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, 1998
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 MAY 12, 1998
----- ---------------------------
Common stock, $0.01 par value 8,365,695
<PAGE>
CCAIR, INC.
FORM 10-Q QUARTERLY REPORT FOR
FISCAL QUARTER ENDED MARCH 31, 1998
TABLE OF CONTENTS
PAGE NO.
PART I - FINANCIAL INFORMATION:
ITEM 1. Financial Statements: 3
Condensed Balance Sheets as of
March 31, 1998 and December 31, 1997 3
Condensed Statements of Income for
the Three Months ended March 31, 1998
and 1997. 4
Condensed Statements of Cash Flows
for Three Months ended March 31,
1998 and 1997. 5
Notes to Condensed Financial Statements. 6
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. 8
ITEM 3. Quantitative and Qualitative Disclosures
About Market Risk 11
PART II - OTHER INFORMATION:
ITEM 1. Legal Proceedings. 11
ITEM 2. Changes in Securities. 11
ITEM 3. Defaults Upon Senior Securities. 11
ITEM 4. Submission of Matters to a Vote
of Security Holders. 11
ITEM 5. Other Information. 11
ITEM 6. Exhibits and Reports on Form 8-K. 11
SIGNATURES 12
EXHIBIT INDEX E-1
2
<PAGE>
CCAIR, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
-----------
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------------------------
(Unaudited) (Unaudited)
<S><C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 20,956 $ 11,647
Receivables, net 5,783,364 5,047,701
Inventories, less allowance for
obsolescence of $466,000 695,717 509,586
Parts held for resale, net of
valuation reserves of $700,000 1,205,277 1,205,277
Prepaid expenses and deposits 1,400,353 1,976,896
----------- -----------
Total current assets 9,105,667 8,751,107
----------- -----------
PROPERTY AND EQUIPMENT:
Flight equipment and leasehold improvements 5,918,097 5,525,291
Ground and other property and equipment 4,413,655 4,380,712
----------- -----------
10,331,752 9,906,003
Less accumulated depreciation
and amortization ( 6,727,377) ( 6,552,430)
----------- -----------
3,604,375 3,353,573
----------- -----------
OTHER ASSETS 24,630 35,522
----------- -----------
Total assets $12,734,672 $12,140,202
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable and current
maturities of long-term debt $ 2,433,988 $ 2,490,334
Note payable expected to be refinanced 7,920,000 7,920,000
Short-term borrowings 900,000 900,000
Current obligations under capital leases 156,599 229,194
Accounts payable 6,570,329 8,129,043
Accrued expenses 7,858,379 5,982,891
----------- -----------
Total current liabilities 25,839,295 25,651,462
Long-term debt, less current maturities 316,216 373,147
Capital lease obligations, less
current obligations 2,148,637 2,269,230
----------- -----------
Total liabilities 28,304,148 28,293,839
----------- -----------
Commitments and contingencies
SHAREHOLDERS' EQUITY (DEFICIT):
Common stock, $.01 par value, 10,000,000
shares authorized, 8,365,695 and
8,335,695 issued and outstanding at
March 31, 1998 and December 31, 1997 83,657 83,357
Additional paid-in-capital 19,543,602 19,508,276
Accumulated deficit (35,196,735) (35,745,270)
----------- -----------
Total shareholders' equity (deficit) (15,569,476) (16,153,637)
----------- -----------
Total liabilities and
shareholders' equity (deficit) $12,734,672 $12,140,202
=========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
CCAIR, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
-----------
Three Months Ended March 31,
----------------------------------
1998 1997
----------- -----------
OPERATING REVENUES:
Passenger $14,334,346 $15,843,373
Other 229,115 641,002
----------- -----------
Total 14,563,461 16,484,375
----------- -----------
OPERATING EXPENSES:
Flight operations 4,521,893 5,653,293
Fuel and oil 1,120,454 1,711,137
Maintenance 2,748,118 3,189,252
Ground operations 2,122,331 1,819,036
Advertising, promotions
and commissions 1,966,054 2,176,866
General and administration 1,156,664 1,153,586
Depreciation and amortization 194,621 418,103
----------- -----------
Total 13,830,135 16,121,273
----------- -----------
OPERATING INCOME 733,326 363,102
Interest expense (214,684) (238,154)
Other income, net 29,893 1,197
----------- -----------
Income before income taxes 548,535 126,145
Provision for income taxes --- ---
----------- -----------
Net income $ 548,535 $ 126,145
=========== ===========
BASIC EARNINGS PER SHARE $ .07 $ .02
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,345,695 7,740,695
=========== ===========
DILUTED EARNINGS PER SHARE $ .06 $ .02
=========== ===========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 8,958,287 8,009,532
=========== ===========
See notes to condensed financial statements.
