SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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 28219-0929
(704) 359-8990
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 7, 1997
----- -------------------------------
Common stock, $0.01 par value 7,790,695
<PAGE>
CCAIR, Inc.
FORM 10-Q QUARTERLY REPORT FOR
FISCAL QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
PART I - FINANCIAL INFORMATION:
<S> <C> <C>
ITEM 1. Financial Statements: 3
Condensed Balance Sheets as of
September 30, 1997 and June 30, 1997. 3
Condensed Statements of Income for
the Three Months ended September
30, 1997 and 1996. 4
Condensed Statements of Cash Flows
for Three Months ended September 30,
1997 and 1996. 5
Notes to Condensed Financial Statements. 6
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. 6
ITEM 3. Quantitative and Qualitative Disclosures
About Market Risk 10
PART II - OTHER INFORMATION:
ITEM 1. Legal Proceedings. 10
ITEM 2. Changes in Securities. 10
ITEM 3. Defaults Upon Senior Securities. 10
ITEM 4. Submission of Matters to a Vote
of Security Holders. 10
ITEM 5. Other Information. 10
ITEM 6. Exhibits and Reports on Form 8-K. 11
SIGNATURES 11
EXHIBIT INDEX E-1
</TABLE>
2
<PAGE>
CCAIR, Inc.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED BALANCE SHEETS
(Unaudited)
-----------
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------ -----------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 328,096 $ 4,904,778
Receivables, net 5,390,905 5,628,959
Inventories, less allowance for
obsolescence of $466,000 2,109,665 2,082,376
Prepaid expenses and deposits 1,484,690 842,320
----------- -----------
Total current assets 9,313,356 13,458,433
----------- -----------
PROPERTY AND EQUIPMENT:
Flight equipment and leasehold improvements 24,780,550 24,417,631
Ground and other property and equipment 4,348,085 4,269,938
29,128,635 28,687,569
Less accumulated depreciation
and amortization (15,690,071) (15,004,807)
----------- -----------
13,438,564 13,682,762
----------- -----------
OTHER ASSETS 798,654 829,464
----------- -----------
Total assets $23,550,574 $27,970,659
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current
maturities of long-term debt $ 985,335 $ 962,748
Short-term borrowings 357,000 3,951,000
Current obligations under capital leases 367,000 328,465
Accounts payable 4,859,275 5,520,553
Accrued expenses 5,833,768 6,316,240
----------- -----------
Total current liabilities 12,402,378 17,079,006
Long-term debt, less current maturities 989,432 922,345
Capital lease obligations, less
current obligations 2,260,702 2,342,517
Deferred credits, net 1,147,725 1,269,635
----------- -----------
Total liabilities 16,800,237 21,613,503
----------- -----------
Commitments and contingencies
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 10,000,000
shares authorized, 7,740,695 issued
and outstanding at September 30,
1997 and June 30, 1997 77,407 77,407
Additional paid-in-capital 17,725,184 17,725,184
Accumulated deficit (11,052,254) (11,445,435)
----------- -----------
Total shareholders' equity 6,750,337 6,357,156
----------- -----------
Total liabilities and
shareholders' equity $23,550,574 $27,970,659
=========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
CCAIR, Inc.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
-----------
3 Months ended September 30,
1997 1996
OPERATING REVENUES:
Passenger $16,454,854 $17,130,339
Other 290,295 239,991
----------- -----------
Total 16,745,149 17,370,330
----------- -----------
OPERATING EXPENSES:
Flight operations 5,343,816 5,893,612
Fuel and oil 1,451,431 1,824,902
Maintenance 3,334,877 3,091,683
Ground operations 2,158,634 2,124,194
Advertising, promotions
and commissions 2,435,888 2,462,771
General and administration 992,423 1,002,679
Depreciation and amortization 390,384 459,484
----------- -----------
Total 16,107,453 16,859,325
----------- -----------
OPERATING INCOME 637,696 511,005
Interest expense (264,866) (192,643)
Other income, net 20,351 2,400
----------- -----------
Net income $ 393,181 $ 320,762
=========== ===========
EARNINGS PER COMMON SHARE $ .05 $ .04
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,359,497 7,958,539
=========== ===========
See notes to condensed financial statements.
