<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 of 15(d) of the Securities
- --- Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
Transition Report Pursuant to Section 13 of 15(d) of the Securities
- --- Exchange Act of 1934 For the transition period from ______________ to
_________________
Commission File No: 0-26432
AIRWAYS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 59-3315474
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
6280 HAZELTINE NATIONAL DRIVE
ORLANDO, FLORIDA 32822
(407) 859-1579
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding as of NOVEMBER 1, 1996
----- ----------------------------------
<S> <C>
Common stock
Par value $.01 per share 9,023,937
</TABLE>
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AIRWAYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
ASSETS 1996 1996
------ ------------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,399 $ 16,437
Restricted cash 7,720 11,309
Accounts receivable, net 1,526 3,135
Current tax assets 2,046 -
Inventory, expendable parts and supplies 1,430 1,847
Prepaid expenses 2,461 1,947
---------- ---------
Total current assets 26,582 34,675
---------- ---------
Property and equipment, net 30,425 29,458
---------- ---------
Other assets:
Goodwill, net 1,820 1,891
Security deposits 1,299 1,339
Deferred income taxes 1,450 -
Other assets, net 750 997
---------- ---------
Total other assets 5,319 4,227
---------- ---------
Total assets $ 62,326 $ 68,360
========== =========
</TABLE>
See accompanying notes to consolidated financial statements. (Continued)
2
<PAGE> 3
AIRWAYS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share information)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1996
- ------------------------------------ ------------------ --------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 12,221 $ 9,362
Air traffic liability 10,797 14,912
Accrued liabilities 1,631 993
Current portion of long-term debt 3,190 3,574
Income taxes payable - 533
------------ ------------
Total current liabilities 27,839 29,374
------------ ------------
Long-term debt:
Long-term debt, less current portion 11,120 12,484
Maintenance reserves for owned aircraft 3,256 2,089
Deferred income taxes - 50
------------ ------------
Total long-term debt 14,376 14,623
------------ ------------
Total liabilities 42,215 43,997
------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value per share, 1,000,000 shares
authorized, no shares issued or outstanding - -
Common stock, $.01 par value per share, 19,000,000 shares
authorized, 9,022,937 and 8,966,937 shares issued and
outstanding at September 30, 1996 and March 31, 1996,
respectively 90 90
Additional paid-in capital 26,503 26,350
Accumulated deficit (6,482) (2,077)
------------ ------------
Total stockholders' equity 20,111 24,363
------------ ------------
Commitments and contingencies (notes 4 and 5)
Total liabilities and stockholders' equity $ 62,326 $ 68,360
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share information)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- -------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating Revenues
Passenger $ 22,289 $ 12,273 $ 50,846 $ 20,809
Charter 66 530 89 1,351
General aviation and other 631 330 1,063 629
------------- ------------ ----------- ----------
Total operating revenues 22,986 13,133 51,998 22,789
Operating Expenses
Flight operations 10,709 4,738 20,128 8,006
Maintenance 7,389 2,347 13,881 4,032
Aircraft and traffic servicing 5,279 2,656 11,651 4,863
Reservations, sales and marketing 4,167 2,494 9,356 4,109
Depreciation and amortization 1,088 398 2,191 754
General and Administrative 1,720 559 2,639 1,416
------------- ------------ ----------- ----------
Total operating expenses 30,352 13,192 59,846 23,180
------------- ------------ ----------- ----------
Operating loss (7,366) (59) (7,848) (391)
Interest (expense) income and other (130) 255 (161) 413
------------- ------------ ----------- ----------
(Loss) income before income taxes (7,496) 196 (8,009) 22
(Benefit) provision for income taxes (3,373) (5) (3,604) 9
------------- ------------ ----------- ----------
Net (loss) income $ (4,123) $ 201 $ (4,405) $ 13
============= ============ =========== ==========
Net (loss) income per share $ (.46) $ .02 $ (.49) $ -
============= ============ =========== ==========
Weighted average shares outstanding 9,004 9,349 8,989 9,349
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1995
