<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Second Quarter Ended Commission File Number
June 30, 1996 33-92752
IN-FLIGHT PHONE CORPORATION
One Tower Lane
Oakbrook Terrace, IL 60181
(708) 573-2660
Delaware 36-3733319
------------------------ -------------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
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
----- -----
At June 30, 1996, Registrant had outstanding 2,339,754 shares of $0.01 par
value common stock.
<PAGE> 2
IN-FLIGHT PHONE CORPORATION
(A Subsidiary of IFP Holdings, Inc.)
INDEX TO FORM 10-Q
Page No.
COVER 1
INDEX 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of 3
June 30, 1996 and December 31, 1995
Condensed Consolidated Statements of Operations for the 4
three months and six months ended June 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows for the 5
six months ended June 30, 1996 and 1995
Condensed Consolidated Statement of Changes in
Stockholder's Deficit 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
EXHIBIT INDEX 16
FINANCIAL DATA SCHEDULE 19
<PAGE> 3
IN-FLIGHT PHONE CORPORATION
(A Subsidiary of IFP Holdings, Inc.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands except share data)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 24,183 $ 47,918
Short-term investments at fair value 9,000 28,123
Other current assets 374 103
--------- ---------
Total current assets 33,557 76,144
--------- ---------
Fixed assets 107,915 104,511
Other noncurrent assets 10,099 19,245
--------- ---------
Total assets $ 151,571 $ 199,900
========= =========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Accounts payable and accrued liabilities $ 23,002 $ 32,746
Notes payable and lease obligations-current portions 2,344 1,684
--------- ---------
Total current liabilities 25,346 34,430
--------- ---------
Senior discount notes 206,503 191,591
Notes payable-related parties 24,964 24,964
Interest payable-related parties 5,311 3,118
Other long-term liabilities 4,726 6,058
--------- ---------
Total long-term liabilities 241,504 225,731
--------- ---------
Exchangeable, mandatorily redeemable preferred stock 41,128 37,434
Warrants 27,387 27,387
Stockholder's deficit:
Common stock and paid in capital, $.01 par value,
10,000,000 shares authorized;
2,339,754 shares issued and outstanding at
June 30, 1996 and December 31, 1995 155,911 159,604
Accumulated deficit (339,833) (285,080)
Unrealized gain on investments 128 394
--------- ---------
Total stockholder's deficit (183,794) (125,082)
--------- ---------
Total liabilities and stockholder's deficit $ 151,571 $ 199,900
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 4
IN-FLIGHT PHONE CORPORATION
(A Subsidiary of IFP Holdings, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES
FlightLink system revenue 1,562 834 $ 3,012 $ 1,279
Other revenue 66 74 66 74
-------- -------- -------- --------
1,628 908 3,078 1,353
-------- -------- -------- --------
EXPENSES
Direct operating costs 1,931 1,216 3,890 2,156
Cost of equipment sold - 47 - 47
Research and development 1,846 1,205 2,674 2,339
Selling, general and administrative 11,730 6,399 24,910 11,911
Depreciation and amortization 5,668 4,379 9,390 7,345
-------- -------- -------- --------
21,175 13,246 40,864 23,798
-------- -------- -------- --------
Loss from operations (19,547) (12,338) (37,786) (22,445)
Interest expense (9,514) (7,281) (18,427) (9,235)
Interest income 659 1,236 1,460 1,281
-------- -------- -------- --------
Loss before income taxes (28,402) (18,383) (54,753) (30,399)
Income taxes - - - -
-------- -------- -------- --------
Net (loss) before extraordinary item (28,402) (18,383) (54,753) (30,399)
Extraordinary item - (5,090) - (5,090)
-------- -------- -------- --------
Net loss $(28,402) $(23,473) $(54,753) $(35,489)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 5
IN-FLIGHT PHONE CORPORATION
(A Subsidiary of IFP Holdings, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands except share data)
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows used for operating activities:
Net loss $(54,753) $ (35,489)
Extraordinary loss 5,090
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 9,390 7,345
Amortization of financing fees and discounts 15,935 5,876
Employee stock option plan expense - 762
Reserve for accounts receivable-affiliate 1,036
Write-off of fixed assets 4,407 -
Change in assets and liabilities:
Other current assets (271) (711)
Inventory - (3)
Other noncurrent assets 6,000 -
