<PAGE>
FORM 10-K/A
Amendment No. 1 to Items 8 and 14
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 0-24126
FRONTIER AIRLINES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1256945
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporated or organization)
12015 E. 46th Avenue, Denver, CO 80239
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (303) 371-7400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
--------------------------
Title of Class
Indicate by check mark whether the Registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K or any amendment to this Form 10-K. [X]
Aggregate Market Value of Stock held by Non-Affiliates of the Company as of June
23, 1998: $31,076,647, based on a closing average bid and asked price on that
date of $3.44 per share.
The number of shares of the Company's Common Stock outstanding as of June 24,
1998 is 13,616,564.
Documents incorporated by reference - Part III is incorporated by reference to
the company's 1998 Proxy Statement.
<PAGE>
ITEM 8: FINANCIAL STATEMENTS
The Company's financial statements are filed as a part of this report
immediately following the signature page.
1
<PAGE>
PART IV
ITEM 14(A): EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Exhibit
Numbers Description of Exhibits
- ------- -----------------------
3.1 Amended and Restated Articles of Incorporation of the Company. (10)
3.2 Amended Bylaws of the Company (June 9, 1997). (5)
4.1 Specimen Common Stock certificate of the Company. (1)
4.2 The Amended and Restated Articles of Incorporation and Amended Bylaws
of the Company are included as Exhibits 3.1 and 3.2.
4.3 Form of Warrant. (1)
4.4 Rights Agreement, dated as of February 20, 1997, between Frontier
Airlines, Inc. and American Securities Transfer & Trust, Inc,
including the form of Rights Certificate and the Summary of Rights
attached thereto as Exhibits A and B, respectively, incorporated by
reference to Frontier Airlines, Inc. Registration Statement on Form 8-
A dated March 11, 1997. (6)
4.4(a) Amendment to Rights Agreement dated June 30, 1997. (5)
10.1 Office Lease. (1)
10.2 Office Lease Supplements and Amendments. (5)
10.2(a) Addendum to Office Lease (10)
10.3 1994 Stock Option Plan. (1)
10.4 Amendment No. 1 to 1994 Stock Option Plan. (2)
10.4(a) Amendment No. 2 to 1994 Stock Option Plan (5)
10.5 Registration Rights Agreement. (1)
10.6 Sales Agreement. (1)
10.7 Airport Use and Facilities Agreement, Denver International Airport (2)
10.8 Aircraft Lease Agreement dated as of July 26, 1994. (2)
10.8(a) Assignment and Assumption Agreements dated as of March 28, 1997 and
March 20, 1997 between USAirways, Inc. and First Security Bank,
National Association ("Trustee") and Frontier Airlines, Inc. (5)
10.8(b) Amendment No. 1, dated June 5, 1997, to Lease Agreement dated as of
July 26, 1994 between Frontier Airlines, Inc. and First Security Bank,
National Association. (5)
10.9 Code Sharing Agreement. (5)
2
<PAGE>
10.10 Aircraft Lease Agreement dated as of October 20, 1995 (MSN 23177).
(3)
10.11 Aircraft Lease Agreement dated as of October 20, 1995 (MSN 23257).
(3)
10.12 Aircraft Lease Agreement dated as of May 1, 1996. (3)
10.13 Aircraft Lease Agreement dated as of June 3, 1996. (3)
10.13(a) Amendment No. 1 to Aircraft Lease Agreement dated as of
June 3, 1996.(10)
10.14 Aircraft Lease Agreement dated as of June 12, 1996. Portions of
this Exhibit have been excluded from the publicly available
document and an order granting confidential treatment of the
excluded material has been received. (3)
10.15 Operating Lease Agreement dated November 1, 1996 between the
Company and First Security Bank, National Association. Portions of
this Exhibit have been excluded from the publicly available
document and an order granting confidential treatment of the
excluded material has been received. (4)
10.16 Aircraft Lease Agreement (MSN 28760) dated as of December 12, 1996
between the Company and Boullion Aircraft Holding Company, Inc.
Portions of this Exhibit have been excluded from the publicly
available document and an order granting confidential treatment of
the excluded material has been received. (4)
10.16(a) Amendment No. 1 to Aircraft Lease Agreement (MSN 28760) dated May
20, 1997. Portions of this Exhibit have been excluded from the
publicly available document and an application for an order
granting confidential treatment of the excluded material has been
made. (5)
10.17 Aircraft Lease Agreement (MSN 28662) dated as of December 12, 1996
between the Company and Boullion Aircraft Holding Company, Inc.
Portions of this Exhibit have been excluded from the publicly
available document and an order granting confidential treatment of
the excluded material has been received. (4)
10.17(a) Amendment No. 1 to Aircraft Lease Agreement (MSN 28662) dated May
20, 1997. Portions of this Exhibit have been excluded from the
publicly available document and an application for an order
granting confidential treatment of the excluded material has been
made. (5)
10.18 Aircraft Lease Agreement (MSN 28563) dated as of March 25, 1997
between the Company and General Electric Capital Corporation.
