UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
Commission File Number: 0-20360
RENO AIR, INC.
(Exact name of registrant as specified in its charter)
Nevada 88-0259913
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
220 Edison Way
Reno, Nevada 89502
(Address of principal executive offices)
(702) 686-3835
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 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
Number of shares of common stock, $.01 par value, of registrant outstanding
at June 30, 1997: 10,503,775.
<PAGE>
RENO AIR, INC.
------------------------------------------------------------------------
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - June 30, 1997 and
December 31, 1996 3
Statements of Operations -
Three Months and Six Months Ended June 30, 1997 and 1996 4
Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and 7
Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
<PAGE>
RENO AIR, INC.
CONDENSED BALANCE SHEETS AT
JUNE 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------------ -------------------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 9,474,739 $ 16,221,297
Short-term investments 1,379,183 2,318,407
Accounts receivable, net 34,385,459 18,834,788
Inventories and operating supplies 2,695,386 2,109,364
Prepaid expenses and other 21,147,064 17,033,968
------------------ -------------------
Total current assets 69,081,831 56,517,824
PROPERTY AND EQUIPMENT:
Flight equipment 69,567,315 63,974,552
Ground property and equipment 6,306,827 8,377,217
Building 3,552,128 -
Less - Accumulated depreciation (15,955,345) (11,253,987)
------------------ -------------------
63,470,925 61,097,782
RESTRICTED CASH AND INVESTMENT 6,064,553 6,519,249
DEPOSITS AND OTHER 21,600,357 19,571,557
------------------ -------------------
$ 160,217,666 $ 143,706,412
================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 22,723,514 $ 19,071,306
Accrued liabilities 17,906,343 19,775,738
Air traffic liability 33,087,998 21,392,594
Current maturities of long-term debt 11,062,160 5,309,758
Current portion of deferred lease payable 1,007,619 1,465,827
------------------ -------------------
Total current liabilities 85,787,634 67,015,223
LONG-TERM DEBT 48,400,415 50,698,058
NON-CURRENT LIABILITIES 17,894,311 13,862,332
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 30,000,000 shares authorized, 10,503,775 and 10,333,446
shares issued and outstanding at June 30, 1997 and December 31, 1996, respectively 105,037 103,334
Additional paid - in capital 33,382,830 32,607,130
Accumulated deficit (25,352,561) (20,579,665)
------------------ -------------------
Total shareholders' equity 8,135,306 12,130,799
------------------ -------------------
$ 160,217,666 $ 143,706,412
================== ===================
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
RENO AIR, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(unaudited)
Six months ended Three months ended
June 30, June 30,
1997 1996 1997 1996
---------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Passenger $ 175,762,153 $ 155,182,459 $ 91,467,514 $ 86,496,903
Other 11,343,562 8,553,304 5,954,331 4,418,999
---------------- --------------- -------------- --------------
Total operating revenues 187,105,715 163,735,763 97,421,845 90,915,902
---------------- ---------------- -------------- --------------
OPERATING EXPENSES:
Salaries, wages and benefits 32,185,423 25,041,827 16,862,974 13,566,229
Aircraft fuel and oil 34,240,572 29,374,864 16,162,531 16,593,053
Aircraft leases 34,115,919 28,479,879 17,512,672 15,560,498
Maintenance 15,648,162 12,130,503 8,068,183 6,311,736
Handling, landing and airport fees 19,166,872 16,292,713 9,788,778 8,922,283
Advertising, sales and distribution 15,074,568 14,683,175 7,609,444 7,911,286
Commissions 9,962,908 9,320,990 5,062,922 5,147,843
Facility leases 6,590,272 5,373,468 3,500,157 2,814,055
Insurance 3,222,628 3,952,842 1,389,744 2,031,174
Communications 2,740,702 2,017,206 1,442,510 1,022,559
Depreciation and amortization 4,701,356 2,367,335 2,483,797 1,386,266
Other 12,684,052 10,630,744 6,593,753 6,022,714
---------------- ---------------- -------------- --------------
Total operating expenses 190,333,434 159,665,546 96,477,465 87,289,696
---------------- ---------------- -------------- --------------
OPERATING INCOME (LOSS) (3,227,719) 4,070,217 944,380 3,626,206
NON-OPERATING INCOME (EXPENSE):
Interest expense (2,435,150) (1,652,409) (1,167,096) (856,893)