Accounts payable and accrued liabilities (9,731) 2,819
Accounts payable-affiliate - (574)
Interest payable 2,188 179
Other long-term liabilities 101 140
Other-net 329 563
-------- ---------
Net cash used for operating activities (26,405) (12,967)
-------- ---------
Cash flows provided by (used for) investing activities:
Purchase of short term investments (32,435) (62,235)
Proceeds from maturity and sale of short term
investments 50,956 -
Other noncurrent assets 2,081 (9,734)
Additions to fixed assets (17,159) (48,202)
-------- ---------
Net cash provided (used) by investing activities 3,443 (120,171)
-------- ---------
Cash flows provided by (used for) financing activities:
Advances from (repayment to) parent - (3,114)
Proceeds from issuance of debt - 190,001
Deferred financing fees - (9,430)
Repayment of debt - (1,000)
Repayments to related parties - (3,471)
Repayments under capital leases (773) (1,088)
Proceeds from issuance of exchangeable preferred stock 40,000
-------- ---------
Net cash provided (used) by financing activities (773) 211,898
-------- ---------
Net decrease in cash and cash equivalents (23,735) 78,760
Cash and cash equivalents at beginning of period 47,918 5,711
-------- ---------
Cash and cash equivalents at end of period $ 24,183 $ 84,471
======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 6
IN-FLIGHT PHONE CORPORATION
(A Subsidiary of IFP Holdings, Inc.)
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S DEFICIT
(amounts in thousands except share data)
<TABLE>
<CAPTION>
Common Stock
-------------------
Number Accumulated Unrealized Gain Stockholder's
of Shares Amount Deficit (Loss) on Investments Deficit
--------- -------- ----------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 2,339,754 $159,604 $(285,080) $394 $(125,082)
Dividends and accretion of exchangeable
mandatorily redeemable preferred
stock (unaudited) (3,693) (3,693)
Condensed consolidated net loss for
six months ended June 30, 1996 (unaudited) (54,753) (54,753)
Unrealized loss on investments (unaudited) (266) (266)
--------- -------- --------- ---- ---------
Condensed consolidated
balance at June 30, 1996 (unaudited) 2,339,754 $155,911 $(339,833) $128 $(183,794)
========= ======== ========= ==== =========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 7
IN-FLIGHT PHONE CORPORATION
(A Subsidiary of IFP Holdings, Inc.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, all normal recurring adjustments necessary
for a fair presentation of the results for the unaudited interim periods
have been included in the accompanying condensed consolidated financial
statements. These condensed consolidated financial statements should be
read in conjunction with the Company's financial statements and notes
thereto for the year ended December 31, 1995. The condensed
consolidated financial statements have been prepared assuming the Company
will continue as a going concern. See discussion under "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
2. Fixed assets at June 30, 1996 and December 31, 1995 were as follows:
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(unaudited)
(in thousands)
<S> <C> <C>
FlightLink system $ 71,165 $ 50,685
Equipment held for installation 64,683 76,124
Assets under capital lease 4,803 4,994
Furniture, fixtures, equipment
and leasehold improvements 6,848 3,976
-------- --------
147,499 135,779
Less accumulated depreciation (39,584) (31,268)
-------- --------
$107,915 $104,511
======== ========
</TABLE>
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The financial statements of the Company as of December 31, 1995 have
been audited by the Company's independent public accountants. The financial
data as of and for the three and six months ended June 30, 1996 and June 30,
1995, as presented herein, have been prepared by management and are unaudited.
This unaudited data reflects all adjustments, consisting primarily of normal
recurring adjustments, which, in the opinion of management, are necessary to
present fairly the financial position, results of operations and cash flows of
the Company for the periods then ended. These interim statements are condensed
and do not include all the information required by generally accepted
accounting principles in a full set of financial statements. These interim
statements should be read in conjunction with the Company's audited financial
statements for the year ended December 31, 1995 and the notes thereto.
