advisory or consultative
services by reason of his illness, disability or other incapacity shall not
affect his right to receive his compensation during the term hereof.
2. TERM. This Consulting Agreement shall be effective upon its
execution and shall remain in effect until compensation terminates in
accordance with Section 3 hereof.
3. COMPENSATION.
(a) Upon Mueller's retirement from full-time employment with
Company as provided in Section 1 hereof, company shall pay Mueller annually,
in equal monthly installments, and as full and complete
<PAGE> 6
- 3 -
compensation for any and all services which Mueller may render to Company, the
following percentages of his base salary at the time of such retirement, which
base salary shall be a minimum of One Hundred Ten Thousand Dollars
($110,000.00) per years:
(1) 70% of base salary commencing at the age of 65 through 67,
inclusive
(ii) 60% of base salary commencing at the age of 68 through 69,
inclusive
(iii) 40% of base salary commencing upon his 70th birthday and
thereafter.
(b) In the event that Mueller shall die prior to the expiration of ten
(10) years from the date on which compensation is first paid to him pursuant to
this Consulting Agreement the Company shall, for a period of three (3) years
following such death, continue to pay to the estate or legal representative of
Mueller, in equal monthly installments, the amount of such payments in effect
at the time of death.
(c) Mueller shall also be entitled to participate in hospitalization,
health and accident and disability insurance made available by Company to its
Executive Officers during the term of this Consulting Agreement.
<PAGE> 7
- 4 -
4. LIMITATION OF TRAVEL. During the term of this Consulting
Agreement, it is anticipated that Mueller shall render his consultative and
advisory services within a radius of one hundred miles of the present city
limits of Cincinnati, Ohio. Although Mueller may be called upon from time to
time to travel beyond the geographic area described above, such demands upon
Mueller shall not be unreasonable. Determinations on this issue shall be made
solely by Mueller in good faith, and his determination shall be binding upon
Company.
5. EXPENSES. In the event that Mueller incurs out-of-pocket expenses
in connection with the performance by him of consultative services to Company,
including but not limited to travel, transportation and entertainment expenses,
then Company shall reimburse Mueller for such expenses upon request and
submission of satisfactory documentation.
6. CONFIDENTIALITY AND NON-COMPETITION.
(a) Mueller will not at any time during the term of this Agreement
or thereafter, except as authorized by company, divulge, furnish or make
accessible to any person, firm, corporation or other entity, and such
confidential and sensitive information and any other information not otherwise
publicly available which he presently possesses or which he may obtain during
the course of his employment with or consultation for Company with respect
to the
<PAGE> 8
- 5 -
business, customers and affairs of Company or any subsidiary or affiliate of
Company or trade secrets, developments, know-how methods or other information
and data pertaining to practices, equipment, developments or any confidential
or secret aspect of the business of Company or any subsidiary or affiliate of
Company, and that all such matters and information shall be kept strictly and
absolutely confidential. Mueller, upon termination of his employment with or
consulting for Company, irrespective of the time, manner or cause of
termination, will surrender and deliver to Company all lists, books, records
and data of every kind relating to or in connection with the business of
Company or any subsidiary or affiliate of Company, and all property belonging
to Company and any subsidiary or affiliate of Company.
(b) During the term of this Agreement and, in the event that Mueller's
employment with or consulting for Company is terminated, for a period of two
(2) years after such termination, Mueller shall not, directly or indirectly,
engage in or contract with others to engage in any business enterprise, line of
work, consulting contract, joint venture or other arrangement which conducts a
business or businesses substantially similar to the business conducted by
Company in any area in which Company or any or its affiliates or subsidiaries
provides or plans to provide air transportation to the public. Mueller
acknowledges that the
<PAGE> 9
- 6 -
geographic area covered hereby, and the period and nature of the agreed
restrictions are reasonable and necessary for the protection of the business of
Company. All provisions of this paragraph concerning non-competition are
severable; and while it is the intention of the parties that all of said
provisions shall be enforceable, if any one of the same shall be held to be
unenforceable in whole or in part, the remainder shall continue to be in full
force and effect.
7. SALE OR MERGER OF COMPANY. In the event of any consolidation or
merger of Company into or with another firm or corporation, or the sale of all
or substantially all of the assets of Company to another firm or corporation,
the acquiring firm or corporation shall assume this Consulting Agreement and
become obligated to perform all the terms and conditions herein set forth to be
performed on the part of Company, and Mueller's obligations hereunder shall
continue in favor of such acquiring firm or corporation, except that Company
shall have the option of prepaying the balance of compensation, if any, owed to
the estate or legal representative of Mueller under Section 13(b) hereof at the
time of such sale, consolidated or merger. Notwithstanding the foregoing, in
the event of sale or merger of company. Mueller may, at his sole option, elect
to terminate this Agreement, in which event Company's obligation to pay
compensation to Mueller shall also terminate.
<PAGE> 10
- 7 -
8. ASSIGNMENT AND SUCCESSORS IN INTEREST. To the extent that the
obligations provided for herein require the personal performance of Mueller,
Mueller's rights, interests and obligations as provided herein may not be
assigned. Except as otherwise provided in the immediately preceding sentence of
this Section, all rights, privileges and obligations of the parties hereto
shall inure to the benefit of and be binding upon their respective successors,
assigns, heirs, executors, administrators and estates.
9. MODIFICATION OF AGREEMENT. This Agreement contains the entire
agreement between the parties and supersedes any and all other agreements,
written or oral, expressed or implied, pertaining to the subject matter hereof.
It may not be changed orally, but only by written instrument signed by the
party against whom enforcement of any waiver, change, modification or discharge
is sought.
10. GOVERNING LAW. The Consulting Agreement shall be construed and
governed in all respects in accordance with laws of the State of Ohio.
<PAGE> 11
- 8 -
IN WITNESS WHEREOF, the parties hereto have caused this Consulting
Agreement to be executed as of the date and year first above written.
WITNESS:
/s/ RAYMOND A. MUELLER
---------------------------
Raymond A. Mueller
COMAIR, INC.
BY: /s/ JOHN S. DUNKIN
-----------------------
<PAGE> 1
EXHIBIT 11
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<S> <C> <C> <C>
March 31, 1994:
Net income................... $28,528,415
Common stock outstanding as
of April 1, 1993........... 48,252,198
Exercise of stock options
(144,214 shares issued).... 41,519
---------- ----------- -----
48,293,717 $28,528,415 $ .59
========== =========== =====
Effect of outstanding stock
options which is less than
3% and not required to be
disclosed in the financial
statements (796,266
shares)..................... 408,229
---------- ----------- -----
48,701,946 $28,528,415 $ .59
========== =========== =====
March 31, 1995:
Net income.................... $29,305,256
Common stock outstanding as of
April 1, 1994............... 48,396,411
Exercise of stock options
(76,550 shares issued)...... 47,201
Repurchase of common shares
(4,510,800 shares
repurchased)................ (2,875,109)
---------- ----------- -----
45,568,503 $29,305,256 $ .64
========== =========== =====
Effect of outstanding stock
options which is less than
3% and not required to be
disclosed in the financial
statements
(716,342 shares)............ 287,417
---------- ----------- -----
45,855,920 $29,305,256 $ .64
========== =========== =====
March 31, 1996:
Net income.................... $60,008,473
Common stock outstanding as of
April 1, 1995............... 43,960,794
Exercise of stock options
(519,146 shares issued)..... 348,848
Repurchase of common shares
(41,737 shares issued)...... (38,200)
---------- ----------- -----
44,271,442 $60,008,473 $1.36
========== =========== =====
Effect of outstanding stock
options which is less than
3% and not required to be
disclosed in the financial
statements
(1,003,427 shares)......... 319,097
---------- ----------- -----
44,590,539 $60,008,473 $1.35
========== =========== =====
</TABLE>
-14-
<PAGE> 1
CONSOLIDATED TEN YEAR SUMMARY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
FISCAL YEAR 1996 1995 1994
------------------------------------------
SUMMARY OF OPERATIONS:
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $463,298,143 $360,704,137 $296,635,551
Operating income (loss) $ 94,826,780 $ 47,024,968 $ 47,300,280
Pretax income (loss) $ 96,771,473 $ 47,705,256 $ 49,210,415
Net income (loss) $ 60,008,473 $ 29,305,256 $ 28,528,415
Net income (loss) per share $ 1.36 $ .64 $ .59
Dividends paid per share $ .165 $ .125 $ .107
Weighted average shares outstanding 44,271,442 45,568,503 48,293,717
===============================================================================
OTHER FINANCIAL DATA:
- -----------------------------------------------------------------------------------------
Working capital $ 92,436,588 $ 41,724,167 $ 77,146,245
Total assets $429,030,154 $347,021,961 $284,559,219
Long-term obligations, net of
current maturities $ 70,745,129 $ 79,906,236 $ 27,115,862
Shareholders' equity $213,129,204 $156,763,419 $169,277,604
Shareholders' equity per share $ 4.80 $ 3.57 $ 3.50
Stock price (end of year) $ 23.17 $ 7.67 $ 9.56
Return on beginning shareholders'
equity 38.3% 17.3% 19.7%
===============================================================================
AIRLINE STATISTICAL DATA:
- -----------------------------------------------------------------------------------------
Passengers carried 4,102,690 3,399,948 2,735,468
Revenue passenger miles (000) 1,281,308 1,015,177 696,443
Available seat miles (000) 2,366,269 2,041,887 1,477,198
Passenger load factor 54.1% 49.7% 47.1%
Breakeven load factor 42.9% 42.9% 39.1%
Yield per revenue passenger mile 34.7(cents) 34.0(cents) 40.6(cents)
Cost per available seat mile 15.0(cents) 14.8(cents) 16.1(cents)
Equivalent full-time employees (end
of year) 2,523 2,447 2,145
Number of aircraft (end of year) 89 84 79
===============================================================================
</TABLE>
All weighted average share and per share information has been adjusted
retroactively for three-for-two stock splits effective May 1996, August 1995,
April 1993 and February 1992.
