<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-21540
COMMANDER AIRCRAFT COMPANY
(Exact name of registrant as specified in its charter)
Virginia 62-1363505
(State of Incorporation) (IRS Employer
Identification No.)
7200 NW 63rd Street
Hangar 8, Wiley Post Airport
Bethany, Oklahoma 73008
(Address of principal executive offices) (Zip Code)
(405) 495-8080
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports 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
requirement for the past 90 days.
Yes__X___ No_____
There were 6,720,548 Shares of Common Stock Outstanding
as of July 31, 1996.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
COMMANDER AIRCRAFT COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $630,090 $138,591
Accounts receivable 53,176 267,232
Notes receivable from related party 3,070,795 4,223,743
Notes receivable 341,007 363,195
Inventories 6,743,706 7,430,844
Prepaid expenses and other assets 115,578 166,548
------------- -------------
Total current assets 10,954,352 12,590,153
------------- -------------
Notes receivable - non current 506,017 986,471
Property and equipment:
Office equipment and furniture 284,054 277,011
Vehicles and aircraft 422,099 435,198
Manufacturing equipment 354,837 354,837
Tooling 499,735 478,771
Leasehold improvements 232,073 232,073
------------- -------------
1,792,798 1,777,890
Less: Accumulated depreciation (722,795) (639,391)
------------- -------------
Net property and equipment 1,070,003 1,138,499
------------- -------------
$12,530,372 $14,715,123
============= =============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Accounts payable $528,269 $1,357,660
Accrued expenses 625,481 839,042
Refundable deposits 27,500 27,800
Notes payable 402,600 -
Notes payable - related parties 2,800,000 2,450,000
------------- -------------
Total current liabilities 4,383,850 4,674,502
------------- -------------
Total liabilities 4,383,850 4,674,502
------------- -------------
Shareholders' investment (deficit):
Preferred stock, $100 par value, 20,000
shares authorized; no shares outstanding - -
Common stock, $.50 par value, 10,000,000
shares authorized; 6,720,548
shares issued and outstanding
at June 30, 1996 and Dec. 31, 1995 3,360,274 3,360,274
Additional paid-in capital 31,770,862 31,770,862
Retained earnings (deficit) (26,984,614) (25,090,515)
------------- -------------
Total shareholders' investment 8,146,522 10,040,621
------------- -------------
$12,530,372 $14,715,123
============= =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1996 1995
------------ ----------
<S> <C> <C>
Net sales - aircraft $2,499,259 $2,184,130
Net sales - service 355,545 308,387
---------- ----------
Total net sales 2,854,804 2,492,517
---------- ----------
Cost of sales - aircraft 2,451,946 1,832,525
Cost of sales - service 264,685 248,565
---------- ----------
Total cost of sales 2,716,631 2,081,090
---------- ----------
Gross margin (deficit) 138,173 411,427
---------- ----------
Other operating expenses:
Product development and engineering costs 94,236 172,807
Selling, general and administrative expenses 954,629 860,033
---------- ----------
Total other operating expenses 1,048,865 1,032,840
---------- ----------
Operating income (loss) (910,692) (621,413)
---------- ----------
Other income (expenses):
Other income 100,342 179,700
Interest expense (89,300) (1,575)
Other expense - (2,706)
---------- ----------
Total other income (expenses) 11,042 175,419
---------- ----------
Net loss ($899,650) ($445,994)
========== ==========
Net loss per share:
Weighted average common shares
outstanding 6,720,548 6,700,259
---------- ----------
Loss per share ($0.13) ($0.07)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statement
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
--------------- ---------------
<S> <C> <C>
Net sales - aircraft $3,777,246 $5,179,135
Net sales - service 540,488 636,352
--------------- ---------------
Total net sales 4,317,734 5,815,487
--------------- ---------------
Cost of sales - aircraft 3,756,898 4,325,592
Cost of sales - service 485,235 451,054
--------------- ---------------
Total cost of sales 4,242,133 4,776,646
--------------- ---------------
Gross margin (deficit) 75,601 1,038,841
--------------- ---------------
Other operating expenses:
Product development and engineering costs 180,944 302,385
Selling, general and administrative expenses 1,845,439 1,734,627
--------------- ---------------
Total other operating expenses 2,026,383 2,037,012
--------------- ---------------
Operating income (loss) (1,950,782) (998,171)
--------------- ---------------
Other income (expenses):
Other income 222,311 268,199
Interest expense (155,481) (108,338)
Other expense (10,147) (3,760)
--------------- ---------------
Total other income (expenses) 56,683 156,101
--------------- ---------------
Net loss ($1,894,099) ($842,070)
============== ==============
Net loss per share:
Weighted average common shares
outstanding 6,720,548 6,444,047
--------------- ---------------
Loss per share ($0.28) ($0.13)
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COMMANDER AIRCRAFT COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,894,099) $ (842,070)
Adjustments to reconcile net loss to
net cash used in operating activities---
Depreciation and amortization 83,404 98,952
Write-off of fixed assets (net) 3,540 19,757
Changes in operating assets and liabilities,
excluding cash:
Accounts receivable 214,056 (1,382,823)
Notes receivable - related parties 1,152,948 (233,583)
Notes receivable 502,642 (153,276)
Inventories 687,138 837,541
Prepaid expense and other assets 50,970 126,175
Accounts payable (829,391) 286,195
Accrued expenses (213,561) 41,931
Refundable deposits (300) (24,625)
------------- -------------
Net cash used in operating activities (242,653) (1,225,826)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (26,448) (26,479)
Proceeds from sale of property and equipment 8,000 -
------------- -------------
Net cash used in investing activities (18,448) (26,479)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings from related parties 350,000
Proceeds from borrowings from bank line 402,600
Proceeds from borrowings under long-term debt - 1,175,000
Proceeds from exercise of warrants 0 128,332
------------- -------------
Net cash provided by financing activities 752,600 1,303,332
------------- -------------
Net increase (decrease) in cash 491,499 51,027
Cash and cash equivalents at beginning of period 138,591 14,798
------------- -------------
Cash and cash equivalents at end of period $ 630,090 $ 65,825
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 113,490 $ 121,956
Income taxes - -
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
1995:
Exchange of $6,400,000 in debentures for 640,000 shares of common stock.
