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, 1996
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 (ss. 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 20, 1996 was approximately $12,578,629.
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 20, 1996, there were 7,740,695 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, 1996, are incorporated by reference in Part III hereof, as
specified.
<PAGE>
CCAIR, INC.
FISCAL 1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
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................. 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 8
Item 6. Selected Financial Data............................................. 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 9
Item 8. Financial Statements and Supplementary Data.........................17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.......................17
PART III
Item 10. Directors and Executive Officers of the Registrant.........17
Item 11. Executive Compensation.....................................17
Item 12. Security Ownership of Certain Beneficial
Owners and Management.....................................18
Item 13. Certain Relationships and Related Transactions.............18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K................................................18
Index to Financial Statements and Schedules...............F-1
Index to Exhibits.........................................E-1
<PAGE>
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 27 turboprop passenger aircraft with 1,409 weekly departures scheduled over a
route system covering approximately 242,400 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. The Company has fulfilled its obligations with
respect to eleven of the fourteen classes of creditors and has paid total claims
of $2,437,000. The Company has restructured the payments to two of the remaining
classes of creditors and has three annual payments of $166,000 due to the other
remaining class of creditors.
Unless otherwise indicated, references in this Annual Report to years
mean the Company's July 1 to June 30 fiscal years and "fiscal 1996" means the
fiscal year that began on July 1, 1995 and ended on June 30, 1996.
BUSINESS AGREEMENT WITH USAIR
Over 80% 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.
The Agreement provides for coordinating schedules and reservations,
joint fares and advertising. In addition, the Agreement provides that USAir or
its affiliates 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 $354,000 per month.
1
<PAGE>
BUSINESS AGREEMENT WITH USAIR, CONTINUED
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") and PSA
Airlines, Inc.; additionally, USAir affiliate, FloridaGulf Airlines, a division
of Mesa Airlines, Inc. serves the Charlotte/Douglas International Airport. 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. Although USAir has recently
demonstrated significantly improved financial performance, USAir believes that
it must continue to lower its costs in order to compete effectively in a low
fare environment. For the six months ended June 30, 1996 and the year ended
December 31, 1995, USAir Group, Inc. reported net income applicable to common
stockholders of $124 million and $34 million, respectively. USAir Group reported
a net loss applicable to common shareholders of $763 million for the year ended
December 31, 1994.
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.
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.
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 September 20, 1996.
<TABLE>
<CAPTION>
DATE SERVICE FLIGHTS OPERATED
COMMENCED PER WEEKDAY
<S> <C> <C>
Alabama:
Montgomery June 1992 3
Georgia:
Athens May 1985 4
Augusta May 1985 8
Columbus November 1994 4
North Carolina:
Asheville May 1985 4
Charlotte May 1985 85
Greenville May 1985 9
Hickory May 1985 8
Jacksonville May 1995 8
Kinston July 1985 7
Raleigh/Durham May 1985 16
Rocky Mount/Wilson July 1986 6
Southern Pines/Pinehurst October 1991 6
Winston-Salem May 1985 3
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
ROUTES, CONTINUED
DATE SERVICE FLIGHTS OPERATED
COMMENCED PER WEEKDAY
<S> <C> <C>
South Carolina:
Charleston April 1995 4
Greenville/Spartanburg May 1985 7
Kentucky:
Lexington May 1993 5
Maryland:
Baltimore August 1991 3
Ohio:
Cincinnati July 1993 4
Virginia:
Lynchburg May 1995 9
Norfolk February 1995 3
Shenandoah Valley June 1992 5
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 80% 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.
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 of $82.25 in
fiscal 1996. This compared favorably with fares in fiscal 1995 and fiscal 1994,
when the average fare was $72.01 and $69.06, respectively. The depressed fares
in 1994 and the first half 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 fiscal 1996 throughout 1997. However, many factors,
including, but not limited to, competition, actions by USAir, fuel costs,
regulation, and general economic conditions can impact fares charged by the
Company.
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 $3.0 million from British
Aerospace Asset Management Turboprops ("AMT") an affiliate of British Aerospace,
Inc. ("BAI").
3
<PAGE>
WORKING CAPITAL, CONTINUED
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 AMT 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.
Due to the timing of the Airlines Clearing House settlement in June,
the Company held the net Clearing House funds in its Clearing House bank account
on June 30, 1996. Therefore, the Company's balance sheet at June 30, 1996
reflects the net Clearing House settlement of $5,023,000 as cash. The
obligations to the BAI affiliates described above were reflected as current
liabilities on the June 30, 1996 balance sheet and paid on July 1, 1996.
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. 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
and Raleigh/Durham. From these hub airports, Delta Air Lines ("Delta") 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 and Midway 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 and Midway. 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.
EMPLOYEES
As of June 30, 1996, the Company had 639 employees. These employees
included 186 pilots and copilots, 49 flight attendants, 278 customer service
personnel, 73 maintenance personnel and 53 other management, administrative,
accounting and marketing personnel.
4
<PAGE>
FUEL
Fuel costs constitute 9% to 10% 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 Company became obligated to pay the 4.3(cent) per
gallon Federal Excise Tax on transportation fuels on October 1, 1995. Airlines
had a three-year exemption from this tax, which became law during 1992. Since
the airline exemption expired, various attempts have been made to either rescind
this tax or reinstate the airline exemption. These efforts have been
unsuccessful to date. The Company cannot predict the ultimate outcome of future
attempts to either rescind the tax or reinstate the airline exemption. The
Company estimates that this tax will result in additional operating expenses of
approximately $370,000 for fiscal 1997 based on its current projected aviation
fuel consumption. The Company recognized expense of approximately $275,000 as a
result of this tax during fiscal 1996.
Fuel prices have experienced significant increases due to market
fluctuations, resulting in increased costs per gallon for the Company. However,
the Company is currently in negotiations with other providers of fuel in an
effort to achieve a more favorable unit price. As fuel expense is currently only
9.6% of operating expenses, the Company does not believe it is cost effective to
attempt to manage fuel price risk. As such, no derivatives or other off-balance
sheet instruments 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.
The Company has complied with all equipment requirements currently
mandated by the FAA. The installation of aircraft collision avoidance systems
("TCAS") on the Jetstream 31 aircraft in December, 1995 concluded a three-year
project of installing the TCAS and ground proximity warning systems in the
entire fleet. This project cost approximately $1,400,000, of which approximately
$375,000 was expended in fiscal 1996.
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.
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 has received subsidy
payments under the EAS Program for Danville and Shenandoah Valley, Virginia. DOT
subsidy payments accounted for approximately 0.5% percent of the Company's
revenues in fiscal 1996. Under provisions in the EAS Program, the Company ceased
service to Danville in October, 1995 and ceased to receive subsidized
compensation in Shenandoah Valley effective July, 1996 and thus anticipates no
EAS revenue during fiscal 1997.
5
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Kenneth W. Gann 57 Director, President and Chief Executive Officer from November, 1990 to present.
Eric W. Montgomery 37 Vice President of Finance from February, 1995 to present; Secretary from February,
1995 to present.
Peter J. Sistare 33 Vice President of Operations from December, 1993 to present.
</TABLE>
ITEM 2. PROPERTIES
GROUND FACILITIES
The Company presently occupies approximately 10,325 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 $163,000 and are
cancelable upon thirty (30) days notice by either party.
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.
PASSENGER AIRCRAFT
The Company presently services its passenger route system with a fleet
of 27 leased turboprop aircraft. The following table sets forth certain
information with respect to the Company's passenger aircraft as of September
1996:
<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> <C> <C> <C>
Shorts 360 9 36 250 220 8.5
Jetstream 31 14 19 350 270 10.2
Dash 8 4 37 450 290 6.2
</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 eight years and the Jetstreams extending
for a maximum of six 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.
6
<PAGE>
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 8,000 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
None reportable.
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 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
FISCAL 1996 HIGH LOW
First Quarter 3 15/16 2 1/4
Second Quarter 2 5/8 1 7/8
Third Quarter 2 3/8 1 1/2
Fourth Quarter 2 3/8 1 5/8
7
<PAGE>
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS, continued
At September 20, 1996 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 1995 and 1996 fiscal years, the Company did not pay cash
dividends on its common stock. Based upon its forecast for fiscal 1997, the
Company does not plan to pay cash dividends in fiscal 1997.