<PAGE> 2
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FISCAL YEAR 1993 1992 1991 1990 1989
------------------------------------------------------------------------
SUMMARY OF OPERATIONS:
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $248,281,681 $217,203,892 $201,551,437 $157,666,352 $118,307,669
Operating income (loss) $ 32,254,010 $ 21,152,042 $ 21,731,650 $ 20,157,621 $ 10,774,705
Pretax income (loss) $ 32,060,079 $ 20,652,322 $ 21,774,097 $ 21,629,471 $ 11,515,849
Net income (loss) $ 19,268,079 $ 12,412,322 $ 13,076,097 $ 13,014,471 $ 7,030,849
Net income (loss) per share $ .46 $ .30 $ .32 $ .32 $ .16
Dividends paid per share $ .084 $ .081 $ .080 $ .067 $ .062
Weighted average shares outstanding 42,009,734 41,128,520 41,103,558 41,200,682 43,090,574
=============================================================================================================
OTHER FINANCIAL DATA:
- -----------------------------------------------------------------------------------------------------------------------
Working capital $ 74,344,774 $ 14,667,083 $ 20,535,063 $ 19,785,209 $ 24,330,841
Total assets $260,088,150 $180,601,757 $166,771,951 $128,241,223 $ 84,163,598
Long-term obligations, net of
current maturities $ 34,619,680 $ 41,597,285 $ 48,674,999 $ 33,005,786 $ 14,231,755
Shareholders' equity $145,028,367 $ 79,478,537 $ 69,419,703 $ 60,015,389 $ 50,012,291
Shareholders' equity per share $ 3.00 $ 1.92 $ 1.69 $ 1.46 $ 1.21
Stock price (end of year) $ 11.19 $ 5.56 $ 3.80 $ 2.99 $ 2.05
Return on beginning shareholders'
equity 24.2% 17.9% 21.8% 26.0% 13.8%
=============================================================================================================
AIRLINE STATISTICAL DATA:
- -----------------------------------------------------------------------------------------------------------------------
Passengers carried 2,394,871 2,055,077 1,904,221 1,601,690 1,250,162
Revenue passenger miles (000) 545,459 446,712 393,868 305,647 232,096
Available seat miles (000) 1,182,124 1,031,408 927,240 683,934 548,152
Passenger load factor 46.1% 43.3% 42.5% 44.7% 42.3%
Breakeven load factor 39.7% 38.8% 37.8% 38.6% 38.3%
Yield per revenue passenger mile 42.9(cents) 45.3(cents) 47.6(cents) 49.2(cents) 49.1(cents)
Cost per available seat mile 17.3(cents) 17.7(cents) 18.1(cents) 19.2(cents) 19.1(cents)
Equivalent full-time employees (end
of year) 1,936 1,936 1,841 1,622 1,354
Number of aircraft (end of year) 68 71 69 63 54
=============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
FISCAL YEAR 1988 1987
---------------------------
SUMMARY OF OPERATIONS:
- --------------------------------------------------------------------------
<S> <C> <C>
Operating revenues $ 87,571,102 $ 62,391,419
Operating income (loss) $ 7,511,613 $ (1,753,364)
Pretax income (loss) $ 7,073,599 $ (993,350)
Net income (loss) $ 5,123,599 $ (942,350)
Net income (loss) per share $ .11 $ (.02)
Dividends paid per share $ .031 $ --
Weighted average shares outstanding 47,309,022 45,490,768
================================================================
OTHER FINANCIAL DATA:
- --------------------------------------------------------------------------
Working capital $ 20,301,723 $ 33,080,001
Total assets $ 80,886,955 $ 80,377,990
Long-term obligations, net of
current maturities $ 16,074,170 $ 17,813,272
Shareholders' equity $ 51,087,138 $ 52,676,658
Shareholders' equity per share $ 1.15 $ 1.09
Stock price (end of year) $ 1.53 $ 1.85
Return on beginning shareholders'
equity 9.7% (2.6%)
================================================================
AIRLINE STATISTICAL DATA:
- --------------------------------------------------------------------------
Passengers carried 911,437 660,151
Revenue passenger miles (000) 176,209 131,447
Available seat miles (000) 425,200 362,336
Passenger load factor 41.4% 36.3%
Breakeven load factor 37.8% 37.3%
Yield per revenue passenger mile 47.4(cents) 44.9(cents)
Cost per available seat mile 18.3(cents) 17.1(cents)
Equivalent full-time employees (end
of year) 1,239 957
Number of aircraft (end of year) 50 37
================================================================
</TABLE>
<PAGE> 3
SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH YEAR
--------------------------------------------------------------------
FISCAL 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $115,393,985 $111,261,882 $112,693,525 $123,948,751 $463,298,143
Operating income $ 26,212,589 $ 22,997,055 $ 21,151,638 $ 24,465,498 $ 94,826,780
Pretax income $ 27,152,519 $ 23,097,147 $ 21,514,776 $ 25,007,031 $ 96,771,473
Net income $ 16,562,519 $ 14,088,147 $ 13,122,776 $ 16,235,031 $ 60,008,473
Net income per share $ .38 $ .32 $ .29 $ .37 $ 1.36
Dividends paid per share $ .036 $ .036 $ .047 $ .047 $ .165
Weighted average shares
outstanding 43,950,238 44,277,358 44,420,816 44,435,650 44,271,442
Stock price data
High $ 17.72 $ 19.58 $ 24.67 $ 23.83 $ 24.67
Low $ 7.56 $ 13.61 $ 15.75 $ 12.42 $ 7.56
==============================================================================================
FISCAL 1995
- -------------------------------------------------------------------------------------------------------
Operating revenues $ 87,865,450 $ 89,979,059 $ 90,060,023 $ 92,799,605 $360,704,137
Operating income $ 14,956,354 $ 12,697,159 $ 11,195,281 $ 8,176,174 $ 47,024,968
Pretax income $ 15,679,155 $ 13,257,575 $ 11,125,707 $ 7,642,819 $ 47,705,256
Net income $ 9,407,155 $ 8,087,575 $ 6,786,707 $ 5,023,819 $ 29,305,256
Net income per share $ .20 $ .18 $ .15 $ .11 $ .64
Dividends paid per share $ .027 $ .027 $ .036 $ .036 $ .125
Weighted average shares
outstanding 47,758,608 45,489,582 45,010,208 44,005,435 45,568,503
Stock price data
High $ 10.67 $ 12.11 $ 10.89 $ 8.56 $ 12.11
Low $ 7.56 $ 9.11 $ 6.11 $ 6.61 $ 6.11
==============================================================================================
FISCAL 1994
- -------------------------------------------------------------------------------------------------------
Operating revenues $ 70,496,837 $ 72,714,842 $ 76,169,038 $ 77,254,834 $296,635,551
Operating income $ 12,852,464 $ 11,264,977 $ 13,230,928 $ 9,951,911 $ 47,300,280
Pretax income $ 13,360,841 $ 11,807,049 $ 13,746,128 $ 10,296,397 $ 49,210,415
Net income $ 8,029,841 $ 6,373,049 $ 8,110,128 $ 6,015,397 $ 28,528,415
Net income per share $ .17 $ .13 $ .17 $ .12 $ .59
Dividends paid per share $ .027 $ .027 $ .027 $ .027 $ .107
Weighted average shares
outstanding 48,253,064 48,268,267 48,303,385 48,350,952 48,293,717
Stock price data
High $ 12.89 $ 14.44 $ 15.33 $ 12.11 $ 15.33
Low $ 9.11 $ 11.11 $ 10.00 $ 9.33 $ 9.11
==============================================================================================
</TABLE>
The above table sets forth the reported high and low prices of the Common Stock
as regularly quoted in the National Association of Securities Dealers
Automated Quotation System.