The results of operations for the three and six months ended June 30,
1996 are not necessarily indicative of the results to be expected for the full
year.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995 the Company had an excess of current assets over
current liabilities of $41.7 million, including cash of $47.9 million and
short-term investments of $28.1 million. In the second quarter of 1996, the
Company completed the installation of the FlightLink system on 55 aircraft
bringing the total of aircraft installed with the FlightLink system to 170. The
Company incurred a net loss for the six month period ended June 30, 1996 of
$54.8 million compared to a net loss of $35.5 million for the same period in
1995. At June 30, 1996, the Company had an excess of current assets over
current liabilities of $8.2 million, including cash of $24.2 million and
short-term investments of $9.0 million. At August 13, 1996, the Company had
$23.1 million in cash and short-term investments. In addition, at August 1,
1996 the Company has open purchase order commitments in excess of $20.0
million and accrued cancellation fees to vendors resulting primarily from the
cancellation of the USAir contract of approximately $5.0 million.
Subject to obtaining sufficient additional financing, the Company
plans to complete substantially all installations of the basic FlightLink
system on aircraft subject to existing contracts during 1996 and 1997. The
Company has experienced significant delays in installations of the aircraft
remaining under contract. Original aircraft installation schedules have not
been met for a number of reasons including aircraft not being made available by
the Company's airline customers on scheduled dates, delays by the Company's
suppliers in providing components, and revised and unanticipated maintenance
programs and campaigns by airline customers which result in the delay of
delivery of aircraft. There can be no assurance that such delays will not
continue to occur. Additionally, under certain airline agreements, the Company
has committed to maintaining technological competitiveness of the FlightLink
system, including installation of live television capability during 1997, the
technology for which is currently in development. These commitments will
require significant capital expenditures.
Although the Company continues to meet its contractual reliability
requirements, the Company continues to experience problems associated with the
reliability of the FlightLink system. As a result, the Company has incurred
unanticipated costs for additional research and development necessary to
improve the design and integration of its on-board systems. Further, to keep
the FlightLink system in compliance with contractual requirements, the Company
has
<PAGE> 9
been required to expend considerable resources on increased on-going
maintenance and for the implementation of system improvements into the existing
installed fleet. Since March 31, 1996 the Company has implemented improvements
including a new ground network system including ISDN and call hand off
capability, and has begun installing five watt amplification capability and
upgraded cabin server units in contracted aircraft. These system improvements
have and continue to require post implementation adjustments such that the
FlightLink system has not yet realized their full benefit. Further, the cost
of the installation of the FlightLink system on contracted aircraft has
exceeded the amount previously estimated in the business model by approximately
10%.
Passenger utilization of the FlightLink system has not increased to the
usage levels anticipated by management. The Company is addressing the system
utilization issue with a variety of actions including alternative pricing
structures and various marketing initiatives. The Company believes that these
initiatives and system improvements, when fully implemented, will have a
positive effect on system utilization.
Based on the above, management believes that the Company will not have
sufficient cash resources to meet its existing capital expenditure requirements
or to meet the obligations of the Company's Senior Discount Notes due in the
year 2002, (the "Senior Discount Notes") and will, therefore, require
additional financing. The Company is developing a plan for acquiring such
additional financing and there can be no assurance that additional financing
will be available or that it will be available on terms acceptable to the
Company. In addition, the Indenture relating to the Senior Discount Notes (the
"Indenture") restricts the amount of additional indebtedness which the Company
may incur.
RESULTS OF OPERATIONS
For the three months ended June 30, 1996, the Company incurred a loss
of approximately $28.4 million, which was approximately $4.9 million higher
than the loss for the corresponding period in 1995.
Three Months Ended June 30, 1996 and Three Months Ended June 30, 1995
Revenues
Revenues increased to $1.6 million in the second quarter of 1996 from
$.9 million for the same period in 1995. At June 30, 1996, the Company had
installed 170 aircraft with the FlightLink system compared to 149 aircraft at
June 30, 1995. In addition, part of the $.7 million increase is due to higher
telephone revenues from the implementation of a user set up fee and higher per
minute charges, partially offset by lower usage per aircraft. The remainder of
the increase is due to increased pricing for games, partially offset by lower
game usage, and higher revenue from other service.
