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Previous: JAMESON INNS INC, 10-Q, EX-27, 2000-08-11 |
Next: GREAT LAKES AVIATION LTD, 10-Q, EX-27, 2000-08-11 |
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| /x/ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2000
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 No. 0-23224
GREAT LAKES AVIATION, LTD.
(Exact name of registrant as specified in its charter)
| IOWA (State or other jurisdiction of incorporation or organization) |
42-1135319 (I.R.S. Employer Identification No.) |
|
| 1022 Airport Parkway, Cheyenne, Wyoming (Address of principal executive offices) |
|
82001 (Zip Code) |
Registrant's telephone number, including area code: (307) 432-7000
Indicate by 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 / /
As of August 11, 2000 there were 8,647,891 shares of Common Stock, par value $.01 per share, issued and outstanding.
| |
Page |
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|---|---|---|
| PART I. FINANCIAL INFORMATION | 1 | |
| Item 1. Financial Statements |
|
1 |
| a) Condensed Consolidated Balance Sheets June 30, 2000 and December 31, 1999 |
|
1 |
| b) Condensed Consolidated Statements of Operations Three months and Six months ended June 30, 2000 and 1999 |
|
2 |
| c) Condensed Consolidated Statements of Cash Flows Six months ended June 30, 2000 and 1999 |
|
3 |
| d) Condensed Notes to the Unaudited Consolidated Interim Financial Statements |
|
4 |
| Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
|
5 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk |
|
9 |
| PART II. OTHER INFORMATION |
|
10 |
| Item 1. Legal Proceedings |
|
10 |
| Item 2. Changes in Securities and Use of Proceeds |
|
10 |
| Item 3. Defaults Upon Senior Securities |
|
10 |
| Item 4. Submission of Matters to a Vote of Security Holders |
|
10 |
| Item 5. Other Information |
|
10 |
| Item 6. Exhibits and Reports on Form 8-K |
|
10 |
| SIGNATURES |
|
11 |
| EXHIBIT INDEX |
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12 |
| |
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|
GREAT LAKES AVIATION, LTD. AND SUBSIDIARY
Consolidated Balance Sheets
(in thousands, except share information)
| |
June 30, 2000 |
December 31, 1999 |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| |
(unaudited) |
|
|||||||
| ASSETS | |||||||||
| CURRENT ASSETS: | |||||||||
| Cash | $ | 180 | $ | 84 | |||||
| Accounts receivable, net allowance for doubtful accounts of approximately $153 and $153 | 17,626 | 12,576 | |||||||
| Inventories, net | 17,963 | 17,975 | |||||||
| Prepaid expenses and other current assets | 859 | 643 | |||||||
| Total current assets | 36,628 | 31,278 | |||||||
| PROPERTY AND EQUIPMENT: | |||||||||
| Flight equipment | 122,250 | 122,250 | |||||||
| Other property and equipment | 5,548 | 5,188 | |||||||
| Less accumulated depreciation and amortization | (15,153 | ) | (12,073 | ) | |||||
| Total property and equipment | 112,645 | 115,365 | |||||||
| OTHER ASSETS | 2,314 | 2,233 | |||||||
| $ | 151,587 | $ | 148,876 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| CURRENT LIABILITIES: | |||||||||
| Notes payable and current maturities of long-term debt | $ | 18,842 | $ | 14,424 | |||||
| Accounts payable | 13,079 | 12,727 | |||||||
| Deferred lease payments | 3,048 | 2,457 | |||||||
| Accrued liabilities and unearned revenue | 4,356 | 4,783 | |||||||
| Total current liabilities | 39,325 | 34,391 | |||||||
| LONG-TERM DEBT, net of current maturities | 96,054 | 98,701 | |||||||
| DEFERRED LEASE PAYMENTS | 2,459 | 2,538 | |||||||
| DEFERRED CREDITS | 4,519 | 4,627 | |||||||
| STOCKHOLDERS' EQUITY | |||||||||
| Common stock, $.01 par value; 50,000,000 shares authorized, 8,647,891 and 8,637,440 shares issued and outstanding at March 31, 2000, and December 31, 1999 respectively | 86 | 86 | |||||||
| Paid-in capital | 31,631 | 31,610 | |||||||
| Accumulated deficit | (22,487 | ) | (23,077 | ) | |||||
| Total stockholders' equity | 9,230 | 8,619 | |||||||
| $ | 151,587 | $ | 148,876 | ||||||
See condensed notes to consolidated financial statements.