The Company's Common Stock is traded in the National Market System under the
NASDAQ symbol COMR.
All weighted average share, per share and stock price data have been adjusted
retroactively for three-for-two stock splits effective May 1996, August 1995 and
April 1993.
<PAGE> 4
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 97% of
operating revenues and expenses in fiscal 1996. 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 benefited 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.
During fiscal 1996, Delta increased certain fees paid by the
Company to Delta related to the Delta Connection program. The Company and Delta
also made changes in aircraft deployment in the Cincinnati/Northern Kentucky and
the Orlando hubs starting on May 1, 1995, and then more changes were made in the
Cincinnati/Northern Kentucky hub effective December 1, 1995. The Company
believes these aircraft deployment changes have positively impacted operating
results. Also, during the fourth quarter of fiscal 1995, most airlines
instituted a commission cap on travel agency commissions for domestic fares over
a certain base fare amount. The Company believes that the effect of the
increases in certain fees paid to Delta, the reduction in passenger commission
expense from the commission cap and the changes in aircraft deployment have,
when combined, had a positive impact on operating results. However, there can be
no assurance that the favorable impact on operating income from the changes in
aircraft deployment and the commission cap will continue to fully offset the
increased fees.
Approximately 27% of the Company's workforce are members of
the unions representing the pilots and mechanics. Collective bargaining
agreements for these unions become amendable in 1998 and 1999, respectively. The
Railways Labor Act, which governs labor relations for these unions, contains
provisions that must be exhausted before work stoppages can occur once a
collective bargaining agreement becomes amendable. The Company has never
experienced any work stoppage and considers its employee relations to be
satisfactory.
FISCAL 1996 COMPARED WITH FISCAL 1995
In fiscal 1996, the Company reported record operating revenues
of $463 million, up 28% from $361 million reported in fiscal 1995. Operating
income, net income and net income per share all increased significantly when
compared with the results reported in fiscal 1995.
Operating income for the year rose 102% to $94.8 million from
$47.0 million. Net income increased 105% to $60.0 million from $29.3 million and
net income per share increased to $2.03 from $.97 on a pre-split basis or to
$1.36 from $.64 on a post-split basis. The increase in earnings is largely the
result of higher passenger enplanements. Passenger enplanement increases were
primarily due to the overall passenger appeal of our Canadair Jet, Delta and
COMAIR building up the Cincinnati hub through additional flights and Delta's
increased promotion of the Cincinnati hub as an easy, less congested alternative
to the other major hubs in the region.
In fiscal 1996, revenue passenger miles (RPMs) increased
26.2%. Capacity, available seat miles (ASMs), grew 15.9% with the acquisition of
ten 50-passenger Canadair Jet aircraft. In fiscal 1996, one 33-passenger Saab
and four 19-passenger Metros were returned to lessors.
Yield per revenue passenger mile increased from 34.0 cents to
34.7 cents. Cost per ASM increased to 15.0 cents per ASM in fiscal 1996 from
14.8 cents per ASM in fiscal 1995. The slightly higher unit cost is primarily
the result
<PAGE> 5
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
of costs associated with higher passenger revenues and pretax income, increased
turboprop maintenance cost and increased fees related to the Delta Connection
program.
The following tables show the major expense categories for
COMAIR for the years ended March 31, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1996 1995 1994
<S> <C> <C> <C>
Salaries and related costs $ 85,333,979 $ 73,282,459 $ 62,388,308
Aircraft fuel 38,703,967 31,824,949 23,512,838
Maintenance materials and repairs 40,895,807 33,986,468 25,839,748
Aircraft rent 57,805,169 53,939,399 42,929,324
Other rent and landing fees 15,932,585 13,753,045 10,850,996
Passenger commissions 38,329,529 32,742,908 26,425,895
Other operating expenses 59,454,915 44,746,733 32,411,614
Depreciation and amortization 19,072,163 17,346,146 13,206,290
--------------------------------------------------------------------
$ 355,528,114 $ 301,622,107 $ 237,565,013
====================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
COST PER ASM 1996 1995 1994
<S> <C> <C> <C>
Salaries and related costs 3.6 3.6 4.2
Aircraft fuel 1.6 1.6 1.6
Maintenance materials and repairs 1.8 1.7 1.8
Aircraft rent 2.4 2.6 2.9
Other rent and landing fees 0.7 0.7 0.7
Passenger commissions 1.6 1.6 1.8
Other operating expenses 2.5 2.2 2.2
Depreciation and amortization 0.8 0.8 0.9
---------------------------------------------------------
15.0 14.8 16.1
=========================================================
</TABLE>
Salaries and related costs have risen from last year as a
result of the additional personnel to support the new Canadair Jet service.
Expenses related to the 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 remain the
same.
Aircraft fuel price per gallon was approximately three cents
higher than last year. The higher price per gallon was due largely to the
Omnibus Budget Reconciliation Act of 1993, which imposed a 4.3 cents per gallon
transportation tax on fuel used in domestic commercial transportation effective
October 1, 1995. Furthermore, aircraft fuel costs increased due to the addition
of the new Canadair Jets. On a unit cost basis, however, fuel costs remained
the same.
Maintenance materials and repair costs increased on a total
and unit cost basis. The increase is related to higher maintenance costs on the
turboprop aircraft.
Aircraft rent expense increased from the addition of ten
Canadair Jets since the third quarter of fiscal 1995. The extension of several
aircraft leases at lower rates in 1995 and the purchase of five Canadair Jets
during the second and third quarters of fiscal 1995 caused this expense to
decrease on a unit cost basis.
Other rent and landing fees increased as the result of the
ongoing addition of Canadair Jet aircraft and the incurrence of one full year of
rent in the new 100,000 square foot flight center at the Cincinnati/Northern
Kentucky International Airport.
Travel agency and credit card commissions have increased as a
result of higher passenger revenues resulting from higher load factors. However,
these costs remained the same on a unit cost basis due to the commission cap
that was instituted by many of the airlines in the fourth quarter of fiscal 1995
that offset the costs associated with higher unit revenues. Commissions as a
percentage of passenger revenues were 8.6% in fiscal 1996 and 9.5% in fiscal
1995.
Other operating expenses increased on a total and unit cost
basis due to the growth in traffic, the costs associated with the new Canadair
Jet service and the increased fees charged by Delta relating to the Delta
Connection program.
<PAGE> 6
Depreciation and amortization remained the same on a unit cost
basis. Although the Company purchased five Canadair Jets during fiscal 1995,
this additional expense was more than offset by an increase in certain assets
associated with the maturing turboprop fleet becoming fully depreciated.
Investment income for fiscal 1996 was higher than last year's
due to significantly higher cash and cash equivalents balances. However, lower
market rates reduced the impact of the higher cash and cash equivalents
balances.
In March 1995, 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 Company will adopt SFAS No. 121 in the first quarter of
fiscal 1997 and, based on current circumstances, does not believe the effect of
adoption will be material.
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 does not intend to adopt the expense recognition provisions of SFAS
No. 123.
The Company's effective tax rate, which includes federal,
state and local taxes, approximated the statutory rates in fiscal 1996 and 1995.
The Company accounts for income taxes using the provisions of the Financial
Accounting Standards Board Statement No. 109 (SFAS No. 109), "Accounting for
Income Taxes". This statement requires deferred tax recognition for all
temporary differences in the tax and financial reporting bases of assets and
liabilities in accordance with the liability method and requires adjustment of
deferred tax assets and liabilities for changes in enacted tax laws and rates.
The Omnibus Budget Reconciliation Act of 1993 imposed a 4.3
cents per gallon transportation tax on fuel used in domestic commercial
transportation. This tax became effective October 1, 1995. As a result, this new
tax increased the Company's operating expenses by approximately $1.3 million in
fiscal 1996.
FISCAL 1995 COMPARED WITH FISCAL 1994
In fiscal 1995, the Company reported record operating revenues
of $361 million, up 22% from $297 million reported in fiscal 1994. Operating
revenue increases were primarily the result of a 24% increase in the number of
passengers.
Operating income for the year decreased 1% to $47.0 million
from $47.3 million. Net income and income per share for fiscal 1995 increased
when compared with the results reported in fiscal 1994. Net income increased 3%
to $29.3 million from $28.5 million and net income per share increased 9% to
$.64 from $.59.
The decrease in operating income was the result of
significantly lower yields (revenue per passenger mile). Although passenger
levels increased 24.3% and cost per available seat mile (ASM) decreased 8%,
these favorable variances were not enough to offset the dilution in yield from
low fare competition in many of our Midwestern and Southeastern markets and
lower yielding (per mile) long-haul traffic in the new Canadair Jet aircraft.
Yield per revenue passenger mile fell by 16% from 40.6 cents to 34.0 cents. A
portion of this decrease was related to the increase in average passenger trip
from 255 miles to 299 miles. The Company believes some of this yield decline
would have been offset by an even greater increase in passenger load factor if
not for the safety related publicity that was prevalent during the third and
fourth quarters of fiscal 1995.