4
<PAGE>
CCAIR, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
----------- -----------
<S><C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 548,535 $ 126,145
Adjustments to reconcile net income to
net cash provided by operating activities:
Note discount amortization 23,860 26,138
Depreciation and amortization(1) 194,621 1,427,398
Loss (gain) on disposal of assets (29,893) 109
Lease expense less than payments ---- (121,913)
Changes in certain assets and liabilities:
Accounts receivable (735,663) (723,464)
Inventories (186,131) (50,297)
Accounts payable (1,558,714) (774,534)
Accrued expenses 1,875,488 466,990
Prepaid expenses and deposits 576,543 1,219,363
Other changes, net 10,892 (830)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 719,538 1,595,105
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (450,514) (1,335,551)
Proceeds from sale of assets 34,985 ----
----------- -----------
NET CASH USED BY
INVESTING ACTIVITIES (415,529) (1,335,551)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 35,626 ----
Issuance of notes and long-term debt ---- 74,000
Short-term borrowings, net ---- (93,000)
Reductions of notes and long-term debt (330,326) (221,370)
----------- -----------
NET CASH USED BY
FINANCING ACTIVITIES (294,700) (240,370)
----------- -----------
Net increase in cash 9,309 19,184
Cash, beginning of period 11,647 9,990
----------- -----------
CASH, END OF PERIOD $ 20,956 $ 29,174
=========== ===========
</TABLE>
(1) Amortization of capitalized overhauls is included in maintenance,
materials and repairs expense in the accompanying Condensed Statements
of Operations for the three months ended March 31, 1997.
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 transition
report for the six-months ended December 31, 1997.
2. EARNINGS PER COMMON SHARE:
-------------------------
In February, 1997 the FASB issued SFAS No. 128, Earnings Per Share.
This statement establishes standards for computing and presenting EPS.
It requires presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and
requires reconciliation of the computation of basic EPS and diluted
EPS. Basic EPS is computed by dividing income available to shareholders
by the weighted average number of shares outstanding for the period.
Diluted EPS gives effect to all dilutive potential common shares that
were outstanding during the period. Prior period EPS has been restated
to conform to the new statement. This statement was adopted by the
Company beginning October 1, 1997.
<TABLE>
<CAPTION>
Three-Month Period Three-Month Period
Ended March 31, Ended March 31,
1998 1997
--------------------------------------- ------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
--------------------------------------- ------------------------------------
<S><C>
Basic earnings per share
Net income $ 548,535 8,345,695 $ 0.07 $ 126,145 7,740,654 $ 0.02
Effect of dilutive securities
(options and warrants) 612,592 268,878
--------- ---------
Diluted earnings per share
Net income $ 548,535 8,958,287 $ 0.06 $ 126,145 8,009,532 $ 0.02
========= =========
Pro forma effect of retroactive
application of change in
accounting principle
Net loss $(37,212) 7,740,654 $(0.00)
</TABLE>
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, results of operations or cash flows.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
- -------
The Company recognized an increase in net income of 335%, from $125,145
($0.02 per share) in the three-month period ended March 31, 1997 to $548,535 in
the three-month period ended March 31, 1998 ($0.07 per share). As a result of
the restructuring of the aircraft fleet, available seat miles ("ASMs") decreased
23.0% for the three months ended March 31, 1998 compared to the three months
ended March 31, 1997. The elimination of unprofitable flying enabled the Company
to improve its passenger revenue per ASM 17.9%, from 22.4(cent) to 26.4(cent).
Load factor increased 20.0% to 54.1%. As a result of the reduction in capacity,
operating revenues decreased 11.7% for the first quarter of 1998 compared to the
same quarter in 1997. The Company's operating results benefited from continued
reductions in fuel, maintenance, and flight operations expenses. The Company
continued to experience relatively low fuel prices, at an average cost of $0.71
per gallon in the three-month period ended March 31, 1998, as compared to $0.90
in the comparable prior year period, a 21% decrease. Consumption also decreased
19%, correlating to the decrease in ASMs.
