SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-17846
CCAIR, Inc.
Incorporated under the laws of Delaware 56-1428192
(I.R.S. Employer ID No.)
P. O. Box 19929
Charlotte, North Carolina 28219-9929
(704) 359-8990
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 5, 1997
----- -------------------------------
Common stock, $0.01 par value 7,740,695
1
<PAGE>
CCAIR, Inc.
FORM 10-Q QUARTERLY REPORT FOR
FISCAL QUARTER ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
PAGE NO.
PART I - FINANCIAL INFORMATION:
ITEM 1. Financial Statements: 3
Condensed Balance Sheets as of
December 31, 1996 and June 30, 1996. 3
Condensed Statements of Income for
the Three Months ended
December 31, 1996 and 1995. 4
Condensed Statements of Cash Flows
for Six Months ended December 31,
1996 and 1995. 5
Notes to Condensed Financial Statements. 6
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. 6
PART II - OTHER INFORMATION:
ITEM 1. Legal Proceedings. 9
ITEM 2. Changes in Securities. 9
ITEM 3. Defaults Upon Senior Securities. 9
ITEM 4. Submission of Matters to a Vote
of Security Holders. 9
ITEM 5. Other Information. 9
ITEM 6. Exhibits and Reports on Form 8-K. 9
SIGNATURES 10
EXHIBIT INDEX 10
2
<PAGE>
CCAIR, Inc.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED BALANCE SHEETS
(Unaudited)
-----------
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,990 $ 5,059,665
Receivables, net 5,057,934 5,937,222
Inventories, less allowance for
obsolescence of $466,000 1,949,251 1,758,453
Prepaid expenses and deposits 1,696,708 1,410,113
----------- -----------
Total current assets 8,713,883 14,165,453
----------- -----------
PROPERTY AND EQUIPMENT:
Flight equipment and aircraft 22,311,779 20,700,870
Ground and other equipment and
leasehold improvements 4,210,238 4,135,574
----------- -----------
26,522,017 24,836,444
Less accumulated depreciation
and amortization (13,846,230) (12,504,463)
----------- -----------
12,675,787 12,331,981
----------- -----------
OTHER ASSETS 632,300 632,244
----------- -----------
Total assets $22,021,970 $27,129,678
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current
maturities of long-term debt $ 619,107 $ 854,438
Short-term borrowings 287,000 3,310,000
Current obligations under capital leases 373,173 373,266
Accounts payable 5,069,889 5,546,146
Accrued expenses 4,389,185 5,441,201
----------- -----------
Total current liabilities 10,738,354 15,525,051
Long-term debt, less current maturities 1,101,912 1,371,328
Capital lease obligations, less
current obligations 2,455,381 2,638,967
Deferred credits, net 1,513,615 1,757,436
----------- -----------
Total liabilities 15,809,262 21,292,782
----------- -----------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000 shares authorized, 7,740,695 issued
and outstanding at December 31,
1996 and June 30, 1996 77,407 77,407
Additional paid-in-capital 17,725,184 17,725,184
Accumulated deficit (11,589,883) (11,965,695)
----------- -----------
Total shareholders' equity 6,212,708 5,836,896
----------- -----------
Total liabilities and
shareholders' equity $22,021,970 $27,129,678
=========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
CCAIR, Inc.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
-----------
<TABLE>
<CAPTION>
3 Months ended December 31, 6 Months ended December 31,
---------------------------- ----------------------------
1996 1995 1996 1995
----------- ----------- ------------ --------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Passenger $16,349,418 $15,714,159 $33,479,757 $31,451,115
Public service ---- 64,511 ---- 251,581
Other 273,427 266,546 513,418 572,727
----------- ----------- ----------- -----------
Total 16,622,845 16,045,216 33,993,175 32,275,423
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Flight operations 5,778,961 5,729,651 11,672,573 11,584,136
Fuel and oil 1,980,444 1,573,143 3,805,346 2,961,851
Maintenance 2,713,913 3,139,808 5,805,596 6,182,512
Ground operations 2,071,545 1,740,166 4,195,739 3,513,854
Advertising, promotions
and commissions 2,376,727 2,117,236 4,839,498 4,330,642
General and administration 964,850 1,051,932 1,967,529 2,038,134
Depreciation and amortization 461,785 465,581 921,269 897,339
----------- ----------- ----------- -----------
Total 16,348,225 15,817,517 33,207,550 31,508,468
----------- ----------- ----------- -----------
OPERATING INCOME 274,620 227,699 785,625 766,955
Interest expense ( 213,933) ( 188,807) ( 406,576) ( 359,667)
Other income (expense), net ( 5,637) ( 160) ( 3,237) 10,138
----------- ----------- ----------- -----------
Net income $ 55,050 $ 38,732 $ 375,812 $ 417,426
=========== =========== =========== ===========
EARNINGS PER COMMON SHARE $ .01 $ .01 $ .05 $ .05
=========== =========== =========== =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 7,925,050 7,760,929 7,953,685 7,813,253
=========== =========== =========== ===========
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
CCAIR, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
-----------
<TABLE>
<CAPTION>
