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, 1999
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 3, 1999
----- --------------------------
Common stock, $0.01 par value 8,970,695
<PAGE>
CCAIR, INC.
FORM 10-Q QUARTERLY REPORT FOR
FISCAL QUARTER ENDED MARCH 31, 1999
TABLE OF CONTENTS
PAGE NO.
PART I - FINANCIAL INFORMATION:
ITEM 1. Financial Statements: 3
Condensed Balance Sheets as of
March 31, 1999 and December 31, 1998. 3
Condensed Statements of Income for
the Three Months ended
March 31, 1999 and 1998. 4
Condensed Statements of Cash Flows
for the Three Months ended March 31,
1999 and 1998. 5
Notes to Condensed Financial Statements. 6
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. 7
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
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------------------------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 141,012 $ 45,584
Receivables, net 7,670,080 6,345,751
Inventories, less allowance for
obsolescence of $466,000 1,267,290 968,352
Parts held for resale, net of
valuation reserves of $726,000 944,964 944,964
Prepaid expenses and deposits 1,940,434 1,894,238
----------- -----------
Total current assets 11,963,780 10,198,889
----------- -----------
PROPERTY AND EQUIPMENT:
Flight equipment and leasehold improvements 7,209,724 6,669,267
Ground and other property and equipment 4,600,036 4,564,950
---------- ---------
11,809,760 11,234,217
Less accumulated depreciation
and amortization ( 7,230,643) ( 7,013,897)
----------- -----------
4,579,117 4,220,320
----------- -----------
OTHER ASSETS:
Deferred preoperating costs ---- 719,443
Other assets 24,630 27,022
----------- -----------
Total assets $16,567,527 $15,165,674
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
- -------------------------------------
CURRENT LIABILITIES:
Notes payable and current
maturities of long-term debt $ 1,390,078 $ 1,581,071
Short-term borrowings 968,406 ----
Current obligations under capital leases 186,833 188,473
Accounts payable 5,128,047 5,540,975
Accrued expenses 8,795,831 8,013,802
----------- -----------
Total current liabilities 16,469,195 15,324,321
Long-term debt, less current maturities 8,596,127 8,643,029
Capital lease obligations, less
current obligations 1,937,679 1,982,422
Warrants liability 232,000 232,000
----------- -----------
Total liabilities 27,235,001 26,181,772
----------- -----------
Commitments and contingencies
SHAREHOLDERS' DEFICIT:
Common stock, $.01 par value, 30,000,000
shares authorized, 8,965,695 and
8,931,195 issued and outstanding at
March 31, 1999 and December 31, 1998,
respectively 89,657 89,312
Additional paid-in-capital 21,313,000 21,260,187
Accumulated deficit (32,070,131) (32,365,597)
----------- -----------
Total shareholders' deficit (10,667,474) (11,016,098)
----------- -----------
Total liabilities and
shareholders' deficit $16,567,527 $15,165,674
=========== ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE>
CCAIR, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
-----------
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
----------- -----------
OPERATING REVENUES:
Passenger $18,792,124 $14,334,346
Other 461,132 229,115
----------- -----------
Total 19,253,256 14,563,461
----------- -----------
OPERATING EXPENSES:
Flight operations 6,104,042 4,505,534
Fuel and oil 1,245,606 1,120,454
Maintenance 4,042,904 2,748,118
Ground operations 2,679,917 2,122,331
Advertising, promotions
and commissions 2,632,400 1,966,054
General and administration 961,734 1,156,663
Depreciation and amortization 216,746 194,621
----------- -----------
Total 17,883,349 13,830,135
----------- -----------
OPERATING INCOME 1,369,907 733,326
Interest expense ( 354,998) ( 214,684)
Other income, net ---- 29,893
----------- -----------
Income before income taxes and
cumulative effect of a change
in accounting principle 1,014,909 548,535
Provision for income taxes --- ---
----------- -----------
Income before cumulative effect of
a change in accounting principle 1,014,909 548,535
Cumulative effect of change in
accounting principle (Note 3) 719,443 ----
----------- ------------
Net income $ 295,466 $ 548,535
=========== ============
BASIC EARNINGS PER SHARE $ .03 $ .07
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 8,958,028 8,345,695
=========== ===========
DILUTED EARNINGS PER SHARE $ .03 $ .06
=========== ===========
WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING 9,569,739 8,958,287
=========== ===========
See notes to condensed financial statements.