---------- ---------
OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) income $ (4,405) $ 13
Adjustments to reconcile net loss to net cash flows (used for)
provided by operating activities:-
Depreciation and amortization 2,191 754
Maintenance reserves, net 2,161 419
Change in current operating items:
Restricted cash 3,589 (2,363)
Accounts receivable, net 1,609 (2,350)
Inventories 416 130
Prepaid expenses (514) (859)
Accounts payable and accrued liabilities 2,504 3,564
Air traffic liability (4,115) 4,962
Current tax assets and liabilities (2,578) (193)
Deferred income taxes (1,500) -
-------- ---------
Net Cash flows (used for) provided by operating activities (643) 4,077
INVESTING ACTIVITIES:
Purchases of property and equipment, net (2,855) (8,450)
Increases in other assets, excluding deferred loan costs 65 (1,955)
-------- ---------
Net cash flows used for investing activities (2,790) (10,405)
-------- ---------
</TABLE>
See accompanying notes to consolidated financial statements. (Continued)
5
<PAGE> 6
AIRWAYS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1995
-------- -------
FINANCING ACTIVITIES:
<S> <C> <C>
Equity contributions - 15,149
Proceeds from notes payable - 5,603
Repayments of long-term debt (1,748) -
Deferred loan costs (10) -
Proceeds from issuance of common stock 153 -
---------- ------------
Net cash flows (used for) provided by financing activities (1,605) 20,752
---------- ------------
Net (decrease) increase in cash and short-term investments
(5,038) 14,424
Cash and short-term investments at beginning of quarter 16,437 961
---------- ------------
Cash and short-term investments at end of quarter $ 11,399 $ 15,385
========== ============
Supplemental disclosures of cash flow activities:
Cash paid for interest $ 752 $ -
========== ============
Cash paid for income taxes $ 475 $ -
========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
AIRWAYS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
The financial statements included herein have been prepared by Airways
Corporation (the Company), without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. The information furnished in the
financial statements includes normal recurring adjustments and reflects all
adjustments which are, in the opinion of management, necessary for a fair
presentation of such financial statements. The Company's business is seasonal
and, accordingly, interim results are not indicative of results for a full
year. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the financial statements for
the year ended March 31, 1996, and the notes thereto, included in the Company's
Form 10-K Annual Report (File No. 0-26432) filed with the Securities and
Exchange Commission.
(1) SPIN-OFF TRANSACTION
In May 1995, AirTran Corporation ("AirTran"), parent of the Company,
Mesaba Aviation, Inc. and Northwest Airlines, Inc. ("Northwest") entered
into an agreement to spin-off AirTran's Orlando-based jet carrier and
fixed-base operations ("FBO") in Grand Rapids, Minnesota. On April 7,
1995, AirTran established the Company as a wholly owned subsidiary to
consolidate the above operations in order to facilitate the spin-off.
The spin-off, in the form of a one-for-one dividend of all of the
outstanding shares of the Company to the shareholders of AirTran (other
than Northwest), was approved by AirTran's shareholders on August 29,
1995. The distribution was made on September 7, 1995 to shareholders of
record (other than Northwest) on August 31, 1995.
AirTran Airways, Inc., which operates the Orlando-based jet carrier, was
previously a subsidiary of AirTran. The FBO had historically been
operated as a division of an AirTran subsidiary. The following financial
statements present the results of the combined entities whereby
significant intercompany accounts and transactions are eliminated.
Additionally, all results presented for periods prior to the spin-off are
presented on a pro-forma basis.
Net loss per share information for the quarter ended September 30, 1996
is based on 9,003,611 shares outstanding calculated on the treasury
method, fully-diluted basis as of September 30, 1996. Pursuant to the
rules promulgated by the Financial Accounting Standards Board, no common
stock equivalents were included in the computation of loss per share
amounts in the quarter ended September 30, 1996 in order to ensure that
the reported loss per share would not be inadvertently minimized through
their inclusion.