Interest income 1,025,629 1,452,386 537,668 728,679
Other, net (135,656) (320,180) (90,577) (223,082)
---------------- ---------------- -------------- --------------
NET INCOME (LOSS) $ (4,772,896) $ 3,550,014 $ 224,375 $ 3,274,910
================ ================ ============== ==============
NET INCOME (LOSS) PER COMMON SHARE AND
COMMON SHARE EQUIVALENT
PRIMARY $ (0.46) $ 0.33 $ 0.02 $ 0.30
================ ================ ============== ==============
FULLY DILUTED $ (0.46) $ 0.32 $ 0.02 $ 0.28
================ ================ ============== ==============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING
PRIMARY 10,409,315 10,855,017 10,749,046 11,063,877
================ ================ ============== ==============
FULLY DILUTED 10,409,315 11,001,210 10,887,526 13,962,798
================ ================ ============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
RENO AIR, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
____________________________
1997 1996
____________________________
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) $ (4,772,896) $ 3,550,014
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 4,701,358 2,367,336
Common stock issued or to be issued for 401(k) Plan 260,675 120,000
Accounts receivable (15,550,671) (8,592,141)
Inventories and operating supplies (586,022) (889,011)
Prepaid expenses and other (4,113,096) (1,386,081)
Restricted cash 454,696 (1,421,080)
Deposits and other (2,028,800) (3,344,010)
Accounts payable 3,652,208 (458,380)
Accrued liabilities (1,869,395) 1,507,237
Fuel purchase agreement - (1,635,388)
Air traffic liability 11,695,404 13,794,224
Deferred lease and noncurrent liabilities 3,573,772 4,776,950
_____________ ____________
Net cash provided by (used in) operating activities (4,582,767) 8,389,670
_____________ ____________
INVESTING ACTIVITIES:
Purchase of property and equipment (4,257,543) (26,330,851)
Purchase of short-term investments (1,379,183) -
Sale of short-term investments 2,318,407 2,944,188
_____________ _____________
Net cash used in investing activities (3,318,319) (23,386,663)
_____________ _____________
FINANCING ACTIVITIES:
Proceeds from exercise of stock options and warrants 516,728 1,085,310
Proceeds from notes payable 3,002,668 13,520,000
Payments on notes payable (2,364,868) (575,920)
______________ ______________
Net cash provided by financing activities 1,154,528 14,029,390
______________ ______________
DECREASE IN CASH AND CASH EQUIVALENTS (6,746,558) (967,603)
CASH AND CASH EQUIVALENTS, beginning of period 16,221,297 34,985,808
______________ ______________
CASH AND CASH EQUIVALENTS, end of period $ 9,474,739 $ 34,018,205
================= ==============
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
RENO AIR, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
The results of operations for the three and six month periods ended June 30,
1997, are not necessarily indicative of the results that will be realized for
the full year. For further information, refer to the financial statements and
notes thereto contained in the Form 10-K for the year ended December 31, 1996.
NOTE B - INCOME (LOSS) PER COMMON SHARE
Income (loss) per share is computed by dividing the net income (loss) available
for common stock by the weighted average number of shares of common stock and
dilutive common stock equivalents assumed outstanding during the period.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating basic earnings per share, the dilutive effect of
stock options will be excluded. The impact is expected to result in no change in
primary earnings (loss) per share for the three and six months ended June 30,
1997 and a two cent increase in the primary earnings per share for the three and
six months ended June 30, 1996. For fully diluted earnings per share, the impact
is expected to result in no change in earnings per share for the three and six
months ended June 30, 1996 and no change in earnings (loss) per share for the
three and six months ended June 30, 1997.
NOTE C - COMMITMENTS
The Company has signed a letter of intent to purchase an aircraft it currently
leases. The Company is seeking to finance this purchase, which is scheduled to
be completed in September, 1997. In June 1997, the Company purchased a spare
engine with short-term financing of $2.8 million, due on September 30, 1997
(which has been included in current maturities of long-term debt at June 30,
1997.) Management intends to seek long term financing for this purchase.
