<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-18653
COMAIR HOLDINGS, INC.
Incorporated under the laws of Kentucky 31-1243613
(I.R.S. Employer ID No.)
P.O. Box 75021
Cincinnati, Ohio 45275
(606) 767-2550
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) or the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 15, 1999
----- --------------------------------
Common stock, no par value 95,526,431
1
<PAGE> 2
COMAIR HOLDINGS, INC.
<TABLE>
<CAPTION>
INDEX
PAGE NOS.
PART I. Financial Information -
<S> <C>
Consolidated Balance Sheets as of September 30, 1999 and March 31, 1999 . . . . . . . . . . . . . . . . . . . . . . 3-4
Consolidated Statements of Income - Three months ended September 30, 1999 and 1998 . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Income - Six months ended September 30, 1999 and 1998 . . . . . . . . . . . . . . . . . . 6
Consolidated Statements of Cash Flows - Six months ended September 30, 1999 and 1998 . . . . . . . . . . . . . . . .7
Consolidated Statement of Shareholders' Equity - Six months ended September 30, 1999 . . . . . . . . . . . . . . . . 8
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9-11
Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . .12-19
PART II. Other Information -
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20-21
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 5. Other Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22-23
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999 AND MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS SEPT. 30, 1999 MARCH 31, 1999
- ------ -------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $172,569,889 $171,003,535
Marketable securities
available for sale 158,056,962 85,240,815
Interest bearing investment -- 30,000,000
------------ ------------
$330,626,851 $286,244,350
Accounts receivable $ 13,868,740 $ 10,585,370
Inventory of expendable parts 17,784,310 17,310,814
Future tax benefits 17,310,865 15,756,205
Prepaid expenses 6,014,771 18,220,832
------------ ------------
Total current assets $385,605,537 $348,117,571
------------ ------------
Property and equipment at cost:
Flight equipment $408,567,376 $423,626,267
Maintenance, operations and
office facilities 10,292,723 10,292,723
Other property and equipment 60,910,876 53,061,509
------------ ------------
$479,770,975 $486,980,499
Less accumulated depreciation and
amortization 141,375,566 138,659,486
Less reserve for engine overhauls and
purchase incentives 17,135,326 16,152,320
------------ ------------
$321,260,083 $332,168,693
Construction in progress 13,119,060 3,706,593
Advanced payments and deposits
for aircraft 55,989,050 55,114,024
------------ ------------
Net property and equipment $390,368,193 $390,989,310
------------ ------------
Other assets and deferred costs $ 16,489,135 $ 11,647,009
------------ ------------
Total assets $792,462,865 $750,753,890
============ ============
</TABLE>
3
<PAGE> 4
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1999 AND MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY SEPT. 30, 1999 MARCH 31, 1999
- ------------------------------------ -------------- --------------
<S> <C> <C>
Current liabilities:
Current installments of long-term obligations $ 12,628,694 $ 13,743,598
Accounts payable 52,743,347 45,416,844
Interline payable and deferred revenue 8,257,828 10,130,333
Accrued lease expense 20,598,337 23,844,809
Accrued wages 12,524,212 10,192,948
Accrued expenses 20,009,612 18,845,984
Accrued taxes 16,592,579 12,586,793
------------- ------------
Total current liabilities $ 143,354,609 $134,761,309
Long-term obligations $ 94,732,762 $100,563,380
------------- ------------
Deferred income taxes $ 75,519,264 $ 70,732,267
------------- ------------
Other liabilities and deferred credits $ 15,641,485 $ 12,327,476
------------- ------------
Shareholders' equity:
Common stock, no par value, 200,000,000
shares authorized, 95,526,431 and
97,387,516 issued and
outstanding, respectively $ -- $ --
Preferred stock, no par value, 1,000,000
shares authorized, none issued or outstanding -- --
Net unrealized gain/(loss) on marketable
securities available for sale (280,100) 378,556
Retained earnings 463,494,845 431,990,902
------------- ------------
Total shareholders' equity $ 463,214,745 $432,369,458
------------- ------------
Total liabilities and shareholders' equity $ 792,462,865 $750,753,890
============= ============
</TABLE>
4
<PAGE> 5
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPT. 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FY2000 FY1999
------ ------
<S> <C> <C>
OPERATING REVENUES:
Passenger $ 205,416,809 $ 185,722,038
Cargo and other 1,609,788 1,402,339
Non-airline operations 9,034,644 7,887,814
------------- -------------
Total operating revenues $ 216,061,241 $ 195,012,191
------------- -------------
OPERATING EXPENSES:
Salaries and related costs $ 40,863,816 $ 35,986,559
Aircraft fuel 20,549,789 13,071,390
Maintenance materials and repairs 15,727,245 15,509,865
Aircraft rent 22,921,079 20,752,254
Other rent and landing fees 6,780,891 6,765,228
Passenger commissions 13,097,225 13,282,111
Other operating expenses 28,505,271 23,803,186
Depreciation and amortization 7,603,505 7,405,544
Non-airline direct costs 7,692,479 5,522,300
------------- -------------
Total operating expenses $ 163,741,300 $ 142,098,437
------------- -------------
Operating income $ 52,319,941 $ 52,913,754
------------- -------------
NON-OPERATING INCOME (EXPENSE):
Investment income $ 3,819,214 $ 3,991,829
Interest expense (964,903) (1,804,484)
------------- -------------
Total non-operating income, net $ 2,854,311 $ 2,187,345
------------- -------------
Income before income taxes $ 55,174,252 $ 55,101,099
Income taxes 20,525,200 20,510,000
------------- -------------
Net income $ 34,649,052 $ 34,591,099
============= =============
Weighted average number of
shares outstanding - Basic (Note 3) 95,706,325 99,263,094
============= =============
Net income per share - Basic (Note 3) $ 0.36 $ 0.35
============= =============
Weighted average number of
shares outstanding - Diluted (Note 3) 97,121,230 100,677,540