7
<PAGE> 8
AIRWAYS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(2) AIRCRAFT TRANSACTIONS
The Company's fleet currently consists of six leased and four owned
Boeing 737 with average capacities of 126 passengers. The Company also
owns three Cessna 172 aircraft used in flight training and rental
operation of the FBO. In addition, the FBO had one F-27 aircraft which
was sold in July, 1996.
(3) ROUTE MATTERS
During the quarter ended September 30, 1996, the Company embarked upon a
route realignment to put its resources into more profitable markets; in
that regard, announcements have been made that the Company will begin
service to Chattanooga, TN, Toledo, OH and Bloomington, IL during the
third quarter. In addition, the Company discontinued service to two
markets during the second quarter and plans to discontinue service to
four others during the third quarter.
(4) LETTERS OF CREDIT
The Company maintains a $ 1,000,000 credit facility with a bank for
purposes of issuing letters of credit. Eight letters totaling $ 810,000,
and nine letters totaling $ 673,000 have been issued and were outstanding
at September 30, 1996 and March 31, 1996, respectively. Advances under
the facility bear interest at the bank's prime rate plus 1-1/4 %. No
amounts were drawn under this facility as of or during either of the
quarters ended September 30, 1996 and March 31, 1996.
(5) LITIGATION
The Company is a party to ongoing legal proceedings arising in the
ordinary course of business. In the opinion of management, the
resolution of these matters will not have a material adverse effect on
the Company's financial position, results of operations, or its cash
flows.
(6) RECLASSIFICATIONS
Certain amounts in the March 31, 1996 financial statements have been
reclassified to conform to presentation in the September 30, 1996
quarterly consolidated financial statements.
8
<PAGE> 9
AIRWAYS CORPORATION
SEPTEMBER 30, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company provides non-stop scheduled passenger air service between Orlando
and 20 cities, principally in the eastern half of the United States. The
following table shows the expansion of the Company's route system and fleet
through September 30, 1996. All flights are to and from Orlando, unless
otherwise noted.
<TABLE>
<CAPTION>
As of Total number Departures
month end of aircraft per month Scheduled cities added
--------- ----------- --------- ----------------------
FISCAL YEAR 1996:
<S> <C> <C> <C>
April 4 354 -
May 4 428 Nashville (1)
June 4 412 -
July 6 426 -
August 7 714 San Antonio(2), Dayton, Birmingham(3),
and Buffalo
September 7 642 -
October 7 880 Dallas(4), Greenville/Spartanburg,
Kansas City, and Norfolk
November 7 874 -
December 8 883 -
January 9 929 -
February 10 1,126 Allentown, Canton/Akron, and Rochester
March 10 1,223 Richmond
FISCAL YEAR 1997
April 10 1,209 -
May 10 1,135 -
June 10 1,106 Greensboro
July 10 1,315 -
August 10 1,280 -
September 10 963 -
</TABLE>
1) Includes services between Tampa and Nashville which were discontinued as of
October 1, 1995. Service from Orlando to Nashville was canceled as of
October 31, 1996.
2) Service to San Antonio was canceled as of October 31, 1996.
3) Service to Birmingham was canceled as of August 19, 1996.
4) Service to Dallas was canceled as of September 2, 1996.
9
<PAGE> 10
AIRWAYS CORPORATION
SEPTEMBER 30, 1996
The table below sets forth the major components of operating revenues and
expenses per ASM and selected operating statistics.
