<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, 1997
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
$832,584,701 based on a closing price of $24.50 on May 21, 1997. As of May 21,
1997, 44,532,815 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, 1997 furnished to the Commission pursuant to Rule 14a-3(c) and
portions of the Registrant's Proxy Statement to be filed with the Commission for
its 1997 Annual Meeting of Shareholders are incorporated by reference in Parts
I, II and III as specified.
<PAGE> 2
COMAIR HOLDINGS, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-K
<TABLE>
<CAPTION>
Part I Page
----
<S> <C>
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>
2
<PAGE> 3
PART I
ITEM 1.
BUSINESS
"Footnotes 1 and 7" on page 25 and 32 of the Registrant's Annual Report
to Shareholders for 1997 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. effective in October 1989. The
agreement may be terminated by either party on not less than 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 1997 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 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.
On June 13, 1997, COMAIR signed a code-share agreement with AirTran
Airways which will be operated under the name AirTran Florida Connection.
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.
Employees
- ---------
As of May 1, 1997, the Company had 2,861 full-time and 366 part-time
employees consisting of 1,751 persons in aircraft operations, 1,092 in customer
service activities, 223 in its fixed base, charter and pilot training operations
and the remainder in office and sales capacities. A collective bargaining
agreement between COMAIR and the Air Lines Pilots Association became effective
June 1, 1994, and becomes amendable in June 1998. A collective bargaining
agreement
3
<PAGE> 4
between COMAIR and the International Association of Machinists and Aerospace
Workers, representing COMAIR's maintenance employees, became effective June 1,
1995, and becomes amendable in June 1999. In fiscal 1997, The National Mediation
Board conducted an election among COMAIR's flight attendants on behalf of the
United Brotherhood of Teamsters. The results of the election and certification
of the Teamsters union as representative of the flight attendants is currently
in litigation.
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 proposed 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. Based on the proposed new regulations, the
Company does not believe the impact will be material to its financial position,
future operating results, or cash flows 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.
4
<PAGE> 5
ITEM 2.
PROPERTIES
----------
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" beginning on page 13 of the Registrant's Annual Report to
Shareholders for 1997 is incorporated herein by reference. Certain additional
information regarding the Properties of the Company is described below:
At March 31, 1997, COMAIR's fleet consisted of 48 jet aircraft and 46
turboprop aircraft. The following table summarizes the fleet:
<TABLE>
<CAPTION>
No. of Seating
Type of Aircraft Aircraft Capacity
---------------- -------- --------
<S> <C> <C>
Canadair Jet 48 50
Embraer Brasilia 39 30
Saab SF340 7 33
</TABLE>
The Company occupies maintenance, operations and office facilities in
Cincinnati and Orlando, 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
58 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.
5
<PAGE> 6
ITEM 3.
LEGAL PROCEEDINGS
-----------------
On January 9, 1997, Flight 3272 crashed near Detroit, Michigan. There
were no survivors among the 29 passengers and crew members aboard the turboprop
aircraft. The Company is cooperating fully with the National Transportation
Safety Board (NTSB) and all other federal, state and local regulatory and
investigatory agencies in connection with the crash. In May 1997, the NTSB
released the factual data obtained to date related to Flight 3272. The findings
to date are inconclusive. Several lawsuits have been filed against the Company
seeking damages attributable to the deaths of those on Flight 3272, and
additional lawsuits are expected. The Company maintains substantial insurance
coverage for such claims and, at this time, believes that the claims, expenses
and litigation related to this accident will not have a material adverse effect
on the Company's financial condition, cash flows or results of operations.
There are no other 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 1997.
PART II
ITEM 5.
MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED SHAREHOLDER MATTERS
--------------------------------------
"Consolidated Ten Year Summary" on page 10, "Selected Quarterly
Financial Data" on page 12 and "Stock Transfer Agent & Registrar", "Stock
Information", and "Market Makers" on page 36 of Registrant's Annual Report to
Shareholders for 1997 are incorporated herein by reference. The Company
currently pays quarterly cash dividends (currently $0.06 per share per quarter),
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 10 of the Registrant's Annual
Report to Shareholders for 1997 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 13 of the Registrant's Annual Report to
Shareholders for 1997 is incorporated herein by reference.
6
<PAGE> 7
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The following Financial Statements of the Registrant beginning on page
20 of its Annual Report to Shareholders for 1997, are incorporated herein by
reference:
Consolidated Balance Sheets as of March 31, 1997 and 1996.
Consolidated Statements of Income for the years ended March
31, 1997, 1996 and 1995.
Consolidated Statements of Shareholders' Equity for the years
ended March 31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended
March 31, 1997, 1996 and 1995.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants.
The following schedules are filed herewith:
Report of Independent Public Accountants.
Schedule II - Valuation and Qualifying Accounts and Reserves
for the three years ended March 31, 1997, 1996 and 1995.
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 12 of the Registrant's
Annual Report to Shareholders for 1997 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 1997 Annual Shareholders Meeting as
filed with the Commission pursuant to Regulation 14A.
7
<PAGE> 8
PART IV
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.
(b) 3 - Exhibits.
8
<PAGE> 9
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit Filing Status
------ ---------------------- -------------
<S> <C> <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 f
10.8 Employment Agreement with Mr. David R. f
Mueller
10.9 Employment Agreement with Mr. David A. f
Siebenburgen
10.10 Performance Based Incentive Bonus Plan f
10.11 Consulting Agreement with Mr. Raymond A. f
Mueller
11 Statement re Computation of Filed herewith
Net Income Per Share
13 Annual Report to Shareholders Filed herewith
for 1997
21 Subsidiaries of the Registrant Filed herewith
23 Consent of Arthur Andersen LLP Filed herewith
27 Financial Data Schedule Filed herewith
99 Safe Harbor - Risk Factors Filed herewith
</TABLE>
9
<PAGE> 10
Exhibit
Number Description of Exhibit
------ ----------------------
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, 1990.
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.
f Filed as an exhibit to Form 10-K for the fiscal
year ended March 31, 1996.
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 75317
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.
(b) Reports on Form 8-K. No reports on Form 8-K were
filed during the last quarter of the fiscal year.
10
<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, 1997 /s/ DAVID R. MUELLER
------------------------------
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>
/s/ DAVID R. MUELLER
- -------------------------- Chairman of the Board, June 26, 1997
David R. Mueller Chief Executive Officer
and Director
/s/ DAVID A. SIEBENBURGEN
- --------------------------
David A. Siebenburgen President, June 26, 1997
Chief Operating Officer
and Director
/S/ RANDY D. RADEMACHER
- --------------------------
Randy D. Rademacher Sr. Vice President Finance June 26, 1997
Chief Financial Officer
(Chief Accounting Officer)
/S/ RAYMOND A. MUELLER Director June 26, 1997
- --------------------------
Raymond A. Mueller
/S/ ROBERT H. CASTELLINI Director June 26, 1997
- --------------------------
Robert H. Castellini
/S/ JOHN A. HAAS Director June 26, 1997
- --------------------------
John A. Haas
</TABLE>
11
<PAGE> 12
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 1997 annual report to shareholders incorporated
by reference in this Form 10-K, and have issued our report thereon dated May 16,
1997. 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 16, 1997.
