FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Fee Required)
For Fiscal Year Ended JUNE 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from ___________________________________ to
________________________________________________
Commission file number 0-17846
CCAIR, Inc.
DELAWARE No. 56-1428192
State or other jurisdiction of I.R.S. Employer ID
incorporation or organization
4700 Yorkmont Road, Second Floor, Charlotte, NC 28208
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 704/359-8990
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $0.01 Par Value
Indicate by check mark whether the Registrant (1) has filed all documents
and 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((section mark) 229,405 of this chapter) 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.[ ]
The aggregate market value of Common Stock held by non-affiliates (based
upon the closing price for the Common Stock on the small-cap stock market
of the National Association of Securities Dealers Automated Quotation
System) on September 16, 1994 was approximately $14,750,390.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant
has filed all documents and reports required to be filed by Section 12, 13
or 15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
YES X NO
As of September 22, 1995, there were 7,400,695 shares of $0.01 par value
Common Stock outstanding.
Documents Incorporated by Reference
Portions of the Registrant's Definitive Proxy Statement, to be filed with
the Commission not later than 120 days after the end of the Registrant's
fiscal year ended June 30, 1995, are incorporated by reference in Part III
hereof, as specified.
___________________________________________________________
<PAGE>
CCAIR, Inc.
FISCAL 1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
<S> <C>
Page No.
Item 1. Business............................................................................. 1
Item 2. Properties........................................................................... 6
Item 3. Legal Proceedings.................................................................... 7
Item 4. Submission of Matters to a Vote of Security Holders.................................. 8
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...................................................... 8
Item 6. Selected Financial Data........................................................... 9
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 11
Item 8. Financial Statements and Supplementary Data....................................... 18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................... 18
PART III
Item 10. Directors and Executive Officers of the Registrant........................ 18
Item 11. Executive Compensation.................................................... 18
Item 12. Security Ownership of Certain Beneficial
Owners and Management.................................................... 19
Item 13. Certain Relationships and Related Transactions............................ 19
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................................... 19
Index to Financial Statements and Schedules............................... F-1
Index to Exhibits......................................................... E-1
</TABLE>
PART I
ITEM 1. BUSINESS
General
CCAIR, Inc. (the "Company") is a Charlotte, North Carolina based
regional air carrier providing regularly scheduled passenger service to 25
cities in Alabama, Georgia, Kentucky, Maryland, Ohio, North Carolina, South
Carolina, Virginia, and West Virginia, primarily from a hub at the
Charlotte/Douglas International Airport. The Company currently operates a
fleet of 26 turboprop passenger aircraft with approximately 1,391 weekly
departures over a route system covering approximately 229,500 miles. The
Company was incorporated under Delaware law in July 1984 under the name
Sunbird Airlines 1984, Inc. for the purpose of purchasing substantially all
of the assets of Sunbird Airlines, Inc. The Company changed its name to
CCAIR, Inc. in January 1986.
The Company's business has involved providing service for business
travelers from small- and medium-sized communities in its market area to
connecting flights of major carriers, principally USAir, Inc. ("USAir"), at
the hub operations of USAir at the Charlotte/Douglas International Airport.
In addition, the Company operates a small number of flights into USAir's
Baltimore hub and Raleigh, North Carolina. In order to market the
Company's services, the Company has an agreement with USAir that permits
the Company to operate under the name "USAir Express" and to charge their
joint passengers on a combined basis with USAir. (See discussion under
"Business Agreement with USAir" below). The Company believes that its use
of USAir's "US" flight designator code continues to be the most significant
factor contributing to its ability to compete for passengers and to its
historical growth.
On March 16, 1992, the U. S. Bankruptcy Court for the Western District
of North Carolina issued a final decree closing the Chapter 11 proceeding
which the Company initiated in July 1990. The Company's Plan of
Reorganization established annual payment obligations to its creditors to
be made on August 31 of the years 1992 through 1999. Payments to creditors
totaling $668,000 were made on August 31, 1992. With respect to the
payment totaling $668,000 required to be made in August of 1993, $383,215
was paid in cash. The remaining $284,785 was satisfied by an offering of
shares of the Company's common stock in exchange for the cash payment
obligations under the Plan and under other agreements. Of the $909,315 in
payments due in August, 1994, payments totaling $655,257 have been made in
cash and payments totaling $254,058 has been restructured per agreement
with one creditor. Of the $909,931 in payments due in August, 1995,
payments totaling $328,424 have been made in cash and payments totaling
$581,507 have been deferred per agreement with two (2) creditors. See Item
7, Management's Discussion and Analysis of Financial Condition and Results
of Operations, Liquidity and Capital Resources, for a more complete
description of the agreements for restructuring plan payments.
Unless otherwise indicated, references in this Annual Report to years
mean the Company's July 1 to June 30 fiscal years and "fiscal 1995" means
the fiscal year that began on July 1, 1994 and ended on June 30, 1995.
Business Agreement with USAir
Over 85% of the Company's passenger revenue is generated by passengers
who are connecting with USAir flights and is determined under an agreement
for the sharing of joint passenger fares and division of revenue with USAir
(the "Agreement"). The Agreement expires on October 31, 1998. The
Agreement provides that it may be terminated upon 180 days prior written
notice for any reason by either USAir or the Company or upon ten (10) days
prior written notice by USAir under certain conditions, including if: (i)
the Company fails to maintain at least a minimum required operating
schedule; (ii) during any one month the Company's flight completion
percentage is less than 96% due to cancellations attributable to
maintenance or operational deficiencies within the Company's control; (iii)
the Company fails to comply with the trademark licensing provisions of the
Agreement; (iv) the Company becomes insolvent; or (v) there is a change of
control or ownership of 51% or more of the Company's common stock without
the consent of USAir.
1
Business Agreement with USAir, continued
The Agreement provides for coordinating schedules and reservations,
joint fares and advertising. In addition, the Agreement provides that
USAir will provide to the Company check-in, ticketing, baggage handling and
security services at twelve (12) airports including Charlotte/Douglas
International Airport in Charlotte, North Carolina. As of February 1,
1994, the Company assumed from USAir total responsibility for ground
operations at Concourse D of the Charlotte/Douglas International Airport
pursuant to an agreement that requires USAir to pay a monthly handling fee
to the Company. The fee is currently approximately $340,000 per month.
The Agreement also authorizes the Company to operate as "USAir Express", to
use the USAir "US" flight designator code to identify its flights and fares
for purposes of computer reservations, printed schedules, and tickets, and
to display the USAir colors and "USAir Express" logo on its fleet of
aircraft. The Company does not have the exclusive rights to the "USAir
Express" name or other attributes described above. USAir has two
subsidiaries serving the Charlotte/Douglas International Airport, Piedmont
Airlines ("Piedmont") (formerly, Henson Aviation, Inc.") and Jetstream
International Airlines, Inc. These regional airlines operate to
destinations not served by the Company but also utilize the "USAir Express"
name and other USAir attributes. The Company pays USAir fees based on the
number of passengers it boards and for reservations services.
The Agreement is a significant factor in the Company's operation and
termination of the Agreement would have a material adverse effect on the
Company's business. Additionally, the Company's business could also be
adversely affected by events that adversely affect USAir. For the six
months ended June 30, 1995 and the years ended December 31, 1994 and 1993,
USAir Group, Inc. reported net losses applicable to common stockholders of
$26 million, $763 million and $466.8 million, respectively. However, USAir
reported net income applicable to common shareholders of $92 million in
their second quarter ended June 30, 1995. Senior management at USAir
attributed the turnaround to improved industry conditions, to financial cost
and revenue actions taken by the airline and to the hard work of USAir's
43,500 employees. Despite these improved results, USAir has stated that it
must achieve a permanent and substantial reduction in operating costs to
remain competitive.
On October 2, 1995, USAir announced that it had engaged in preliminary
talks with American Airlines and United Airlines concerning "possible
strategic relationships, up to and including acquisition" of USAir. United
Airlines subsequently announced that they expect to spend a month
"evaluating the feasibility, economics and structure" of a proposal. While
such talks are preliminary, the Company believes that either of the
possible combinations would have a strong presence in the Charlotte market
and the Company is favorably positioned to provide feeder service to a
combined airline.
Operating Strategy and Seasonal Nature of Business
The Company's operating strategy is designed to attract interline
passengers from small- and medium-sized communities in its market area who
wish to connect with flights on major carriers, principally USAir, at
Charlotte/Douglas International Airport. In addition, the Company seeks to
attract passengers for its local flights between destinations serviced by
the Company. The Company particularly emphasizes providing reliable and
conveniently scheduled service for business travelers.
Market changes during fiscal 1995 resulted in the suspension of
service to Columbia, South Carolina, Huntsville, Alabama, Wilmington, North
Carolina, Bristol/Kingsport/Johnson City, Tennessee and Knoxville,
Tennessee and the addition of new service to Lynchburg, Virginia,
Greenbrier/Lewisburg, West Virginia and Jacksonville, North Carolina.
The Company's passenger traffic is influenced by seasonal travel.
Increases in passenger traffic generally occur in the months of March
through October and decreases in November through February. The Company's
operations also are influenced by the weather, principally in the winter
months.
2
Routes
The Company operates a "hub and spoke" route system with Charlotte as
its hub. The Company's operations are a component of the "hub and spoke"
route system strategy employed by USAir at Charlotte. The Company's route
system currently includes service between Charlotte/Douglas International
Airport and twenty (20) other airports as well as service between
Raleigh/Durham, North Carolina and Asheville, North Carolina, Charleston
and Greenville/Spartanburg, South Carolina and Norfolk, Virginia.
The following table sets forth selected information about the
Company's route system and scheduling as of October 4, 1995.
<TABLE>
<CAPTION> <C> <C>
Date Service Flights Operated
Commenced per Weekday
Alabama:
Montgomery June 1992 3
Georgia:
Athens May 1985 4
Augusta May 1985 8
Columbus November 1994 3
North Carolina:
Asheville May 1985 4
Charlotte May 1985 87
Greenville May 1985 9
Hickory May 1985 10
Jacksonville May 1995 9
Kinston July 1985 5
Raleigh/Durham May 1985 16
Rocky Mount/Wilson July 1986 6
Southern Pines/Pinehurst October 1991 4
Winston-Salem May 1985 5
South Carolina:
Charleston April 1995 4
Greenville/Spartanburg May 1985 5
Kentucky:
Lexington May 1993 4
Maryland:
Baltimore August 1991 3
Ohio:
Cincinnati July 1993 4
Virginia:
Lynchburg May 1995 7
Norfolk February 1995 4
Shenandoah Valley June 1992 4
West Virginia:
Huntington April 1987 4
Greenbrier/Lewisburg February 1995 1
</TABLE>
The Company continually reviews and analyzes its route structure for
the purpose of proposing adjustments in flight schedules. Such adjustments
are implemented after the Company receives the consent of USAir to the
adjustments.
Fares
The Company derives its passenger revenues from joint fares involving
travel on the route system of both the Company and USAir and from local
fares. Approximately 85% of the Company's passenger revenues are derived
from joint fares, that is, fares which are shared with USAir. Local fares,
which are fares for flights provided by the Company within its route
system, account for the balance of the Company's passenger revenues.
3
Fares
The Company's revenues from joint fares are dependent on pricing
decisions made by USAir and the Company has little ability to influence
such pricing decisions. The Company prices its local fares to be
comparable with fares charged by major carriers in similar markets. The
Company seeks to maximize its passenger yields by restricting the number of
discount fares for passengers on flights with high passenger demand.
The Company realized improved average passenger fares in the third and
fourth quarters of fiscal 1995, $79.25 and $79.81, respectively. This
compared favorably with fares in the first and second quarters of fiscal
1995 and fiscal 1994, when the average fare was $64.64, $66.66 and $69.06,
respectively. The depressed fares in 1994 and the first two quarters of
1995 were a result of the initiation of service to Greensboro, North
Carolina and Greenville/Spartanburg, South Carolina by Continental Lite, a
low-fare division of Continental Airlines. USAir reduced fares, including
the joint fares shared with the Company, to avoid losing market share and
to stimulate traffic. Continental eliminated the Continental Lite concept
in the third quarter of fiscal 1995, which allowed USAir to alter its
pricing strategy and thus resulted in increased yields for the Company
based upon higher joint fares. The Company currently projects fares to
remain at levels achieved in the third and fourth quarters of fiscal 1995
throughout 1996.
Working Capital
The Company's air traffic receivables are settled through the Airlines
Clearing House and collected monthly, one month in arrears. To reduce the
cash flow problems caused by the payment of receivables one month in
arrears, the Company has obtained a line of credit in the amount of $2.5
million from JSX Capital Corporation ("JSX") an affiliate of British
Aerospace, Inc. ("BAI"). This line of credit replaced the Company's $1.66
million line of credit, previously provided by NationsBank of North
Carolina, N.A. This line was terminated on January 31, 1995 and replaced
by the JSX line.
Under the line of credit, the air traffic receivables, after set-off
of amounts due USAir and other airlines, are transferred from the Airlines
Clearing House to a pledge account with a bank. From that account, in
accordance with irrevocable instructions, funds are transferred to JSX to
pay for any sums due under the line of credit and then to Jet Acceptance
Corporation ("JACO"), an affiliate of BAI, for payments due under lease
obligations. The balance in the pledge account is then paid to the
Company.
Marketing
The Company's services are promoted primarily through listings in
computer reservation systems and the Official Airline Guide and through
direct contact with travel agencies and corporate travel departments. The
Company and USAir have agreed to coordinate advertising and public
relations for the USAir Express program.
In addition, the Company's services are advertised in newspapers and
on radio, television and outdoor billboards. Advertising is done on a
cooperative basis with USAir. The Company, from time to time, has offered
promotional fares to introduce new service and to stimulate traffic on
special occasions and holidays. Through USAir, the Company also has ticket
arrangements with major United States and foreign air carriers that allow
these carriers to write interline tickets on the Company's flights.
Competition
The principal competition for the Company is the air service provided
by major and other regional air carriers operating from hub airports in
Atlanta, Nashville and Raleigh/Durham. From these hub airports, Delta Air
Lines ("Delta"), American Airlines ("American") and Midway Airlines
("Midway") offer service to some destinations also served by USAir through
its hub operations at the Charlotte/Douglas International Airport. The
Company competes with Delta, Midway and American and with regional air
carriers that have joint marketing agreements with them for passengers
traveling to destinations served through hub airports. The principal
customers for these services are business travelers and competition is
based upon scheduling and flight connections, reliability and, to a lesser
extent, pricing. The Company constantly reviews its scheduling and the
frequency of its flights to reduce the layover time experienced in
connecting with a USAir flight, in order to minimize the length of the
combined trip and to compete with similar service offered by Delta, Midway
or American. To a lesser extent, the Company competes with air service by
United Airlines and its regional airline at Washington, D.C. (Dulles) and
various forms of ground transportation, primarily private automobiles,
which are used to travel to a hub airport or other airport offering direct
air service. The Company believes that the principal factors affecting the
Company's competitive position are scheduling and flight connections,
reliability, pricing, customer service and type of aircraft.
4
Employees
As of June 30, 1995, the Company had 638 employees. These employees
included 166 pilots and copilots, 47 flight attendants, 288 customer
service personnel, 83 maintenance personnel and 54 other management,
administrative, accounting and marketing personnel.
Fuel
Fuel costs constitute 8% to 9% of the Company's total operating
expenses. The Company obtains substantially all of its fuel under a
consortium agreement with other airlines. Such arrangement, however, does
not assure the Company access to any specified quantity of fuel and prices
thereunder reflect market prices for fuel. To date, such arrangement has
provided adequate supplies of fuel for the Company. The Federal fuel tax
increased 4.3(cent mark) per gallon on October 1, 1995. However, the House of
Representatives Ways and Means committee voted to include a two-year
extension of the airline industry's fuel tax exemption in the House budget
reconciliation bill. The airline industry is requesting that the Senate
include language in its budget reconciliation identical to the House
version. The extension of the exemption would be retroactive to October 1,
1995. If the fuel tax exemption is not extended, the Company's fuel
expense will increase approximately $350,000 on an annual basis at current
consumption levels. The Company thus will be adversely affected to the
extent such costs are not offset by higher fares.
As fuel expense is currently only 8.7% of operating expenses, the
Company does not believe it is cost effective to attempt to manage fuel
price risk. As such, no derivatives are used to hedge fuel prices.
Governmental Regulation
The Company is subject to the Federal Aviation Act of 1958, as amended
(the "Federal Aviation Act"), under which the Department of Transportation
(the "DOT") and the Federal Aviation Administration (the "FAA") exercise
regulatory authority over air carriers. The FAA regulates air safety and
flight operations as well as aircraft noise emissions. The DOT regulates
the economic and consumer-related aspects of the airline industry. The FAA
reviews operations of all carriers, including the Company, on an on-going
basis to determine compliance with FAA regulations and operating
authorizations.
The Company applied for a Certificate of Public Convenience and
Necessity under Section 401(d)(1) of the Federal Aviation Act (the "401
Certificate") in order to facilitate aircraft financing. The 401
Certificate was granted on September 10, 1992.
In accordance with FAA requirements, a portion of the Company's
aircraft fleet had the initial equipment installed for aircraft collision
avoidance systems (TCAS) by September 30, 1991. Also, in accordance with
FAA requirements, installation of TCAS II equipment on all of its Shorts
360 and Dash 8 aircraft was completed by December 31, 1993 at a total cost
of $490,007. Installation of the required ground proximity warning system
(GPWS), as well as provisioning for TCAS I, was completed on all of the
Company's Jetstream 31 aircraft by April 20, 1994 at a total cost of
$570,532. The Company will complete the installation of TCAS II equipment
on its Jetstream 31 aircraft by December 31, 1995 at an approximate cost of
$400,000.
Although the Company cannot offer assurances in this regard, it
believes it is in compliance with all requirements necessary to maintain,
in good standing, its operating authorities granted by the DOT and the FAA,
and that its aircraft comply with all applicable Federal and local laws and
regulations pertaining to aircraft noise.
The Company is subject to various Federal and local laws and
regulations pertaining to other issues of environmental protection. The
Company believes it is in compliance with all governmentally imposed
environmental protection standards.
The Federal Communications Commission ("FCC") has jurisdiction over
the use of radio facilities by air carriers. Airlines, and in some cases
their personnel, operating transmitters and receivers must obtain licenses
from the FCC, which may be revoked for cause. The Company believes that it
and its personnel hold all required FCC licenses.
5
The Essential Air Service Program
Pursuant to the Airline Deregulation Act of 1978, certain communities
in the United States are guaranteed specified levels of essential air
service (the "EAS Program"). The EAS Program provides for the payment of
compensation to carriers which volunteer to provide subsidized essential
air service and are selected by the DOT to provide such service. The
Company receives subsidy payments under the EAS Program for Danville and
Shenandoah Valley, Virginia. DOT subsidy payments accounted for
approximately 1.1% percent of the Company's revenues in fiscal 1995. The
level of subsidy payments to the Company is determined by the DOT and may
be reduced or terminated at its direction. There can be no assurance that
funds will be available for the EAS Program in the future.