<TABLE>
<CAPTION>
Quarters ended September 30,
--------------------------------------
Percent
1996 1995 Change
------------- --------------- ------------
<S> <C> <C> <C>
Operating revenue:
Passenger $ .058 $ .063 (7.9)%
Charter .000 .003 (100.0)%
General aviation and other .002 .001 100.0%
------------- --------------- -----------
Total .060 .067 (10.5)%
Operating expenses
Flight operations .028 .024 16.7%
Maintenance .019 .012 58.3%
Aircraft and traffic servicing .014 .013 7.7%
Reservations, sales and marketing .011 .013 (15.4)%
Depreciation and amortization .003 .002 50.0%
General and administrative .004 .003 33.3%
------------- --------------- -----------
Total .079 .067 17.9%
------------- --------------- -----------
Operating Income $ (.019) $ .000 N/A
============= =============== ===========
Available seat miles (1) 380,846,000 195,892,000 94.4%
Revenue passenger miles (2) 232,609,000 118,509,000 96.3%
Passengers 270,149 135,551 99.3%
Departures 3,558 1,782 99.7%
Load Factor (3) 61.1% 60.5% 6.0%
Yield per revenue passenger mile (4) $ 0.096 $ 0.104 (7.7)%
</TABLE>
(1) The number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.
(2) The number of scheduled miles flown by revenue passengers.
(3) Revenue passenger miles divided by available seat miles. Year over year
percent change is measured only as percentage points difference.
(4) Passenger revenue divided by revenue passenger miles.
10
<PAGE> 11
AIRWAYS CORPORATION
SEPTEMBER 30, 1996
OPERATING REVENUES
Total operating revenues were $ 22,986,000 and $ 13,133,000 for the quarters
ended September 30, 1996 and 1995, respectively. The increase of $ 9,853,000
or 75.0 % in 1996 primarily reflects expansion of the aircraft fleet, growth in
departures and steady load factors. This growth was partially offset by an 8.9
% decrease in average fare, due to increased competition in 1996. The fleet
expansion arose from the purchase of one and leasing of two additional aircraft
since September 30, 1995.
ASMs were 380,846,000 and 195,892,000 in 1996 and 1995, respectively, an
increase of 184,954,000 or 94.4 %. Revenue Passenger Miles ("RPM"s) were
232,609,000 and 118,509,000 in 1996 and 1995, respectively, an increase of
114,100,000 or 96.3 %. This was principally the result of the addition of nine
new markets in 1996.
Charter revenues were $ 66,000 and $ 530,000 in the quarters ended September
30, 1996 and 1995, respectively, a decrease of $ 464,000 or 87.6 %. The
decrease in charter revenue reflects the deliberate shift of aircraft use to
scheduled service in 1996.
OPERATING EXPENSES
Flight operations expense includes expenses related directly to the operation
of aircraft except for depreciation and amortization of aircraft and aircraft
improvements. Expenses for hull insurance, pilots' salaries, aircraft fuel and
flight operations administration are all included in flight operations. Flight
operations expenses were $ 10,709,000 and $ 4,738,000 in 1996 and 1995,
respectively, an increase of $ 5,971,000 or 126.0 %. Departures were 3,558 and
1,782 in 1996 and 1995, respectively, an increase of 1,776 or 99.7 %. The
Company exercised purchase options on two aircraft that were previously being
leased at September 30, 1995. Aircraft purchases shift fleet ownership costs
from flight operations expense to depreciation. This decrease, however, was
offset mainly by expenses incurred for substitute aircraft rentals ($ 1.1
million, or 23 percentage points of the increase) required to accommodate
passengers whose flights otherwise would have been canceled during the second
quarter. Additionally, fuel expense was significantly higher in the current
quarter due to the rise in jet fuel prices and the expiration of the aviation
exemption from the federal fuel deficit reduction tax of $ 0.043 per gallon on
October 1, 1995. The increased cost of fuel and taxes, per gallon, was $ .17,
driving costs up by over $ 1,100,000 in the second quarter of fiscal 1997.
Maintenance expense includes all expenses related to the upkeep of aircraft.