4
<PAGE>
CCAIR, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-----------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 295,466 $ 548,535
Adjustments to reconcile net income to
net cash provided by operating activities:
Note discount amortization 9,000 23,860
Depreciation and amortization 216,746 194,621
Gain (loss) on disposal of assets ---- ( 29,893)
Change in accounting principle 719,443 ----
Changes in certain assets and liabilities:
Accounts receivable (1,324,329) ( 735,663)
Inventories ( 298,938) ( 186,131)
Accounts payable ( 412,928) (1,558,714)
Accrued expenses 782,029 1,875,488
Prepaid expenses and deposits ( 46,196) 576,543
Other changes, net 2,392 10,892
----------- ------------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES ( 57,315) 719,538
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ( 575,543) ( 450,514)
Proceeds from sale of assets ---- 34,985
----------- ------------
NET CASH USED BY
INVESTING ACTIVITIES ( 575,543) ( 415,529)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 53,158 35,626
Short-term borrowings, net 968,406 ----
Reductions of notes and long-term debt ( 293,278) ( 330,326)
----------- ------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 728,286 ( 294,700)
----------- ------------
Net increase in cash 95,428 9,309
Cash, beginning of period 45,584 11,647
----------- ------------
CASH, end of period $ 141,012 $ 20,956
=========== ============
</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 on Form 10-K for the year ended
December 31, 1998.
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.
<TABLE>
<CAPTION>
THREE-MONTH PERIOD THREE-MONTH PERIOD
ENDED MARCH 31, ENDED MARCH 31,
1999 1998
<S> <C> <C> <C> <C> <C> <C>
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------------------------------- -----------------------------------
Basic earnings per share
Income from operations $ 1,014,909 8,958,028 $ .11 $ 548,535 8,345,695 $ 0.07
Cumulative effect of
accounting change $( 719,443) ---- $( .08) $ ----- ----- ---
------------ ---------- ------- -----------------------------------
Net income $ 295,466 8,958,028 $ .03 $ 548,535 8,345,695 $ 0.07
============ ======= ============ ========
Effect of dilutive securities
(options and warrants) 611,711 612,592
---------- ----------
Diluted earnings per share
Income from operations $ 1,014,909 9,569,739 $ .11 $ 548,535 8,958,287 $ 0.06
Cumulative effect of
accounting change $( 719,443) ---- $( .08) $ ----- ----- ---
------------ ---------- ------- -----------------------------------
Net income $ 295,466 9,569,739 $ .03 $ 548,535 8,958,287 $ 0.06
============ ========== ======= ===================================
</TABLE>
3. DEFERRED PREOPERATING COSTS
---------------------------
The Company accepted delivery of six additional Dash 8 aircraft from
June, 1998 through October, 1998. Certain costs were incurred to
integrate the aircraft into the Company's operations. These expenditures
were comprised primarily of rental payments on the aircraft prior to
their entrance into scheduled flying, costs incurred for the retention
and training of flight crews and expenses for initial airworthiness
inspections. These costs were capitalized as preoperating costs and were
being amortized over 24 months. The AICPA issued its Statement of
Position 98-5, which became effective for fiscal years beginning after
December 15, 1998. This Statement precludes the capitalization of
preoperating costs of this nature. Accordingly, the Company was required
to write off the unamortized deferred asset balance as of January 1,
1999, which was reflected as a cumulative effect of a change in
accounting principle of $719,443 in the accompanying unaudited condensed
statements of income for the three months ended March 31, 1999.
6
<PAGE>
4. 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.
PROPOSED MERGER OF THE COMPANY WITH MESA AIR GROUP, INC.
--------------------------------------------------------
The Company and Mesa Air Group, Inc. ("Mesa"), a regional airline based
in Phoenix, Arizona, executed a definitive purchase agreement dated as
of January 28, 1999, whereby the Company will become a wholly-owned
subsidiary of Mesa. The transaction is valued at approximately $54
million and is intended to be accounted for as a pooling of interests.
The purchase agreement contemplates an all stock transaction whereby
Mesa will acquire all outstanding shares of the Company's common stock
by issuing Mesa shares equivalent in value to $4.35 for each share of
the Company's common stock, subject to a maximum of .6214 shares (at a
Mesa share price of $7.00) and a minimum of .435 shares (at a Mesa share
price of $10.00). Consummation of the transaction is subject to certain
conditions, including regulatory approval, satisfaction of closing
conditions and shareholder approval from both the Company's shareholders
(as to the merger) and Mesa's shareholders (as to the issuance of Mesa
shares in the merger). The shareholders of both CCAIR and Mesa will vote
on the transaction at each company's Special Meeting of Shareholders to
be held on June 8, 1999.