Portions of this Exhibit have been excluded from the publicly
available document and an application for an order granting
confidential treatment of the excluded material has been made. (5)
10.19 Space and Use Agreement with Continental Airlines, as amended.
Portions of this Exhibit have been excluded from the publicly
available document and an application for an order granting
confidential treatment of the excluded material has been made. (5)
10.20 Letter of Understanding with Continental Airlines dated August
16,1996. Portions of this Exhibit have been excluded from the
publicly available document and an application for an order
granting confidential treatment of the excluded material has been
made. (5)
10.21 Service Agreement between Frontier Airlines, Inc. and Greenwich Air
Services, Inc. dated May 19, 1997. Portions of this Exhibit have
been excluded from the publicly available document and an
application for an order granting confidential treatment of the
excluded material has been made. (5)
3
<PAGE>
10.22 Agreement between Frontier Airlines, Inc. and Dallas Aerospace, Inc.
dated April 17, 1997. Portions of this Exhibit have been excluded
from the publicly available document and an application for an order
granting confidential treatment of the excluded material has been
made. (5)
10.23 General Services Agreement between Frontier Airlines, Inc. and Tramco,
Inc. dated as of August 6, 1996. (5)
10.24 General Terms Engine Lease Agreement between Frontier Airlines, Inc.
and Terandon Leasing Corporation dated as of August 15, 1996, as
assigned to U.S. Bancorp Leasing and Financial on February 19, 1997.
Portions of this Exhibit have been excluded from the publicly
available document and an application for an order granting
confidential treatment of the excluded material has been made. (5)
10.25 Lease Agreement between Frontier Airlines, Inc. and Aircraft
Instrument and Radio Company, Inc. dated December 11, 1995. Portions
of this Exhibit have been excluded from the publicly available
document and an application for an order granting confidential
treatment of the excluded material has been made. (5)
10.26 Agreement and Plan of Merger between Western dated June 30, 1997. (5)
Pacific Airlines, Inc. and Frontier Airlines, Inc.
10.26(a)Agreement dated as of September 29, 1997 between Airlines, Inc. (7)
Western Pacific Airlines, Inc. and Frontier
10.27 Security Agreement with Wexford Management LLC dated December 2, 1997.
(8)
10.28 Amended and Restated Warrant Agreement with Wexford Management LLC
dated as of February 27, 1998. (10)
10.29 Amended and Restated Registration Rights Agreement with Wexford
Management LLC dated asof February 27, 1998. (10)
10.30 Securties Purchase Agreement with B III Capital Partners, L.P. dated
as of April 24, 1998. (9)
10.31 Registration Rights Agreement with B III Capital Partners, L.P. dated
as of April 24, 1998. (10)
10.32 Warrant Agreement with The Seabury Group, LLC dated as of may 26,
1998. (10)
10.33 Registration rights Agreement with The Seabury Group, LLC dated as of
May 26, 1998. (10)
23.1 Consent of KPMG Peat Marwick LLP (11)
27.1 Financial Data Schedule (10)
- ---------------------------
(1) Incorporated by reference from the Company's Registration Statement on Form
SB-2, Commission File No. 33-77790-D, declared effective May 20, 1994.
(2) Incorporated by reference from the Company's Annual Report on Form 10-KSB,
Commission File No. 0-4877, filed on June 29, 1995.
(3) Incorporated by reference from the Company's Annual Report on Form 10-KSB,
Commission File No. 0-4877, filed on June 24, 1996.
(4) Incorporated by reference from the Company's Quarterly Report on Form 10-
QSB, Commission File No. 0-4877, filed on February 13, 1997.
(5) Incorporated by reference from the Company's Annual Report on Form 10-KSB,
Commission File No. 0-24126, filed July 14, 1997.
4
<PAGE>
(6) Incorporated by reference from the Company's Report on Form 8-K filed on
March 12, 1997.
(7) Incorporated by reference from the Company's Report on Form 8-K filed on
October 1, 1997.
(8) Incorporated by reference from the Company's Report on Form 8-K filed on
December 12, 1997.
(9) Incorporated by reference from the Company's Report on Form 8-K filed on
May 4, 1998.
(10) Previously filed.
(11) Filed herewith.
ITEM 14(b): REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the quarter ended March 31, 1998.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
FRONTIER AIRLINES, INC.
Date: July 9, 1998 By: /s/ Samuel D. Addoms
---------------------
Samuel D. Addoms, Principal Executive
Officer and Principal Financial Officer
Date: July 9, 1998 By: /s/ Elissa A. Potucek
----------------------
Elissa A. Potucek, Vice President, Controller,
Treasurer and Principal Accounting Officer
<PAGE>
Independent Auditors' Report
----------------------------
THE BOARD OF DIRECTORS AND
STOCKHOLDERS
FRONTIER AIRLINES, INC.:
We have audited the accompanying balance sheets of Frontier Airlines, Inc. as of
March 31, 1998 and 1997, and the related statements of operations, stockholders'
equity, and cash flows for each of the years in the three-year period ended
March 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Frontier Airlines, Inc., as of
March 31, 1998 and 1997, and the results of its operations and its cash flows
for each of the years in the three-year period ended March 31, 1998, in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Denver, Colorado
June 16, 1998
F-1
<PAGE>
FRONTIER AIRLINES, INC.
