SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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 0-17846
CCAIR, Inc.
Incorporated under the laws of Delaware 56-1428192
(I.R.S. Employer ID No.)
4700 Yorkmont Road, Second Floor
Charlotte, North Carolina 28208
(704) 359-8990
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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 9, 1995
----- -------------------------------
Common Stock, $0.01 par value 7,415,695
<PAGE>
CCAIR, Inc.
FORM 10-Q QUARTERLY REPORT FOR
FISCAL QUARTER ENDED SEPTEMBER 30, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I - FINANCIAL INFORMATION:
ITEM 1. Financial Statements: 3
Condensed Balance Sheets as of
September 30, 1995 and June 30, 1995. 3
Condensed Statements of Income
for the Three Months ended
September 30, 1995 and 1994. 4
Condensed Statements of Cash Flows
for Three Months ended September 30,
1995 and 1994. 5
Notes to Condensed Financial Statements. 6
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. 7
PART II - OTHER INFORMATION:
ITEM 1. Legal Proceedings. 9
ITEM 2. Changes in Securities. 9
ITEM 3. Defaults Upon Senior Securities. 9
ITEM 4. Submission of Matters to a Vote
of Security Holders. 10
ITEM 5. Other Information. 10
ITEM 6. Exhibits and Reports on Form 8-K. 10
SIGNATURES 10
EXHIBIT INDEX E-1
</TABLE>
2
<PAGE>
CCAIR, Inc.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED BALANCE SHEETS
(Unaudited)
-----------
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
----------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 706,100 $ 56,995
Receivables, net 5,057,081 5,517,072
Related party receivable ---- 1,000,000
Inventories, less allowance for
obsolescence of $466,000 1,864,026 1,784,885
Prepaid expenses and deposits 1,592,360 1,354,130
----------- -----------
Total current assets 9,219,567 9,713,082
----------- -----------
PROPERTY AND EQUIPMENT:
Flight equipment and aircraft 19,995,573 20,380,436
Ground and other equipment and
leasehold improvements 4,467,949 4,383,803
----------- -----------
24,463,522 24,764,239
Less accumulated depreciation
and amortization (12,527,173) (12,358,632)
----------- -----------
11,936,349 12,405,607
----------- -----------
OTHER ASSETS 34,542 34,542
----------- -----------
Total assets $21,190,458 $22,153,231
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current
maturities of long-term debt $ 927,661 $ 1,575,047
Current obligations under capital leases 355,962 350,377
Accounts payable 2,890,522 4,058,097
Accrued expenses 4,419,812 4,288,320
----------- -----------
Total current liabilities 8,593,957 10,271,841
Long-Term Debt, less current maturities 2,123,096 1,863,371
Capital lease obligations, less
current obligations 2,921,122 3,012,217
Deferred credits, net 1,974,467 1,810,486
Noncurrent rent obligations 148,604 162,611
----------- -----------
Total liabilities 15,761,246 17,120,526
----------- -----------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000 shares
authorized, 7,415,695 and 7,400,695 issued and
outstanding at September 30, 1995 and June 30, 1995 74,156 74,007
Additional paid-in-capital 17,037,812 17,020,148
Accumulated deficit (11,682,756) (12,061,450)
----------- -----------
Total shareholders' equity 5,429,212 5,032,705
----------- -----------
Total liabilities and
shareholders' equity $21,190,458 $22,153,231
=========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
CCAIR, Inc.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
-----------
<TABLE>
<CAPTION>
3 Months ended September 30,
1995 1994
------------ -------
<S> <C> <C>
OPERATING REVENUES:
Passenger $15,736,956 $15,390,572
Public service 187,070 155,902
Other 306,181 362,296
----------- -----------
Total 16,230,207 15,908,770
----------- -----------
OPERATING EXPENSES:
Flight operations 5,854,485 6,221,336
Fuel and oil 1,388,708 1,366,733
Maintenance 3,042,704 2,755,420
Ground operations 1,773,688 1,929,672
Advertising, promotions
and commissions 2,213,406 2,334,429
General and administration 986,202 1,224,324
Depreciation and amortization 431,758 430,055
----------- -----------
Total 15,690,951 16,261,969
