United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997. [No Fee Required]
Transition report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934 [No Fee Required]
For the transition period from ________________________________
to _______________________________
Commission File number 0-21976
ATLANTIC COAST AIRLINES, INC.
(Exact name of registrant as specified in charter)
Delaware 13-3621051
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
515-A Shaw Road
Dulles, Virginia 20166
(Address of Principal Executive Offices)
Registrant's telephone number including area code: (703) 925-6000
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 requirements for the past 90 days. Yes No
As of August 29, 1997, 7110,934 shares of Common Stock of the Registrant
were outstanding.
Documents Incorporated by Reference
None
EXPLANATORY NOTE
Item 2 is hereby amended by deleting from such Item the
section entitled "Comparison of three months ended March 31,
1997, to three months ended March 31, 1996" and replacing such
section with the section attached hereto and filed herewith. The
purpose of the amendment is to expand Management's Discussion and
Analysis of Results of Operation and Financial Condition for the
quarterly period ended March 31, 1996 by including a review of
each component of operating expense on a per available seat mile
("ASM") basis.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
* * * *
Comparison of Three Months ended March 31, 1997, to Three
Months Ended March 31, 1996
Overview
In the three months ended March 31, 1997, the Company earned
income before provision for income taxes of $988,000 compared to
$635,000, excluding restructuring reversals, in the three months
ended March 31, 1996.
Operating Revenues
The Company's operating revenue increased 8.4% from $37.9
million in the first quarter of 1996 to $41.1 million in the
first quarter of 1997. The increase resulted from a 7.6% increase
in available seat miles ("ASMs") and an 8.4% increase in yield
per revenue passenger mile from 51.0 cents in the first quarter
of 1996 to 55.3 cents. The increase in ASMs was primarily the
result of a completion factor improvement of 7.4 points from
88.3% in the first quarter of 1996 to 95.7% in the first quarter
of 1997. This increase was offset by a 2.7 point decrease in load
factor quarter over quarter. Total passenger levels showed a
slight decline of 0.2% on a quarter over quarter basis. The
Company's break-even passenger load factor for the first quarter
of 1997 declined to 38.2% as compared to 40.9% for the first
quarter of 1996.
The Company's average passenger fare increased as a result
of the effect of industry-wide fare increases and the Company's
improved yield management. Management believes that recent
industry fare increases resulted in part from the temporary
expiration of the ticket tax on two separate occasions -- from
January 1, 1996 through August 26, 1996, and from January 1, 1997
through March 6, 1997. Consistent with industry practice, the
Company did not collect the ticket tax during these periods. The
ticket tax was most recently reinstated effective March 7, 1997,
with an expiration date of September 30, 1997.
Operating Expenses
The Company's operating expenses increased 9.1% in the first
quarter of 1997 compared to the first quarter of 1996, or 8.3%
before reversals of restructuring charges, due primarily to a
7.6% ASM increase, increased passenger-related costs (traffic
commissions and related fees), increased pilot wages, additional
aircraft rent expense and an increase in the total cost of fuel.
In the first quarter of 1996 operating expenses included a
reversal of excess restructuring reserves of $263,000. Unit costs
before reversals of restructuring charges increased 0.5% to 21.4
cents in the first quarter of 1997 compared to 21.3 cents in the
first quarter of 1996.
An unaudited summary of operating expenses as a percentage
of operating revenues and operating cost per ASM for the three
months ended March 31, 1996 and 1997 is as follows:
<TABLE>
Three Months Ended March 31,
1996 1997
<S> <C> <C> <C> <C>
Percent Percent
of of
Operating Cost Operating Cost
Revenuues per ASM Revenues per ASM
(cents) (cents)
Salaries and related 28.0% 6.1 28.3% 6.1
costs
Aircraft fuel 9.8% 2.1 10.5% 2.3
Aircraft maintenance and 9.7% 2.1 9.1% 2.0
materials
Aircraft rentals and 21.0% 4.6 20.2% 4.5
landing fees
Traffic commissions and 16.0% 3.5 15.4% 3.4
related fees
Depreciation and 1.7% .4 1.8% .4
amortization
Other 11.5% 2.5 12.2% 2.7
Total (before
reversals of
restructuring 97.7% 21.3 97.5% 21.4
charges)
</TABLE>
ASMs increased 7.6% in the first quarter of 1997 compared to
the first quarter of 1996 as a result of a 6.9% increase in block
hours and the addition of two aircraft. Cost per ASM increased on
a quarter over quarter basis due to increases in the cost of fuel
and other operating expenses.
Salaries and related costs per ASM were unchanged at 6.1
cents for the first quarter of 1997 compared to the first quarter
of 1996 despite a 21.8% increase in profit sharing, additional
flight crew hours and ground personnel and contractual wage
increases for pilots and flight attendants effective March 1,
1997, and May 1, 1996 respectively. In absolute dollars, salaries
and related costs increased 8.4% from $10.7 million in the first
quarter of 1996 to $11.6 million in the first quarter of 1997.