In June 1997, the Company contracted to purchase 12 million gallons of fuel for
delivery between August 1, 1997, and January 31, 1998, at the Company's Reno and
Las Vegas hubs at an average purchase price of approximately 70 cents per gallon
(including taxes and freight). This purchase represents approximately 25% of the
Company's anticipated fuel requirements during the delivery period.
<PAGE>
Item 2. Management's Discussion and Analysis Of Financial Condition
and Results of Operations
General
This report contains certain forward-looking statements within the meaning of
the Securities Litigation Reform Act. Actual results may differ materially.
Certain of the factors that could impact future results are discussed in the
Company's 1996 Annual Report on Form 10-K, under the heading "Item 1 Cautionary
Statements."
The Company's results during the first six months of 1997 were significantly
impacted by unusually harsh weather that affected the Company's West Coast
operations during January 1997, by fuel prices that were substantially higher in
the first quarter of 1997 than in the first quarter of 1996, and by a shortage
of spare engines that forced the Company to temporarily ground as many as three
aircraft in the second quarter.
In late April, Reno Air opened its second reservations center, in Las Vegas.
This call center has more than doubled the Company's internal call handling
capability, and provides important back-up in the event of service outages at
the Company's Reno facility.
In the first quarter of 1997, the Company commenced scheduled service from
Gulfport/Biloxi, Mississippi to St. Petersburg, and Sanford, Florida and
Atlanta, Georgia, under a limited revenue guarantee agreement. The Company also
commenced daily service from Reno to Detroit.
In the second quarter of 1997, the Company significantly increased its service
to Las Vegas, creating a hub linking seven existing Reno Air cities in the
Southwestern United States. The Company also increased its service to Detroit
and its seasonal summer service to Anchorage, Alaska and reinstituted service
between Reno and Ontario, California. In the third quarter of 1997, the Company
is adding service between Oklahoma City and Las Vegas, with direct and
connecting service to the West Coast.
The Company's summer schedule is designed to increase aircraft utilization and
decrease unit costs. Average aircraft utilization has increased from 9.5 hours
in April 1997 to 10 hours in July.
On April 23, Reno Air's flight attendants became represented by the
International Brotherhood of Teamsters (IBT). The Company will be negotiating a
contract with the IBT. Management cannot predict the timing of such
negotiations, when a contract might be concluded, or the extent such a contract
will contain terms different from the Company's current work and pay rules.
On July 23, the Air Line Pilots Association filed an application with the
National Mediation Board to represent the Company's pilots. The Company has not
been advised when ballots will be mailed or counted. If unionization of the
Company's pilots occurs, the Company would be required to negotiate a contract
with the union and the Company's flexibility in dealing with its pilots would be
restricted, which could result in a material increase in costs. Management
cannot predict the timing of such negotiations if a union were to be elected,
when a contract might be entered into, or the extent such a contract would
contain terms different from the Company's current work and pay rules.
Congress has adopted changes to the federal excise ticket tax, which is
currently 10% of a ticket's fare. The new legislation reduces this tax to 9%,
and eventually to 7.5%, but imposes an additional surcharge of $1, which
eventually increases to $3, for each trip segment flown. The initial structure
is effective on October 1, 1997, with the full changes being phased in through
the year 2002. As an example, the tax on Reno Air's current unrestricted coach
fare from Los Angeles to Seattle (a two-segment trip) will increase by
approximately $0.50 on October 1 and by $2.25 when the new structure is fully
effective. Management cannot predict the extent the new taxes will be passed on
to passengers, because fares continue to be volatile in response to industry
conditions and competitors fare actions.