Repayment of accrued interest of $106,764 was waived.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations; however, the Company believes that
the disclosures are adequate to make the information presented not
misleading. In the opinion of the Company, all adjustments necessary to
present fairly the financial position of Commander Aircraft Company as of
June 30, 1996 and December 31, 1995, and the results of operations for the
three and six month periods ended June 30, 1996 and 1995, and the cash flows
for the six month periods ended June 30, 1996 and 1995 have been included and
are of a normal, recurring nature. The results of operations for such interim
periods are not necessarily indicative of the results for the full year. It
is suggested that these condensed financial statements be read in conjunction
with the Company's 1995 Annual Report on Form 10-K, as incorporated by
reference in the Company's filing of this Form 10-Q.
2. The earnings per share of common stock was computed by using the weighted
average number of shares of common stock outstanding during the period.
3. Through March 6, 1995, the Company's majority shareholder, and an affiliate
of the shareholder, purchased $1,075,000 in subordinated debentures at 10%
interest, payable in arrears, with principal due September 30, 1996. On March
7, 1995, the Company accepted the offer of its majority shareholder, and an
affiliate of the shareholder, to exchange $6,4000,000 of subordinated debt
for 640,000 shares of newly issued common stock at $10 per share. The payment
of accrued interest related to this debt in 1995 of $106,764 was waived at
the time of the exchange of common stock.
4. On February 6, 1996, the Company entered into an agreement with Will Rogers
Bank of Oklahoma City, for a line of credit in the amount of $600,000,
secured by specific aircraft to supplant working capital and to purchase pre-
owned aircraft to be refurbished and sold.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
GENERAL:
The Company reported sales for the second quarter and six months ended June 30,
1996 of $2,854,804 and $4,317,734, respectively. Sales for the second quarter
and six months ended June 30, 1995 were $2,492,517 and $5,815,487, respectively.
The net loss from operations for the quarter was $899,650, or $0.13 per share,
compared to a net loss from operations of $445,994, or $0.07 per share in the
comparable period of fiscal 1995. The net loss from operations for the six
months ended June 30, 1996 was $1,894,099, or $.28 per share, while the net loss
from operations for the six months ended June 30, 1995 was $842,070, or $.13 per
share. Lower sales revenue in the first half of 1996 versus the comparable
period of 1995 is due to the unusually large number of aircraft delivered in the
first quarter of 1995, which comprised 40% of total 1995 aircraft sales.
RESULTS FROM OPERATIONS:
Revenues from the sale of aircraft were $2,499,259 and $3,777,246, for the
second quarter and six months ended June 30, 1996, respectively. The Company
reported sales of aircraft of $2,184,130 and $5,179,135 during the second
quarter and first six months of 1995, respectively. Two pre-owned aircraft were
sold in the second quarter of 1996, and a total of three pre-owned aircraft were
sold during the first six months of 1996. No pre-owned aircraft were sold in
the second quarter or first six months of 1995.
Service revenues increased in the quarter ended June 30, 1996 to $355,545 from
$308,387 for the quarter ended June 30, 1995, due to increased spare parts sales
and refurbishment work. For the six months ended June 30, 1996 service revenues
decreased to $540,488 from $636,352 for the six months ended June 30, 1995. The
decrease in service revenues for the six month period ended June 30, 1996, was
due to an unusually large amount of service center billings that occurred in the
first quarter of 1995 resulting from retrofitting air conditioning systems.
Cost of aircraft sales increased for the three month period ended June 30, 1996
to $2,451,946 from $1,832,525 for the three month period ended June 30, 1995 due
to an increase in number of aircraft sold during the quarter and an increase in
unit production cost due to lower production levels in 1996. Cost of aircraft
sales for the six month period ended June 30, 1996 decreased to $3,756,898
compared to $4,325,592 for the six month period ended June 30, 1995. This
decrease was due primarily to fewer units sold in 1996.