Such expenses include labor, parts, supplies and contract maintenance. The
direct cost of airframe and engine overhauls are expensed and, for leased
aircraft, paid monthly to the lessor in the form of reserves. For owned
aircraft, the Company reserves on a per flight hour basis for future
maintenance. These reserves are recorded on the Company's balance sheet each
month as the aircraft are flown. The reserves are
11
<PAGE> 12
AIRWAYS CORPORATION
SEPTEMBER 30, 1996
then available for major overhauls when they occur. Maintenance expenses were
$ 7,389,000 and $ 2,347,000 for the quarters ended September 30, 1996 and
1995, respectively, an increase of $ 5,042,000 or 214.0 %. Maintenance
expense is a semi-variable cost, driven by facilities and salaries and wages
(which are relatively fixed), reserve expense (which is variable according to
the number of hours flown) and other repairs and maintenance expenses which
are driven by expansion of the airline and other events as explained below:-
- - Facilities and salaries and wages increased $ 314,000 or 81 % due to the
expansion of the airline and the acquisition of the Company's new
maintenance hangar in February of 1996.
- - Reserve expense increased by $ 922,000 or 85.4 % which is driven
principally by flight hours. Although flight hours only increased 70.5%,
the Company began reserving for foreign object damage to engines, effective
July 1, 1996, which increased reserve expense at a faster rate than the
volume would have otherwise suggested.
- - The remainder, or other maintenance and repair expenses, totaled $
4,576,000 which was an increase of $ 3,751,000 over 1995, or 454 %. This
large variance was caused by the following contributing factors:
1. To facilitate the continued managed growth of the airline, the Company
initiated an inspection program during the previous quarter to ensure
that all aircraft maintenance and records of maintenance had been
properly executed. This program involved engaging outside consultants
to provide an independent report on the Company's maintenance
procedures and records.
2. That report recommended, among other things, that certain repairs and
parts replacement be made.
3. In addition to those costs, the Company experienced several
unscheduled engine repairs, including one for foreign object damage.
4. Aside from the cost of the repairs themselves, these events required
leasing of replacement engines during their repair.
5. Lastly, as previously reported in the Company's Form 10-K, the prior
year's expenses were, in some cases, not tabulated and reported until
the fourth quarter of that fiscal year resulting in an unusually low
base against which this year's quarter is being compared - the
remainder of the difference in this expense category is largely the
result of those expenses.
<TABLE>
<S> <C>
Increased expense from:
Company initiated inspection program
- outside consultants $ 1,263,000
- replacement of parts and repairs 789,000
Foreign object damage and other engine repairs 600,000
Leasing costs of replacement engines 136,000
Increase in expense anticipated as a result of doubled ASM volume 780,000
Other 183,000
---------------
Total $ 3,751,000
===============
</TABLE>
12
<PAGE> 13
AIRWAYS CORPORATION
SEPTEMBER 30, 1996
Aircraft and traffic servicing expense includes all expenses incurred at
airports, including landing fees, facilities rental, station labor, passenger
liability insurance, ground handling services, flight attendant wages, catering
expenses and flight attendant overnight expenses. Aircraft and traffic
servicing expenses were $ 5,279,000 and $ 2,656,000 in the 1996 and 1995 second
quarters, respectively, an increase of $ 2,623,000 or 98.8 %. These costs were
directly in line with the increased volume of ASMs and departures in the
current quarter.
Reservations and sales expense includes all sales, marketing and advertising
expenses as well as the cost of reservations. Reservation expense includes
salaries of reservations personnel, computer reservation system expenses and
travel agent commissions. Reservations and sales expenses were $ 4,167,000
and $ 2,494,000 in the 1996 and 1995 second quarters, respectively, an increase
of $ 1,673,000 or 67.1 %. Higher sales and marketing costs are correlated with
increased passenger volume and related revenue as well as the added cities year
over year. Costs increased at a lower rate than passenger growth due to a
shift in the mix of travel agency versus Company-direct bookings. The higher
utilization of the Company's WINGS 2000 reservation system causes lower cost in
two ways: first, the Company avoids costly travel agency commission fees and
booking fees and second, the operating cost of the Reservations department is
spread over a higher volume of calls. Reservations and sales cost per ASM was $
0.011 and $ 0.013 for the quarters ended September 30, 1996 and 1995,
respectively, a decrease of $ 0.002 or 15.4 %.