<PAGE>
<TABLE>
<CAPTION>
Selected Operating Statistics
Quarter Quarter Quarter
Ended Ended Percent Ended Percent
June 30,1997 June 30, 1996 Change (1) March 31, 1997 Change (2)
_____________ ______________ __________ _______________ ___________
<S> <C> <C> <C> <C> <C> <C>
Revenue passengers (3) 1,404,943 1,298,135 8.2% 1,272,875 10.4%
Revenue Passenger Miles (RPMsx1000) (4) 802,508 769,876 4.2% 722,618 11.1%
Available Seat Miles (ASMsx1000) (5) 1,161,784 1,169,078 -0.6% 1,116,811 4.0%
Passenger load factor (percent) (6) 69.08 65.85 4.9% 64.70 6.8%
Breakeven load factor (percent) (7) 68.91 63.36 8.8% 68.54 0.5%
Revenue per passenger mile (cents) (8) 11.40 11.24 1.4% 11.67 -2.3%
Passenger revenues per ASM (cents) 7.87 7.40 6.4% 7.55 4.2%
Operating expense per ASM (cents) 8.34 7.47 11.6% 8.40 -0.7%
Aircraft in service at end of period 30 28 7.1% 30 0.0%
Average aircraft length of haul (miles) 513 537 -4.5% 528 -2.8%
Average passenger length of haul (miles) 571 593 -3.7% 568 0.5%
Average cost of fuel (cents per gallon) (9) $ 0.71 $ 0.74 -4.1% $ 0.86 -17.4%
_________________________________________
(1) Percentage change from quarter ended June 30, 1996 to quarter ended June 30, 1997.
(2) Percent change from quarter ended from March 31, 1997 to quarter ended June 30, 1997.
(3) The number of trip segments flown by paying passengers.
(4) The number of miles flown by paying passengers.
(5) The number of seats for paying passengers multiplied by the number of miles such seats are flown.
(6) RPMs divided by ASMs.
(7) The passenger load factor that would have resulted in the Company having broken even on a net income basis during the period,
assuming yield and operating costs remained constant.
(8) The operating revenue realized from passengers, divided by RPMs.
(9) Jet fuel prices excluding into-plane service charges.
</TABLE>
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended Percent
June 30, 1997 June 30, 1996 Change (1)
________________ _______________ __________
<S> <C> <C> <C>
Revenue Passengers (3) 2,677,818 2,396,788 11.7%
Revenue Passenger miles (RPMx1000) (4) 1,525,126 1,415,080 7.8%
Available Seat Miles (ASMx1000) (5) 2,278,595 2,116,423 7.7%
Passenger load factor (percent) (6) 66.93 66.86 0.1%
Breakeven load factor (percent) (7) 68.75 65.28 5.3%
Revenue per passenger mile (cents) (8) 11.52 10.97 5.0%
Passenger revenues per ASM (cents) 7.71 7.33 5.2%
Operating expenses per ASM (cents) 8.35 7.54 10.7%
Aircraft in service at end of period 30 28 7.1%
Average aircraft length of haul (miles) 515 543 -5.2%
Average passenger length of haul (miles) 570 590 -3.4%
Average cost of fuel (cents per gallon) (9) $ 0.82 $ 0.72 13.9%
__________________________________________
(1) Percent change from six months ended June 30, 1996 to six months ended June 30, 1997.
(3) thru (9) See above
</TABLE>
<PAGE>
Results of Operations
The Company realized net income of $224,375 for the quarter ended June 30, 1997,
as compared to net income of $3,274,910 for the quarter ended June 30, 1996. For
the six months ended June 30, 1997, the Company realized a net loss of
$4,772,896, as compared to net income of $3,550,014 realized in the first six
months of 1996.
The significant decline in financial results is due to an historic flood in
Reno, Nevada, which affected first quarter results, and an engine shortage
attributable to industry-wide conditions which affected the Company's second
quarter results. Management believes the significant decline in year-over-year
results is attributable to these two factors. The Company's revenue per
available seat mile increased 5.2% in the first six months of 1997 as compared
to the year-earlier period.
The January flood shut down the Reno, Nevada airport for two days at a time of
record passenger travel demand during the New Year's holiday. This caused a
substantial reduction in available seat miles below plan, reducing revenues and
increasing cost per seat mile. The Company also experienced decreased load
factors during the quarter due to travelers avoiding travel to or over Reno, as
a result of the negative publicity about the flood.