----------- -----------
OPERATING INCOME (LOSS) 539,256 ( 353,199)
Interest expense ( 170,860) ( 205,399)
Other income (expense), net 10,298 ( 11,278)
----------- -----------
Net income (loss) $ 378,694 $( 569,876)
=========== ===========
EARNINGS (LOSS) PER COMMON SHARE $ .05 $( .08 )
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 7,807,892 7,381,195
=========== ===========
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
CCAIR, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
-----------
<TABLE>
<CAPTION>
Three Months Ended September 30,
1995 1994
------------ --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 378,694 $( 569,876)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Note discount amortization 73,533 88,938
Depreciation and amortization 1,507,450 1,181,584
Lease expense in excess of payments 209,036 67,607
(Gain) loss on disposal of assets ( 10,500) 14,279
Changes in certain assets and liabilities:
Accounts receivable 459,991 435,985
Inventories ( 79,141) ( 10,707)
Other note payable ---- ( 801,000)
Accounts payable (1,167,575) 556,380
Accrued expenses 131,492 261,736
Prepaid expenses and deposits ( 238,230) 764,809
Noncurrent rent obligations ( 8,145) ( 8,145)
Other changes, net ( 47,190) ( 44,972)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,209,415 1,936,618
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,038,192) (1,053,782)
Proceeds from sale of assets 10,500 21,925
----------- -----------
NET CASH USED BY
INVESTING ACTIVITIES (1,027,692) (1,031,857)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale-leaseback transaction 1,000,000 ----
Issuance of common stock 17,813 ----
Issuance of notes and long-term debt 90,000 317,954
Reductions of notes and long-term debt ( 640,431) (1,810,912)
----------- -----------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 467,382 (1,492,958)
----------- -----------
Net increase (decrease) in cash 649,105 ( 588,197)
Cash, beginning of period 56,995 651,020
----------- -----------
CASH, END OF PERIOD $ 706,100 $ 62,823
=========== ===========
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
CCAIR, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
-----------
1. Basis of Presentation:
The condensed financial statements included herein have been prepared
by CCAIR, Inc. (the "Company"), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. These
condensed financial statements reflect all adjustments which are, in
the opinion of management, necessary for a fair statement of results
for the interim period. These adjustments consist solely of normal
recurring adjustments. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed
financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's annual
report for fiscal year ended June 30, 1995.
2. Earnings (Loss) Per Common Share:
The computation of earnings (loss) per common share is based on the
weighted average number of common shares outstanding for each period,
after considering the effect of common stock equivalents.
3. Commitments and Contingencies:
The Company is subject to the regulatory authority, among others, of
the Federal Aviation Administration and the Department of
Transportation. These agencies require compliance with their standards
and conduct safety and compliance audits. Violations, if any, of these
regulations subject the Company to fines or sanctions. The Company is
also subject to other claims arising in the ordinary course of
business. In the opinion of management, the outcome of these matters
would not have a material adverse impact on the Company's financial
condition or results of operations.
6
<PAGE>
CCAIR, Inc.
FISCAL QUARTER ENDED SEPTEMBER 30, 1995
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
In the three-month period ended September 30, 1995, the Company had net
income of $378,694, or $.05 per share, versus a net loss of $569,876, or $.08
per share, in the comparable period in fiscal 1995. The principal factors in the
improvement from the prior year were the 13.5% increase in yield per revenue
passenger mile and the 3.5% reduction in operating expenses in conjunction with
a 7.4% increase in capacity.