Six Months Ended December 31,
1996 1995
------------ --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 375,812 $ 417,426
Adjustments to reconcile net income to
net cash provided by operating activities:
Note discount amortization 53,129 137,599
Depreciation and amortization 2,766,472 2,997,999
Loss (gain) on disposal of assets 3,237 ( 10,500)
Rental expense in excess
of (less than) payments ( 232,095) 146,189
Changes in certain assets and liabilities:
Accounts receivable 879,287 839,615
Inventories ( 190,798) ( 164,749)
Accounts payable ( 476,282) ( 995,147)
Accrued expenses (1,052,007) 29,500
Prepaid expenses and deposits ( 286,652) ( 482,724)
Other changes, net ( 21,709) ( 114,303)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,818,394 2,800,905
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,105,913) (2,889,030)
Proceeds from sale of assets 2,400 10,500
----------- -----------
NET CASH USED BY
INVESTING ACTIVITIES (3,103,513) (2,878,530)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale-leaseback transaction ---- 1,000,000
Issuance of common stock ---- 17,813
Issuance of notes and long-term debt 110,000 ----
Short-term payments, net (3,023,000) ----
Reductions of notes and long-term debt ( 851,556) ( 855,630)
----------- -----------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (3,764,556) 162,183
----------- -----------
Net increase (decrease) in cash (5,049,675) 84,558
Cash, beginning of period 5,059,665 56,995
----------- -----------
CASH, END OF PERIOD $ 9,990 $ 141,553
=========== ===========
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
CCAIR, Inc.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
-----------
1. Basis of Presentation:
The condensed financial statements included herein have been prepared
by CCAIR, Inc. (the "Company"), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. These
condensed financial statements reflect all adjustments which are, in
the opinion of management, necessary for a fair statement of results
for the interim period. These adjustments consist solely of normal
recurring adjustments. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed
financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's annual
report for fiscal year ended June 30, 1996.
2. Earnings Per Common Share:
The computation of earnings per common share is based on the weighted
average number of common shares outstanding for each period, after
considering the effect of common stock equivalents.
3. Commitments and Contingencies:
The Company is subject to the regulatory authority, among others, of
the Federal Aviation Administration and the Department of
Transportation. These agencies require compliance with their standards
and conduct safety and compliance audits. Violations, if any, of these
regulations subject the Company to fines or sanctions. The Company is
also subject to other claims arising in the ordinary course of
business. In the opinion of management, the outcome of these matters
would not have a material adverse impact on the Company's financial
condition or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
In the six-month period ended December 31, 1996, the Company recorded
net income of $375,812, or $.05 per share, versus a net income of $417,426 in
the comparable period of fiscal 1996. Revenue improvements resulting from
increased traffic were offset by higher fuel prices and increased marketing and
passenger handling fees.
Net income for the three months ended December 31, 1996 was $55,050 or
$.01 per share versus $38,732 for the three months ended December 31, 1995.
6
<PAGE>
CCAIR, Inc.
FISCAL QUARTER ENDED DECEMBER 31, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth selected operating comparisons
for the three- and six-month periods ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Airline Operating Statistics
For the Three Months For the Six Months
Ended December 31, Ended December 31,
% %
1996 1995 Change 1996 1995 Change
----------- ----------- ------ ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue $16,622,845 $16,045,216 3.6 $33,993,175 $32,275,423 5.3
Operating expense $16,348,225 $15,817,517 3.4 $33,207,550 $31,508,468 5.4
Revenue passengers carried 202,782 193,340 4.9 411,362 389,235 5.7
Revenue passenger miles (1) 37,376,636 36,023,270 3.8 76,067,877 70,745,572 7.5
Available seat miles (2) 77,999,131 78,380,666 ( .5) 160,389,870 158,425,100 1.2
Passenger load factor (3) 47.9% 46.0% 4.1 47.4% 44.7% 6.0
Passenger breakeven load factor 47.8% 45.9% 4.1 46.9% 44.0% 6.6
Yield per revenue passenger
mile (4) 43.7(cent) 43.6(cent) .2 44.0(cent) 44.5(cent)( 1.1)
Operating cost per available
seat mile 21.0(cent) 20.2(cent) 4.0 20.7(cent) 19.9(cent) 4.0
Average passenger trip (miles) 184.3 186.3 ( 1.1) 184.9 181.7 1.8
Average daily aircraft utilization
per plane (block hours) 8.2 8.3 ( 1.2) 8.2 8.2 ---
Average passenger fare $80.63 $81.28 ( .8) $81.39 $80.80 .7
Average monthly completion factor 96.7% 95.9% .8 96.3% 96.0% .3
</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.