In the second quarter, the Company grounded up to three aircraft at one time
(losing a total of 143 days of aircraft utilization) as a result of a shortage
of spare engines. The shortage was attributable to delays in engine overhauls
caused by an industry-wide shortage of spare parts, the sudden recall of two
spare engines leased from another airline, a higher than average frequency of
unscheduled engine changes, and an industry-wide limited availability of
JT8D-219 spare engines for lease. In addition to an increase in maintenance
expenditures, these factors led to a decrease in fleet utilization and an
increase in overall unit costs.
Operating Revenues
The Company's operating revenues increased by 14.3% in the first six months of
1997, as compared to the same period in 1996, on a 7.7% increase in operations,
as measured by available seat miles.
The Company's year-over-year growth is attributable to growth in the first
quarter of 1997 as compared to the first quarter of 1996. The Company
significantly expanded operations in April 1996. The Company's capacity (as
measured by available seat miles declined in the second quarter of 1997 as
compared to the second quarter of 1996, as the Company's 1997 summer expansion
occurred later (in May) and was comparatively slight, and operations were
impacted by the engine shortages.
Passenger revenue per available seat mile increased from 7.3(cent) to 7.7(cent)
from the first six months of 1996 to the first six months of 1997, due to a 5.0%
increase in passenger yield, year over year. The Company's load factor remained
flat at 66.9% in each six month period.
The increase in passenger yield was attributable in part to a higher fare
environment on the West Coast and expiration of the federal excise tax on
December 31, 1996. This tax was reinstated effective March 10, 1997. While the
Company was not able to raise its fares by 10% on March 10 to recoup the full
amount of the tax, it had matched its competitors' price increases earlier in
the quarter, with the result that the Company's average ticket prices for the
first quarter of 1997 were more than 10% higher than in the first quarter of
1997. Yields declined slightly from the first quarter of 1997 to the second
quarter of 1997, due to the reimposition of the excise tax, but continued to be
slightly higher compared to the second quarter of 1996.
Operating Expenses
While the Company's scope of operations (as measured by available seat miles)
increased 7.7% from the first six months of 1996 to the first six months of
1997, the Company's operating expenses increased 19.2%. Most items of expense,
including fuel, maintenance, salaries, aircraft leases and depreciation
increased on a percentage basis more than the increase in scope of operations.
Salaries, aircraft leases and depreciation increased in substantial part because
the Company incurred up-front expenses related to future growth, including
opening a second reservations center in Las Vegas; training flight crews for the
Company's expanded summer schedule; and preparing to switch reservations
database systems from EDS to SABRE in the fourth quarter of 1997. Depreciation
and amortization expense almost doubled between the six-month periods primarily
as a result of the Company's purchase of a second aircraft in July 1996 and
construction of a hanger in Reno, Nevada, which was completed in late 1996.
Primarily as a result of the unusually high number of flight cancellations
attributable to the flood and the engine shortage, a 5.2% decrease in average
stage length, and fuel prices that remained high during the first quarter of
1997, the Company's cost per available seat mile increased from 7.5(cent) in the
first six months of 1996 to 8.4(cent) in the first six months of 1997. This cost
increase more than offset higher revenue per ASM experienced during the period,
resulting in the carrier's breakeven load factor increasing from 65.3% to 68.7%,
period to period.
Fuel expenses increased 16.6% from the first six months of 1996 to the first six
months of 1997 due to increased fuel prices in the first quarter of 1997. During
the first six months, fuel prices (including tax) declined from an average of
93(cent) per gallon in January to 69(cent) in June. Reno Air purchases
approximately eight million gallons of fuel per month; the difference between
January and June average fuel prices represents a decrease of approximately $1.9
million in the Company's monthly fuel expense.
In June 1997, the Company contracted to purchase 12 million gallons of fuel for
delivery between August 1, 1997, and January 31, 1998, at the Company's Reno and
Las Vegas hubs at an average purchase price of approximately 70 cents per gallon
(including taxes and freight). This purchase represents approximately 25% of the
Company's anticipated fuel requirements during the delivery period. The Company
may enter into similar agreements, or utilize fuel price hedges, in the future.