BALANCE SHEETS
MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
MARCH 31, March 31,
1998 1997
------------- ------------
Assets
- ------
Current assets:
Cash and cash equivalents $ 3,641,395 $ 10,286,453
Restricted investments 4,000,000 2,000,000
Trade receivables, net of allowance for doubtful accounts of
$139,096 and $71,713 at March 31, 1998 and 1997 11,661,323 7,451,342
Maintenance deposits (note 3) 9,307,723 6,968,379
Prepaid expenses 3,843,694 3,449,871
Inventories 1,164,310 997,102
Deferred lease and other expenses 380,975 289,579
Note receivable - current portion - 27,288
------------ ------------
Total current assets 33,999,420 31,470,014
Security, maintenance and other deposits (note 3) 7,633,143 6,596,660
Property and equipment, net (note 2) 5,579,019 4,340,982
Note receivable - long-term portion - 31,762
Deferred lease and other expenses 780,429 918,994
Restricted investments 2,606,459 734,133
------------ ------------
$ 50,598,470 $ 44,092,545
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 13,664,750 $8,045,533
Air traffic liability 18,910,441 13,058,632
Other accrued expenses 5,157,640 3,318,043
Accrued maintenance expense (note 3) 12,537,228 8,277,115
Note payable - 9,812
Current portion of obligations under capital leases (note 3) 54,346 35,700
----------- ------------
Total current liabilities 50,324,405 32,744,835
Senior secured notes payable (note 4) 3,468,138 -
Accrued maintenance expense (note 3) 2,381,354 1,408,363
Obligations under capital leases, excluding current portion (note 3) 97,757 56,444
----------- ------------
Total liabilities 56,271,654 34,209,642
----------- -----------
Stockholders' (deficit) equity
Preferred stock, no par value, authorized 1,000,000 shares;
none issued and outstanding - -
Common stock, no par value, stated value of $.001 per share,
authorized 40,000,000 shares; 9,253,563 and 8,844,375
shares issued and outstanding at March 31, 1998 and 1997 9,253 8,844
Additional paid-in capital 37,954,584 35,764,710
Accumulated deficit (43,637,021) (25,890,651)
----------- ------------
Total stockholders' (deficit) equity (5,673,184) 9,882,903
----------- ------------
Commitments and contingencies (notes 3,6,10 and 11)
$ 50,598,470 $ 44,092,545
============ ============
See accompanying notes to financial statements.
</TABLE>
F-2
<PAGE>
FRONTIER AIRLINES, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 31, 1998, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
Revenues:
<S> <C><C> <C><C> <C><C>
Passenger $ 142,018,392 $ 113,758,027 $ 68,530,051
Cargo 3,008,919 1,956,150 1,148,357
Other 2,115,326 786,457 714,167
------------- -------------- -------------
Total revenues 147,142,637 116,500,634 70,392,575
------------- -------------- -------------
Operating expenses:
Flight operations 66,288,125 52,650,575 28,019,390
Aircraft and traffic servicing 30,684,992 24,849,388 18,486,719
Maintenance 31,790,600 24,945,636 11,732,102
Promotion and sales 29,328,970 21,526,345 14,218,814
General and administrative 6,352,977 4,617,982 3,320,700
Depreciation and amortization 1,251,364 1,072,160 547,514
------------- -------------- -------------
Total operating expenses 165,697,028 129,662,086 76,325,239
------------- -------------- -------------
Operating loss (18,554,391) (13,161,452) (5,932,664)
------------- -------------- -------------
Nonoperating income:
Interest income 722,380 1,033,508 419,756
Interest expense (324,167) (20,435) (22,671)
Other, net 409,808 (37,953) (46,103)
------------- -------------- -------------
Total nonoperating income, net 808,021 975,120 350,982
------------- -------------- -------------
Net loss $ (17,746,370) $ (12,186,332) $ (5,581,682)
============== ============== =============
Basic and diluted loss per common share $(1.95) $(1.49) $(1.23)
============== ============== =============
Weight average shares outstanding 9,095,220 8,156,302 4,536,914
============== ============== =============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
FRONTIER AIRLINES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1998, 1997 AND 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK
----------------------- ADDITIONAL TOTAL
STATED PAID-IN ACCUMULATED stockholders'
SHARES VALUE CAPITAL DEFICIT (DEFICIT) EQUITY
------------ -------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCES,
MARCH 31, 1995 3,443,300 $3,443 9,761,686 (8,122,637) 1,642,492
Contribution of common stock to
employee stock ownership plan 137,340 - 721,000 - 721,000
Issuance of compensatory
common stock options - - 60,500 - 60,500
Sale of common stock and
warrants, net of offering
costs of $1,230,000 1,840,000 1,978 7,279,532 - 7,281,510
Issuance of warrants 577,200 577,200
Net loss - - - (5,581,682) (5,581,682)
------------- --------- ---------- ----------- ----------------
BALANCES,
MARCH 31, 1996 5,420,640 5,421 18,399,918 (13,704,319) 4,701,020
Sale of common stock, net of
offering costs of $279,385 678,733 679 2,720,615 2,721,294
Exercise of common stock
warrants, net of issuance
costs of $55,518 2,666,133 2,666 13,275,145 13,277,811
Contribution of common stock
to employee stock ownership
plan 78,869 78 499,922 500,000
Issuance of warrants 869,110 869,110
Net loss (12,186,332) (12,186,332)
------------- --------- ---------- ----------- ----------------
BALANCES,
MARCH 31, 1997 8,844,375 8,844 35,764,710 (25,890,651) 9,882,903
Exercise of common stock
options 409,188 409 434,948 435,357
Warrants issued in conjunction -
with debt 1,754,926 1,754,926
Net loss (17,746,370) (17,746,370)
------------- --------- ---------- ----------- ----------------
BALANCES,
MARCH 31, 1998 9,253,563 $9,253 37,954,584 (43,637,021) (5,673,184)
============= ========= ========== =========== ================
See accompanying notes to financial statements
</TABLE>
F-4
<PAGE>
FRONTIER AIRLINES, INC.