============= =============
Net income per share - Diluted (Note 3) $ 0.36 $ 0.34
============= =============
Dividends paid per share $ 0.030 $ 0.027
============= =============
</TABLE>
5
<PAGE> 6
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED SEPT. 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FY2000 FY1999
------ ------
<S> <C> <C>
OPERATING REVENUES:
Passenger $ 413,175,664 $ 363,812,073
Cargo and other 3,182,835 2,682,180
Non-airline operations 19,171,990 16,430,131
------------- -------------
Total operating revenues $ 435,530,489 $ 382,924,384
------------- -------------
OPERATING EXPENSES:
Salaries and related costs $ 80,332,115 $ 68,991,271
Aircraft fuel 36,903,486 25,666,735
Maintenance materials and repairs 29,343,682 29,246,948
Aircraft rent 44,907,807 40,742,529
Other rent and landing fees 12,953,393 12,747,786
Passenger commissions 26,970,776 26,326,372
Other operating expenses 55,038,397 46,365,877
Depreciation and amortization 15,042,058 14,920,500
Non-airline direct costs 15,656,147 11,121,921
------------- -------------
Total operating expenses $ 317,147,861 $ 276,129,939
------------- -------------
Operating income $ 118,382,628 $ 106,794,445
------------- -------------
NON-OPERATING INCOME (EXPENSE):
Investment income $ 7,502,248 $ 7,346,296
Interest expense (1,981,955) (3,644,016)
------------- -------------
Total non-operating income, net $ 5,520,293 $ 3,702,280
------------- -------------
Income before income taxes $ 123,902,921 $ 110,496,725
Income taxes 46,092,200 41,571,000
------------- -------------
Net income $ 77,810,721 $ 68,925,725
============= =============
Weighted average number of
shares outstanding - Basic (Note 3) 96,225,915 99,575,308
============= =============
Net income per share - Basic (Note 3) $ 0.81 $ 0.69
============= =============
Weighted average number of
shares outstanding - Diluted (Note 3) 97,653,196 100,926,451
============= =============
Net income per share - Diluted (Note 3) $ 0.80 $ 0.68
============= =============
Dividends paid per share $ 0.057 $ 0.054
============= =============
</TABLE>
6
<PAGE> 7
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
FY2000 FY1999
------ ------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 77,810,721 $ 68,925,725
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 15,042,058 14,920,500
Amortization and accrual of overhaul expenses 5,791,348 6,819,101
Deferred income tax provision 3,232,337 7,807,919
Other, net (836,643) 531,032
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (3,283,370) (5,507,781)
Decrease (increase) in inventory of
expendable parts (473,496) (299,588)
Decrease (increase) in other current assets 12,206,061 5,944,634
Increase (decrease) in accounts payable 7,326,503 (2,259,519)
Increase (decrease) in other current liabilities 2,381,701 (3,176,459)
------------- -------------
Net cash provided by operating activities $ 119,197,220 $ 93,705,564
------------- -------------
Cash Flows From Investing Activities:
Additions to property and equipment, net ($ 19,300,010) ($ 12,392,505)
Return of interest bearing investments 30,000,000 --
Purchases and maturities of marketable
securities, net (87,112,219) (20,396,746)
Proceeds from sale of marketable securities 13,637,416 10,369,563
Deferred costs (848,745) (73,530)
Other, net (755,008) (337,260)
------------- -------------
Net cash used in investing activities ($ 64,378,566) ($ 22,830,478)
------------- -------------
Cash Flows From Financing Activities:
Issuance of common stock 315,980 261,526
Repurchase of common stock (41,123,280) (36,780,616)
Payments of cash dividends and repurchase
of fractional shares (5,499,478) (5,329,440)
Repayments of long-term obligations (6,945,522) (6,645,469)
------------- -------------
Net cash used in financing activities ($ 53,252,300) ($ 48,493,999)
Net increase in cash and cash equivalents $ 1,566,354 $ 22,381,087
------------- -------------
Cash and cash equivalents at beginning
of period $ 171,003,535 $ 156,214,247
------------- -------------
Cash and cash equivalents at end of period $ 172,569,889 $ 178,595,334
============= =============
Cash paid during the period for interest $ 3,328,782 $ 4,132,512
============= =============
Cash paid during the period for income taxes $ 40,968,561 $ 42,093,867
============= =============
</TABLE>
7
<PAGE> 8
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive Common Comprehensive Retained
Income Stock Income (Loss) Earnings Total
------ ----- ------------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1999 $ -- $ 378,556 $431,990,902 $432,369,458
-----------------------------------------------------------------------
Repurchase of common shares -- -- (41,123,280) (41,123,280)
Exercise of stock options
($7.78 weighted avg. per share) -- -- 315,980 315,980
Dividends ($.057 per share) -- -- (5,499,478) (5,499,478)
Comprehensive Income:
Net Income $ 77,810,721 -- -- 77,810,721 77,810,721
------------
Other Comprehensive Income, net of tax:
Net unrealized gain/(loss) on
marketable securities
available-for-sale (658,656) -- (658,656) -- (658,656)
Comprehensive Income $ 77,152,065 $ -- -- -- --
============------------------------------------------------------------------------
Balance, September 30, 1999 $ -- $ (280,100) $ 463,494,845 $463,214,745
=======================================================================
</TABLE>
8
<PAGE> 9
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by
Comair Holdings, Inc. and its wholly-owned subsidiaries (the Company), without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. These statements reflect all adjustments, which are, in the opinion
of management, necessary for a fair presentation of the results for the interim
periods presented. Certain information in footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the following disclosures are
adequate to make the information presented not misleading. It is suggested that
these consolidated financial statements can be read in conjunction with the
financial statements and the notes thereto included in the Company's latest
annual report on Form 10-K.