Passenger increases were primarily due to the addition of new
routes served by the new Canadair Jet aircraft. In fiscal 1995, revenue
passenger miles (RPMs) increased 45.8%. Capacity, available seat miles (ASMs),
grew 38.2% with the acquisition of nine 50-passenger Canadair Jet aircraft. In
fiscal 1995, two 33-passenger Saabs and two 19-passenger Metros were returned to
lessors.
As noted above, cost per ASM decreased 8% to 14.8 cents per
ASM in fiscal 1995 from 16.1 cents per ASM in fiscal 1994. The lower unit cost
is primarily the result of productivity gains from the long-haul service
provided by the new Canadair Jets.
Salaries and related costs rose from last year as a result of
the addition of more pilots, mechanics and customer service agents to support
the new Canadair Jet service. However, increased utilization from the long-haul
jet markets reduced these costs on a unit basis.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The price of aircraft fuel per gallon was approximately 2.5
cents lower than fiscal 1994. Total aircraft fuel costs increased due to the
addition of the new Canadair Jets. On a unit cost basis, however, fuel costs
remained the same.
Aircraft rent expense increased with the addition of the
Canadair Jets as discussed above. This expense decreased slightly on a unit cost
basis, as five Canadair Jets acquired and placed in service during the year were
debt financed.
Maintenance materials and repair costs decreased on a unit
cost basis. The lower cost per ASM is related to the use of the new Canadair
Jets, as most components are under warranty and have not incurred the initial
overhaul expenditure. Overall, however, these costs increased as the number of
engine and other component overhauls, primarily related to the Brasilia fleet,
increased.
Other rent and landing fees increased as the result of the
addition of Canadair Jet aircraft and the opening of the new 100,000 square foot
flight center at the Cincinnati/Northern Kentucky International Airport.
Travel agency and credit card commissions increased as a
result of higher passenger revenues. However, lower revenue per ASM has reduced
this expense on a cost per ASM basis. Commissions as a percentage of passenger
revenues were 9.5% in fiscal 1995 and 9.4% in fiscal 1994.
Other operating expenses increased due to the growth in
traffic and the costs associated with the new Canadair Jet service.
Depreciation and amortization increased as the result of the
purchase of five Canadair Jets during the second and third quarters of fiscal
1995.
Investment income in fiscal 1995 was higher than in fiscal
1994, even though the cash and marketable securities balances were lower, due to
the increasing market interest rates which generated a higher yield on the
Company's investments.
During the first quarter of fiscal 1995, the Company adopted
the Financial Accounting Standards Board Statement No. 115 (SFAS No. 115),
"Accounting for Certain Investments in Debt and Equity Securities". This
statement requires that equity securities that have readily determinable fair
values and all debt securities be classified into one of three categories: (1)
held to maturity, (2) trading securities or (3) available-for-sale. The Company
classified all marketable securities as available-for-sale. Available-for-sale
securities are carried at fair value, with unrealized appreciation or
depreciation, net of applicable taxes, reflected as a separate component of
shareholders' equity. The impact of adopting the new standard of accounting for
debt and equity securities as of April 1, 1994, was not material.
During the first quarter of fiscal 1995, the Company also
adopted Financial Accounting Standards Board Statement No. 112 (SFAS No. 112),
"Employers' Accounting for Postemployment Benefits". The adoption of SFAS No.
112 did not have a material impact on the Company's results of operations, cash
flows or financial position.
The Company's effective tax rate, which includes federal,
state and local taxes, approximated the statutory rates in fiscal 1995. In
fiscal 1994, the Company's effective tax rate was higher than the statutory
rate. The Budget Reconciliation Act of 1993 which was signed into law by the
President on August 10, 1993, increased the regular corporate income tax rate
from 34% to 35%, effective January 1, 1993. During the first quarter of fiscal
1994, the Company adopted the Financial Accounting Standards Board Statement No.
109 (SFAS No. 109), "Accounting for Income Taxes". This statement requires
deferred tax recognition for all temporary differences in the tax and financial
reporting bases of assets and liabilities in accordance with the liability
method and requires adjustment of deferred tax assets and liabilities for
changes in enacted tax laws and rates. This adjustment to deferred taxes,
coupled with an additional provision to reflect the retroactive application of
the new rate to January 1, 1993, resulted in approximately $500,000 in
additional tax expense in the second quarter of fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operating activities of $119.6
million in fiscal 1996, $70.3 million in fiscal 1995 and $54.7 million in fiscal
1994. Total working capital increased to $92.4 million at March 31, 1996, from
$41.7 million at March 31, 1995, while the current ratio increased to 1.88 at
March 31, 1996 from 1.53 at March 31, 1995.
Additions to property and equipment were $37.9 million, $111.8
million and $40.8 million in fiscal 1996, 1995 and 1994, respectively.
Acquisitions of aircraft were $80.6 million in fiscal 1995 and were
insignificant in fiscal 1996 and fiscal 1994, as the Company has primarily used
operating leases to finance aircraft acquisitions. Major capital expenditures
during fiscal 1996 included major engine overhauls and aircraft spare parts and
support equipment and facilities.
On September 3, 1994, the Company opened the new 100,000
square foot flight center at the Cincinnati/Northern Kentucky International
Airport and initiated its lease with the airport. As of March 31, 1996,
<PAGE> 8
COMAIR had incurred net expenditures of $10.9 million for leasehold improvements
and support equipment related to this new facility, including $1.0 million in
fiscal 1996.
Currently, there are a number of new regulations under
consideration by the FAA relating to operating specifications and aircraft
certification. These regulations have not been published in their final format
and it is expected that modifications will be made. Because the final
regulations are uncertain, the Company cannot definitively assess the impact on
future operating results or cash flows from these new regulations.
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. Cash to fund this stock repurchase is provided by
operations or working capital. As of March 31, 1996, the Company had repurchased
4.5 million shares of this authorization at a cost of $37.2 million.
In fiscal 1996, the Company paid out dividends of $.165 per
share or $7.3 million. Shareholders' equity per share rose from $3.57 at March
31, 1995 to $4.80 at March 31, 1996.
Cash was also used to make payments of $11.5 million on
long-term obligations in fiscal 1996. The Company's long-term obligations to
equity position was 25% debt, 75% equity at March 31, 1996, as opposed to 34%
debt, 66% equity at March 31, 1995.
COMAIR acquired ten new generation, 50-passenger Canadair Jet
aircraft during fiscal 1996, bringing the total Canadair Jet fleet to 30. 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 of these ten aircraft were financed with debt
and five were financed through operating leases with terms up to 16.5 years.
As of March 31, 1996, COMAIR had scheduled delivery positions
for 15 Canadair Jets to be delivered in fiscal 1997. In May 1996, COMAIR
exercised options for an additional five Canadair Jets to be delivered through
May 1997. The aggregate cost of these aircraft, including support equipment and
estimated escalation, will be approximately $340 million. Four of these aircraft
have been delivered through May 1996 using interim financing. 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.
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.
In March 1996, the Company entered into an agreement to
purchase and assume substantially all of the assets and liabilities of Spirit
Airlines, Inc. (Spirit) for approximately $18 million. Spirit is a U.S.
Certified air carrier holding both domestic and international authority to
transport passengers and cargo. Spirit, headquartered in Michigan, currently
operates 10 DC-9 aircraft in scheduled air transportation in the Eastern part of
the U.S., as well as charter services to various locations. The transaction is
subject to satisfactory completion of due diligence review and various
regulatory approvals. The Company intends to record the acquisition under the
purchase accounting method. If this transaction is consummated, cash to fund the
acquisition would be provided by operations or working capital.