Statements of Cash Flows
Years Ended March 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C>
Cash flows from operating activities:
Net loss $(17,746,370) $(12,186,332) $(5,581,682)
Adjustments to reconcile net loss to net cash
used by operating activities:
Employee stock ownership plan compensation expense - 500,000 721,000
Issuance of compensatory common stock options - - 60,500
Depreciation and amortization 1,749,097 1,322,916 603,014
Loss on sale of equipment 10,334 4,708 62,940
Changes in operating assets and liabilities:
Restricted investments (2,372,326) 82,458 (842,574)
Trade receivables (4,209,981) (1,579,184) (2,289,183)
Security, maintenance and other deposits (3,583,327) (1,608,524) (5,149,965)
Prepaid expenses (393,823) (562,954) (2,269,203)
Inventories (167,208) (427,926) (362,581)
Note receivable 11,740 10,950 -
Accounts payable 5,619,217 3,643,071 1,590,072
Air traffic liability 5,851,809 1,858,072 7,384,114
Other accrued expenses 1,839,597 1,323,037 (337,294)
Accrued maintenance expense 5,233,104 1,151,443 5,572,559
------------- ------------- ------------
Net cash used in operating activities (8,158,137) (6,468,265) (838,283)
------------- ------------- ------------
Cash flows used by investing activities:
Decrease (increase) in short-term investments - 1,168,200 (1,168,200)
Aircraft lease deposits 207,500 (2,682,250) (1,661,250)
Increase in restricted investments (1,500,000) (600,000) -
Capital expenditures (2,355,266) (3,434,789) (1,097,788)
Proceeds from sale of property and equipment - - 32,440
------------- ------------- ------------
Net cash used in investing activities (3,647,766) (5,548,839) (3,894,798)
------------- ------------- ------------
Cash flows from financing activities:
Net proceeds from issuance of common stock and warrants 435,357 15,999,455 7,281,510
Proceeds from sale of senior secured notes including warrants 5,000,000 - -
Cash payments for debt issuance costs (227,500)
Proceeds from short-term borrowings 202,810 95,911 101,496
Principal payments on short-term borrowings (212,622) (96,540) (91,055)
Principal payments on obligations under capital leases (37,200) (54,523) (34,357)
------------- ------------- ------------
Net cash provided by financing activities 5,160,845 15,944,303 7,257,594
------------- ------------- ------------
Net (decrease) increase in cash and cash equivalents (6,645,058) 3,927,199 2,524,513
Cash and cash equivalents, beginning of year 10,286,453 6,359,254 3,834,741
------------- ------------- ------------
Cash and cash equivalents, end of year $3,641,395 $10,286,453 $6,359,254
============= ============= ============
See accompanying notes to financial statements.
</TABLE>
F-5
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
- -------------------------------------------------------------------------------
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS AND INDUSTRY RISKS
Frontier Airlines, Inc. (the "Company") was incorporated in the State of
Colorado on February 8, 1994 and is a low-fare full service commercial
airline based in Denver, Colorado which currently serves cities on the west
and east coasts, as well as intermediate cities in relatively close
proximity to Denver. The Company commenced airline operations on July 5,
1994.
The airline industry is highly competitive primarily due to the effects of
the Airline Deregulation Act of 1978, which has substantially eliminated
government authority to regulate domestic routes and fares and has increased
the ability of airlines to compete with respect to flight frequencies and
fares. The Company's results are highly sensitive to changes in fare
levels. The Company cannot predict future fare levels, which can change
rapidly, and are subject to actions by the Company's competitors.
The airline industry is also characterized by fixed costs that are high in
relation to revenues. Accordingly, a shortfall from expected revenue levels
can have a material adverse effect on profitability and liquidity, including
those of the Company's. The Company's connecting hub is located at Denver
International Airport (DIA). DIA opened in March 1995. Financed through
revenue bonds, DIA depends on landing fees, gate rentals and other income
from airlines, the traveling public and others to pay debt service and
support operations. Management believes that the Company's operating costs
at DIA will continue to substantially exceed those that other airlines incur
at hub airports in other cities.
The airline industry is significantly affected by general economic
conditions. Because a substantial portion of business and personal airline
travel is discretionary, the industry tends to experience severe adverse
financial results during general economic downturns. The Company's business
also is seasonal, which affects the Company's results of operations from
quarter to quarter.
Fuel is a major component of operating expense for all airlines. Both the
cost and availability of fuel are subject to many economic and political
factors and events occurring throughout the world. The future cost and
availability of fuel to the Company cannot be predicted, and substantial
price increases or the unavailability of adequate fuel supplies could have a
material adverse effect on the Company's operations and profitability.
F-6
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- -------------------------------------------------------------------------------
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For financial statement purposes, the Company considers cash and short-
term investments with an original maturity of three months or less to be
cash equivalents.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Noncash Financing and Investment Activities:
During the year ended March 31, 1998, the Company issued warrants to its
lender in connection with its $5,000,000 senior secured notes with an
estimated fair market value totaling $1,645,434, and issued warrants to its
financial advisor in connection with debt and equity financing with an
estimated fair market value totaling $109,492. Also during the year ended
March 31, 1998, the Company entered into capital lease agreements totaling
$97,000, and exchanged a note receivable for certain property and equipment
totaling $47,000. In the years ended March 31, 1997 and 1996, the Company
issued warrants to aircraft lessors with an estimated fair market value
totaling $869,110 and $577,200, respectively. The unamortized portion of
deferred lease expense totaled $850,125 and $1,139,703 at March 31, 1998 and
1997. In the year ended March 31, 1996, the Company sold equipment and
accepted a promissory note in lieu of cash for $70,000.