Direct Operating Costs
Direct operating expenses increased by $.6 million from $1.3 million to
$1.9 million and is attributable to the increase in guaranteed airline
commissions.
Research and Development Expense
Research and development expenses increased by $0.6 million to $1.8
million due to the increased expense associated with the development of live
television.
<PAGE> 10
Selling, General and Administrative Expense
Selling, general and administrative expense increased to $11.7 million
from $6.4 million for the same period in 1995. This increase was primarily due
to revised estimates for asset write-offs, higher consultant and outside labor
expenses, increased professional fees, and an increase in salary expense to
support the higher levels of head count.
Depreciation and Amortization
Depreciation and amortization expense increased to $5.7 million from
$4.4 million for the same period in 1995. This increase of $1.3 million
resulted from the higher cost of the installed FlightLink equipment, increase
in ground system assets and increase in capital assets to support the Company's
infrastructure.
Net Interest Expense
Net interest expense increased to $8.9 million from $6.0 million for
the same period in 1995. The increase was primarily the result of the non-cash
interest on the Company's Senior Discount Notes.
Extraordinary Loss
In April 1995, the Company incurred an extraordinary loss of $5.1
million relating to the extinguishment of debt in connection with the
financial restructuring preceding the issuance of the Senior Discount Notes.
Income Tax
The Company has not recorded a provision for income taxes since
inception due to the net losses incurred. The Company has substantial net
operating loss carryovers and expects to incur additional losses. While
utilization of such losses on a carryover basis will be limited to the extent
that the Company undergoes one or more ownership changes, the occurrence and
timing of such changes may be subject to factual and legal uncertainties. No
net deferred tax asset has been recorded due to the uncertainties associated
with the realization of the Company's deferred tax assets.
Net Loss
For the three months ended June 30, 1996, the Company incurred a loss
of approximately $28.4 million, which was approximately $4.9 million higher
than the loss for the corresponding period in 1995. This increase was
attributable to the low level of revenues in relation to the Company's
operating expenses, the increase in the estimate for asset write-offs, and
higher net interest.
Six Months Ended June 30, 1996 and Six Months Ended June 30, 1995
Revenues
Revenues increased to $3.0 million during the first six months of 1996
from $1.3 million for the same period in 1995. At June 30, 1996, the Company
had installed 170 aircraft with the FlightLink system compared to 149 aircraft
at June 30, 1995. In addition, part of the $1.7 million increase is due to
higher telephone revenues from the implementation of a user set up fee and
higher per minute charges, partially offset by lower usage rates per aircraft.
The remainder of the increase is due to higher pricing for games, as
promotional pricing for games was terminated June 30, 1995, partially offset
by lower game usage, and higher revenue from other service.
Direct Operating Costs
Direct operating expenses increased by $1.7 million from $2.2 million
to $3.9 million attributable to the increase in guaranteed commissions and
higher costs related to call hand-off.
<PAGE> 11
Research and Development Expense
Research and development expenses increased by $0.3 million to $2.7
million due to the increased expense associated with live television, partially
offset by the completion and implementation of call hand-off.
Selling, General and Administrative Expense
Selling, general and administrative expense increased to $24.9 million
from $11.9 million for the same period in 1995. This increase was primarily due
to revised estimates for asset write-offs, higher consultant and outside labor
expenses, increased professional fees, and increase in salary expense to
support the higher levels of head count.
Depreciation and Amortization
Depreciation and amortization expense increased to $9.4 million from
$7.3 million for the same period in 1995. This increase of $2.1 million
resulted from the higher cost of the installed FlightLink equipment, increase
in ground system installations and increase in capital assets to support the
Company's infrastructure.
Net Interest Expense
Net interest expense increased to $17.0 million from $8.0 million for
the same period in 1995. The increase was primarily the result of the non-cash
interest on the Senior Discount Notes.
Income Tax
The Company has not recorded a provision for income taxes since
inception due to the net losses incurred. The Company has substantial net
operating loss carryovers and expects to incur additional losses. While
utilization of such losses on a carryover basis will be limited to the extent
that the Company undergoes one or more ownership changes, the occurrence and
timing of such changes may be subject to factual and legal uncertainties. No
net deferred tax asset has been recorded due to the uncertainties associated
with the realization of the Company's deferred tax assets.