The Company must give the DOT ninety (90) days advance notice before
discontinuing or significantly reducing service to those communities. If
the DOT determines that such discontinuance or reduction would result in
the loss of "essential air transportation" for that community, the DOT may
require the Company to continue to provide service to the community, at
least until a replacement carrier is found.
The Company filed with the DOT on June 1, 1994 to discontinue service
to Danville, Virginia and petition was granted October 1, 1995. In May,
1994 the Company negotiated a new EAS subsidy agreement to serve Shenandoah
Valley, Virginia, through May, 1996.
Executive Officers of the Company
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Kenneth W. Gann 56 Director, President and Chief Executive
Officer from November, 1990 to present.
Eric W. Montgomery 36 Vice President of Finance from February,
1995 to present; Secretary from February, 1995 to present.
Peter J. Sistare 32 Vice President of Operations from December, 1993 to present.
Kathryn L. Chisholm 32 Vice President, Sales and Service from December, 1993 to present.
</TABLE>
ITEM 2. PROPERTIES
Ground Facilities
The Company presently occupies approximately 15,792 square feet of
office space in the Charlotte/Douglas International Airport's old terminal
building, in Charlotte, North Carolina and 15,000 square feet of hangar
space and 10,000 square feet of space for operations use also at the
Charlotte/Douglas International Airport. The office space is used for the
Company's principal executive and administrative offices and the hangar
facility contains the Company's maintenance operations for its aircraft, as
well as maintenance support and inventory. The office space and hangar
facility are leased under commercial use permits with the City of
Charlotte, North Carolina. The permits are a month-to-month tenancy with
an annual rental of $188,000 and are cancelable upon thirty (30) days
notice by either party. The Company has incurred in fiscal 1995
approximately $257,000 in upfitting expenses, including the cost of an
access road to tow its aircraft to the hangar facility. The Company has
given 30 days notice effective October 1, 1995 to the Charlotte Airport
Authority to terminate the lease for approximately 5,000 square feet of
office space that will reduce annual expense by approximately $53,000.
The Company's counter, baggage, gate and ramp spaces at the airports
served by the Company are provided by USAir except at thirteen (13)
airports where the space is leased from the airport authorities. With
respect to the ground operations at Concourse D of the Charlotte/Douglas
International Airport, the Company provides those services under contract
with USAir. USAir reimburses the Company for its costs in providing the
services.
6
Passenger Aircraft
The Company presently services its passenger route system with a fleet
of 26 leased turboprop aircraft. The following table sets forth certain
information with respect to the Company's passenger aircraft as of October
1994:
<TABLE>
<CAPTION>
Approx. Approx. Approx.
Effective Cruising Average
Number of Number of Range Speed Age
Aircraft Aircraft Seats in Miles (MPH) (years)
<S> <C> <C> <C>
Shorts 360 9 36 250 220 7.3
Jetstream 31 13 19 350 270 9.2
Dash 8 4 37 450 290 5.2
</TABLE>
The Company operates its Shorts aircraft primarily on its higher
density and shorter-haul markets and its Jetstream aircraft for lower
density and longer-haul segments. The Dash 8 aircraft were leased to
operate in certain longer-haul and high density markets. All of the
aircraft are leased, with terms for the Shorts extending a maximum of nine
years and the Jetstreams extending for a maximum of seven years. The
renegotiated Dash 8 leases extend to 2007.
With respect to the Company's renegotiation of its aircraft lease
payments in fiscal 1995 (discussed in Management's Discussion and Analysis
of Financial Condition and Results of Operations), the lease reductions
would cease in the event of a merger, consolidation, acquisition or other
significant change in the ownership of the Company.
Maintenance of Aircraft
The engines on all of the Company's Jetstream 31 aircraft are
maintained under a continuous airworthiness maintenance program. Overhauls
are performed on these engines as needed to meet performance standards
recommended by the manufacturer. The engines on the Shorts 360 aircraft
undergo overhaul after every 7,500 hours of operation. This interval is
based on the manufacturers' approved sampling program which allows for
escalation at 500-hour intervals after the completion of a satisfactory
engine overhaul. The engines on the Company's Jetstream 31 aircraft
undergo disassembly inspection and repair after every 3,500 hours of
operation. This interval is also based on the manufacturers'
recommendation. The engines on the Dash 8 aircraft undergo overhaul after
every 12,000 hours of operation. This interval is also based on the
manufacturers' recommendation. The engines on the Shorts 360 and Dash 8
aircraft are maintained under a continuous airworthiness maintenance
program which includes computerized engine analysis.
Substantially all of the maintenance, service and inspection of
aircraft, except major engine and component overhaul, is performed by
Company personnel. Major engine repair is performed by the engine
manufacturer or its authorized overhaul agencies. Component overhaul is
performed by the applicable manufacturer or an appropriate contractor.
ITEM 3. LEGAL PROCEEDINGS
ALA, Inc. and Larry H. Schatz v. CCAIR, Inc. In United States
District Court for the District of New Jersey, ALA, Inc. and Larry H.
Schatz on April 7, 1993 filed a complaint alleging breach of contract and a
right to specific performance. The complaint arose from a letter with Mr.
Schatz concerning the potential sale of the Company's common stock to a
purchaser represented by him. Mr. Schatz sought damages in excess of
$525,000 and ALA, Inc. sought damages in excess of $20,000,000. The
Company has vigorously denied that the letter constituted a contract to
sell shares of the Company's common stock. The Company engaged the New
Jersey law firm of Archer & Greiner to represent the Company in the
litigation. On September 27, 1993, Judge Wolin dismissed the complaint on
the merits. The plaintiffs appealed the dismissal, which appeal was
decided in the Third Circuit Court of Appeals on July 7, 1994. The Third
Circuit reversed, so that ALA could do limited discovery to seek an admission
from the Company that a contract was formed. On May 1, 1995, Judge Wolin
again dismissed the complaint, finding that ALA had failed to establish an
admission. The plaintiffs have appealed this second dismissal and the
appeal could be heard as early as January, 1996. The Company intends to
continue to defend this matter vigorously, although the possibility of a
favorable out-of-court settlement has not been unequivocally rejected.
7
ITEM 3. LEGAL PROCEEDINGS, continued
CCAIR, Inc. v. ALA, Inc. and Larry H. Schatz. On April 8, 1993, the
Company commenced a declaratory judgment action in Superior Court in
Mecklenburg County, North Carolina seeking a determination that the Company
had no obligation to issue and sell any of its securities to ALA, Inc.,
that the Company breached no duty or obligation owed to ALA, Inc., that the
Company was not liable to ALA, Inc. in any amount, that the Company had
breached no duty or obligation to Larry H. Schatz, and that the Company is
not liable to Larry H. Schatz in any amount. The defendants removed the
proceeding to the Federal District Court for the Western District of North
Carolina on May 7, 1993. Further proceedings in this action were suspended
pending the final decision of the New Jersey action referred to above. The
Company has determined to delay any decision on pursuing this action until
the New Jersey action is final and all appeals have been exhausted.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None reportable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock was first sold to the public in July of
1989, when the Company completed an initial public offering of 1,904,518
shares of common stock, of which 1,283,872 shares were sold by the Company
and the balance was sold by existing Company stockholders. The Company's
common stock is traded in the over-the-counter market, called the Small-Cap
Stock Market of NASDAQ. The common stock is quoted under the symbol
"CCAR". The following table sets forth the high and low bid quotations for
the Company's common stock in the over-the-counter market as reported by
NASDAQ for the quarters of the last two (2) fiscal years. These over-the-
counter market quotations reflect inter-dealer prices, without retail mark-
up, mark-down or commission, and may not necessarily represent actual
transactions.
FISCAL 1994 HIGH LOW
First Quarter 9 3/8 5 1/8
Second Quarter 7 3/8 4 7/8
Third Quarter 5 5/8 3 5/8
Fourth Quarter 4 1/8 1 3/8
FISCAL 1995 HIGH LOW
First Quarter 2 3/8 1 1/2
Second Quarter 2 1/4 7/8
Third Quarter 2 9/16 1 1/8
Fourth Quarter 3 11/16 1 3/4
At September 22, 1995 there were approximately 430 stockholders of
record.
The transfer agent for the Company's common stock is First Union
National Bank of North Carolina, Charlotte, North Carolina.
During its 1994 and 1995 fiscal years, the Company did not pay cash
dividends on its common stock. Based upon its forecast for fiscal 1996,
the Company does not plan to pay cash dividends in fiscal 1996.
8
ITEM 6. SELECTED FINANCIAL DATA (in thousands, except income per share)
<TABLE>
<CAPTION>
Year ended June 30
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Operating revenues:
Passenger
$60,804 $60,063 $61,296 $51,678 $53,952
Public service 695 814 724 676 558
Other 1,540 1,215 1,159 820 686
Total operating revenues 63,039 62,092 63,179 53,174 55,196
Operating expenses:
Flight operation 22,416 25,586 24,131 16,439 17,374
Fuel and oil 5,406 5,202 5,858 4,769 6,634
Maintenance materials, repairs
and overhead 11,619 11,270 11,448 10,364 12,248
Ground operations 7,391 9,026 8,100 6,775 7,472
Advertising, promotion and
commissions 9,007 8,921 9,745 7,876 7,795
General and administrative 4,802 4,369 3,821 4,749 4,349
Depreciation and amortization 1,845 1,595 1,446 1,268 1,527
Loss from write-off of
preoperating costs 684
Total operating expenses 62,486 65,969 65,233 52,240 57,399
Operating income (loss) 553 (3,877) (2,054) 934 (2,203)
Interest expense (920) (819) (789) (394) (41)
Other income (expense), net 5 (60) 60 (184) 24
Income (loss) before
reorganization items
and income taxes (362) (4,756) (2,783) 356 (2,220)
Reorganization items:
Chapter 11 administrative expense
and professional fees (99) (1,417)
Provision for rejected
executory contracts (100)
Interest earned on accumulated
cash resulting from Chapter 11
proceedings 20
Total reorganization items (99) (1,497)
Income (loss) before
income taxes (362) (4,756) (2,783) 257 (3,717)
Provision (benefit) for
income taxes
Income (loss) before
extraordinary item (362) (4,756) (2,783) 257 (3,717)
Extraordinary item, gain on debt
restructuring 6,098
Net income (loss) $(362) $(4,756) $(2,783) $ 6,355 $(3,717)
Income (loss) per share:
Income (loss) before extraordinary item $( .05) $( .68) $( .43) $ .04 $( .64)
Extraordinary item .93
Net income (loss) $( .05) $( .68) $( .43) $ .97 $( .64)
Weighted average common and
common equivalent shares
outstanding 7,382 7,006 6,547 6,581 5,842
Cash dividends declared
per common share - - - - - - - - - -
</TABLE>
9
ITEM 6. SELECTED FINANCIAL DATA (in thousands, except income per share),
continued
<TABLE>
<CAPTION>
Year ended June 30
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Balance sheet data:
Current assets $ 9,713 $11,242 $11,458 $12,677 $11,242
Current liabilities 10,271 11,937 7,850 6,956 3,886
Net property and
equipment 12,406 13,337 12,283 9,508 10,677
Total assets 22,153 24,629 23,793 22,945 22,120
Long-term debt, less
current portion (1) 4,876 5,902 6,866 4,339 1,047
Liabilities subject
to compromise 13,127
Shareholders'
equity 5,032 5,372 7,320 9,680 1,878
(1) See Note 5 to financial statements regarding certain capital lease obligations which are included in long-term
debt in this schedule.
</TABLE>
10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
The following table sets forth selected operating data relating
to the Company's passenger service for fiscal years 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Year ended June 30
1995 1994 1993
<S> <C> <C> <C>
Operating revenue (000) $63,039 $ 62,092 $ 63,179
Operating expense (000) 62,486 65,969 65,233
Revenue passengers carried 844,421 869,742 898,146
Revenue passenger miles (000) (1) 142,499 148,943 137,704
Available seat miles (000) (2) 305,388 289,452 284,424
Passenger load factor (3) 46.7% 51.5% 48.4%
Passenger breakeven load factor 46.9% 56.5% 51.5%
Yield per revenue passenger mile (4) 42.7(cent mark) 40.3(cent mark) 44.5(cent mark)
Operating cost per available seat mile 20.5(cent mark) 22.8(cent mark) 22.9(cent mark)
Average passenger trip (miles) 168.7 171.2 153.3
Average daily aircraft utilization
per plane (block hours) 8.2 7.4 7.6
Average passenger fare $72.01 $ 69.06 $ 68.25
Average completion factor 95.1% 95.8% 96.2%
(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 passenger revenue per revenue passenger mile.
</TABLE>
The following table sets forth selected operating data relating to
the Company's passenger service for each quarter of fiscal year 1995
(see Note 12):
<TABLE>
<CAPTION>
1995 Quarterly Data
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Operating revenue (000) $15,909 $15,096 $14,960 $17,074
Operating income (loss) (000) ( 353) 636 ( 26) 296
Net income (loss) (000) ( 570) 437 ( 274) 45
Earnings (loss) per share ( .08) .06 ( .04) .01
Passengers carried 238,087 218,951 179,661 207,722
Revenue passenger miles (000) 38,548 36,594 31,069 36,288
Available seat miles (000) 74,498 75,928 75,586 79,376
Passenger load factor 51.7% 48.2% 41.1% 45.7%
Passenger breakeven load factor 54.7% 46.7% 41.9% 45.6%
Yield per revenue passenger mile 39.9(cent) 39.9(cent) 45.8(cent) 45.7(cent)
Average passenger trip (miles) 161.9 167.1 172.9 174.7
Average passenger fare $ 64.64 $ 66.66 $ 79.25 $ 79.81
</TABLE>
11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued
Results of Operations, continued
Fiscal 1995
The operating results for fiscal 1995 reflect significant improvement
over fiscal year 1994. The cost reduction plan initiated by the Company
was the principal reason for the improvement. This plan reduced operating
costs by 5.3%, even though capacity, as measured by available seat miles,
increased 5.5%. The operating expense reductions, while encompassing all
functional areas within the Company, were focused on the following areas:
aircraft leases, pilot pay and passenger handling. Operating results also
benefitted from the improved yield per revenue passenger mile, which
increased from 40.3(cent mark) in fiscal 1994 to 42.7(cent mark) in
fiscal 1995. The result of these improvements was operating income of
$553,000 and a net loss of $362,000, as compared to an operating loss of
$3,877,000 and net loss of $4,756,000 in fiscal 1994.
Revenues for the years ended June 30, 1995 and 1994 were $63,039,000
and $62,092,000, respectively. The 6.0% increase in yield in fiscal 1995
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 USAir and the Company in its service area, 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 increased yields for the Company
based upon higher joint fares.
The number of available seat miles (ASMs) increased 5.5% in fiscal
1995 over fiscal 1994, 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 turbo prop 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. These cities were Wilmington, North
Carolina, Asheville, North Carolina, Tri-Cities, Tennessee, Columbia, South
Carolina, Huntsville, Alabama and Knoxville, Tennessee. The net effect of
this schedule change was an increase in ASMs, as fourth quarter capacity
increased by 5.5% over the third quarter and 6.9% over the same quarter in
fiscal 1994. While external factors make analysis imprecise, the Company
believes, based on initial results, this change to the schedule, while
increasing capacity, was slightly negative from both a yield and load
factor perspective. The Company, while able to implement changes in its
flight schedule after receiving the consent of USAir, has limited control
over the cities it is able to serve as a USAir Express carrier. The
Company is unaware of any contemplated schedule changes which would have a
significant impact on operations.
The number of revenue passengers carried decreased by 2.9% and revenue
passenger miles (RPMs) decreased by 4.3% in fiscal 1995 as compared to
fiscal 1994. 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 in fiscal 1995 declined 10.1%
from 22.8(cent mark) to 20.5(cent mark), as compared to the previous
fiscal year. The increases in fuel, maintenance, advertising, general
and administrative and depreciation were more than offset by decreases
in flight operations and ground operations.
Flight operations expense decreased by 12.4% in fiscal 1995 to
$22,416,000 compared to $25,586,000 in fiscal 1994. The principal reason
for this reduction was a 19.1% decrease in aircraft lease expense. See
discussion below under Liquidity and Capital Resources. In addition,
pilots' salaries and related costs decreased 4.7% in fiscal 1995 as a
result of the implementation of a salary reduction plan negotiated with the
Air Line Pilots Association (ALPA). The reduced pay levels began in
October 1994 and will be phased back in over sixteen months. The plan
entailed an initial 16% pay reduction in October 1994. After each
subsequent four-month period, an additional 4% of the initial reduction
would be reinstated until February 1996, at which time the salaries will
revert to the levels prior to October 1, 1994. The Company has previously
estimated that the ALPA agreement would result in savings of approximately
$850,000 from October 1, 1994 through January 31, 1996 at present staffing
levels, of which $638,000 would be realized in fiscal 1995. The actual
savings were $318,000, which differed from the projection due to the
increased block hours flown due to the service schedule increase in the
fiscal 1995 fourth quarter.
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued
Results of Operations, continued
Fiscal 1995, continued
Crew travel expenses were reduced by 9.7%, or $137,000, in fiscal 1995
as a crew base was established in Augusta, Georgia, to decrease crew per
diem and lodging expenses. A Jacksonville, North Carolina crew base was
established in August, 1995 which will further reduce crew per diem and
lodging expense for fiscal 1996. Efficient utilization of pilots allowed
the Company to operate the increased capacity without adding new pilots,
thus pilot training costs consisted only of recurrent training. This
efficiency enabled the Company to reduce crew training costs by $160,000,
or 34.0%. Flight attendant salaries and related costs increased $77,000 or
7.3%, due to scheduled service increases, and hull insurance expense
increased 11.4%, or $182,000, due to rate increases.
Fuel and oil expense increased to $5,406,000 in fiscal 1995 from
$5,202,000 in fiscal 1994. The average cost per gallon of fuel into
plane decreased to 67.1(cent mark) in 1995 from 68.3(cent mark) in 1994,
reflecting the continued savings to the Company from the purchase of
fuel through a USAir subsidiary. As fuel expense is only 8.7% of
operating expenses, the Company does not believe it is cost effective to
attempt to manage fuel price risk, thus no derivatives are used for
hedging purposes. Total fuel consumption was 8.1 million gallons in
fiscal 1995 versus 7.7 million gallons in fiscal 1994. The increase
from year to year was a direct result of increased levels of operations.
Maintenance materials, repairs and overhead increased from $11,270,000
in fiscal 1994 to $11,619,000 in fiscal 1995. The higher costs were
attributable to an increase in the number of flight hours flown, however,
the cost of maintenance repairs and materials per ASM in fiscal 1995 was
3.8(cent mark) compared to 3.9(cent mark) per ASM in fiscal 1994.