BUSINESS AGREEMENT WITH US AIRWAYS
----------------------------------
Approximately 80% of the Company's passenger revenue is generated by
passengers who are connecting with US Airways flights and is determined
under an agreement for the sharing of joint passenger fares and division
of revenue with US Airways (the "Agreement"). On March 5, 1999, the
Company and US Airways announced the extension of the Agreement through
December 31, 2003. The Agreement provides that it may be terminated upon
180 days prior written notice for any reason by either US Airways or the
Company or upon sixty (60) days prior written notice by US Airways under
certain conditions, including: (i) the Company's failure to maintain at
least a minimum required operating schedule; (ii) if during any one
month the Company's flight completion percentage is less than 95% due to
cancellations attributable to maintenance or operational deficiencies
within the Company's control; (iii) the Company's failure to comply with
the trademark licensing provisions of the Agreement; (iv) the initiation
of a bankruptcy or similar proceeding for the Company or its assets;
(v) the Company's failure to perform, keep or observe terms, conditions
or covenants after notice by US Airways; or (vi) a change of control or
ownership of 51% or more of the Company's common stock or a change in
the Company's President or Chief Executive Officer without the consent
of US Airways. While the Company has not received written approval by US
Airways of the proposed merger with Mesa, US Airways has expressed its
willingness to consent to the transaction.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
- -------
The Company recorded net income before change in accounting principle of
$1,015,000 in the quarter ended March 31, 1999, versus net income of $549,000 in
the quarter ended March 31, 1998, an increase of 84.9%. As previously discussed,
on January 1, 1999 the Company recorded a $719,000 charge, representing the
cumulative effect of adopting new accounting guidelines which required the
Company to expense unamortized preoperating costs related to certain fleet
additions. The Company has increased its fleet size significantly since the
first quarter of 1998, when it operated fourteen Jetstream Super 31 aircraft
(with nineteen seats) and four de Havilland Dash 8 aircraft (with thirty-seven
seats). In the quarter ended March 31, 1999, the Company operated sixteen
Jetstream 31 and ten Dash 8 aircraft. As a result of this expansion, available
seat miles increased 56.3% and operating revenues increased 32.2%.
RESULTS OF OPERATIONS
- ---------------------
The following table sets forth selected operating comparisons for the
three-month periods ended March 31, 1999 and 1998:
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
AIRLINE OPERATING STATISTICS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-----------------------------------
<S> <C> <C> <C>
%
1999 1998 CHANGE
----------- ----------- ------
Operating revenue $19,253,256 $14,563,461 32.2
Operating expense $17,883,349 $13,830,135 29.3
Revenue passengers carried 197,589 162,795 21.4
Revenue passenger miles (1) 44,429,721 29,416,144 51.0
Available seat miles (2) 84,998,092 54,368,082 56.3
Passenger load factor (3) 52.3% 54.1% ( 3.3)
Passenger breakeven load factor 49.4% 52.1% ( 5.2)
Yield per revenue passenger
mile (4) 42.3(cent) 48.7(cent) (13.1)
Passenger revenue per available
seat mile 22.1(cent) 26.4(cent) (16.3)
Operating cost per available
seat mile 21.0(cent) 25.4(cent) (17.3)
Average passenger trip (miles) 224.8 180.7 24.4
Average passenger fare $95.11 $88.05 8.0
Completion factor 95.4% 96.6% ( 1.2)
</TABLE>
(1) One revenue passenger transported one mile ("RPMs").
(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, 1999 COMPARED TO THREE MONTHS
------------------------------------------------------------------
ENDED MARCH 31, 1998
---------------------
Operating revenues increased $4,740,000 or 32.2% for the quarter ended
March 31, 1999 versus March 31, 1998. The Company carried 197,589 revenue
passengers in the current quarter, as compared to 162,795 in the quarter ended
March 31, 1998, an increase of 21.4%. RPMs increased 51.0% in the quarter ended
March 31, 1999. RPMs increased at a greater percentage than the increase in
passengers as the average passenger trip increased from 180.7 miles in the
quarter ended March 31, 1998 to 224.8 miles for the same period in 1999, an
increase of 24.4%. The yield decreased from 48.7(cent) for the quarter ended
March 31, 1998 to 42.3(cent) for the same period in 1999. In addition, the
Company's revenue per ASM ("RASM") decreased from 26.4(cent) for the quarter
ended March 31, 1998 to 22.1(cent) for the quarter ended March 31, 1999. The
Company's previously announced expansion in Florida in the last six months of
1998, which are relatively long-haul flights, is the principal reason for the
increase in RPMs, ASMs and average passenger trip, and the decrease in yield and
RASM.