Net Loss
For the six months ended June 30, 1996, the Company incurred a loss of
approximately $54.8 million, which was approximately $19.3 million higher than
the loss for the corresponding period in 1995. This increase was attributable
to the low level of revenues in relation to the Company's operating expenses,
the increase in the estimate for asset write-offs, and higher net interest
expense.
Impairment of Assets
In 1995, the Financial Accounting Standards Board ("FASB") issued
Statement on Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Measurement of any impairment loss for
long-lived assets that an entity expects to hold and use should be based on the
fair value of the assets.
<PAGE> 12
Based on current estimates, the Company believes that it will recover the
carrying amount of its fixed assets from future operations. However, given the
difficulties with the Company's airline customers and its brief operating
history, the Company may not meet its anticipated installation schedules and
levels of revenue, expense and capital expenditures. Consequently, the
Company's estimate that it will recover the carrying amount of its fixed assets
from future operations may change in the near term and as a result the carrying
value of the fixed assets could be reduced materially.
<PAGE> 13
PART II.
ITEM 1. - LEGAL PROCEEDINGS
On December 6, 1995, the Company commenced litigation against USAir for
wrongful termination of the USAir Agreement. The complaint was filed in the
Circuit Court of Cook County, Illinois, and seeks declaratory and injunctive
relief, or damages for breach of contract in excess of $186 million. The
complaint alleges that USAir breached its obligations under the USAir Agreement
by failing and refusing to cooperate with the Company during the 30-day period
to cure defaults under the USAir Agreement and by defeating the Company's right
to a cure period. On December 7, 1995, the Company sought a restraining order,
enjoining USAir from acting to effect a termination of the USAir Agreement
before the Company had been given the opportunity to cure. This motion was
denied. On December 14, 1995, the Company's motion for a preliminary
injunction, seeking similar injunction relief, was also denied. USAir answered
the complaint on December 13, 1995, generally denying the allegations in the
complaint. No counterclaims were asserted against the Company in the answer.
On January 12, 1996, the court ordered that the litigation be transferred from
the Chancery Division to the Law Division, and on March 15, 1996 the case was
placed on the commercial calendar.
On June 6, 1996 USAir filed a counterclaim against the Company claiming
damages in excess of $25 million and seeking additional punitive damages in
excess of an additional $25 million. The Company disputes USAir's claims. On
July 3 USAir filed a motion for summary judgement. No court date has been set
and the litigation remains pending.
<PAGE> 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) The Exhibits listed in the "Exhibit Index" are filed as a part of
this report.
b) Reports on Form 8-K.
No reports on Form 8-K were filed during the period covered by
this Form 10-Q.
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IN-FLIGHT PHONE CORPORATION
Date: August 14, 1996 By: ________________________________
Michael K. Nissenbaum
Chief Financial Officer
Vice President - Finance & Administration
Secretary & Treasurer
Duly Authorized Officer and
Principal Financial Officer.
<PAGE> 16
EXHIBIT INDEX
DESIGNATION DESCRIPTION
3.1 Amended and Restated Certificate of Incorporation of the
Registrant, as filed May 15, 1995 (incorporated by reference to
Exhibit 3.1 to Amendment No. 3 to the Company's Registration Statement
on Form S-4 dated November 13, 1995, file number 33-92752).
3.2 By-Laws of the Registrant (incorporated by reference to Exhibit
3.2 to Amendment No. 3 to the Company's Registration Statement on Form
S-4 dated November 13, 1995, file number 33-92752).
4.1 Indenture, dated as of May 9, 1995, between the Registrant and
Marine Midland Bank, as Trustee (incorporated by reference to Exhibit
4.1 to Amendment No. 3 to the Company's Registration Statement on Form
S-4 dated November 13, 1995, file number 33-92752).
4.2 Warrant Agreement, dated as of May 9, 1995, between the
Registrant and Marine Midland Bank, as Warrant Agent (incorporated by
reference to Exhibit 4.2 to Amendment No. 3 to the Company's
Registration Statement on Form S-4 dated November 13, 1995, file
number 33-92752).