Results of Operations
The following table sets forth selected operating comparisons for the
three-month period ended September 30, 1995 and 1994:
<TABLE>
<CAPTION>
Airline Operating Statistics
For the Three Months
Ended September 30,
%
1995 1994 Change
----------- ----------- ------
<S> <C> <C> <C>
Operating revenue $16,230,207 $15,908,770 2.0
Operating expense $15,690,951 $16,261,969 ( 3.5)
Revenue passengers carried 195,895 238,087 (17.7)
Revenue passenger miles (1) 34,722,302 38,547,787 ( 9.9)
Available seat miles (2) 80,044,434 74,498,096 7.4
Passenger load factor (3) 43.4% 51.7% (16.1)
Passenger breakeven load factor 42.4% 54.7% (22.5)
Yield per revenue passenger
mile (4) 45.3(cent) 39.9(cent) 13.5
Operating cost per available
seat mile 19.6(cent) 21.8(cent) (10.1)
Average passenger trip (miles) 177.2 161.9 9.5
Average daily aircraft utilization
per plane (block hours) 8.1 7.7 5.2
Average passenger fare $80.33 $64.64 24.3
Completion factor 96.1% 96.0% .1
</TABLE>
(1) One revenue passenger transported one mile.
(2) The product of the number of aircraft miles and the number of available
seats on each stage, representing the total passenger capacity offered.
(3) The ratio of revenue passenger miles to available seat miles,
representing the percentage of seats occupied by revenue passengers.
(4) The operating revenue per revenue passenger mile.
For the Three Months Ended September 30, 1995 Compared to Three Months Ended
September 30, 1994
Operating revenues increased by 2.0% over the prior year, as higher
yields more than offset decreased traffic. The 13.5% improvement in yield, from
39.9(cent) in the first quarter of fiscal 1995 to 45.3(cent) in the same period
in fiscal 1996, was the result of industrywide fare increases implemented in the
third quarter of fiscal 1995 and the elimination of the low-fare division of
Continental, Continental Lite, in the same period. Continental Lite was a direct
competitor of the Company's marketing partner, USAir, and the Company, and USAir
reduced fares, including the joint fares shared with the Company, to avoid
losing market share and to stimulate traffic in the winter of 1993. The
Continental Lite pricing and service strategy was eliminated by Continental
Airlines in the third quarter of fiscal 1995, which allowed USAir to alter its
pricing strategy and thus resulted in increasing yields for the Company based
upon higher joint fares.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
Results of Operations, continued
The number of available seat miles (ASMs) increased 7.4% in the first
quarter of fiscal 1996 over the comparable period in fiscal 1995, primarily as a
result of changes in the Company's service schedule. In conjunction with USAir's
strategy of eliminating jet service to short-haul markets and turning this
flying over to USAir Express commuter operators, the Company initiated all
turboprop service to Augusta, Georgia in February, 1995 and Jacksonville, North
Carolina and Lynchburg, Virginia in May, 1995. Also during 1995, the Company
ceased service to several cities it had previously served on a shared basis with
USAir from Charlotte, North Carolina. The net effect of these schedule changes
was an increase in ASMs.
The number of revenue passengers carried decreased by 17.7% and revenue
passenger miles (RPMs) decreased by 9.9% in the three-month period ended
September 30, 1995 as compared to the prior year. The primary reason for the
reduced passengers and RPMs is the elimination of the low-fare, traffic
stimulation environment which existed in the Company's service area until the
cessation of Continental Lite as previously addressed.
Operating costs per available seat mile declined 10.1% from 21.8(cent)
in the quarter ended September 30, 1994 to 19.6(cent) in the quarter ended
September 30, 1995. The following table compares components of operating cost
per ASM for the three-month periods ended September 30, 1995 and 1994:
Cost per ASM - Quarter
Ended September 30
(in cents)
1995 1994
Flight Operations 7.3 8.4
Fuel and Oil 1.7 1.8
Maintenance 3.8 3.7
Ground Operations 2.3 2.6
Advertising, Promotions, Commissions 2.8 3.1
General and Administration 1.2 1.6
Depreciation and Amortization 0.5 0.6
--- ---
19.6 21.8
Flight operations expense per ASM decreased 1.1(cent) in the current
quarter as compared to the prior year, primarily due to aircraft lease
restructuring. The Company reached agreement with Shorts Brothers (USA), Inc.