RESULTS OF OPERATIONS
- ---------------------
The following table sets forth selected operating comparisons for the
three-month periods ended March 31, 1998 and 1997:
<TABLE>
<CAPTION>
AIRLINE OPERATING STATISTICS
For The Three Months
Ended March 31,
-------------------------------------------------------------
%
1998 1997 Change
----------- ----------- ------
<S><C>
Operating revenue $14,563,461 $16,484,375 (11.7)
Operating expense $13,830,135 $16,121,273 (14.2)
Revenue passengers carried 162,795 172,116 ( 5.4)
Revenue passenger miles (1) 29,416,144 31,869,574 ( 7.7)
Available seat miles (2) 54,368,082 70,619,538 (23.0)
Passenger load factor (3) 54.1% 45.1% 20.0
Passenger breakeven load factor 52.0% 44.8% 16.1
Yield per revenue passenger
mile (4) 48.7(cent) 49.7(cent) ( 2.0)
Passenger revenue per available
seat mile 26.4(cent) 22.4(cent) 17.9
Operating cost per available
seat mile 25.4(cent) 22.8(cent) 11.4
Average passenger trip (miles) 180.7 185.2 ( 2.4)
Average passenger fare $88.05 $92.05 ( 4.3)
Completion factor 96.6% 94.6% 2.1
</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, 1998 COMPARED TO THREE MONTHS ENDED MARCH
31, 1997
Pursuant to its fleet rationalization plan, the Company terminated its
Shorts leases and returned all nine (9) aircraft. Additionally, the Company has
taken delivery of all 20 of its Jetstream Super 31 replacement aircraft.
Retirement of aging aircraft and the addition of a newer, faster Jetstream fleet
has resulted in improved operational performance. Due to the more efficient
aircraft, the Company's completion factor increased from 94.6% in the
three-month period ended March 31, 1997 to 96.6% for the same period in 1998.
The passenger load factor has increased 20.0%, from 45.1% in the three months
ended March 31, 1997 to 54.1% in the three months ended March 31, 1998.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company's reduction in passenger seating capacity resulted in a
decrease in RPMs and passengers carried; however, the decrease in RPMs of 7.7%
was not commensurate with the 23.0% decrease in ASMs, leading to the improved
load factor discussed above. The average passenger trip decreased 2.4%,
primarily as a result of the suspension of service to Shenandoah Valley,
Virginia in July, 1997 and to Montgomery, Alabama (a long-haul market) in
September, 1997.
Operating revenues decreased 11.6%, or $1.9 million, for the three
months ended March 31, 1998 as compared to the same period in 1997. This decline
was a result of the reduction in ASMs, consequent to the aircraft restructuring
activities and the elimination of certain unprofitable routes in the Company's
system. The Company's restructured operations resulted in a 17.9% increase in
passenger revenue per ASM in the first quarter of 1998 as compared to the prior
year period ended March 31, 1997. Although the yield remained relatively stable,
decreasing 2.0% or 1.0(cent) from the quarter ended March 31, 1997 to the
quarter ended March 31, 1998, the average passenger fare declined 4.3% for the
comparable periods due to the reduction in average passenger trip miles.
Although appreciable efficiencies related to variable operating costs
were achieved through the Company's recent fleet restructuring, operating costs
per ASM increased 11.4%, or 2.6(cent), for the three-month period ended March
31, 1998 as compared to the same period in 1997. This increase was primarily
attributable to the 23% decrease in ASMs in the current quarter versus the same
period in the prior year. The following table compares components of operating
cost per ASM for the three months ended March 31, 1998 and 1997:
Cost per ASM -
Quarter Ended
March 31,
(In Cents)
------------------
1998 1997
---- ----
Flight operations 8.3 8.0
Fuel and oil 2.1 2.4
Maintenance 5.1 4.5
Ground operations 3.9 2.6
Advertising, promotions, commissions 3.6 3.1
General and administration 2.1 1.6
Depreciation and amortization 0.3 0.6
---- ----
25.4 22.8
==== ====
Maintenance and general and administrative expenses increased on a per
ASM basis, and was directly related to the reduction in total seat capacity
through the replacement of Shorts flying with Jetstream aircraft on many of the
Company's routes. Ground operations expense increased 1.3(cent) as a result of
increases in customer service employee salaries and wages and additions to
customer service staffing levels initiated to remain in concert with US Airways'
commitment to higher levels of passenger service. An increase in fees charged to
the Company resulted in elevated advertising, promotions and commissions expense
of 0.5(cent). In conjunction with its restructuring, the Company wrote off or
wrote down many of its fixed assets; accordingly, the depreciation expense
recorded in the three months ended March 31, 1998 was reduced significantly as
compared to the same period in 1997, resulting in a 0.3(cent) decrease in
expense per ASM.