General and administrative expenses include the wages and benefits for the
Company's executive officers and various other administrative personnel. Also
included are costs for office supplies, legal expenses, accounting and
miscellaneous expenses. General and administrative expenses were $ 1,720,000
and $ 559,000 for the quarters ended September 30, 1996 and 1995, respectively,
an increase of $ 1,161,000 or 207.7 %. The Company became an independent,
publicly traded entity in September of last year and has expanded its
administrative infrastructure to support its reporting and compliance
requirements. That, coupled with senior management changes and associated
restructuring costs increased general and administrative expense by over $
600,000. Additionally, information service expenses of $ 120,000 to support
the systems environment were incurred this quarter, whereas last year the
Company only incurred developmental costs for the new reservations system, all
of which were capitalized. Finally, a $ 132,000 adjustment premium for workers
compensation insurance for 1995 was charged in the current quarter.
Depreciation and amortization expense includes depreciation on equipment,
aircraft and aircraft improvements and amortization of leasehold improvements,
goodwill and aircraft and loan acquisition costs. Depreciation and
amortization expense were $ 1,088,000 and $ 398,000 in the 1996 and 1995 first
quarters, respectively, an increase of $ 690,000 or 173.4 % driven largely by
purchases of aircraft completed in the third quarter last year, information
systems acquired and put into place since the prior year and the acquisition of
the Company's maintenance facility in the fourth quarter of the prior year.
The Company's losses generate provisions for income tax benefit associated with
its ability to apply for refunds of income taxes previously paid and avoidance
of income taxes on future income. The
13
<PAGE> 14
AIRWAYS CORPORATION
SEPTEMBER 30, 1996
Company believes that future taxable income will be sufficient to use the
benefit associated with the tax loss carryforwards.
EFFECTS OF DISTRIBUTION ON LIQUIDITY
Prior to the spin-off distribution (see note 1), AirTran contributed cash and
property to the Company having a book value of approximately $ 20,250,000, in
addition to $ 8,750,000 invested in the Company in 1995. Pursuant to a
distribution agreement, the Company and AirTran agreed to certain tax-sharing
provisions (including AirTran's assumption of all tax liability related to the
Company's operations prior to spin-off) and to indemnify each other against
certain other liabilities occurring both before and after the distribution.
Costs associated with the distribution were expensed for financial reporting
purposes and charged pursuant to the distribution agreement to the party for
whose benefit the expenses were incurred. The Company had consolidated current
assets of $ 26,582,000 and $ 27,900,000 as of September 30, 1996 and 1995,
respectively. Management believes that such assets, along with internally
generated funds as well as financing which management believes is or will be
made available, will satisfy projected operating and capital needs. If the
Company increases its rate of growth over current projections, acquires another
company, purchases more aircraft (rather than leasing additional aircraft) than
is presently planned, sustains further losses, or otherwise requires
significant additional capital, other sources of funds will need to be secured
and there is no assurance that such funds will be secured.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on September 11, 1996 for
the purposes of (1) electing the Company's Board of Directors; (2) to consider
and vote upon a proposal to increase to 1,150,000 shares the number of shares
of common stock reserved pursuant to the Company's 1995 Stock Option Plan; (3)
to ratify the selection of KPMG Peat Marwick LLP, independent certified public
accountants, as auditors for the Company for the year ending March 31, 1997;
(4) to transact such other business as may properly come before the meeting.
Proxies were solicited by the Company under Regulation 14A of the Securities
and Exchange Commission's proxy rules and there was no solicitation in
opposition to management's nominees for directors listed in the Proxy
Statement. A summary of the votes cast for and against each of the matters set
forth in the Proxy Statement is set forth below:
<TABLE>
<S> <C> <C>
Election of Directors: Votes in favor Votes against
John K. Ellingboe 7,779,509 422,556
Roger T. Munt 7,779,549 422,516
John S. Olbrych [1] [1]
Robert D. Swenson 7,781,093 420,972
</TABLE>
14
<PAGE> 15
AIRWAYS CORPORATION
SEPTEMBER 30, 1996
<TABLE>
<S> <C> <C>
Alan R. Stephen 7,781,109 420,956
Increase of shares for Stock Option Plan [2] 6,953,267 679,362
Ratification of Independent Accountants [2] 8,047,672 9,788
</TABLE>
[1] Mr. Olbrych withdrew his name from consideration prior to the annual
meeting and, therefore, the votes cast for him were not counted.