4
<PAGE>
CCAIR, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
-----------
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
------------ --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 393,181 $ 320,762
Adjustments to reconcile net income to
net cash provided by operating activities:
Note discount amortization 22,753 26,595
Depreciation and amortization 1,376,356 1,365,962
Gain on disposal of assets (20,351) (2,400)
Lease expense less than payments (121,910) (116,048)
Changes in certain assets and liabilities:
Accounts receivable 238,054 555,456
Inventories (27,289) (107,864)
Accounts payable (661,281) (705,685)
Accrued expenses (482,472) 14,472
Prepaid expenses and deposits (642,370) (155,016)
Other changes, net 30,810 (15,863)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 105,481 1,180,371
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,132,158) (1,078,403)
Proceeds from sale of assets 20,351 2,400
----------- -----------
NET CASH USED BY
INVESTING ACTIVITIES (1,111,807) (1,076,003)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of notes and long-term debt 361,645 110,000
Short-term borrowings, net (3,594,000) (60,000)
Reductions of notes and long-term debt (338,001) (325,591)
----------- -----------
NET CASH USED BY
FINANCING ACTIVITIES (3,570,356) (275,591)
----------- -----------
Net decrease in cash (4,576,682) (171,223)
Cash, beginning of period 4,904,778 5,059,665
----------- -----------
CASH, END OF PERIOD $ 328,096 $ 4,888,442
=========== ===========
</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, 1997.
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 three-month period ended September 30, 1997, the Company
recorded net income of $393,181, or $.05 per share, versus a net income of
$320,762, or $.04 per share in the comparable period of fiscal 1997. Reductions
in unprofitable flying, while decreasing the number of available seat miles
"(ASMs") flown, allowed the Company to improve its revenue per ASM 11.1%, thus
operating income increased by 24.8% from the quarter ended September 30, 1996 to
the quarter ended September 30, 1997. The Company also received benefit from the
impact of lower fuel prices in the quarter.
6
<PAGE>
CCAIR, Inc.
FISCAL QUARTER ENDED SEPTEMBER 30, 1997
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-month period ended September 30, 1997 and 1996:
<TABLE>
<CAPTION>
Airline Operating Statistics
For the Three Months
Ended September 30,
%
1997 1996 Change
----------- ----------- ------
<S> <C> <C> <C>
Operating revenue $16,745,149 $17,370,330 (3.6)
Operating expense $16,107,453 $16,859,325 (4.5)
Revenue passengers carried 205,149 208,580 (1.6)
Revenue passenger miles (1) 37,940,714 38,691,241 (1.9)
Available seat miles (2) 71,318,199 82,390,739 (13.4)
Passenger load factor (3) 53.2% 47.0% 13.2
Passenger breakeven load factor 51.9% 46.1% 12.6
Yield per revenue passenger
mile (4) 43.4(cent) 44.3(cent) (2.0)
Passenger revenue per available
seat mile 23.1(cent) 20.8(cent) 11.1
Operating cost per available
seat mile 22.6(cent) 20.5(cent) 10.2
Average passenger trip (miles) 184.9 185.5 (.3)
Average daily aircraft utilization
per plane (block hours) 7.9 8.1 (2.5)
Average passenger fare $80.21 $82.13 (2.3)
Completion factor 97.9% 96.0% 2.0
</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 September 30, 1997
Compared to Three Months Ended September 30, 1996
For the quarter ended September 30, 1997, operating revenues decreased
3.6%. ASMs decreased 13.4% from the first quarter of fiscal 1997. Pursuant to an
economic analysis of aircraft utilization and profitability, the Company has
removed several Shorts aircraft from the schedule. For the quarter ended
September 30, 1997, only six of the nine Shorts aircraft were scheduled, while
all nine of the aircraft leased from Shorts were utilized in the quarter ended
September 30, 1996. The Company also reduced its daily aircraft utilization from
8.1 hours in the first quarter of fiscal 1997 to 7.9 hours in the first quarter
of fiscal 1998 in order to improve its operating performance. The Company's
completion factor thus improved from 96.0% in the first quarter of 1997 to 97.9%
in the corresponding quarter of fiscal 1998.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
Results of Operations, continued
While the reduction in ASMs resulted in decreased operating revenues in
the first quarter of fiscal 1998, the elimination of unprofitable flying allowed
the Company to improve its revenue per available seat mile 11.1%, from
20.8(cent) in the first quarter of fiscal 1997 to 23.1(cent) in the same period
of fiscal 1998. The yield remained relatively stable, decreasing from 44.3(cent)
per revenue passenger mile ("RPM") for the quarter ended September 30, 1996 to
43.4(cent) per RPM in the quarter ended September 30, 1997. RPMs decreased 1.9%,
as revenue passengers carried decreased 1.6% for the first quarter of fiscal
1998 compared to the comparable period in fiscal 1997, and the average passenger
trip decreased .3% for the same periods.