4.3 Unit Agreement, dated as of May 9, 1995, between the Registrant
and Marine Midland Bank, as Unit Agent (incorporated by reference to
Exhibit 4.3 to Amendment No. 3 to the Company's Registration Statement
on Form S-4 dated November 13, 1995, file number 33-92752).
4.4 Warrant Agreement, dated May 9, 1995, between the Registrant and
MCI (incorporated by reference to Exhibit 10.8 to Amendment No. 3 to
the Company's Registration Statement on Form S-4 dated November 13,
1995, file number 33-92752).
4.5 Form of 14% Series B Senior Discount Notes due 2002 of the
Registrant (incorporated by reference to Exhibit 4.5 to Amendment No.
3 to the Company's Registration Statement on Form S-4 dated November
13, 1995, file number 33-92752).
4.6 Warrant Agreement, dated as of April 4, 1995 between the
Registrant and IFPC Funding, Inc. (incorporated by reference to
Exhibit 4.3 of Form S-1 dated May 1, 1996, file number 333-4292).
10.1 Telephone and interactive Data Services System Agreement, dated
March 6, 1993, between the Registrant and USAir, Inc. (incorporated by
reference to Exhibit 10.1 to Amendment No. 3 to the Company's
Registration Statement on Form S-4 dated November 13, 1995, file number
33-92752).
10.2 Telephone System Agreement, dated June 7, 1994, between the
Registrant and Continental Airlines, Inc. ("Continental"), as amended
(incorporated by reference to Exhibit 10.2 to Amendment No. 3 to the
Company's Registration Statement on Form S-4 dated November 13, 1995,
file number 33-92752).
10.21 Letter Agreement, dated March 29, 1995 between the Registrant and
Continental amending the terms of the Telephone System Agreement, dated
June 7, 1994, between the Registrant and Continental (incorporated by
reference to exhibit 10.2 of Form S-1 dated May 1, 1996, file number
333-4292).
10.22 Letter Agreement, dated April 5, 1996 between the Registrant and
Continental amending the terms of the Telephone System Agreement, dated
June 7, 1994 between the Registrant and Continental (incorporated by
reference to exhibit 10.2 of Form S-1 dated May 1, 1996, file number
333-4292).
10.3 Standby Operating Agreement, dated June 7, 1994, among Continental,
MCI Telecommunications Corporation ("MCI") and the Registrant (the
"Standby Operating Agreement") (incorporated by reference to Exhibit
10.3 to Amendment No. 3 to the Company's Registration Statement on Form
S-4 dated November 13, 1995, file number 33-92752).
10.4 Financial Guaranty, dated June 7, 1994, between MCI and Continental
(the "Financial Guaranty") (incorporated by reference to Exhibit 10.4
to Amendment No. 3 to the Company's Registration Statement on Form S-4
dated November 13, 1995, file number 33-92752).
<PAGE> 17
DESIGNATION DESCRIPTION
10.5 Agreement as to compensation under the Standby Operating Agreement
dated June 7, 1994 between the Registrant and MCI (incorporated by
reference to Exhibit 10.5 to Amendment No. 3 to the Company's
Registration Statement on Form S-4 dated November 13, 1995, file number
33-92752).
10.6 Agreement concerning payments under the MCI Financial Guaranty,
dated June 7, 1994 among the Registrant, Holdings, and MCI
(incorporated by reference to Exhibit 10.6 to Amendment No. 3 to the
Company's Registration Statement on Form S-4 dated November 13, 1995,
file number 33-92752).
10.7 Air-to-Ground Telecommunications Agreement, dated November 24,
1993, between the Registrant and America West Air Lines, Inc.
(incorporated by reference to Exhibit 10.7 to Amendment No. 3 to the
Company's Registration Statement on Form S-4 dated November 13, 1995,
file number 33-92752).
10.71 Agreement dated November 2, 1995 among the Registrant, America West
Air Lines, Inc. and MCI Telecommunications Corporation (incorporated by
reference to Exhibit 10.71 to Amendment No. 3 to the Company's
Registration Statement on Form S-4 dated November 13, 1995, file number
33-92752).