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> 9
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
ASSETS CURRENT ASSETS:
Cash and cash equivalents $ 111,601,283 $ 46,628,897
Marketable securities - Notes 1 & 8 39,860,347 37,448,919
-----------------------------------------
$ 151,461,630 $ 84,077,816
Accounts receivable - Notes 1 & 7 15,642,878 9,505,082
Inventory of expendable parts - Note 1 13,864,258 13,259,183
Future tax benefits - Note 4 8,756,848 5,947,267
Prepaid expenses 7,183,499 7,704,589
----------------------------------------------------------------------------------------------------------
Total current assets $ 196,909,113 $ 120,493,937
=========================================
PROPERTY AND EQUIPMENT, AT COST - NOTE 2:
Flight equipment $ 264,254,099 $ 244,018,322
Maintenance, operations and office facilities 9,120,198 9,120,198
Other property and equipment 37,778,133 34,826,544
-----------------------------------------
$ 311,152,430 $ 287,965,064
Less accumulated depreciation and amortization 97,769,467 79,694,318
Less reserve for engine overhauls and purchase incentives 6,734,885 7,508,035
-----------------------------------------
$ 206,648,078 $ 200,762,711
Construction in progress 692,033 379,963
Advance payments and deposits for aircraft 20,027,679 20,274,844
----------------------------------------------------------------------------------------------------------
$ 227,367,790 $ 221,417,518
=========================================
OTHER ASSETS AND DEFERRED COSTS $ 4,753,251 $ 5,110,506
=========================================
$ 429,030,154 $ 347,021,961
=========================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
<PAGE> 10
LIABILITIES &
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
CURRENT LIABILITIES:
Current installments of long-term obligations - Note 2 $ 9,167,087 $ 11,470,888
Accounts payable - Note 7 39,608,872 24,289,851
Interline payable and deferred revenue 5,970,855 5,066,639
Accrued lease expense 20,298,748 15,625,524
Accrued wages 5,567,900 4,279,584
Accrued expenses 11,304,479 8,899,114
Accrued taxes 12,554,584 9,138,170
----------------------------------------------------------------------------------------------------------
Total current liabilities $ 104,472,525 $ 78,769,770
=========================================
LONG-TERM OBLIGATIONS - NOTE 2 $ 70,745,129 $ 79,906,236
=========================================
DEFERRED INCOME TAXES - NOTE 4 $ 35,947,060 $ 28,155,814
=========================================
OTHER LIABILITIES AND DEFERRED CREDITS - NOTE 1 $ 4,736,236 $ 3,426,722
=========================================
SHAREHOLDERS' EQUITY - NOTE 6:
Common stock, no par value, 100,000,000 shares
authorized, 44,438,204 and 43,960,794
issued and outstanding, respectively $ 51,094,753 $ 47,166,553
Preferred stock, no par value, 1,000,000 shares
authorized, none issued or outstanding -- --
Net unrealized gain (loss) on marketable securities
available-for-sale (82,419) 173,388
Retained earnings 162,116,870 109,423,478
----------------------------------------------------------------------------------------------------------
Total shareholders' equity $ 213,129,204 $ 156,763,419
=========================================
$ 429,030,154 $ 347,021,961
=========================================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
<PAGE> 11
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
OPERATING REVENUES:
Passenger $ 444,121,247 $ 345,359,026 $ 282,594,548
Cargo and other 4,751,011 3,905,666 3,259,625
Non-airline operations 14,425,885 11,439,445 10,781,378
------------------------------------------------------------------------------------------------------------------
Total operating revenues $ 463,298,143 $ 360,704,137 $ 296,635,551
====================================================================
OPERATING EXPENSES -- NOTE 7:
Salaries and related costs $ 85,333,979 $ 73,282,459 $ 62,388,308
Aircraft fuel 38,703,967 31,824,949 23,512,838
Maintenance materials and repairs 40,895,807 33,986,468 25,839,748
Aircraft rent 57,805,169 53,939,399 42,929,324
Other rent and landing fees 15,932,585 13,753,045 10,850,996
Passenger commissions 38,329,529 32,742,908 26,425,895
Other operating expenses 59,541,534 44,946,939 32,630,052
Depreciation and amortization 21,008,438 19,243,782 15,040,798
Non-airline direct costs 10,920,355 9,959,220 9,717,312
------------------------------------------------------------------------------------------------------------------
Total operating expenses $ 368,471,363 $ 313,679,169 $ 249,335,271
====================================================================
Operating income $ 94,826,780 $ 47,024,968 $ 47,300,280
====================================================================
NONOPERATING INCOME (EXPENSE) -- NOTE 1:
Investment income $ 6,691,296 $ 3,522,331 $ 3,405,664
Interest expense (4,746,603) (2,842,043) (1,495,529)
------------------------------------------------------------------------------------------------------------------
Total nonoperating income, net $ 1,944,693 $ 680,288 $ 1,910,135
====================================================================
Income before income taxes $ 96,771,473 $ 47,705,256 $ 49,210,415
INCOME TAXES -- NOTE 4 36,763,000 18,400,000 20,682,000
====================================================================
Net income $ 60,008,473 $ 29,305,256 $ 28,528,415
====================================================================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 44,271,442 45,568,503 48,293,717
====================================================================
NET INCOME PER SHARE -- NOTE 1 $ 1.36 $ .64 $ .59
====================================================================
DIVIDENDS PAID PER SHARE $ .165 $ .125 $ .107
====================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE> 12
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF COMMON RETAINED
SHARES STOCK OTHER EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1993 21,445,421 $ 82,595,988 $ -- $ 62,432,379 $145,028,367
Exercise of stock options 64,095 873,019 -- -- 873,019
Dividends (.107 cents
per share) -- -- -- (5,152,197) (5,152,197)
Net income -- -- -- 28,528,415 28,528,415
-----------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1994 21,509,516 $ 83,469,007 $ -- $ 85,808,597 $169,277,604
Repurchase of common shares (2,004,800) (36,784,137) -- -- (36,784,137)
Exercise of stock options 34,022 481,683 -- -- 481,683
Net unrealized gains
on marketable securities
available-for-sale -- -- 173,388 -- 173,388
Dividends (.125 cents
per share) -- -- -- (5,690,375) (5,690,375)
Net income -- -- -- 29,305,256 29,305,256
-----------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1995 19,538,738 $ 47,166,553 $ 173,388 $ 109,423,478 $156,763,419
Repurchase of common shares (18,550) (383,063) -- -- (383,063)
Exercise of stock options 272,609 4,311,263 -- -- 4,311,263
3-for-2 stock split 9,833,105 -- -- (16,012) (16,012)
3-for-2 stock split 14,812,302 -- -- (15,095) (15,095)
Net unrealized loss
on marketable securities
available-for-sale -- -- (255,807) -- (255,807)
Dividends (.165 cents
per share) -- -- -- (7,283,974) (7,283,974)
Net income -- -- -- 60,008,473 60,008,473
-----------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1996 44,438,204 $ 51,094,753 $ (82,419) $ 162,116,870 $213,129,204
==========================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE> 13
CONSOLIDATED STATEMENTS
OF CASH FLOWS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 60,008,473 $ 29,305,256 $ 28,528,415
Adjustments to reconcile net income to
net cash provided from operating activities:
Depreciation and amortization 21,008,438 19,243,782 15,040,798
Amortization and accrual of overhaul expenses 12,684,510 10,740,153 9,895,979
Deferred income tax provision 4,981,665 6,300,000 3,355,402
Other, net (869,010) (245,027) (861,302)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (6,137,797) (1,158,809) 1,566,779
Decrease (increase) in inventory of expendable parts (605,075) (1,762,330) (2,619,288)
Decrease (increase) in other current assets 521,090 (2,952,641) (3,459,927)
Increase (decrease) in accounts payable 15,319,021 6,690,369 (1,776,623)
Increase (decrease) in other current liabilities 12,687,537 4,099,842 5,017,729
---------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 119,598,852 $ 70,260,595 $ 54,687,962
=====================================================
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment $ (37,854,056) $(111,774,908) $ (40,759,640)
Advance payments and deposits -- -- (1,311,767)
Return of advance payments and deposits -- 500,000 1,803,211
Proceeds from sale of marketable securities 6,658,940 -- 10,335,058
Purchases and maturities of
marketable securities, net (9,326,175) 21,256,916 (54,383,267)
Deferred costs (769,108) (1,554,215) (2,317,096)
Other, net 1,515,722 452,854 375,213
---------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities $ (39,774,677) $ (91,119,353) $ (86,258,288)
=====================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock $ 4,311,263 $ 481,683 $ 873,019
Payments of cash dividends and
repurchase of fractional shares (7,315,081) (5,690,375) (5,152,197)
Repurchase of common stock (383,063) (36,784,137) --
Proceeds from long-term obligations -- 65,580,389 --
Repayments of long-term obligations (11,464,908) (8,750,577) (7,049,977)
---------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities $ (14,851,789) $ 14,836,983 $ (11,329,155)
=====================================================
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS: $ 64,972,386 $ (6,021,775) $ (42,899,481)
Cash and cash equivalents at beginning of period 46,628,897 52,650,672 95,550,153
---------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 111,601,283 $ 46,628,897 $ 52,650,672
=====================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE> 14
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements reflect the application
of accounting policies described in this note.
a BASIS OF CONSOLIDATION AND BUSINESS
The consolidated financial statements include the accounts of
Comair Holdings, Inc. (the Company) and its wholly-owned subsidiaries. All
significant intercompany transactions have been eliminated. COMAIR, Inc., the
Company's principal subsidiary, accounting for approximately 97 percent of its
operating revenues and expenses, is a large regional airline serving airports in
the Midwestern, Southeastern and Northeastern United States as well as Canada
and the Bahamas. Revenues are derived primarily through the air transportation
of passengers and cargo in scheduled airline service under a marketing agreement
with Delta Air Lines, Inc. (See Note 7). Certain reclassifications have been
made in prior years' financial statements to conform to the 1996 presentation.
b USE OF ESTIMATES
The preparation of the financial statements in conformity with
generally accepted accounting principles requires the Company to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
c CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a
maturity of three months or less to be cash equivalents. This portfolio of
investments has no significant concentrations of credit risk by activity or
region.
d MARKETABLE SECURITIES
The Company adopted the Financial Accounting Standards Board
Statement No. 115 (SFAS No. 115), "Accounting For Certain Investments in Debt
and Equity Securities", effective April 1, 1994. The Company's investments in
marketable securities consist of United States Treasury and government agency
securities, municipal bonds, mutual funds, corporate notes and common stock.