Cost of sales for aircraft service increased to $264,685 for the three month
period ended June 30, 1996 from $248,565 for the three month period ended June
30, 1995 due to the increased level of business. For the six months ended June
30, 1996, cost of sales for aircraft service increased to $485,235 from $451,054
for the six months ended June 30, 1995.
Product development and engineering costs decreased to $94,236 for the quarter
ended June 30, 1996 from $172,807 for the quarter ended June 30, 1995. For the
six months ended June 30, 1996, product development and engineering costs
decreased to $180,944 from $302,385 for the six months ended June 30, 1995. The
decreased cost was due to the completion of engineering efforts expended for FAA
certification of the Commander 114TC in 1995.
<PAGE>
Sales and marketing expense was $701,796 and $1,363,774 for the quarter and six
months ended June 30, 1996, respectively. For the quarter and six months ended
June 30, 1995 sales and marketing expense was $653,617 and $1,289,500,
respectively. The increase over the three month and six month periods ended
June 30, 1995 was due to the expansion of sales offices and an increase in sales
personnel in 1996.
General and administrative costs increased to $252,833 for the quarter ended
June 30, 1996 from $206,416 for the quarter ended June 30, 1995. The increase
was due to increased legal fees. For the six months ended June 30, 1996 and
1995, general and administrative costs totaled $481,665 and $445,127,
respectively.
For the quarter and six months ended June 30, 1996, other income totaled
$100,342 and $222,311, respectively, which consisted primarily of interest
earned on notes receivable and on short-term investments in cash funds. For the
comparable periods in 1995, other income totaled $179,700 and $268,199,
respectively. A concession of approximately $77,300 was received in the second
quarter ended June 30, 1995 relating to the renegotiation of prices on an
advertising contract.
Interest expense, comprised primarily of interest on short term notes, for the
quarter and six months ended June 30, 1996 totaled $89,300 and $155,481,
respectively. Interest expense for the three months and six months ended June
30, 1995 totaled $1,575 and $108,338, primarily consisting of interest accrued
on the subordinated debentures prior to the exchange for common stock on March
7, 1995.
LIQUIDITY AND CAPITAL RESOURCES:
Total inventories decreased for the three months ended June 30, 1996 by $744,440
and decreased $687,138 for the six months ended June 30, 1996. For the three
months ended June 30, 1996, parts and work in process inventories decreased
$574,509 while new and used aircraft and demonstrator aircraft inventory
decreased $169,931. For the six month period ended June 30, 1996, parts and
work in process inventories decreased $483,325 while finished aircraft and
demonstrator aircraft inventory decreased $203,813.
Accounts receivable increased from $37,475 at March 31, 1996 to $53,176 at June
30, 1996 due to an increase in parts sold on account. Accounts receivable
decreased $214,056 from $267,232 at December 31, 1995 as payments were received
in January for balances on new aircraft.
Notes receivable from related parties at June 30, 1996 decreased $344,946 from
March 31, 1996, and decreased $1,152,948 from the balance due December 31, 1995.
Notes receivable as of June 30, 1996 include four aircraft sold by the Company
to non-affiliates. The Company has agreed to finance three aircraft in
consideration for notes with terms ranging from 8 to 10 years at competitive
interest rates with principal and interest payments due monthly.
Accounts payable decreased to $528,269 at June 30, 1996 from $1,357,660 at
December 31, 1995, a decrease of $829,391 due primarily to a decrease in
procurement of inventory.
Short term notes payable to Will Rogers Bank for used aircraft financing and
working capital totaled $402,600 compared to $247,000 at March 31, 1996. The
line, established in February 1996, provides up to $600,000 in short term
credit.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURE
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.
COMMANDER AIRCRAFT COMPANY
--------------------------
(Registrant)
By /s/ Stephen R. Buren
--------------------
Stephen R. Buren
Vice President Finance
(Chief Financial Officer and
Authorized Signatory)
Date: August 13, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 630,090
<SECURITIES> 0
<RECEIVABLES> 3,464,978
<ALLOWANCES> 0
<INVENTORY> 6,743,706
<CURRENT-ASSETS> 10,954,352
<PP&E> 1,792,798
<DEPRECIATION> 722,795
<TOTAL-ASSETS> 12,530,372
<CURRENT-LIABILITIES> 4,383,850
<BONDS> 0
0
0
<COMMON> 3,360,274
<OTHER-SE> 4,786,248
<TOTAL-LIABILITY-AND-EQUITY> 12,530,372
<SALES> 4,317,734
<TOTAL-REVENUES> 4,317,734
<CGS> 4,242,133
<TOTAL-COSTS> 4,242,133
<OTHER-EXPENSES> 2,026,383
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 155,481
<INCOME-PRETAX> (1,894,099)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,894,099)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,894,099)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> 0
</TABLE>