[2] Votes in favor and against are tabulated here excluding abstentions and
non-votes which were not in material quantities.
ITEM 5. OTHER INFORMATION
The Company's common stock is listed on the NASDAQ National Market under the
symbol "AAIR." Trading in the stock began on September 8, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
27.0 Financial Data Schedule (for SEC use only)
Reports on Form 8-K (incorporated by reference)
None
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AIRWAYS CORPORATION
Date: November 14, 1996
/s/ Mark B. Rinder
--------------------------------
Mark B. Rinder
VICE PRESIDENT - FINANCE,
SECRETARY AND CHIEF FINANCIAL OFFICER
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT # NAME
<S> <C>
3.1 Certificate of Incorporation of Registrant. [1]
3.2 Bylaws of Registrant. [1]
4.0 Form of Stock Certificate of common stock of Registrant. [1]
10.1 Air Carrier Certificate issued to AirTran Airways, Inc. effective June 6, 1994. [1]
10.17.1 Orlando Tradeport Maintenance Hangar Lease Agreement by and between Greater Orlando Aviation
Authority and Page AvJet Corporation dated December 11, 1989.
10.17.2 Amendment No. 1 to Orlando Tradeport Maintenance Hangar Lease Agreement by and between Greater
Orlando Aviation Authority and Page AvJet Corporation dated June 22, 1990.
10.17.3 Agreement and Second Amendment to Orlando Tradeport Maintenance Hangar Lease Agreement by and
between Greater Orlando Aviation Authority and AirTran Airways, Inc. dated January 25, 1996.
10.18 Agreement between AirTran Airways, Inc. and MarketLink, Inc. dated January 26, 1996.
10.2 Certificate of Public Convenience and Necessity for Interstate Air Transportation issued to
AirTran Airways, Inc., d/b/a AirTran Airways, effective November 30, 1994. [1]
10.3 FAA Repair Station Certificate. [1]
10.4.1 Aircraft Lease Agreement, dated June 20, 1994, between Polaris Holding Company and AirTran
Airways, Inc. for one used Boeing model 737-214 aircraft, manufacturer's serial number 20158.
[1]
10.4.2 Aircraft Lease Agreement, dated June 25, 1994, between Polaris Holding Company and AirTran
Airways, Inc. for one used Boeing model 737-200 aircraft, manufacturer's serial number 20976.
[1]
10.4.3 Aircraft Lease Agreement, dated December 6, 1994, between C.I.T. Leasing Corporation and AirTran
Airways, Inc. for one used Boeing model 737-297 aircraft with two Pratt & Whitney JT8D-9A engines
on the aircraft, manufacturer's serial number 22631. [1]
10.4.4 Aircraft Lease Agreement, dated February 16, 1995, between Polaris Aircraft Leasing
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17
<PAGE> 18
<TABLE>
<S> <C>
K.B. and AirTran Airways, Inc. for one used Boeing model 737-200 advanced aircraft, manufacturer's
serial number 21355. [1]
10.4.5 Aircraft Lease Agreement, dated June 16, 1995, between First Security Bank of Utah National
Association, as trustee, and AirTran Airways, Inc. for one used Boeing model 737-2L9 aircraft,
manufacturer's serial number 21278. [2]
10.4.6 Aircraft Lease Agreement, dated June 16, 1995, between First Security Bank of Utah National
Association, as trustee, and AirTran Airways, Inc. for one used Boeing model 737-2L9 aircraft,
manufacturer's serial number 21528. [2]
10.4.7 Aircraft Sale Agreement dated August 31, 1995 between B&A Leasing Corporation, as seller, and
AirTran Airways, Inc., as buyer, for One Used Boeing 737-200ADV Aircraft, Manufacturer's Serial
No. 21279. [2]
10.4.8 Secured Loan Agreement dated August 28, 1995 between Finova Capital Corporation, as Lender, and
AirTran Airways, Inc., as borrower. [2]