These investments are classified as available-for-sale and reported at fair
market value as of March 31, 1996 and 1995, with unrealized appreciation or
depreciation, net of applicable taxes, reflected as a separate component of
shareholders' equity. Prior to the implementation of SFAS No. 115, marketable
securities were carried at amortized cost for debt securities or at the lower of
cost or market value for equity securities or mutual funds. The effect of the
initial adoption of SFAS No. 115 to shareholders' equity was immaterial.
e INVENTORY OF EXPENDABLE PARTS
Expendable parts are stated at cost, on a first-in, first-out
basis, less an obsolescence reserve of $2,795,000 and $1,665,000 at March 31,
1996 and 1995, respectively. These parts are charged to maintenance expense as
used.
f DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment costs less estimated
residual values and the amortization of related purchase incentives are computed
on the straight-line method over the estimated useful lives of the related
assets as follows:
Flight equipment, including rotable parts 5-16 years
Maintenance, operations and office facilities 30 years
Other property and equipment 2-20 years
g INTANGIBLE ASSETS
Costs incurred in connection with the introduction of new
aircraft types, primarily flight crew training costs, have been deferred and are
being amortized over five years, beginning with the initial service dates.
Financing costs associated with long-term debt and lease financings are deferred
and amortized over the term of the specific indebtedness or lease. The costs of
developing new or extended routes and pre-operating costs, other than training
incurred in connection with the introduction of new aircraft types, are charged
to expense as incurred.
<PAGE> 15
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
h REVENUE RECOGNITION
Revenues are recognized when the respective services are
rendered. An allowance ($155,000 and $115,000 at March 31, 1996 and 1995,
respectively) is maintained for doubtful accounts. For scheduled airline
service, tickets which are sold but not used are recorded as deferred revenue.
In addition, with respect to student flight training, payments made in advance
of the training being provided are recorded as deferred revenue.
i FREQUENT FLYER AWARDS
As a Delta Connection carrier, COMAIR participates in Delta
Air Lines' frequent flyer program. COMAIR does not defer any revenue or accrue
for incremental costs for mileage accumulation relating to this program, as the
impact would be immaterial.
j MAINTENANCE
Maintenance and repairs are expensed when incurred except for
major inspections. For new aircraft, the deferral method is used whereby the
costs of major engine inspections are capitalized when incurred and amortized
over the period to the next inspection. For used aircraft, estimated engine
inspection costs are recorded on the accrual method whereby the Company charges
maintenance expense on the basis of hours and cycles flown.
k DEFERRED GAINS ON SALE AND
LEASEBACK TRANSACTIONS
Gains on the sale and leaseback of property and equipment are
deferred and amortized over the life of the leases as a reduction in lease
expense. Such deferred gains are found in the other liabilities and deferred
credits section of the consolidated balance sheet.
l INTEREST EXPENSE
The Company capitalizes interest costs incurred on long-term
construction projects and advance payments on aircraft purchase contracts. Total
interest costs incurred were $5,703,000, $3,824,000 and $2,807,000 in fiscal
1996, 1995 and 1994, respectively. Costs capitalized in fiscal 1996, 1995 and
1994 totaled $1,327,000, $1,153,000 and $1,312,000, respectively.
The Company receives the benefit of interest rate subsidies
through the Brazilian Export Financing program which it uses to reduce payments
under long-term obligations and operating leases for its Embraer Brasilia
aircraft (see Notes 2 and 3). These subsidies are recorded ratably over the life
(10-16 years) of the long-term obligation or operating lease. A portion of the
interest rate subsidies has been guaranteed by third parties. However, the
Company is exposed to credit risk in the event of default by the
guarantor/obligor. Substantially all subsidies due to the Company through March
31, 1996 have been received.
m ADVERTISING EXPENSES
Costs related to advertising are expensed as incurred. The
Company's advertising expense was $2,210,000, $2,155,000 and $1,608,000 in
fiscal 1996, 1995 and 1994, respectively.
n INCOME TAXES
The Company adopted Financial Accounting Standards Board
Statement No. 109 (SFAS No. 109) "Accounting for Income Taxes", effective April
1, 1993. The statement requires deferred tax recognition for all temporary
differences in the tax and financial reporting bases of assets and liabilities
in accordance with the liability method and requires adjustment of deferred tax
assets and liabilities for enacted changes in the tax laws and rates. Prior to
the implementation of SFAS No. 109, the Company accounted for income taxes using
Accounting Principles Board Opinion No. 11.
<PAGE> 16
o NET INCOME PER SHARE
Net income per share has been computed based upon the weighted
average number of shares outstanding during the periods. No material dilution
results from outstanding stock options, the only common stock equivalent. All
weighted average share and per share information has been adjusted retroactively
for three-for-two stock splits effective May 1996, August 1995 and April 1993.
p RECENT PRONOUNCEMENTS
In March 1995, 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. This statement also
addresses the accounting for long-lived assets that are expected to be disposed
of in the future. The Company will adopt SFAS No. 121 in the first quarter of
fiscal 1997 and, based on current circumstances, does not believe the effect of
adoption will be material.
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 does not intend to adopt the expense recognition provisions of SFAS
No. 123.
NOTE 2 LONG-TERM OBLIGATIONS
The following is a summary of long-term obligations as of
March 31, 1996 and 1995:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
Secured obligations for the purchase of five Canadair
jets, due in semi-annual installments through 2004
with variable interest rates based on six month
LIBOR. Rates at March 31, 1996 were 6.1000%
to 6.7250% $ 60,228,268 $ 64,261,254
Secured obligations for the purchase of eight Embraer Brasilia
aircraft and related equipment, due in semi-annual
installments through 2001, with interest at 4.25% to 4.875%, net
of the benefits of interest rate subsidies
through the Brazilian Export Financing program 19,310,806 23,857,005
Conditional sales agreement for the purchase of three Saab
340 aircraft, due in quarterly installments through
1996 with interest at 10.69% -- 2,581,268
Secured Industrial Revenue Bonds for the construction of
maintenance, operations and office facilities, interest at
5.72% with interest rate and monthly payment adjusted every three
years and full payment due by April 1997 373,142 677,597
-----------------------------------------
$ 79,912,216 $ 91,377,124
Less -- Current Installments 9,167,087 11,470,888
-----------------------------------------
Total $ 70,745,129 $ 79,906,236
=========================================
</TABLE>
<PAGE> 17
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
<TABLE>
Maturities of long-term obligations are as follows:
<S> <C>
1998 $ 9,113,805
.....................................................
1999 9,366,150
.....................................................
2000 9,381,041
.....................................................
2001 6,879,314
.....................................................
2002 and thereafter 36,004,819
.....................................................
</TABLE>
The net book value of assets pledged as security under the
above obligations totaled $123,000,000 as of March 31, 1996.
The Company receives interest rate subsidies through the
Brazilian Export Financing program on the obligations secured by Embraer
Brasilia aircraft. Such subsidies are recorded as an offset to interest expense
and effectively reduce the Company's interest cost on the obligations to the
fixed rates indicated above. During fiscal 1996, 1995 and 1994, the Company
reduced its interest expense by $454,000, $236,000 and $49,000, respectively, as
a result of these interest rate subsidies. The amount of net interest paid
totaled $5,901,000, $3,079,000 and $3,092,000 in fiscal 1996, 1995 and 1994
respectively.
The Company has an unused bank line of credit for up to
$5,000,000 at prime.
NOTE 3 LEASES
The Company currently operates 73 aircraft in airline
operations which are accounted for under operating leases with remaining terms
of up to sixteen years. Most of these leases provide for renewal and/or fair
market value-based purchase options as well as early termination of the leases
under certain circumstances (primarily if the equipment is obsolete or in excess
of the Company's needs). In some cases, in the event of an early termination,
the Company would be required to pay to the lessor the greater of the proceeds
from the sale of the aircraft or the termination value as stated in the lease.
The Company also leases several light training aircraft,
airport, maintenance and sales office facilities under operating lease
agreements expiring at various dates through fiscal 2016.
The Company receives the benefit of interest rate subsidies
through the Brazilian Export Financing program on operating leases on 32 Embraer
Brasilia aircraft. The Company utilizes these subsidies to substantially fix its
net payments under these operating leases.