Ground operations expense decreased from $9,026,000 in fiscal 1994 to
$7,391,000 in fiscal 1995. In July of 1993, USAir increased handling fees
that the Company pays for its passengers. At this time the Company was
paying $8.24 per passenger handled by USAir. In March of 1994, the Company
assumed responsibility for ground operations at Concourse D at the
Charlotte/Douglas International Airport in conjunction with the
implementation of cost cutting measures by USAir. The Company assumed the
responsibility for the salaries and benefits of the Concourse D employees,
and in return received $296,900 per month from USAir and a reduction in
passenger handling fees to $5.70 per passenger. In January of 1995, the
Company's reimbursement rate for operating Concourse D increased to
$340,000 per month. In March, 1995, the per-passenger handling fee charged
by USAir increased to $6.20 and increased to $6.50 in July, 1995. The
Company cannot predict the timing or extent of future passenger handling
fee adjustments. The reduction in ground operations expenses, while
primarily due to the Concourse D realignment, was also due to operational
efficiencies experienced at other stations operated by the Company.
Advertising, promotion and commissions expense increased from
$8,921,000 in fiscal 1994 to $9,007,000 in fiscal 1995, a 1.0% increase.
This increase is directly related to the passenger revenue increase, as
these expenses as a percentage of passenger revenue remained constant,
14.8% of revenue in fiscal 1995 and 14.9% of revenue in fiscal 1994.
General and administrative expense increased to $4,802,000 in fiscal
1995 as compared to $4,369,000 in fiscal 1994. This increase was primarily
attributable to passenger liability and property insurance increases of
$230,000, or 19%. Passenger liability rate increases more than offset the
reduction in passengers and the resultant decrease in RPMs.
Depreciation and amortization increased from $1,595,000 in fiscal 1994
to $1,845,000 in 1995, primarily as a result of increased depreciation on
rotable flight equipment reclassified from inventory in fiscal 1994.
Fiscal 1994
The financial results for fiscal 1994 reflected the difficult
environment facing the Company. The Company was able to limit the increase
in operating expenses to 1.1%, but operating revenue decreased by 1.7%.
The decrease in operating revenue was directly related to lower ticket
prices caused by increased fare competition and cancellation of flights due
to weather in the third quarter. The result was an operating loss of
$3,877,000 and a net loss of $4,756,000. These results compare to an
operating loss of $2,054,000 and net loss of $2,783,000 in fiscal 1993.
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued
Results of Operations, continued
Fiscal 1994, continued
For fiscal 1994 as in fiscal 1993, the depressed yield per revenue
passenger mile led to net operating losses. The yield per revenue
passenger showed a steady increase to 44.2(cent mark) in the three-month
period ended March 31, 1994, but at the end of that period, the yield
decreased due to USAir's fare reductions as part of its strategy to
avoid losing market share. The number of revenue passengers carried
decreased by 3% in fiscal 1994 as compared to fiscal 1993; however, the
number of revenue passenger miles increased by 8% over the same periods.
In fiscal 1994, the Company's passengers on average took longer flights
as evidenced by the 12% increase in the length of average passenger trip
over fiscal 1993. The number of revenue passengers carried was affected
by a reduction in opportunities to connect traffic over the Charlotte
hub and weather-related cancellations in January and February of 1994.
The number of available seat miles increased 1.8% in fiscal 1994 over
fiscal 1993, as a result primarily of changes in the Company's service
schedule. In the first three-month period, ASMs were in excess of 78
million, but that level was not obtained in the remaining three quarters of
fiscal 1994. During the last three quarters of fiscal 1994, the Company
reduced and terminated service to Columbus, Georgia and Panama City,
Florida, that represented two of the longer stage lengths in the Company's
system. For fiscal year 1994, the Company did not have full deployment of
its fleet due to capital improvements and overhauls.
Operating costs per ASM in fiscal 1994 declined slightly from
22.9(cent mark) to 22.8(cent mark), as compared to the prior fiscal
year. The increases in the expense categories of flight operations,
ground operations and general and administrative expenses were offset to
a degree by decreases in the categories of fuel, maintenance and
advertising, promotion and commissions. Flight operations expense had an
increase of approximately $375,000 due to the addition of fifteen pilots
for anticipated new flying. Those pilots were furloughed in the
three-month period ended June 30, 1994. Per- passenger fees charged by
USAir for passenger handling and reservations service increased on July
1, 1993, resulting in an aggregate cost increase of approximately
$188,000 per month. Those per-passenger fees were reduced on March 1,
1994 resulting in an aggregate cost reduction based on the number of
revenue passengers in that period of approximately $234,000 per month.
Other efficiencies created by the Company taking over the handling of
Concourse D in Charlotte also contributed to the cost reductions. A
40.5% increase in insurance expense affected both flight operations and
general and administrative expenses.
Fiscal 1993
Financial results for the year were disappointing. Total revenue
increased by 18.8%, but operating and nonoperating expenses increased by
24.8%. The larger increase in expenses resulted in a net loss of
$2,783,000. This net loss compares to net income of $6,355,000 in fiscal
1992. The net income in fiscal 1992 included an extraordinary gain of
$6,098,000 on debt restructuring accomplished through the Chapter 11
bankruptcy proceeding.
A significant factor in the net loss was the depressed yield per
revenue passenger mile experienced in fiscal 1993. In the first quarter of
fiscal 1993, the yield was depressed due to industrywide fare wars.
These fare wars caused the Company's yield to fall to 41(cent mark) for
the three-month period ended September 30, 1992 and resulted in an
operating loss of $2,216,000. During the period from October 1, 1992
through March 31, 1993, the Company experienced an increase in the yield
per revenue passenger mile and achieved an operating income of
$1,025,000. The improvement in yield per revenue passenger mile did not
continue into the three-month period ended June 30, 1993. In fact, the
yield fell to 43(cent mark) due to the effects of fare reductions and
length of passenger haul. Thus, the reduction of operating loss
experienced during the middle part of fiscal 1993 was reversed and the
operating loss of $2,783,000 resulted.
The number of revenue passengers carried was below management's
expectations and was reflected in the 48.4% load factor for the period.
The shortfall was caused by a reduction in opportunities to connect traffic
over the Charlotte hub.
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued
Results of Operations, continued
Fiscal 1993, continued
Costs per ASM decreased by 7.7%, from 24.8(cent mark) to 22.9(cent
mark), as compared to the prior fiscal year. This decrease is due to
the increase in ASMs of 35% while holding operating costs to an increase
of 24.8%, as compared to the prior fiscal year. The Company experienced
a lower increase in total operating costs compared to the increase in
ASMs due to longer stage lengths flown as reflected in the increase in
average passenger trip miles of 11% as well as certain cost containment
strategies. These strategies included a reduction in personnel employed
in the general and administrative and the maintenance areas.
Operating costs in fiscal 1993 were also affected by a write-down of
$684,000 in preoperating costs. Previously, these preoperating costs,
incurred incidental to the introduction to service of de Havilland Dash 8
aircraft in fiscal 1992, were deferred and amortized over periods not to
exceed five years, to reflect the benefit of the new equipment and the
incidental costs over future periods. As a result of the lower yields
experienced by the Company in the first quarter, the Company elected to
write off all of the preoperating costs, because the benefits to future
periods became doubtful. The Company's assessment was based on estimated
cash flows from operations of the related aircraft which were not
sufficient to assure recovery of the deferred costs. Management believes
that this adjustment was prudent based on actual and projected business
conditions. While this adjustment represented a one-time, noncash charge
that increased operating costs, it will not be repeated; however, it will
reduce amortization charges contained in future income statements.
Liquidity and Capital Resources
The Company's cash needs result from continuing operations including
capital expenditures necessary to the operation of its aircraft, and the
payment of creditors in accordance with the schedule set forth in its Plan
of Reorganization as modified by subsequent agreements. During fiscal 1995
the Company satisfied its cash requirements through internally generated
funds and borrowings under a revolving line of credit agreement with a bank
from July 1, 1994 through February 2, 1995 and under a revolving line of
credit agreement with an affiliate of an aircraft manufacturer from
February 3, 1995 through the end of the fiscal year, both secured by all of
the Company's accounts receivable. The Company also utilized short-term
loans from certain directors and officers secured by owned flight
equipment, and through the deferral of certain scheduled debt and lease
payments pursuant to note agreements to satisfy its cash needs.
In order to improve the financial condition of the Company in fiscal
1995, management implemented a cost reduction and debt restructuring plan
based upon the following components:
1. Reduction in aircraft lease payments.
2. Bankruptcy debt restructuring with aircraft manufacturers.
3. New line of credit facility.
4. Consolidation of maintenance and administrative facilities.
5. Concessionary labor agreement with the pilots. (See discussion
above under Fiscal 1995 Results of Operations.)
Restructuring
During the first quarter of fiscal 1995, the Company began
negotiations to reduce its lease payments for its Shorts and Jetstream 31
aircraft. The Company entered into revised aircraft lease agreements with
Shorts, effective October 1, 1994, for the Company's nine Shorts 360
aircraft, and with JACO, effective September 1, 1994, for the Company's
twelve Jetstream 31 aircraft. These agreements provided for reductions in
lease payments aggregating approximately $192,000 per month. 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. The current leases expire in calendar
years 1997, 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
leases for the additional aircraft will expire in December 2001.
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued
Liquidity and Capital Resources, continued
Restructuring, continued
During fiscal 1994 the Company did not make lease payments totaling
$585,000 to Mellon Financial Services Corporation #3 ("Mellon") for the
Dash 8 aircraft operated by the Company. The failure to make the aircraft
lease payments to Mellon in 1994 resulted in the cancellation of the
related lease agreements, however, the Company operated the aircraft under
interim leases with Mellon through November 1994. In November, 1994, CIT
Leasing Corporation ("CIT"), acquired the four Dash 8 aircraft from Mellon.
The Company subsequently signed new lease agreements with CIT which expire
in 2007, resulting in an annual reduction of approximately $516,000 in
aircraft rental payments. As a result, during the second quarter of fiscal
1995, the Company reversed the $585,000 of accrued rental payments
previously recorded as due to Mellon as a reduction of flight operations
expense.
Subsequent to June 30, 1995, the Company and Jet Acceptance
Corporation ("JACO") restructured the entire remaining amount due to JACO
under the bankruptcy plan, including the August 31, 1995 installment of
$327,000. The amount due was approximately $1,232,000, net of $402,000
discount at 15% as of June 30, 1995. Under this agreement, the Company
will issue a promissory note to JACO in the principal amount of $676,000,
payable in forty-eight equal monthly installments of $17,727, consisting of
principal and interest, beginning on January 30, 1996. Interest at 10% per
annum will accrue beginning September 1, 1995. Additionally, the remaining
balance due under the bankruptcy plan subsequent to the issuance of the
above promissory note will be satisfied with the issuance of 325,000 shares
of the Company's common stock to JACO. The stock must be held by JACO,
with certain exceptions, for a minimum of one year from issue date before
it can be transferred.
At June 30, 1995, $378,500 remained due to Shorts under a note
agreement related to previous rent and bankruptcy debt obligations. In
September, 1995 the Company reached an agreement with Shorts to restructure
the payment of the remaining two installments of this note payable and the
payment of the remaining two installments of the bankruptcy debt due on
August 31, 1995 and 1996. Under this agreement, the Company will issue a
promissory note to Shorts in the principal amount of $892,067, payable in
forty-eight equal monthly installments of $22,625, consisting of principal
and interest, beginning on October 1, 1995. Interest at 10% per annum will
accrue beginning October 1, 1995. Subsequent to June 30, 1995 the Company
deferred a lease payment due Shorts amounting to $306,000. The Company and
Shorts have agreed to satisfy this obligation with proceeds resulting from
the anticipated sale of 125,000 shares of the Company's common stock at
market prices. Proceeds in excess of the $306,000 liability will be
credited against future lease payments and any deficit will be satisfied in
cash by the Company after the completion of the issuance and sale of the
stock.
On August 31, 1995, the Company made the bankruptcy payment of
$166,000 due to the unsecured creditors and the bankruptcy payments
totalling $70,000 to certain aircraft parts suppliers. In addition, the
Company made the scheduled bankruptcy payments due August 30, 1995 to
certain taxing authorities totalling $92,000. After the bankruptcy
installments due in August, 1995, excluding the restructured payments
above, the Company has one payment to taxing authorities due in June, 1996
totalling $91,000 and payments to unsecured creditors of $166,000 due
annually each August until 2000. The Company intends to make these
payments when due.
During fiscal 1994 and through October 31, 1994, the Company had
available a revolving line of credit agreement (the "Line") with a bank up
to a maximum of $1,660,000 bearing interest at the prime rate. The Line
was guaranteed by one of the Company's creditors via a loan purchase
agreement with the bank and a $1,660,000 standby letter of credit.
Substantially all receivables collateralized the Line and the underlying
guarantee. Although the Line expired on October 31, 1994, the bank granted
monthly extensions through January 31, 1995. In February, 1995, the
Company obtained a line of credit (the "Line of Credit") in an amount not
to exceed $2,500,000 from JSX Capital Corporation ("JSX"). JSX is an
affiliate of JACO and British Aerospace Holdings, Inc., the company that
had previously collateralized the Company's bank Line through a loan
purchase agreement. The Line of Credit permits the Company to borrow up to
50% of a borrowing base, which consists of the Company's transportation and
nontransportation charges to Airlines Clearing House, Inc. ("ACH") or such
greater amount as JSX shall determine, but in no event more than
$2,500,000. The Line of Credit is secured by all of the Company's accounts
receivable, bears interest at prime + 2% and terminates on December 31,
1995, but may be extended by JSX for successive one year periods.
Subsequent to June 30, 1995, JSX has committed to extend the Line of Credit
through December 31, 1996.
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued
Liquidity and Capital Resources, continued
Restructuring, continued
The relocation and consolidation, effective July 11, 1994, of
maintenance, maintenance support and inventory into the 15,000 square foot
hangar facility has reduced maintenance costs through increased
productivity and efficiency in the maintenance function. In addition, the
flight operations, dispatch, crew scheduling, ground service maintenance,
catering supply inventory and marketing functions were consolidated into a
10,000 square foot facility in the first quarter of fiscal 1996. The
effect of this will reduce expense approximately $200,000 per year and to
increase Company revenue and productivity in the flight operations
department by coordinating flight operations and marketing functions.
Other Financing
On June 30, 1995, the Company entered into a sale and leaseback
transaction with Adallipa Partners ("the Partnership"), a North Carolina
partnership, whereby the Company sold and simultaneously leased back
certain aircraft engines. The Partnership was formed June 30, 1995 by
certain members of the Company's Board of Directors for the purpose of
entering into the sale and leaseback transaction. The Company received
$1,000,000 in July, 1995, in consideration for the engines. To induce the
Partnership to enter into this transaction, the Company issued to the
Partnership a warrant to purchase 250,000 shares of the Company's common
stock at an issue price equal to the fair market value of the Company's
common stock on June 30, 1995. The warrant carries a three-year term for
exercise. Under the terms of the operating lease, the Company will pay
approximately $30,000 per month rental expense during the three-year lease
term. The lease may be renewed at the end of the original term at a
reduced lease rate.
During fiscal 1995, the Company obtained several short-term loans from
certain directors and officers. Amounts borrowed under these loans ranged
from $30,000 to $400,000, and earned interest at rates of seven and ten
percent. The aggregate maximum and average amounts outstanding under these
loans were $600,000 and $157,000 respectively. In connection with these
loans, the Company issued to the lending parties options or warrants to
purchase 78,425 shares of the Company's common stock. Of the options
issued, 20,675 remain subject to shareholder approval due to share
availability limitations.
Capital Expenditures
Capital expenditures consist of major component overhauls and fixed
asset replacement. Capital expenditures in fiscal 1995 were $5,437,000 as
compared to $4,888,000 in fiscal 1994. The increase is primarily due to
increased expenditures for engine overhauls on the Dash 8 aircraft. The
Company projects fiscal 1996 capital expenditures to be approximately $5.0
million. The major components of the 1996 capital budget are engine
overhauls ($3,700,000), installation of Traffic Collision Avoidance System
(TCAS) equipment on the Jetstream 31 aircraft ($400,000), and airframe and
landing gear overhauls on the Shorts aircraft ($600,000).
Operating Cash Flow
The Company receives payments for airline tickets under interline
agreements through the Airlines Clearing House one month in arrears.
Historically, this payment in arrears has caused significant cash flow
problems in the last half of each month. The Company has a line of credit
with JSX to provide a steady cash flow between ACH settlements. The
Company believes that the restructuring stated above and improved revenue
environment will provide sufficient cash flows to provide for continuing
operations, capital expenditures and scheduled debt and bankruptcy payments
absent adverse changes in current market conditions. If operating cash
flows and the Line of Credit are insufficient to meet obligations, the
Company has these financing sources available: issuance of stock, short-
term loans from officers and directors, extending terms with trade
creditors and restructuring aircraft lease payments.
Accounts receivable increased to $5,517,000 in fiscal 1995 from
$5,245,000 in fiscal 1994. The increase is attributable to greater
passenger revenue in 1995 resulting from an increase in yield per revenue
passenger mile, plus an increase in subcontracted handling fees billed to
USAir.
17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued
Liquidity and Capital Resources, continued
Operating Cash Flow, continued
Inventories decreased from $2,192,000 in fiscal 1994 to $1,785,000 in
fiscal 1995, primarily due to the reclassification of certain parts
previously recorded as inventory to property and equipment in fiscal 1995.
Prepaid expenses decreased from $3,154,000 in fiscal 1994 to
$1,354,000 in fiscal 1995. This decrease was the result of a change in the
method of paying the hull and passenger liability insurance. In fiscal
1994, the Company financed the insurance premium through a finance company
and recorded the related short-term notes payable and prepaid insurance
upon signing the note at the beginning of the insurance policy term (March
1, 1994). In fiscal 1995, no such short-term note was signed, and the
Company is paying the insurance premium directly to the insurance broker on
an installment basis. The difference between amounts recorded as expense
and premium installments paid is recorded as prepaid expense in fiscal
1995. In conjunction with this, notes payable and current maturities of
long-term debt decreased from $3,396,000 in fiscal 1994 to $1,575,000 in
fiscal 1995.
Accounts payable increased to $4,058,000 in fiscal 1995 as compared to
$3,011,000 in fiscal 1994 due to the extension of terms with trade
creditors and the timing of payments. Accrued expenses decreased from
$5,170,000 in fiscal 1994 to $4,288,000 in fiscal 1995 as aircraft lease
payments were current in fiscal 1995.
Deferred credits increased $697,000 as a result of lease expense
recorded in excess of lease payments on the Company's JACO leases (see Note
5 to the financial statements).
Inflation
Inflation has not had a material impact on the Company's operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is submitted beginning on Page
F-4 of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
18
PART III
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Items 10 through 13 are incorporated by reference to the Company's
definitive proxy statement as filed with the Securities and Exchange
Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. & 2. The financial statements and schedule required by this
Item can be found as indexed on Page F-1.
3. Exhibits shown by index beginning on page E-1.
(b) Reports on Form 8-K.