Appreciable operational efficiencies have been achieved through the
Company's fleet restructuring activities and subsequent expansion in Florida,
particularly in the flight operations sector. In the quarter ended March 31,
1999, total operating expenses increased 29.3% with an increase in ASMs of
56.3%, resulting in a decrease of 17.3% in the Company's operating cost per ASM.
The following table compares components of operating cost per ASM for the three
months ended March 31, 1999 and 1998.
COST PER ASM -
QUARTER ENDED
MARCH 31,
(IN CENTS)
----------
1999 1998
---- ----
Flight operations 7.2 8.3
Fuel and oil 1.5 2.1
Maintenance 4.8 5.1
Ground operations 3.1 3.9
Advertising, promotions, commissions 3.1 3.6
General and administration 1.1 2.1
Depreciation and amortization 0.2 0.3
----- -----
21.0 25.4
==== ====
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The decrease in flight operations expense on a per unit basis was due to
reduced aircraft lease expense and reduced hull insurance expense. Fuel expense
decreased on a per ASM basis, as a 43.9% increase in fuel consumption was offset
by a 25.5% reduction in the average cost per gallon of fuel. Maintenance, ground
operations, marketing, general and administrative and depreciation and
amortization expense all decreased on a per unit basis due to efficiencies
related to the Company's fleet expansion.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The cash position and cash flows of the Company continue to be critical
issues as of March 31, 1999. The Company utilized borrowings under two revolving
lines of credit to satisfy its operating cash requirements during the period
ended March 31, 1999. The key elements to improved operating results are the
level of yield per RPM and passenger load factors. For the quarter ended March
31, 1999, the yield per RPM decreased 13.1% as compared to the prior year
quarter. Additionally, the yield could be affected by fare discounting beyond
the control of the Company. The load factor decreased 3.3% and revenue
passengers carried increased 21.4% in the first quarter of 1999 versus the same
period last year.
The Company maintains a line of credit with British Aerospace Asset
Management ("BAAM") to provide for more even cash flows between ACH settlements.
As of March 31, 1999 the Company had $968,000 outstanding under this line. The
maximum outstanding balance on this line during the three months ended March 31,
1999 was $4.5 million, with interest charged at an average rate of 10.25%.
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 $4,505,000
on March 31, 1999, as compared to $5,125,000 on December 31, 1998.
Working capital is affected by seasonality of operations.
Cash utilized by operating activities was $57,000 for the three months
ended March 31, 1999. The primary sources of cash were net income, depreciation,
and the increase in accrued expenses, for a total of $1,294,000. The major uses
of cash were increases in accounts receivables and inventories and the reduction
of accounts payable, aggregating to $2,036,000.
The Company's capital expenditures totaled $576,000, 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. The
Company made scheduled debt payments of $293,000 in the three-month period ended
March 31, 1999.
OTHER
- -----
YEAR 2000 COMPLIANCE
--------------------
Many currently installed computer systems, imbedded microchips and
software products are coded to accept two-digit entries in the date code field.
These date code fields will need to accept four digit entries to distinguish
years beginning with "20" from years beginning with "19". Any programs that have
time sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in the computer shutting down or
performing incorrect computations. As a result, computer systems and software
used by many companies will need to be upgraded to comply with such "Year 2000"
requirements. Certain of the Company's systems, including information and
computer systems and automated equipment, will be affected by the Year 2000
issue.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company completed its comprehensive inventory of its core business
applications to determine the adequacy of these systems to meet future business
requirements. The Company has also been performing system upgrades, which are
approximately 80% complete. After these upgrades and system evaluations are
complete, the Company will begin testing the results of its compliance work. To
date, the Company's Year 2000 remediation efforts have focused on its core
business computer applications (i.e., those systems that the Company is
dependent upon for the conduct of day-to-day business operations). Out of this
effort, a number of systems have already been identified for upgrade. In no case
has a system been replaced or contemplated to be replaced solely because of Year
2000 issues with the exception of the Company's voice mail system, which can be
replaced for approximately $20,000. Additionally, while the Company may have
incurred an opportunity cost for addressing the Year 2000 issue, it does not
believe that any specific information technology projects have been deferred as
a result of its Year 2000 efforts.