NOTE 1: The accounts of the Company have been consolidated in the accompanying
financial statements. Upon consolidation, all material intercompany
accounts, transactions and profits have been eliminated. The Company
considers the transportation of passengers and cargo in scheduled
airline service by its major subsidiary, COMAIR, Inc., to be its
predominant business segment. The Company's stock is traded in the
Nasdaq/National Market System under the symbol COMR.
NOTE 2: Results of operations for the interim periods are not necessarily
indicative of results to be expected for the year.
NOTE 3: In fiscal 1998, the Company adopted Financial Accounting Standards
Board 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 for the same components in the
diluted earnings per share computation. The following table shows the
amounts used in computing earnings per share and the effect on income
and the weighted average number of shares for the three months and six
months ending September 30, 1999 and 1998 of dilutive potential common
stock.
9
<PAGE> 10
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
<TABLE>
<CAPTION>
2nd Quarter 2nd Quarter Year-to-Date Year-to-Date
FY2000 FY1999 FY2000 FY1999
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Net Income $34,649,052 $ 34,591,099 $77,810,721 $ 68,925,725
=========== ============ =========== ============
Denominator:
For Earnings Per Share - Basic:
Weighted Average Shares
Outstanding - Basic 95,706,325 99,263,094 96,225,915 99,575,308
Effect of Dilutive Securities:
Stock Options 1,414,905 1,414,446 1,427,281 1,351,143
For Earnings Per Share - Diluted:
Weighted Average Shares
Outstanding - Diluted 97,121,230 100,677,540 97,653,196 100,926,451
=========== ============ =========== ============
Earnings Per Share - Basic $ 0.36 $ 0.35 $ 0.81 $ 0.69
=========== ============ =========== ============
Earnings Per Share - Diluted $ 0.36 $ 0.34 $ 0.80 $ 0.68
=========== ============ =========== ============
</TABLE>
NOTE 4: The Company operates predominantly in one business segment (air
transportation). Substantially all revenues are derived from the air
transportation of passengers and cargo in scheduled airline service.
The Company's chief operating decision maker or decision making group
assesses the operating effectiveness and financial performance of the
Company based on the results of this business segment. Additionally,
the Company does not engage in material operations in foreign countries
and no material portion of its revenues are derived from customers in
foreign countries.
10
<PAGE> 11
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 5: In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting
for Derivatives Instruments and Hedging Activities", which requires an
entity to recognize all derivatives as either an asset or liability at
fair value. Accounting for the fair value of a derivative depends on
its designation and effectiveness. Derivatives that are not hedges must
be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of the
derivatives will either be offset against the change in fair value of
the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's
change in fair value will be immediately recognized in earnings. SFAS
No. 133 is required to be adopted in fiscal years beginning after June
15, 2000 (effective date as deferred by SFAS No. 137). SFAS No. 133
permits early adoption as of the beginning of any fiscal quarter after
its issuance. The Company does not currently hold any derivative
instruments and does not expect the adoption of SFAS No. 133 to have a
material impact on its financial condition, results of operations, or
cash flows.
11
<PAGE> 12
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
Comair Holdings, Inc. (the Company) was incorporated in 1988. COMAIR,
Inc. (COMAIR), the principal subsidiary of Comair Holdings, Inc., was founded in
1977. COMAIR accounted for 96% of the second quarter operating revenues and
expenses, and is considered to be the Company's major line of business. 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, excluding fuel prices, have not had a
material adverse effect on COMAIR's operations because revenues and expenses
generally reflect current price levels. COMAIR's market area, strong financial
position and focus on continuously improving operating performance 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 and increased competition from other airlines could impact
COMAIR's ability to recoup future cost increases through higher fares.
Delta Air Lines Holdings, Inc., a wholly owned subsidiary of Delta Air
Lines, Inc. (Delta), owns approximately 22% of the Company's outstanding
common stock, leases reservation equipment and terminal facilities to COMAIR,
and provides certain services to COMAIR including reservation, passenger and
aircraft handling services. Approximately 43% of COMAIR's passengers in the
second quarter of fiscal 2000 connected to Delta.
On October 17, 1999, Comair Holdings, Inc., the parent company of
COMAIR, entered into an Agreement and plan of Merger with Delta and Kentucky
Sub, Inc., an indirect, wholly owned subsidiary of Delta (Kentucky Sub),
pursuant to which Kentucky Sub commenced a tender offer (the Offer) for all
outstanding shares of common stock of the Company for $23.50 per share in cash.
The Offer is conditioned upon, among other things, satisfaction of the
condition that there be validly tendered and not withdrawn at least two-thirds
of the outstanding shares of common stock of the Company held by stockholders,
including Delta and Kentucky Sub. Following completion of the Offer, upon the
terms and subject to the conditions of the Plan of (Merger Agreement) Kentucky
Sub will be merged into the Company, and each share of common stock of the
Company not tendered in the Offer (other than those shares owned by Delta, its
affiliates, or by any dissenting shareholder) will be converted into the right
to receive $23.50 per share in cash, without interest. Upon consummation of
these transactions, Delta will own the entire equity interest in the Company.