Interest and Taxes Paid During the Year:
Cash paid for interest totaled $184,999, $20,435, and $22,671, for the years
ended March 31, 1998, 1997 and 1996, respectively. No income taxes were
paid during the years ended March 31, 1998, 1997, and 1996.
F-7
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- -------------------------------------------------------------------------------
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
RESTRICTED INVESTMENTS
Restricted investments include certificates of deposit which secure certain
letters of credit issued primarily to companies which process credit card
sale transactions, certain airport authorities and aircraft lessors.
Restricted investments are carried at cost, which management believes
approximates market value. Maturities are for one year or less and the
Company intends to hold restricted investments until maturity.
VALULATION AND QUALIFYING ACCOUNTS
The allowance for doubtful accounts was $139,096 and $72,713 at March 31,
1998 and 1997. Provisions for bad debts net of recoveries totaled $267,000,
$160,000, and $222,000 for the years ended March 31, 1998, 1997 and 1996.
Deductions from the reserve totaled $200,000, $120,000, and $190,000 for the
years ended March 31, 1998, 1997, and 1996.
INVENTORIES
Inventories consist of expendable parts, supplies and aircraft fuel and are
stated at the lower of cost or market. Inventories are accounted for on a
first-in, first-out basis and are charged to expense as they are used.
The Company has two aircraft parts agreements for the Company's 14 Boeing
737 aircraft discussed in note 3, one with another air carrier and another
with an aircraft parts supplier. The Company is required to pay a monthly
consignment fee to each of these lessors, based on the value of the
consigned parts, and to replenish any such parts when used with a like part.
At March 31, 1998 and 1997, the Company held consigned parts and supplies in
the amount of approximately $8,161,000 and $7,105,944, which are not
included in the Company's balance sheet.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Major additions, betterments
and renewals are capitalized. Depreciation and amortization is provided for
on a straight-line basis to estimated residual values over estimated
depreciable lives as follows:
Flight equipment 5-20 years
Improvements to leased aircraft Life of improvements or term of lease,
whichever is less
Ground property, equipment, and
leasehold improvements 3-5 years or term of lease
F-8
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- -------------------------------------------------------------------------------
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Assets utilized under capital leases are amortized over the lesser of
the lease term or the estimated useful life of the asset using the straight-
line method. Amortization of capital leases is included in depreciation
expense.
MAINTENANCE
Routine maintenance and repairs are charged to operations as incurred.
Under the terms of its aircraft lease agreements, the Company is required to
make monthly maintenance deposits based on usage; such deposits are applied
against the cost of major airframe maintenance checks, landing gear and
engine overhauls. These deposits are expensed in the month the usage was
incurred and a liability for accrued maintenance is established. Deposit
balances remaining at lease termination remain with the lessor and any
remaining liability for maintenance checks is reversed against the deposit
balance. Additionally, a provision is made for the estimated costs of
scheduled major overhauls required to be performed on leased aircraft and
components under the provisions of the aircraft lease agreements if the
required monthly deposit amounts are not adequate to cover the entire cost
of the scheduled maintenance. Accrued maintenance expense expected to be
incurred beyond one year is classified as long-term.
REVENUE RECOGNITION
Passenger, cargo, and other revenues are recognized when the transportation
is provided or after the tickets expire, and are net of excise taxes.
Revenues which have been deferred are included in the accompanying balance
sheet as air traffic liability.
PASSENGER TRAFFIC COMMISSIONS AND RELATED EXPENSES
Passenger traffic commissions and related expenses are expensed when the
transportation is provided and the related revenue is recognized. Passenger
traffic commissions and related expenses not yet recognized are included as
a prepaid expense.
FREQUENT FLYER AWARDS
The Company had maintained a frequent travel award program that provided
awards to program members based on accumulated segments flown, which was
discontinued effective September 11, 1996. The Company allows its
passengers to accumulate mileage on Continental Airlines' OnePass frequent
flyer program. The cost of providing mileage on the OnePass program is
based on an agreed upon rate per mileage credit, which is paid to
Continental Airlines on a monthly basis.
F-9
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- -------------------------------------------------------------------------------
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
LOSS PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share (SFAS No.
128). This statement replaces the presentation of primary earnings per
share (EPS) and fully diluted EPS with a presentation of basic EPS and
diluted EPS, respectively. Basic EPS excludes dilution and is computed by
dividing earnings (loss) available to common stockholders by the weighted-
average number of common shares outstanding for the period. Similar to
fully diluted EPS, diluted EPS reflects the potential dilution of securities
that could share in earnings. This statement has been adopted in the
accompanying financial statements.
Common stock equivalents are excluded from the computation of diluted loss
per share as their effect would have been anti-dilutive.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method
prescribed by Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. Under the asset and liability method, deferred
income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to future
years to differences between the financial statement carrying amounts and
tax bases of the existing assets and liabilities. A valuation allowance for
net deferred tax assets is provided unless realizability is judged by
management to be more likely than not. The effect on deferred taxes from a
change in tax rates is recognized in income in the period that includes the
enactment date.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the fair value of its monetary assets and liabilities
based upon existing interest rates related to such assets and liabilities
compared to current rates of interest for instruments with a similar nature
and degree of risk. The Company estimates that the carrying value of all of
its monetary assets and liabilities approximates fair value as of March 31,
1998.
