<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------------- -------------------
Commission file number 0-26914
---------------------------------------------------------
VALUJET, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 58-2189551
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1800 Phoenix Boulevard
Suite 126
Atlanta, Georgia 30349
---------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(770) 907-2580
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------- ---------
As of August 1, 1996, there were 54,678,842 shares of Common Stock of the
Registrant outstanding.
<PAGE>
VALUJET, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ------- --------------------
<S> <C>
Consolidated Balance Sheets - December 31, 1995 and June 30, 1996 (Unaudited) 3
Consolidated Statements of Operations - Three months ended June 30, 1995 and 1996 (Unaudited);
Six months ended June 30, 1995 and 1996 (Unaudited) 5
Consolidated Statements of Cash Flows - Six months ended June 30, 1995 and 1996 (Unaudited) 7
Condensed Notes to Unaudited Consolidated Interim Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
- ------- -------------------------------------------------
Condition and Results of Operations 10
-----------------------------------
PART II - OTHER INFORMATION
Item 2. Changes in Securities 18
- --------- ---------------------
Item 4. Submission of Matters to a Vote of Security Holders 18
- --------- ---------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K 18
- --------- --------------------------------
</TABLE>
SIGNATURES
EXHIBITS
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
VALUJET, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------- ------------
ASSETS (Note) (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $127,947,096 $207,977,095
Accounts receivable, less allowance
of $405,000 and $642,000 at December 31,
1995 and June 30, 1996, respectively 12,074,394 1,743,722
Inventories of parts 4,016,266 4,516,325
Prepaid expenses 4,758,205 3,211,915
Deferred tax asset 401,621 401,621
Assets held for disposition 0 72,684,815
Other current assets 589,986 1,892,697
------------ ------------
Total current assets 149,787,568 292,428,190
Property and equipment, at cost
Flight equipment 153,513,693 171,183,172
Other property and equipment 40,472,604 62,741,668
Deposits on flight equipment
purchase contracts 21,801,525 23,230,773
------------ ------------
215,787,822 257,155,613
Less allowance for depreciation (18,834,231) (31,889,198)
------------ ------------
196,953,591 225,266,415
Debt issuance costs 0 3,897,441
------------ ------------
Total assets $346,741,159 $521,592,046
============ ============
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date, but does not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. See
condensed notes to financial statements.
3
<PAGE>
VALUJET, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, June 30,
1995 1996
------------- -------------
(Note) (Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 6,721,754 $ 3,178,892
Accrued liabilities 35,866,095 25,605,155
Air traffic liability 22,221,133 3,827,152
Income taxes payable 24,957 334,902
Current maturities of long-term debt 21,430,984 74,459,445
------------ ------------
Total current liabilities 86,264,923 107,405,546
Long-term debt less current maturities 87,607,149 237,980,172
Deferred income taxes payable 10,803,856 10,803,856
Stockholders' equity:
Common stock, $.001 par value: 54,556 54,671
1,000,000,000 shares authorized: issued
and outstanding - 54,556,020 at December 31,
1995 and 54,670,530 at June 30, 1996
Additional paid-in capital 74,433,062 76,677,298
Retained earnings 87,577,613 88,670,503
------------ ------------
Total stockholders' equity 162,065,231 165,402,472
------------ ------------
Total liabilities and stockholders' equity $346,741,159 $521,592,046
============ ============
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. See condensed notes to
financial statements.
4
<PAGE>
VALUJET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------
June 30, June 30,
1995 1996
-------------- -------------
<S> <C> <C>
Operating revenues:
Passenger $83,579,796 $ 77,961,574
Cargo 1,146,173 1,261,818
Other 2,187,045 1,993,898
----------- ------------
Total operating revenues 86,913,014 81,217,290
Operating expenses:
Flight operations 3,486,683 5,414,622
Aircraft fuel 12,468,198 17,061,473
Maintenance 11,321,971 15,807,217
Station operations 11,631,505 14,748,674
Passenger services 2,185,490 3,631,749
Marketing and advertising 2,530,839 2,223,363
Sales and reservations 7,448,004 6,547,058
General and administrative 2,543,638 4,271,741
Employee bonus 4,200,000 (550,000)
Depreciation 3,104,990 6,694,708
Shutdown and other nonrecurring expenses 0 31,623,410
----------- ------------
Total operating expenses 60,921,318 107,474,015
----------- ------------
Operating income (loss) 25,991,696 (26,256,725)
Other expenses (income):
Interest expense 1,656,560 6,221,023
Interest income (1,341,407) (2,677,785)
Arrangement fee for aircraft transfers 0 (11,861,294)
Gain from insurance recovery (1,093,527) (2,814,785)
----------- ------------
Total other expenses (income), net (778,374) (11,132,841)
----------- ------------
Income (loss) before income taxes 26,770,070 (15,123,884)
Provision for income taxes 9,910,026 (5,550,000)
----------- ------------
Net income (loss) $16,860,044 ($9,573,884)
=========== ============
Net income (loss) per share $0.28 ($0.18)
=========== ============
Weighted average shares outstanding 59,392,398 54,663,481
=========== ============
</TABLE>
See accompanying notes.