12
<PAGE> 13
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Three Years Ended March 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Additions
Balance at Charged to Deductions Balance at
Beginning Costs and From End of
Classification of Period Expenses Reserves Period
-------------- --------- -------- -------- ------
<S> <C> <C> <C> <C>
Allowances and reserves
deducted from assets--
Year Ended March 31, 1997
- -------------------------
Inventory Reserve $2,795,000 $ 465,000 $ - $3,260,000
Year Ended March 31, 1996
- -------------------------
Inventory Reserve $1,665,000 $1,130,000 $ - $2,795,000
Year Ended March 31, 1995
- -------------------------
Inventory Reserve $1,064,000 $ 601,000 $ - $1,665,000
</TABLE>
13
<PAGE> 1
EXHIBIT 11
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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
========== =========== =====
March 31, 1997:
Net income...................... $75,424,593
Common stock outstanding as of
April 1, 1996................. 44,438,204
Exercise of stock options
(94,611 shares issued)....... 33,290
---------- ----------- -----
44,471,494 $75,424,593 $1.70
========== =========== =====
Effect of outstanding stock options
which is less than 3% and not
required to be disclosed in the
financial statements
(919,340 shares)............... 381,701
---------- ----------- -----
44,853,195 $75,424,593 $1.68
========== =========== =====
</TABLE>
<PAGE> 1
CONSOLIDATED TEN YEAR SUMMARY
<TABLE>
<CAPTION>
Comair Holdings, Inc. and Subsidiaries
for the Years Ended March 31,
- ----------------------------------------------------------------------------------------------------------------
FISCAL YEAR 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues $563,815,043 $463,298,143 $360,704,137
Operating income $116,117,400 $ 94,826,780 $ 47,024,968
Pretax income $120,160,593 $ 96,771,473 $ 47,705,256
Net income $ 75,424,593 $ 60,008,473 $ 29,305,256
Net income per share $ 1.70 $ 1.36 $ .64
Dividends paid per share $ .214 $ .165 $ .125
Weighted average shares outstanding 44,471,494 44,271,442 45,568,503
===================================================================================================
OTHER FINANCIAL DATA:
---------------------------------------------------------------------------------------------------------
Working capital $119,687,410 $ 92,436,588 $ 41,724,167
Total assets $588,585,945 $429,030,154 $347,021,961
Long-term obligations, net of current
maturities $127,747,861 $ 70,745,129 $ 79,906,236
Shareholders' equity $280,299,329 $213,129,204 $156,763,419
Shareholders' equity per share $ 6.30 $ 4.80 $ 3.57
Stock price (end of year) $ 21.75 $ 23.17 $ 7.67
Return on beginning shareholders' equity 35.4% 38.3% 17.3%
===================================================================================================
AIRLINE STATISTICAL DATA:
---------------------------------------------------------------------------------------------------------
Passengers carried 4,708,498 4,102,690 3,399,948
Revenue passenger miles (000) 1,551,093 1,281,308 1,015,177
Available seat miles (000) 2,774,926 2,366,269 2,041,887
Passenger load factor 55.9% 54.1% 49.7%
Breakeven load factor 44.9% 42.9% 42.9%
Yield per revenue passenger mile 34.7(cent) 34.7(cent) 34.0(cent)
Cost per available seat mile 15.5(cent) 15.0(cent) 14.8(cent)
Equivalent full-time employees (end of year) 2,897 2,523 2,447
Number of aircraft (end of year) 94 89 84
===================================================================================================
</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.
10 1997 Comair Holdings, Inc. Annual Report.
<PAGE> 2
Table
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
$296,635,551 $248,281,681 $217,203,892 $201,551,437
$ 47,300,280 $ 32,254,010 $ 21,152,042 $ 21,731,650
$ 49,210,415 $ 32,060,079 $ 20,652,322 $ 21,774,097
$ 28,528,415 $ 19,268,079 $ 12,412,322 $ 13,076,097
$ .59 $ .46 $ .30 $ .32
$ .107 $ .084 $ .081 $ .080
48,293,717 42,009,734 41,128,520 41,103,558
======================================================================================================
- ------------------------------------------------------------------------------------------------------
$ 77,146,245 $ 74,344,774 $ 14,667,083 $ 20,535,063
$284,559,219 $260,088,150 $180,601,757 $166,771,951
$ 27,115,862 $ 34,619,680 $ 41,597,285 $ 48,674,999
$169,277,604 $145,028,367 $ 79,478,537 $ 69,419,703
$ 3.50 $ 3.00 $ 1.92 $ 1.69
$ 9.56 $ 11.19 $ 5.56 $ 3.80
19.7% 24.2% 17.9% 21.8%
======================================================================================================
- ------------------------------------------------------------------------------------------------------
2,735,468 2,394,871 2,055,077 1,904,221
696,443 545,459 446,712 393,868
1,477,198 1,182,124 1,031,408 927,240
47.1% 46.1% 43.3% 42.5%
39.1% 39.7% 38.8% 37.8%
40.6(cent) 42.9(cent) 45.3(cent) 47.6(cent)
16.1(cent) 17.3(cent) 17.7(cent) 18.1(cent)
2,145 1,936 1,936 1,841
79 68 71 69
======================================================================================================
- ---------------------------------------------------------
1990 1989 1988
- ---------------------------------------------------------
- ---------------------------------------------------------
<C> <C> <C>
$157,666,352 $118,307,669 $ 87,571,102
$ 20,157,621 $ 10,774,705 $ 7,511,613
$ 21,629,471 $ 11,515,849 $ 7,073,599
$ 13,014,471 $ 7,030,849 $ 5,123,599
$ .32 $ .16 $ .11
$ .067 $ .062 $ .031
41,200,682 43,090,574 47,309,022
==========================================================
- -----------------------------------------------------------
$ 19,785,209 $ 24,330,841 $ 20,301,723
$128,241,223 $ 84,163,598 $ 80,886,955
$ 33,005,786 $ 14,231,755 $ 16,074,170
$ 60,015,389 $ 50,012,291 $ 51,087,138
$ 1.46 $ 1.21 $ 1.15
$ 2.99 $ 2.05 $ 1.53
26.0% 13.8% 9.7%
==========================================================
- ----------------------------------------------------------
1,601,690 1,250,162 911,437
305,647 232,096 176,209
683,934 548,152 425,200
44.7% 42.3% 41.4%
38.6% 38.3% 37.8%
49.2(cent) 49.1(cent) 47.4cent)
19.2(cent) 19.1(cent) 18.3(cent)
1,622 1,354 1,239
63 54 50
===========================================================
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
SELECTED QUARTERLY
FINANCIAL DATA
Comair Holdings, Inc. and Subsidiaries
- --------------------------------------
FIRST SECOND THIRD FOURTH YEAR
- ---------------------------------------------------------------------------------------------------------------------------
FISCAL 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 139,025,159 $ 137,524,194 $ 138,272,352 $ 148,993,338 $ 563,815,043
Operating income $ 34,524,116 $ 28,847,706 $ 24,092,295 $ 28,653,283 $ 116,117,400
Pretax income $ 35,552,363 $ 29,782,420 $ 24,942,544 $ 29,883,266 $ 120,160,593
Net income $ 22,042,363 $ 18,487,420 $ 15,464,544 $ 19,430,266 $ 75,424,593
Net income per share $ .50 $ .42 $ .35 $ .44 $ 1.70
Dividends paid per share $ .047 $ .047 $ .060 $ .060 $ .214
Weighted average shares
outstanding 44,440,454 44,446,953 44,471,316 44,528,134 44,471,494
Stock price data
High $ 30.63 $ 27.25 $ 26.13 $ 25.88 $ 30.63
Low $ 20.88 $ 20.00 $ 18.13 $ 19.00 $ 18.13
===========================================================================================================================
FISCAL 1996
- ---------------------------------------------------------------------------------------------------------------------------
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
===========================================================================================================================
</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
and August 1995.