F-10
<PAGE>
FRONTIER AIRLINES, INC.
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
STOCK BASED COMPENSATION
The Company follows Accounting Principles Board Opinion No. 25 Accounting
for Stock Issued to Employees ("APB 25") and related Interpretations in
accounting for its employee stock options and follows the disclosure
provisions of Statement of financial Accounting Standards No. 123 (SFAS No.
123). Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized. The Company has included the
pro forma disclosures required by SFAS No. 123 in Note 7.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company records impairment losses on long-lived assets used in
operations when indicators of impairment are present and either the
undiscounted future cash flows estimated to be generated by those assets or
the fair market value are less than the assets' carrying amount.
RECLASSFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year presentation.
(2) PROPERTY AND EQUIPMENT, NET
As of March 31, 1998 and 1997 property and equipment consisted of the
following:
1998 1997
---------- ----------
Flight equipment and improvements to leased aircraft $4,932,024 $3,251,284
Ground property, equipment and leasehold improvements 3,673,363 2,923,658
---------- ----------
8,605,387 6,174,942
Less accumulated depreciation and amortization 3,026,368 1,833,960
---------- ----------
Property and equipment, net $5,579,019 $4,340,982
========== ==========
Property and equipment includes certain office equipment under capital
leases. At March 31, 1998 and 1997, office equipment recorded under capital
leases was $280,857 and $183,698 and accumulated amortization was $113,364
and $104,479.
F-11
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(3) LEASE COMMITMENTS
AIRCRAFT LEASES
At March 31, 1998, the Company operated 14 aircraft which are accounted for
under operating lease agreements with initial terms ranging from 2 to 8
years with certain leases that allow for renewal options. Security deposits
related to leased aircraft at March 31, 1998 and 1997 totaled $4,604,750 and
$4,812,250 and are included in security, maintenance and other deposits on
the balance sheet. Letters of credits issued to certain aircraft lessors in
lieu of cash deposits and related restricted investments to secure these
letters of credits at March 31, 1998 and 1997 totaled $2,100,000 and
$1,500,000.
In addition to scheduled future minimum lease payments, the Company is
required to pay to each aircraft lessor monthly cash deposits based on
flight hours and cycles operated to provide funding for certain scheduled
maintenance costs of leased aircraft. The lease agreements provide that the
Company shall pay taxes, maintenance, insurance, and other operating
expenses applicable to the leased property. At March 31, 1998 and 1997,
aircraft maintenance deposits totaled $11,466,033 and $8,142,176 and are
reported as a component of security, maintenance and other deposits on the
balance sheet.
Any cash deposits paid to aircraft lessors for future scheduled maintenance
costs to the extent not used during the lease term remain with the lessors,
and any remaining liability for maintenance checks is reversed against the
deposit balance. Maintenance deposits are unsecured and may be subject to
the risk of loss in the event the lessors are not able to satisfy their
obligations under the lease agreements.
OTHER LEASES
The Company leases a office and hangar space, a spare engine and office
equipment for its headquarters, airport facilities, and certain ground
equipment. The Company also leases certain airport gate facilities on a
month-to-month basis.
At March 31, 1998, commitments under capital and noncancelable operating
leases (excluding maintenance deposit requirements) with terms in excess of
one year were as follows:
F-12
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(3) LEASE COMMITMENTS (CONTINUED)
Capital Operating
Leases Leases
-------- ------------
Year ended March 31:
1999 $ 69,069 $ 35,944,976
2000 43,167 32,112,675
2001 24,636 22,715,742
2002 24,636 18,688,397
2003 24,636 17,773,916
Thereafter - 32,987,326
-------- ------------
Total minimum lease payments 186,144 160,223,032
============
Less amount representing interest (34,041)
--------
Present value of obligations
under capital leases 152,103
Less current portion of
obligations under capital
leases 54,346
--------
Obligations under capital leases,
excluding current portion $ 97,757
========
The obligations under capital leases have been discounted at imputed
interest rates ranging from 10.5% to 12.2%.
Rental expense under operating leases, including month-to-month leases, for
the years ended March 31, 1998, 1997 and 1996 was $36,573,509, $25,336,749
and $12,625,175, respectively.
F-13
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(4) SENIOR SECURED NOTES
In December 1997, the Company sold $5,000,000 of 10% senior secured notes to
Wexford Management LLC ("Wexford"). The notes are due and payable in full
on December 15, 2001 with interest payable quarterly in arrears. The notes
are secured by substantially all of the assets of the company. The Wexford
agreement contains restrictions primarily related to liens on assets and
requires prior written consent for expenditures outside the ordinary course
of business. In connection with this transaction, the Company issued
Wexford warrants to purchase 1,750,000 shares of Common Stock at $3.00 per
share. The Company determined the value of the warrants to be $1,645,434
and recorded the value as equity in additional paid-in capital. The balance
of the notes will be accreted to its face value over the term of the notes
and included as interest expense. The effective interest rate on the notes
is approximately 22.5% including the value of the warrants.
(5) INCOME TAXES
The Company has not recognized any income tax benefit related to net
operating losses incurred for the years ended March 31, 1998, 1997 and 1996
because the benefit of the net operating losses were offset by an increase
in the valuation allowance for net deferred tax assets.
