<PAGE>
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 March 31, 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 28219-9929
(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 May 5, 1997
Common stock, $0.01 par value 7,740,695
<PAGE>
CCAIR, Inc.
FORM 10-Q QUARTERLY REPORT FOR
FISCAL QUARTER ENDED MARCH 31, 1997
TABLE OF CONTENTS
PAGE NO.
PART I - FINANCIAL INFORMATION:
ITEM 1. Financial Statements: 3
Condensed Balance Sheets as of
March 31, 1997 and June 30, 1996. 3
Condensed Statements of Income for
the Three and Nine Months ended
March 31, 1997 and 1996. 4
Condensed Statements of Cash Flows
for Nine Months ended March 31,
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
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. 10
ITEM 6. Exhibits and Reports on Form 8-K. 10
SIGNATURES 10
EXHIBIT INDEX 10
2
<PAGE>
CCAIR, Inc.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
CONDENSED BALANCE SHEETS
(Unaudited)
-----------
March 31, June 30,
1997 1996
----------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 29,174 $ 5,059,665
Receivables, net 5,781,399 5,937,222
Inventories, less allowance for
obsolescence of $466,000 1,999,548 1,758,453
Prepaid expenses and deposits 469,846 1,410,113
------------ ------------
Total current assets 8,279,967 14,165,453
------------ ------------
PROPERTY AND EQUIPMENT:
Flight equipment and aircraft 23,013,719 20,700,870
Ground and other equipment and
leasehold improvements 4,312,534 4,135,574
------------ ------------
27,326,253 24,836,444
Less accumulated depreciation
and amortization (14,742,421) (12,504,463)
------------ ------------
12,583,832 12,331,981
------------ ------------
OTHER ASSETS 633,130 632,244
------------ ------------
Total assets $ 21,496,929 $ 27,129,678
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current
maturities of long-term debt $ 430,262 $ 854,438
Short-term borrowings 194,000 3,310,000
Current obligations under capital leases 346,451 373,266
Accounts payable 4,295,350 5,546,146
Accrued expenses 4,856,180 5,441,201
------------ ------------
Total current liabilities 10,122,243 15,525,051
Long-term debt, less current maturities 1,256,068 1,371,328
Capital lease obligations, less
current obligations 2,388,060 2,638,967
Deferred credits, net 1,391,705 1,757,436
------------ ------------
Total liabilities 15,158,076 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 March 31,
1997 and June 30, 1996 77,407 77,407
Additional paid-in-capital 17,725,184 17,725,184
Accumulated deficit (11,463,738) (11,965,695)
------------ ------------
Total shareholders' equity 6,338,853 5,836,896
------------ ------------
Total liabilities and
shareholders' equity $ 21,496,929 $ 27,129,678
============ ============
See notes to condensed financial statements.
3
<PAGE>
CCAIR, Inc.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
-----------
<TABLE>
<CAPTION>
3 Months ended March 31, 9 Months ended March 31,
--------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Passenger $ 15,843,373 $ 15,160,128 $ 49,323,130 $ 46,611,243
Public service ---- 45,604 ---- 297,185
Other 641,002 584,433 1,154,420 1,157,160
------------ ------------ ------------ ------------
Total 16,484,375 15,790,165 50,477,550 48,065,588
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Flight operations 5,653,293 5,732,995 17,325,866 17,317,131
Fuel and oil 1,711,137 1,541,720 5,516,483 4,503,571
Maintenance 3,189,252 2,810,915 8,994,848 8,993,427
Ground operations 1,819,036 1,915,601 6,014,775 5,429,455
Advertising, promotions
and commissions 2,176,866 2,001,971 7,016,364 6,332,613
General and administration 1,153,586 1,001,904 3,121,115 3,040,038
Depreciation and amortization 418,103 474,789 1,339,372 1,372,128
------------ ------------ ------------ ------------
Total 16,121,273 15,479,895 49,328,823 46,988,363
------------ ------------ ------------ ------------
OPERATING INCOME 363,102 310,270 1,148,727 1,077,225
Interest expense (238,154) (201,453) (644,730) (561,120)
Other income (expense), net 1,197 (39,262) (2,040) (29,124)
------------ ------------ ------------ ------------
Net income $ 126,145 $ 69,555 $ 501,957 $ 486,981
============ ============ ============ ============
EARNINGS PER COMMON SHARE $ .02 $ .01 $ .06 $ .06
============ ============ ============ ============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,009,532 7,995,536 7,970,829 8,010,587
============ ============ ============ ============
</TABLE>
See notes to condensed financial statements.