5
<PAGE>
VALUJET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
June 30, June 30,
1995 1996
------------ -------------
<S> <C> <C>
Operating revenues:
Passenger $141,801,874 $183,530,818
Cargo 2,025,267 2,707,764
Other 3,832,616 4,973,715
------------ ------------
Total operating revenues 147,659,757 191,212,297
Operating expenses:
Flight operations 6,194,525 12,932,717
Aircraft fuel 22,596,536 39,137,578
Maintenance 19,499,970 31,418,618
Station operations 20,621,123 32,641,303
Passenger services 3,710,436 7,623,789
Marketing and advertising 5,393,400 6,506,737
Sales and reservations 12,482,178 15,442,045
General and administrative 4,353,268 8,161,420
Employee bonus 6,632,000 1,245,000
Depreciation 5,603,537 13,211,088
Shutdown and other nonrecurring expenses 0 31,623,410
------------ ------------
Total operating expenses 107,086,973 199,943,705
------------ ------------
Operating income (loss) 40,572,784 (8,731,408)
Other expenses (income):
Interest expense 3,086,455 8,624,015
Interest income (2,857,573) (4,524,234)
Arrangement fee for aircraft transfers 0 (11,861,294)
Gain from insurance recovery (1,093,527) (2,814,785)
------------ ------------
Total other expenses (income), net (864,645) (10,576,298)
------------ ------------
Income before income taxes 41,437,429 1,844,890
Provision for income taxes 15,506,773 752,000
------------ ------------
Net income $ 25,930,656 $ 1,092,890
============ ============
Net income per share $0.44 $0.02
============ ============
Weighted average shares outstanding 59,414,608 59,587,450
============ ============
</TABLE>
See accompanying notes.
6
<PAGE>
VALUJET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------------
June 30, June 30,
1995 1996
----------------- --------------
<S> <C> <C>
Operating activities:
Net income $ 25,930,656 $ 1,092,890
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 5,603,537 14,690,386
Provision for uncollectible accounts (121,000) 2,420,482
Gain from insurance recovery on loss of aircraft 0 (2,814,785)
Deferred income taxes (14,277) 0
Changes in certain assets and liabilities:
Accounts receivable (3,423,060) 7,910,190
Other current assets (5,375,359) (256,477)
Accounts payable and accrued liabilities 20,921,819 (13,803,802)
Air traffic liability 16,958,769 (18,393,981)
Income taxes payable 5,839,040 309,945
------------ -------------
Net cash provided by (used in) operating activities 66,320,125 (8,845,152)
Investing activities:
Proceeds from insurance claim 3,000,000 4,000,000
Purchases of property and equipment (44,103,065) (116,706,995)
------------ -------------
Net cash used in investing activities (41,103,065) (112,706,995)
Financing activities:
Issuance of long-term debt 25,713,486 216,529,498
Proceeds from sale of common stock 233,332 2,244,351
Proceeds from notes receivable 5,700,010 0
Payment of long-term debt (3,962,142) (17,191,703)
Payment of offering expenses (35,151) 0
------------ -------------
Net cash provided by financing activities 27,649,535 201,582,146
------------ -------------
Net increase in cash and cash equivalents 52,866,595 80,029,999
Cash and cash equivalents at beginning of period 85,077,542 127,947,096
------------ -------------
Cash and cash equivalents at end of period $137,944,137 $ 207,977,095
============ =============
</TABLE>
See accompanying notes.