The differences between the Company's provision for income taxes and such
provisions (benefit) for income taxes computed at the federal statutory rate
is comprised of the items shown in the following table:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income tax benefit at the
statutory rate 34% 34% 34%
Net operating loss producing
no current benefit (34%) (34%) (34%)
----------------------------------------
- - -
========================================
</TABLE>
F-14
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(5) INCOME TAXES, CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at March 31, 1998 are presented below:
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 13,434,000 $ 7,603,000
Start-up cost deferred for tax purposes 108,000 198,000
Accrued maintenance not deductible for
tax purposes 899,000 717,000
Accrued vacation and health insurance
liability not deductible for tax purposes 527,000 395,000
Other 110,000 117,000
---------------------------------
Total gross deferred tax assets 15,078,000 9,030,000
Less valuation allowance (14,832,000) (8,934,000)
---------------------------------
246,000 96,000
---------------------------------
Deferred tax liabilities:
Equipment depreciation and amortization (246,000) (96,000)
---------------------------------
Net deferred taxes - -
=================================
</TABLE>
The valuation allowance is provided since it is uncertain that the
deferred tax assets will be realized. The Company established the valuation
allowance based principally on its historical financial results from
operations. Additionally, the utilization of these carryforwards may be
limited due to the ownership change provisions as enacted by the Tax Reform
Act of 1986 and subsequent legislation.
The valuation allowance for deferred tax assets as of March 31, 1997 was
$8,934,000. The increase in the valuation allowance for the year ended
March 31, 1998 was $5,989,000. At March 31, 1998, the Company had net
operating loss carryforwards of approximately $36,015,000, which expire in
the years 2010 to 2013.
F-15
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(6) WARRANTS
The Company issued 2,670,000 warrants to purchase common stock in
conjunction with a private placement and its initial public offering. Each
warrant entitled the warrant holder to purchase one share of common stock
for $5.00. These warrants were subject to redemption at $.05 per warrant by
the Company on 45 days written notice if certain conditions were met. The
Company met these conditions in May 1996 and on May 14, 1996, the Company
notified the warrant holders of the Company's intent to exercise its
redemption rights with respect to the warrants not exercised on or before
June 28, 1996. 2,666,133 warrants were exercised with net proceeds to the
Company totaling $13,275,000.
At completion of the Company's initial public offering in 1994, an
underwriter acquired options to purchase up to 110,000 shares of common
stock exercisable at a price equal to $5.525 per share. Additionally, the
underwriter was granted up to 110,000 warrants to purchase common stock at a
price equal to $.325 per warrant and $5.00 per share of common stock. The
underwriters in a secondary public offering by the Company in 1995 received
a warrant to purchase 168,500 shares of common stock at $5.55 per share.
The options and warrants issued to underwriters in connection with the
initial and secondary public offerings expire, respectively, on May 20, 1999
and September 18, 2000.
In October 1995, the Company issued to each of two of its Boeing 737-300
aircraft lessors a warrant to purchase 100,000 shares of Common Stock for an
aggregate purchase price of $500,000. In June 1996, the Company issued two
warrants to a Boeing 737-200 lessor, each warrant entitling the lessor to
purchase 70,000 shares of common stock at an aggregate exercise price of
$503,300 per warrant. In connection with a Boeing 737-300 aircraft to be
delivered in August 1997, the Company has issued to the lessor a warrant to
purchase 55,000 shares of Common Stock at an aggregate purchase price of
$385,000. Warrants issued to aircraft lessors, to the extent not earlier
exercised, expire upon expiration of the aircraft leases in March 2000, May
and June 2001, and September 2005.
In February 1998, in connection with the $5,000,000 senior notes as
discussed in note 4, the Company issued a warrant to the lender to purchase
1,750,000 shares of the Company's Common Stock at a purchase price of $3.00
per share, which warrant expires in December 2001. In May 1998, the Company
issued a warrant to its financial advisor, in connection with debt and
equity financings, a warrant to purchase 548,000 shares of the Company's
Common Stock at a purchase price of $3.00 per share, which warrant expires
in May 2003. Of the 548,000 shares, 116,450 were recognized as of March 31,
1998 as part of the sale of the senior secured notes discussed in note 4.
The Company recorded a value of $109,492 for these shares and recorded the
value as equity in additional paid in capital and deferred loan expenses.
The value will be amortized over the life of the notes.
F-16
<PAGE>
FRONTIER AIRLINES, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
- --------------------------------------------------------------------------------
(7) STOCK OPTION PLAN
The Company has a stock option plan whereby the Board of Directors or its
Compensation Committee may issue options to purchase shares of the
Company's common stock to employees, officers, and directors of the
Company.
Under the plan, the Company has reserved an aggregate of 2,250,000 shares
of common stock for issuance pursuant to the exercise of options. With
certain exceptions, options issued through March 31, 1998 generally vest
one year from the date of grant and expire from March 9, 1999 to December
11, 2007. At March 31, 1998, 308,750 options are available for grant under
the plan.