None.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
DATE: October 12, 1995 BY: /s/ Kenneth W. Gann
Kenneth W. Gann, President and
Chief Executive Officer
Pursuant to the requirement of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ Kenneth W. Gann Chairman of the Board of Directors, October 12, 1995
Kenneth W. Gann Chief Executive Officer, President
(Principal Executive Officer)
/s/ Eric W. Montgomery Vice President of Finance;
October 12, 1995
Eric W. Montgomery (Principal Financial Officer,
Principal Accounting Officer)
/s/ John A. Adams Director October 12, 1995
John A. Adams
/s/ K. Ray Allen Director October 12, 1995
K. Ray Allen
/s/ Gordon Linkon Director October 12, 1995
K. Ray Allen
/s/ Dean E. Painter, Jr. Director October 12, 1995
Dean E. Painter, Jr.
</TABLE>
20
CCAIR, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
PAGE NO.
Report of Arthur Andersen LLP - Independent Public Accountants F-2
Report of Coopers & Lybrand - Independent Accountants F-3
Financial Statements:
Balance Sheets as of June 30, 1995 and 1994 F-4
Statements of Operations for the Years ended June 30,
1995, 1994 and 1993 F-5
Statements of Changes in Shareholders' Equity for the Years
ended June 30, 1995, 1994 and 1993 F-6
Statements of Cash Flows for the Years ended
June 30, 1995, 1994 and 1993 F-7
Notes to Financial Statements F-8 - F-17
Financial Statement Schedule:
II Valuation and Qualifying Accounts for the Years ended
June 30, 1995, 1994 and 1993 S-1
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted because they are not applicable, not required or the information
presented has been furnished elsewhere.
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CCAIR, Inc.:
We have audited the accompanying balance sheets of CCAIR,
Inc. (a Delaware corporation) as of June 30, 1995 and 1994, and
the related statements of operations and changes in shareholders'
equity and cash flows for the years then ended. 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 financial statements referred to above
present fairly, in all material respects, the financial position
of CCAIR, Inc. as of June 30, 1995 and 1994, and the results of
its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule
listed in the index of financial statements 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.
Charlotte, North Carolina, Arthur Andersen LLP
October 12, 1995
F-2
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of CCAIR, Inc.:
We have audited the balance sheet of CCAIR, Inc. as of June
30, 1993 and the related statements of operations, shareholders'
equity and cash flows for the year ended June 30, 1993. These
financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and
financial statement schedules based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
As discussed in Note 2 to the financial statements, on July
5, 1990, the Company filed a voluntary petition for protection
under Chapter 11 of the United States Bankruptcy Code. From July
5, 1990 until September 3, 1991, the Company operated its
business as a Debtor-in-Possession. In June 1991, the Company
filed a Revised and Amended Plan of Reorganization (the "Plan")
with the United States Bankruptcy Court (the "Court"). The Plan
was voted upon by the Company's creditors and was confirmed by
the Court with an effective date of September 3, 1991.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of CCAIR, Inc. as of June 30, 1993, and the results of its
operations and its cash flows for the year ended June 30, 1993 in
conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedules
referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included
therein.
Charlotte, North Carolina,
October 8, 1993 COOPERS & LYBRAND
F-3
CCAIR, INC.
BALANCE SHEETS
June 30, 1995 and 1994
_________________________
<TABLE>
<CAPTION>
ASSETS
1995 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 56,995 $ 651,020
Receivables, principally traffic,
less allowance for doubtful
receivables of $86,800 in 1995
and $186,800 in 1994 5,517,072 5,244,782
Related party receivable (Note 7) 1,000,000 ----
Inventories, less allowance for
obsolescence of $466,000 in 1995
and 1994 1,784,885 2,192,219
Prepaid expenses 1,354,130 3,154,433
Total current assets: 9,713,082 11,242,454
Property and equipment, at cost:
Flight equipment and leasehold improvements 20,380,436 18,842,203
Ground and other property and equipment 4,383,803 3,919,105
24,764,239 22,761,308
Less accumulated depreciation
and amortization (12,358,632) ( 9,423,875)
12,405,607 13,337,433
Other assets 34,542 49,075
Total assets $22,153,231 $24,628,962
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities
of long-term debt $ 1,575,047 $ 3,395,830
Current obligations under capital leases 350,377 360,196
Accounts payable 4,058,097 3,011,203
Accrued expenses 4,288,320 5,169,610
Total current liabilities 10,271,841 11,936,839
Long-term debt, less current maturities 1,863,371 2,570,438
Capital lease obligations, less current
obligations 3,012,217 3,331,314
Deferred credits, net of amortization of
$1,380,735 in 1995 and $1,200,513 in 1994 1,810,486 1,293,920
Noncurrent rent obligations
and other liabilities 162,611 124,780
Total liabilities 17,120,526 19,257,291
Commitments and contingencies (Notes 5, 6, and 10)
Shareholders' equity:
Common stock, $.01 par value, 10,000,000
shares authorized, 7,400,695 and 7,381,195
issued and outstanding at June 30, 1995
and 1994, respectively 74,007 73,812
Additional paid-in capital 17,020,148 16,997,186
Accumulated deficit (12,061,450) (11,699,327)
Total shareholders' equity 5,032,705 5,371,671
Total liabilities and
shareholders' equity $22,153,231 $24,628,962
</TABLE>
The accompanying notes to financial statements are an integral part of
these balance sheets.
F-4
CCAIR, INC.
STATEMENTS OF OPERATIONS
For the Years Ended June 30, 1995, 1994 and 1993
________________________
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Operating revenue:
Passenger $60,804,001 $60,062,853 $61,296,168
Public service 695,047 814,192 723,618
Other, principally freight
and charter 1,539,652 1,215,382 1,159,008
63,038,700 62,092,427 63,178,794
Operating expenses:
Flight operations 22,415,288 25,586,446 24,131,102
Fuel and oil 5,406,055 5,202,135 5,858,661
Maintenance materials and repairs 11,619,432 11,269,951 11,447,780
Ground operations 7,390,643 9,025,532 8,100,035
Advertising, promotion and
commissions 9,006,992 8,920,815 9,744,902
General and administrative 4,802,454 4,369,407 3,821,008
Depreciation and amortization 1,844,683 1,594,812 1,445,838
Write-off of preoperating
costs (Note 1) ---- ---- 684,067
62,485,547 65,969,098 65,233,393
Operating income (loss) 553,153 (3,876,671) (2,054,599)
Interest expense ( 920,528) ( 819,519) ( 789,139)
Other income (expense), net 5,252 ( 59,579) 60,305
Net loss $( 362,123) $(4,755,769) $(2,783,433)
Loss per common share $( .05) $( .68) $( .43)
Weighted average common and common
equivalent shares outstanding 7,381,729 7,005,957 6,546,927
</TABLE>
The accompanying notes to financial statements are an integral part of
these financial statements.
F-5
CCAIR, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the Years Ended June 30, 1995, 1994 and 1993
_________________________
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
Balances, June 30, 1992 6,496,195 64,962 13,775,404 ( 4,160,125) 9,680,241
Net loss ( 2,783,433) (2,783,433)
Exercise of options 168,000 1,680 421,820 423,500
Balances, June 30, 1993 6,664,195 $66,642 $14,197,224 $( 6,943,558) $7,320,308
Net loss ( 4,755,769) (4,755,769)
Issuance of stock to vendors 650,000 6,500 2,526,507 2,533,007
Exercise of options 67,000 670 273,455 274,125
Balances, June 30, 1994 7,381,195 $73,812 $16,997,186 $(11,699,327) $5,371,671
Net loss ( 362,123) ( 362,123)
Exercise of options 19,500 195 22,962 23,157
Balances, June 30, 1995 7,400,695 $74,007 $17,020,148 $(12,061,450) $5,032,705
</TABLE>
The accompanying notes to financial statements are an integral part of
these financial statements.
F-6
CCAIR, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended June 30, 1995, 1994 and 1993
________________________
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $( 362,123) $(4,755,769) $(2,783,433)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Note discount amortization 328,238 376,825 393,793
Depreciation and amortization 5,388,356 4,792,962 4,518,488
Lease expense in excess of payments 696,788 ---- ----
Write-off of preoperating costs ---- ---- 684,067
Loss on disposal of assets 36,902 58,310 59,356
Changes in certain assets
and liabilities:
Receivables, net ( 272,290) (1,886,218) 2,117,503
Inventories, net 407,334 89,941 ( 370,777)
Accounts payable 1,046,894 1,569,749 138,139
Accrued expenses ( 562,790) 3,332,579 46,767
Other note payable ( 801,000) 801,000 ----
Noncurrent rent obligations ( 32,515) ( 32,579) ( 32,579)
Other changes, net 1,627,431 (1,426,064) ( 403,805)
Net cash provided by
operating activities 7,501,225 2,920,736 4,367,519
Cash flows from investing activities:
Capital expenditures (5,437,286) (4,887,696) (5,197,784)
Proceeds from sale of assets 44,539 23,255 34,001
Net cash used in
investing activities (5,392,747) (4,864,441) (5,163,783)
Cash flows from financing activities:
Issuance of common stock 23,157 274,125 423,500
Issuance of notes and long-term debt 2,857,211 3,693,351 3,504,994
Reductions of notes and long-term debt,
including payments under capital
lease obligations (5,582,871) (4,117,908) (3,304,417)
Net cash provided (used)
by financing activities (2,702,503) ( 150,432) 624,077
Net decrease in cash ( 594,025) (2,094,137) ( 172,187)
Cash, beginning of period 651,020 2,745,157 2,917,344
Cash, end of period $ 56,995 $ 651,020 $ 2,745,157
</TABLE>
The accompanying notes to financial statements are an integral part of
these financial statements.
F-7
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS
____________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied
in the preparation of these financial statements follows:
Business Description and Basis of Presentation - CCAIR,
Inc. is an independent regional airline providing scheduled
passenger service as USAir Express in the southeast United
States. CCAIR, Inc. operates within one industry (air
transportation) and, accordingly, no segment information is
provided.
Revenue Recognition - Passenger revenue is recognized when
service is rendered. Public service revenue represents Federal
subsidies received for providing Essential Air Service to
certain communities which produce insufficient air traffic to
profitably support such service. Rates for such transportation
services are determined under the Federal Aviation Act by the
Department of Transportation. Revenue is recognized when
service is rendered.
Frequent Traveler Awards - The Company does not sponsor its own
frequent traveler program. It does honor the USAir program
but limits the available program seats. The Company's share of
future travel awards to be incurred, if any, is not
determinable but incremental costs of providing such awards
are believed by management to be immaterial.
Cash and Cash Equivalents - Cash equivalents include all
investments with an original maturity of three months or
less. Cash and cash equivalents are principally held by one
bank.
Receivables - The Company's air traffic receivables are settled
through the Airlines Clearing House and collected monthly, one
month in arrears.
Inventories - Inventories consist principally of expendable
spare parts and operating supplies and are valued at the lower
of cost or market, determined on an average cost basis.
Expendable parts are recorded as inventory when purchased and
charged to operations as used. At June 30, 1995, inventories
included approximately $380,327 of parts held for resale,
net of a $158,000 reserve for obsolescence.
During fiscal 1995, the Company identified approximately
$1,000,000 of flight equipment that had previously been
included in inventories for financial statement presentation
purposes. This amount has been included in property and
equipment in the accompanying June 30, 1995 balance sheet.
Accordingly, an amount representing this flight equipment
has been reclassified in the June 30, 1994 balance sheet.
Prepaid Expenses - Prepaid expenses include prepaid
insurance and beginning in fiscal year 1994, prepaid
maintenance.
Depreciation and Amortization - Property and equipment are
depreciated to estimated residual values on the straight-line
method over their economic useful service lives, ranging as
follows:
<TABLE>
<CAPTION>
<S> <C>
Flight equipment, excluding spare engines and major overhauls 10 years
Ground and other property and equipment 3-10 years
</TABLE>
F-8
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, continued
____________________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
Depreciation and Amortization, continued
Spare engines are depreciated based on actual hours of usage,
with a total estimated flying time of 60,000 hours. Major
overhauls of flight equipment are capitalized and depreciated
over the period to the next overhaul. See "Maintenance"
section of Note 1 for additional discussion.
Leasehold improvements and flight equipment held under
capital leases are amortized using the straight-line method
over the estimated useful service lives of the related assets,
not exceeding the lease term. Cost and accumulated
depreciation of property retired or otherwise disposed of are
removed from the accounts, and the related gain or loss is
included in other income.
Maintenance - Maintenance and repairs are expensed as incurred
except for major overhauls. The costs of major overhauls are
capitalized when incurred and amortized over the period to the
next overhaul (generally 1-4 years). Beginning in fiscal year
1994, the Company entered into a maintenance agreement under
which the Company began prepaying for certain engine
overhauls based on hours flown. At the time of overhaul, the
Company transfers related prepaid amounts to property and
equipment, and begins amortization over the period to the next
overhaul (generally 1-4 years). At June 30, 1995 and
1994, $264,000 and $496,000, respectively, is included in
prepaid expense on the accompanying balance sheet related to
this maintenance agreement.
Preoperating and Route Development Costs - Expenditures for
preoperating and training costs incidental to new aircraft
equipment related to route extensions were deferred and
amortized over periods not to exceed five years, to reflect
the benefit of such costs to future periods as permitted
by the Airline Audit Guide. The Company evaluates impairment of
these costs based on anticipated operating cash flows generated
from related aircraft. As such, in 1993, the Company
recorded a one-time charge of $684,000 to eliminate previously
deferred preoperating costs from its balance sheet because the
benefits to future periods became doubtful. The Company's
assessment was based on estimated cash flows from operations
of the related aircraft which were not sufficient to assure
recovery of the deferred costs.
Deferred Credits - As incentives for the Company to
integrate new aircraft into its fleet, certain aircraft
manufacturers have provided the Company with cash, spare
parts and other credits. These deferred credits are amortized
on a straight-line basis over the terms of the related
operating leases as reductions in rent expense. In addition,
beginning in fiscal 1995, deferred credits also include lease
expense in excess of lease payments.
Income Taxes - The Company accounts for income taxes
according to the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes,"
("SFAS 109") which requires recognition of deferred tax
liabilities and assets for the expected future tax
consequences of events that have been included in the
financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect for
the year in which the differences are expected to reverse (see
Note 8).
Fair Value of Financial Instruments - The carrying amount
of the Company's financial instruments approximates fair
value at June 30, 1995.
Income (loss) per Common Share - Income (loss) per common share
is based on the weighted average number of common shares
outstanding after consideration of the effect of common stock
equivalents.
Reclassifications - Certain amounts included in the prior
years' financial statements have been reclassified to
conform with 1995 presentation.
2. PETITION FOR RELIEF UNDER CHAPTER 11
The Filing - As a result of cash flow difficulties and the need for
protection based upon its defaults under certain leasing and financing
arrangements, the Company filed for Chapter 11 bankruptcy on July 5,
1990.
F-9
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, continued
____________________
2. PETITION FOR RELIEF UNDER CHAPTER 11, continued
The Plan of Reorganization (the "Plan")
Under Chapter 11, certain claims against the Debtor in
existence prior to the filing of the petition for relief under
the Federal Bankruptcy laws are stayed while the Debtor
continues business operations as Debtor-in-Possession.
Additional claims arose subsequent to the filing date through
September 3, 1991, the Plan's effective date. Such claims
resulted from rejection of executory contracts, including
leases, and from the determination by the Bankruptcy Court
(or agreed to by the parties-in-interest) of allowed claims
for contingencies and other disputed amounts. Claims secured
against the Debtor's assets ("Secured Claims") also are stayed,
although holders of such claims have the right to seek relief
from the stay. Secured claims are collateralized primarily
by liens on the Company's property and equipment.
The Company received approval from the Bankruptcy Court (the
"Court") to pay or otherwise honor certain of its prepetition
obligations, including employee wages, insurance, and payables
to USAir in the normal course of business. The Company
determined that there was insufficient collateral to cover the
interest portion of scheduled payments on its prepetition debt
obligations and discontinued accruing interest on
these obligations. Contractual interest on those prepetition
obligations was approximately $847,000, which was $739,000
in excess of reported interest expense in 1991. Chapter 11
provides for reorganization of the Company's debt and equity
structure and allows the business to continue operations.
Subsequent to filing Chapter 11, the Company engaged in
negotiations with its creditors and other parties-in-interest
toward achieving a plan of reorganization and a settlement
of outstanding claims against the Company. As a result of
these negotiations, the Company filed a Plan of Reorganization
on April 10, 1991, a Revised Plan of Reorganization on May 3,
1991 and a Revised and Amended Plan of Reorganization on
June 12, 1991 (the "Plan") with the Court. On July 19, 1991,
the creditors and the Court confirmed the Plan effective
September 3, 1991.
In the process of developing the Plan intended to return the
Company to profitable operations, management evaluated its
aircraft fleet, route system, and relationship with USAir,
Inc. Under the Bankruptcy Code, the Company elected to assume
or reject certain aircraft leases, real and personal property
leases, service contracts and other executory prepetition
contracts subject to the Court's review. During 1991, the
Company returned three (3) owned aircraft and twelve (12)
leased aircraft, although subsequently the Company accepted and
took back four (4) of the leased aircraft.
Distribution to Creditors Under the Plan - The provisions of
the Plan divide claims and interests into fourteen (14)
classes and contain various repayment provisions and
compromises of allowed claims. The principal Plan provisions
vary depending on the class of claims and are as follows:
1. Payment of ten (10) to twenty (20) percent of allowed
claims at the time of the Plan's effective date, with
the remainder of such claims paid in equal annual
installments over up to eight (8) years;
2. Return of aircraft, parts or equipment in satisfaction of
allowed claims or in accordance with settlement
agreements;
3. Release of certain liens on aircraft parts and equipment;
4. Issuance of common shares in payment of allowed claims;
5. Compromise of claims for prepetition and postpetition
accrued aircraft lease payments; assumption of certain
aircraft leases, payment of accrued prepetition and
postpetition lease payments on rejected aircraft leases
and settlement payments at the effective date as well as
in future equal annual installments over up to eight (8)
years (see Note 6).
F-10
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, continued
____________________
3. USAir AGREEMENT
The Company and USAir Group, Inc. ("USAir"), an unaffiliated
company, have entered into an agreement (the "Agreement")
expiring on October 31, 1998, whereby the Company provides
commuter air service on air routes of USAir. The majority of
passenger revenue is generated from the Agreement through
joint passenger fares and division of revenue with USAir.
The Company receives use of various USAir service marks
including use of the designator code and USAir logo and color
patterns. Under the contract, the Company is obligated
to pay USAir for reservation services and various ground
support services (exclusive of aircraft fueling).
The Company is required to maintain certain flight completion
factors and to meet other conditions as specified in the
Agreement. Should an event of default occur, the Agreement
provides that USAir has the right to terminate the Agreement
upon ten (10) days' written notice. The Agreement also
provides that it may be terminated by either party upon 180
days' notice.