The Company's maintenance expense increased during the six-month period as
compared to the 1996 period as a result of increased overhaul costs attributable
in part to aging of the Company's fleet (which increases the cost of annual
airframe maintenance checks) and a rate of unscheduled engine removals higher
than the Company's historical average.
Insurance costs declined on an absolute basis year-over-year due to the
Company's obtaining lower insurance rates. Commissions expense increased, on a
percentage basis, less than the increases in operations and revenues due to a
larger percentage of the Company's sales being handled internally.
<PAGE>
The following chart lists the components of the Company's per unit costs:
<TABLE>
<CAPTION>
Operating Expenses
Per Available Seat Mile (cents)
Six Months Ended
June 30,
____________________
1997 1996
____ ____
<S> <C> <C>
Salaries, wages and benefits 1.41 1.18
Aircraft fuel and oil 1.50 1.39
Aircraft Leases 1.50 1.35
Maintenance 0.69 0.57
Handling, landing and airport fees 0.84 0.77
Advertising, sales and distribution 0.66 0.69
Commissions 0.44 0.44
Facility leases 0.29 0.25
Insurance 0.14 0.19
Communications 0.12 0.10
Depreciation and amortization 0.21 0.11
Other 0.55 0.50
_____ ____
Total 8.35 7.54
===== =====
</TABLE>
<PAGE>
Liquidity and Capital Resources
As of June 30, 1997, the Company's cash, cash equivalents and short term
investments totaled $10.9 million, as compared to $18.5 million at the beginning
of the year. Cash declined in part due to an increase in prepaid expenses,
including for fuel purchased under forward contracts. During the six month
period, cash used in operating activities was approximately $4.6 million. The
Company's $4.8 million net loss during the period was offset by $4.7 million in
non-cash depreciation expense. A $15.5 million increase in accounts receivable
was only partly offset by an $11.7 million increase in air traffic liability.
The Company has a $10 million line of credit with U. S. Bank of Nevada.
Drawdowns under the line of credit are secured by a first priority lien on the
Company's unencumbered spare parts and certain other assets. The Company is
required to maintain a ratio of collateral value to loan balance of not less
than two to one. As of June 30, 1997, no borrowings were outstanding under the
line of credit.
Cash provided by financing activities during the six-month period totaled $1.2
million, as proceeds from issuance of $3.0 million of notes payable (primarily
a mortgage loan financing the Company's new maintenance hanger), were partly
offset by $2.4 million of principal payments made on the Company's notes
payable. Exercise of Company stock options provided $517,000.
Cash used in investing activities during the six-month period was $3.3 million,
as the sale (net) of $900,000 of short term investments was offset by the
Company's acquisition of $4.3 million of property and equipment.
The Company leases aircraft under operating leases with remaining terms ranging
from less than one year, to almost 18 years. In late March 1997, the Company
leased an MD-87 aircraft under a six year operating lease. In April 1997, the
Company executed a letter of intent to purchase in September 1997 an MD-83
aircraft that is currently leased. The Company intends to seek financing for
this purchase. Management is negotiating the renewal of other aircraft leases.
The Company leased one additional spare engine in March 1997, and three
additional spare engines in May and June 1997, for terms ranging from six months
to three years. Also, in June 1997, the Company purchased an additional spare
engine with short term financing of $2.8 million, due on September 30, 1997.
Management expects to refinance this purchase, but has not yet sought
commitments to do so.
Management believes that the Company's cash position, together with cash flow
generated from operations and additional liquidity that management believes can
be accessed through the capital markets, will be sufficient to meet the
Company's obligations and capital requirements for the next twelve months.
Nevertheless, airline results are highly sensitive to various factors including
the price of fuel and the actions of competing airlines, either of which can
materially and adversely affect the Company's liquidity and cash flows.
Management may seek to raise additional funds through sales of equity or debt
securities, or the sale and leaseback of assets including aircraft and spare
engines.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on May 22, 1997, the
stockholders approved management's proposal to amend and restate the Reno Air
1992 Stock Option Plan, renaming the plan the Employee Stock Incentive Plan,
increasing to 4,600,000 the total number of shares reserved for issuance under
the plan (less prior issuances) and making other changes. The stockholders voted
their shares as follows: 4,113,428 shares in favor; 926,928 shares against or
abstained; and 4,249,843 broker non-votes.