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT INCOME
PER SHARE)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Operating revenues:
Passenger $64,482 $60,804 $60,063 $61,296 $51,678
Public service 353 695 814 724 676
Other 1,399 1,540 1,215 1,159 820
------- ------- ------- ------- --------
Total operating revenues 66,234 63,039 62,092 63,179 53,174
------- ------- ------- ------- -------
Operating expenses:
Flight operation 23,490 22,416 25,586 24,131 16,439
Fuel and oil 6,262 5,406 5,202 5,858 4,769
Maintenance materials, repairs
and overhead 12,566 11,619 11,270 11,448 10,364
Ground operations 7,839 7,391 9,026 8,100 6,775
Advertising, promotion and
commissions 9,104 9,007 8,921 9,745 7,876
General and administrative 4,273 4,802 4,369 3,821 4,749
Depreciation and amortization 1,814 1,845 1,595 1,446 1,268
Loss from write-off of
preoperating costs 684
----------- ----------- ----------- --------- --------
Total operating expenses 65,347 62,486 65,969 65,233 52,240
------- ------- ------- ------- -------
Operating income (loss) 886 553 (3,877) ( 2,054) 934
Interest expense ( 761) ( 920) ( 819) ( 789) ( 394)
Other income (expense), net ( 11) 5 ( 60) 60 ( 283)
--------- --------- --------- --------- --------
Income (loss) before income taxes 114 ( 362) (4,756) ( 2,783) 257
Provision for income taxes 18 --- --- --- ---
--------- ----------- --------- ------------ --------
Income (loss) before
extraordinary item 96 ( 362) (4,756) ( 2,783) 257
Extraordinary item, gain on debt
restructuring --- --- --- --- 6,098
---------- ----------- ---------- ------------ --------
Net income (loss) $ 96 $( 362) $(4,756) $(2,783) $ 6,355
======== ======== ======= ======= =======
Income (loss) per share:
Income (loss) before extraordinary item $ .01 $( .05) $( .68) $( .43) $ .04
Extraordinary item --- --- --- --- .93
---------- ----------- ----------- ------------ --------
Net income (loss) $ .01 $( .05) $( .68) $( .43) $ .97
======= ======== ======== ======== =======
Weighted average common and
common equivalent shares
outstanding 7,633 7,382 7,006 6,547 6,581
====== ====== ====== ======= =======
Cash dividends declared
per common share - - - - - - - - - -
========== ========== ========== ========== ========
</TABLE>
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT INCOME PER
SHARE), CONTINUED
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance sheet data:
Current assets $14,165 $ 9,713 $11,242 $11,458 $12,677
Current liabilities 15,525 10,272 11,937 7,850 6,956
Net property and
equipment 12,332 12,406 13,337 12,283 9,508
Total assets 27,130 22,153 24,629 23,793 22,945
Long-term debt, less
current portion (1) 4,010 4,876 5,902 6,866 4,339
Shareholders'
equity 5,837 5,032 5,372 7,320 9,680
</TABLE>
(1) See Note 5 to financial statements regarding certain capital lease
obligations which are included in long-term debt in this schedule.
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 1996, 1995 and 1994.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Operating revenue (000) $66,234 $63,039 $ 62,092
Operating expense (000) 65,347 62,486 65,969
Revenue passengers carried 783,997 844,421 869,742
Revenue passenger miles (000) (1) 144,695 142,499 148,943
Available seat miles (000) (2) 311,967 305,388 289,452
Passenger load factor (3) 46.4% 46.7% 51.5%
Passenger breakeven load factor 46.3% 46.9% 56.5%
Yield per revenue passenger mile (4) 44.5(cent) 42.7(cent) 40.3(cent)
Operating cost per available seat mile 20.9(cent) 20.5(cent) 22.8(cent)
Average passenger trip (miles) 183.9 168.7 171.2
Average daily aircraft utilization
per plane (block hours) 8.0 8.2 7.4
Average passenger fare $82.25 $72.01 $ 69.06
Average completion factor 95.1% 95.1% 95.8%
</TABLE>
(1) One revenue passenger transported one mile.
(2) The product of the number of aircraft miles and the number of
available seats on each stage, representing the total
passenger capacity offered.
(3) The ratio of revenue passenger miles to available seat miles,
representing the percentage of seats occupied by revenue
passengers.
(4) The passenger revenue per revenue passenger mile.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS, CONTINUED
The following table sets forth selected operating data relating to the
Company's passenger service for each quarter of fiscal year 1996 (see Note 12):
<TABLE>
<CAPTION>
1996 QUARTERLY DATA
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C>
Operating revenue (000) $16,230 $16,045 $15,790 $18,169
Operating income (loss) (000) 539 228 310 ( 191)
Net income (loss) (000) 379 39 70 ( 392)
Earnings (loss) per share .05 .01 .01 ( .05)
Passengers carried 195,895 193,340 169,489 225,273
Revenue passenger miles (000) 34,722 36,023 32,242 41,707
Available seat miles (000) 80,044 78,381 72,420 81,122
Passenger load factor 43.4% 46.0% 44.5% 51.4%
Passenger breakeven load factor 42.4% 45.9% 44.3% 52.5%
Yield per revenue passenger mile 45.3(cent) 43.6(cent) 47.0(cent) 42.8(cent)
Average passenger trip (miles) 177.2 186.3 190.2 185.1
Average passenger fare $ 80.33 $ 81.28 $ 89.45 $ 79.33
Operating cost per available
seat mile 19.6(cent) 20.2(cent) 21.4(cent) 22.6(cent)
</TABLE>
Fourth quarter results include adjustments for third quarter estimates.
These estimates related to maintenance expenses, USAir service fee expenses and
property tax recoveries. After expenses based on third quarter estimates were
finalized in the fourth quarter, third quarter maintenance expenses were
understated by $420,000 and USAir service fees were understated by $150,000. In
addition, after final negotiations with taxing authorities were concluded in the
fourth quarter, the savings realized from property tax reevaluations originally
anticipated in the third quarter were reduced by $90,000.
FISCAL 1996
The operating results for fiscal 1996 continued the positive trend from
fiscal 1995. Passenger revenues increased 6.0%, attributable to the improved
yield per revenue passenger mile of 44.5(cent) in fiscal 1996 from 42.7(cent) in
fiscal 1995. The result of these overall improvements is a current year
operating income of $886,000 and a net income of $96,000 versus operating income
of $553,000 and a net loss of $362,000 in fiscal 1995. Operating expense
increases of 4.6% partially offset the revenue improvement.
Annual revenues for the 1996 and 1995 fiscal years were $66,234,000 and
$63,039,000, respectively. The 5.1% increase over the prior year was due to the
absence of low-fare competitors in the Company's markets and to continued
industrywide fare growth. Additionally, in February, 1996 the Company
implemented local market fares for travel between Company-controlled
destinations, thus stimulating travel and increasing revenues. Revenues were
significantly hampered, however, by inclement weather in the Company's operating
area during the third quarter of 1996. Severe winter storms caused the
cancellation of approximately 1,200 flights during this quarter. As a result,
the Company estimates that operating revenues were adversely impacted by
approximately $1,100,000. Harsh weather in the northeast section of the United
States caused further revenue losses as connecting passengers with reservations
on the Company's flights were unable to initiate their trips. The Company
experienced yield erosion in the months of May and June, 1996. The yield
declined from 44.4(cent) in April to 42.5(cent) in May and 41.7(cent) in June.
While some slippage in yield is normal, the presence of low-cost/low fare
competitors in the Company's service area exacerbated the negative effects.
While these pressures have subsided in the first quarter of fiscal 1997, yield
fluctuations can be volatile and as such cannot be predicted.
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
RESULTS OF OPERATIONS, CONTINUED
FISCAL 1996, CONTINUED
Available seat miles increased 2.2% over fiscal 1995. The growth is
primarily due to increased daily service to longer-haul markets, including
Columbus, Georgia, Lexington, Kentucky and Lynchburg, Virginia, increasing total
weekday departures to 216 from 213 in fiscal 1995. The Company, while able to
implement changes in its flight schedule after receiving the consent of USAir,
has limited control over the cities it serves as a USAir Express carrier. The
Company is not aware of schedule changes being contemplated that would have a
significant impact on operations.
While the number of revenue passengers carried decreased by 7.2%,
revenue passenger miles increased 1.6% as compared to fiscal 1995 as a result of
changes to the Company's service schedule. Because the low-fare competition of
Continental Lite in 1995 was not present in 1996 to depress fares, the Company
was able to maintain higher average ticket prices of $82.25 in fiscal 1996
versus $72.01 in fiscal 1995, thus increasing yield per revenue passenger mile
to 44.5(cent), an increase of 4.2% over 1995.
Operating costs per available seat mile increased from 20.5(cent) to
20.9(cent) for fiscal 1995 to 1996. Contributing factors include increases in
fuel costs, pilot training expenses, USAir fees and engine overhaul expenses. A
portion of these increases were offset by cost reductions recognized in the
Company's aircraft hull insurance, professional fees and property tax expenses.