The Company's reservation system is tied to its code-sharing partner, US
Airways. The Company's representatives have met with US Airways to assess the
Year 2000 progress of the reservations system providers. The Company has
installed an upgraded version of its current accounting, revenue accounting,
maintenance parts and payroll systems. Approximately 75% of these systems have
been tested. The Company has had extensive discussions with the manufacturers of
its various aircraft to discuss Year 2000 issues and identify the required
avionics and flight systems upgrades which will be implemented during 1999. The
aircraft manufacturers are also required to report the Year 2000 status of their
aircraft to the FAA.
The Company is currently assessing other potential Year 2000 issues,
including noninformation technology systems. A broad-based Year 2000 Task Force
has been formed and has begun meeting to identify areas of concern and develop
action plans. The Company has also been meeting with similar task forces at US
Airways and Mesa. The Company's relationships with vendors, contractors,
financial institutions and other third parties will be examined to determine the
status of the Year 2000 issue efforts on the part of the other parties to
material relationships. The Year 2000 Task Force will include both internal and
Company-external representation.
The Company expects to incur Year 2000-specific costs in the future but
does not at present anticipate that these costs will be material. In the worst
case scenario, the Company believes that relationships it has with third parties
would cease as a result of either the Company or the third party not
successfully completing their Year 2000 remediation efforts. If this were to
occur, the Company would encounter disruptions to its business that could have a
material adverse effect on its business, financial position and results of
operations. The Company could be materially impacted by widespread economic or
financial market disruption or by Year 2000 computer system failures.
The Company has not at this time established a formal Year 2000
contingency plan but will consider and, if necessary, address doing so as part
of its Year 2000 Task Force activities. The Company maintains and deploys
contingency plans designed to address various other potential business
interruptions. These plans may be applicable to address the interruption of
support provided by third parties resulting from their failure to be Year 2000
ready.
The Company has relationships with certain governmental entities such as
the FAA upon which it is dependent to operate its aircraft. The FAA has
represented on its web page that its systems are Year 2000 compliant. If,
however, systems at the FAA fail, the Company's aircraft will not be able to
operate or will operate at a substantially reduced level. If this were to occur,
the Company approximates that it would lose substantially all the revenue
associated with these nonoperated flights.
For each day that the Company is unable to operate flights as a result
of Year 2000 failures, it anticipates a $225,000 loss of revenue and net loss of
approximately $110,000.
NEW ACCOUNTING PRONOUNCEMENTS
-----------------------------
In April 1998, the AICPA issued its Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities", which requires that start-up
and preoperating costs be expensed as incurred and becomes effective for fiscal
years beginning after December 15, 1998. Any unamortized deferred assets must be
written off on the effective date. Accordingly, the Company wrote off its
unamortized deferred asset balance as of January 1, 1999, which was reflected as
a cumulative effect of a change in accounting principle of approximately
$719,000.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF 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 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.
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
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
None to report.
- ----------------------
(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 17, 1999
CCAIR, INC.
By: /s/ Kenneth W. Gann By: /s/ Eric W. Montgomery
-------------------- -----------------------
Kenneth W. Gann, President Eric W. Montgomery
and Chief Executive Officer Vice President - Finance
(Principal Executive Officer) (Principal Financial Officer)
12
<PAGE>
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>
The schedule contains summary financial information extracted from CCAIR,Inc.
financial statements for the quarter ended March 31, 1999 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 141,012
<SECURITIES> 0
<RECEIVABLES> 7,670,080
<ALLOWANCES> 0
<INVENTORY> 2,212,254
<CURRENT-ASSETS> 11,963,780
<PP&E> 11,809,760
<DEPRECIATION> (7,230,643)
<TOTAL-ASSETS> 16,567,527
<CURRENT-LIABILITIES> 16,469,195
<BONDS> 0
0
0
<COMMON> 89,657
<OTHER-SE> (10,757,131)
<TOTAL-LIABILITY-AND-EQUITY> 16,567,527
<SALES> 0
<TOTAL-REVENUES> 19,253,256
<CGS> 0
<TOTAL-COSTS> 17,883,349
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 354,998
<INCOME-PRETAX> 1,014,909
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,014,909
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (719,443)
<NET-INCOME> 295,466
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