A summary of other transactions and year-end account balances
with USAir and subsidiaries is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Service fees expense $ 9,736,995 $10,503,375 $10,019,200
Passenger revenue receivable 4,878,676 4,426,969 2,836,300
Amounts payable 1,660,404 1,564,510 1,478,600
</TABLE>
Due to the Company's revenue-sharing arrangement and
operational ties with USAir, the Company is, to an extent,
currently economically dependent upon USAir. For the six
(6) months ended June 30, 1995 and the years ended December
31, 1994 and 1993, USAir reported net losses applicable to
common stockholders of $26 million, $763 million and $466.8
million, respectively. The Company does not believe the
current situation with USAir will have a material adverse
impact on the Company's financial position or results of
operations.
On October 2, 1995, USAir announced that it had engaged in
preliminary talks with American Airlines and United Airlines
concerning "possible strategic relationships, up to and
including acquisition" of USAir. United Airlines
subsequently announced that they expect to spend a month
"evaluating the feasibility, economics and structure" of a
proposal. While such talks are preliminary, the Company
believes that either of the possible combinations would have
a strong presence in the Charlotte market and the Company is
favorably positioned to provide feeder service to a combined
airline.
4. ACCRUED EXPENSES
Accrued expenses by major classification are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Salaries and wages, vacation pay
and related payroll taxes $1,974,675 $1,830,931
Accrued ground and passenger charges 1,660,065 1,564,510
Accrued property and excise taxes 400,176 413,888
Accrued leases 240,621 1,279,252
Other accrued expenses 12,783 81,029
$4,288,320 $5,169,610
</TABLE>
5. LEASE TRANSACTIONS
The Company operates using significant amounts of leased
property, including aircraft, equipment and facilities. Leases
generally are on a long-term, net rent basis whereby taxes,
insurance and maintenance are paid by the Company. Rental
expenses incurred under all operating leases totaled
approximately $10,934,000, $13,800,000 and $13,508,000 for the
years ended June 30, 1995, 1994 and 1993, respectively. Monthly
rentals under one operating lease are required to be paid in
full each month at the time receivables are collected from the
Airlines Clearing House. Flight and ground equipment with
a capitalized cost of approximately $4,646,000 is included
in property and equipment, less accumulated amortization of
$2,147,000 and $1,677,000, respectively, at June 30, 1995 and
1994.
F-11
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, continued
____________________
5. LEASE TRANSACTIONS, continued
The Company leases aircraft and certain equipment from three
different lessors. In fiscal 1994, the Company failed to
meet certain lease payment obligations totaling $585,000 under
aircraft lease agreements with Mellon Financial Services
Corporation #3 ("Mellon"), resulting in cancellation of the
related agreements. The Company operated the aircraft
under interim leases with Mellon through November, 1994. In
November, 1994, CIT Leasing Corporation ("CIT"), acquired the
four Dash 8 aircraft from Mellon. The Company subsequently
signed new lease agreements with CIT, which expire in June,
2007, resulting in an annual reduction of approximately $516,000
in aircraft rental payments. As a result, during the second
quarter of fiscal 1995, the Company reversed the $585,000 of
accrued rental payments previously due to Mellon as a
reduction of flight operations expense.
In 1994, the Company also failed to meet certain payment
obligations totaling $1,201,500 under aircraft lease agreements
with Short Brothers (USA), Inc. ("Shorts"). In order to
partially satisfy this obligation, the Company entered into a
$801,000 note payable to Shorts at 7% per annum, due in four
monthly installments beginning June 30, 1994. The Company
repaid this entire note during fiscal 1995. On March 21, 1995,
the Company entered into a $573,000 note agreement with Shorts
to repay the remaining balance due of $318,500 ($400,500 less
an $82,000 credit received from Shorts related to
previous overpayments of lease payments), along with a
previously missed bankruptcy payment of $254,000, originally
due to Shorts on August 31, 1994. At June 30, 1995,
$378,500 remained due to Shorts under this note agreement
(see Note 6). Subsequent to June 30, 1995, the Company did not
make a lease payment due Shorts amounting to $306,000. The
Company and Shorts have agreed to satisfy this liability
with proceeds resulting from the anticipated sale of
approximately 125,000 shares of the Company's common stock at
market prices.
The Company entered into a revised aircraft lease agreement with
Shorts, effective October 1, 1994, for the Company's nine
Shorts 360 aircraft. This revised agreement provided for
reductions in lease payments aggregating approximately
$94,000 per month for the remainder of the lease term. In
addition, the Company entered into a revised aircraft
agreement with Jet Acceptance Corporation ("JACO"), effective
September 1, 1994, for the Company's twelve Jetstream 31
aircraft. This revised agreement provided for reductions
in lease payments aggregating approximately $98,000 per
month through December 31, 1995. In September, 1995,
JACO agreed to extend the lease reductions for the remainder
of the lease term. The JACO lease reductions would cease in
the event of a change in control of the Company.
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 1997, 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 June 30, 1995, the Company has
recorded a deferred credit of approximately $697,000
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 June 30, 1995. This amount, along with
additional amounts accumulated through September 30, 1995 will
reduce lease expense over the remaining term of the leases.
Future minimum lease payments required under capital and
noncancelable operating leases with terms of greater than one
year, under the new lease agreements, are as follows:
<TABLE>
<CAPTION>
Capital Operating
Years Ended June 30: Leases Leases
<S> <C> <C>
1996 $ 564,000 $ 10,827,000
1997 564,000 11,394,000
1998 437,000 11,008,000
1999 342,000 9,546,000
2000 342,000 9,165,000
Thereafter 2,160,000 31,642,000
Total lease payments 4,409,000 $ 83,582,000
Less amounts representing interest 1,047,000
3,362,000
Less current obligations 350,000
$3,012,000
F-12
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, continued
____________________
6. LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt and notes payable as of June 30, are as follows:
</TABLE>
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Notes payable, noninterest bearing, aircraft manufacturers
and their affiliates in annual installments through
2000, less $445,161 and $677,647 discount at 15% at
June 30, 1995 and 1994, respectively $1,698,971 $1,970,511
Notes payable, noninterest bearing, parts suppliers in
annual installments through 1996, less $1,527 and $12,016
discount at 15% at June 30, 1995 and 1994, respectively 68,708 128,455
Notes payable, taxing authorities in annual installments
through 1996, with 8.5% interest 163,276 370,347
Notes payable, noninterest bearing, unsecured vendors in
annual installments through 2000, less $203,986 and $289,249
discount at 15% at June 30, 1995 and 1994, respectively 626,018 706,755
Notes payable, due in monthly installments of $392,215
through December 1, 1994, including interest of 4% ---- 1,943,546
Note payable to officer, principal and interest at 10%
due on July 31, 1995 100,000 ----
Other notes payable 781,445 846,654
3,438,418 5,966,268
Less current maturities 1,575,047 3,395,830
$1,863,371 $2,570,438
</TABLE>
Principal maturities, net of discounts, of long-term
debt and notes payable as of June 30, 1995 are $1,575,047 in
1996; $592,574 in 1997; $369,490 in 1998; $419,212 in 1999 and
$482,095 in 2000.
On August 31, 1994, the Company did not make a bankruptcy
plan annual installment payment of $254,000 to Shorts. On
March 21, 1995 the Company entered into a $573,000 note
agreement with Shorts, whereby the Company agreed to repay the
$254,000, along with $318,500 in missed lease payments (see
Note 5), in three equal installments due June 1, July 1, and
August 1, 1995, along with interest at 10%. At June 30,
1995, $378,500 remained due to Shorts under this note
agreement. In September, 1995, the Company reached an
agreement with Shorts to restructure the payment of this
outstanding note payable and the payment of the entire
remaining amount due to Shorts under the bankruptcy plan
(approximately $465,827, net of $43,473 discount at 15% as of
June 30, 1995). Under this agreement, in consideration of
the past due note payable as well as the remaining bankruptcy
payments, the Company will issue a promissory note to Shorts
in the principal amount of $892,067, payable in forty-eight
equal monthly installments of $22,625, consisting of principal
and interest, beginning on October 1, 1995. Interest at 10%
per annum will accrue beginning September 1, 1995.
A bankruptcy plan annual installment payment of $242,000,
originally due to JACO on August 31, 1994, was paid in four
equal installments during fiscal 1995. Subsequent to June 30,
1995, the Company did not pay a bankruptcy plan annual
payment of $327,000 to JACO, originally due August 31, 1995.
In September, 1995, the Company reached an agreement with JACO
to restructure the payment of the entire remaining amount due
to JACO under the bankruptcy plan (approximately $1,232,000,
net of $402,000 discount at 15% as of June 30, 1995). Under
this agreement, the Company will issue a promissory note to JACO
in the principal amount of $676,000, payable in forty-eight
equal monthly installments of $17,727, consisting of
principal and interest, beginning on January 30, 1996.
Interest at 10% per annum will accrue beginning on September 1,
1995. Additionally, the remaining balance due under the
bankruptcy plan, subsequent to the issuance of the above
promissory note, will be paid with any proceeds resulting
from the anticipated sale of approximately 325,000 shares
of the Company's common stock at market prices. The stock
must be held by JACO, with certain exceptions, for a minimum of
one year from issue date before it can be transferred.
Principal maturities of long-term debt and notes payable
considering the effect of the debt restructurings discussed
above are $1,010,941 in 1996; $496,087 in 1997; $528,635 in
1998; $600,940 in 1999 and $292,801 in 2000.
F-13
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, continued
____________________
6. LONG-TERM DEBT AND NOTES PAYABLE, continued
In fiscal 1994, the Company had available a revolving line of
credit agreement (the "Line") with a bank up to a maximum of
$1.66 million bearing interest at the prime rate. The Line was
guaranteed by one of the Company's creditors via a loan
purchase agreement with the bank and a $1.66 million standby
letter of credit. Substantially all receivables collateralized
the Line and the guarantee. Generally, borrowings under the
Line were required to be paid in full each month at the
time receivables are collected from the Airlines Clearing
House. There were no outstanding borrowings at June 30,
1994, although the Company utilized the Line in fiscal 1994.
The Line expired on October 31, 1994, although monthly
extensions were granted by the lender through January 31,
1995.
In February, 1995, the Company obtained a line of credit (the
"Line of Credit") in an amount not to exceed $2.5 million
from JSX Capital Corporation ("JSX"). JSX is an affiliate of
Jet Acceptance Corporation, the leasing company for the
Company's fleet of Jetstream 31 aircraft, and British
Aerospace Holdings, Inc., the company that had previously
collateralized the Company's line of credit from
NationsBank, N.A. through a loan purchase agreement. The
Line of Credit permits the Company to borrow up to 50% of
a borrowing base, consisting of the Company's transportation
and nontransportation charges to Airlines Clearing House,
Inc. or such greater amount as JSX shall determine, but in no
event more than $2.5 million. The Line of Credit is secured
by all of the Company's accounts receivable, bears interest at
prime + 2% and terminates on December 31, 1995, but may be
extended by JSX for successive one-year periods. Subsequent
to June 30, 1995, JSX has committed to extend the Line of
Credit through December 31, 1996. Under the provisions of the
Line of Credit, the Company must comply with certain
restrictive operational covenants. The Company utilized the
full amount available under the Line of Credit during
fiscal 1995, borrowing an average amount of $1,715,000 during
the year. There was no amount outstanding under the Line of
Credit at June 30, 1995.
During fiscal 1995, the Company obtained several short-term
loans from certain directors and officers. Amounts borrowed
under these loans ranged from $30,000 to $400,000, and earned
interest at rates of seven and ten percent. The aggregate
maximum and average amounts outstanding under these loans
during fiscal 1995 were $600,000 and $157,000,
respectively. At June 30, 1995, $100,000, bearing interest
at 10%, remained due to an officer of the Company. The
Company repaid this amount on August 16, 1995. In connection
with these loans, the Company issued to the lending officers
and directors options and warrants to purchase 78,425 shares
of the Company's common stock (see Note 9).
7. RELATED-PARTY TRANSACTIONS
On June 30, 1995, the Company entered into a sale and
leaseback transaction with Adallipa Partners ("the
Partnership"), a North Carolina partnership acting through its
agent, CLG, Inc., whereby the Company sold and simultaneously
leased back certain aircraft engines. The Partnership was
formed June 30, 1995, by certain members of the
Company's Board of Directors, for the purpose of entering into
the sale and leaseback transaction. CLG, Inc. is owned by
a member of the Company's Board of Directors. The Company
received $1,000,000 in consideration for the engines in July,
1995, which amount is included on the accompanying June 30,
1995, balance sheet as other receivable. A deferred gain of
$70,000, recorded in connection with the sale and leaseback
transaction, is included in noncurrent rent and other
liabilities in the accompanying June 30, 1995 balance sheet. To
induce the Partnership to enter into this transaction, the
Company issued to the Partnership a warrant to purchase
250,000 shares of the Company's common stock (see Note 9).
The Company paid fees of $61,846, $89,663 and $88,297, in
fiscal years 1995, 1994 and 1993, respectively, to a consulting
firm which is fifty- percent owned by a member of the Board of
Directors. Additionally, the Company paid consulting fees of
$54,000 and $33,500 for the years ended June 30, 1994 and
1993 respectively, to a member of the Board of Directors.
F-14
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, continued
____________________
8. INCOME TAXES
The Company accounts for income taxes according to the
provisions of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"). SFAS
109 requires the recognition of deferred income taxes to
reflect the tax consequences on future years of differences
between the tax basis of assets and liabilities and their
financial reporting amounts at each year end.
The Company's effective tax rate on income before income taxes
differs from the U.S. statutory federal tax rate as follows:
<TABLE>
<CAPTION>
Year Ended June 30
1995 1994 1993
<S> <C> <C> <C>
Income tax expense (benefit) at statutory rate (35.0)% (35.0)% (34.0)%
NOL carryforwards not currently recognizable 35.0 35.0 34.0
Effective income tax rate -0-% -0-% -0-%
</TABLE>
Significant components of the Company's deferred income tax
assets and liabilities at June 30, 1995 and 1994 are as follows:
Deferred tax assets: 1995 1994
Receivables $ 35,000 $ 75,000
Inventories 186,000 186,000
Accrued expenses 325,000 271,000
Rent obligations 281,000 50,000
Net operating loss carryforwards 3,129,000 3,991,000
Investment tax credit carryforwards 60,000 60,000
Valuation allowance (2,592,000) (2,625,000)
Total deferred tax asset 1,424,000 2,008,000
Deferred tax liabilities:
Property and equipment (1,424,000) (2,008,000)
Net deferred tax $ -0- $ -0-
At June 30, 1995, the Company had approximately $7,823,000 of
U. S. Federal regular tax operating loss carryforwards
available to offset future U. S. Federal taxable income, which
begin expiring on June 30, 2005. A valuation allowance has
been recognized to offset the related deferred tax assets due
to the uncertainty of realizing the benefit of the loss
carryforwards. The Company has approximately $60,000 of
investment tax credit carryforwards that expire beginning June
30, 1999.
9. STOCK OPTIONS
The Company has adopted a stock option plan (the "Stock
Option Plan") under which options may be granted to officers,
employees and directors. Options granted under the Stock
Option Plan are exercisable at the market value of the shares
at the date of grant. The options are exercisable over a
period not to exceed ten years. No shares are reserved for
future grants as of June 30, 1995.
F-15
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, continued
____________________
9. STOCK OPTIONS, continued
Information with respect to the Stock Option Plan follows:
1995 1994 1993
Options outstanding, at July 1 666,668 308,668 454,168
Options granted 616,500 565,000 262,000
Options exercised ( 19,500) ( 67,000) ( 168,000)
Options cancelled ( 625,000) ( 140,000) ( 239,500)
Options outstanding at June 30 638,668 666,668 308,668
Options exercisable at June 30 622,668 231,668 108,668
Option price per share, granted and
outstanding, at June 30 $.50-$1.4375 $.50-$4.50 $.50-$4.50
During fiscal 1995, the Company cancelled 533,000 outstanding
options to purchase shares of the Company's common stock,
which options had been previously granted under the Stock
Option Plan. Simultaneously, the Company granted 533,000
additional options at an exercise price equal to the market
price on the date of grant, subject to terms as defined in
the Stock Option Plan.
During fiscal 1995, in connection with the short-term
loans from officers and directors discussed in Note 6, the
Company issued to certain officers options to purchase
22,125 shares of the Company's common stock, at an exercise
price equal to the market price on the date of grant. The
options became exercisable six months from the date of grant,
expire ten years from the date of grant and are subject to
other provisions as defined in the Stock Option Plan.
Certain of these options (20,675) remain subject to
shareholder approval due to share availability limitations.
The Company also issued to certain directors warrants to
purchase 56,250 shares of the Company's common stock, at an
exercise price equal to market price on the date of grant. The
warrants expire ten years from the date of grant.
On June 30, 1995, in connection with the sale and leaseback
transaction discussed in Note 7, the Company issued to the
Partnership a warrant to purchase 250,000 shares of the
Company's common stock, at an issue price equal to the fair
market value of the Company's common stock on June 30, 1995.
The warrant carries a three-year term for exercise.
10. COMMITMENTS AND CONTINGENCIES
The Company is subject to the regulatory authority 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.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Cash flows include interest paid of approximately $627,000,
$443,000, and $143,700 in the years ended June 30, 1995,
1994 and 1993, respectively. Income taxes paid, net of
refunds, totaled $1,507 and $2,633 in the years ended June 30,
1994 and 1993, respectively.
F-16
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, continued
____________________
11. SUPPLEMENTAL CASH FLOW INFORMATION, continued
Noncash transactions include:
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994 1993
<S> <C> <C> <C>
Sale and leaseback of engines, for
which consideration is recorded
as other receivable $1,000,000
Issuance of promissory note for
previously due lease payments
and bankruptcy plan installments 573,200
Parts and equipment acquired
under capital lease $2,641,418
Issuance of 650,000 shares of Common
Stock with proceeds applied to:
Annual bankruptcy payments $ 284,785
Current aircraft lease payments 2,061,868
Other payables 186,354
</TABLE>
12. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
The following table presents selected quarterly unaudited
financial data for the years ended June 30, 1995, 1994, and
1993:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
(in thousands, except per share data)
<S> <C> <C> <C> <C>
1995
Operating revenue $15,909 $15,096 $14,960 $17,074
Operating income (loss) ( 353) 636 ( 26) 296
Net income (loss) ( 570) 437 ( 274) 45
Earnings (loss) per share ( .08) .06 ( .04) .01
1994
Operating revenue $15,526 $16,167 $14,385 $16,014
Operating loss (1,508) ( 413) (1,643) ( 313)
Net loss (1,724) ( 597) (1,851) ( 584)
Loss per share ( .26) ( .09) ( .26) ( .08)
1993
Operating revenue $15,634 $15,942 $16,112 $15,491
Operating income (loss) ( 2,216) 238 787 ( 863)
Net income (loss) ( 2,370) 19 768 (1,200)
Income (loss) per share ( .36) .00 .11 ( .18)
</TABLE>
Operating income (loss), net income (loss) and earnings
(loss) per share for the second and third quarter of 1995
are different from amounts previously reported in the
Company's Form 10-Q filings due to the correction of an
error in reporting aircraft lease expenses. Rent expense in
excess of cash payments was recorded as a deferred credit in
the second quarter and reversed in the third quarter. The
third quarter reversal should have been reported as a
restatement of second quarter results.