Flight operations expense increased 4.8% to $23,490,000 in 1996,
compared to $22,416,000 in fiscal 1995. In fiscal 1995 reductions in aircraft
lease rates were achieved through negotiations with lessors, which the Company
continued receiving the benefit of in fiscal 1996. Additionally, more favorable
hull insurance rates and reductions in the insured value of the Company's
aircraft yielded a decrease in hull insurance expense of 12.9% or $228,000 as
compared to 1995. Several factors impacted the pilot salaries, resulting in
escalations from $7,428,000 in fiscal 1995 to $8,512,000 in 1996, a 14.6%
increase. Pilot turnover in the fourth quarter was exceptionally high due to
recruiting and hiring by the major airlines. Because the internal pilot reserve
was depleted, the Company incurred significant training costs in order to
maintain necessary crew levels. Additionally, during the period of crew
shortages, flight lines were being covered by existing pilot crews at the higher
pay rates due to overtime. The effect of these factors in the fourth quarter of
1996 as compared to the same period of 1995 is an increase in salaries and
training costs of $480,000, or 30.2%. Furthermore, the final two increases under
the pilot salary reduction plan were phased in during October, 1995 and
February, 1996. Under the plan negotiated with the Air Line Pilots Association
("ALPA"), pilot salaries were initially reduced by 16% in October, 1994, with 4%
of the original concession being reinstated after each subsequent four-month
period. Flight attendant salaries increased 6.3% or $62,000 over the previous
fiscal year due to scheduled service increases.
Crew travel expenses, encompassing meal allowances and accommodations,
remained relatively unchanged at $1,280,000 and $1,366,000 from fiscal year end
1995 to 1996, respectively. In April, 1996 four new crew bases were established
in Lynchburg, Virginia, Cincinnati, Ohio, Lexington, Kentucky and Kinston, North
Carolina, placing a total of 14 crews at these locations. While crew bases are
designed to reduce crew travel expenses, the savings were not evident for the
fiscal year ended June 30, 1996 because of expenses associated with moving the
crews. The Company estimates that it will recognize a savings of approximately
$250,000 in fiscal 1997 related to the establishment of additional crew bases.
Fuel and oil expenses are sensitive to market fluctuations in price and
ASMs flown. As previously discussed, ASMs grew by only 2.2% over the prior year.
However, the escalation of market prices of fuel significantly affected the
current year's fuel expense. Fuel expenditures totaled $5,406,000 in fiscal
1995, representing an increase of 15.8% to $6,262,000 in 1996, when the average
price per gallon of fuel increased from 67.1(cent) to 75.8(cent). Total fuel
consumption was 8.3 million gallons versus 8.1 million gallons in fiscal years
1996 and 1995, respectively. The increase between years was directly related to
the increased service schedule. Fuel expense for 1996 includes the 4.3(cent) per
gallon federal excise tax on transportation fuels which the Company became
obligated to pay on October 1, 1995. As fuel expense is only 9.6% of total
operating expenses, the Company does not believe it is cost effective to attempt
to manage fuel price risk, thus no derivatives or other off-balance sheet
instruments are used for hedging purposes.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Results of Operations, continued
FISCAL 1996, CONTINUED
Maintenance materials, repairs and overhead experienced an 8.2%
increase over the previous year, from $11,619,000 to $12,566,000 in fiscal 1996.
The escalation was due exclusively to the increase in annual amortization of
engine and gear overhauls from $3,496,000 in 1995 to $4,393,000 in 1996. From
March, 1995 through the end of fiscal 1996, expenditures related to overhauls of
Dash 8 airframe and engine components were $1,509,000, with amortization lives
ranging from 11 to 48 months. Amortization of these overhaul additions was the
principal factor in the increase in overhaul expense for the fiscal year ended
1996.
Ground operations expense increased 6.1% over 1995, as expenses went
from $7,386,000 to $7,839,000. The principal factor in the higher expenses is
the increase in USAir handling fees that the Company pays as a result of USAir
handling the Company's passengers in certain markets. These handling fees have
increased as follows: March, 1994 $5.70 per passenger, March, 1995 $6.20 per
passenger, July, 1995 $6.50 per passenger and January, 1996 $7.75 per passenger.
The increase in handling fees has been mitigated by the schedule changes which
enable the Company to handle more of its own traffic and the Company's
reimbursement rate for operating Concourse D which increased to $354,000 in
January, 1996. The Company cannot predict the timing or extent of any future
passenger handling fee adjustments. Inclement weather in the winter months
caused an additional $200,000 in aircraft servicing charges in fiscal 1996 as
compared to 1995, as deicing fluid purchases drastically increased.
Advertising, promotion and commissions expense decreased from 14.8% of
passenger revenue in fiscal 1995 to 14.1% of passenger revenue in 1996. The
reason for this decrease was the revised rate structure for commissions paid to
travel agencies, which went into effect during March, 1995. Commissions paid on
travel agency-generated tickets decreased from an average of 10.0% in 1995 to
8.9% in 1996. As approximately 80% of tickets collected by the Company are
written by travel agencies, the 1996 savings from this structure change was
approximately $575,000. Partially offsetting this reduction was an increase in
reservations fees charged by USAir. On January 1, 1996, the reservations fee
charged changed to a new fee structure resulting in an additional $360,000 in
expense ($.90 per passenger) during the last two quarters of the 1996 fiscal
year over fees which would have been paid under the old structure. The Company
cannot predict the timing or extent of any future reservations fee adjustments.
Total general and administrative expenses decreased 11.0% or $529,000
from 1995 to 1996. Contributing to this decrease were reductions in professional
fees incurred and property tax assessment adjustments. Professional fees were
lower due to the absence of extensive lease and union negotiations that were
present during prior years. Property tax assessments have been reduced as of the
tax year beginning January 1, 1996, going forward through the revaluation of the
aircraft fleet to market value as of the date of filing (January 1, 1996) in the
Company's most significant ad valorem taxing district, North Carolina. This
revaluation and other property tax adjustments resulted in savings in calendar
1996 of $200,000. The Company intends to refile personal property returns for
the years available under local statutes (1991-1995), and anticipates refunds of
$200,000 related to property reclassifications. Such refunds will be recorded as
a reduction of general and administrative expense in the period in which they
are received.
Depreciation and amortization decreased slightly from $1,845,000 in
fiscal 1995 to $1,814,000 in 1996, as asset additions for rotable flight
equipment, ground equipment and leasehold improvements were minimal in the
current year, and thus little depreciation was generated on current-year
property additions.
In fiscal 1996, recognition of net operating loss carryforwards offset
income tax expense at the statutory rate, but the Company's effective federal
income tax rate was 15.9%, which reflects the impact of the alternative minimum
tax on operations. Income tax expense was thus $18,100 versus $0 in 1995. At
June 30, 1996 the Company had approximately $7,777,000 of United States Federal
regular tax operating loss carryforwards available to offset future taxable
income. These carryforwards begin expiring on June 30, 2005.
The estimates of future results included above are based upon present
information regarding operations and future trends. While the Company believes
that the estimates constitute its best judgment on future results, the actual
results may differ materially from the estimates.
12
<PAGE>
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) in fiscal 1994 to
42.7(cent) 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.
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) to 20.5(cent), 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 was reinstated until February 1996, at which time the salaries
reverted 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.
13
<PAGE>
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. 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) in 1995 from 68.3(cent) in 1994, reflecting the
continued savings to the Company from the purchase of fuel through a USAir
subsidiary. 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) compared
to 3.9(cent) 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.
14
<PAGE>
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) 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) to 22.8(cent), 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.
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 1996 the
Company satisfied its cash requirements through internally generated funds and
borrowings under a revolving line of credit agreement with an affiliate of an
aircraft manufacturer, 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
lease payments pursuant to note agreements to satisfy its cash needs.
In September, 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 issued 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.
Additionally, the remaining balance due under the bankruptcy plan of $690,000
was satisfied in December, 1995 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. In conjunction with this agreement, the Company agreed to accept
delivery of four used Jetstream 31 aircraft prior to June 30, 1996. Two
Jetstream 31 aircraft were delivered in fiscal 1996. This agreement was modified
in September, 1996, and any further commitment for future additional aircraft
beyond the two already accepted was eliminated.
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
LIQUIDITY AND CAPITAL RESOURCES,CONTINUED
RESTRUCTURING
In September, 1996, the Company made the bankruptcy payment of $166,000
due to the unsecured creditors. After the bankruptcy installments due in
September, 1996, the Company has payments to unsecured creditors of $166,000 due
annually each August until 1999. The Company intends to make these payments when
due.
During fiscal 1996 the Company had available a line of credit (the
"Line") in an amount not to exceed $2,500,000 from British Aerospace Asset
Management Turboprops ("AMT"). AMT 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 AMT 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, 1996,
but must extended by AMT for successive one year periods until December 31,
2001. Subsequent to June 30, 1996, AMT committed to increase the maximum credit
available to $3,000,000.