12 1997 Comair Holdings, Inc. Annual Report.
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comair Holdings, Inc. and Subsidiaries
- --------------------------------------
RESULTS OF OPERATIONS
COMAIR, Inc. (COMAIR) is the principal subsidiary of Comair
Holdings, Inc. (with its subsidiaries, the Company), accounting for
96% of operating revenues and expenses in fiscal 1997. Although the
following discussion and analysis entails various aspects of the
Company's financial performance, many of the factors that affect year
to year comparisons relate solely to COMAIR.
Inflation and changing prices have not had a material effect on
COMAIR's operations because revenues and expenses generally reflect
current price levels. COMAIR's market area, strong financial position
and strong cost control efforts have helped lessen the effect on the
Company of price competition and resulting low fares when compared to
many others in the airline industry. However, changes in the pricing
strategies of other airlines and increased competition of low fare
carriers could impact COMAIR's ability to recoup future cost increases
through higher fares.
COMAIR operates as a "Delta Connection" carrier under a ten-year
marketing agreement with Delta Air Lines, Inc. dated and effective in
October of 1989. The agreement may be terminated by either party on
not less than one hundred eighty (180) days' advance written notice.
Delta owns approximately 21% of the Company's outstanding common
stock, leases reservation equipment and terminal facilities to COMAIR,
and provides certain services to COMAIR including reservations and
passenger and aircraft handling services. The Company has historically
benefitted from its relationship with Delta. However, the Company's
results of operations and financial condition may be adversely
impacted by Delta's decisions regarding routes and other operational
matters, as well as any material interruption or modifications in this
arrangement.
In April 1997, COMAIR signed a Letter of Intent with AirTran
Airways regarding a code sharing or "interlining" agreement. The
agreement is subject to various approvals and acceptance by the Board
of Directors of both companies. A start date has not been established.
Approximately 35% 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.
In fiscal 1997, The National Mediation Board conducted an election
among the flight attendants on behalf of the United Brotherhood of
Teamsters. The result of the election and certification of the
Teamsters union as representative of the flight attendants is
currently in litigation.
13 1997 Comair Holdings, Inc. Annual Report
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- -------------------------------------
FISCAL 1997 COMPARED WITH FISCAL 1996
- -------------------------------------
In fiscal 1997, the Company reported record operating revenues,
operating income, net income and passenger enplanements. Operating
revenues for the year increased to $564 million, up 22% from $463
million in fiscal 1996.
Operating income for the year rose 22% to $116.1 million from
$94.8 million. Net income increased 26% to $75.4 million from $60.0
million and net income per share increased to $1.70 from $1.36. The
increase in earnings is largely the result of a 15% increase in
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 1997, revenue passenger miles (RPMs) increased 21%.
Capacity, available seat miles (ASMs), grew 17% with the acquisition
of eighteen 50-passenger Canadair Jet aircraft. During fiscal 1997,
nine 33-passenger Saab and three 19-passenger Metro aircraft were
retired from service. COMAIR has now completely transitioned out of
the 19-passenger Metro aircraft and will retire the remaining
33-passenger Saab aircraft by summer of 1997.
Yield per revenue passenger mile remained the same year over year,
while cost per ASM increased to 15.5 cents per ASM from 15.0 cents per
ASM in fiscal 1996. The higher unit cost is primarily the result of a
16% increase in fuel prices, and an increase in transition costs
associated with phasing out our turboprop aircraft on an accelerated
schedule. Flight schedules were also reduced to enable COMAIR to
prepare these aircraft for sale or their return to lessors. This
lower asset utilization reduced the growth in capacity.
The following tables show the major expense categories for the
years ended March 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries and related costs $ 99,879,467 $ 85,333,979 $ 73,282,459
Aircraft fuel 55,466,125 38,703,967 31,824,949
Maintenance materials and repairs 44,242,523 40,895,807 33,986,468
Aircraft rent 70,753,755 57,805,169 53,939,399
Other rent and landing fees 18,828,801 15,932,585 13,753,045
Passenger commissions 44,855,202 38,329,529 32,742,908
Other operating expenses 74,960,417 59,454,915 44,746,733
Depreciation and amortization 21,747,953 19,072,163 17,346,146
-------------------------------------------------------------
$ 430,734,243 $ 355,528,114 $301,622,107
=============================================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COST PER ASM 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Salaries and related costs 3.6(cent) 3.6(cent) 3.6(cent)
Aircraft fuel 2.0 1.6 1.6
Maintenance materials and repairs 1.6 1.8 1.7
Aircraft rent 2.5 2.4 2.6
Other rent and landing fees 0.7 0.7 0.7
Passenger commissions 1.6 1.6 1.6
Other operating expenses 2.7 2.5 2.2
Depreciation and amortization 0.8 0.8 0.8
-------------------------------------------------------------
15.5(cent) 15.0(cent) 14.8(cent)
=============================================================
</TABLE>
14 1997 Comair Holdings, Inc. Annual Report
<PAGE> 6
Salaries and related costs rose from last year as a result of the
additional pilots, mechanics and customer service agents due to the
increase in Canadair Jet service. The average number of employees in
these areas increased 6% over fiscal 1996 levels. Expenses related to
the incentive compensation plans were also higher due to the increased
pretax earnings.
Aircraft fuel price per gallon increased 16% over fiscal 1996.
This increase is due primarily to higher crude oil prices and a full
year effect of the 4.3 cent fuel tax that was imposed on domestic
commercial transportation in October 1995. Fuel consumption increased
23% as COMAIR added eighteen new Canadair Jet aircraft during fiscal
1997.
Maintenance materials and repair costs increased in total, but
decreased on a unit cost basis. The decrease in cost per ASM is
related to lower initial maintenance costs associated with the new jet
aircraft.
Aircraft rent expense increased on a total and unit cost basis.
During fiscal 1997, COMAIR accepted delivery of eighteen Canadair
Jets, thirteen of which were financed with operating leases. The
higher cost per ASM is associated with phasing out our turboprop
aircraft on an accelerated schedule. In order to prepare these
aircraft for sale or their return to lessors, flight schedules were
reduced, lowering utilization.
Other rent and landing fees increased on a total basis as a result
of the addition of the larger Canadair Jets. These costs remained the
same on a unit cost basis due to the additional capacity generated by
the jet equipment.
Travel agency and credit card commissions have increased as a
result of a 21% increase in passenger revenues. Although unit revenues
(revenue per available seat mile) were higher in fiscal 1997, cost per
ASM was lower due to lower weighted average commission rates.
Commissions as a percentage of passenger revenues were 8.3% in fiscal
1997 and 8.6% in fiscal 1996.
Other operating expenses increased on a total and unit cost basis.
The increase was due mainly to the costs associated with the increase
in Canadair Jet service, additional training costs related to our
accelerated fleet transition and higher operating costs of our service
in the Northeast. In April 1997, certain service in the Northeast was
discontinued.
Depreciation and amortization increased in total due to the
purchase of five Canadair Jets during the third quarter of fiscal
1997. Unit cost remained the same as a result of the additional
capacity generated by the Canadair Jets acquired during fiscal 1997.