Total rental expense for fiscal 1996, 1995 and 1994 was
$69,620,000, $63,448,000 and $51,328,000, respectively, net of the impact of the
interest rate subsidies, which were $1,480,000, $943,000 and $836,000,
respectively, for fiscal 1996, 1995 and 1994.
At March 31, 1996, the future net minimum rental payments
under noncancellable operating leases had a present value of approximately
$376,311,263 and a gross amount payable (including principal and interest) of
$569,816,490 payable $68,655,446 in 1997, $62,924,310 in 1998, $61,282,163 in
1999, $61,931,603 in 2000, $52,389,888 in 2001, and $262,633,080 through 2016.
In addition, the Company has various cancellable leases with
monthly rentals of approximately $271,000.
NOTE 4 INCOME TAXES
Effective April 1, 1993, the Company adopted the Financial
Accounting Standards Board Statement No. 109 (SFAS No. 109), changing its method
of accounting for income taxes. As permitted under the new rules, prior years'
financial statements have not been restated to reflect the change in accounting
method. The cumulative effect of adopting SFAS No. 109 as of April 1, 1993 was
not material.
<PAGE> 18
<TABLE>
The following is a summary of the provision for income taxes:
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31, 1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $ 27,713,000 $ 10,400,000 $ 15,102,000
State 3,650,000 1,700,000 2,225,000
--------------------------------------------------------------------
Total Current Provision $ 31,363,000 $ 12,100,000 $ 17,327,000
Deferred:
Federal $ 4,925,000 $ 5,800,000 $ 3,221,000
State 475,000 500,000 134,000
--------------------------------------------------------------------
Total Provision $ 36,763,000 $ 18,400,000 $ 20,682,000
====================================================================
</TABLE>
Deferred income taxes reflect the net effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and amounts used for income tax purposes. Significant
components of the Company's deferred tax liabilities and assets as of March 31,
1996 and 1995 are as follows:
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31, 1996 1995
<S> <C> <C>
Deferred tax liabilities:
Accelerated depreciation $ 31,328,362 $ 22,912,171
Amounts expended for major engine inspections, net 4,643,386 4,536,675
Other, net 1,092,898 1,763,036
-----------------------------------------
Deferred tax liabilities $ 37,064,646 $ 29,211,882
=========================================
Deferred tax assets:
Expenses not currently deductible $ 7,783,649 $ 5,405,186
Deferred gains on sale/leaseback transactions 1,117,586 1,056,068
Other, net 973,199 542,081
-----------------------------------------
Deferred tax assets $ 9,874,434 $ 7,003,335
-----------------------------------------
Net deferred tax liabilities $ 27,190,212 $ 22,208,547
=========================================
</TABLE>
No valuation allowance for deferred tax assets has
been recorded.
The following is a reconciliation between the
statutory federal income tax rate and the effective rate.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31, 1996 1995 1994
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Increase in tax rate resulting from --
State income taxes, net of federal
income tax effect 2.8 3.0 3.1
Other, net .2 0.6 2.9
Adjust deferred tax liability for fiscal
1994 income tax rate increase -- -- 1.0
---------------------------------------------------------
Effective income tax rate 38.0% 38.6% 42.0%
=========================================================
</TABLE>
<PAGE> 19
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
The Omnibus Budget Reconciliation Act of 1993 increased the
statutory federal income tax rate from 34% to 35%, effective January 1, 1993.
Under SFAS No. 109, the Company's deferred taxes were adjusted to reflect the
new rate. This adjustment to deferred taxes coupled with an adjustment to
reflect the retroactive application of the new rate to January 1, 1993, resulted
in $500,000 in additional tax expense in fiscal 1994.
The Company made cash income tax payments of $28,160,000 in
fiscal 1996, $11,533,000 in fiscal 1995 and $17,144,000 in fiscal 1994.
NOTE 5 COMMITMENTS
As of March 31, 1996, COMAIR had scheduled delivery positions
for fifteen Canadair Jets to be delivered in fiscal 1997. In late May 1996,
COMAIR intends to exercise options for an additional five Canadair Jets to be
delivered through May 1997. The aggregate cost of these aircraft, including
support equipment and estimated escalation, will be approximately $340 million.
Four of these aircraft were delivered through May 1996 using interim financing
provided by the manufacturer. Advance payments and deposits and capitalized
interest of $20.0 million are included in the March 31, 1996 consolidated
balance sheets.
COMAIR also has options for 25 additional Canadair Jets. The
25 additional aircraft, valued at approximately $450 million, including support
equipment and estimated escalation, could be available for delivery in fiscal
1998 through fiscal 2000.
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 the 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.
NOTE 6 BENEFIT PLANS
The Company established a stock option plan for its officers
and key employees with 2,531,250 shares of common stock reserved for issuance.
Options are permitted to be granted at up to 110% of the market value of the
underlying common stock on the date of grant. The options become exercisable
over periods of four to nine years after the date of grant and expire ten years
after the date of grant as long as the holder remains an employee of the
Company.
The Company also has a stock option plan for nonemployee
directors with 248,063 shares of common stock reserved for issuance. Each year
each nonemployee director of the Company receives an option to purchase 5,063
shares of common stock at a purchase price equal to the last sale price on the
date of grant. These options become exercisable six months after the date of
grant and expire ten years after the date of grant.
Transactions involving the stock option plans for the years
ended March 31, 1996, 1995 and 1994 are shown in the table below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
Outstanding at beginning of year (at $1.56-$13.78 per share) 1,298,804 967,316 940,417
Granted (at $7.67-$13.78 per share) 274,388 411,413 171,113
Exercised (at $1.56-$13.78 per share) (519,146) (76,550) (144,214)
Expired (at $4.37-$12.67 per share) (40,189) (3,375) --
--------------------------------------------------------------
Outstanding at end of year (at $1.56-$13.78 per share) 1,013,857 1,298,804 967,316
==============================================================
Exercisable at end of year (at $1.56-$13.78 per share) 371,428 645,820 432,792
==============================================================
Available for grant at end of year 1,650,618 1,925,006 2,336,418
==============================================================
</TABLE>
<PAGE> 20
The Company has a 401(k) plan which is available to all
employees. This plan offers several investment alternatives, including the
Company's stock which is purchased in the open market at market value. The
Company matches contributions (on up to ten percent of the participant's
compensation) at a rate of twenty-five percent of such contributions. The
Company has an Incentive Bonus Plan which is available to all eligible employees
after one year of service. The Company also has a Performance Based Incentive
Bonus Plan and a Deferred Incentive Compensation Plan for certain employees, as
designated by a committee of the Board of Directors.
In fiscal 1996, 1995 and 1994, the Company expensed
$6,886,000, $3,694,000 and $4,612,000, respectively, related to these plans.
The Company has no material liability for post-employment
benefits under Statement of Financial Accounting Standard No. 112.
NOTE 7 RELATED PARTY TRANSACTIONS
Delta Air Lines, Inc. (Delta) owns approximately 21% of the
Company's common stock. COMAIR is a designated "Delta Connection" carrier,
operating all flights under the DL code. Under this marketing agreement, COMAIR
is able to offer passengers joint fares, coordinated schedules for timely
connections and Delta frequent flyer mileage. In return for set fees, Delta also
handles COMAIR's reservations and flights at some airport locations. Costs of
these various services in fiscal 1996, 1995 and 1994 were approximately
$20,790,000, $12,587,000 and $8,486,000, respectively. Accounts payable at March
31, 1996 and 1995 included approximately $7,056,000 and $4,612,000 due Delta for
these services.
Trade receivables in the accompanying consolidated balance
sheets include amounts due from Delta of $9,002,000 and $3,972,000 as of March
31, 1996 and 1995, respectively. Approximately 45% of COMAIR's passengers in
fiscal 1996, 44% in fiscal 1995 and 49% in fiscal 1994 connected with Delta.
The Company has historically benefited 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 to
the "Delta Connection" marketing agreement.
NOTE 8 FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company
in estimating its fair value disclosures for financial instruments:
Cash, cash equivalents and marketable securities: The carrying
amount reported in the consolidated balance sheets for cash, cash equivalents
and marketable securities approximates fair value. Fair value of marketable
securities are based on quoted market prices as of March 31, 1996 and March 31,
1995.
Long-term obligations: The fair values of the Company's
long-term obligations are estimated by discounting the future cash flows based
on the Company's estimate of current borrowing rates for debt with similar
remaining maturities.
Interest rate subsidies on long-term obligations: The Company
receives interest rate subsidies on certain long-term obligations (see Note 2).
The fair values of interest rate subsidies on long-term obligations are
estimated by discounting the estimated future cash flows based upon the
Company's estimate of current borrowing rates with similar remaining maturities.