OTHER FINANCING
During fiscal 1996, the Company obtained several short-term loans from
certain directors and officers. Amounts borrowed under these loans ranged from
$50,000 to $400,000, and earned interest at the rate of ten percent. The
aggregate maximum and average amounts outstanding under these loans were
$810,000 and $119,000, respectively. In connection with these loans, the Company
issued to the lending parties options or warrants to purchase 69,625 shares of
the Company's common stock.
CAPITAL EXPENDITURES
Capital expenditures consist of major component overhauls and fixed
asset replacement. Capital expenditures in fiscal 1996 were $6,169,000 as
compared to $5,437,000 in fiscal 1995. The increase is primarily due to
increased expenditures for engine overhauls on the Dash 8 aircraft. The Company
projects fiscal 1997 capital expenditures to be approximately $5,900,000. The
components of the 1997 capital budget are $5,200,000 of engine overhauls,
$500,000 of airframe and landing gear overhauls on the Company's aircraft and
$200,000 for other capital items.
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 AMT 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.
The Company received with the June Airlines Clearing House ("ACH")
payment on the scheduled settlement date of June 28, 1996. However, because the
first business day subsequent to receipt of funds was July 1, 1996, the Company
maintained possession of the full settlement amount of $5,023,000 as of June 30,
1996. Ordinarily, AMT accesses the settlement on the first business day
subsequent to the transfer utilizing amounts necessary to satisfy the Line of
Credit balance ($2,500,000 plus interest of $20,000 at June 30, 1996) and
accrued aircraft lease payments due to JACO ($351,000) returning the remaining
cash funds to the Company's account. Other short-term liabilities not settled
from the residual funds on July 1, 1996 included outstanding loans from Company
Directors and Officers in the amount of $810,000. Because of the timing of the
ACH settlement, the Company also delayed its June 28, 1996 employee payroll to
July 1, 1996. Also, accounts payable reflect an increase of $1,488,000 over June
30, 1995 from $4,058,000 to $5,546,000 as of June 30, 1996.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, CONTINUED
Liquidity and Capital Resources, continued
OPERATING CASH FLOW, continued
Accounts receivable increased to $5,937,000 in fiscal 1996 from
$5,517,000 in fiscal 1995. The increase is attributable to greater passenger
revenue in June, 1996 versus June, 1995 resulting from increased passenger
traffic plus an increase in subcontracted handling fees billed to USAir.
Related party receivables went from $1,000,000 in fiscal 1995 to $0 in
1996 as the receivable amount of $1,000,000 recorded in June, 1995 related to
the sale and leaseback of certain aircraft engines was received in July, 1995.
This sale and leaseback transaction was with a partnership consisting of various
members of the Company's Board of Directors.
Other noncurrent assets increased from $35,000 in fiscal 1995 to
$632,000 in 1996 as prepayments for engine overhauls expected to be completed in
a time period greater than the next twelve months increased by $595,000 over the
respective balance sheet dates.
Accounts payable increased to $5,546,000 in fiscal 1996 as compared to
$4,058,000 in fiscal 1995 due to the extension of terms with trade creditors and
the timing of payments. Notes payable, including current maturities, decreased
from $3,338,000 in fiscal 1995 to $2,226,000 in 1996 due to the issuance of
stock to satisfy $691,000 in long-term debt and scheduled debt payments.
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
17
<PAGE>
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.
18
<PAGE>
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: September 27, 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, September 27, 1996
- ---------------------------- Chief Executive Officer, President
Kenneth W. Gann (Principal Executive Officer)
/s/ Eric W. Montgomery Vice President of Finance; September 27, 1996
- --------------------------- (Principal Financial Officer,
Eric W. Montgomery Principal Accounting Officer)
/s/ John A. Adams Director September 27, 1996
- -----------------------------
John A. Adams
/s/ K. Ray Allen Director September 27, 1996
- --------------------------------
K. Ray Allen
/s/ Gordon Linkon Director September 27, 1996
- ------------------------------
Gordon Linkon
/s/ Dean E. Painter, Jr. Director September 27, 1996
- ------------------------------
Dean E. Painter, Jr.
</TABLE>
19
<PAGE>
CCAIR, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
PAGE NO.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
FINANCIAL STATEMENTS:
Balance Sheets as of June 30, 1996 and 1995 F-3
Statements of Operations for the Years ended June 30,
1996, 1995 and 1994 F-4
Statements of Changes in Shareholders' Equity for the Years
ended June 30, 1996, 1995 and 1994 F-5
Statements of Cash Flows for the Years ended
June 30, 1996, 1995 and 1994 F-6
Notes to Financial Statements F-7-F-16
FINANCIAL STATEMENT SCHEDULE:
II Valuation and Qualifying Accounts for the Years ended
June 30, 1996, 1995 and 1994 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
<PAGE>
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, 1996 and 1995, and the related statements
of operations and changes in shareholders' equity and cash flows for each of the
three years in the period ended June 30, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of CCAIR, Inc. as of
June 30, 1996 and 1995, and the results of its operations and its cash flows for
each of the three years in the period ended June 30, 1996, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to
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
September 27, 1996.
F-2
<PAGE>
CCAIR, INC.
BALANCE SHEETS
JUNE 30, 1996 AND 1995
-------------------------
<TABLE>
<CAPTION>
ASSETS 1996 1995
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,059,665 $ 56,995
Receivables, principally traffic,
less allowance for doubtful
receivables of $50,000 in 1996
and $86,800 in 1995 5,937,222 5,517,072
Related party receivable (Note 8) -0- 1,000,000
Inventories, less allowance for
obsolescence of $466,000 in 1996
and 1995 1,758,453 1,784,885
Prepaid expenses 1,410,113 1,354,130
----------- -----------
Total current assets: 14,165,453 9,713,082
----------- -----------
Property and equipment, at cost:
Flight equipment and leasehold improvements 20,700,870 20,380,436
Ground and other property and equipment 4,135,574 4,383,803
----------- -----------
24,836,444 24,764,239
Less accumulated depreciation
and amortization (12,504,463) (12,358,632)
----------- -----------
12,331,981 12,405,607
----------- -----------
Other noncurrent assets 632,244 34,542
----------- -----------
Total assets $27,129,678 $22,153,231
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities
of long-term debt $ 854,438 $ 1,475,047
Short-term borrowings 3,310,000 100,000
Current obligations under capital leases 373,266 350,377
Accounts payable 5,546,146 4,058,097
Accrued expenses 5,441,201 4,288,320
----------- -----------
Total current liabilities 15,525,051 10,271,841
Long-term debt, less current maturities 1,371,328 1,863,371
Capital lease obligations, less current
obligations 2,638,967 3,012,217
Deferred credits, net of amortization of
$1,805,462 in 1996 and $1,380,735 in 1995 1,757,436 1,973,097
----------- -----------
Total liabilities 21,292,782 17,120,526
----------- -----------
Commitments and contingencies (Notes 5, 7
and 11)
Shareholders' equity:
Common stock, $.01 par value, 10,000,000 shares
authorized, 7,740,695 and 7,400,695 issued and
outstanding at June 30, 1996 and 1995,
respectively 77,407 74,007
Additional paid-in capital 17,725,184 17,020,148
Accumulated deficit (11,965,695) (12,061,450)
----------- -----------
Total shareholders' equity 5,836,896 5,032,705
----------- -----------
Total liabilities and
shareholders' equity $27,129,678 $22,153,231
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part
of these balance sheets.
F-3
<PAGE>
CCAIR, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
------------------------
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Operating revenue:
Passenger $64,482,156 $60,804,001 $60,062,853
Public service 352,888 695,047 814,192
Other, principally freight
and charter 1,398,657 1,539,652 1,215,382
----------- ----------- -----------
66,233,701 63,038,700 62,092,427
----------- ----------- -----------
Operating expenses:
Flight operations 23,490,322 22,415,288 25,586,446
Fuel and oil 6,261,716 5,406,055 5,202,135
Maintenance materials and repairs 12,565,634 11,619,432 11,269,951
Ground operations 7,838,926 7,390,643 9,025,532
Advertising, promotion and
commissions 9,104,225 9,006,992 8,920,815
General and administrative 4,273,030 4,802,454 4,369,407
Depreciation and amortization 1,813,533 1,844,683 1,594,812
----------- ----------- -----------
65,347,386 62,485,547 65,969,098
----------- ----------- -----------
Operating income (loss) 886,315 553,153 (3,876,671)
Interest expense ( 761,433) ( 920,528) ( 819,519)
Other income (expense), net ( 11,027) 5,252 ( 59,579)
----------- ----------- -----------
Income (loss) before
income taxes 113,855 ( 362,123) (4,755,769)
Provision for income taxes ( 18,100) -0- -0-
----------- ----------- ------------
Net income (loss) $ 95,755 $( 362,123) $(4,755,769)
=========== =========== ===========
Income (loss) per common share $ .01 $( .05) $( .68)
=========== =========== ===========
Weighted average common and common
equivalent shares outstanding 7,969,314 7,381,729 7,005,957
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-4
<PAGE>
CCAIR, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
-------------------------
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ----- ------- -------- -----
<S> <C> <C> <C> <C> <C>
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
Net income ---- --- ---- 95,755 95,755
Issuance of stock to lessor 325,000 3,250 687,375 ---- 690,625
Exercise of options 15,000 150 17,661 ---- 17,811
--------- ------- ----------- ------------ ----------
Balances, June 30, 1996 7,740,695 $77,407 $17,725,184 $(11,965,695) $5,836,896
========= ======= =========== ============ ==========
</TABLE>
The accompanying notes to financial statements are an integral part
of these statements.