Investment income for fiscal 1997 increased over the prior year
due to higher average cash balances available for investment, coupled
with higher interest rates on our investments.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 (SFAS No. 128), "Earnings Per Share", which replaces
the presentation of primary earnings per share with a presentation of
basic earnings per share. It also requires dual presentation of basic
and diluted earnings per share on the face of the income statement for
all entities with complex capital structures and requires a
reconciliation of both the numerator and the denominator of the basic
earnings per share computation for the same components in the diluted
earnings per share computation. The Company is required to adopt SFAS
No. 128 in the third quarter of fiscal 1998. The Company anticipates
the impact of SFAS No. 128 to be immaterial.
15 1997 Comair Holdings, Inc. Annual Report
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
During the first quarter of fiscal 1997, the Company adopted the
Financial Accounting Standards Board Statement No. 121 (SFAS No. 121),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", which required impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
SFAS No. 121 also addresses the accounting for long-lived assets that
are expected to be disposed of in the future. The effect of adoption
was not 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, requires pro forma disclosures in the Company's fiscal
1997 financial statements. Rather than adopt the expense recognition
provision of this statement, the Company has elected to follow
Accounting Principles Board Opinion No. 25 (APB No. 25), "Accounting
for Stock Issued to Employees" and related interpretations and provide
the disclosures required by SFAS No. 123. Therefore, the application
of this standard did not impact the Company's financial position or
results of operations.
The Company's effective tax rate, which includes federal, state
and local taxes, approximated the statutory rates in fiscal 1997 and
1996.
FISCAL 1996 COMPARED WITH FISCAL 1995
In fiscal 1996, the Company reported 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, RPMs increased 26.2%. 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 to 34.7 cents from 34.0
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 of costs associated with higher passenger
revenues and pretax income, increased turboprop maintenance cost and
increased fees related to the Delta Connection program.
16 1997 Comair Holdings, Inc. Annual Report
<PAGE> 8
Salaries and related costs have risen from fiscal 1995 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 fiscal 1995. 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 related
to the Delta Connection program.
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 fiscal 1995 due
to significantly higher cash and cash equivalents balances. However,
lower market rates reduced the impact of the higher cash and cash
equivalents balances.
The Company's effective tax rate, which includes federal, state
and local taxes, approximated the statutory rates in fiscal 1996 and
1995. 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.
17 1997 Comair Holdings, Inc. Annual Report
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operating activities of $122.5
million in fiscal 1997, $119.6 million in fiscal 1996, and $70.3
million in fiscal 1995. Total working capital increased to $119.7
million at March 31, 1997, from $92.4 million at March 31, 1996, while
the current ratio increased to 1.99 at March 31, 1997 from 1.88 at
March 31, 1996.
Additions to property and equipment were $146.6 million, $37.9
million and $111.8 million in fiscal 1997, 1996 and 1995,
respectively. Acquisitions of aircraft were $109.6 million in fiscal
1997, $80.6 million in fiscal 1995 and were insignificant in fiscal
1996, as the Company has primarily used operating leases to finance
aircraft acquisitions. Major capital expenditures during fiscal 1997
included major engine inspections, aircraft spare parts and support
equipment.
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 of the
regulations will be made. Based on the proposed new regulations, the
Company does not believe their impact will be material to its
financial position, future operating results, or cash flows.
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 has
been provided by operations or working capital. As of March 31, 1997,
the Company had repurchased 4.5 million shares of this authorization
at a cost of $37.2 million.
In fiscal 1997, the Company paid out dividends of $.214 per share
or $9.5 million. Shareholders' equity per share rose to $6.30 at March
31, 1997 from $4.80 at March 31, 1996.
The increase in long-term obligations in fiscal 1997 is due to the
debt financing of five new Canadair Jets, slightly offset by debt
repayments of $9.2 million. The Company's long-term obligations to
equity position was 31% debt, 69% equity at March 31, 1997, as opposed
to 25% debt, 75% equity at March 31, 1996.
COMAIR acquired eighteen new generation, 50-passenger Canadair Jet
aircraft during fiscal 1997, bringing the total Canadair Jet fleet to
48. 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. Of the
remaining 28 aircraft, ten were financed with debt and 18 were
financed through operating leases with terms of up to 16.5 years.
As of March 31, 1997, COMAIR had scheduled delivery positions for
two Canadair Jets to be delivered in fiscal 1998. These two aircraft
were delivered in April 1997. COMAIR also had 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.
On May 30, 1997, COMAIR signed an agreement to acquire 30 Canadair
Jets, to be delivered through fiscal 2000. Eighteen of these aircraft
are firm orders, while twelve are subject to certain conditions. The
aggregate cost of these aircraft, including support equipment and
estimated escalation, will be approximately $540 million. In addition,
the options referenced above for 25 jet aircraft, were replaced with
options for the delivery of 45 jet aircraft, valued at approximately
$875 million, including support equipment and estimated escalation.
These aircraft could be available for delivery in fiscal 2000 through
fiscal 2002.
18 1997 Comair Holdings, Inc. Annual Report
<PAGE> 10
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.
On January 9, 1997, Flight 3272 crashed near Detroit, Michigan.
There were no survivors among the 29 passengers and crew members
aboard the turboprop aircraft. The Company is cooperating fully with
the National Transportation Safety Board (NTSB) and all other federal,
state and local regulatory and investigatory agencies in connection
with the crash. In May 1997, the NTSB released the factual data
obtained to date related to Flight 3272. The findings to date are
inconclusive. Several lawsuits have been filed against the Company
seeking damages attributable to the deaths of those on Flight 3272 and
additional lawsuits are expected. The Company maintains substantial
insurance coverage for such claims and, at this time, believes that
the claims, expenses and litigation related to this accident will not
have a material adverse effect on the Company's financial condition,
cash flows or results of operations.
There are no other 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 proceedings are adequately insured.
In fiscal 1998, 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.