Amounts reported for operating income (loss), net income
(loss) and earnings (loss) per share were originally
reported in the Company's Form 10-Qs for the second and
third quarters of 1995 as follows:
<TABLE>
<CAPTION>
Second Third
Quarter Quarter
(in thousands, except per share data)
<S> <C> <C>
1995
Operating income (loss) 396 695
Net income (loss) 197 447
Earnings (loss) per share .03 .06
</TABLE>
The Company has restated the second and third quarter data to
reflect the correction of an error in the recording of aircraft
lease expense in the respective periods. The error was made in
connection with recording the impact of the lease modifications
with Shorts and JACO discussed in Note 5.
F-17
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended June 30, 1995, 1994 and 1993
____________________
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Balance at Additions Balance at
Beginning Charged to Costs Charged to End
Description of Period and Expenses Other Accounts Deductions of Period
<S> <C> <C> <C> <C> <C> <C>
1995
Reserve for doubtful
receivables and pricing
adjustments $186,800 $100,000 $ 86,800
Reserve for
inventory obsolescence 466,000 466,000
Reserve for medical claims
incurred but not reported 226,000 $ 13,000 239,000
1994
Reserve for doubtful
receivables and pricing
adjustments $ 56,800 $130,000 $186,800
Reserve for
inventory obsolescence 158,000 200,000 $ 108,000 (1) 466,000
Reserve for medical claims
incurred but not reported 240,000 $ 14,000 226,000
Reserve for repairable parts 108,000 (108,000)(1)
1993
Reserve for doubtful
receivables and pricing
adjustments $ 56,800 $ 56,800
Reserve for inventory
obsolescence 105,000 $ 53,000 158,000
Reserve for medical claims
incurred but not reported 200,000 40,000 240,000
Reserve for repairable parts 108,000 108,000
(1) Reclassification of reserve for repairable parts from property and equipment to inventories.
</TABLE>
S-1
Item 16. Exhibits.
<TABLE>
<S> <C>
2. Plan of Reorganization of CCAIR, Inc., effective September 3,
1991. (5)
4. Specimen Common Stock Certificate. (1)
10.1 (a) The Company's Stock Option Plan dated May 18, 1989 with forms of
Incentive Stock Option Agreement and Nonqualified Stock Option
Agreement attached. (1)
(b) Amendment to the Amended and Restated Stock Option Plan, dated
February 6, 1992. (6)
(c) Second Amended and Restate Stock Option Plan, dated February 6,
1993. (13)
(d) Third Amended and Restated Stock Option Plan of the Company, dated
February 23, 1994. (10)
(e) Fourth Amended and Restated Stock Option Plan of the Company,
dated November 15, 1994. (14)
10.2 (a) Agreement dated October 16, 1991 between CCAIR, Inc. and The Air
Line Pilots in the service of CCAIR, Inc. as represented by the
Air Line Pilots Association International. (6)
(b) Letter of Agreement amendment dated December 14, 1991 between
CCAIR, Inc. and The Air Line Pilots in the service of CCAIR, Inc.
as represented by the Air Line Pilots Association International.
(6)
(c) Letter of Agreement amendment dated February 28, 1992 between
CCAIR, Inc. and The Air Line Pilots in the service of CCAIR, Inc.
as represented by the Air Line Pilots Association International.
(6)
(d) Letter of Agreement amendment dated February 28, 1992 between
CCAIR, Inc. and The Air Line Pilots in the service of CCAIR, Inc.
as represented by The Air Line Pilots Association International.
(6)
10.3 (a) Service Agreement between USAir, Inc. and CCAIR, Inc. dated
November 1, 1988. (1)
(b) First Amendment to Service Agreement between USAir, Inc., and
CCAIR, Inc., dated July 1, 1990. (3)
(c) Supplemental Agreement between USAir, Inc., and CCAIR, Inc., dated
July 30, 1990. (4)
(d) Second Amendment to Service Agreement between USAir, Inc., and
CCAIR, Inc., dated January 23, 1991. (4)
(e) Third Amendment to Service Agreement between USAir, Inc., and
CCAIR, Inc., dated August 1, 1991. (8)
(f) Ground Handling Agreement, dated February 1, 1994, between CCAIR.
Inc., and USAir, Inc. (10)
10.4 (a) Loan Agreement dated as of September 4, 1991, between CCAIR, Inc.,
and NCNB National Bank of North Carolina. (4)
(b) Revolving Credit Promissory Note by CCAIR, Inc. in favor of NCNB
National Bank of North Carolina, dated September 4, 1991. (4)
(c) Security Agreement dated as of September 4, 1991, between CCAIR,
Inc., and NCNB National Bank of North Carolina. (4)
(d) Loan Purchase Agreement dated as of September 4, 1991, by and
among NCNB National Bank of North Carolina, British Aerospace,
Inc., and CCAIR, Inc. (4)
(e) Security Agreement dated as of September 4, 1991, between CCAIR,
Inc. and British Aerospace, Inc. An identical agreement was
executed with Jet Acceptance Corporation as of September 4, 1991,
and is not filed herewith. (4)
(f) Pledge of Cash Collateral Account dated as of September 4, 1991,
by and among CCAIR, Inc., NCNB National Bank of North Carolina,
British Aerospace, Inc., and Jet Acceptance Corporation. (4)
(g) Loan Agreement dated as of August 14, 1992 between CCAIR, Inc. and
NationsBank of North Carolina, N.A. (6)
(h) Agreement dated as of January 17, 1994 among CCAIR, Inc.,
NationsBank of North Carolina, N.A., British Aerospace, Inc. and
Jet Acceptance Corporation. (10)
(h)(i) Assignment and Bill of Sale dated as of January 10, 1995 by
and among CCAIR, Inc., NationsBank of North Carolina, N.A.,
British Aerospace, Inc. and Jet Acceptance Corporation. (16)
10.5 Equipment Lease Agreement dated April 18, 1986 between CLG, Inc.
and CCAIR, Inc. (1)
10.6 (a) Spare Parts Lease Agreement dated as of December 9, 1985 between
Jet Acceptance Corporation and Sunbird Airlines 1984, Inc. (1)
(b) Amendment No. 1 to Spare Parts Lease Agreement, dated August 29,
1991, between Jet Acceptance Corporation and CCAIR, Inc. (4)
10.7 (a) Spare Parts Lease Agreement dated as of December 17, 1987 between
Jet Acceptance Corporation and CCAIR, Inc. (1)
(b) Amendment No. 1 to Spare Parts Lease Agreement, dated August 29,
1991, between Jet Acceptance Corporation and CCAIR, Inc., said
Amendment is substantially identical to the Amendment in Exhibit
10.6(b) and is not filed herewith.
10.8 (a) Spare Parts Lease Agreement dated as of June 19, 1986 between Jet
Acceptance Corporation and CCAIR, Inc. (1)
(b) Amendment No. 1 to Spare Parts Lease Agreement, dated August 29,
1991, between Jet Acceptance Corporation and CCAIR, Inc., said
Amendment is substantially identical to the Amendment in Exhibit
10.6(b) and is not filed herewith.
Note: For footnote references see page E-9.
E-1
10.9 (a) Amended and Restated Aircraft Equipment Sublease Agreement dated
as of August 29, 1991, between Jet Acceptance Corporation and
CCAIR, Inc. (4)
(b) Acceptance Supplement dated September 5, 1991, between Jet
Acceptance Corporation and CCAIR, Inc. (4)
10.10 (a)(i) Lease Agreement effective as of April 19, 1991 between the
Asheville Regional Airport Authority and CCAIR, Inc. (4)
(a)(ii) Letter dated August 28, 1991 by Asheville Regional Airport
Authority amending Lease. (4)
(b) Lease Agreement dated July 5, 1989 between Clarke County Airport
Authority and CCAIR, Inc. (4)
(c) Agreement dated October 10, 1987 between the Central West Virginia
Regional Airport Authority and CCAIR, Inc. (1)
(d) Commuter Airline Agreement and Lease dated May 20, 1988 between
the City of Charlotte and CCAIR, Inc. (1)
(e) Agreement dated July 16, 1991 between the Chattanooga Metropolitan
Airport Authority and CCAIR, Inc. (4)
(f) Airport Use and Lease Agreement entered into as of January 1, 1989
between the Richland-Lexington Airport District and CCAIR, Inc.
(4)
(g) Agreement dated July 1, 1988 between the City of Danville,
Virginia and CCAIR, Inc. (1)
(h) Airport Use and Lease Agreement dated November 1, 1982 between
Greenville-Spartanburg Airport District and Sunbird, Inc. (1)
(i)(i) Letter Agreement dated July 13, 1988 from CCAIR, Inc. to
Tri-State Airport Authority. (1)
(i)(ii) Letter dated February 25, 1991 by Tri-State Airport
Authority amending Lease. (4)
(j)(i) Airport Use Agreement dated March 1, 1988 between the Board
of Commissioners of Onslow County and CCAIR, Inc. (1)
(j)(ii) Amendment to Lease dated July 15, 1988 between the same
parties. (1)
(k) Operating Agreement dated April 15, 1987 between Metropolitan
Knoxville Airport Authority and CCAIR, Inc. (1)
(l) Lease Agreement dated March 1, 1988 between the City of Macon and
CCAIR, Inc. (1)
(m) Letter Agreement dated September 5, 1990 between New Hanover
County and CCAIR, Inc. (4)
(n) Lease Agreement dated May 1, 1989 between Tri-City Airport
Commission and CCAIR, Inc. (4)
(o) Use Agreement dated May 1, 1991 between Airport Commission of
Forsyth County and CCAIR, Inc. (4)
(p) Letter from Pitt County - City of Greenville Airport Authority
dated May 31, 1990 announcing fee structure. (4)
(q) Airport Use Agreement dated May 1, 1991 between Raleigh County
Airport Authority and CCAIR, Inc. (4)
(r) Letter Agreement dated July 7, 1990 between Mercer County Airport
Authority and CCAIR, Inc. (4)
(s) Contract for Conduct of Commercial Flight Operations dated
September 1, 1991 between Maryland Aviation Administration and
CCAIR, Inc. (6)
10.11 (a)(i) Aircraft Lease between Shorts Air Lease, Inc. and CCAIR,
Inc. dated as of July 27, 1987 (Reg. No. N-121PC). This
Aircraft Lease is substantially identical to Aircraft Leases
dated as of July 30, 1987 (Reg. No. N-722PC), November 20,
1987 (Reg.No. N-729PC), December 22, 1987 (Reg. No. N-
360CC), January 25, 1989 (Reg. No. N-747SA) and June 7, 1989
(Reg. No. N-153CC), not filed herewith. (1)
(a)(ii) Aircraft Lease between Lynrise Air Lease, Inc. (formerly
Shorts Air Lease, Inc.) and CCAIR, Inc., dated as of August
1, 1991 (Reg. No. N-748SA). (4)
(a)(iii) Aircraft Lease between Lynrise Air Lease, Inc., and CCAIR,
Inc. dated as of August 1, 1991 (Reg. No. N-159CC). (4)
(b) Lease Amendment No. 1 dated as of May 20, 1988 to Aircraft Lease
dated as of December 22, 1987 (Reg. No. N-730CC). This Lease
Amendment is substantially identical to Lease Amendment dated as
of May 20, 1988 (Reg. No. N-360CC), not filed herewith. (1)
(c) Lease Supplement No. 1 dated as of July 27, 1987 to Aircraft Lease
(Reg. No. N-121PC). This Lease Supplement No. 1 is substantially
identical to Lease Supplements dated as of July 30, 1987 (Reg.No.
N-722PC), November 20, 1987 (Reg. No. N-729PC), December 22, 1987
(Reg. No. N-360CC), August 30, 1988 (Reg. No. N-742CC), January
25, 1989 (Reg. No. N-747SA) and June 7, 1989 (Reg. No. N-153CC),
not filed herewith. (1)
(d) Covenant of Quiet Enjoyment by the First National Bank of Boston
and the CIT Group/Financing, Inc. in favor of CCAIR, Inc. and
Shorts Air Lease dated as of July 27, 1987 (Reg. No. N-121PC).
This Covenant of Quiet Enjoyment is substantially identical to
Covenants of Quiet Enjoyment dated as of July 30, 1987 (Reg. No.
N-722PC), November 20, 1987 (Reg. No. N-729PC) and December 22,
1987 (Reg. No. N-360CC). This Covenant of Quiet Enjoyment is also
substantially identical to Covenants of Quiet Enjoyment by the
First National Bank of Boston, Meridian Trust Company, Principal
Mutual
Note: For footnote references see page E-9.
E-2
Life Insurance Company and State Street Bank and Trust
Company in favor of CCAIR, Inc. and Shorts Air Lease, Inc. dated
as of August 30, 1988 (Reg. No. N-742CC), January 25, 1989 (Reg.
No. N-747SA), January 25, 1989 (Reg. No. N-748SA), June 7, 1989
(Reg. No. N-153CC) and September 11, 1989 (Reg. No. N-159CC), not
filed herewith. (1)
(e) Notice of Assignment and Consent from Shorts Air Lease, Inc. to
CCAIR, Inc. dated July 27, 1987 (Reg. No. N-121PC). This Notice
of Assignment and Consent to Assignment is substantially identical
to Notices of Assignment and Consents to Assignment dated as of
July 30, 1987 (Reg. No. N-722PC), November 20, 1987 (Reg. No. N
729PC), December 22, 1987 (Reg. No. N-360CC), August 12, 1988
(Reg. No. N-742CC), January 25, 1989 (Reg. No. N-747SA), January
25, 1989 (Reg. No. N-748SA), June 7, 1989 (Reg. No. N-153CC) and
September 11, 1989 (Reg. No. N-159CC), not filed herewith. (1)
(f) Consent to Assignment from CCAIR, Inc. to the First National Bank
of Boston dated July 27, 1987 (Reg. No. N-121PC). This Consent to
Assignment is substantially identical to Consents to Assignment
from CCAIR, Inc. to the First National Bank of Boston or State
Street Bank and Trust Company dated July 30, 1987 (Reg. No. N-
722PC), November 20, 1987 (Reg. No. N-729PC), December 22, 1987
(Reg. No. N-360CC), August 30, 1988 (Reg. No. N-742CC), January
25, 1989 (Reg. No. N-747SA), January 25, 1989 (Reg. No. N-748SA),
June 7, 1989 (Reg. No. N-153CC) and September 11, 1989 (Reg. No.
N-159CC), not filed herewith. (1)
(g) Sublease Assignment from Shorts Air Lease, Inc. to the First
National Bank of Boston dated July 27, 1987 (Reg. No. N-121PC).
This Sublease Assignment is substantially identical to Sublease
Assignments from the First National Bank of Boston or State Street
Bank and Trust Company dated July 30, 1987 (Reg. No. N-722PC),
November 20, 1987 (Reg. No. N-729PC), December 22, 1987 (Reg. No.
N-360CC), August 30, 1988 (Reg. No. N-742CC), January 25, 1989
(Reg. No. N-747SA), January 25, 1989 (Reg. No. N-748SA), June 7,
1989 (Reg. No. N-159CC), not filed herewith. (1)
(h) Lease Amendment (Reg. N-121PC) dated as of September 30, 1994
between Lynrise Air Lease, Inc., formerly Shorts Air Lease, Inc.,
and CCAIR, Inc. This Lease Amendment is substantially identical
to Lease Amendments between Lynrise Air Lease, Inc. and CCAIR,
Inc. dated as of September 30, 1994 (Reg. No. N-722PC, Reg. No. N-
729PC, Reg. No. N-360CC, Reg. No. N-159CC, Reg. No. N-153CC, Reg.
No. N-747HH, Reg. No. N-729PC, Reg. No. N-742CC, and Reg. No. N-
748CC), not filed herewith. (16)
10.12 Aircraft Lease between Shorts Air Lease, Inc. and CCAIR, Inc.
dated as of August 12, 1988 (Reg. No. N-742CC). (1)
10.13 Participation Agreement among Short Brothers PLC, Westinghouse
Credit Corporation, The First National Bank of Boston, Shorts Air
Lease, Inc. and the CIT Group/Capital Financing, Inc. dated as of
July 27, 1987 (Reg. No. N-121PC). This Participation Agreement is
substantially identical to Participation Agreements dated as of
July 30, 1987 (Reg. No. N-722PC) and November 20, 1987 (Reg. No.
N-729PC); a Participation Agreement dated as of December 22, 1987
(Reg. No. N-360CC) among Short Brothers PLC, Wells Fargo Leasing
Corporation, The First National Bank of Boston, Shorts Air Lease,
Inc.; and the CIT Group/Capital Financing, Inc. and Participation
Agreements among Short Brothers PLC, Westinghouse Credit
Corporation, The First National Bank of Boston, Shorts Air Lease,
Inc., Principal Mutual Life Insurance Company and Meridian Trust
Company dated as of August 12, 1988 (Reg. No. N-742CC), January
25, 1989 (Reg. No. N-747SA) and January 25, 1989 (Reg. No. N-
748SA), not filed herewith. (1)
10.14 Trust Agreement between Westinghouse Credit Corporation and The
First National Bank of Boston dated as of July 27, 1987 (Reg. No.
N-121PC). This Trust Agreement is substantially identical to
Trust Agreements dated as of July 30, 1987 (Reg. No. N-722PC),
November 20, 1987 (Reg. No. N-729PC), August 12, 1988 (Reg. No. N-
742CC), January 25, 1989 (Reg. No. N-747SA) and January 25, 1989
(Reg. No. N-748SA) and a Trust Agreement between Wells Fargo
Leasing Corporation and The First National Bank of Boston dated as
of December 22, 1987 (Reg. No. N-360CC), not filed herewith. (1)
10.15 Trust Agreement and Security Agreement Supplement ("Trust and
Security Supplement") between The First National Bank of Boston
and Westinghouse Credit Corporation dated as of July 27, 1987
(Reg. No. N-121PC). This Trust and Security Supplement is
substantially identical to Trust and Security Supplements dated as
of July 30, 1987 (Reg. No. N-722PC), November 20, 1987 (Reg. No.
N-729PC),
August 12, 1988 (Reg. No. N-742CC), January 25, 1989 (Reg. No. N-
747SA) and January 25, 1989 (Reg. No. N-748SA) and a Trust and
Security Supplement between The First National Bank of Boston and
Wells Fargo Leasing Corporation dated as of December 22, 1987
(Reg. No. N-360CC), not filed herewith. (1)
10.16 Purchase Agreement among Short Brothers PLC, Short Aircraft
Delivery, Inc. and The First National Bank of Boston dated July
27, 1987 (Reg. No. N-121PC). This Purchase Agreement is
substantially identical to Purchase Agreements dated July 30, 1987
(Reg. No. N-722PC), November 20, 1987 (Reg. No. N-722PC), November
20, 1987 (Reg. No. N-729 PC), December 22, 1987 (Reg. No. N-
360CC),
Note: For footnote references see page E-9.