F-5
<PAGE>
CCAIR, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
------------------------
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 95,755 ( 362,123) $(4,755,769)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Note discount amortization 201,503 328,238 376,825
Depreciation and amortization 6,206,823 5,388,356 4,792,962
Lease expense in excess of payments 20,496 696,788 ----
Loss on disposal of assets 31,855 36,902 58,310
Changes in certain assets
and liabilities:
Receivables, net 579,850 ( 272,290) (1,886,218)
Inventories, net 26,432 407,334 89,941
Accounts payable 1,488,049 1,046,894 1,569,749
Accrued expenses 1,152,881 ( 562,790) 3,332,579
Other note payable ---- ( 801,000) 801,000
Other changes, net ( 889,841) 1,594,916 (1,458,643)
----------- ----------- -----------
Net cash provided by
operating activities 8,913,803 7,501,225 2,920,736
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (6,169,304) (5,437,286) (4,887,696)
Proceeds from sale of assets 4,250 44,539 23,255
----------- ----------- -----------
Net cash used in
investing activities (6,165,054) (5,392,747) (4,864,441)
----------- ----------- -----------
Cash flows from financing activities:
Issuance of common stock 17,811 23,157 274,125
Issuance of notes and long-term debt 530,281 620,211 3,507,351
Short-term borrowings, net 3,210,000 100,000 ( 91,340)
Reductions of notes and long-term debt,
including payments under capital
lease obligations (1,504,171) (3,445,871) (3,840,568)
----------- ----------- -----------
Net cash provided (used)
by financing activities 2,253,921 (2,702,503) ( 150,432)
----------- ----------- -----------
Net increase (decrease) in cash 5,002,670 ( 594,025) (2,094,137)
Cash, beginning of period 56,995 651,020 2,745,157
----------- ----------- -----------
Cash, end of period $ 5,059,665 $ 56,995 $ 651,020
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of
these financial statements.
F-6
<PAGE>
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:
NATURE OF OPERATIONS 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,
1996 and 1995, inventories included approximately $357,000 and
$380,000, respectively, of parts held for resale, net of a $158,000
reserve for obsolescence.
PREPAID EXPENSES - Prepaid expenses include prepaid insurance and
prepaid maintenance (see "Maintenance" section of Note 1 for additional
discussion).
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:
Flight equipment, excluding spare engines
and major overhauls 10 years
Ground and other property and equipment 3-10 years
F-7
<PAGE>
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). The Company has entered into two maintenance agreements
under which the Company prepays 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, 1996
and 1995, approximately $1,132,000 and $553,000, respectively, has been
prepaid under the agreements, of which approximately $537,000 and
$553,000 is included in prepaid expenses on the accompanying 1996 and
1995 balance sheets. The remaining $595,000 is included in other
noncurrent assets in the accompanying 1996 balance sheet as it relates
to overhauls that management expects not to occur within the next
twelve months.
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 (see Note 5).
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 9).
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amount of the
Company's financial instruments approximates fair value at June 30,
1996 and 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.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATIONS - Certain amounts included in prior years' financial
statements have been reclassified to conform with 1996 presentation.
F-8
<PAGE>
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
--------------------
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.
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 7).
F-9
<PAGE>
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 regional 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>
1996 1995 1994
----------- ----------- -------
<S> <C> <C> <C>
Service fees expense $ 5,550,962 $ 4,839,916 $ 5,604,302
Passenger revenue receivable 4,992,157 4,878,676 4,426,969
Amounts payable 1,351,120 1,660,404 1,564,510
</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, 1996 and
the years ended December 31, 1995 and 1994, USAir reported net income
(losses) applicable to common stockholders of approximately
$124,000,000, $34,000,000 and ($763,000,000), respectively.
4. ACCRUED EXPENSES
Accrued expenses by major classification are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- -------
<S> <C> <C>
Salaries and wages, vacation pay
and related payroll taxes $2,505,445 $1,974,675
Accrued ground and passenger charges 1,677,384 1,660,065
Accrued property and excise taxes 330,423 400,176
Accrued leases 898,233 240,621
Other accrued expenses 29,716 12,783
---------- ----------
$5,441,201 $4,288,320
========== ==========
</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 $11,200,000, $10,934,000, and $13,800,000
for the years ended June 30, 1996, 1995 and 1994, 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 $4,498,000 is included in property and equipment, less
accumulated amortization at June 30, 1996 and 1995 of approximately
$2,485,000 and $2,031,000, respectively.
F-10
<PAGE>
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 approximately $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 July, 1995, the Company did not make a lease payment due Shorts
amounting to $306,000. The Company and Shorts are currently negotiating
the settlement of this liability. While the terms are indefinite, the
Company has recorded the lease payment as a current liability.
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 also committed to lease two additional Jetstream
31 aircraft during 1995, which were leased by the Company in June and
December, 1995. The lease terms for the additional aircraft expire in
December, 2001. The Company has accounted for the modifications to the
JACO lease agreements as they have occurred. As a result, the Company
recorded a deferred credit of approximately $906,000, representing the
excess of rent expense recorded on a straight line basis over actual
payments made from September, 1994 through September, 1995. This amount
will reduce lease expense over the remaining term of the leases. At
June 30, 1996 $717,000 (net of amortization of $189,000) of such excess
rent expense is included in deferred credits on the accompanying
balance sheets.
Future minimum lease payments required under capital and noncancelable
operating leases with terms of greater than one year, under these new
lease agreements, are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
Years Ended June 30: LEASES LEASES
---------- ---------
<S> <C> <C>
1997 563,525 10,889,544
1998 463,567 10,819,244
1999 342,588 10,512,058
2000 347,722 10,424,640
2001 374,580 9,542,620
Thereafter 2,062,829 24,781,810
---------- ------------
Total lease payments 4,154,811 $ 76,969,916
============
Less amounts representing interest 1,142,578
----------
3,012,233
Less current obligations 373,266
$2,638,967
==========
</TABLE>
6. SHORT-TERM BORROWINGS
In February, 1995, the Company obtained a line of credit (the "Line of
Credit") in an amount not to exceed $2,500,000 from British Aerospace
Asset Management Turboprops ("AMT"), formerly JSX Capital Corporation.
AMT 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.
F-11
<PAGE>
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
--------------------
6. SHORT-TERM BORROWINGS, CONTINUED
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 AMT shall determine, but in no event more than $2.5
million. Subsequent to June 30, 1996, AMT agreed to increase the
maximum credit available to $3 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, 1996, but must be extended by AMT
pursuant to the BAI term sheet agreement entered into during the
bankruptcy period. Under this agreement, the Line of Credit may not be
terminated until the termination date of the last remaining aircraft
sublease assumed or entered into pursuant to the bankruptcy
Reorganization Plan. This date is December 31, 2001. While the minimum
commitment under this agreement is $1,500,000, the Company anticipates
the Line of Credit will be extended at $3,000,000. Under the provisions
of the Line of Credit, the Company must comply with certain restrictive
operational covenants. Average amounts outstanding under the credit
line were approximately $1,825,000 and $1,715,000 during 1996 and 1995,
respectively. There was $2,500,000 and $-0- outstanding under the Line
of Credit at June 30, 1996 and 1995, respectively.
During fiscal 1996 and 1995, the Company obtained short-term loans from
certain directors and officers. Amounts borrowed under these loans
ranged from $50,000 to $400,000 during fiscal 1996 and $30,000 to
$400,000 during fiscal 1995. Interest at rates related to these loans
were ten percent during fiscal 1996 and seven to ten percent during
fiscal 1995. The aggregate maximum and average amounts outstanding
under these loans were $810,000 and $119,000 during fiscal 1996 and
$600,000 and $157,000 during fiscal 1995, respectively. At June 30,
1996 and 1995, $810,000 and $100,000, respectively, were outstanding
under these loans. In connection with these loans, the Company issued
to the lending officers and directors options and warrants to purchase
69,625 and 78,425 shares of the Company's common stock during fiscal
1996 and 1995, respectively (see Note 10).