1
GREAT LAKES AVIATION, LTD. AND SUBSIDIARY
Consolidated Statements of Operations
For the Three Months and Six Months Ended June 30
(Unaudited)
(in thousands, except share and per share information)
| |
For the Three Months Ended June 30 |
For the Six Months Ended June 30 |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
2000 |
1999 |
2000 |
1999 |
||||||||||
| OPERATING REVENUES: | ||||||||||||||
| Passenger | $ | 28,009 | $ | 27,340 | $ | 53,869 | $ | 51,058 | ||||||
| Public service | 4,344 | 4,240 | 8,426 | 8,497 | ||||||||||
| Freight, charter and other | 1,609 | 1,720 | 3,617 | 3,927 | ||||||||||
| Total operating revenues | 33,962 | 33,300 | 65,912 | 63,482 | ||||||||||
| OPERATING EXPENSES: | ||||||||||||||
| Salaries, wages and benefits | 8,534 | 8,086 | 16,973 | 16,354 | ||||||||||
| Aircraft fuel | 5,022 | 3,984 | 9,777 | 7,468 | ||||||||||
| Aircraft maintenance materials and component repairs | 3,128 | 3,400 | 6,832 | 6,879 | ||||||||||
| Commissions | 1,064 | 1,529 | 2,202 | 2,885 | ||||||||||
| Depreciation and amortization | 1,762 | 904 | 3,520 | 1,801 | ||||||||||
| Aircraft rental | 2,283 | 4,258 | 4,748 | 8,564 | ||||||||||
| Other rentals and landing fees | 1,837 | 1,892 | 3,636 | 3,831 | ||||||||||
| Other operating expenses | 6,296 | 6,268 | 13,286 | 12,575 | ||||||||||
| Total operating expenses | 29,926 | 30,321 | 60,974 | 60,357 | ||||||||||
| Operating income | 4,036 | 2,979 | 4,938 | 3,125 | ||||||||||
| INTEREST EXPENSE: | 2,269 | 945 | 4,348 | 1,838 | ||||||||||
| Income before income taxes | 1,767 | 2,034 | 590 | 1,287 | ||||||||||
| INCOME TAX EXPENSE (BENEFIT) | — | — | — | — | ||||||||||
| NET INCOME | $ | 1,767 | $ | 2,034 | $ | 590 | $ | 1,287 | ||||||
| NET INCOME PER SHARE: | ||||||||||||||
| Basic | $ | .20 | $ | .24 | $ | .07 | $ | .15 | ||||||
| Diluted | $ | .19 | $ | .22 | $ | .06 | $ | .14 | ||||||
| WEIGHTED AVERAGE SHARES USED IN COMPUTATION: | ||||||||||||||
| Basic | 8,647,891 | 8,624,496 | 8,642,723 | 8,624,496 | ||||||||||
| Diluted | 9,254,832 | 9,351,659 | 9,270,673 | 9,345,187 | ||||||||||
See condensed notes to consolidated financial statements.
2
GREAT LAKES AVIATION, LTD. AND SUBSIDIARY
Consolidated Statements of Cash Flow
For the Six Months Ended June 30
(Unaudited)
(in thousands)
| |
2000 |
1999 |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| OPERATING ACTIVITIES: | |||||||||||
| Net Income | $ | 590 | $ | 1,287 | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities | |||||||||||
| Depreciation and amortization | 3,332 | 1,711 | |||||||||
| Change in current operating items: | |||||||||||
| Accounts receivable, net | (5,050 | ) | (1,697 | ) | |||||||
| Inventories, net | (239 | ) | (1,704 | ) | |||||||
| Prepaid expenses and other current assets | (216 | ) | 108 | ||||||||
| Accounts payable and accrued liabilities | (75 | ) | 215 | ||||||||
| Deferred lease payments and deferred credits | 404 | 2,291 | |||||||||
| Net cash flows (used in) provided by operating acitivies | (1,254 | ) | 2,211 | ||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Purchases of flight equipment and other property and equipment | (361 | ) | (1,165 | ) | |||||||
| Change in other assets | (81 | ) | 394 | ||||||||
| Net cash flows used in investing activities | (442 | ) | (771 | ) | |||||||
| FINANCING ACTIVITIES: | |||||||||||
| Proceeds from issuance of notes payable and long term debt | 7,715 | — | |||||||||
| Repayment of notes payable and long term debt | (2,347 | ) | (175 | ) | |||||||
| Payments on line of credit | (3,597 | ) | (1,316 | ) | |||||||
| Proceeds from sale of common stock | 21 | 41 | |||||||||
| Net cash flows provided by (used in) financing activities | 1,792 | (1,450 | ) | ||||||||
| NET CHANGE IN CASH |
|
|
96 |
|
|
(10 |
) |
||||
| CASH: | |||||||||||
| Beginning of period | 84 | 189 | |||||||||
| End of period | $ | 180 | $ | 179 | |||||||
| SUPPLEMENTARY CASH FLOW INFORMATION: | |||||||||||
| Cash paid during the period for—Interest | $ | 4,397 | $ | 1,324 | |||||||
See condensed notes to consolidated financial statements.