The waiting period applicable to Delta's proposed acquisition of Comair under
the Hart-Scott-Rodino Antitrust Improvements Act expired on November 10, 1999.
COMAIR has operated in Cincinnati, Ohio since 1984 and in Orlando,
Florida since 1987 as a "Delta Connection" carrier pursuant to a marketing
agreement with Delta (the Delta Connection Agreement). The current Delta
Connection Agreement was entered into on October 1, 1989 and was scheduled to
expire on October 30, 1999. Delta and Comair have extended the Delta Connection
Agreement on a month-to-month basis after its expiration. If the offer does not
result in Delta's acquisition of COMAIR, then COMAIR's results of operations and
financial condition could be adversely impacted by Delta's decisions regarding
routes and other operational matters, as well as, any material interruption or
modifications in any new arrangement. Historically, the Company has benefited
from its relationship with Delta.
12
<PAGE> 13
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS
For the second quarter of fiscal 2000 operating revenues increased to
$216.1 million, up 11% from the $195.0 million reported in the second quarter of
fiscal 1999. Operating income for the second quarter decreased to $52.3, down 1%
from $52.9 reported in the second quarter of fiscal 1999, while net income
remained approximately the same. Net income per diluted share for the second
quarter increased 6% to $.36 per share from $.34 per share.
The growth in traffic continues to demonstrate our success in
attracting passengers to our system by offering world class regional airline
facilities and more regional jet service than any other regional airline in the
United States.
<TABLE>
<CAPTION>
CAPACITY AND TRAFFIC ANALYSIS
QUARTER ENDED
9/30/99 9/30/98
------- -------
<S> <C> <C>
Passengers 1,907,059 1,654,670
ASMs (000's) 1,049,931 856,522
RPMs (000's) 698,352 562,618
Load factor (%) 66.5% 65.7%
Breakeven load factor (%) 49.8% 47.6%
Yield (cents) 29.4 33.0
Revenue per ASM (cents) 19.6 21.7
Cost per ASM (cents) 14.8 15.8
</TABLE>
<TABLE>
<CAPTION>
CAPACITY AND TRAFFIC ANALYSIS
SIX MONTHS ENDED
9/30/99 9/30/98
------- -------
<S> <C> <C>
Passengers 3,751,459 3,218,021
ASMs (000's) 2,045,212 1,649,465
RPMs (000's) 1,359,260 1,081,153
Load factor (%) 66.5% 65.5%
Breakeven load factor (%) 47.9% 47.0%
Yield (cents) 30.4 33.7
Revenue per ASM (cents) 20.2 22.1
Cost per ASM (cents) 14.7 15.9
</TABLE>
13
<PAGE> 14
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
With the increase in passengers, revenue passenger miles (RPMs) grew
24%. Capacity, as measured by available seat miles (ASMs), grew 23%. We continue
to increase capacity from additional utilization with existing aircraft and from
the jet aircraft deliveries that were deployed in new markets, used as
supplemental service in existing markets, and used to replace turboprop
aircraft. Currently, approximately 91% of COMAIR's capacity is generated by the
jet aircraft.
Yield per revenue passenger mile decreased 11% from the second quarter
of last year. The decline in passenger yield was related to our growing stage
length and the current industry weakness in full fare versus discount fare
trends. COMAIR also incurred a dilution in yield from certain adjustments made
in its revenue management processes this quarter. COMAIR has taken steps to
improve its revenue forecasting and monitoring activities.
The following tables show the expense categories for COMAIR for the second
quarter of the last two fiscal years.
EXPENSE CATEGORIES
<TABLE>
<CAPTION>
QTR Ended Cents QTR Ended Cents
9/30/99 per ASM 9/30/98 per ASM
------- ------- ------- -------
<S> <C> <C> <C> <C>
Salaries and Related Costs $ 40,863,816 3.9 $ 35,986,559 4.2
Aircraft Fuel 20,549,789 2.0 13,071,390 1.5
Maintenance Materials
and Repairs 15,727,245 1.5 15,509,865 1.8
Aircraft Rent 22,921,079 2.2 20,752,254 2.4
Other Rent and Landing
Fees 6,780,891 0.6 6,765,228 0.8
Passenger Commissions 13,097,225 1.3 13,282,111 1.6
Other Operating Expenses 28,441,855 2.7 23,739,126 2.8
Depreciation and
Amortization 6,689,310 0.6 6,413,741 0.7
----------------------------------------------------------------
$155,071,210 14.8 $135,520,274 15.8
================================================================
</TABLE>
14
<PAGE> 15
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
EXPENSE CATEGORIES
<TABLE>
<CAPTION>
6 Mo. Ended Cents 6 Mo. Ended Cents
9/30/99 per ASM 9/30/98 per ASM
------- ------- ------- -------
<S> <C> <C> <C> <C>
Salaries and Related Costs $ 80,332,115 3.9 $ 68,991,271 4.2
Aircraft Fuel 36,903,486 1.8 25,666,735 1.5
Maintenance Materials
and Repairs 29,343,682 1.5 29,246,948 1.8
Aircraft Rent 44,907,807 2.2 40,742,529 2.4
Other Rent and Landing
Fees 12,953,393 0.6 12,747,786 0.8
Passenger Commissions 26,970,776 1.3 26,326,372 1.6
Other Operating Expenses 54,897,964 2.7 46,245,991 2.8
Depreciation and
Amortization 13,496,631 0.7 12,992,836 0.8
----------------------------------------------------------------
$299,805,854 14.7 $262,960,468 15.9
================================================================
</TABLE>
Total salaries and related costs have risen from the second quarter of
last year. The Company has hired additional personnel to support the increase in
capacity and to service the growing passenger base. The average number of
employees increased 14% over last year's second quarter levels. However, unit
costs, measured in cents per ASM, decreased as the result of increases in
capacity and aircraft utilization.