7
<PAGE>
VALUJET, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
----------------------------------------------------------------------
A. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
interim financial statements contain all adjustments necessary to present fairly
the Company's financial position as of June 30, 1996 and December 31, 1995, the
results of operations for the three and six month periods ended June 30, 1996
and June 30, 1995, and cash flows for the six month periods ended June 30, 1996
and June 30, 1995. The adjustments made are of a normal recurring nature.
Certain information and footnote disclosures normally included in the annual
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission for Form 10-Q. It is suggested that
these unaudited interim financial statements be read in conjunction with the
audited financial statements and the notes thereto included in the Annual Report
on Form 10-K filed by the Company with the Securities and Exchange Commission on
March 29, 1996, and amendments thereto.
The results of operations for the three and six month periods ended
June 30, 1996 are not necessarily indicative of the results to be expected for
the full fiscal year.
B. NET INCOME PER COMMON SHARE
Net income per share is based on the weighted average number of common
shares outstanding and common stock equivalents during the periods. Common
stock equivalents include shares issuable upon the assumed exercise of stock
options using the treasury stock method when dilutive.
<TABLE>
<CAPTION>
C. LONG-TERM DEBT
<S> <C> <C>
December 31, June 30,
1995 1996
------------ ------------
(Unaudited)
Promissory notes due 1998 through 2006.. $109,038,133 $312,439,617
Less current maturities................. 21,430,984 74,459,445
------------ ------------
$ 87,607,149 $237,980,172
============ ============
</TABLE>
During 1995 and during the six months ended June 30, 1996, the Company signed
promissory notes totaling $76,095,000 and $70,593,000, respectively, to finance
the purchase of 21 aircraft and spare engines during 1995 and 10 aircraft during
1996. The Company also closed a private offering of $150,000,000 principal
amount of 10 1/4% Senior Notes due 2001. Interest on the senior notes is payable
semi-annually on April 15 and October 15. The notes related to aircraft
financing bear interest at rates ranging from 6.8% to 9.78% per annum and
principal and interest payments are due in monthly or quarterly installments
over four to ten year terms on a mortgage-style amortization based on the
delivery date of the aircraft. Certain of these notes with an aggregate unpaid
purchase balance of approximately $15.6 million as of June 30, 1996, have a
variable rate of interest based on the London interbank offered rate plus 1.85%
to 3% (1.85% at December 31, 1995 and June 30, 1996) based on the Company's
compliance with specific financial ratios concerning leverage and fixed charge
coverage. Certain other of these notes have a variable rate of interest based on
LIBOR plus a range of 1.15% to 1.50%. A substantial portion of the secured notes
require prepayment if specific financial ratios (concerning debt to equity, net
worth, fixed charge coverage and current ratio) are not maintained. The aircraft
and engines serve as collateral on this debt. Total interest paid was
approximately $3,100,000 and $5,400,000 for the six months ended June 30, 1995
and June 30, 1996, respectively.
D. COMMITMENTS AND CONTINGENCIES
On May 11, 1996, the Company suffered a tragic loss involving Flight 592. The
accident, following a number of incidents and heightened Federal Aviation
Administration (FAA) scrutiny resulted in extensive media coverage calling into
question the safety of low-fare airlines in general and the Company in
particular, despite the fact that the cause of the accident is still under
investigation by the National Transportation Safety Board. In response to the
accident, the FAA conducted an
8
<PAGE>
extraordinary review of the Company's operations. As a result, the Company
significantly reduced its schedule between May 19, 1996 and June 17, 1996, and
on June 17, 1996 entered into a consent order with the FAA under which the
Company agreed to several matters including the suspension of operations until
such time as the Company is able to satisfy the FAA as to its safety concerns
and the payment of $2,000,000 to the FAA to compensate it for the cost of the
special inspections. When the Company satisfies the FAA's safety concerns, the
consent order permits the resumption of service with up to 15 aircraft as
opposed to 51 aircraft in service prior to the shutdown. See Note E regarding
charges associated with the accident and related shutdown of operations.
As a result of the above mentioned events, several class action suits have
been filed by shareholders against the Company and various officers alleging,
among other things, misrepresentations regarding the Company's safety. The
plaintiffs seek unspecified damages based upon the decrease in market value of
shares of the Company's stock. Management intends to defend these actions
vigorously and believes that the suits are without merit. While any litigation
contains elements of uncertainty, management presently believes, based on the
information available to it and discussions with outside counsel, that the
outcome of each such proceeding or claim which is pending or known to be
threatened, or all of them combined, will not have a material adverse effect on
the results of operations or the financial position of the Company.