19 1997 Comair Holdings, Inc. Annual Report
<PAGE> 11
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
ASSETS
Comair Holdings, Inc. and Subsidiaries
As Of March 31, 1997 and 1996
- -------------------------------------------------------------------------------------------------------------------------
ASSETS 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 122,604,792 $111,601,283
Marketable securities - Notes 1 & 8 54,111,024 39,860,347
------------- ------------
$ 176,715,816 $151,461,630
Accounts receivable - Notes 1 & 7 20,289,523 15,642,878
Inventory of expendable parts - Note 1 18,229,847 13,864,258
Future tax benefits - Note 4 11,056,864 8,756,848
Prepaid expenses 14,458,955 7,183,499
------------------------------------------------------------------------------------------------------
Total current assets $ 240,751,005 $196,909,113
============= ============
PROPERTY AND EQUIPMENT, AT COST - NOTE 2:
Flight equipment $ 394,323,083 $264,254,099
Maintenance, operations and office facilities 10,292,723 9,120,198
Other property and equipment 42,490,273 37,778,133
------------- ------------
$ 447,106,079 $311,152,430
Less accumulated depreciation and amortization 116,100,656 97,769,467
Less reserve for engine overhauls and purchase incentives 12,633,839 6,734,885
------------- ------------
$ 318,371,584 $206,648,078
Construction in progress 14,580 692,033
Advance payments and deposits for aircraft 21,086,563 20,027,679
------------------------------------------------------------------------------------------------------
$ 339,472,727 $227,367,790
============= ============
OTHER ASSETS AND DEFERRED COSTS - NOTE 1 $ 8,362,213 $ 4,753,251
============= ============
$ 588,585,945 $429,030,154
============= ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
20 1997 Comair Holdings, Inc. Annual Report
<PAGE> 12
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
Comair Holdings, Inc. and Subsidiaries
As Of March 31, 1997 and 1996
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES & SHAREHOLDERS' EQUITY 1997 1996
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Current installments of long-term obligations - Note 2 $ 12,909,768 $ 9,167,087
Accounts payable - Note 7 47,933,952 39,608,872
Interline payable and deferred revenue 5,579,663 5,970,855
Accrued lease expense 22,015,215 20,298,748
Accrued wages 6,427,279 5,567,900
Accrued expenses 13,785,587 11,304,479
Accrued taxes 12,412,131 12,554,584
------------------------------------------------------------------------------------------------------
Total current liabilities $ 121,063,595 $104,472,525
===============================
LONG-TERM OBLIGATIONS - NOTE 2 $ 127,747,861 $ 70,745,129
===============================
DEFERRED INCOME TAXES - NOTE 4 $ 52,389,105 $ 35,947,060
===============================
OTHER LIABILITIES AND DEFERRED CREDITS - NOTE 1 $ 7,086,055 $ 4,736,236
===============================
COMMITMENTS AND CONTINGENCIES - NOTES 3 AND 5
SHAREHOLDERS' EQUITY - NOTE 6:
Common stock, no par value, 100,000,000 shares
authorized, 44,532,815 and 44,438,204 issued
and outstanding, respectively $ 52,302,390 $ 51,094,753
Preferred stock, no par value, 1,000,000 shares
authorized, none issued or outstanding -- --
Net unrealized loss on marketable securities
available-for-sale (25,543) (82,419)
Retained earnings 228,022,482 162,116,870
------------------------------------------------------------------------------------------------------
Total shareholders' equity $ 280,299,329 $213,129,204
===============================
$ 588,585,945 $429,030,154
===============================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
21 1997 Comair Holdings, Inc. Annual Report
<PAGE> 13
<TABLE>
<CAPTION>
CONSOLIDATED
STATEMENTS OF INCOME
Comair Holdings, Inc. and Subsidiaries
For the Years Ended
March 31, 1997, 1996 and 1995
- ------------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------------
OPERATING REVENUES:
<S> <C> <C> <C>
Passenger $ 537,872,614 $ 444,121,247 $ 345,359,026
Cargo and other 4,644,159 4,751,011 3,905,666
Non-airline operations 21,298,270 14,425,885 11,439,445
-----------------------------------------------------------------------------------
Total operating revenues $ 563,815,043 $ 463,298,143 $ 360,704,137
===============================================
OPERATING EXPENSES -- NOTE 7:
Salaries and related costs $ 99,879,467 $ 85,333,979 $ 73,282,459
Aircraft fuel 55,466,125 38,703,967 31,824,949
Maintenance materials and repairs 44,242,523 40,895,807 33,986,468
Aircraft rent 70,753,755 57,805,169 53,939,399
Other rent and landing fees 18,828,801 15,932,585 13,753,045
Passenger commissions 44,855,202 38,329,529 32,742,908
Other operating expenses 75,227,082 59,541,534 44,946,939
Depreciation and amortization 24,908,928 21,008,438 19,243,782
Non-airline direct costs 13,535,760 10,920,355 9,959,220
-----------------------------------------------------------------------------------
Total operating expenses $ 447,697,643 $ 368,471,363 $ 313,679,169
===============================================
Operating income $ 116,117,400 $ 94,826,780 $ 47,024,968
===============================================
NONOPERATING INCOME (EXPENSE) -- NOTE 1:
Investment income $ 8,897,144 $ 6,691,296 $ 3,522,331
Interest expense (4,853,951) (4,746,603) (2,842,043)
-----------------------------------------------------------------------------------
Total nonoperating income, net $ 4,043,193 $ 1,944,693 $ 680,288
===============================================
Income before income taxes $ 120,160,593 $ 96,771,473 $ 47,705,256
INCOME TAXES-- NOTE 4 44,736,000 36,763,000 18,400,000
-----------------------------------------------
Net income $ 75,424,593 $ 60,008,473 $ 29,305,256
===============================================
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 44,471,494 44,271,442 45,568,503
===============================================
NET INCOME PER SHARE-- NOTE 1 $ 1.70 $ 1.36 $ .64
===============================================
DIVIDENDS PAID PER SHARE $ .214 $ .165 $ .125
===============================================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
22 1997 Comair Holdings, Inc. Annual Report
<PAGE> 14
<TABLE>
<CAPTION>
CONComair Holdings, Inc. and Subsidiaries CONSOLIDATED STATEMENTS
For the Years Ended OF SHAREHOLDERS' EQUITY
March 31, 1997, 1996 and 1995
- -----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF COMMON RETAINED
SHARES STOCK OTHER EARNINGS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 gain 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
Exercise of stock options 94,611 1,207,637 1,207,637
Net unrealized gain on marketable
securities available-for-sale -- -- 56,876 -- 56,876
Dividends (.214 cents per share) -- -- -- (9,518,981) (9,518,981)
Net income -- -- -- 75,424,593 75,424,593
----------------------------------------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1997 44,532,815 $ 52,302,390 $ (25,543) $ 228,022,482 $ 280,299,329
====================================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
23 1997 Comair Holdings, Inc. Annual Report
<PAGE> 15
<TABLE>
<CAPTION>
Comair Holdings, Inc. and Subsidiaries CONSOLIDATED
For the Years Ended STATEMENTS OF CASH FLOWS
March 31, 1997, 1996 and 1995
- -------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 75,424,593 $ 60,008,473 $ 29,305,256
Adjustments to reconcile net income to
net cash provided from operating activities:
Depreciation and amortization 24,908,928 21,008,438 19,243,782
Amortization and accrual of overhaul expenses 13,010,867 12,684,510 10,740,153
Deferred income tax provision 14,142,029 4,981,665 6,300,000
Other, net (1,577,594) (869,010) (245,027)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (4,646,645) (6,137,797) (1,158,809)
Decrease (increase) in inventory of expendable parts (4,365,589) (605,075) (1,762,330)
Decrease (increase) in other current assets (7,275,456) 521,090 (2,952,641)
Increase (decrease) in accounts payable 8,325,080 15,319,021 6,690,369
Increase (decrease) in other current liabilities 4,523,309 12,687,537 4,099,842
- ---------------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 122,469,522 $ 119,598,852 $ 70,260,595
===========================================================
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment $(146,595,228) $ (37,854,056) $(111,774,908)
Advance payments and deposits (1,000,000) -- --
Return of advance payments and deposits -- -- 500,000
Proceeds from sale of marketable securities 3,375,502 6,658,940 --
Purchases and maturities of
marketable securities, net (17,569,303) (9,326,175) 21,256,916
Deferred costs (2,896,652) (292,108) (1,554,215)
Other, net 785,599 1,038,722 452,854
- ---------------------------------------------------------------------------------------------------------------------------
Net cash flows from investing activities $(163,900,082) $ (39,774,677) $(91,119,353)
===========================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock $ 1,207,637 $ 4,311,263 $ 481,683
Payments of cash dividends and
repurchase of fractional shares (9,518,981) (7,315,081) (5,690,375)
Repurchase of common stock -- (383,063) (36,784,137)
Proceeds from long-term obligations 69,912,500 -- 65,580,389
Repayments of long-term obligations (9,167,087) (11,464,908) (8,750,577)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash flows from financing activities $ 52,434,069 $ (14,851,789) $ 14,836,983
===========================================================
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS: $ 11,003,509 $ 64,972,386 $ (6,021,775)
Cash and cash equivalents at beginning of period 111,601,283 46,628,897 52,650,672
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 122,604,792 $ 111,601,283 $ 46,628,897
===========================================================
</TABLE>
24 1997 Comair Holdings, Inc. Annual Report
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
<PAGE> 16
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Comair Holdings, Inc. and Subsidiaries
- -------------------------------------------------------------------
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 96 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
1997 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 an initial 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'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, 1997 and 1996, with
unrealized appreciation or depreciation, net of
applicable taxes, reflected as a separate component of
shareholders' equity.