4
<PAGE>
CCAIR, Inc.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
-----------
<TABLE>
<CAPTION>
Nine Months Ended March 31,
1997 1996
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 501,957 $ 486,981
Adjustments to reconcile net income to
net cash provided by operating activities:
Note discount amortization 79,267 201,664
Depreciation and amortization 4,193,870 4,491,216
Loss on disposal of assets 3,346 28,762
Rental expense less
than payments (348,144) (107,903)
Changes in certain assets and liabilities:
Accounts receivable 155,823 (170,273)
Inventories (241,095) (232,682)
Accounts payable (1,250,796) (334,821)
Accrued expenses (585,017) 188,609
Prepaid expenses and deposits 932,711 74,384
Other changes, net (28,423) (117,683)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 3,413,499 4,508,254
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,441,465) (4,258,912)
Proceeds from sale of assets 2,400 10,500
----------- -----------
NET CASH USED BY
INVESTING ACTIVITIES (4,439,065) (4,248,412)
----------- -----------
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 184,000 ----
Short-term borrowings, net (3,116,000) ----
Reductions of notes and long-term debt (1,072,925) (1,193,772)
----------- -----------
NET CASH USED BY
FINANCING ACTIVITIES (4,004,925) (175,959)
----------- -----------
Net increase (decrease) in cash (5,030,491) 83,883
Cash, beginning of period 5,059,665 56,995
----------- -----------
CASH, END OF PERIOD $ 29,174 $ 140,878
=========== ===========
</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 nine-month period ended March 31, 1997, the Company recorded net
income of $501,957, or $.06 per share, versus a net income of $486,981 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 March 31, 1997 was $126,145 or
$.02 per share versus $69,555 for the three months ended March 31, 1996.
6
<PAGE>
CCAIR, Inc.
FISCAL QUARTER ENDED MARCH 31, 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- and nine-month periods ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
Airline Operating Statistics
For the Three Months For the Nine Months
Ended March 31, Ended March 31,
------------------------------------------ -----------------------------------------
% %
1997 1996 Change 1997 1996 Change
----------- ----------- ------ ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue $16,484,375 $15,790,165 4.4 $50,477,550 $48,065,588 5.0
Operating expense $16,121,273 $15,479,895 4.1 $49,328,823 $46,988,363 5.0
Revenue passengers carried 172,116 169,489 1.6 583,478 558,724 4.4
Revenue passenger miles(1) 31,869,574 32,242,363 (1.2) 107,937,451 102,987,935 4.8
Available seat miles(2) 70,619,538 72,419,524 (2.5) 231,009,408 230,844,624 .1
Passenger load factor(3) 45.1% 44.5% 1.3 46.7% 44.6% 4.7
Passenger breakeven load factor 44.8% 44.3% 1.1 46.2% 44.1% 4.8
Yield per revenue passenger
mile(4) 49.7(cents) 47.0(cents) 5.7 45.7(cents) 45.3(cents) .9
Operating cost per available
seat mile 22.8(cents) 21.4(cents) 6.5 21.4(cents) 20.4(cents) 4.9
Average passenger trip (miles) 185.2 190.2 (2.6) 185.0 184.3 .4
Average daily aircraft utilization
per plane (block hours) 8.2 7.6 7.9 8.2 8.0 2.5
Average passenger fare $92.05 $89.45 2.9 $84.53 $83.42 1.3
Average monthly completion factor 94.6% 91.0% 4.0 95.7% 94.4% 1.4
</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 March 31, 1997 Compared to Three Months
Ended March 31, 1996
For the quarter ended March 31, 1997, operating revenues increased 4.4%
as the yield realized by the Company increased 5.7% from 47.0(cents) per revenue
passenger mile ("RPM") in the third quarter of fiscal 1996 to 49.7(cents) in the
fiscal 1997 third quarter. A 1.6% increase in passengers carried and a 2.6%
decrease in the average passenger trip resulted in a 1.2% decrease in RPMs. As a
result of the increased yields and stable traffic, passenger revenues increased
4.5% from $15,160,000 in the third quarter of fiscal 1996 to $15,843,000 for the
comparable quarter in fiscal 1997. Public service revenue was $46,000 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 6.5% from
21.4(cents) in the quarter ended March 31, 1996 to 22.8(cents) in the quarter
ended March 31, 1997. The following Table compares components of operating cost
per ASM for the three months ended March 31, 1997 and 1996.
Cost per ASM -
Quarter Ended
March 31,
(in cents)
------------------
1997 1996
---- ----
Flight operations 8.0 7.9
Fuel and oil 2.4 2.1
Maintenance 4.5 3.9
Ground operations 2.6 2.6
Advertising, promotions, commissions 3.1 2.8
General and administration 1.6 1.4
Depreciation and amortization 0.6 0.7
---- ----
22.8 21.4
==== ====
Flight operations expense per ASM increased $.001 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 $.003 per ASM in the second quarter of fiscal
1997 as compared to the third quarter of fiscal 1996, as the cost per gallon of
fuel increased from 78.5(cents) to 90.4(cents). Maintenance expense increased
$.006 per ASM as outside repair and engine rental expense increased over the
prior year. Advertising and commissions increased by $.003 per ASM due to the
increased number of passengers and increased handling and service fees charged
by US Airways. Ground operations expense, depreciation and general and
administration expenses remained relatively constant on a unit basis.