7. LONG-TERM DEBT AND NOTES PAYABLE
Long-term debt and notes payable as of June 30, are as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Note payable to aircraft manufacturer due in monthly
installments of $22,625 through September 1, 1999,
including interest at 10% $ 750,700 -0-
Note payable to aircraft manufacturer due in monthly
installments of $17,727 through December 31, 1999,
including interest at 10%, less $73,866 discount at
15% at June 30, 1996 564,570 -0-
Notes payable, noninterest bearing, to unsecured vendors in
annual installments through 2000, less $130,833 and $203,986
discount at 15% at June 30, 1996 and 1995, respectively 533,170 626,018
Notes payable, noninterest bearing, to aircraft
manufacturers and their affiliates
less $445,161 discount at 15% at
June 30, 1995, restructured in 1996 -0- $1,698,971
Notes payable, noninterest bearing, to parts suppliers
in annual installments through 1996, less $1,527
discount at 15% at June 30, 1995, restructured in 1996 -0- 68,708
Notes payable, taxing authorities in annual installments
prepaid in full in 1996 -0- 163,276
Other notes payable 377,326 781,445
---------- ----------
2,225,766 3,338,418
Less current maturities 854,438 1,475,047
---------- ----------
$1,371,328 $1,863,371
========== ==========
</TABLE>
Principal maturities of long-term debt and notes payable are $854,438
in 1997; $491,176 in 1998; $560,717 in 1999; $319,435 in 2000 and $-0-
in 2001.
F-12
<PAGE>
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
--------------------
7. LONG-TERM DEBT AND NOTES PAYABLE, CONTINUED
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 their outstanding note payable and the
payment of the entire remaining amount due to Shorts under the
bankruptcy plan (approximately $466,000, net of $43,000 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 issued 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. At
June 30, 1996, $750,700 was outstanding on this note.
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. 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
issued 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 accrued beginning on September 1, 1995. At
June 30, 1996, $564,570 was outstanding on this note. Additionally, the
remaining balance due under the bankruptcy plan, subsequent to the
issuance of the above promissory note, was satisfied with the issuance
of 325,000 shares of the Company's common stock. The stock must be held
by JACO, with certain exceptions, for a minimum of one year from issue
date before it can be transferred.
8. 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 related party
receivable. Initially, the Company recorded a deferred gain of $70,000,
in connection with the sale and leaseback transaction, which is
included in noncurrent rent and other liabilities in the accompanying
June 30, 1996 and 1995 balance sheets. The unamortized deferred gain is
approximately $47,000 at June 30, 1996. 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 10).
The Company paid fees of $27,000, $62,000 and $90,000 in fiscal years
1996, 1995 and 1994, 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 for the year
ended June 30, 1994 to a member of the Board of Directors.
F-13
<PAGE>
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
--------------------
9. INCOME TAXES
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
1996 1995 1994
------ ------ -----
<S> <C> <C> <C>
Income tax expense (benefit) at statutory rate 35.0 % (35.0)% (35.0)%
NOL carryforwards recognized/not
currently recognizable ( 35.0) 35.0 35.0
Impact of alternative minimum tax 15.9 -0- -0-
------- ------- -----
Effective income tax rate 15.9 % -0- % -0- %
======= ======= =======
</TABLE>
Significant components of the Company's deferred income tax assets and
liabilities at June 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Deferred tax assets: 1996 1995
--------------- --------------
<S> <C> <C>
Receivables $ 20,000 $ 35,000
Inventories 186,000 186,000
Accrued expenses 319,000 325,000
Rent obligations 32,000 281,000
Net operating loss carryforwards 3,111,000 3,129,000
Alternative minimum tax carryforward 18,100 -0-
Investment tax credit carryforwards 60,000 60,000
Valuation allowance ( 2,362,100) (2,592,000)
----------- -----------
Total deferred tax asset 1,384,000 1,424,000
Deferred tax liabilities:
Property and equipment ( 1,384,000) (1,424,000)
----------- ------------
Net deferred tax $ -0- $ -0-
=============== =============
</TABLE>
At June 30, 1996, the Company had approximately $7,777,000 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 $60,000 of investment tax
credit carryforwards that expire beginning June 30, 1999 and $18,100 of
alternative minimum tax credit carryforwards which are available to
reduce future federal regular income taxes over an indefinite period.
10. 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.
84,200 shares are reserved for future grants as of June 30, 1996.
F-14
<PAGE>
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
--------------------
10. STOCK OPTIONS, CONTINUED
Information with respect to the Stock Option Plan follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C> <C>
Options outstanding, at July 1 638,668 666,668 308,668
Options granted 150,300 616,500 565,000
Options exercised ( 15,000) ( 19,500) ( 67,000)
Options cancelled ( 5,000) ( 625,000) ( 140,000)
---------- --------- ---------
Options outstanding at June 30 768,968 638,668 666,668
========== ========= =========
Options exercisable at June 30 761,593 622,668 231,668
========== ========= =========
Option price per share, granted and
outstanding, at June 30 $.50-$3.25 $.50-$1.4375 $.50-$4.50
========== ============ ==========
</TABLE>
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 1996 and 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 17,125 and 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 become 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. The
Company also issued to certain directors warrants to purchase 52,500
and 56,250 shares of the Company's common stock, at an exercise price
equal to market price on the date of grant during fiscal 1996 and
fiscal 1995, respectively. 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 8, 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.
11. COMMITMENTS AND CONTINGENCIES
The Company has been engaged with representatives of and counsel for
Her Majesty the Queen in Right of Canada as Represented by the Ministry
of Industry, Science and Technology (the "Ministry") in discussions and
negotiations regarding the reimbursement obligation, if any, of the
Company to the Ministry arising from the change in lessor for the four
(4) de Havilland DHC-8-102 aircraft (the "Aircraft") leased by the
Company. The Ministry has informed the Company that the new lessor, CIT
Group/Capital Equipment Financing, Inc. ("CIT") made a claim under
certain economic development insurance provided by the Ministry to the
former lessor, Mellon Financial Services Corporation #3 ("Mellon"),
when the Company entered into new lease agreements with CIT for the
Aircraft in December of 1994. The Ministry asserts that it has a right
to reimbursement in the amount of $16,996,995 but has proposed that the
Company agree to pay $6,000,000 secured by a pledge of an undetermined
number of shares of the Company's common stock.
The Company does not have an agreement with the Ministry regarding the
economic development insurance and has not acknowledged any obligation
to reimburse the Ministry for claims paid under the original leases at
the same time that the Company entered into new leases with CIT. The
Company has made certain proposals for future consideration to resolve
the Ministry's claim. It is uncertain whether the Company and the
Ministry will reach an agreement on future considerations. Based on
information presently available to CCAIR, management believes that the
ultimate outcome of this matter will not have a material impact on the
financial condition or results of operations of the Company.
F-15
<PAGE>
CCAIR, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
--------------------
11. COMMITMENTS AND CONTINGENCIES, CONTINUED
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.
12. SUPPLEMENTAL CASH FLOW INFORMATION
Cash flows include interest paid of approximately $804,000, $627,000
and $443,000 in the years ended June 30, 1996, 1995 and 1994,
respectively. Income taxes paid, net of refunds, totaled $1,500 in the
years ended June 30, 1994.
12. SUPPLEMENTAL CASH FLOW INFORMATION, CONTINUED
Noncash transactions include:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
1996 1995 1994
----------- ----------- ----------
<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 ----
Issuance of 325,000 shares and 650,000 shares
of Common Stock during fiscal 1996 and 1994, respectively, with
proceeds applied to:
Annual bankruptcy payments $ 690,625 ---- $ 284,785
Current aircraft lease payments ---- ---- 2,061,868
Other payables ---- ---- 186,354
</TABLE>
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table presents selected quarterly unaudited financial
data for the years ended June 30, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1996
Operating revenue $16,230 $16,045 $15,790 $18,169
Operating income (loss) 539 228 310 ( 191)
Net income (loss) 379 39 70 ( 392)
Income (loss) per share .05 .01 .01 ( .05)
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)
</TABLE>
F-16
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
--------------------
<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>
1996
Reserve for doubtful
receivables and pricing
adjustments $ 86,800 $ 13,200 $ 50,000 $ 50,000
Reserve for inventory obsolescence 466,000 466,000
Reserve for medical claims
incurred but not reported 239,000 20,000 219,000
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)
</TABLE>
(1) Reclassification of reserve for repairable parts from property and
equipment to inventories.