Several lawsuits have also been filed against the Company seeking damages
attributable to the deaths of those on Flight 592, and additional lawsuits are
expected. The Company's insurance carrier has assumed defense of these lawsuits
and handles all aspects of such claims. As all claims are handled independently
by the Company's insurance carrier, the Company cannot reasonably estimate the
amount of liability which might finally exist. As a result, no accruals for
losses and the related claim for recovery from the Company's insurance carrier
have been reflected in the accompanying financial statements. The Company
maintains $750 million of liability insurance per occurrence with a major group
of independent insurers that provide facilities for all forms of aviation
insurance for many major airlines. Management believes, based on the
information currently available to it, that such coverage is sufficient to cover
claims associated with this accident and that the insurers have sufficient
financial strength to pay claims.
E. SHUTDOWN AND OTHER NONRECURRING EXPENSES
Costs associated with the loss of Flight 592 and excess operating costs
related to the reduced schedule from May 19, 1996 to the June 17, 1996 and the
suspension of operations subsequent to June 17, 1996 are shown in the statement
of operations as shutdown and other nonrecurring expenses. Such costs consist
of expenses directly related to the accident and the ensuing extensive FAA
review of the Company's operations including legal fees, payments to the FAA,
inspection related costs and unusual maintenance costs in excess of normal
recurring maintenance. In addition, depreciation on grounded aircraft, rental
of abandoned or idled facilities and costs of personnel idled as a result of the
reduced and suspended operations during May and June are included in shutdown
and other nonrecurring expenses.
A summary of such costs is as follows:
<TABLE>
<CAPTION>
<S> <C>
Maintenance $7,855,000
Legal and other consulting 6,317,000
Facilities rental 4,109,000
Wages, salaries and benefits 3,916,000
FAA payment 2,000,000
Depreciation 1,480,000
Other 5,946,000
----------
$31,623,000
===========
</TABLE>
No accrual was provided for costs to be incurred in future periods related
to aircraft depreciation and maintenance and rental costs associated with
temporarily idled facilities; such costs will be recognized as they are
incurred.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
RESULTS OF OPERATIONS
ValuJet Airlines, Inc. began flight operations on October 26, 1993 with two
DC-9-32 aircraft operating eight daily flights between Atlanta and Jacksonville,
Orlando and Tampa. Since that time and until suspension of service on June 17,
1996, the Company has increased the number of markets served and number of
flights offered as the Company has placed in service additional aircraft. The
following chart indicates the expansion of service through June 1996:
<TABLE>
<CAPTION>
New
As of Total Number Number of Peak Cities
Quarter End of Aircraft Day Flights Added
----------- ------------ -------------------------------------
<S> <C> <C> <C>
December 1993 6 34 Atlanta, Jacksonville,
Orlando, Tampa, Fort Lauderdale,
Louisville, Memphis, New Orleans
March 1994 10 70 Nashville, Washington, D.C. (Dulles),
West Palm Beach, Fort Myers, Savannah
June 1994 14 92 Chicago (Midway), Philadelphia
September 1994 16 114 Dallas/Fort Worth, Indianapolis
December 1994 22 124 None
March 1995 27 184 Detroit, Hartford/Springfield, Miami,
Raleigh/Durham, Columbus, Montreal
June 1995 28 208 Boston
September 1995 34 228 Kansas City, Newport News, Jackson
(Montreal discontinued)
December 1995 42 268 None
March 1996 47 286 Charlotte, Pittsburgh
June 1996 51 0 New York (La Guardia), Fort Walton Beach,
Mobile
Service suspended to all markets as of
June 17, 1996
</TABLE>
On May 11, 1996, ValuJet Flight 592 from Miami to Atlanta crashed in the Florida
Everglades. There were no survivors among the 110 people aboard, including 105
customers and five flight crew members. The accident, following a number of
incidents and heightened FAA scrutiny, resulted in extensive media coverage
calling into question the safety of low-fare airlines in general and the Company
in particular, despite the fact that the cause has not yet been definitively
determined. In response to the accident, the FAA conducted an extraordinary
review of the Company's operations, including an FAA inspection of each aircraft
before departure, the review of the maintenance history of each aircraft and the
presence of an FAA inspector onboard each Company aircraft at least once per
week. The intensive inspection process and the redoubling of the Company's focus
on safety resulted in many flight delays and cancellations. In response to these
circumstances, the Company reduced its schedule by more than 40% between May 19,
1996 and June 17, 1996, by reducing service to its markets without eliminating
service to any market. In addition, the Company retained The Spectrum Group and
named James B. Davis (General USAF-Ret.) as its "safety czar" to conduct a
thorough inspection of the Company's maintenance and safety policies and
procedures.