For the Three Months Ended December 31, 1996
Compared to Three Months Ended December 31, 1995
For the quarter ended December 31, 1996, operating revenues increased
3.6% as a 4.9% increase in passengers carried and a 1.1% decrease in the average
passenger trip resulted in a 3.8% increase in revenue passenger miles ("RPMs").
The yield for the three-month period was relatively flat, increasing from
43.6(cent) in the second quarter of fiscal 1996 to 43.7(cent) in the fiscal 1997
second quarter. As a result of the increased traffic and stable yield, passenger
revenues increased 4.0%, from $15,714,159 in the second quarter of fiscal 1996
to $16,349,418 for the comparable quarter in fiscal 1997. Public service revenue
was $64,511 in fiscal 1996, but the Company ceased to receive subsidies for
serving Shenandoah Valley, VA in July, 1996 and ceased service to Danville, VA
in October, 1995 and thus anticipates receiving no public service revenue during
fiscal 1997.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
Results of Operations, continued
Operating costs per available seat mile ("ASM") increased 4.0% from
20.2(cent) in the quarter ended December 31, 1995 to 21.0(cent) in the quarter
ended December 31, 1996. The following Table compares components of operating
cost per ASM for the three months ended December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Cost per ASM -
Quarter Ended
December 31,
(in cents)
1996 1995
<S> <C> <C>
Flight operations 7.4 7.3
Fuel and oil 2.5 2.0
Maintenance 3.5 4.0
Ground operations 2.7 2.2
Advertising, promotions, commissions 3.1 2.7
General and administration 1.2 1.4
Depreciation and amortization 0.6 0.6
----- -----
21.0 20.2
==== ====
</TABLE>
Flight operations expense per ASM increased 0.1(cent) in the current
quarter as compared to the prior year, as flight crew salaries and related cost
increases were partially offset by reduced costs of insuring the Company's fleet
of aircraft. Fuel costs increased 0.5(cent) per ASM in the second quarter of
fiscal 1997 as compared to the second quarter of fiscal 1996, as the cost per
gallon of fuel increased from 75.8(cent) to 94.6(cent). Maintenance expense
decreased 0.5(cent) per ASM as reduced engine rent expense was only partially
offset by an increase in outside repair expense. Ground operations expense
increased 0.5(cent) per ASM and advertising and commissions increased by
0.4(cent) per ASM due to the increased number of passengers and increased
handling and service fees charged by USAir. Depreciation and general and
administration expenses remained relatively constant on a unit basis.
For the Six Months Ended December 31, 1996 Compared to Six Months
Ended December 31, 1995
The Company reported net income of $375,812, or $.05 per share, for the
six months ended December 31, 1996 as compared to net income of $417,426 for the
six months ended December 31, 1995. Operating revenue increased from $32,275,423
for the six months ended December 31, 1995 to $33,993,175 for the six months
ended December 31, 1996. The principal reason for the improved operating revenue
was the 5.7% increase in passenger traffic.
Cost per ASM increased 4.0% in the six-month period ended December 31,
1996. This increase was principally due to higher fuel costs and increased
marketing and passenger handling fees.
Liquidity and Capital Resources
The cash position of the Company remains critical at December 31, 1996.
The key element to improved operating results will be the level of the yield per
RPM. While the yield for January, 1997 has met Company projections, the yield
could be affected by fare discounting beyond the control of the Company. If
operating cash flows and the Company's 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.
Cash and cash equivalents decreased by $5,049,676 during the first six
months of fiscal 1997. 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. At December 31, 1996, the Company had already received the Clearing
House funds and used the cash to pay down short-term debt and aircraft leases.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
Cash generated from operating activities was $1,818,000. The major
sources of operating cash were net income of $376,000, depreciation and
amortization of $2,766,000 and the reduction in accounts receivable of $879,000.
The major operating cash use was the reduction in accounts payable and accrued
expenses of $1,528,000.
