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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 7, 1998
RENO AIR, INC.
(Exact name of registrant as specified in its charter)
Nevada 0-20360 88-0259913
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification Number
220 Edison Way 89502
Reno, Nevada (Zip Code)
(Address of Principal Executive Offices)
(702) 954-5000
(Registrant's telephone number, including area code)
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Item 5. Other Events.
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On May 7, 1998, Reno Air, Inc. ("Reno Air" or the "Company") issued a
news release disclosing the results of operations for the three months ended
March 31, 1998 (see Exhibit 99 to this report). Joseph R. O'Gorman, Chairman,
President, and Chief Executive Officer of Reno Air and Todd Kehoe, Vice
President-Treasury and Acting Chief Financial Officer spoke with industry
analysts on a conference call following the news release. Mr. O'Gorman advised
the analysts that he was of opinion that the financial results for the second
quarter of 1998 would be better than the first quarter, that Reno Air would be
profitable for fiscal year 1998 as a whole, and that Reno air would expect
to see yield enhancements, beginning in the second quarter of 1998. Mr. O'Gorman
also advised that, in light of the competitive landscape, it would be beneficial
in the long-term for Reno Air to find an airline partner or to be part of an
alliance. With respect to cost reduction measures, Mr. O'Gorman noted the
Company's goal of achieving an available seat mile cost of approximately 7.7
cents and that the Company expected to receive a positive impact of between $8
and $11 million from the recently announced restructing plan. Certain of the
information discussed on the conference call, including certain of the
information set forth above, should be considered "forward-looking information"
which is subject to a number of risks and uncertainties. The preparation of
forward-looking information requires the use of estimates of future revenues,
expenses, activity levels and economic and market conditions, many of which are
outside of the Company's control. Among the specific factors that could cause
actual results to differ materially from those set forth in the forward-looking
information are the following: economic conditions, labor costs, aviation fuel
costs, competitive pressures on pricing particularly from lower-cost
competitors, weather conditions, government legislation, consumer perceptions of
the Company's product, demand for air transportation in the markets in which the
Company operates and the risks listed from time to time in the Company's reports
to the United States Securities and Exchange Commission. Other factors and
assumptions not identified above were also involved in the preparation of this
forward-looking information, and the failure of such other factors and
assumptions to be realized may also cause actual results to differ materially
from those discussed. The Company assumes no obligation to update such estimates
to reflect actual results, changes in assumptions or changes in other factors
affecting such estimates. (this space intentionally left blank).
Item 7. Financial Statements and Exhibits
(c) Exhibits
Designation Description
99 News release dated May 7, 1998 of Reno Air with
statements of operations for the three months
ended March 31, 1998, and select operating and
financial statistics for Reno Air for the same
period.
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Exhibit 99
RENO AIR ANNOUNCES FIRST QUARTER RESULTS
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Reno, Nev., May 7, 1998 -- Reno Air, Inc. [(NASDAQ: RENO), (PCX: RNO)] today
reported that in the first quarter of 1998 it had a net loss of $7.1 million, or
$0.67 per share of common stock (basic and diluted), compared to a loss of $5.0
million, or $0.48 per common share, for the same quarter last year. The loss in
1998 is before restructuring charges.
Reno Air Chairman, President and CEO Joe O'Gorman stated, "Coming out of a poor
fourth quarter in 1997, there was not enough time to fix the revenue and cost
issues that continued through the first quarter of 1998. Specifically, some
maintenance issues remained and there was some heavily discounted revenue that
continued into the first quarter of 1998. These items are now cleaned up and
processes have been put in place to preclude their reoccurrence.
"During March and April, the schedule was realigned closing four cities,
reducing the fleet and reallocating resources. This optimized schedule increases
frequencies in key markets, raises aircraft utilization, and along with improved
yield management will enhance revenue during the remainder of 1998. In
addition, significant emphasis has been placed on reducing costs, including
eliminating 15 percent of the workforce and continuing a complete review of all
expenditures.
"Although the impact of these actions won't be seen until the middle of the
second quarter and through the beginning of the third quarter, the company
remains on a solid footing and performance improvement is being seen. With a
new, experienced management team in place, we are confident Reno Air's
shareholders will see improved results and we expect to show a profit for the
full year."
In connection with the workforce reduction and other related actions, the
Company incurred restructuring charges of $2.1 million, of which approximately
$1.5 million was recorded in the first quarter. The balance of the restructuring
charges will be recognized in the second quarter of 1998.