S-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
<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 Restated 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
<PAGE>
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
<PAGE>
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. No. 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
<PAGE>
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
<PAGE>
(g) Trust Agreement dated as of November 15, 1985 between Greyhound Leasing & Financial Corporation
and American Bank & Trust Co. of PA (Reg. Nos. N-162PC, 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
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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)
10.40 September 1995 Master Agreement among CCAIR, Inc., British Aerospace Holdings, Inc., Jet
Acceptance Corporation and JSX Capital Corporation. (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)
</TABLE>
Note: For footnote references see page E-9.
E-8
<PAGE>
Footnotes:
<TABLE>
<CAPTION>
<S> <C>
(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.
</TABLE>
E-9
<PAGE>
EXHIBIT 10.40
THE SEPTEMBER 1995 MASTER AGREEMENT
THIS AGREEMENT made and entered into as of the 28th day of September 1995 by and
among CCAIR, Inc., d/b/a U.S. Air Express ("CCAIR"), British Aerospace Holdings,
Inc., successor in interest to British Aerospace, Inc. ("BAH"), Jet Acceptance
Corporation ("JACO"), and JSX Capital Corporation ("JSX").
WHEREAS the CCAIR Plan of Reorganization confirmed on July 19, 1991 by order of
the United States Bankruptcy Court for the Western District of North Carolina in
Case No. C-B-90-30927 provides for the payment to JACO and BAH of an amount the
unpaid balance of which is one million six hundred thirty-four thousand
thirty-two dollars and forty two cents ($1,634,032.42) (the "Outstanding
Bankruptcy Debt"); and
WHEREAS, JACO and BAH are prepared to waive payment of the Outstanding
Bankruptcy Debt on the terms and conditions provided herein; and
WHEREAS CCAIR currently leases from JACO twelve Jetstream 31 aircraft (the "12
Aircraft") and JACO and CCAIR have heretofore entered into an Amended and
Restated Aircraft Sublease Agreement dated as of August 29, 1991 in respect of
each of the 12 Aircraft (each, a "Sublease"); and
WHEREAS the parties desire to modify the rental rate (the "Basic Rent") for the
12 Aircraft pursuant to the terms hereof; and
WHEREAS, CCAIR and Lynrise Air Lease, Inc. ("Lynrise") have entered into an
agreement pursuant to which the rental rate on each of the aircraft leased by
Lynrise to CCAIR has been reduced to $34,000.00 per month for the remainder of
the term of the lease agreement, which agreement is in full force and effect
there have been no other amendments to any agreement between Lynrise and CCAIR
and no new agreement between Lynrise or any of its affiliates and CCAIR; and
WHEREAS in respect of seven of the 12 Aircraft (the "7 Aircraft"), three (3)
Subleases expire January 2, 1998, two (2) Subleases expire July 2, 1998, and two
(2) Subleases expire January 2, 1999, and CCAIR wishes to lease a replacement
Jetstream 31 aircraft from JACO or JSX for a term commencing the day after the
expiration of each such Sublease and expiring December 31, 2001 (each, a
"Replacement Aircraft"); and
WHEREAS CCAIR wishes to lease four (4) additional Jetstream 31 aircraft from
JACO or JSX for a term commencing between the date hereof and June 30, 1996 and
expiring December 31, 2001 ("Incremental Aircraft"); and
<PAGE>
WHEREAS CCAIR wishes to have the right to return Replacement Aircraft and
Incremental Aircraft on a one-for-one basis if CCAIR leases Jetstream 41
aircraft from JSX, and the right to return Incremental Aircraft on the first
anniversary of the delivery date thereof; and
WHEREAS CCAIR wishes to have the right to sublease additional Jetstream 31
aircraft from JACO or JSX on similar terms to the Incremental Aircraft.
The terms not otherwise defined herein shall have the meaning ascribed to them
in the Subleases.
NOW THEREFORE for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. BANKRUPTCY DEBT
JACO and BAH hereby waive payment of the Outstanding Bankruptcy Debt
and CCAIR hereby undertakes:
(a) to pay to JACO and BAH the principal amount of Six
Hundred Seventy-Six Thousand, One Hundred Twenty-Eight
Dollars and Ninety Cents ($676,128.90) in forty-eight
(48) equalized consecutive monthly installments of
principal and interest. Interest will accrue from
September 1, 1995 and will be compounded monthly at the
rate of ten percent (10%) per annum. The amount of each
payment will be Seventeen Thousand Seven Hundred Twenty-
Seven Dollars and Seventeen Cents ($17,727.17) payable on
the first business day following the 28th day of each
month if the 28th day of the month is a business day,
otherwise on the second business day following the 28th
day of each month commencing in the month of January
1996. CCAIR will evidence this debt by issuing a
promissory note to JACO and BAH contemporaneously with
the execution hereof in the form set out in Exhibit A
hereto, and
(b) on or before December 29, 1995 to issue to JACO and BAH
three hundred twenty-five thousand (325,000) shares (the
"JACO Shares") of fully paid, non-assessable common stock
of CCAIR. JACO undertakes not to sell or otherwise trade
(other than to a JACO affiliate) any of the JACO Shares
prior to December 1, 1996; provided however that this
undertaking will become void in the event of a merger,
consolidation, acquisition or other significant change in
the ownership of CCAIR, including without limitation the
issuance by CCAIR after the date hereof of amounts of its
common stock aggregating more than five hundred thousand
(500,000) shares (collectively referred to as the
"Triggering Events") and upon the occurrence of a
2
<PAGE>
Triggering Event JACO shall be entitled, in its sole
discretion, to require CCAIR, prior to the effective date of
any such Triggering Event, to undertake either of the
following: (i) to file with the Securities and Exchange
Commission (the "SEC"), on appropriate form, under and in
accordance with the Securities Act of 1933, a registration
statement for JACO's resale to the general public of the JACO
Shares (the "Registration Statement"), such Registration
Statement to become effective prior to CCAIR's effecting such
Triggering Event, or (ii) to purchase the JACO Shares at a
price equal to the greatest of (x) $2.08 per share, (y) the
highest per share price paid for shares of common stock of
CCAIR by any third party as part of or in connection with the
Triggering Event, and (z) the market price per share for CCAIR
common stock as reported by NASDAQ on the day prior to the
effective date of the Triggering Event. In addition, if CCAIR
shall undertake any other registration of shares of its common
stock prior to December 1, 1996, JACO shall be entitled to
have the JACO Shares included in such registration to permit
the resale of the JACO Shares to the general public. CCAIR
shall, in any event, file a Registration Statement with the
SEC and take such steps as shall be necessary and appropriate
to cause the Registration Statement to become and continue
effective for the resale of the JACO Shares to the general
public for and after December 1, 1996.
SECTION 2. RENT REDUCTION
Subject to the other terms and conditions hereof CCAIR agrees to pay
and JACO hereby agrees to accept as Basic Rent for each of the 12
Aircraft the amount set forth in Exhibit B hereto under the column
headed "Sept 95 Amend Effective Jan 96" from the date hereof until the
expiry date of the applicable Sublease. Such Basic Rent shall be given
effect by entering into an Acceptance Supplement No. 3 with respect to
each Sublease, generally in the form attached hereto as Exhibit C.
SECTION 3. REPLACEMENT AIRCRAFT
Thirty (30) days prior to the expiry date of each Sublease in respect
of the 7 Aircraft, JACO or JSX shall offer a Replacement Aircraft to
CCAIR and, with effect from the day immediately following the expiry
date of each such Sublease, or such earlier date as may be mutually
agreed, CCAIR shall lease from JACO or JSX a Replacement Aircraft from
such commencement date until December 31, 2001 at a rental rate,
subject to Section 6 hereof, of twenty-one thousand dollars ($21,000)
per month payable in arrears.
3
<PAGE>
SECTION 4. INCREMENTAL AIRCRAFT
a) Incremental Aircraft
CCAIR shall lease four (4) Incremental Aircraft from JACO or
JSX for a term commencing between the date hereof and June 30,
1996 and expiring December 31, 2001. The rental rate for each
such Incremental Aircraft shall be twenty-one thousand dollars
($21,000) per month payable in arrears subject to Section 6
hereof. CCAIR shall give 90 days notice to JACO of its
intention to lease an Incremental Aircraft.
b) Jetstream 31 Aircraft Serial Number 693 (the "Aircraft
693")
CCAIR and JACO hereby agree that Aircraft 693 will be deemed
one of the four (4) Incremental Aircraft with effect from June
7, 1995 and the rental rate for Aircraft 693 shall be
twenty-one thousand dollars ($21,000) per month payable in
arrears with effect from such date and such date will be
deemed to be the commencement date of the sublease for
Aircraft 693 with respect to the termination right described
in Section 7 below. Upon the expiration of the sublease for
Aircraft 693 on January 2, 1999, CCAIR will lease an
additional Incremental Aircraft from January 3, 1999 until
December 31, 2001 at the same rental rate.
c) Additional Incremental Aircraft
At the request of CCAIR and subject to availability of
aircraft, JACO or JSX shall lease additional Incremental
Aircraft to CCAIR on the same terms as set out in Section 4(a)
above.