10.8 Subordinated Notes Due July 1, 2003 issued by the Registrant to
John Hancock Mutual Life Insurance Company ("Hancock") in the aggregate
principal amount of $18,780,753.39 (incorporated by reference to
Exhibit 10.9 to Amendment No. 3 to the Company's Registration Statement
on Form S-4 dated November 13, 1995, file number 33-92752).
10.9 Subordinated Note Due July 1, 2003 issued by the Registrant to the
State Treasurer of the State of Michigan, Custodian of the Michigan
Public School Employees' Retirement System, State Employees' Retirement
System and Michigan Judges Retirement System in the principal amount of
$6,182,684.57 (incorporated by reference to Exhibit 10.10 to Amendment
No. 3 to the Company's Registration Statement on Form S-4 dated
November 13, 1995, file number 33-92752).
10.10 Shareholders Agreement, dated April 4, 1995, among MCI, Hancock and
Dearborn Financial Inc., and certain of its affiliates (incorporated by
reference to Exhibit 10.11 to Amendment No. 3 to the Company's
Registration Statement on Form S-4 dated November 13, 1995, file number
33-92752).
10.11 Tax Sharing Agreement, dated April 4, 1995, between the Registrant
and Holdings (incorporated by reference to Exhibit 10.12 to Amendment
No. 3 to the Company's Registration Statement on Form S-4 dated November
13, 1995, file number 33-92752).
10.12 Employment Agreement among the Registrant, Holdings and Phil Bakes
(incorporated by reference to Exhibit 10.13 to Amendment No. 3 to the
Company's Registration Statement on Form S-4 dated November 13, 1995,
file number 33-92752).
10.13 Employment Agreement between the Registrant and Neal F. Meehan
(incorporated by reference to Exhibit 10.14 to Amendment No. 3 to the
Company's Registration Statement on Form S-4 dated November 13, 1995,
file number 33-92752).
10.14 Consulting Agreement among the Registrant, Holdings and Sojourn
Enterprises, Inc. (incorporated by reference to Exhibit 10.15 to
Amendment No. 3 to the Company's Registration Statement on Form S-4
dated November 13, 1995, file number 33-92752).
10.15 Registrant's 1995 Bonus Plan (incorporated by reference to Exhibit
10.16 to Amendment No. 3 to the Company's Registration Statement on Form
S-4 dated November 13, 1995, file number 33-92752).
10.16 Holdings' 1995 Stock Option Plan (incorporated by reference to
Exhibit 10.17 to Amendment No. 3 to the Company's Registration Statement
on Form S-4 dated November 13, 1995, file number 33-92752).
10.17 Employment Agreement between the Registrant and Edward F. Upton
(incorporated by reference to Exhibit 10.18 to Amendment No. 3 to the
Company's Registration Statement on Form S-4 dated November 13, 1995,
file number 33-92752).
10.18 Employment Agreement between the Registrant and Michael K.
Nissenbaum (incorporated by reference to Exhibit 10.19 to Amendment No.
3 to the Company's Registration Statement on Form S-4 dated November 13,
1995, file number 33-92752).
<PAGE> 18
DESIGNATION DESCRIPTION
10.19 Employment Agreement between the Registrant and Anand B. Malani
(incorporated by reference to Exhibit 10.20 to Amendment No. 3 to the
Company's Registration Statement on Form S-4 dated November 13, 1995,
file number 33-92752).
23.1 Consent of Rogers & Wells (contained in opinion filed as Exhibit
5.1) (incorporated by reference to Exhibit 23.1 to Amendment No. 3 to
the Company's Registration Statement on Form S-4 dated November 13,
1995, file number 33-92752).
23.2 Consent of Price Waterhouse LLP (incorporated by reference to
Exhibit 23.2 to Amendment No. 3 to the Company's Registration Statement
on Form S-4 dated November 13, 1995, file number 33-92752).
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 24,183
<SECURITIES> 9,000
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<CURRENT-ASSETS> 33,557
<PP&E> 147,499
<DEPRECIATION> 39,584
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<BONDS> 236,778
41,128
0
<COMMON> 155,911
<OTHER-SE> (339,833)
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