E Inventory of Expendable Parts
--------------------------------------
Expendable parts are stated at cost, on a first-in,
first-out basis, less an obsolescence reserve of
$3,260,000 and $2,795,000 at March 31, 1997 and 1996,
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.
25 1997 Comair Holdings, Inc. Annual Report
<PAGE> 17
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Comair Holdings, Inc. and Subsidiaries
H Revenue Recognition
--------------------------------------
Revenues are recognized when the respective services
are rendered. An allowance ($155,000 at March 31, 1997
and 1996) 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 $6,192,000, $5,703,000 and $3,824,000 in
fiscal 1997, 1996 and 1995, respectively. Costs
capitalized in fiscal 1997, 1996 and 1995 totaled
$1,245,000, $1,327,000 and $1,153,000 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, 1997 have been received.
M Advertising Costs
--------------------------------------
Costs related to advertising are expensed as
incurred. The Company's advertising expense was
$2,202,000, $2,210,000 and $2,155,000 in fiscal 1997,
1996 and 1995, respectively.
N Financial Instruments
--------------------------------------
Financial instruments in the form of interest rate
swap agreements were utilized by the Company to hedge
its exposure to interest rate fluctuations involved in
aircraft financing. The Company does not hold or issue
derivative financial instruments for trading purposes.
Gains and losses on interest rate swap agreements are
deferred and amortized as an adjustment to lease
expense over the lease term. The fair value of interest
rate swap agreements is not recognized in the
consolidated financial statements since they are
accounted for as hedges.
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
26 1997 Comair Holdings, Inc. Annual Report
<PAGE> 18
stock equivalent. All weighted average share and per share
information has been adjusted retroactively for
three-for-two stock splits effective May 1996 and
August 1995.
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 adopted
SFAS No. 121 in the first quarter of fiscal 1997. The
effect of adoption was not 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. Rather than adopt the expense recognition
provisions of this statement, the Company has elected
to follow Accounting Principles Board Opinion No. 25
(APB No. 25) "Accounting for Stock Issued to Employees"
and related interpretations and provide the disclosures
required by SFAS No. 123 (See Note 6).
In February 1997, the Financial Accounting Standards
Board issued Statement No. 128 (SFAS No. 128), "Earnings
Per Share", which replaces the presentation of primary
earnings per share with a presentation of basic earnings
per share. It also requires dual presentation of basic
and diluted earnings per share on the face of the income
statement for all entities with complex capital structures
and requires a reconciliation of both the numerator and
denominator of the basic earnings per share computation.
SFAS No. 128 is effective for financial statements for
both interim and annual periods ending after December 15,
1997 (fiscal 1998 for the Company). The Company does not
expect a material impact on earnings per share upon
adoption.
- -------------------------------------------------------------------
NOTE 2 LONG-TERM OBLIGATIONS
- ------------------------------------------------------------------
The following is a summary of long-term obligations as
of March 31, 1997 and 1996:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Secured obligations for the purchase of ten Canadair Jets,
due in semi-annual installments through 2006 with
variable interest rates based on six month LIBOR.
Rates at March 31, 1997 were 6.047% to 6.725% $125,862,946 $ 60,228,268
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 14,764,608 19,310,806
Secured Industrial Revenue Bonds for the construction of
maintenance, operations and office facilities, interest at
6.793% with interest rate and monthly payment adjusted
every three years and full payment due by April 1997 30,075 373,142
---------------------------------
$140,657,629 $ 79,912,216
=================================
Less--Current Installments 12,909,768 9,167,087
Total $127,747,861 $ 70,745,129
=================================
</TABLE>
27 1997 Comair Holdings, Inc. Annual Report
<PAGE> 19
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Comair Holdings, Inc. and Subsidiaries
Maturities of long-term obligations are as follows:
1999 $ 13,435,344
---------------------------------------------------------
2000 $ 13,743,598
---------------------------------------------------------
2001 $ 11,556,385
---------------------------------------------------------
2002 $ 10,838,531
---------------------------------------------------------
2003 and thereafter $ 78,174,003
---------------------------------------------------------
The net book value of assets pledged as security
under the above obligations totaled $197,222,000 as of
March 31, 1997.
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 rates indicated above. During fiscal 1997, 1996 and
1995, the Company reduced its interest expense by $376,000,
$531,000 and $334,000, respectively, as a result of these
interest rate subsidies. The amount of net interest paid
totaled $4,852,000, $5,901,000 and $3,079,000 in fiscal
1997, 1996 and 1995 respectively.
The Company has an unused bank line of credit for up
to $5,000,000 at prime.
- -------------------------------------------------------------------
NOTE 3 LEASES
- -------------------------------------------------------------------
As of March 31, 1997, the Company operated 73
aircraft in airline operations which are accounted for
under operating leases with remaining terms of up to
16.5 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 and 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 31 Embraer Brasilia
aircraft. The Company utilizes these subsidies to
substantially fix its net payments under these operating
leases.
Total rental expense for fiscal 1997, 1996 and 1995
was $84,022,000, $69,620,000 and $63,448,000,
respectively, net of the impact of the interest rate
subsidies, which were $1,375,000, $1,480,000 and
$943,000, respectively, for fiscal 1997, 1996 and 1995.
At March 31, 1997, the future net minimum rental
payments under noncancellable operating leases had a
present value of approximately $479,057,559 and a gross
amount payable (including principal and interest) of
$759,255,561 payable $79,995,206 in 1998, $75,779,757 in
1999, $76,059,756 in 2000, $67,071,422 in 2001, $58,816,979
in 2002, and $401,532,441 through 2016.
- -------------------------------------------------------------------
NOTE 4 INCOME TAXES
- -------------------------------------------------------------------
The Company accounts for income taxes under the
liability method pursuant to the Financial Accounting
Standards Board Statement No. 109 (SFAS No. 109)
"Accounting for Income Taxes". Under the liability
method deferred tax liabilities and assets are
determined based on the differences between the
financial reporting and tax bases of assets and
liabilities using enacted tax rates.