A summary of the Plan's stock option activity and related information for
the years ended March 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of year 1,911,250 $1.85 1,731,250 $1.27 1,631,250 $1.17
Granted 30,000 2.77 180,000 7.40 100,000 3.07
Exercised (409,188) 1.06
Surrendered (180,000) 7.40
Re-issued 180,000 3.00
------------------------------------------------------------------------
1,532,062 $1.56 1,911,250 $1.85 1,731,250 $1.27
========================================================================
Exercisable at end of year 1,445,394 $1.48 1,761,250 $1.39 1,671,250 $1.20
</TABLE>
Exercise prices for options outstanding under the plan as of March 31, 1998
ranged from $1.00 to $3.75 per option share. The weighted-average remaining
contractual life of those options is 5.6 years. A summary of the
outstanding and exercisable options at March 31, 1998, segregated by
exercise price ranges, is as follows:
<TABLE>
<CAPTION>
Weighted-
Average
Weighted- Remaining Weighted-
Exercise Price Options Average Contractual Exercisable Average
Range Outstanding Exercise Price Life (in years) Options Exercise Price
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.00 - $ 2.75 1,200,812 $1.11 5.0 1,200,812 $1.11
$3.00 - $ 3.75 331,250 3.19 7.8 244,582 3.26
-----------------------------------------------------------------------------
1,532,062 $1.56 5.6 1,445,394 $1.48
=============================================================================
</TABLE>
F-17
<PAGE>
FRONTIER AIRLINES, INC.
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
(7) STOCK OPTION PLAN, CONTINUED
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to March 31, 1995 under the fair value method of that
Statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1998, 1997 and 1996, respectively: risk-
free interest rates of 6.42%, 6.55% and 6.08%, dividend yields of 0%, 0%
and 0%; volatility factors of the expected market price of the Company's
common stock of 64.33%, 58.78% and 60.86%, and a weighted-average expected
life of the options of 7 years for each year.
The Company applies APB Opinion 25 and related Interpretations in accounting
for its plans. Accordingly, no compensation cost is recognized for options
granted at a price equal to the fair market value of the common stock. Had
compensation cost for the Company's stock-based compensation plan been
determined using the fair value of the options at the grant date, the
Company's net loss for the years ended March 31, 1998, 1997 and 1996, would
have been $17,843,000, $12,367,000 and $5,628,000, and loss per common share
would have been $1.96, $1.52 and $1.24 per share.
(8) EMPLOYEE STOCK OWNERSHIP PLAN
The Company has established an Employee Stock Ownership Plan (ESOP) which
inures to the benefit of each permanent employee of the Company, except
those employees covered by a collective bargaining agreement that does not
provide for participation in the ESOP. Company contributions to the ESOP
are discretionary and vary from year to year. In order for an employee to
receive an allocation of company common stock from the ESOP, the employee
must be employed on the last day of the ESOP's plan year, with certain
exceptions. The Company's annual contribution to the ESOP, if any, will be
allocated among the eligible employees of the Company as of the end of each
plan year in proportion to the relative compensation (as defined in the
ESOP) earned that plan year by each of the eligible employees. The ESOP
does not provide for contributions by participating employees. Employees
will vest in contributions made to the ESOP based upon their years of
service with the Company. A year of service is an ESOP plan year during
which an employee has at least 1,000 hours of service. Vesting generally
occurs at the rate of 20% per year, beginning after the first year of
service, so that a participating employee will be fully vested after five
years of service. Distributions from the ESOP will not be made to employees
during employment. However, upon termination of employment with the
Company, each employee will be entitled to receive the vested portion of his
or her account balance.
F-18
<PAGE>
FRONTIER AIRLINES, INC.
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
(8) EMPLOYEE STOCK OWNERSHIP PLAN, CONTINUED
The initial Company contribution to the ESOP was made on June 22, 1995 and
consisted of 137,340 shares of Common Stock, of which 27,468 shares relate
to the plan year ended March 31, 1995 and 109,872 shares relate to the
period from April 1, 1995 to December 31, 1995. During the years ended
March 31, 1997, the Company contributed 78,869 shares to the plan and none
during the year ended March 31, 1998. The Company recognized compensation
expense during the year ended March 31, 1997 and 1996 of $500,000 and
$721,000 related to its contribution to the ESOP and none during the year
ended March 31, 1998.
(9) CONCENTRATION OF CREDIT RISK
The Company does not believe it is subject to any significant concentration
of credit risk relating to trade receivables. At March 31, 1998 and 1997,
60% and 75% of the Company's trade receivables relate to tickets sold to
individual passengers through the use of major credit cards, travel
agencies approved by the Airlines Reporting Corporation, tickets sold by
other airlines and used by passengers on Company flights, or the United
States Postal Service. These receivables are short-term, generally being
settled shortly after sale or in the month following ticket usage.
(10) CONTINGENCIES
The Company is party to legal proceedings and claims which arise during the
ordinary course of business. In the opinion of management, the ultimate
outcome of these matters will not have a material adverse effect upon the
Company's financial position or results of operations.
(11) SUBSEQUENT EVENTS
In April 1998, the Company sold 4,363,001 shares of its common stock, no
par value, through a private placement to an institutional investor. Gross
proceeds to the Company from the transaction was $14,179,753, of which the
Company received net proceeds of approximately $13,850,000. The Company
issued a warrant to this investor to purchase 716,929 shares of common
stock of the Company at a purchase price of $3.75 per share, which warrant
expires in April 2002.
F-19
<PAGE>
EXHIBIT 23.1
------------
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
THE BOARD OF DIRECTORS
FRONTIER AIRLINES, INC.:
We consent to the incorporation herein by reference in the registration
statements Nos. 333-13333 and 333-31389 on Form S-8 and No. 333-07699 on Form
S-3 of Frontier Airlines, Inc. of our report dated June 16, 1998, relating to
the balance sheets of Frontier Airlines, Inc. as of March 31, 1998 and 1997, and
the related statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended March 31, 1998, which report
appears in the March 31, 1998 annual report on Form 10-K/A of Frontier Airlines,
Inc.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
July 9, 1998