Aircraft fuel expense increased as a result of aircraft fuel price per
gallon, including taxes and into-plane fees, for the second quarter of fiscal
2000 increasing 29% to 73.0 cents from 56.4 cents a year ago. Additionally, fuel
consumption increased 21% year over year due to the additional jet aircraft.
Currently, the fuel price per gallon, including taxes and into-plane fees, is
approximately 80.0 cents. As a result of the rate at which fuel prices have
escalated coupled with the competitive market place, COMAIR has been unable to
offset these higher fuel prices through fare increases.
Maintenance material and repair costs increased slightly in total, but
decreased on a unit cost basis. The lower unit cost was the result of increases
in capacity generated by the new jet aircraft and higher aircraft utilization.
The slight increase in costs was attributable to higher maintenance costs due to
warranty periods expiring on certain jet aircraft. These higher costs were
partially offset by incurring a lower volume of scheduled maintenance events due
to the timing of certain inspections on the jet aircraft. As the jet fleet
continues to age, COMAIR will incur more scheduled inspections causing costs
related to this area to increase.
Aircraft rent expense increased in total but decreased on a unit cost
basis. For the twelve months ended September 30, 1999, COMAIR acquired sixteen
Canadair Jets through operating leases. The decrease in unit cost was generated
by a year over year increase in capacity and aircraft utilization.
15
<PAGE> 16
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Other rent and landing fees decreased on a unit cost basis due to an
increase in capacity and aircraft utilization offset the additional expense.
Travel agency and credit card commissions have decreased in total and
on a unit cost basis due to lower overall industry commission rates and lower
unit revenues.
Other operating expenses (the principle components of which include
passenger reservation fees, aircraft and passenger handling, crew training, crew
accommodations and per diem expense, property taxes, advertising expenses and
insurance expense) increased in total but decreased on a unit cost basis. This
increase was related to costs associated with higher passenger enplanements and
aircraft utilization while the additional capacity and higher aircraft
utilization caused these costs to decrease on a unit basis.
Depreciation and amortization costs increased in total from the
purchase of additional support equipment for the Canadair fleet. However, unit
costs decreased due to the additional capacity generated by the sixteen Canadair
Jets acquired through operating leases during the twelve months ended September
1999 and higher aircraft utilization.
LIQUIDITY AND CAPITAL RESOURCES
The Company considers its level of cash on hand, its current ratio and
working capital levels to be its most important measures of short-term
liquidity. In terms of long-term liquidity indicators, the Company believes its
ratio of long-term debt to equity and its historical levels of cash generated
from operations to be the important measures.
In the first six months of fiscal 2000, the Company generated cash
from operating activities of $119.2 million. Total working capital increased to
$242.3 million from $213.4 million at March 31, 1999, while the current ratio
increased to 2.69 from 2.58. The Company repurchased 1.9 million shares of
common stock at a cost of $41.1 million, repaid long-term obligations of $6.9
million and paid cash dividends of $5.5 million. The Company's long-term debt to
equity position was 17% debt, 83% equity at September 30, 1999, as compared to
19% debt, 81% equity at March 31, 1999. During the same period, the Company had
net property and equipment additions of $19.3 million. In addition, during the
first six months, the Company received repayments related to prior interest
bearing investments from an aircraft manufacturer of $30.0 million. In fiscal
2000, additional capital for repayment of long-term obligations, planned
dividend payments and other capital expenditures are expected to be provided by
operations.
16
<PAGE> 17
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
COMAIR took delivery of seven new generation, 50-passenger Canadair Jet
aircraft during the first six months of fiscal 2000 bringing the total Canadair
Jet fleet to 82 aircraft. For 20 of the 82 aircraft, the financing includes 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.
In October 1999, COMAIR elected to retain the first 10 of these aircraft for the
remainder of the operating lease term of up to 16.5 year. A decision will be
made on the remaining 10 aircraft between May 2000 and May 2001. For the
remaining 62 aircraft, 10 aircraft were financed with debt, one was acquired
with available cash, while the other 51 aircraft were financed through operating
leases with terms of up to 16.5 years.
As of September 30, 1999, COMAIR had scheduled delivery positions for
twenty-eight 50-passenger Canadair Jets to be delivered through fiscal 2001, at
an aggregate cost, including support equipment and estimated escalation, of
approximately $523.0 million. COMAIR also has delivery positions for twenty
70-passenger Canadair Jets. The aggregate cost of the 70-passenger aircraft,
including support equipment and estimated escalation, is expected to be
approximately $500.0 million. COMAIR is scheduled to take delivery of its first
70-passenger jet at the end of calendar 2001. In addition to this outstanding
firm order, COMAIR has options for 115 additional aircraft, valued at
approximately $2.8 billion including support equipment and estimated escalation,
which could be available for delivery in 2001 through 2007.
The Company has broken ground on approximately $40.0 million in new
construction and facility upgrades, which include a new corporate headquarters,
additional maintenance and training facilities, and improvements to passenger
facilities at the Greater Cincinnati/Northern Kentucky International Airport.