On June 17, 1996, the Company entered into a consent order with the
FAA under which: (i) the Company agreed to suspend operations until such time as
the Company is able to satisfy the FAA as to various safety concerns identified
by the FAA as a
10
<PAGE>
result of its intensive inspections of the Company's operations, (ii) the FAA
agreed to work with the Company in order to reestablish operations with up to 15
aircraft, and (iii) the Company is to pay $2 million to the FAA to compensate it
for the costs of the special inspections conducted. In order to reduce costs
while the Company prepares its plan to restore service, the Company has
furloughed more than 90% of its personnel.
Other consequences of the accident, ensuing media coverage and
shutdown of operations include:
1. The Company is unable to predict with certainty when the Company
will be able to resume service or the level of service that will be offered at
that time. The Company's recommencement of service is also subject to approval
by the Department of Transportation (DOT). The Association of Flight Attendants
(AFA) has made certain filings with the DOT, asserting that the Company's
management should be replaced prior to resumption of service. The Company is
unable to predict what effect, if any, the filings will have on the DOT's
determination or the timing thereof.
2. The expansion of the Company's operations will likely be
subject to FAA approval for an indefinite period of time.
3. The Company expects that its traffic after resumption of service
will be less than experienced prior to suspension of operations. The Company is
unable to predict how significantly the accident and shutdown will affect load
factors after the Company resumes operations or the length of time load factors
will be impacted.
4. The Company has sought to defer acceptance of certain aircraft
presently under contract for delivery in 1996 and the Company may lease out or
sell some of its aircraft.
5. The Company has refunded fares paid by customers affected by the
Company's changing schedules and cancellations and by those who otherwise chose
to change their travel plans.
6. After resumption of service, the Company's cost per ASM will
likely increase to some extent to reflect the cost of any additional maintenance
or safety procedures adopted by the Company and lower aircraft utilization
levels.
7. The Company may reduce its workforce permanently if the FAA,
safety concerns or lack of customer acceptance extends the period prior to the
Company reestablishing prior levels of service.
8. The aircraft destroyed was insured for $4.0 million which is in
excess of its book value. The Company carries $750 million of liability
insurance. Although the Company believes that such insurance will be sufficient
to cover all claims arising from the accident, there can be no assurance that
the aggregate of all claims will not exceed such insurance limits.
9. Several stockholder lawsuits have been filed against the Company
and certain of its officers and directors alleging, among other things,
violations of federal securities laws. While the Company denies that it has
violated any of its obligations under the federal securities laws and believes
that the lawsuits do not have any merit, there can be no assurance that the
Company will not sustain material liability under such or related lawsuits.
10. Various governmental authorities are conducting civil and criminal
investigations of the circumstances surrounding the accident. The Company is
cooperating with the authorities in connection with these investigations.
In light of these factors, persons investing in the securities of the
Company should be apprised of the following additional risks:
1. There can be no assurance that the Company will be able to
recover sufficient customer acceptance in order to regain profitability.
2. Even if the Company regains profitability, the Company may have
permanently lost a certain amount of customer support which could decrease the
Company's profitability indefinitely.
3. The Company may face losses of customer support as a result of
the shutdown of its operations in addition to the costs incurred during the
period operations have been affected.
4. If the National Transportation Safety Board (NTSB) were to
determine that the Company's maintenance procedures or aging aircraft
contributed to the cause of the accident, such determination could also have a
substantial adverse effect on the Company's future operations.
5. The occurrence of one or more subsequent incidents by ValuJet's
aircraft could likely have a substantial adverse effect on the Company's public
perception and future operations.
11
<PAGE>
As a result of the accident, the ensuing extraordinary review of the
Company's operations by the FAA and the reduction in the level of service by the
Company for an indefinite period of time, the Company's results for periods
prior to May 11, 1996 are not necessarily reflective of the results to be
expected in future periods. The following is a comparison of selected financial
data of the Company for the three and six months ended June 30, 1995 and 1996.