3
GREAT LAKES AVIATION, LTD.
CONDENSED NOTES TO THE UNAUDITED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
General
The consolidated financial statements included herein have been prepared by Great Lakes Aviation, Ltd. (the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in the consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of such consolidated financial statements. The Company's business is seasonal and, accordingly, interim results are not necessarily indicative of results for a full year. Certain information and footnote disclosures normally included in consolidated 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 consolidated financial statements be read in conjunction with the consolidated financial statements for the year ended December 31, 1999 and the notes thereto included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of Great Lakes Aviation, Ltd. and its wholly owned subsidiary "RDU Inc.", referred to collectively as the Company. All significant inter-company transactions and balances have been eliminated in consolidation. RDU, Inc. currently has no activity and is not being utilized by the Company.
The Company is currently operating scheduled passenger and airfreight service exclusively under a cooperative marketing agreement, (the "United Express Agreement") with United Airlines, Inc. ("United"). (See United Express Relationship)
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement ("FAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended by FAS 137, which will be effective for the Company for the year beginning January 1, 2001. This statement establishes accounting and reporting standards for derivative instruments and all hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities at their fair values. Accounting for changes in the fair value of a derivative depends on its designation and effectiveness. For derivatives that qualify as effective hedges, the change in fair value will have no impact on earnings until the hedged item affects earnings. For derivatives that are not designated as hedging instruments, or for the ineffective portion of a hedging instrument, the change in fair value will affect current period earnings. At June 30, 2000, the Company had no derivative instruments.
4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion and analysis in this section and in the notes to the financial statements contain certain forward-looking terminology such as "believes," "anticipates," "will," and "intends," or comparable terminology which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Potential purchasers of the Company's securities are cautioned not to place undue reliance on such forward-looking statements which are qualified in their entirety by the cautions and risks described herein and in other reports filed by the Company with the Securities and Exchange Commission.
The Company began providing air charter service in 1979, and has provided scheduled passenger service in the Upper Midwest since 1981, along the East Coast from October 1995 to May 1997, and in the Southwest and Mexico from August 1995 to May 1997. In April 1992, the Company began operating as a United Express carrier under a cooperative marketing agreement with United that expired April 25, 1997, but was extended through December 31, 1997. As of June 30, 2000, the Company served 61 destinations in 14 states with 342 scheduled departures each weekday.
2. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
The following table sets forth certain financial information regarding the Company:
| |
For the Three Months Ended June 30 |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
2000 |
1999 |
||||||||||||
| |
Amount (in 000s) |
Cents Per ASM |
% Increase (decrease) from 1999 |
Amount (in 000s) |
Cents Per ASM |
|||||||||
| Total Operating Revenues | $ | 33,962 | 25.8 | 2.0 | % | $ | 33,300 | 24.8 | ||||||
| Salaries, wages and benefits | 8,534 | 6.5 | 5.5 | 8,086 | 6.0 | |||||||||
| Aircraft fuel | 5,022 | 3.8 | 26.7 | 3,984 | 3.0 | |||||||||