E-3
August 12, 1988 (Reg. No. N-742CC), January 25, 1989 (Reg.
No. N-747SA), January 25, 1989 (Reg. No. N-748SA), June 7, 1989
(Reg. No. N-153CC) and September 11, 1989 (Reg. No. N-159CC), not
filed herewith. (1)
10.17 Aircraft Lease between The First National Bank of Boston and
Shorts Air Lease, Inc. dated as of July 27, 1987 (Reg. No. N-
121PC). This Aircraft Lease is substantially identical to
Aircraft Leases dated as of July 30, 1987 (Reg. No. N-722PC),
November 20, 1987 (Reg. No. N-729PC), August 12, 1988 (Reg. No. N-
742CC), January 25, 1989 (Reg. No. N-747SA), January 25, 1989
(Reg. No. N-748SA), June 7, 1989 (Reg. No. N-153CC) and September
11, 1989 (Reg. No. N-159CC), not filed herewith. (1)
10.18 Lease Supplement No. 1 between The First National Bank of Boston
and Shorts Air Lease, Inc. dated as of July 27, 1987 (Reg. No. N-
121PC). This Lease Supplement No. 1 is substantially identical to
Lease Supplements dated as of July 30,1987 (Reg. No. N-722PC),
November 20, 1987 (Reg. No. N-729PC), December 22, 1987 (Reg. No.
N-360CC), August 12, 1988 (Reg. No. N-742CC), January 25, 1989
(Reg. No. N-747SA), January 25, 1989 (Reg. No. N-748SA), June 7,
1989 (Reg. No. N-153CC) and September 11, 1989 (Reg. No. N-159CC),
Not filed herewith. (1)
10.19 Tax Indemnity Agreement between Westinghouse Credit Corporation
and Shorts Air Lease, Inc. dated as of July 27, 1987 (Reg. No. N-
121PC). This Tax Indemnity Agreement is substantially identical
to Tax Indemnity Agreements dated as of July 30, 1987 (Reg. No. N-
722PC), November 20, 1987 (Reg. No. N-729PC), December 22, 1987
(Reg. No. N-360CC), August 12, 1988 (Reg. No. N-742CC), January
25, 1989 (Reg. No. N-747SA), January 25, 1989 (Reg. No. N-748SA),
June 7, 1989 (Reg. No. N-153CC) and September 11, 1989 (Reg. No.
N-159CC), not filed herewith. (1)
10.20 Loan and Security Agreement between The First National Bank of
Boston and The CIT Group/Capital Financing, Inc. dated as of July
27, 1987 (Reg. No. N-121PC). This Loan and Security Agreement is
substantially identical to Loan and Security Agreements dated as
of July 30, 1987 (Reg. No. N-722PC), November 20, 1987 (Reg. No.
N-729PC), December 22, 1987 (Reg. No. N-360CC), August 12, 1988
(Reg. No. N-742CC), January 25, 1989 (Reg. No. N-747SA), January
25, 1989 (Reg. No. N-748SA), June 7, 1989 (Reg. No. N-153CC) and
September 11, 1989 (Reg. No. N-159CC), not filed herewith. (1)
10.21 (a) Interim Aircraft Sublease Agreement dated as of February 20, 1991,
between CCAIR, Inc., and Jet Acceptance Corporation (Reg. No. N-
162PC). This Interim Aircraft Sublease Agreement is substantially
identical to Interim Aircraft Sublease Agreements dated as of
April 4, 1991 (Reg. No. N-165PC), April 5, 1991 (Reg. No. N-164PC)
and April 8, 1991 (Reg. No. N-159PC), not filed herewith. (4)
(b) Acceptance Supplement dated February 22, 1991 between CCAIR, Inc.
and Jet Acceptance Corporation (Reg. No. N-162PC). This
Acceptance Supplement is substantially identical to Acceptance
Supplements dated April 4, 1991 (Reg. No. N-165PC), April 8, 1991,
(Reg. No. N-164PC) and April 8, 1991 (Reg. No. N-159PC), not filed
herewith.(4)
(c) Termination of Sublease between CCAIR, Inc. and Jet Acceptance
Corporation (Reg. No. N-162PC). This Termination of Sublease is
substantially identical to Terminations of Sublease (Reg. No. N-
165PC, N-164PC and N-159PC), not filed herewith. (4)
10.22 (a) Aircraft Sublease Agreement dated as of August 29, 1991, between
CCAIR, Inc., and Jet Acceptance Corporation (Reg. No. N-162PC).
This Aircraft Sublease Agreement is substantially identical to
Amended and Restated Aircraft Sublease Agreements dated as of
August 29, 1991, (Reg. No. N-161PC and Reg. No. N-163PC), not
filed herewith. (4)
(b) Acceptance Supplement dated September 5, 1991, between CCAIR, Inc.
and Jet Acceptance Corporation (Reg. No. N-162PC). This
Acceptance Supplement is substantially identical to Acceptance
Supplements dated September 5, 1991 (Reg. No. N-161PC and Reg. No.
N-163PC), not filed herewith. (4)
(c) Limited Warranty Agreement and Disclaimer of Warranty dated as of
December 27, 1985 between British Aerospace, Inc. and Sunbird
Airlines 1984, Inc. (Reg. No. N-162PC). This Limited Warranty
Agreement is substantially identical to Limited Warranty
Agreements dated December 13, 1985 (Reg. No. N-161PC) and December
27, 1985 (Reg. No. N-163PC), not filed herewith. (1)
(d) Aircraft Lease Agreement dated as of November 15, 1985 between
American Bank & Trust Co. of PA and Jet Acceptance Corporation
(Reg. Nos. N-162PC, N-161PC and N-163PC). (1)
(e) Lease Supplement No. 5 dated November 15, 1985 between American
Bank & Trust Co. of PA and Jet Acceptance Corporation (Reg. No. N-
162PC). This Lease Supplement is substantially identical to Lease
Supplements dated November 15, 1985 (Reg. No. N-161PC) and
December 27, 1985 (Reg. No. N-163PC), not filed herewith. (1)
(f) Mortgage and Trust Indenture dated as of November 15, 1985 between
American Bank & Trust Company of PA and The Connecticut Bank and
Trust Company, National Association (Reg. Nos. N-162PC, N-161PC
and N-163PC). (1)
Note: For footnote references see page E-9.
E-4
(g) Trust Agreement dated as of November 15, 1985 between Greyhound
Leasing & Financial Corporation and American Bank & Trust Co. of
PA (Reg. Nos. N162PC, N-161PC and N-163PC). (1)
(h) Trust Agreement and Mortgage Supplement No. 5 dated December 27,
1985 by American Bank & Trust Co. of PA (Reg. No. N-162PC). This
Trust Agreement and Mortgage Supplements dated December 13, 1985
(Reg. No. N-161PC) and December 27, 1985 (Reg. No. N-163PC), not
filed herewith. (1)
(i) Sublease Security Assignment dated as of November 15, 1985 by Jet
Acceptance Corporation (Reg. No. N-162PC). This Sublease Security
Assignment is substantially identical to Sublease Security
Assignments dated as of November 15, 1985 (Reg. No. N-161PC) and
November 15, 1985 (Reg. No. N-163PC), not filed herewith. (1)
(j) Tax indemnification Agreement dated as of November 15, 1985
between Jet Acceptance Corporation and Greyhound Leasing &
Financial Corporation (Reg. Nos. N-162PC, N-161PC and N-163PC).
(1)
10.23 (a) Amended and Restated Aircraft Sublease Agreement dated as of
August 29, 1991, between CCAIR, Inc., and Jet Acceptance
Corporation (Reg. No. N-169PC). This Amended and Restated
Aircraft Sublease Agreement is substantially identical to an
Amended and Restated Aircraft Sublease Agreement dated as of
August 29, 1991, (Reg. No. N-168PC), not filed herewith. (4)
(b) Acceptance Supplement dated September 5, 1991, between CCAIR, Inc.
and Jet Acceptance Corporation (Reg. No. N-169PC). This
Acceptance Supplement is substantially identical to an Acceptance
Supplement dated September 5, 1991 (Reg. No. N-168PC), not filed
herewith. (4)
(c) Limited Warranty Agreement and Disclaimer of Warranty dated as of
May 20, 1986 between British Aerospace, Inc. and CCAIR, Inc. (Reg.
No. N-169PC). This Limited Warranty Agreement is substantially
identical to a Limited Warranty Agreement dated as of May 20, 1986
(Reg. No. N-168PC), not filed herewith. (1)
(d) Aircraft Lease Agreement dated as of May 1, 1986 between Meridian
Trust Company and Jet Acceptance Corporation (Reg. Nos. N-169PC
and N-168PC), not filed herewith. (1)
(e) Lease Supplement No. 2 dated as of May 1, 1986 between Meridian
Trust Company and Jet Acceptance Corporation (Reg. No. N-169PC).
This Lease Supplement is substantially identical to a Lease
Supplement dated May 20, 1986 (Reg. No. N-168PC), not filed
herewith. (1)
(f) Mortgage and Trust Indenture dated as of May 1, 1986 between
Meridian Trust Company and the Connecticut Bank and Trust Company,
National Association (Reg. Nos. N-169PC and N-168PC). (1)
(g) Trust Agreement dated as of May 1, 1986 between EFC Leasing
Corporation and Meridian Trust Company (Reg. Nos. N-169PC and N-
168PC). (1)
(h) Trust Agreement and Mortgage Supplement No. 2 dated May 20, 1986
by Meridian Trust Company (Reg. No. N-169PC). This Trust
Agreement and Mortgage Supplement is substantially identical to a
Trust Agreement and Mortgage Supplement dated May 20, 1986 (Reg.
No. N-168PC), not filed herewith. (1)
(i) Sublease Security Assignment dated as of May 9, 1986 by Jet
Acceptance Corporation (Reg. No. N-169PC). This Sublease Security
Assignment is substantially identical to a Sublease Security
Assignment dated as of and May 8, 1986 (Reg. No. N-168PC), not
filed herewith. (1)
(j) Tax Indemnification Agreement dated as of May 1, 1986 between Jet
Acceptance Corporation and EFC Leasing Corporation (Reg. Nos. N-
169PC and N-168PC). (1)
10.24 (a) Aircraft Sublease Agreement dated as of August 29, 1991, between
CCAIR, Inc., and Jet Acceptance Corporation (Reg. No. N-164PC).
This Aircraft Sublease Agreement is substantially identical to an
Aircraft Sublease Agreement (Reg. No. N-165PC) and an Amended and
Restated Aircraft Sublease Agreement (Reg. No. N-170PC), dated as
of August 29, 1991, not filed herewith. (4)
(b) Acceptance Supplement dated September 5, 1991, between CCAIR, Inc.
and Jet Acceptance Corporation (Reg. No. N-164PC). This
Acceptance Supplement is substantially identical to Acceptance
Supplements dated September 5, 1991 (Reg. No. N-165PC and Reg. No.
N-170PC), not filed herewith. (4)
(c) Limited Warranty Agreement and Disclaimer of Warranty dated as of
June 19, 1986 between British Aerospace, Inc. and CCAIR, Inc.
(Reg. No. N-164PC). This Limited Warranty Agreement is
substantially identical to Limited Warranty Agreements dated as of
July 7, 1986 (Reg. No. N-165PC) and December 22, 1986 (Reg. No. N-
170PC), not filed herewith. (1)
(d) Aircraft Lease Agreement dated as of March 1, 1986 between
Meridian Trust Company and Jet Acceptance Corporation (Reg. Nos.
N-164PC, N-165PC and N-170PC). (1)
(e) Lease Addendum dated December 22, 1986 between Meridian Trust
Company and Jet Acceptance Corporation (Reg. Nos. N-164PC, N-165PC
and N-170PC). (1)
(f) Lease Supplement No. 1 dated as of March 1, 1986 between Meridian
Trust Company and Jet Acceptance Corporation (Reg. No. N-164PC).
This Lease Supplement is substantially identical to Lease
Supplements dated March 14, 1986 (Reg. No. N-165PC) and December
22, 1986 (Reg. No. N-170PC), not filed herewith. (1)
Note: For footnote references see page E-9.
E-5
(g) Mortgage and Trust Indenture dated as of March 1, 1986 between
Meridian Trust Company and The Connecticut Bank and Trust Company,
National Association (Reg. Nos. N-164PC, N-165PC and N-170PC). (1)
(h) Mortgage Addendum dated December 22, 1986 between Meridian Trust
Company and The Connecticut Bank and Trust Company, National
Association (Reg. Nos. N-164PC, N-165PC and N-170PC). (1)
(i) Trust Agreement dated as of March 1, 1986 between Greyhound
Leasing and Financial Corporation and Meridian Trust Company (Reg.
Nos. N-164PC, N-165PC and N-170PC). (1)
(j) Trust Agreement Mortgage Supplement dated March 14, 1986 by
Meridian Trust Company (Reg. No. N-164PC). This Trust Agreement
and Mortgage Supplement is substantially identical to Trust
Agreement and Mortgage Supplements dated March 14, 1986 (Reg. No.
N-165PC) and December 22, 1986 (Reg. No. N-170PC), not filed
herewith. (1)
(k) Sublease Security Assignment dated as of June 19, 1986 by Jet
Acceptance Corporation (Reg. No. N-164PC). This Sublease Security
Assignment is substantially identical to Sublease Security
Assignments dated June 19, 1986 (Reg. No. N-165PC) and June 19,
1986 (Reg. No. N-170PC), not filed herewith. (1)
(l) Tax Indemnification Agreement dated as of March 1, 1986 (Reg. Nos.
N-164PC, N-165PC and N-170PC). (1)
10.25 (a) Amended and Restated Aircraft Sublease Agreement dated as of
August 29, 1991, between CCAIR, Inc., and Jet Acceptance
Corporation (Reg. No. N-156PC). This Amended and Restated
Aircraft Sublease Agreement is substantially identical to an
Amended and Restated Aircraft Sublease Agreement dated as of
August 29, 1991 (Reg. No. N-157PC), not filed herewith. (4)
(b) Acceptance Supplement dated September 5, 1991, between CCAIR, Inc.
and Jet Acceptance Corporation (Reg. No. N-156PC). This
Acceptance Supplement is substantially identical to an Acceptance
Supplement dated September 5, 1991 (Reg. No. N-157PC), not filed
herewith. (4)
(c) Limited Warranty Agreement and Disclaimer of Warranty dated
December 17, 1987 between British Aerospace, Inc. and CCAIR, Inc.
(Reg. No. N-156PC). This Limited Warranty Agreement is
substantially identical to Limited Warranty Agreement dated as of
December 17, 1987 (Reg. No. N-157PC), not filed herewith. (1)
(d) Lease Agreement dated as of August 15, 1987 between First Security
Bank of Utah, National Association and Jet Acceptance Corporation
(Reg. Nos. N-156PC and N-157PC). (1)
(e) Lease Supplement No. 1 dated December 17, 1987 between First
Security of Utah, National Association and Jet Acceptance
Corporation (Reg. Nos. N-156PC and N-157PC). (1)
(f) Assignment of Sublease and Security Agreement dated as of August
15, 1987 from Jet Acceptance Corporation to First Security Bank of
Utah, National Association (Reg. Nos. N-156PC and N-157PC). (1)
(g) Trust Agreement dated as of August 15, 1987 between First Security
Bank of Utah, National Association and TECO Investments, Inc.
(Reg. Nos. N-156PC and N-157PC). (1)
(h) Security Agreement-Trust Deed dated as of August 15, 1987 between
First Security Bank of Utah, National Association and The
Connecticut Bank and Trust Company, National Association (Reg.
Nos. N-156PC and N-157PC). (1)
(i) Security Agreement-Trust Deed Supplement No. 2 dated as of
December 17, 1987 between First Security Bank of Utah, National
Association and The Connecticut Bank and Trust Company, National
Association (Reg. Nos. N-156PC and N-157PC). (1)
(j) Tax Indemnification Agreement dated as of August 15, 1987 between
TECO Investments, Inc. and Jet Acceptance Corporation (Reg. Nos.
N-156PC and N-157PC). (1)
10.26 (a) Amended and Restated Aircraft Sublease Agreement dated as of
August 29, 1991, between CCAIR, Inc., and Jet Acceptance
Corporation (Reg. No. N-190PC). This Amended and Restated
Aircraft Sublease Agreement is substantially identical to an
Aircraft Sublease Agreement dated as of August 29, 1991 (Reg. No.
N-159PC), not filed herewith. (4)
(b) Acceptance Supplement dated September 5, 1991, between CCAIR, Inc.
and Jet Acceptance Corporation (Reg. No. N-190PC). This
Acceptance Supplement is substantially identical to an Acceptance
Supplement dated September 5, 1991 (Reg. No. N-159PC), not filed
herewith. (4)
(c) Limited Warranty Agreement and Disclaimer of Warranty dated as of
December 17, 1987 between British Aerospace, Inc. and CCAIR, Inc.
(Reg. No. N-190PC). This Limited Warranty Agreement is
substantially identical to Limited Warranty Agreement dated as of
December 17, 1987 (Reg. No. N-159PC), not filed herewith. (1)
(d) Lease Agreement dated as of November 15, 1987 between First
Security Bank of Utah, National Association and Jet Acceptance
Corporation (Reg. Nos. N-190PC and N-159PC). (1)
Note: For footnote references see page E-9.
E-6
(e) Assignment of Sublease Security Agreement dated as of November 15,
1987 from Jet Acceptance Corporation to First Security Bank of
Utah, National Association (Reg. Nos. N-190PC and N-159PC). (1)
(f) Trust Agreement dated as of November 15, 1987 between First
Security Bank of Utah, National Association and NCNB Lease
Investments, Inc. (Reg. Nos. N-190PC and N-159PC). (1)
(g) Security Agreement-Trust Deed dated as of November 15, 1987
between First Security Bank of Utah, National Association and The
Connecticut Bank and Trust Company, National Association (Reg.
Nos. N-190PC and N-159PC). (1)
(h) Tax Indemnification Agreement dated as of November 15, 1987
between NCNB Lease Investments, Inc. and Jet Acceptance
Corporation (Reg. Nos. N-190PC and N-159PC. (1)
10.27 (a) Amended and Restated Aircraft Sublease Agreement dated as of
August 29, 1991, between CCAIR, Inc., and Jet Acceptance
Corporation (Reg. No. N-158PC). (4)
(b) Acceptance Supplement dated September 5, 1991, between CCAIR, Inc.
and Jet Acceptance Corporation (Reg. No. N-158PC). (4)
(c) Limited Warranty Agreement and Disclaimer of Warranty dated as of
February 17, 1988 between British Aerospace, Inc. and CCAIR, Inc.
(Reg. No. N-158PC). (1)
(d) Lease Agreement dated as of September 1, 1987 between First
Security Bank of Utah, National Association and Jet Acceptance
Corporation (Reg. No. N-158PC). (1)
(e) Assignment of Sublease and Security Agreement dated as of
September 1, 1987 from Jet Acceptance Corporation to First
Security Bank of Utah, National Association (Reg. No. N-158PC).