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------------------
June 30, 1995 June 30, 1996
------------------------------------------------ ------------------------------------
Percent of Per Percent of Per
Amount Revenues ASM Amount Revenues ASM
------------------- -------------- ----------- --------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
(000) (000)
Total operating revenues $ 86,913 100.0% 10.10c $ 81,217 100.0% 8.28c
======== ===== ===== ======== ===== =====
Expense Category:
- -----------------
Flight operations $ 3,487 4.0% 0.41c 5,415 6.7% 0.55c
Aircraft fuel 12,468 14.3 1.45 17,061 21.0 1.74
Maintenance 11,322 13.0 1.31 15,807 19.4 1.61
Station operations 11,631 13.4 1.35 14,749 18.2 1.51
Passenger services 2,185 2.5 0.25 3,632 4.5 0.37
Marketing and advertising 2,531 2.9 0.29 2,223 2.7 0.23
Sales and reservations 7,448 8.6 0.87 6,547 8.1 0.67
General and administrative 2,544 2.9 0.30 4,272 5.3 0.44
Employee bonuses 4,200 4.8 0.49 (550) (0.7) (0.06)
Depreciation 3,105 3.6 0.36 6,695 8.2 0.68
Nonrecurring expenses 0 0.0 0.00 31,623 38.9 3.23
Other expenses, net (778) (0.9) (0.09) (11,133) (13.7) (1.14)
-------- ----- ----- -------- ----- -----
Total expenses $ 60,143 69.2% 6.99c $ 96,341 118.6% 9.83c
======== ===== ===== ======== ===== =====
Six Months Ended
--------------------------------------------------------------------------------------
June 30, 1995 June 30, 1996
------------------------------------------------ ------------------------------------
Percent of Per Percent of Per
Amount Revenues ASM Amount Revenues ASM
------------------- -------------- ----------- --------- --------- --------------
Total operating revenues $147,660 100.0% 9.41c $191,212 100.0% 8.25c
======== ===== ===== ======== ===== =====
Expense Category:
- -----------------
Flight operations $ 6,195 4.2% 0.40c 12,933 6.8% 0.56c
Aircraft fuel 22,597 15.3 1.44 39,137 20.4 1.69
Maintenance 19,500 13.2 1.24 31,419 16.4 1.35
Station operations 20,621 14.0 1.31 32,641 17.1 1.41
Passenger services 3,710 2.5 0.24 7,624 4.0 0.33
Marketing and advertising 5,394 3.7 0.34 6,507 3.4 0.28
Sales and reservations 12,482 8.5 0.80 15,442 8.1 0.67
General and administrative 4,353 2.9 0.28 8,161 4.3 0.35
Employee bonuses 6,632 4.5 0.42 1,245 .7 0.05
Depreciation 5,603 3.7 0.36 13,211 6.9 0.57
Nonrecurring expenses 0 0.0 0.00 31,623 16.5 1.36
Other expenses, net (865) (0.6) (0.06) (10,576) (5.5) (0.46)
-------- ----- ----- -------- ----- -----
Total expenses $106,222 71.9% 6.77c $189,367 99.1% 8.16c
======== ===== ===== ======== ===== =====
</TABLE>
12
<PAGE>
Quarter over quarter comparison
- -------------------------------
Operating revenues
Total operating revenues decreased approximately 7% ($5,696,000) from the
second quarter 1995 to the second quarter 1996. This decrease was primarily due
to the reduction in traffic as a result of the May 11, 1996 accident and the
suspension of service on June 17, 1996. The average number of flights increased
from 172 flights per day during the second quarter 1995 to 190 flights per day
during the second quarter 1996 as the Company placed into service additional
aircraft and commenced service to additional markets. Total available seat
miles (ASMs) increased 14% from the three months ending June 30, 1995 to the
three months ending June 30, 1996 and revenue passenger miles (RPMs) decreased
14% during the same period due to lower load factors. The increase in ASMs was
attributable to increasing service levels up until May 11, 1996.
The load factor for the second quarter 1996 was approximately 56% compared to
approximately 74% for the second quarter 1995 due to a decrease in traffic as a
result of the accident and schedule unreliability during the period of intensive
FAA scrutiny. Meanwhile, the average fare increased to $73.79 for the three
months ending June 30, 1996 from $66.31 for the three months ended June 30, 1995
primarily due to a 4% increase in stage length and the Company's decision not to
reduce gross fares upon the expiration of the 10% federal excise tax on air
transportation as of January 1, 1996.