| Aircraft maintenance materials and component repairs | 3,128 | 2.4 | (8.0 | ) | 3,400 | 2.5 | ||||||||
| Commissions | 1,064 | 0.8 | (30.4 | ) | 1,529 | 1.1 | ||||||||
| Depreciation and amortization | 1,762 | 1.3 | 94.9 | 904 | 0.7 | |||||||||
| Aircraft rental | 2,283 | 1.7 | (46.4 | ) | 4,258 | 3.2 | ||||||||
| Other rentals and landing fees | 1,837 | 1.4 | (2.9 | ) | 1,892 | 1.4 | ||||||||
| Other operating expense | 6,296 | 4.8 | 0.4 | 6,268 | 4.7 | |||||||||
| Total Operating Expenses | 29,926 | 22.7 | (1.3 | )% | 30,321 | 22.6 | ||||||||
| Operating income | 4,036 | — | 35.5 | 2,979 | — | |||||||||
| Interest expense (net) | 2,269 | 1.7 | 140.1 | % | 945 | 0.7 | ||||||||
5
| |
2000 |
Increase (Decrease) from 1999 |
1999 |
||||
|---|---|---|---|---|---|---|---|
| Available Seat Miles (000s) | 131,822 | (1.7 | )% | 134,102 | |||
| Revenue Passenger Miles (000s) | 65,627 | (0.3 | )% | 65,808 | |||
| Passenger Load Factor | 49.8 | % | 0.7 | pts | 49.1 | % | |
| Passengers carried | 270,654 | 5.1 | % | 257,503 | |||
| Average Yield per Revenue Passenger Mile | 42.7 | ¢ | 2.9 | % | 41.5 | ¢ | |
| Revenue per ASM | 25.8 | ¢ | 4.0 | % | 24.8 | ¢ |
Operating revenues increased 2.0% to $34.0 million in the second quarter of 2000 from $33.3 million during the second quarter of 1999. The increase in operating revenues over the same period in the prior year is primarily a result of an increase of 5.1% in revenue passengers carried to 270,654 in the second quarter of 2000, from 257,503 during the same period of 1999 and a 2.8% increase in yield to 42.7 cents in the second quarter of 2000, from 41.5 cents during the same period of 1999, partially offset by a 6.5% reduction in freight, charter and other revenues to $1.6 million in the second quarter of 2000, from $1.7 million during the same period of 1999.
Total operating expenses were $29.9 million, or 22.7 cents per ASM, in the second quarter of 2000 compared to $30.3 million or 22.6 cents per ASM in the second quarter of 2000. The increase in cost per ASM is primarily due to increased fuel prices during the quarter.
Salaries, wages, and benefits expense increased to 6.5 cents per ASM during the second quarter of 2000, from 6.0 cents per ASM during the second quarter of 1999, due to staffing additions and normal salary increases.
Aircraft fuel expenses increased 26.7%, to 3.8 cents per ASM in the second quarter of 2000 from 3.0 cents in the second quarter of 1999. This increase was due to higher fuel prices.
Aircraft maintenance materials and component repair expense decreased to 2.4 cents per ASM during the second quarter of 2000 from 2.5 cents per ASM during the second quarter of 1999.
Aircraft rental expense decreased during the second quarter of 2000 to $2.3 million or 1.7 cents per ASM from $4.3 million or 3.2 cents per ASM during the second quarter of 1999. This decrease is due to the Company's purchase and debt financing of 22 1900D aircraft which the Company had previously leased under short-term operating leases.
Interest expense increased to 1.7 cents per ASM for the second quarter of 2000, from 0.7 cents per ASM during the second quarter of 1999. Depreciation and amortization increased to 1.3 cents per ASM during the second quarter of 2000, from 0.7 cents per ASM in the second quarter of 1999. The increases in these expenses was the result of the above-mentioned conversion of short-term leases to aircraft utilizing long-term debt.
Other operating expenses increased to 4.8 cents per ASM in the second quarter of 2000 from 4.7 cents in the second quarter of 1999, primarily due to expenses incurred for the Company's relocation which occurred during the second quarter of 2000.
6
No income tax expense was recorded for the three months ended June 30, 2000 due to the fact that the Company is in a loss carry forward position. A benefit for these loss carryforwards has not be previously recognized in the consolidated financial statements since it is more likely than not that the benefits will not be realized.
3. RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
The following table sets forth certain financial information regarding the Company:
| |
For the Six Months Ended June 30 |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
2000 |
1999 |
||||||||||||
| |
Amount |
Cents Per ASM |
% Increase (decrease) from 1999 |
Amount |
Cents Per ASM |
|||||||||
| Total Operating Revenues | $ | 65,912 | 25.4 | 3.8 | % | $ | 63,482 | 23.5 | ||||||
| Salaries, wages and benefits | 16,973 | 6.5 | 3.8 | 16,354 | 6.1 | |||||||||
| Aircraft fuel | 9,777 | 3.8 | 30.9 | 7,468 | 2.8 | |||||||||
| Aircraft maintenance materials and component repairs | 6,832 | 2.6 | (0.7 | ) | 6,879 | 2.6 | ||||||||
| Commissions | 2,202 | 0.8 | (23.7 | ) | 2,885 | 1.1 | ||||||||
| Depreciation and amortization | 3,520 | 1.4 | 95.4 | 1,801 | 0.7 | |||||||||
| Aircraft rental | 4,748 | 1.8 | (44.6 | ) | 8,564 | 3.2 | ||||||||
| Other rentals and landing fees | 3,636 | 1.4 | (5.1 | ) | 3,831 | 1.4 | ||||||||
| Other operating expense | 13,286 | 5.1 | 5.7 | 12,575 | 4.7 | |||||||||
| Total Operating Expenses | 60,974 | 23.5 | 1.0 | % | 60,357 | 22.4 | ||||||||
| Operating income | 4,938 | 1.9 | 58.0 | 3,125 | 1.2 | |||||||||
| Interest expense (net) | 4,348 | 1.7 | 136.6 | % | 1,838 | 0.7 | ||||||||
| |
2000 |
Increase (Decrease) from 1999 |
1999 |
||||
|---|---|---|---|---|---|---|---|
| Available Seat Miles (000s) | 259,814 | (3.6 | )% | 269,581 | |||
| Revenue Passenger Miles (000s) | 124,583 | 0.4 | % | 124,142 | |||
| Passenger Load Factor | 48.0 | % | 3.1 | pts | 46.0 | % | |
| Passengers carried | 517,181 | 7.8 | % | 479,831 | |||
| Average Yield per Revenue Passenger Mile | 43.2 | ¢ | 7.4 | % | 41.0 | ¢ | |
| Revenue per ASM | 25.4 | ¢ | 12.1 | % | 23.5 | ¢ |
Operating revenues increased 3.8% to $65.9 million in the first half of 2000 from $63.5 million during the first half of 1999. Revenue passengers carried increased by 7.8% to 517,181 in the first half of 2000, from 479,831 during the first half of 1999, in addition to a 2.2 cent increase in yield per revenue passenger mile to 43.2 cents per revenue passenger mile, partially offset by a 7.9% reduction in freight, charter and other revenues to $3.6 million in the first half of 2000, from $3.9 million during the same period of 1999.
7
Total operating expenses increased 1.0% to $61.0 million in the first half of 2000 from $60.4 million in the first half of 1999. Total operating expenses increased to 23.5 cents per ASM in the first half of 2000 from 22.4 cents per ASM in the first half of 1999. Cost per ASM in the first half of 2000 increased primarily as a result of significantly higher fuel cost.
Salaries, wages, and benefits expense increased to 6.5 cents per ASM during the first half of 2000, from 6.1 cents per ASM during the same period of 1999. Cost per ASM for the first half of 2000 is higher due to normal salary increases, spread over a smaller ASM base.
Aircraft fuel expense increased 30.9% to 3.8 cents per ASM in the first half of 2000 from 2.8 cents per ASM the first half of 1999. This increase was due to significantly higher fuel prices during the first half of 2000 as compared to the first half of 1999.
Aircraft maintenance materials and component repair expenses were 2.6 cents per ASM during the first half of 2000 and during the first half of 1999.
Aircraft rental expense decreased during the first half of 2000 to $4.7 million or 1.8 cents per ASM from $8.6 million or 3.2 cents per ASM during the first half of 1999. This decrease is due to the Company's purchase and debt financing of 22 1900D aircraft which the Company had previously leased under short-term operating leases.
Interest expense increased to 1.7 cents per ASM for the first half of 2000, from 0.7 cents per ASM during the first half of 1999. Depreciation and amortization increased to 1.4 cents per ASM during the first half of 2000, from 0.7 cents per ASM in the first half of 1999. The increases in these expenses was the result of the above-mentioned conversion of short-term leases to aircraft utilizing long-term debt.
Other operating expenses increased 5.7% to 5.1 cents per ASM in the first half of 2000 from 4.7 cents per ASM in the first half of 1999, primarily due to expenses incurred for the Company's relocation which occurred during the first half of 2000.
No income tax expense was recorded for the six months ended June 30, 2000 due to the fact that the Company is in a loss carry forward position. A benefit for these loss carryforwards has not be previously recognized in the consolidated financial statements since it is more likely than not that the benefits will not be realized.
4. LIQUIDITY AND CAPITAL RESOURCES
Cash increased to $180,000 at June 30, 2000 from $84,000 at December 31, 1999. Net cash flows used by operating activities were $1.2 million in the first half of 2000, and cash flows used in operating activities were $2.2 million in the first half of 1999. The major use of such cash flows in the first half of 2000 was an increase in accounts receivable.