(1)
(f) Trust Agreement dated as of September 1, 1987 between First
Security Bank of Utah, National Association and NCNB Lease
Investments, Inc. (Reg. No. N-158PC). (1)
(g) Security Agreement-Trust Deed dated as of September 1, 1987
between First Security Bank of Utah, National Association and The
Connecticut Bank and Trust Company, National Association (Reg. No.
N-158PC). (1)
(h) Tax Indemnification Agreement dated as of September 1, 1987
between NCNB Lease Investments, Inc. and Jet Acceptance
Corporation (Reg. No. N-158PC). (1)
10.28 Indemnity Agreement dated as of July 11, 1989 between CCAIR, Inc.
and Evrika Shipping Corporation. (1)
10.29 (a) Commercial Use Permit between CCAIR, Inc., and City of Charlotte,
North Carolina dated April 1, 1991, relating to Old Terminal
Building at Charlotte/Douglas International Airport. (4)
(b) Commercial Use Permit dated April 15, 1992 between the City of
Charlotte and CCAIR, Inc. (6)
10.30 (a) Flight Attendant Agreement between CCAIR, Inc., and the Flight
Attendants in the service of CCAIR, Inc., as represented by the
Association of Flight Attendants, effective May 22, 1991. (4)
(b) Letter of Agreement amendment dated May 6, 1992 between CCAIR,
Inc. and the Flight Attendants in service of CCAIR, Ins. as
represented by the Association of Flight Attendants. (6)
10.31 Letter Agreement dated February 27, 1991 between Pennsylvania
Airlines and CCAIR, Inc. (4)
10.32 (a) Purchase Agreement No. 8-0237, dated as of February 23, 1992
between CCAIR, Inc. and de Havilland Inc. (successor to Boeing of
Canada, Ltd., a Delaware corporation, through its de Havilland
Division) as amended by letter agreements attached thereto for two
de Havilland DHC-8-102 Aircraft (N880CC) and (N881CC). (6)
(b) Purchase Agreement Assignment between CCAIR, Inc. and Mellon
Financial Services Corporation #3 dated as of May 15, 1992
(N880CC). This Purchase Agreement Assignment is substantially
identical to Purchase Agreement Assignment (N881CC), dated as of
May 15, 1992, not filed herewith. (6)
(c) Lease Agreement between CCAIR, Inc. and Mellon Financial Services
Corporation #3 dated as of May 15, 1992 (N880CC). This Lease
Agreement is substantially identical to Lease Agreements (N881CC),
(N882CC) and N883CC) dated as of May 15, 1992, not filed herewith.
(6)
(d) Lease Supplement #1 between CCAIR, Inc. and Mellon Financial
Services Corporation #3 dated as of May 22, 1992 (N880CC). This
Lease Supplement #1 is substantially identical to Lease
Supplements (N881CC), (N882CC) and (N883CC) dated as of May 22,
June 1 and June 12, 1992, respectively, not filed herewith. (6)
(e) Tax Indemnity Agreement between CCAIR, Inc. and Mellon Financial
Services Corporation #3 dated as of May 15, 1992 (N880CC). This
Tax Indemnity Agreement is substantially identical to Tax
Indemnity Agreements (N881CC), (N882CC) and (N883CC) dated as of
May 15, 1992, not filed herewith. (6)
(f) Assignment and Assumption Agreement dated as of November __, 1995
between C.I.T. Leasing Corporation and Mellon Financial Services
Corporation #3. (16)
(g) Aircraft Lease Termination dated as of November ___, 1995 between
Mellon Financial Services Corporation #3 and CCAIR, Inc. (16)
10.33 (a) Lease Agreement (Spares) between CCAIR, Inc. and Mellon Financial
Services Corporation #3 dated as of August 14, 1992. (6)
Note: For footnote references see page E-9.
E-7
(b) Lease Supplement between CCAIR, Inc. and Mellon Financial Services
Corporation #3 dated as of August 28, 1992. (6)
(c) Tax Indemnity Agreement between CCAIR, Inc. and Mellon Financial
Services Corporation #3 dated as of August 14, 1992. (6)
10.34 Agreement dated January 1, 1994 between CCAIR, Inc. and the
Mechanics and related employees in the service of CCAIR as
represented by the International Brotherhood of Teamsters. (13)
10.35 Employment Agreement between Kenneth W. Gann and CCAIR, Inc. dated
February 8, 1994. (13)
10.36 (a) Agreement dated November 14, 1994, by and among CCAIR, Inc.,
British Aerospace Holdings, Inc., formerly British Aerospace,
Inc., and Jet Acceptance Corporation. (16)
(b) Acceptance Supplement No. 2(N158PC) dated as of November 14, 1994
between Jet Acceptance Corporation and CCAIR, Inc. This
Acceptance Supplement No. 2 is substantially identical to
Acceptance Supplements No. 2 between Jet Acceptance Corporation
and CCAIR, Inc. (N164PC, N162PC, N159PC, N157PC, N156PC, N190PC,
N170PC, N169PC, N168PC, N163PC and N161PC), notified herewith.
(16)
10.37 (a) Lease Agreement dated as of November 15, 1994 between C.I.T.
Leasing Corporation and CCAIR, Inc. for DHC-8-102 Aircraft (Reg.
No. 880CC). This Lease Agreement is substantially identical to
Lease Agreements dated as of November 15, 1994 between C.I.T.
Leasing Corporation and CCAIR, Inc. for DHC-8-102 Aircraft (Reg.
No. 881CC, Reg. No. 882CC and Reg. No. 883CC), not filed herewith.
(16)
(b) Lease Agreement (Spares) dated as of November 15, 1994 between
C.I.T. Leasing Corporation and CCAIR, Inc. (16)
(c) Lease Supplement No. 1 is substantially identical to Lease
Supplements No. 1 between C.I.T. Leasing Corporation and CCAIR,
Inc. for DHC-8-102 Aircraft (Reg. No. 881CC, Reg. No. 882CC and
Reg. No. 883CC) and Lease Supplement No. 1 (Spares), not filed
herewith. (16)
10.38 (a) Amended and Restated Loan Agreement dated as of February 10, 1995,
between JSX Capital Corporation and CCAIR, Inc. (16)
(b) Revolving Note dated February 10, 1995 in the principal amount of
$2,500,000 by CCAIR, Inc. to the order of British Aerospace
Holdings, Inc. (16)
(c) Amended and Restated Security Agreement dated as of February 10,
1995 between JSX Capital Corporation and CCAIR, Inc. (16)
(d) Amended and Restated Special Account and Disbursement
Authorization Agreement dated as of February 10, 1995 among
Wachovia Bank of North Carolina, N.A., CCAIR, Inc., British
Aerospace Holdings, Inc., Jet Acceptance Corporation and JSX
Capital Corporation. (16)
10.39 Letter Agreement dated September 28, 1995 between JSX Capital
Corporation and CCAIR, Inc. (17)
11 Computation of earnings per share. (17)
16 Letter regarding change in Company's certifying accountant. (9)
23.1 Consent of Arthur Andersen, LLP. (17)
23.2 Consent of Coopers & Lybrand, LLP. (17)
Note: For footnote references see page E-9.
E-8
Footnotes:
(1) Incorporated by reference to Registration Statement on Form S-1, File
No. 33-28967.
(2) Incorporated by reference to Annual Report on Form 10-K for the fiscal
year ended June 30, 1989, File No. 0-17846.
(3) Incorporated by reference to Annual Report on Form 10-K for the fiscal
year ended June 30, 1990, File No. 0-17846.
(4) Incorporated by reference to Annual Report on Form 10-K for the fiscal
year ended June 30, 1991, File No. 0-17846.
(5) Incorporated by reference to Current Report on Form 8-K, filed August 1,
1991.
(6) Incorporated by reference to Annual Report on Form 10-K for the fiscal
year ended June 30, 1992, File No. 0-17846.
(7) Incorporated by reference to Annual Report on Form 10-K for the fiscal
year ended June 30, 1993, File No. 0-17846.
(8) Incorporated by reference to Pre-Effective Amendment No. 1 to
Registration Statement on Form S-2, File No. 33-65878.
(9) Incorporated by reference to Current Report on Form 8-K/A, dated
November 30, 1993, File No. 0-17846
(10) Incorporated by reference to Registration Statement on Form S-2, File
No. 33-77574.
(11) Incorporated by reference to Amendment No. 1 to Registration Statement
on Form S-2, File No. 33-77574.
(12) Incorporated by reference to Amendment No. 2 to Registration Statement
on Form S-2, File No. 33-77574.
(13) Incorporated by reference to Annual Report on Form 10-K for the fiscal
year ended June 30, 1994, File No. 0-17846.
(14) Incorporated by reference to Registration Statement on Form S-8 and Form
S-3, File No. 33-89832.
(15) Incorporated by reference to Quarterly Report on Form 10-Q for the
three-month period ended March 31, 1995, File No. 0-17846.
(16) Incorporated by reference to Post-Effective Amendment No. 1 to
Registration Statement on Form S-2, File No. 33-77574.
(17) Filed herewith.
E-9
</TABLE>
Exhibit 10.39
JSX CAPITAL CORPORATION
A British Aerospace Company
September 28, 1995
Via Facsimile No. 704-359-0351
and Overnight Courier
Mr. Kenneth Gann, President
CCAIR, Inc.
4700 Yorkmont Road
Second Floor
Charlotte, North Carolina 28208
Subject: Bankruptcy Debt Restructuring and Rent Reductions To
End of Lease Term
Dear Ken:
Further to our telephone conversation today, this proposal
outlines the revised terms under which JSX Capital Corporation
("JSX") would be willing to restructure the bankruptcy payments
due from CCAIR, Inc. ("CCAIR"), to help alleviate CCAIR's cash
flow problems for the winter of 1995-1996. In addition, we will
continue the lease rate reductions on CCAIR's existing fleet of
12 Jetstream 31 aircraft through the applicable Sublease
termination dates.
A. BANKRUPTCY DEBT:
JSX has a current net present valuation of the bankruptcy debt of
$1,352,257.80 which was arrived at by discounting the future
payment schedule (which has a nominal value of $1,634,032.42) at
a ten (10) percent annual discount rate, applied on a monthly
equivalent. Our proposal is to break this net present value down
into two components: new debt and a debt-for-equity swap.
JSX is willing to forgive the old bankruptcy debt in exchange for
the following:
(i) CCAIR would issue a promissory note to JSX in the
principal amount of $676,128.90 payable in forty-eight
equalized monthly installments of principal and
interest commencing January 30, 1996. Interest would
accrue from September 1, 1995 and would be compounded
monthly at the rate of ten (10) percent per annum. The
amount of each payment would be $17,727.17 and CCAIR
would make payments monthly through the lockbox
arrangement.
Mr. Kenneth Gann, President & CEO, CCAIR, Inc.
Subject: Bankruptcy Debt Restructuring and Rent Reductions To
End of Lease Term
September 28, 1995
(ii) CCAIR will issue to JSX 325,000 shares of fully
registered common stock. The stock will be issued
between September 1 and December 1, 1995. In order to
ease the impact on CCAIR of issuing this amount of
shares, JSX would be willing to agree to a lockup
agreement on these particular shares for a period of 12
months from date of issue subject to paragraph (v) of
Section C, General Terms, below.
B. RENT REDUCTION:
The rent reduction is based on two components: CCAIR's
commitment to lease replacement J31 aircraft, for the period
through December 31, 2001 for the J31s whose leases expire in
1997, 1998, and 1999 (seven aircraft total) and an agreement to
lease four (4) additional aircraft beginning the first half of
1996 through December 31, 2001. CCAIR will also have the option
to take additional J31 aircraft at favorable lease rates.
(i) Replacement Aircraft: The rentals for CCAIR's existing
fleet of twelve Jetstream 31 aircraft will continue at
the level prevailing today from January 1, 1996 through
the expiry date of each Sublease. Seven of those
Subleases are due to expire during 1997, 1998, and
1999, and as each of those Subleases expires CCAIR will
lease one replacement J31 aircraft from JSX through
December 31, 2001 at a rental rate of $21,000 per month
per aircraft ("Replacement Aircraft"). If CCAIR leases
Jetstream 41 aircraft from JSX in the future, CCAIR may
return the Replacement Aircraft to JSX on a one-for-one
basis.
(ii) Incremental Aircraft: CCAIR will commit to lease four
additional J31 aircraft from JSX during the first half
of the calendar year 1996 ("Incremental Aircraft").
The lease for these aircraft will run through December
31, 2001. However, CCAIR shall have a one-time right
to return the aircraft on the first anniversary of the
delivery date. The monthly lease rate for these
aircraft shall be $21,000. In the event that CCAIR
exercises its return right described above, it will pay
JSX a termination fee of $36,000 per aircraft in
addition to all rents due and unpaid at the return
date. For these purposes, aircraft serial number 693
may be considered one of the four aircraft. At any
time after commitment to the full lease term through
December 31, 2001, CCAIR
2
Mr. Kenneth Gann, President & CEO, CCAIR, Inc.
Subject: Bankruptcy Debt Restructuring and Rent Reductions To
End of Lease Term
September 28, 1995
may return the Incremental Aircraft to JSX on a one-
for-one basis if CCAIR leases Jetstream 41 aircraft
from JSX in the future.
(iii) Additional Aircraft: JSX would be willing to lease to
CCAIR, Inc. aircraft additional to the Incremental
Aircraft on the same terms as the Incremental Aircraft,
subject to availability.
C. GENERAL TERMS:
(i) In the context of this letter, we would regard any J32
aircraft added to your fleet as meeting the requirement
for Replacement Aircraft or Incremental Aircraft, but
rentals for J32 aircraft would be at the rate of
$24,000 per month whether leased as Replacement
Aircraft or Incremental Aircraft as described above.
(ii) All aircraft would be leased to you under lease
agreements broadly similar to the ones you already have
but subject to the specific headleases. Return
conditions would be similar to those recently agreed
for aircraft serial number 693. You would of course be
responsible for all maintenance on the aircraft during
the time that they are on lease with you.
(iii) Payments for all aircraft and payments due under the
Promissory Note referred to in Section A hereof, would
be coordinated to fall into the lockbox arrangement.
(iv) Formal documentation of this proposal would provide
that in the event of a merger, consolidation,
acquisition, or other significant changes in the
ownership of CCAIR, the rental reductions contemplated
herein would cease.
(v) Notwithstanding paragraph (ii) of Section A, JSX would
be entitled to dispose of any common stock issued to it
in any manner JSX in its sole discretion sees fit in
the event of a merger, consolidation or other
significant change in the ownership of CCAIR, including
without limitation the issuance of a significant amount
of CCAIR's common stock.
(vi) CCAIR will provide a detailed business plan for its
fiscal years 1996 and 1997 by October 31, 1995.
3
Mr. Kenneth Gann, President & CEO, CCAIR, Inc.
Subject: Bankruptcy Debt Restructuring and Rent Reductions To
End of Lease Term
September 28, 1995
This proposal replaces ours of September 7 and September 14, 1995
and yours of September 11, 1995. When accepted by you, it will
be an agreement between us of the principal terms and conditions
covering the subject matter hereof and JSX and CCAIR further
agree to negotiate in good faith detailed and definitive
agreements with
respect to these matters. If this proposal is acceptable to you
on that basis please so indicate by counter signing it in the
space provided below.
Yours sincerely, Accepted for and on behalf of
CCAIR, Inc.
________________________ ____________________________
David Tomkins Kenneth Gann
Executive Vice President President & CEO
4
EXHIBIT 11
CCAIR, Inc.
COMPUTATION OF EARNINGS PER SHARE
__________
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
1995 1994 1993
<S> <C> <C> <C>
Primary earnings:
Net loss $( 362,123) $(4,755,769) $(2,783,433)
Shares:
Weighted average number of shares outstanding 7,381,729 7,005,957 6,546,927
Assumed exercise of options and warrants (1) ---- ---- ----
Total average number of common and common
equivalent shares used for primary computation 7,630,936 7,005,957 6,546,927
Primary loss per share $( .05) $( .68) $( .43)
Fully diluted net loss $( 362,123) $(4,755,769) $(2,783,433)
Shares:
Weighted average number of shares outstanding 7,381,729 7,005,957 6,546,927
Assumed exercise of options and warrants (1) ---- ---- ----
Total average number of shares assumed to be
outstanding after full conversion 7,819,877 7,005,957 6,546,927
Loss per common share assuming
full dilution $( .05) $( .68) $( .43)
</TABLE>
(1) The effect of including stock options in 1994 and 1993
would be antidilutive and therefore is excluded from the
calculation.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby
consent to the incorporation of our report on the
Company's 1995 and 1994 financial statements and
schedules included in this Form 10-K, into the
Company's previously filed Registration on Form S-8
(Statement File No. 33-58860).
Charlotte, North Carolina, Arthur Andersen LLP
October 12, 1995
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in
the registration statement of CCAIR, Inc. on Form S-8
(File No. 33-58860) of our report dated October 8, 1993
which includes an explanatory paragraph emphasizing
that the Company previously filed a voluntary petition
for protection under Chapter 11 of the United States
Bankruptcy Code, and that a Plan of Reorganization was
confirmed by the Bankruptcy Court effective September
3, 1991, on our audit of the financial statements and
financial statement schedules of CCAIR, Inc. as of and
for the year ended June 30, 1993, which report is
included in this Annual Report on Form 10-K.
Charlotte, North Carolina,
October 12, 1995 COOPERS & LYBRAND LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule Contains Summary Financial Information Extracted From
CCAIR, Inc. Financial Statements for the Fiscal Year and Quarter
Ended June 30, 1995 and is qualified in its entirety by reference to
such Financial Statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 56,995 56,995
<SECURITIES> 0 0
<RECEIVABLES> 5,603,872 5,603,872
<ALLOWANCES> 86,800 86,800
<INVENTORY> 1,784,885 1,784,885
<CURRENT-ASSETS> 9,713,082 9,713,082
<PP&E> 24,764,239 24,764,239
<DEPRECIATION> 12,358,632 12,358,632
<TOTAL-ASSETS> 22,153,231 22,153,231
<CURRENT-LIABILITIES> 10,271,841 10,271,841
<BONDS> 0 0
<COMMON> 74,007 74,007
0 0
0 0
<OTHER-SE> 4,958,698 4,958,698
<TOTAL-LIABILITY-AND-EQUITY> 22,153,231 22,153,231
<SALES> 0 0
<TOTAL-REVENUES> 17,074,071 63,038,700
<CGS> 0 0
<TOTAL-COSTS> 16,777,251 62,485,547
<OTHER-EXPENSES> (18,142) (5,252)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 269,925 920,528
<INCOME-PRETAX> 45,037 (362,123)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 45,037 (362,123)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 45,037 (362,123)
<EPS-PRIMARY> .01 (.05)
<EPS-DILUTED> .01 (.05)
</TABLE>