28 1997 Comair Holdings, Inc. Annual Report
<PAGE> 20
<TABLE>
<CAPTION>
The following is a summary of the provision for income taxes:
- ---------------------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31, 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
Current:
<S> <C> <C> <C>
Federal $ 26,800,000 $ 27,713,000 $ 10,400,000
State 3,530,000 3,650,000 1,700,000
----------------------------------------------------
Total Current Provision $ 30,330,000 $ 31,363,000 $ 12,100,000
Deferred:
Federal $ 12,791,000 $ 4,925,000 $ 5,800,000
State 1,615,000 475,000 500,000
----------------------------------------------------
Total Provision $ 44,736,000 $ 36,763,000 $ 18,400,000
====================================================
</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, 1997 and 1996
are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31, 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
<S> <C> <C>
Accelerated depreciation $ 40,420,735 $ 28,926,215
Amounts expended for major engine inspections, net 9,176,881 4,249,736
Other, net 2,791,489 2,771,109
--------------------------------
Deferred tax liabilities $ 52,389,105 $ 35,947,060
--------------------------------
Deferred tax assets:
Expenses not currently deductible $ 9,079,063 $ 6,717,702
Deferred gains on sale/leaseback transactions 712,896 812,178
Other, net 1,264,905 1,226,968
--------------------------------
Deferred tax assets $ 11,056,864 $ 8,756,848
--------------------------------
Net deferred tax liabilities $ 41,332,241 $ 27,190,212
=================================
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>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31, 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
<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 2.8 3.0
Other, net (0.6) .2 0.6
--------------------------------------------
Effective income tax rate 37.2% 38.0% 38.6%
============================================
The Company made cash income tax payments of $31,456,000 in
fiscal 1997, $28,160,000 in fiscal 1996 and $11,533,000 in fiscal
1995.
</TABLE>
29 1997 Comair Holdings, Inc. Annual Report
<PAGE> 21
NOTES TO CONSOLIDATED
Comair Holdings, Inc. and Subsidiaries FINANCIAL STATEMENTS
- -------------------------------------------------------
NOTE 5 COMMITMENTS AND CONTINGENCIES
- -------------------------------------------------------
As of March 31, 1997, COMAIR had scheduled delivery
positions for two Canadair Jets to be delivered in
fiscal 1998. The aggregate cost of these aircraft,
including support equipment and estimated escalation,
will be approximately $35 million. These aircraft were
delivered in April 1997 using lease financing with
terms of up to 16.5 years. Advance payments, deposits,
and capitalized interest of $21 million are included in
the March 31, 1997 consolidated balance sheets.
COMAIR also had 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 enters into interest rate swap contracts to
effectively hedge its exposure to interest rate
fluctuations involved in aircraft financing. The swap
contracts involve Comair exchanging floating rate for
fixed payments over the life of the agreement without
an exchange of the notional amount upon which the
payments are based. As of March 31, 1997, Comair had an
interest rate swap agreement with a third party to
exchange monthly payments on a notional amount of
$26,320,000. Under the agreement, the Company pays or
receives the difference between a floating LIBOR
interest rate and a fixed rate of interest. This
agreement was settled in April 1997 with no material
effect. Currently, there are no other such agreements
open or in place.
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.
On January 9, 1997, Flight 3272 crashed near
Detroit, Michigan. There were no survivors among the 29
passengers and crew members aboard the turboprop
aircraft. The Company is cooperating fully with the
National Transportaion Safety Board (NTSB) and all
other federal, state and local regulatory and
investigatory agencies in connection with the crash. In
May 1997, the NTSB released the factual data obtained
to date related to Flight 3272. The findings to date
are inconclusive. Several lawsuits have been filed
against the Company seeking damages attributable to the
deaths of those on Flight 3272 and additional lawsuits
are expected. The Company maintains substantial
insurance coverage for such claims and, at this time,
believes that the claims, expenses and litigation
related to this accident will not have a material
adverse affect on the Company's financial condition,
cash flows or results of operations.
There are no other 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 proceedings are adequately insured.
- -------------------------------------------------------
NOTE 6 BENEFIT PLANS
- -------------------------------------------------------
The Company has 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 354,375 shares of common
stock reserved for issuance. Each year each nonemployee
director of the Company receives an option to pur-
30 1997 Comair Holdings, Inc. Annual Report
<PAGE> 22
chase 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.
The issuance of SFAS No. 123 requires, at a minimum,
pro forma disclosures of expense for stock-based awards
based on their fair values. The fair value of each
option grant is estimated on the date of grant using
the Black-Scholes option pricing model. The following
weighted average assumptions were used for grants in
fiscal 1997 and 1996:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Dividend yield 1% 1%
Expected volatility 46.6% 46.6%
Risk-free interest rate 6.36% - 6.80% 6.05%
Expected life 5.5 - 10 yrs 5.5 yrs
</TABLE>
At March 31, 1997, the 339,364 options granted in
fiscal 1997 to employees and nonemployee directors have
an exercise price of $23.71, fair values ranging from
$11.26 to $14.29 per option and a remaining contractual
life of ten years. The 274,388 options granted in
fiscal 1996 to employees have an exercise price of
$7.67, a fair value of $3.61 per option and a remaining
contractual life of nine years.
If the Company had adopted the expense recognition
provision of SFAS No. 123, net income and earnings per
share for the years ended March 31, 1997 and 1996 would
have been as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------
Net income
<S> <C> <C>
As reported $ 75,424,593 $ 60,008,473
Pro forma $ 74,610,212 $ 59,795,444
Earnings per share
As reported $ 1.70 $ 1.36
Pro forma $ 1.68 $ 1.35
</TABLE>
Since SFAS No. 123 has not been applied to options
granted prior to December 15, 1994, the resulting
compensation cost may not be representative of that
expected in future years.
Transactions involving the stock option plans for
the years ended March 31, 1997, 1996 and 1995 are shown
in the table below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
WTD AVG WTD AVG WTD AVG
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,013,857 $ 8.19 1,298,804 $ 6.41 967,316 $ 5.06
Granted 339,364 $ 23.71 274,388 $ 7.67 411,413 $ 9.11
Exercised (94,611) $ 5.41 (519,146) $ 3.41 (76,550) $ 3.54
Expired -- $ -- (40,189) $ 8.73 (3,375) $ 12.67
Outstanding at end of year 1,258,610 $ 12.58 1,013,857 $ 8.19 1,298,804 $ 6.41
Exercisable at end of year 505,403 $ 9.25 371,428 $ 7.55 645,820 $ 4.49
</TABLE>
31 1997 Comair Holdings, Inc. Annual Report
<PAGE> 23
NOTES TO CONSOLIDATED
Comair Holdings, Inc. and Subsidiaries FINANCIAL STATEMENTS
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 (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 1997, 1996 and 1995, the Company
expensed $8,581,000, $6,886,000 and $3,694,000,
respectively, related to these plans.
- -------------------------------------------------------
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, which
expires in 1999, 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 1997, 1996 and 1995 were
approximately $27,142,000, $20,790,000 and $12,587,000,
respectively. Accounts payable at March 31, 1997 and
1996 included approximately $9,835,000 and $7,056,000
due Delta for these services.
Trade receivables in the accompanying consolidated
balance sheets include amounts due from Delta of
$7,822,000 and $9,002,000 as of March 31, 1997 and
1996, respectively. Approximately 45% of COMAIR's
passengers in fiscal 1997 and 1996 and 44% in fiscal
1995 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, 1997 and 1996.
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.