For the quarter ending June 30, 1998 ASMs are scheduled to increase
approximately 22% over the first quarter. The Company added a 37-seat Dash 8
aircraft in April, 1998 and intends to add an additional Dash 8 in May. On May
5, 1998 the Company began new Jetstream Super 31 service from Raleigh to Myrtle
Beach and Roanoke, Virginia, as well as new intra Virginia service between
Norfolk, Richmond and Roanoke. On June 1, 1998 the Company will institute
service from Raleigh to Washington (Dulles) with three round trips (increasing
to six in July) and from Raleigh to Savannah with two round trips. As a result
of these scheduled capacity increases, the Company hired and trained flight
crews in the first quarter of 1998, the expense of which was partially offset by
reductions in aircraft lease payments negotiated in the fleet restructuring
resulting in a net 0.3(cent) increase in flight operations expense per ASM.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The cash position and cash flows of the Company continue to be a
critical issue as of March 31, 1998. The Company utilized borrowing under two
revolving lines of credit and short-term loans to satisfy its operating cash
requirements during the period ended March 31, 1998. The key element to improved
operating results is the level of yield per RPM. For the quarter ended March 31,
1998, the yield per RPM remained relatively stable as compared to the prior year
quarter. However, 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, it may obtain financing through short-term
loans from officers and directors, extension of terms with trade creditors, or
issuance of Company stock.
The Company's balance sheet reflects a deficit in working capital,
defined as current assets less current liabilities, of approximately $16,734,000
on March 31, 1998, as compared to $16,900,000 on December 31, 1997. Working
capital is affected by both a $9.7 million short-term note issued in conjunction
with lease termination agreements and seasonality of operations. The Company
intends to exercise its option to convert $7.9 million of the short-term note to
a long-term obligation prior to August 31, 1998. The payment of $1.8 million
necessary to exercise the option and satisfy the remaining portion of the
short-term obligation will be generated through internal operations or by the
issuance of stock, or a combination of these methods.
Cash generated from operating activities was $720,000. The primary
sources of cash were net income, depreciation, the reduction in prepaid expenses
and the increase in accrued expenses, for a total of $3,195,000. The major uses
of cash were increases in accounts receivable and inventories and the reduction
of accounts payable, aggregating to $2,480,000.
The Company's capital expenditures totalled $451,000, comprised
primarily of purchases of major spare parts assemblies and leasehold
improvements. Capital expenditures planned for the remainder of the year consist
of purchases of major spare parts assemblies, leasehold improvements and fixed
asset replacement. Effective July 1, 1997, the Company began accounting for
major component overhauls using the accrual method, as opposed to the deferral
method practiced in prior years. Accordingly, expenditures for overhauls in the
current year are not included in planned capital expenditures. The Company made
scheduled debt payments of $330,000 in the three-month period ended March 31,
1998.
RESTRUCTURING
-------------
On September 11, 1997 the Company entered into a transaction with
Lynrise Air Lease, Inc. ("Lynrise") to return the Company's nine leased Shorts
aircraft to Lynrise as lessor. The aircraft leases were scheduled to continue
through September, 2004, at a monthly rate of $34,000 per aircraft. These
aircraft did not meet US Airways criteria of cabin service, as they are
unpressurized and slow. In addition, the lease expense per block hour was high,
and the operating expenses continued to escalate. The aircraft were returned
between November, 1997 and January, 1998. In return for this early termination
of the aircraft leases, the Company issued a promissory note in the amount of
$9,725,000. The promissory note was issued in contemplation of the Company's
obligations to the lessor: lease termination and aircraft remarketing provisions
- - $6.1 million, previously recorded liabilities in the form of accrued rent and
notes payable - $1.8 million and return condition obligations - $1.8 million.
This note is due on August 31, 1998.
Before August 31, 1998, the Company intends to exercise its option
issued in conjunction with the note, whereby it would pay Lynrise $1,675,000 in
cash or stock and $130,000 in aircraft parts. Upon the option's exercise, the
remainder of the note, $7,920,000, would be converted to a subordinated note,
which is convertible to common stock at $7.50 per share. This subordinated note
would be due in 2004, with interest and principal payments to begin in 1999.
Principal payments may be paid in cash or stock, at the Company's option.