("Shorts") aircraft in the second quarter of fiscal 1995 for reductions in lease
payments aggregating approximately $94,000 per month for the remainder of the
lease term for the Company's nine Shorts 360 aircraft. The Company also entered
into new lease agreements for its four Dash 8 aircraft in the second quarter of
fiscal 1995 which reduced lease payments approximately $43,000 per month for the
remainder of the lease term. Fuel and maintenance expense were relatively flat
on a unit basis. Ground operations expense decreased 3(cent) per ASM in the
quarter ended September 30, 1995 versus the same quarter in the prior year,
primarily as a result of decreased per-passenger handling charges. Marketing and
commissions expense declined 3(cent) per ASM, principally as a result of
decreased travel agents commission rates and decreased booking fees paid to
other airlines due to decrease in the number of passengers. General and
administration expenses declined .4(cent) on a unit basis due to decreased
passenger liability insurance expense as a result of fewer passengers and a
decrease in legal fees.
Liquidity and Capital Resources
The Company increased cash and cash equivalents by $649,000 during the
first three months of fiscal 1996. Cash generated from operating activities was
$1,209,000. In addition, the Company used $1,000,000 received from related
parties in a sale leaseback transaction (see Note 7 to the financial statements
included in the Company's 1995 Annual Report on Form 10-K), cash flows generated
from depreciation and amortization of $1,507,000 and trade receivable decreases
of $507,000 to reduce accounts payable due to trade creditors by $1,168,000,
fund capital expenditures of $1,038,000 and make scheduled debt payments of
$640,000.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
Liquidity and Capital Resources, continued
In September, 1995, as discussed in Note 5 to the financial statements
included in the Company's 1995 Annual Report on Form 10-K, the Company and Jet
Acceptance Corporation ("JACO") agreed to extend the lease reductions for the
Company's twelve Jetstream 31 aircraft for the remainder of the lease term.
These lease reductions had originally been negotiated in September, 1994, and
had provided for lease reductions aggregating approximately $98,000 per month
through December 31, 1995. Additionally, the Company has agreed to lease
replacement Jetstream 31 aircraft, at further reduced rates through December,
2001, upon the expiration of seven of the current leases with JACO during
calendar years 1995, 1998 and 1999. The Company has also committed to lease four
additional Jetstream 31 aircraft during the first half of calendar year 1996, of
which one aircraft was leased by the Company in June, 1995. The lease terms for
the additional aircraft will expire in December, 2001. The Company has accounted
for the modifications to the JACO lease agreements as they have occurred. As a
result, at September 30, 1995, the Company has recorded a deferred credit of
approximately $907,000 representing the excess of rent expense recorded on a
straight line basis (reflecting lease payment reductions only through December
31, 1995) over actual payments made from September 1, 1994 through September 30,
1995. As a result, the excess lease expense previously recorded will reduce
lease expense over the remaining term of the leases.
In the first quarter of fiscal 1996, the Company and JACO restructured
the entire remaining amount due to JACO under the Bankruptcy Plan. Under this
agreement, the Company will issue a promissory note to JACO in the principal
amount of $676,000. Installment payments of $17,727 will begin in January, 1996.
Additionally, the remaining balance due under the Bankruptcy Plan will be
satisfied with any proceeds resulting from the issuance of 325,000 shares of
the Company's common stock to JACO (see Management's Discussion and
Analysis of Financial Condition and Results of Operations in the Company's
Annual Report on Form 10-K for further information).
In September, 1995, the Company reached an agreement with Shorts to
restructure the payment of certain outstanding obligations. Under this
agreement, the Company issued a promissory note to Shorts in the principal
amount of $892,067, payable in forty-eight installments of $22,625, beginning
October 1, 1995. The Company and Shorts have also agreed to satisfy an
outstanding lease payment of $306,000 with any proceeds resulting from the
sale of 125,000 shares of the Company's common stock. (See Management's
Discussion and Analysis of Financial Condition and Results of Operations in
the Company's Annual Report on Form 10-K for further information).