At the same meeting, the stockholders approved management's proposal to approve
the Reno Air Director Stock Option Plan, pursuant to which 300,000 shares are
reserved for issuance, pursuant to a specified formula, to members of the
Company's Board of Directors. The stockholders voted their shares as follows:
4,157,598 shares in favor; 1,088,609 shares against or abstained; and 4,044,181
broker non-votes.
Each of the Company's nominees for director received the affirmative vote of
shareholders holding not less than 8.8 million shares.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits Page
11 Statement Re: Computation of Earnings (Loss) Per Share for the
Three and Six Months ended June 30, 1997 and June 30, 1996 16
B. Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RENO AIR, INC.
DATE: August 14, 1997 By: /s/ B.J. RONE
__________________________
B. J. Rone
as Chief Financial Officer
and on behalf of Registrant
<TABLE>
<CAPTION>
Exhibit 11
Statement Re: Computation of Per Share Earnings (Loss)
For the Six Months Ended For the Three Months Ended
------------------------------ -------------------------------
June 30, June 30,
------------------------------ -------------------------------
1997 1996 1997 1996
-------------- ------------- -------------- --------------
Primary:
<S> <C> <C> <C> <C>
Weighted Average Shares Outstanding 10,409,315 10,154,773 10,447,699 10,239,957
Common Stock Equivalents:
Options anti-dilutive 633,005 271,535 736,024
Warrants anti-dilutive 67,239 29,812 87,896
-------------- ------------- -------------- --------------
10,409,315 10,855,017 10,749,046 11,063,877
============== ============= ============== ==============
Net Income (loss) Applicable to Common Stock $ (4,772,896) $ 3,550,014 $ 224,375 $ 3,274,910
============== ============= ============== ==============
Per Share Earnings (Loss) $ (0.46) $ 0.33 $ 0.02 $ 0.30
============== ============= ============== ==============
Fully diluted:
Weighted Average Shares Outstanding 10,409,315 10,154,773 10,447,699 10,239,957
Common Stock Equivalents:
Options anti-dilutive 763,767 405,815 752,690
Warrants anti-dilutive 75,415 34,012 87,896
Other Dilutive Securities:
7.25% notes not applicable 7,255 not applicable 7,255
9% Senior convertible notes anti-dilutive anti-dilutive anti-dilutive 2,875,000
-------------- ------------- -------------- -------------
10,409,315 11,001,210 10,887,526 13,962,798
============== ============= ============== ==============
Net Income (loss) Applicable to Common Stock $ (4,772,896 $ 3,550,014 $ 224,375 $ 3,274,910
Interest expense addback 7.25% notes not applicable 1,844 not applicable 922
Interest expense addback 9% senior convertible notes anti-dilutive anti-dilutive anti-dilutive 645,103
-------------- --------------- ----------------- --------------
$ (4,772,896 $ 3,551,858 $ 224,375 $ 3,920,935
=============== ================ ================= ==============
Per Share Earnings (Loss) $ (0.46) $ 0.32 $ 0.02 $ 0.28
============== =============== ================= ================
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Jun-30-1997
<CASH> 9,474,739
<SECURITIES> 1,379,183
<RECEIVABLES> 34,385,459
<ALLOWANCES> 0
<INVENTORY> 2,695,386
<CURRENT-ASSETS> 69,081,831
<PP&E> 79,426,270
<DEPRECIATION> 15,955,345
<TOTAL-ASSETS> 160,217,666
<CURRENT-LIABILITIES> 85,787,634
<BONDS> 48,400,415
0
0
<COMMON> 105,037
<OTHER-SE> 8,030,269
<TOTAL-LIABILITY-AND-EQUITY> 160,217,666
<SALES> 187,105,715
<TOTAL-REVENUES> 187,105,715
<CGS> 190,333,434
<TOTAL-COSTS> 190,333,434
<OTHER-EXPENSES> 135,656
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,435,150
<INCOME-PRETAX> (4,772,896)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,772,896)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,772,896)
<EPS-PRIMARY> (0.46)
<EPS-DILUTED> (0.46)
</TABLE>