This construction is expected to be complete by the end of calendar year 2000.
COMAIR expects to finance the aircraft and construction described above
through a combination of available cash, lease, equity and debt financing, and
the utilization of manufacturers' assistance to the extent available. 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
aircraft acquisition and expansion plans. Currently, there are new regulations
by the FAA relating to operating specifications and aircraft certification.
Based on a review of these regulations, the Company does not believe the impact
will be material to its financial condition, future operating results, or cash
flows.
COMAIR has collective bargaining agreements with the Air Line Pilots
Association (ALPA), representing COMAIR's pilots, and the International
Association of Machinists and Aerospace Workers (IAM), representing COMAIR's
maintenance employees. COMAIR's collective bargaining agreement with the ALPA
became amendable on June 1, 1998 and the collective bargaining agreement with
the IAM became amendable on June 1, 1999. Renegotiation of these collective
bargaining agreements is currently underway. The National Mediation Board is
assisting COMAIR in negotiations of these collective bargaining agreements. In
September 1998, the International Brotherhood of Teamsters (IBT) was certified
as the collective bargaining representative of the flight attendants of COMAIR.
COMAIR is also in negotiations with the IBT. At this time, the negotiations of
these collective bargaining agreements have not progressed to the stage that
would enable the Company to comment on any possible effects of the negotiations.
As a result, the Company cannot anticipate with certainty whether the
negotiations will have a material effect on its financial condition, results of
operations or cash flow.
17
<PAGE> 18
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
YEAR 2000 READINESS
The Company depends on many internal and external information
technology systems that were not originally designed to process dates beyond
1999. The Company has developed a Year 2000 Readiness Program to ensure that its
systems will function properly in the Year 2000 and thereafter. With the
assistance of an experienced outside consultant specializing in the aviation
technology field, the Company has formulated a plan to address all information
technology requirements that could be impacted by any potential Year 2000
issues. Our Year 2000 Readiness Program focuses on our internal information
technology and operating systems (IT Systems); non-information technology
systems (Non-IT Systems); and third party vendors and suppliers. These areas
specifically include, but are not limited to, those that are critical and
essential for the Company to continue operations without interruption. The
Company's Year 2000 Readiness Program consists of the following five phases: (1)
Identification & Awareness, (2) Assessment, (3) Remediation, (4) Testing and
Validation, and (5) Quality Assurance Review.
The Company has completed the first four phases of its Program for all
of its IT Systems and has entered into the Quality Assurance Review phase, which
include software applications, hardware and infrastructure that are essential
for aircraft maintenance; flight operation management; revenue management;
finance systems, which includes revenue accounting; internal communication
systems and facility management. The Company will continue the Quality Assurance
Review phase throughout the remainder of the year.
The Company has completed the first four phases of its Program for all
of its Non-IT Systems with embedded technology such as aircraft onboard support
systems. The Company will continue the Quality Assurance Review phase throughout
the remainder of the year.
As indicated, the Company has also assessed Year 2000 issues
concerning its relationships with third parties. The Company has identified
vendors and suppliers that were defined as critical to our business, and has
initiated formal communications with those suppliers and vendors. These third
parties include the suppliers of infrastructure critical to the airline
industry, such as the air traffic control and related systems of the Federal
Aviation Administration, the U.S. Department of Transportation, and airport
authorities. Other critical third parties on which the Company relies include
other airlines, suppliers of aircraft fuel, utilities, communication services,
aircraft maintenance parts suppliers and other airline reservation systems. The
Company has polled its critical third parties regarding their Year 2000 plans
and state of readiness. The Company has received responses from a majority of
its critical third party suppliers and vendors. Most of the respondents assured
the Company that their systems are or will be Year 2000 ready. We have also been
involved in industry efforts led by the Air Transport Association and the
Regional Airline Association in addressing Year 2000 issues concerning third
party relationships. The progress of each of their Year 2000 Programs is being
monitored based on information provided to us by them and information available
through industry sources. The failure of third parties to remediate their
respective systems could have a material adverse effect on the Company's
financial condition, cash flows and results of operations.
18
<PAGE> 19
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
The Company estimates that the overall cost of the Year 2000 readiness
activities could approximate $3.0 million. This cost includes hardware and
software upgrades, consultant fees, and internal staffing salaries for our
employees involved in the Program. The total cost of the Program through
September 30, 1999 was approximately $2.1 million and has been charged to other
operating expense.
The Company is revising and developing business continuity plans for
its most critical processes to address internal and external issues related to
the Year 2000 problem to the extent practicable. Revisions to these plans,
originally expected to be complete by September 1999, are expected to be
complete by the end of November 1999. These plans, which are intended to allow
the Company to work around potential disruptions, could include carrying
additional inventories for fuel and flight essential components; performing
certain processes manually; changing suppliers; and reducing operations. The
Company believes that since the Year 2000 issues are so widespread in nature,
the contingency plans will be continually adjusted, as new information becomes
available.
The Company is currently of the opinion that its material processes and
systems, to the extent within its control, will be Year 2000 ready in the time
frame mentioned. However, there can be no assurance that the Company's internal
systems, equipment or third parties which the Company relies on will be Year
2000 ready in a timely manner or the Company's or third parties' contingency
plans will mitigate the effects of any noncompliance. The failure of the systems
or equipment of the Company or third parties (which the Company believes is the
most reasonably likely worst case scenario) could result in the reduction or
suspension of the Company's operations and could have a material adverse effect
on the Company's financial condition, cash flows and results of operations.