The capital expenditures of $1,038,000 during the three-month period
ended September 30, 1995, resulted primarily from expenditures on major overhaul
of engines and on major spare parts and assemblies. Current Federal Aviation
Administration directives require that the Company complete the process of
equipping its aircraft with traffic alert and collision avoidance systems by
December 31, 1995. The remaining estimated cost for the modifications on the
Company's current fleet is approximately $375,000.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
ALA, Inc. and Larry H. Schatz v. CCAIR, Inc. On October 31,
1995, the Clerk for the Third Circuit Court of Appeals
dismissed the appeal by ALA, Inc. and Larry H. Schatz on their
motion. The decision by Judge Wolin on May 1, 1995 dismissing
the action has thus become final. The Company has not
pursued further action in the declaratory judgment action
pending in the Federal District Court for the Western District
of North Carolina
ITEM 2. Changes in Securities
None to report.
ITEM 3. Defaults Upon Senior Securities
None to report.
9
<PAGE>
ITEM 4. Submission of Matters to a Vote of Security Holders
None to report.
ITEM 5. Other Information
None to report.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Exhibit
4 Specimen Common Stock Certificate. (1)
11 Computation of Earnings Per Share.
(b) Reports on Form 8-K
None.
- ----------------------
(1) Incorporated by reference to Registration Statement on Form S-1, File
No. 33-28967.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CCAIR, Inc.
November 13, 1995 By: /s/ Kenneth W. Gann
----------------------
Kenneth W. Gann, President and
Chief Executive Officer
(Principal Executive Officer)
November 13, 1995 By: /s/ Eric W. Montgomery
-------------------------
Eric W. Montgomery, Vice
President - Finance
(Principal Financial Officer)
10
<PAGE>
EXHIBIT INDEX
Exhibit Filed Sequential
No. Exhibit Herewith At Page No.
2 Revised Plan of Reorganization
4 Specimen Common Stock
Certificate. (1)
11 Computation of Earnings Per Share E-2
- ---------------------
(1) Incorporated by reference to Registration Statement on Form S-1, File
No. 33-28967.
E-1
PART II, ITEM 6 EXHIBIT 11
CCAIR, Inc.
COMPUTATION OF EARNINGS (LOSS) PER SHARE (1)
<TABLE>
<CAPTION>
Three Months ended September 30,
1995 1994
-------------- ---------
<S> <C> <C>
Net income (loss) $ 378,694 $( 569,876)
=========== ===========
Shares
Weighted average number of
shares outstanding 7,413,552 7,381,195
Assuming exercise of options 394,340 ----
------------- ---------
Weighted average number of
shares outstanding,
as adjusted 7,807,892 7,381,195
============ ============
Income (loss) per share: $ .05 $ ( .08 )
=============== ============
</TABLE>
(1) Fully diluted average number of shares outstanding, as adjusted and
earnings (loss) per share are the same as calculated for primary for
the periods presented.
E-2
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from CCAIR,
Inc. condensed financial statements for the fiscal quater ended September
30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 706,100
<SECURITIES> 0
<RECEIVABLES> 5,057,081
<ALLOWANCES> 0
<INVENTORY> 1,864,026
<CURRENT-ASSETS> 9,219,567
<PP&E> 24,463,522
<DEPRECIATION> 12,527,173
<TOTAL-ASSETS> 21,190,458
<CURRENT-LIABILITIES> 8,593,957
<BONDS> 0
<COMMON> 74,156
0
0
<OTHER-SE> 5,355,055
<TOTAL-LIABILITY-AND-EQUITY> 21,190,458
<SALES> 0
<TOTAL-REVENUES> 16,230,207
<CGS> 0
<TOTAL-COSTS> 15,690,951
<OTHER-EXPENSES> (10,298)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,860
<INCOME-PRETAX> 378,694
<INCOME-TAX> 0
<INCOME-CONTINUING> 378,694
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 378,694
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>