After the restructuring charge, the Company reported a net loss applicable to
common stock of $8.6 million in the first quarter of 1998, or $0.81 per common
share on both a basic and diluted basis.
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OPERATING REVENUES
Operating revenues increased 4.6 percent to $93.8 million during the first
quarter of 1998 compared to $89.7 million during the first quarter of 1997. This
increase was driven primarily by a 6.8 percent increase in revenue passenger
miles to 772 million compared to 723 million revenue passenger miles in the
first quarter of 1997. The 1998 increase in operating revenues was depressed
somewhat by a 1.3 percent decrease in yield to 11.52 cents.
The first quarter 1998 load factor was 64.6 percent, a slight decrease of 0.1
points from the first quarter of 1997.
OPERATING EXPENSES
Operating expenses increased by $6.8 million in the first quarter of 1998
compared to the 1997 period, such increase resulting primarily from higher
payroll and aircraft maintenance expenses and by the $1.5 million restructuring
charge. Despite the increase in operating expenses, operating costs per
available seat mile remained at 8.4 cents for the first quarter of 1998
resulting principally from a 6.9 percent increase in available seat miles
compared to the 1997 period.
In the first quarter of 1998, the Company changed its estimate of the
depreciable lives of the Company's owned and Stage III compliant aircraft, spare
engines and related aircraft components to approximately 25 years which had the
effect of decreasing depreciation expense by $1.2 million in the quarter. This
change in the depreciable lives is more representative of the estimated useful
lives for this flight equipment than those shorter depreciable lives used
previously by the Company.
###
Contact: Reno Air Corporate Communications - (702) 954-5000
Evening/Weekend - (888) 396-0817
Connie Huff x4326
Reno Air, Inc.
Statements of Operations
For the Three Months Ended March 31, 1998 and 1997
(in thousands, except for share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------------
1998 1997
(unaudited)
<S> <C> <C>
Operating revenues:
Passenger revenues $ 88,919 $ 84,295
Other 4,907 5,389
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Total operating revenues 93,826 89,684
Operating expenses:
Salaries, wages and benefits 18,081 15,323
Aircraft fuel and oil 14,838 18,078
Aircraft leases 17,628 16,603
Aircraft maintenance 11,283 7,580
Handling, landing and airport fees 10,642 9,378
Advertising, marketing and sales 6,593 7,465
Commissions 4,044 4,900
Facility leases 4,000 3,090
Insurance 1,409 1,833
Communications 1,696 1,298
Depreciation 1,868 2,218
Restructuring charges 1,487 --
Other 7,091 6,090
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Total operating expenses 100,660 93,856
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Operating loss (6,834) (4,172)
Nonoperating income (expense):
Interest expense (1,508) (1,268)
Interest income 838 488
Other (281) (45)
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Nonoperating income (expense), net (951) (825)
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Loss before income tax provision and preferred stock dividends (7,785) (4,997)
Income tax (expense) benefit -- --
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Net loss before preferred stock dividends (7,785) (4,997)
Preferred stock dividends 807 --
Net loss applicable to common stock $ (8,592) $ 4,997)
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Loss per common share and potential common share:
Basic $ (0.81) $ (0.48)
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Diluted $ (0.81) $ (0.48)
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Weighted average common shares and potential common
shares outstanding:
Basic 10,560,111 10,370,907
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Diluted 10,560,111 10,370,907
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Selected operating statistics:
Revenue passenger miles (in thousands) 771,635 722,618
Available seat miles (ASMs, in thousands) 1,194,315 1,116,810
Load factor (percent) 64.6 64.7
Passengers enplaned 1,337,892 1,272,875
Yield (cents) 11.5 11.7
Revenue per ASM (cents):
Passenger 7.4 7.5
Total operating revenues 7.9 8.0
Operating cost per ASM (cents) 8.4 8.4
Breakeven load factor after preferred stock dividends (percent) 70.9 68.5
Weighted average number of aircraft during the period (1) 29 29
Average daily aircraft utilization (revenue block hours) 10.4 9.5
Average fuel cost per gallon (cents) (2) 64.5 85.0
</TABLE>
(1) excludes one aircraft on lease to another company.
(2) excludes into-plane and similar fees.
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.
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RENO AIR, INC.
By: /s/ Steven A. Rossum
Steven A. Rossum
Senior Vice President, General Counsel, and Corporate Secretary.