Operating costs per ASM increased 10.2% from 20.5(cent) in the quarter
ended September 30, 1996 to 22.6(cent) in the quarter ended September 30, 1997.
The following Table compares components of operating cost per ASM for the three
months ended September 30, 1997 and 1996.
Cost per ASM -
Quarter Ended
September 30,
(in cents)
1997 1996
Flight operations 7.5 7.2
Fuel and oil 2.0 2.2
Maintenance 4.7 3.8
Ground operations 3.0 2.6
Advertising, promotions, commissions 3.5 3.0
General and administration 1.4 1.2
Depreciation and amortization 0.5 0.5
----- -----
22.6 20.5
==== ====
Flight operations expense per ASM increased .3(cent) in the current
quarter as compared to the prior year, as the Company was still incurring lease
expense on the aircraft removed from the flight schedule. Fuel costs decreased
.2(cent) per ASM in the first quarter of fiscal 1998 as compared to the first
quarter of fiscal 1997, as the average cost per gallon of fuel decreased from
87.4(cent) to 78.1(cent). Maintenance expense increased .9(cent) per ASM as
outside repair and engine rental expense on the Company's Shorts and Jetstream
aircraft increased over the prior year. Ground operations and advertising and
commissions increases are due to increased handling and service fees charged by
US Airways, plus higher booking fees charged by other airlines through their
reservations systems. General and administration expenses per ASM increased
.2(cent) as professional fees, principally legal and accounting, were greater in
the quarter ended September 30, 1997 versus the quarter ended September 30,
1996.
Liquidity and Capital Resources
The cash position of the Company remains critical at September 30,
1997. The key element to improved operating results will be the level of the
yield per RPM. While the yield for October, 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: short-term loans from officers and directors, extending terms with
trade creditors and restructuring aircraft lease payments.
Cash and cash equivalents decreased by $4,577,000 during the first
three months of fiscal 1998. 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, 1997. Therefore, the Company's balance
sheet at June 30, 1997 reflects the net Clearing House settlement of $4,876,000
as cash. At September 30, 1997, 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 $105,000. The major
sources of operating cash were net income of $393,000, depreciation and
amortization of $1,376,000 and the reduction in accounts receivable of $238,000.
The major operating cash use was the reduction in accounts payable and accrued
expenses of $1,144,000 and the increase in prepaid expenses of $642,000.
The capital expenditures of $1,132,000 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 $338,000 in the
three-month period ended September 30, 1997.
Proposed Transactions
The Company and its advisors, Barlow Partners, have determined that the
elimination of the Shorts aircraft from the fleet would positively impact the
operating results of the Company. Long-term savings would be achieved in the
areas of reduced spare parts inventories, reduced personnel training expenses,
and reduced lease rates per flight hour. The Company would also realize
improvements in performance measures such as on-time departures and arrivals,
denied boardings and flight cancellations.
To this end, the Company is currently in negotiations with the aircraft
lessor to terminate the Shorts leases and return the aircraft. In return, the
Company is proposing to issue a subordinated note, convertible to common stock.
Under the terms of the proposed transaction, principal payments on the note
would be paid in either cash or stock at the Company's discretion. Interest
would begin accruing from the date of the agreement, and although interest is
required to be paid in cash, the first interest payment under the note would not
be due until January, 1999. If the transaction is consummated, the face amount
of the note is projected to be approximately $8,000,000. This amount would
encompass approximately $1,800,000 of liabilities (accrued leases and notes
payable) currently recorded in the Company's financial statements at September
30, 1997.
Under this proposed transaction, the Company anticipates having to meet
certain return conditions, which would entail performing two engine overhauls
(approximately $500,000 in the aggregate). The Company has the same sources of
cash to meet the return conditions as it does to fund continuing operations, as
outlined above.