FORWARD - LOOKING STATEMENTS
Certain statements contained in this report are "forward-looking
statements" as that term is defined in federal securities laws. The actual
results could vary materially from those described in those statements. Factors
that could cause actual results to vary are described in detail in our reports
to the Securities and Exchange Commission including Exhibit 99 of this Form 10-Q
for the period ending September 30, 1999 and are also discussed in the
"INTRODUCTION" and "YEAR 2000 READINESS" sections of the "MANAGEMENT'S
DISCUSSION AND ANALYSIS ON FINANCIAL CONDITION AND RESULTS OF OPERATIONS".
19
<PAGE> 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On October 17, 1999, Delta, Kentucky Sub, Inc. (an indirect, wholly
owned subsidiary of Delta) and the Company entered into a Merger Agreement
providing for the merger of Kentucky Sub into the Company.
As discussed below, five lawsuits are pending relating to the Merger
Agreement. Each of these lawsuits names as defendants the Company, the members
of the Company's Board of Directors and Delta, and seeks to proceed on behalf of
a purported class of the Company's common shareholders other than the
defendants.
1. On or about October 19, 1999, an action styled Barkley v. Comair Holdings,
Inc. was commenced by a purported Company shareholder in the Jefferson
County Circuit Court, Commonwealth of Kentucky. The complaint alleges,
among other things: (a) that the members of the Company's Board of
Directors breached their fiduciary duties to the Company's shareholders by
agreeing to allegedly inadequate consideration in the Merger Agreement; and
(b) that Delta, which plaintiff alleges to be a "controlling shareholder"
of the Company, allegedly aided and abetted those breaches of fiduciary
duty, all of which allegedly has deprived the Company's shareholders of the
highest value available to them for their shares. The complaint seeks to
enjoin Delta's acquisition of the Company; to rescind the acquisition if it
is consummated; unspecified monetary damages; and costs and attorneys'
fees. On October 29, 1999, the Jefferson County Circuit Court issued an
opinion and order denying plaintiff's motions for a temporary restraining
order enjoining Delta's acquisition of the Company and invalidating certain
provisions of the Merger Agreement.
2. On October 20, 1999, an action styled Byrnes v. Castellini was commenced by
two purported Company shareholders in the Supreme Court of the State of New
York for Nassau County. The complaint makes allegations and seeks relief
substantially similar to the allegations made and relief sought in the
Barkley complaint, and also alleges that Delta breached fiduciary duties it
owed directly to the Company's shareholders.
3. On October 28, 1999, plaintiffs in three other previously filed actions
filed a first amended consolidated class action complaint in the Boone
County Circuit Court, Commonwealth of Kentucky, under the caption Schear v.
Comair Corporation. On October 29, 1999, the Boone County Circuit Court
consolidated the three actions. The amended consolidated complaint alleges
(a) that the price for the Company's shares agreed to in the Merger
Agreement is inadequate; (b) that the members of the Company's Board of
Directors breached their fiduciary duties to the Company's shareholders by
allegedly failing to thoroughly investigate the value of the Company before
entering into the Merger Agreement; and (c) that Delta purportedly aided
and abetted these alleged breaches of duty. The amended consolidated
complaint, among other things, also makes other related claims against the
Company's Board of Directors and the Company's financial advisor, Morgan
Stanley Dean Witter. The amended consolidated complaint seeks preliminary
and permanent injunctive relief against Delta's acquisition of the Company;
compensatory and/or rescissory damages in an unspecified amount; and costs
and attorneys' fees. On October 29, 1999, the
20
<PAGE> 21
Boone County Circuit Court denied plaintiffs' motion for a preliminary
injunction to enjoin Delta's acquisition of the Company and for expedited
discovery.
4. On October 28, 1999, an action styled Deutch v. Mueller was commenced by a
purported Company shareholder in the Court of Common Pleas of Hamilton
County, Ohio. The complaint makes allegations and seeks relief
substantially similar to the allegations made and relief sought in the
Schear amended consolidated complaint and in the Barkley complaint.
5. On November 1, 1999, an action styled Shutte v. Comair Holdings, Inc. was
commenced by a purported Company shareholder in the Jefferson County
Circuit Court in the Commonwealth of Kentucky. The complaint makes
allegations and seeks relief substantially similar to the allegations made
and relief sought in the Barkley complaint.
On November 10, 1999 counsel for the parties to the five lawsuits
described above entered into a memorandum of understanding (Memorandum of
Understanding) setting forth the parties' agreement-in-principle to the
terms of a proposed settlement of those actions. Under the Memorandum of
Understanding, which was agreed to by the Company, the members of the
Company's Board of Directors and Delta (collectively, Defendants) solely to
avoid the burden, expense and distraction of further litigation, Defendants
(1) agreed to amend the Merger Agreement to eliminate the $50 million
termination fee payable to Delta if the Merger Agreement were terminated in
the event the Company received and accepted a superior acquisition offer or
in certain other circumstances; and (2) agreed to certain other matters,
including meeting with plaintiffs' counsel and their financial experts and
discussing with them the considerations of the Company's Board of Directors
leading up to the Merger Agreement and providing plaintiffs' counsel with
an opportunity to review and comment upon the disclosure contained in the
publicly filed disclosure documents relating to the Merger Agreement. The
settlement contemplated in the Memorandum of the Understanding is subject
to a number of conditions, including consummation of Delta's acquisition of
the Company as contemplated in the Merger Agreement; completion by
plaintiffs of appropriate discovery reasonably satisfactory to plaintiffs'
counsel; drafting and execution of definitive settlement documents; and
final approval of the settlement by the Boone County Circuit Court
following notice and a hearing regarding its fairness and adequacy to the
Company's shareholders other than the Defendants. If the Court approves the
settlement that is contemplated in the Memorandum of Understanding, the
Defendants and certain other parties will be released and discharged from
all claims that were or could have been raised against them in the actions
or in connection with the Merger Agreement and the actions will be
dismissed with prejudice as to a class consisting of all the Company's
shareholders (other than Defendants) for the period from May 19, 1999,
through and including the effective time of the merger of Kentucky Sub into
the Company. In connection with Court approval of the settlement
contemplated in the Memorandum of Understanding, plaintiffs' counsel intend
to apply to the Court for an award of fees to be paid by the Company or its
successor corporation up to an aggregate amount of $675,000 and expenses up
to an aggregate of $75,000, which Defendants have agreed in principle not
to oppose.