The capital expenditures of $3,106,000 resulted primarily from
expenditures on major overhaul of engines and on major spare parts and
assemblies. Capital expenditures planned for the remainder of the fiscal year
consist of scheduled major overhaul of engines and on major spare parts and
assemblies. The Company also made scheduled debt payments of $852,000 in the
six-month period ended December 31, 1996.
The Company is in the final stages of negotiations with aircraft
manufacturers to replace a significant portion of its existing fleet with newer
aircraft. Candidate aircraft are in the 30- to 50-seat category with higher
cruise speeds than the equipment they will replace. Financial analysis clearly
indicates the operating efficiency of newer aircraft will have a favorable
impact on profitability.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None to report.
ITEM 2. Changes in Securities
None to report.
ITEM 3. Defaults Upon Senior Securities
None to report.
ITEM 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held in
Charlotte, North Carolina on November 14, 1996. Of the
7,740,695 shares of common stock outstanding on the record
date, 6,662,836 shares were present by proxy. Those shares
were voted on the matters before the meeting as follows:
A. Election of Directors
Name of Director No. Votes For: No. Votes Withheld:
John A. Adams 6,503,725 159,111
K. Ray Allen 6,506,247 156,589
Kenneth W. Gann 6,503,725 159,111
Gordon Linkon 6,516,747 146,089
Dean E. Painter, Jr. 6,515,987 146,849
ITEM 5. Other Information
George Murnane, III has accepted a position on the Board of
Directors with the Company effective January 24, 1997. Mr.
Murnane is a general partner of Barlow Partners, L.P. which
owns 6.6% of the Company's common stock.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Exhibit
4 Specimen Common Stock Certificate. (1)
11 Computation of Earnings Per Share.
(b) Reports on Form 8-K
None.
- ----------------------
(1) Incorporated by reference to Registration Statement on
Form S-1, File No. 33-28967.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
February 7, 1997 CCAIR, Inc.
<S> <C>
By: /s/ Kenneth W. Gann By: /s/ Eric W. Montgomery
Kenneth W. Gann, President and Eric W. Montgomery
Chief Executive Officer Vice President - Finance
(Principal Executive Officer) (Principal Financial Officer)
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Filed Sequential
No. Exhibit Herewith At Page No.
<S> <C> <C>
4 Specimen Common Stock
Certificate. (1)
11 Computation of Earnings Per Share E-1
- ---------------------
</TABLE>
(1) Incorporated by reference to Registration Statement on Form S-1,
File No. 33-28967.
10
<PAGE>
ITEM 6 EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE (1)
<TABLE>
<CAPTION>
Three Months ended December 31,
1996 1995
-------------- ---------
<S> <C> <C>
Net income $ 55,050 $ 38,732
============ ===========
Shares
Weighted average number of
shares outstanding 7,740,695 7,426,293
Assuming exercise of options 184,355 334,636
------------- -------------
Weighted average number of
shares outstanding,
as adjusted 7,925,050 7,760,929
============ ============
Earnings per share $ .01 $ .01
=============== ==========
Six Months ended December 31,
1996 1995
-------------- ---------
Net income $ 375,812 $ 417,426
============ ===========
Shares
Weighted average number of
shares outstanding 7,740,695 7,419,957
Assuming exercise of options 212,990 393,296
------------- ------------
Weighted average number of
shares outstanding,
as adjusted 7,953,685 7,813,253
============ ============
Earnings per share $ .05 $ .05
=============== ==========
</TABLE>
- ----------------
(1) Fully diluted average number of shares outstanding, as adjusted and
earnings per share are the same as calculated for primary for the
periods presented.
E-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
*This schedule contains summary financial information extracted from CCAIR,
Inc. condensed financial statements for the fiscal quarter ended December
31, 1996 and is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 9,990
<SECURITIES> 0
<RECEIVABLES> 5,057,934
<ALLOWANCES> 0
<INVENTORY> 1,949,251
<CURRENT-ASSETS> 8,713,883
<PP&E> 26,522,017
<DEPRECIATION> 13,846,230
<TOTAL-ASSETS> 22,021,970
<CURRENT-LIABILITIES> 10,738,354
<BONDS> 0
0
0
<COMMON> 77,407
<OTHER-SE> 6,135,301
<TOTAL-LIABILITY-AND-EQUITY> 22,021,970
<SALES> 0
<TOTAL-REVENUES> 16,622,845
<CGS> 0
<TOTAL-COSTS> 16,348,225
<OTHER-EXPENSES> 5,637
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 213,933
<INCOME-PRETAX> 55,050
<INCOME-TAX> 0
<INCOME-CONTINUING> 55,050
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,050
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