SECTION 5. DOCUMENTATION
Replacement Aircraft and Incremental Aircraft shall be leased by CCAIR
from JACO or JSX pursuant to new sublease agreements; provided,
however, that the new sublease agreements shall be subject to
variations which may be necessary to conform to the terms of this
Agreement and the headleases governing the Replacement Aircraft and the
Incremental Aircraft and, provided, further, the new sublease
agreements shall contain aircraft return conditions substantially
similar to the aircraft return conditions contained in the sublease
agreement between CCAIR and JACO dated June 7, 1995 for Aircraft 693.
CCAIR and JACO will execute an amendment to the sublease agreement
dated as of June 7, 1995 for Aircraft 693 to reflect the terms hereof.
4
<PAGE>
SECTION 6. SUBSTITUTE AIRCRAFT AND AVAILABILITY
This Agreement contemplates that Jetstream 31 aircraft shall be
supplied as Replacement Aircraft and Incremental Aircraft. In the event
that no Jetstream 31 aircraft are available to meet the requirement for
Replacement Aircraft or Incremental Aircraft, JACO and JSX may offer
Jetstream 32 aircraft in lieu thereof and CCAIR shall accept such
substitution. Furthermore, at the request of CCAIR, JACO or JSX shall
endeavor to offer Jetstream 32 aircraft as Replacement Aircraft or
Incremental Aircraft. In the event a Jetstream 32 aircraft is leased to
CCAIR by JACO or JSX, the rental rate shall be twenty-four thousand
dollars ($24,000) per aircraft per month payable in arrears. In the
event no Jetstream 31 or Jetstream 32 aircraft are available to meet
the requirement for either Replacement Aircraft or Incremental
Aircraft, the parties hereto are relieved of their obligations to offer
aircraft or to take aircraft on lease but all other obligations and
undertakings hereunder remain valid and enforceable.
SECTION 7. TERMINATION RIGHTS
a) CCAIR may turn back each Incremental Aircraft to JACO or JSX
on the first anniversary date of its delivery to CCAIR. CCAIR
shall give notice to JACO sixty (60) days prior to the turn
back date of its intention to return any Incremental Aircraft.
Upon turn back of each Incremental Aircraft to JACO, CCAIR
will pay JACO a termination fee of thirty-six thousand dollars
($36,000).
b) In the event that CCAIR leases new or used Jetstream 41
aircraft from JSX (or, with JSX's prior written consent,
from BAH), CCAIR will have the right to terminate the
sublease for a Replacement Aircraft or an Incremental
Aircraft (provided any such Incremental Aircraft has been
leased by CCAIR for a period in excess of twelve (12)
months) on a one-for-one basis for each Jetstream 41
aircraft leased by CCAIR from JSX (or, with JSX's prior
written consent, from BAH).
c) At any time after CCAIR has exercised all its termination
rights pursuant to Section 7(b) above, CCAIR will have the
further right to terminate the Sublease for aircraft bearing
manufacturers Serial Numbers 728, 737, 750, 763, and 768 on a
one-for-one basis for each additional Jetstream 41 aircraft
leased by CCAIR from JSX (or, with JSX's prior written
consent, from BAH).
5
<PAGE>
SECTION 8. MISCELLANEOUS TERMS AND CONDITIONS
a) This Agreement shall be included in the definition of
JACO Documents as such are defined in Article I of the
Amended and Restated Special Account and Disbursement
Authorization Agreement made as of February 10, 1995 by
and among Wachovia Bank of North Carolina, N.A., CCAIR,
BAH, JACO, and JSX as may be amended from time to time
("Disbursement Agreement"). Each of the forty-eight (48)
installments described in Section 1 hereof and all
obligations arising under any sublease for any
Replacement Aircraft, Incremental Aircraft or Jetstream
41 Aircraft shall be deemed to be part of the JACO
Obligations as defined in Article I of the Disbursement
Agreement. JSX is hereby authorized by CCAIR to include
each such installment and other such obligations when due
in the appropriate Disbursement Instruction issued each
month pursuant to the Disbursement Agreement and is
further authorized to include in such Disbursement
Instruction any rental or other payments which become due
and payable to JACO, JSX or BAH pursuant to this
Agreement.
b) In the event of a merger, consolidation, acquisition, or
other significant change in the ownership of CCAIR, the
rental reductions provided in Section 2 hereof shall
cease and with effect from the date of such merger,
consolidation, acquisition or other significant change in
the ownership of CCAIR, CCAIR shall pay to JACO Basic
Rent monthly in arrears for each of the 12 Aircraft in
the amounts set forth in Exhibit B under the column
headed "Sept 94 Amend Effective Sept 94."
c) CCAIR will provide to JSX a detailed business plan for
its fiscal years 1996 and 1997 by December 31, 1995.
d) This Agreement will be governed by and construed according to
the laws of the Commonwealth of Virginia without regard to its
conflicts laws. The terms hereof shall not be waived, varied,
contradicted, explained or amended in any other manor except
by an instrument in writing of even or subsequent date hereto,
executed by both parties.
6
<PAGE>
AGREED AND ACCEPTED TO: AGREED AND ACCEPTED TO:
JSX Capital Corporation CCAIR, Inc.
By: By: /s/ Kenneth Gann
------------------------ -----------------
Title: Executive Vice President Title: President
------------------------ -----------------
Date: 12/28/95 Date: 12/27/95
--------- -----------------
AGREED AND ACCEPTED TO: AGREED AND ACCEPTED TO:
Jet Acceptance Corporation British Aerospace Holdings, Inc.
By:____________________________ By:________________________
Title: Vice President Title: Assistant Secretary
------------------- -------------------
Date: 12/28/95 Date:
---------------------- ------------------------------
7
<PAGE>
EXHIBIT 11
CCAIR, INC.
COMPUTATION OF EARNINGS PER SHARE
----------
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
----------------------------------------------------
1996 1995 1994
------------ ------------ --------
<S> <C> <C> <C>
Primary earnings:
Net income (loss) $ 95,755 $( 362,123) $(4,755,769)
============ ============ ============
Shares:
Weighted average number of shares outstanding 7,633,480 7,381,729 7,005,957
Assumed exercise of options and warrants (1) 335,834 ---- ----
------------ ------------ --------
Total average number of common and common
equivalent shares used for primary computation 7,969,314 7,381,729 7,005,957
============ ============ ===========
Primary income (loss) per share $ .01 $( .05) $( .68)
============ ============ ============
Fully diluted net income (loss) $ 95,755 $( 362,123) $(4,755,769)
============ ============ ============
Shares:
Weighted average number of shares outstanding 7,633,480 7,381,729 7,005,957
Assumed exercise of options and warrants (1) 335,834 ---- ----
------------ ------------ --------
Total average number of shares assumed to be
outstanding after full conversion 7,969,314 7,381,729 7,005,957
============ ============ ===========
Income (loss) per common share assuming
full dilution $ .01 $( .05) $( .68)
============ ============ ============
</TABLE>
(1) The effect of including stock options in 1995 and 1994 would be
antidilutive and therefore is excluded from the calculation.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into the Company's
previously filed Registration on Form S-8 (Statement File No. 33-58860).
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
September 27, 1996
<PAGE>
<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, 1996,
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-30-1996 JUN-30-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 5,059,665 5,059,665
<SECURITIES> 0 0
<RECEIVABLES> 5,987,222 5,987,222
<ALLOWANCES> 50,000 50,000
<INVENTORY> 1,758,453 1,758,453
<CURRENT-ASSETS> 14,165,453 14,165,453
<PP&E> 24,836,444 24,836,444
<DEPRECIATION> 12,504,463 12,504,463
<TOTAL-ASSETS> 27,129,678 27,129,678
<CURRENT-LIABILITIES> 15,525,051 15,525,051
<BONDS> 0 0
0 0
0 0
<COMMON> 77,407 77,407
<OTHER-SE> 5,759,489 5,759,489
<TOTAL-LIABILITY-AND-EQUITY> 27,129,678 27,129,678
<SALES> 0 0
<TOTAL-REVENUES> 18,168,113 66,233,701
<CGS> 0 0
<TOTAL-COSTS> 18,359,023 65,347,386
<OTHER-EXPENSES> (18,097) 11,027
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 200,313 761,433
<INCOME-PRETAX> (373,126) 113,855
<INCOME-TAX> 18,100 18,100
<INCOME-CONTINUING> (391,226) 95,755
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (391,226) 95,755
<EPS-PRIMARY> (.05) .01
<EPS-DILUTED> (.05) .01
</TABLE>