10.5 Distribution Agreement between AirTran Corporation, Mesaba Aviation, Inc. AirTran Airways, Inc.
and Airways Corporation. [2]
10.6 Agreement, dated May 18, 1995, between Northwest Airlines, Inc. Northwest Aircraft, Inc., Mesaba
Aviation, Inc. and AirTran Corporation. [2]
10.7 Lease of headquarters of Registrant in Orlando, Florida. [1]
10.8 Airways Corporation 1995 Stock Option Plan. [2]
10.9 Airways Corporation 1995 Directors Stock Option Plan. [2]
10.10 Severance Agreement between Robert D. Swenson and AirTran Corporation, Mesaba Aviation, Inc. and
Airways Corporation dated April 28, 1995. [1]
10.11 Lease of headquarters of Registrant in Orlando, Florida, dated November 1, 1995. [4]
10.12 Aircraft Sale Agreement dated December 28, 1995 between C. I. T. Leasing Corporation, as seller,
and AirTran Airways, Inc., as buyer, for One Used Boeing 737-200 Aircraft, Manufacturer's Serial
No. 19074. [4]
10.13 Security Agreement dated December 28, 1995 between C. I. T. Leasing Corporation, as lender and
AirTran Airways, Inc., as borrower. [4]
10.14 Aircraft Lease Agreement, dated December 22, 1995, between C. I. T. Leasing Corporation, as lessor,
and AirTran Airways, Inc., as lessee, for one used Boeing model 737-2T4 aircraft, manufacturer's serial
number 22055. [4]
10.15 Security Agreement dated December 20, 1995 between Finova Capital Corporation, as lender and
AirTran Airways, Inc., as borrower. [4]
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<PAGE> 19
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10.16 Security Agreement dated December 20, 1995 between Finova Capital Corporation and AirTran Airways, Inc. [4]
11.0 Statement of Computation of Weighted Average Shares and Per Share Earnings. [5]
18.0 Preference letter re: Change in accounting principles. [5]
21.0 Subsidiary of Airways Corporation. [5]
23.1 Letter re: Consent of Arthur Anderson LLP. [5]
23.2 Letter re: Consent of KPMG Peat Marwick LLP. [5]
27.0 Financial Data Schedule (submitted only in electronic format).
</TABLE>
[1] Incorporated by reference to the Registrant's Form S-4 Registration
Statement (File No. 33-98104).
[2] Incorporated by reference to the Registrant's form 10-Q for the quarterly
period ended June 30, 1995.
[3] Incorporated by reference to the Registrant's form 10-Q for the quarterly
period ended September 30, 1995.
[4] Incorporated by reference to the Registrant's form 10-Q for the quarterly
period ended December 31, 1995.
[5] Incorporated by reference to the Registrant's form 10-K for the year ended
March 31, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AIRWAYS CORPORATION FOR THE SIX MONTHS ENDED SEPTEMBER
30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 19,119
<SECURITIES> 0
<RECEIVABLES> 1,526
<ALLOWANCES> 0
<INVENTORY> 1,430
<CURRENT-ASSETS> 26,582
<PP&E> 34,366
<DEPRECIATION> 3,941
<TOTAL-ASSETS> 62,326
<CURRENT-LIABILITIES> 27,839
<BONDS> 0
0
0
<COMMON> 90
<OTHER-SE> 20,021
<TOTAL-LIABILITY-AND-EQUITY> 62,326
<SALES> 0
<TOTAL-REVENUES> 22,986
<CGS> 0
<TOTAL-COSTS> 30,352
<OTHER-EXPENSES> (263)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 393
<INCOME-PRETAX> (7,496)
<INCOME-TAX> (3,373)
<INCOME-CONTINUING> (4,123)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,123)
<EPS-PRIMARY> (.46)
<EPS-DILUTED> (.46)
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