Raytheon is the Company's primary aircraft supplier and largest creditor. The Company has financed all of its Beechcraft 1900D aircraft and one of its Brasilia aircraft under related lease and debt agreements with Raytheon, and Raytheon has also provided the Company a $5.0 million working capital line of credit (payable on demand) and had provided a $5.0 million short term loan (payable on demand) which is collateralized by Beechcraft spare parts and equipment and accounts receivable. On January 7, 2000, the Company entered into an agreement with Coast Business Credit, a division of Southern Pacific Bank, for a $20.0 million revolving credit facility. This credit facility bears interest at prime plus 0.5%, payable monthly, and requires a minimum loan balance of $7.0 million. Borrowings under this facility are payable on demand and are limited to certain eligible accounts receivable. The
8
line of credit agreement is effective through December 31, 2002. The line of credit agreement contains various restrictive covenants which require the Company to maintain minimum levels of tangible net worth and remain current on all other outstanding debt obligations, among other matters. The credit facility also limits additional indebtedness, capital expenditures and dividends. The Company was in compliance with all such covenants at June 30, 2000. In connection with entering into this revolving credit facility, the Company paid Raytheon the $5.0 million short-term loan and entered into an agreement, whereby Raytheon would receive certain aircraft parts as payment for the remaining line of credit balance.
The Company currently leases four 1900C aircraft from Raytheon under short-term operating leases for use in contracted mail. Additionally, the Company has financed seven of its Brasilia aircraft through lease and debt agreements with other unrelated entities.
Capital expenditures related to aircraft and equipment totaled $361,000 in the first half of 2000 compared to $1.2 million during the first half of 1999. Principal repayments on long-term debt were $2.3 million in the first half of 2000.
Long-term debt, net of current maturities of $5.8 million, totaled $96.1 million at June 30, 2000 compared to $98.7 million, net of current maturities of $5.5 million, at December 31, 1999.
The code sharing agreement with United expired in December 1997. The Company believes its relationship with United is satisfactory, as evidenced by United's selection, during 1998, of the Company as the United Express carrier for additional routes serving the Denver airport. Since December 31, 1997, the Company has been operating as if the principal day-to-day operational provisions of the previous code sharing agreement are still effective. The Company and United have entered into negotiations to renew the code sharing agreement. As part of their negotiations, United has restructured its operating relationships with certain of its United Express carriers, pursuant to which the Company has provided service to Denver from 24 additional cities since April 23, 1998. As a result of this restructuring, the Company is the only United Express carrier providing service with nineteen seat aircraft at the Chicago and Denver hubs. While the Company expects a new code sharing agreement to be finalized on a mutually advantageous basis, no assurance can be given that this actually will be accomplished. Any failure to enter into a new code sharing agreement with United, any material adverse change in terms from the prior code sharing agreement, or any substantial decrease in the number of routes served by the Company under this agreement could have a material adverse effect on the Company's business. As a result of the code sharing relationship with United, the Company's business is sensitive to events and risks affecting United. If adverse events affect United's business, the Company's business may also be adversely affected.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There were no significant changes to the information reported in the Company's 1999 Annual Report on Form 10-K.
9
The Company is a party to routine litigation incidental to its business, none of which is likely to have a material effect on the Company's financial position.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None to report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
| |
|
For |
|
Withhold |
|---|---|---|---|---|
| Douglas G. Voss | 8,133,417 | 20,972 | ||
| Vernon A. Mickelson | 8,136,517 | 17,872 | ||
| Gayle R. Brandt | 8,134,917 | 19,472 | ||
| Ivan L. Simpson | 8,139,017 | 15,372 |
On June 8, 2000, the Company began transitioning into its new maintenance and administration facility located in Cheyenne, Wyoming. Flight schedule changes made on that date have allowed the Company to discontinue significant amounts of non-productive flying from the Denver hub that previously had been required to position aircraft into Spencer, Iowa for maintenance. On August 5, 2000, the Company moved its Maintenance Control, Flight Dispatch, Crew Planning and Scheduling Departments into the new facility.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
27.1 Financial Data Schedule
The registrant filed no Current Reports on Form 8-K for the quarter ended June 30, 2000.
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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, thereunder duly authorized.
| Dated: August 11, 2000 | GREAT LAKES AVIATION, LTD. | |||
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By: |
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/s/ DOUGLAS G. VOSS Douglas G. Voss President and Chief Executive Officer |
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By: |
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/s/ RICHARD A. HANSON Richard A. Hanson Vice President—Finance |
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| Exhibit Number |
Description |
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|---|---|---|
| 27.1 | Financial Data Schedule |
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