The cost per ASM of aircraft fuel increased to 2.3 cents in
the first quarter of 1997 compared to 2.1 cents in the first
quarter of 1996. The increase in fuel expense resulted from a
9.5% increase in average fuel price per gallon. Aircraft fuel
prices fluctuate with a variety of factors, including the price
of crude oil, and future increases or decreases cannot be
predicted with a high degree of certainty. There is no assurance
that further increases will not adversely affect the Company's
operating costs. During the latter half of the first quarter of
1997, however, the price of fuel moderated to levels more closely
reflecting 1996 prices. In absolute dollars, aircraft fuel
expense increased 16.2% from $3.7 million in the first quarter of
1996 to approximately $4.3 million in the first quarter of 1997.
The cost per ASM of aircraft maintenance and materials
decreased to 2.0 cents in the first quarter of 1997 compared to
2.1 cents in the first quarter of 1996. During the first quarter
of 1997, the Company recognized credits of approximately $400,000
for manufacturer penalties related to engine overhauls and
dispatch reliability, that were offset by increased maintenance
related to the addition of two J-41 aircraft and the expiration
of warranty coverage for certain aircraft. In absolute dollars,
aircraft maintenance and materials expense was $3.7 million in
the first quarter of 1997 and was unchanged from the first
quarter of 1996.
The Company's maintenance accounting policy is a combination
of expensing events as incurred and accruals for maintenance
events. Maintenance accruals are estimated on a cost per flight
hour or per cycle basis for all aircraft, including those under
warranty.
The cost per ASM of aircraft rentals and landing fees
decreased to 4.5 cents in the first quarter of 1997 compared to
4.6 cents in the first quarter of 1996 despite increased rent and
landing fees associated with the two additional J-41 aircraft
delivered during the first quarter of 1997 and increased landing
fees at certain of the airports the Company serves. In absolute
dollars, aircraft rentals and landing fees increased 3.8% from
$8.0 million in the first quarter of 1996 to $8.3 million in the
first quarter of 1997.
The cost per ASM of traffic commissions and related fees
decreased to 3.4 cents in the first quarter of 1997 compared to
3.5 cents in the first quarter of 1996 despite a 9.1% increase in
passenger revenue and contractual rate increases in program fees
paid to United. In absolute dollars, traffic commissions and
related fees increased 3.3% from $6.1 million in the first
quarter of 1996 to $6.3 million in the first quarter of 1997.
The cost per ASM of depreciation and amortization was
unchanged at 0.4 cents for the first quarter of 1997 compared to
first quarter of 1996, despite the acquisition of rotable spare
parts associated with additional aircraft, ground equipment,
improvements to aircraft, facility leasehold improvements and
other capital expenditures since the first quarter of 1996. In
absolute dollars, depreciation and amortization increased 12.3%
from $641,000 in the first quarter of 1996 to $720,000 in the
first quarter of 1997.
The cost per ASM of other operating expenses increased to
2.7 cents in the first quarter of 1997 compared to 2.5 cents in
the first quarter of 1996. The increase resulted primarily from
out of period adjustments in the first quarter of 1996,
consisting of reversals of prior period accruals for denied
boarding compensation and passenger claims expense of
approximately $400,000 and a manufacturer credit of approximately
$200,000. In absolute dollars, other operating expenses increased
16.3% from $4.3 million in the first quarter of 1996 to $5.0
million in the first quarter of 1997.
As a result of the foregoing components, total cost per ASM
increased to 21.4 cents in the first quarter of 1997 compared to
21.3 cents before reversals of restructuring charges in the first
quarter of 1996. The first quarter of 1996 included a reversal of
excess restructuring reserves of (0.2) cents per ASM. Total ASMs
increased 7.6% and, in absolute dollars, total operating expenses
increased 9.3% from $36.7 million in the first quarter of 1996 to
$40.1 million in the first quarter of 1997.
The Company's effective tax rate for the first quarter of
1997 was approximately 29%. This estimated effective tax rate is
lower than the statutory rate due to revisions of income
estimates and permanent differences. The Company expects that in
future periods the estimated effective tax rate will more closely
approximate the statutory rate for state and federal taxes of
approximately 39%.
In the first quarter of 1997, the Company posted net income
of $703,000 compared to net income of $862,000 for the first
quarter of 1996. The Company's first quarter of 1997 results
reflect a provision for income taxes that assumes an estimated
effective tax rate of 29%, compared to an estimated effective tax
rate of 4% for the first quarter of 1996 due to the existence of
a net operating loss carryforward. In the first quarter of 1997,
the Company earned income before income tax provision of
$988,000, compared to $898,000 in the first quarter of 1996.
During the first quarter of 1997, the Company generated operating
income of $1.0 million compared to $1.1 million for the first
quarter of 1996. Results for the first quarter of 1996 include a
reversal of excess restructuring reserves of $263,000.
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.
ATLANTIC COAST AIRLINES, INC.
August 29, 1997 By: /s/ Paul H. Tate
Paul H. Tate
Senior Vice President and
Chief Financial Officer
August 29, 1997 By: /s/ Kerry B. Skeen
Kerry B. Skeen
President and
Chief Executive Officer