<PAGE> 21
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
The cost and estimated fair values of the Company's financial
instruments at March 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Asset (Liability)
-------------------------------------------------------------------------
Cost Estimated Fair Value
1996 1995 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 111,601,283 $ 46,628,897 $ 111,601,283 $ 46,628,897
Marketable securities $ 40,022,739 $ 37,215,755 $ 39,860,347 $ 37,448,919
Total long-term obligations
(before interest rate subsidies) $ (79,912,216) $ (91,377,124) $ (79,912,545) $ (91,451,673)
Interest rate subsidies on
long-term obligations $ -- $ -- $ 2,921,000 $ 2,823,000
</TABLE>
The following tables summarize the unrealized gains and losses
for available-for-sale securities at March 31, 1996 and 1995.
<TABLE>
<CAPTION>
Unrealized
--------------------------------------------------------------
1996 1996
Amortized Fair
Cost Gains Losses Value
--------------------------------------------------------------
<S> <C> <C> <C> <C>
US Treasury and Government
Agency Securities $ 2,350,062 $ -- $ 62 $ 2,350,000
Municipal Bonds and Mutual Funds 31,176,112 54,014 118,279 31,111,847
Corporate Notes 3,001,027 -- 9,777 2,991,250
Common Stock 3,495,538 -- 88,288 3,407,250
--------------------------------------------------------------
Total $40,022,739 $ 54,014 $ 216,406 $39,860,347
==============================================================
</TABLE>
<TABLE>
<CAPTION>
Unrealized
--------------------------------------------------------------
1995 1995
Amortized Fair
Cost Gains Losses Value
--------------------------------------------------------------
<S> <C> <C> <C> <C>
US Treasury and Government
Agency Securities $ 7,158,647 $ 8,000 $ 68,658 $ 7,097,989
Municipal Bonds and Mutual Funds 18,476,423 14,958 122,826 18,368,555
Corporate Notes 6,013,210 -- 144,460 5,868,750
Common Stock 5,567,475 546,150 -- 6,113,625
--------------------------------------------------------------
Total $37,215,755 $ 569,108 $ 335,944 $37,448,919
==============================================================
</TABLE>
<PAGE> 22
The following table presents the amortized cost and fair value
of debt securities available-for-sale at March 31, 1996 and 1995.
<TABLE>
<CAPTION>
Amortized Cost Fair Value
1996 1995 1996 1995
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than year $13,603,644 $11,804,733 $13,613,730 $11,687,508
After one year through five years 22,923,557 16,337,375 22,839,367 16,139,868
--------------------------------------------------------------
Total $36,527,201 $28,142,108 $36,453,097 $27,827,376
==============================================================
</TABLE>
In fiscal 1996, the Company realized gains from the sale of
marketable securities of $1,091,000. There were no material realized gains or
losses in fiscal 1995 or fiscal 1994.
NOTE 9 ACQUISITION OF SPIRIT AIRLINES
In March, 1996, the Company entered into an agreement to
purchase and assume substantially all of the assets and liabilities of Spirit
Airlines, Inc. (Spirit) for approximately $18 million. Spirit is a U.S.
Certified air carrier holding both domestic and international authority to
transport passengers and cargo. Spirit, headquartered in Michigan, currently
operates 10 DC-9 aircraft in scheduled air transportation in the Eastern part of
the U.S., as well as charter services to various locations. The transaction is
subject to satisfactory completion of due diligence review and various
regulatory approvals. The Company intends to record the acquisition under the
purchase accounting method.
<PAGE> 23
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
TO COMAIR HOLDINGS, INC.:
We have audited the accompanying consolidated balance sheets
of Comair Holdings, Inc. (a Kentucky corporation) and subsidiaries as of March
31, 1996 and 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended March 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Comair Holdings, Inc. and subsidiaries as of March 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1996 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Cincinnati, Ohio,
May 15, 1996.
<PAGE> 24
CORPORATE INFORMATION
STOCK TRANSFER AGENT & REGISTRAR
Chemical Mellon Shareholder Services
85 Challenger Road
Ridgefield Park, NJ 07660
(800) 756-3353
STOCK INFORMATION
The Company's common stock, traded in the Nasdaq
National Market tier of The Nasdaq Stock Market under
the symbol COMR, was held by approximately 2,264
holders of record as of March 31, 1996, which the
Company believes represents approximately 20,000
beneficial owners.
MARKET MAKERS
(as of 3/31/96)
Alex. Brown & Sons Incorporated
The First Boston Corporation
Herzog, Heine, Geduld, Inc.
Jefferies & Company, Inc.
J.J.B. Hilliard, W.L. Lyons, Inc.
Knight Securities L.P.
Lehman Brothers Inc.
Mayer & Schweitzer, Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
J.P. Morgan Securities Inc.
Morgan Stanley & Co., Inc.
PaineWebber Inc.
Prudential Securities Inc.
Robinson Humphrey Co., Inc.
Sherwood Securities Corp.
Smith Barney Shearson Inc.
Troster Singer Corp.
Weeden & Co., Inc.
LEGAL COUNSEL
Keating, Muething & Klekamp, Cincinnati, Ohio
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, Cincinnati, Ohio
FORM 10-K
Shareholders may obtain the fiscal 1996 annual report
on Form 10-K filed with the Securities and Exchange
Commission without charge by writing to:
Investor Relations Department
Comair Holdings, Inc.
P.O. Box 75021
Cincinnati, Ohio 45275
WORLD-WIDE WEBSITE
htttp://fly-comair.com
<PAGE> 25
DIRECTORY
BOARD OF DIRECTORS
David R. Mueller(1)
Chairman of the Board
Chief Executive Officer
Comair Holdings, Inc.
David A. Siebenburgen
President, Chief Operating Officer
Comair Holdings, Inc.
Robert H. Castellini
Chairman, Chief Executive Officer
Castellini Company
(Produce Distributor/Processor)
Peter H. Forster(2)
Chairman of the Board
Chief Executive Officer
DPL Inc.
(Utility)
John A. Haas
Retired President, Chief Executive Officer
Ball Glass Container Corporation
(Manufacturer)
Raymond A. Mueller(3)
Retired Chairman of the Board
Comair Holdings, Inc.
Christopher J. Murphy III(4)
President, Chief Executive Officer
1st Source Bank
1st Source Corporation
(Financial Institution)
Gerald L. Wolken
Managing Partner
MLE Enterprises Inc.
(Management Consulting)
Maurice W. Worth
Executive Vice President - Customer Service
Delta Air Lines, Inc.
(Major Airline)
1 Chairman of Finance Committee
2 Chairman of Compensation Committee
3 Chairman of Executive Committee
4 Chairman of Audit Committee
OFFICERS OF COMAIR HOLDINGS, INC.
David R. Mueller
Chairman of the Board
Chief Executive Officer
David A. Siebenburgen
President, Chief Operating Officer
Randy D. Rademacher
Senior Vice President Finance
Chief Financial Officer
Brian L. McDonald
Vice President
Controller
Richard D. Siegel
Secretary
Partner, Keating, Muething & Klekamp
OTHER OFFICERS OF COMAIR, INC.
Charles E. Curran III
Senior Vice President
Marketing
K. Michael Stuart
Senior Vice President
Aircraft Operations
Linda D. Landers
Vice President
Customer Services
Kenneth W. Marshall
Vice President
Flight Operations and Corporate Safety
Ralph E. Martin
Vice President
Maintenance
Linda E. Noble
Vice President
Human Resources
C. Michael Willis
Vice President
Customer Services-Cincinnati
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF COMAIR HOLDINGS, INC.
COMAIR, INC., an Ohio corporation.
COMAIR SERVICES, INC., a Kentucky corporation.
COMAIR AVIATION ACADEMY, INC., a Florida corporation.
CVG AVIATION, INC., a Kentucky corporation.
COMAIR INVESTMENT COMPANY, a Delaware corporation.
COMAIR AIRCRAFT, INC., a Kentucky corporation.
-15-
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in and incorporated by reference in this Form 10-K,
into the Company's previously filed Registration Statements File Nos. 2-78766,
2-87728, 33-23415 and 33-57548.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
June 26, 1996.
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000835344
<NAME> COMAIR HOLDINGS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 111,601,283
<SECURITIES> 39,860,347
<RECEIVABLES> 15,642,878
<ALLOWANCES> 0
<INVENTORY> 13,864,258
<CURRENT-ASSETS> 196,909,113
<PP&E> 311,152,430
<DEPRECIATION> 97,769,467
<TOTAL-ASSETS> 429,030,154
<CURRENT-LIABILITIES> 104,472,525
<BONDS> 70,745,129
<COMMON> 51,094,753
0
0
<OTHER-SE> 162,034,451
<TOTAL-LIABILITY-AND-EQUITY> 429,030,154
<SALES> 0
<TOTAL-REVENUES> 463,298,143
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 368,471,363
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,746,603
<INCOME-PRETAX> 96,771,473
<INCOME-TAX> 36,763,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,008,473
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 0
</TABLE>