21
<PAGE> 22
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. AT THE COMPANY'S
ANNUAL MEETING OF SHAREHOLDERS HELD ON AUGUST 10, 1999, THE FOLLOWING ACTIONS
WERE TAKEN BY SHAREHOLDERS:
4.1 All persons nominated as Class B Directors were elected with the votes
for each person being:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Shares Against
Name Shares For or Withheld
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Peter H. Forster 83,223,944 529,100
- ----------------------------------------------------------------------------------------------------------------------
John A. Haas 83,414,914 338,130
- ----------------------------------------------------------------------------------------------------------------------
Gerald L. Wolken 83,397,600 355,444
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
4.2 A shareholder proposal urging the Board to take necessary steps to
declassify the Board of Directors was defeated by the following vote:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Shares For Shares Against Shares Abstained
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
20,040,466 50,508,887 663,729
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
4.3 The selection of Arthur Andersen LLP as independent public accountants
for fiscal year 2000 was ratified by the following vote:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Shares For Shares Against Shares Abstained
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
83,430,325 206,087 116,632
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 5. OTHER EVENTS
5.1 On October 17, 1999, Comair Holdings, Inc., the parent company of
COMAIR, entered into an Agreement and Plan of Merger with Delta and
Kentucky Sub, Inc., an indirect, wholly owned subsidiary of Delta,
pursuant to which Kentucky Sub commenced a tender offer for all
outstanding shares of common stock of the Company for $23.50 per share
in cash. The Offer is conditioned upon, among other things,
satisfaction of the condition that there be validly tendered and not
withdrawn at least two-thirds of the outstanding shares of common
stock of the Company held by stockholders, including Delta and
Kentucky Sub. Following completion of the Offer, upon the terms and
subject to the conditions of the Merger Agreement, Kentucky Sub will
be merged into the Company, and each share of common stock of the
Company not tendered in the Offer (other than those shares owned by
Delta, its affiliates, or by any dissenting shareholder) will be
converted into the right to receive $23.50 per share in cash, without
interest. Upon consummation of these transactions, Delta will own the
entire equity interest in the Company. The waiting period applicable
to Delta's proposed acquisition of Comair under the Hart-Scott-Rodino
Antitrust Improvements Act expired on November 10, 1999.
22
<PAGE> 23
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
OTHER INFORMATION (continued)
COMAIR has operated in Cincinnati, Ohio since 1984 and in Orlando,
Florida since 1987 as a "Delta Connection" carrier pursuant to a marketing
agreement with Delta. The current Delta Connection Agreement was entered into on
October 1, 1989 and was scheduled to expire on October 31, 1999. Delta and
Comair have extended the Delta Connection Agreement on a month-to-month basis
after its expiration. If the offer does not result in Delta's acquisition of
COMAIR, then COMAIR's results of operations and financial condition could be
adversely impacted by Delta's decisions regarding routes and other operational
matters, as well as, any material interruption or modifications in any new
arrangement. Historically, the Company has benefited from its relationship with
Delta.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 99 - Forward-Looking Statements
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which
this report is filed.
23
<PAGE> 24
COMAIR HOLDINGS, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to this report to be signed on its
behalf by the undersigned thereunto duly authorized.
COMAIR HOLDINGS, INC.
November 15, 1999 BY: /s/ Randy D. Rademacher
-----------------------------
Randy D. Rademacher
Senior Vice President Finance
Chief Financial Officer
24
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000835344
<NAME> COMAIR HOLDINGS, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 172,569,889
<SECURITIES> 158,056,962
<RECEIVABLES> 13,868,740
<ALLOWANCES> 0
<INVENTORY> 17,784,310
<CURRENT-ASSETS> 385,605,537
<PP&E> 479,770,975
<DEPRECIATION> 141,375,566
<TOTAL-ASSETS> 792,462,865
<CURRENT-LIABILITIES> 143,354,609
<BONDS> 94,732,762
0
0
<COMMON> 0
<OTHER-SE> 463,214,745
<TOTAL-LIABILITY-AND-EQUITY> 792,462,865
<SALES> 0
<TOTAL-REVENUES> 216,061,241
<CGS> 0
<TOTAL-COSTS> 163,741,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 964,903
<INCOME-PRETAX> 55,174,252
<INCOME-TAX> 20,525,200
<INCOME-CONTINUING> 0
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</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-Q
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; higher employment costs resulting from the amendment of collective
bargaining agreements; effects of the Year 2000 problem; continued low
unemployment levels; and/or actions by the United States and foreign
governments.