32 1997 Comair Holdings, Inc. Annual Report
<PAGE> 24
<TABLE>
<CAPTION>
The cost and estimated fair values of the Company's
financial instruments at March 31, 1997 and 1996 are as
follows:
ASSET (LIABILITY)
- ---------------------------------------------------------------------------------------------------------------------------
COST ESTIMATED FAIR VALUE
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 122,604,792 $ 111,601,283 $ 122,604,792 $ 111,601,283
Marketable securities $ 54,185,913 $ 40,022,739 $ 54,111,024 $ 39,860,347
Total long-term obligations
(before interest rate subsidies) $(140,657,629) $ (79,912,216) $(140,657,629) $ (79,912,545)
Interest rate subsidies on
long-term obligations $ -- $ -- $ 1,149,000 $ 2,921,000
The following tables summarize the unrealized gains and losses for
available-for-sale securities at March 31, 1997 and 1996:
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1997 1997
AMORTIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US Treasury and Government
Agency Securities $ 1,000,000 $ 590 $ -- $ 1,000,590
Municipal Bonds and Mutual Funds 52,491,116 117,357 168,837 52,439,636
Common Stock 694,797 -- 23,999 670,798
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 54,185,913 $ 117,947 $ 192,836 $ 54,111,024
===========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
1996 1996
AMORTIZED UNREALIZED 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>
The following table presents the amortized cost and fair value of debt
securities available-for-sale at March 31, 1997 and 1996:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
AMORTIZED COST FAIR VALUE
1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than one year $ 14,997,052 $ 13,603,644 $ 15,042,358 $ 13,613,730
After one year through five years 38,494,064 22,923,557 38,397,868 22,839,367
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 53,491,116 $ 36,527,201 $ 53,440,226 $ 36,453,097
===========================================================================================================================
</TABLE>
The Company realized gains from the sale of marketable securities of $711,000
and $1,091,000 in fiscal 1997 and 1996, respectively. There were no material
realized gains or losses in fiscal 1995.
33 1997 Comair Holdings, Inc. Annual Report
<PAGE> 25
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS
Comair Holdings, Inc. and Subsidiaries
- --------------------------------
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, 1997 and
1996, and the related consolidated statements of
income, shareholders' equity and cash flows for each of
the three years in the period ended March 31, 1997.
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, 1997
and 1996, and the results of their operations and their
cash flows for each of the three years in the period
ended March 31, 1997 in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Cincinnati, Ohio,
May 16, 1997
34 1997 Comair Holdings, Inc. Annual Report
<PAGE> 26
Comair Holdings, Inc. and Subsidiaries DIRECTORY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
BOARD OF DIRECTORS OFFICERS OF COMAIR HOLDINGS, INC.
- ------------------------------------------------------------------------------------------
<S> <C>
David R. Mueller 1 David R. Mueller
Chairman of the Board Chairman of the Board
Chief Executive Officer Chief Executive Officer
Comair Holdings, Inc.
David A. Siebenburgen
David A. Siebenburgen President, Chief Operating Officer
President, Chief Operating Officer
Comair Holdings, Inc. Randy D. Rademacher
Senior Vice President Finance
Robert H. Castellini Chief Financial Officer
Chairman, Chief Executive Officer
Castellini Company Brian L. McDonald
(Produce Distributor/Processor) Vice President
Controller
Peter H. Forster 2
Chairman of the Board Richard D. Siegel
DPL Inc. Secretary
(Utility) Partner, Keating, Muething & Klekamp
-----------------------------------------------
OTHER OFFICERS OF COMAIR, INC.
-----------------------------------------------
John A. Haas Charles E. Curran III
Retired President, Chief Executive Officer Senior Vice President
Ball Glass Container Corporation Marketing
(Manufacturer)
K. Michael Stuart
Raymond A. Mueller 3 Senior Vice President
Retired Chairman of the Board Aircraft Operations
Comair Holdings, Inc.
Linda D. Landers
Christopher J. Murphy III 4 Vice President
President, Chief Executive Officer Customer Services
1st Source Corporation
(Financial Institution) Kenneth W. Marshall
Vice President
Gerald L. Wolken Flight Operations and Corporate Safety
Managing Partner
MLE Enterprises Inc.
(Management Consulting) Ralph E. Martin
Vice President
1 Chairman of Finance Committee Maintenance
2 Chairman of Compensation Committee
3 Chairman of Executive Committee Linda E. Noble
4 Chairman of Audit Committee Vice President
Human Resources
C. Michael Willis
Vice President
Customer Services-Cincinnati
</TABLE>
35 1997 Comair Holdings, Inc. Annual Report
<PAGE> 27
CORPORATE INFORMATION
Comair Holdings, Inc. and Subsidiaries
- ------------------------------------------
INVESTOR RELATIONS
- ------------------------------------------
Shareholders may obtain the fiscal 1997 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
- ------------------------------------------
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 2,400
holders of record as of March 31, 1997, which the
Company believes represents approximately 20,000
beneficial owners.
- ------------------------------------------
MARKET MAKERS
- ------------------------------------------
(as of 3/31/97)
Alex. Brown & Sons Inc.
The First Boston Corporation
Herzog, Heine, Geduld, 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.
Nash, Weiss & Co.
PaineWebber Inc.
Prudential Securities Inc.
Robinson Humphrey Co., Inc.
Sherwood Securities Corp.
Smith Barney Inc.
Troster Singer Corp.
Weeden & Co., Inc.
- ------------------------------------------
STOCK TRANSFER AGENT & REGISTRAR
- ------------------------------------------
ChaseMellon Shareholder Services
85 Challenger Road
Ridgefield Park, NJ 07660
(800) 756-3353
- ------------------------------------------
LEGAL COUNSEL
- ------------------------------------------
Keating, Muething & Klekamp, Cincinnati, Ohio
- ------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS
- ------------------------------------------
Arthur Andersen LLP, Cincinnati, Ohio
- ------------------------------------------
WORLD-WIDE WEBSITE
- ------------------------------------------
http://fly-comair.com
36 1997 Comair Holdings, Inc. Annual Report
<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 ACQUISITION, INC., a Delaware corporation.
<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, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000835344
<NAME>COMAIR HOLDINGS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 122,604,792
<SECURITIES> 54,111,024
<RECEIVABLES> 20,289,523
<ALLOWANCES> 0
<INVENTORY> 18,229,847
<CURRENT-ASSETS> 240,751,005
<PP&E> 447,106,079
<DEPRECIATION> 116,100,656
<TOTAL-ASSETS> 588,585,945
<CURRENT-LIABILITIES> 121,063,595
<BONDS> 127,747,861
<COMMON> 52,302,390
0
0
<OTHER-SE> 227,996,939
<TOTAL-LIABILITY-AND-EQUITY> 588,585,945
<SALES> 0
<TOTAL-REVENUES> 563,815,043
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 447,697,643
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,853,951
<INCOME-PRETAX> 120,160,593
<INCOME-TAX> 44,736,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,424,593
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99
SAFE HARBOR
The Private Securities Litigation Reform Act of 1995 provides a safe
harbor from civil litigation in many instances for forward-looking statements.
Such statements must be accompanied by meaningful cautionary statements that
identify important factors that could cause actual results to differ materially
from those that might be projected. This exhibit to the Registrant's Form 10-K
is being filed in order to adhere to the provisions of this Act by providing the
following cautionary statements:
Risk Factors Affecting Comair Holdings, Inc.
- ---------------------------------------------
The Company's business operations and strategy are subject to a number
of uncertainties and risks which could cause the actual results to differ
materially from projected results. It is not possible to list all of the many
factors and events that could cause the actual results to differ materially from
the projected results. Such factors may include, but are not limited to:
competitive factors such as the airline pricing environment, the capacity
decisions of other airlines, and the presence of low-cost, low-fare carriers;
the willingness of customers to travel; general economic conditions; changes in
jet fuel prices; availability of aircraft; unplanned increases in financing or
other costs; and actions by the United States and foreign governments.