The Company is also currently negotiating with British Aerospace Asset
Management ("BAAM") to return its entire Jetstream 31 fleet and acquire Super 31
aircraft under lease. Under the terms of the proposed transaction, in return for
leasing 14 Super 31 aircraft through December, 2004, the Company would be able
to reduce its rental payments on Jetstream aircraft by approximately $10,000 per
month per aircraft. While both aircraft have 19 seats, the Super 31 aircraft are
approximately five years newer than the Jetstream 31 aircraft which average 11
years of age, resulting in reduced maintenance expense and other savings based
on operational factors. The Super 31 aircraft are also faster, more fuel
efficient and operate with less weight restrictions than their precursors. While
the Jetstream 31 leases have return conditions which must be satisfied, the
Company's cash outlays related to these return conditions are projected to be
less than $20,000. The Company is also attempting to acquire six additional
Super 31 aircraft to meet short-term operating needs. The leases on these six
incremental aircraft are not anticipated to exceed one year in duration from
inception and are projected to be at the same lease rate as the 14 aircraft
described above.
The Company will record the effects of the above fleet restructuring
when consummated which will include a charge to operating expenses for the lease
termination of approximately $6.2 million. In addition, if all elements of the
restructuring are completed as planned, the Company will also write off
approximately $6.3 million of parts assemblies, capital overhauls and leasehold
improvements reflected in the accompanying September 30, 1997 balance sheet.
The Company and a potential investor group are currently negotiating a
private placement of the Company's stock. Upon completion of this transaction,
the Company anticipates selling 500,000 of authorized and available common stock
to the investor group at a negotiated price approximating market, with certain
restrictions on subsequent resale. The Company expects this transaction to be
finalized in the quarter ending December 31, 1997.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, continued
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Certain statements in this Quarterly Report on Form 10-Q reflect
projections or expectations of future financial or economic performance of the
Company and are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995.
No assurance can be given that actual results or events will not differ
materially from those projected, estimated, assumed or anticipated in any such
forward-looking statements. Important factors that could result in such
differences include: the Company's relationship with US Airways; general
economic conditions in the Company's markets; price competition in the airline
industry; increases in the costs for fuel and maintenance; new governmental
regulations concerning aircraft or air transportation; operating results for US
Airways; and other factors discussed in the Company's filings with the
Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
CONDITION AND RESULTS OF OPERATIONS, continued
None to report.
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
None to report.
ITEM 5. Other Information
None to report.
10
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Exhibit
4 Specimen Common Stock Certificate. (1)
11 Computation of Earnings Per Share.
(b) Reports on Form 8-K
None.
- ----------------------
(1) Incorporated by reference to Registration Statement on Form S-1, File
No. 33-28967.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
November 12, 1997 CCAIR, Inc.
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)
11
<PAGE>
EXHIBIT INDEX
Exhibit Filed Sequential
No. Exhibit Herewith At Page No.
4 Specimen Common Stock
Certificate. (1)
11 Computation of Earnings Per Share E-1
- ---------------------
(1) Incorporated by reference to Registration Statement on Form S-1, File
No. 33-28967.
ITEM 6 EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE (1)
Three Months ended September 30,
1997 1996
------------ -----------
Net income $ 393,181 $ 320,762
============ ===========
Shares
Weighted average number of
shares outstanding 7,740,695 7,740,695
Assuming exercise of options 618,802 217,844
------------ -----------
Weighted average number of
shares outstanding,
as adjusted 8,359,497 7,958,539
============ ===========
Earnings per share $ .05 $ .04
============ ===========
- ----------------
(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
September 30, 1997 and is qualified in its entirety by reference to such
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 328,096
<SECURITIES> 0
<RECEIVABLES> 5,390,905
<ALLOWANCES> 0
<INVENTORY> 2,109,665
<CURRENT-ASSETS> 9,313,356
<PP&E> 24,780,550
<DEPRECIATION> 4,348,085
<TOTAL-ASSETS> 23,550,574
<CURRENT-LIABILITIES> 12,402,378
<BONDS> 0
0
0
<COMMON> 77,407
<OTHER-SE> 6,672,930
<TOTAL-LIABILITY-AND-EQUITY> 23,550,574
<SALES> 0
<TOTAL-REVENUES> 16,745,149
<CGS> 0
<TOTAL-COSTS> 16,107,453
<OTHER-EXPENSES> (20,351)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 264,866
<INCOME-PRETAX> 393,181
<INCOME-TAX> 0
<INCOME-CONTINUING> 393,181
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 393,181
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