Under an accord reached with an aircraft lessor in November, 1997 the
Company agreed to replace its 14 Jetstream 31 aircraft with 20 Jetstream Super
31 aircraft. In return for renegotiated lease rates, the Company agreed to lease
14 of the Jetstream Super 31 aircraft for seven years, and the additional six
Jetstream Super 31 aircraft until December 31, 1998. The final Jetstream Super
31 aircraft was operational in the Company's system prior to April 30, 1998. The
Jetstream Super 31 aircraft are newer and faster than the predecessor
Jetstreams, and can operate with fewer weight restrictions. The Jetstream 31
aircraft are expected to be returned to the lessor in the second quarter of
1998.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company estimates that the return condition specifications on these
aircraft will cost approximately $50,000 per aircraft. These costs were provided
for as restructuring charges in the period ended December 31, 1997. As a result
of the retirement of two aircraft types, the Company wrote down its spare parts
inventory to net realizable value at December 31, 1997. The writedowns consisted
of $1.2 million in Shorts parts; $100,000 in Jetstream parts; $100,000 in
ancillary parts required to maintain both fleets; and a valuation reserve
increase of $700,000 in contemplation of uncertainties in the resale market. The
Company anticipates to aggressively market its excess spares in 1998. The net
book value of parts held for resale was $1,200,000 on March 31, 1998.
Additionally, the Company wrote off $680,000 in unamortized leasehold
improvements related to these two aircraft types in the period ended December
31, 1997.
As a result of the restructuring plans undertaken to accomplish fleet
simplification and cost reductions, the Company estimates total annual expense
reductions in excess of $4 million per year, commencing in 1998. These savings
will result principally from the reduction in aircraft rentals, maintenance
expense, flight crew and other labor costs, landing fees and spare parts
inventory levels. In addition, the fleet simplification should improve the
Company's ability to achieve higher levels of reliability, resulting in fewer
flight cancellations and delays and increased revenues. The Company does not
anticipate any additional restructuring charges at this time.
OTHER
- -----
CHANGE IN ACCOUNTING PRINCIPLE
------------------------------
Effective July 1, 1997 the Company elected to change its method of
accounting for engine, propeller and landing gear overhauls from the deferral
method to the accrual method. Under the method previously utilized, the Company
capitalized these expenditures and amortized them over the estimated service
life of the overhaul. The change in accounting principle results in accrual for
future expenditures for overhauls based on fight hours incurred each month, at a
rate commensurate with the future expected cost of overhaul. Implementation of
the change in principle necessitated the write-off of previously capitalized
items, along with the related accumulated amortization, as of July 1, 1997. The
Company believes the newly implemented accounting principle more closely
emulates its lease agreements and contracts for repair and maintenance of these
components.
YEAR 2000 COMPLIANCE
--------------------
The Company has evaluated its information infrastructure for Year 2000
compliance. The Company's financial and statistical reporting and its crew
scheduling systems are in the process of being updated, with completion of the
process expected in early 1999. Any costs associated with these modifications
will be expensed as incurred. The Company depends upon passenger reservations
and operational control systems maintained by other companies, vendors and
government entities. In the event that any of these systems are not Year 2000
compliant, the Company's operations could be adversely affected.
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 and are subject to risks and
uncertainties that may cause future results to differ materially from those set
forth in such statements. The Company is not obligated to update forward-looking
statements to reflect events or circumstances after the date of this report.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
Exhibit No. Exhibit
----------- -------
4 Specimen Common Stock Certificate. (1)
11
<PAGE>
(b) Reports on Form 8-K
A report on Form 8-K was filed by the Company on February 10,
1998 reporting under Item 8 a change in the fiscal year end
for the Company from June 30 to December 31, effective
December 31, 1997, and that a report on Form 10-K would be
filed for the transition period of July 1, 1997 to December
31, 1997.
- ----------------------
(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 14, 1998
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)
- ---------------------
(1) Incorporated by reference to Registration Statement on Form S-1, File
No. 33-28967.
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, 1998
and is qualified in its entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 20,956
<SECURITIES> 0
<RECEIVABLES> 5,783,364
<ALLOWANCES> 0
<INVENTORY> 695,717
<CURRENT-ASSETS> 9,105,667
<PP&E> 10,331,752
<DEPRECIATION> 6,727,377
<TOTAL-ASSETS> 12,734,672
<CURRENT-LIABILITIES> 25,839,295
<BONDS> 0
<COMMON> 83,657
0
0
<OTHER-SE> (15,569,476)
<TOTAL-LIABILITY-AND-EQUITY> 12,734,672
<SALES> 0
<TOTAL-REVENUES> 14,563,461
<CGS> 0
<TOTAL-COSTS> 13,830,135
<OTHER-EXPENSES> (29,893)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 214,684
<INCOME-PRETAX> 548,535
<INCOME-TAX> 0
<INCOME-CONTINUING> 548,535
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 548,535
<EPS-PRIMARY> .07
<EPS-DILUTED> .06
</TABLE>