For the Nine Months Ended March 31, 1997 Compared to Nine Months Ended
March 31, 1996
The Company reported net income of $502,000, or $.06 per share, for the
nine months ended March 31, 1997 as compared to net income of $487,000 for the
nine months ended March 31, 1996. Operating revenue increased from $48,066,000
for the nine months ended March 31, 1996 to $50,478,000 for the nine months
ended March 31, 1997. The principal reason for the improved operating revenue
was the 4.4% increase in passenger traffic.
Cost per ASM increased 4.9% in the nine-month period ended March 31,
1997. 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 March 31, 1997. The
key element to improved operating results will be the level of the yield per
RPM. While the yield for April, 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 $5,030,000 during the first nine
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 March 31, 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 $3,413,000. The major
sources of operating cash were net income of $502,000, depreciation and
amortization of $4,194,000 and the reduction in prepaid expenses of $933,000.
The major operating cash use was the reduction in accounts payable and accrued
expenses of $1,836,000.
The capital expenditures of $4,441,000 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 $1,073,000 in the
nine-month period ended March 31, 1997. The Company has negotiated a new line of
credit with Coast Business Credit, an asset based lender. This new line of
credit has a maximum loan amount of $5,000,000, compared to the $3,000,000
maximum on the current facility. However, as of May 2, 1997, funding on the new
loan facility has not taken place due to difficulties in removing restrictions
being placed on the Company by the old lender. Thus, funding under the new
facility cannot be assured.
On April 22, 1997, the Company announced that it had retained Barlow
Partners, L.P. as financial advisor to its previously announced fleet
rationalization plan. Barlow Partners will assist the Company in the
redeployment and future acquisition of aircraft to meet its fleet plan, as well
as provide other financial advice with respect to the fleet plan.
On December 20, 1996, US Airways notified the Company that it was
amending the service agreement between US Airways and the Company to change the
method for the division of revenue on joint fares effective with tickets used on
or after July 1, 1997. Preliminary analysis by the Company indicates that US
Airways will capture an additional 4% of revenues presently allocated to the
Company. While the Company is studying ways to minimize the impact of this
change in the service agreement, the ultimate effect of the change will
negatively impact the results of the Company's operations.
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.
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.
9
<PAGE>
ITEM 5. Other Information
None to report.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Exhibit
----------- -------
4 Specimen Common Stock Certificate.(1)
11 Computation of Earnings Per Share.
(b) Reports on Form 8-K
None.
- ----------------------
(1) Incorporated by reference to Registration Statement on Form S-1,
File No. 33-28967.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 9, 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)
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.
10
ITEM 6 EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE(1)
Three Months ended March 31,
1997 1996
---------- ----------
Net income $ 126,145 $ 69,555
========== ==========
Shares
Weighted average number of
shares outstanding 7,740,695 7,740,695
Assuming exercise of options 268,837 254,841
---------- ----------
Weighted average number of
shares outstanding,
as adjusted 8,009,532 7,995,536
========== ==========
Earnings per share $ .02 $ .01
========== ==========
Nine Months ended March 31,
1997 1996
---------- ----------
Net income $ 501,957 $ 486,981
========== ==========
Shares
Weighted average number of
shares outstanding 7,740,695 7,654,528
Assuming exercise of options 230,134 356,059
---------- ----------
Weighted average number of
shares outstanding,
as adjusted 7,970,829 8,010,587
========== ==========
Earnings per share $ .06 $ .06
========== ==========
- ----------------
(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 March 31, 1997 and
is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 29,174
<SECURITIES> 0
<RECEIVABLES> 5,781,399
<ALLOWANCES> 0
<INVENTORY> 1,999,548
<CURRENT-ASSETS> 8,279,967
<PP&E> 27,326,253
<DEPRECIATION> 14,742,421
<TOTAL-ASSETS> 21,496,929
<CURRENT-LIABILITIES> 10,122,243
<BONDS> 0
0
0
<COMMON> 77,407
<OTHER-SE> 6,261,446
<TOTAL-LIABILITY-AND-EQUITY> 21,496,929
<SALES> 0
<TOTAL-REVENUES> 16,484,375
<CGS> 0
<TOTAL-COSTS> 16,121,273
<OTHER-EXPENSES> (1,197)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 238,154
<INCOME-PRETAX> 126,145
<INCOME-TAX> 0
<INCOME-CONTINUING> 126,145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 126,145
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