Expenses
Flight operations expenses include all expenses related directly to the
operation of the aircraft other than aircraft fuel, maintenance expenses, and
passenger services expenses. Expenses for hull insurance and compensation of
pilots (exclusive of bonuses) are included in flight operations. Also included
are expenses related to flight dispatch and flight operations administration.
Expenses for flight operations per ASM increased from approximately .41c per ASM
in the second quarter of 1995 to .55c per ASM in the second quarter of 1996 due
to the Company reducing its schedule by more than 40% shortly after the May 11,
1996 accident and suspending operations as of June 17, 1996.
Aircraft fuel expenses include both the direct cost of the fuel as well as
the costs of delivering fuel into the aircraft. On a per ASM basis, fuel expense
increased from 1.45c per ASM during the second quarter 1995 to 1.74c per ASM
during the second quarter 1996. The Company's average fuel cost increased from
approximately $.60 per gallon for the second quarter 1995 to approximately $.72
per gallon for the second quarter 1996 while fuel burn per block hour decreased
from 870 gallons to 858 gallons over the same period. Approximately $.04 per
gallon of this increase was due to the expiration as of October 1, 1995 of the
airlines' exemption to a certain excise tax applied to fuel.
Maintenance expenses include all expenses related to the upkeep of the
aircraft and ground equipment. Such expenses include maintenance labor, parts
and supplies. The cost of engine overhauls and routine maintenance costs for
aircraft and engine maintenance are charged to maintenance expense as incurred.
Maintenance expenses increased 40% from the second quarter 1995 to the second
quarter 1996. Maintenance expenses in prior periods were lower as a result of
the Company having a fewer number of aircraft, and since each aircraft acquired
by the Company entered service immediately following a scheduled maintenance
check, no scheduled maintenance was required during the first several months of
each aircraft's operations. Due to the Company's use of a continuous overhaul
program, the Company's aircraft are generally scheduled for some level of
overhaul procedures within twelve months of the purchase date. Maintenance
expenses were also impacted by the intense FAA inspections during May and June
requiring certain scheduled maintenance procedures to be performed in advance of
their regular schedule.
Station operations expenses include all expenses incurred at the airports, as
well as station operations administration. Station operations expenses include
landing fees, facilities rental, station labor, passenger liability insurance
and ground handling expenses. Station operations expenses increased
approximately 27% ($3,118,000) from the second quarter 1995 to the second
quarter 1996, primarily due to an increase in the number of cities served and an
increase in the number of departures. The Company served 24 cities at the end
of the second quarter 1995 and increased that number to 31 during the second
quarter 1996. In addition, departures increased from approximately 15,449 during
the second quarter 1995 to 17,060 during the second quarter 1996, and the
average cost per departure increased from approximately $753 to approximately
$865 over the same period primarily as a result of the reduced schedule during
May and June and the suspension of operations as of June 17, 1996.
13
<PAGE>
Passenger services expenses include flight attendant wages and benefits and
catering expenses. Also included are the costs for flight attendant training
and flight attendant overnight expenses. Passenger services expenses for the
second quarter 1996 increased approximately 66% over the second quarter 1995
level as the number of departures rose approximately 10%. The Company also spent
more on hotel costs and training. Hotel expenditures increased due to the
Company operating a schedule which required more overnight stays by flight crew
and the impact of the irregular schedule operated between May 12, 1996 and June
17, 1996. Additional training expenses were incurred to train flight crew to
operate the MD-80 series aircraft which were placed into service during the
quarter. The Company also incurred certain additional costs related to the
reduced and suspended operations during May and June.
Marketing and advertising expenses include all advertising expenses and wages
and benefits for the marketing department. Marketing and advertising expenses,
as a percentage of revenues, decreased from 2.9% in the second quarter 1995 to
2.7% in the second quarter 1996 due to the Company's suspension of advertising
after the May 11, 1996 accident.
Sales and reservations expenses include all of the costs related to recording
a sale or reservation. These expenses include wages and benefits for
reservationists, rent, telecommunication charges, credit card fees and travel
agency commissions. Sales and reservations expenses remained flat as bookings
dropped off and more time was spent refunding customers. The costs related to
refunding reservations as a result of the accident and shutdown are included in
the nonrecurring expense line item.
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 other
miscellaneous expenses. General and administrative expenses increased 68% from
the second quarter 1995 to the second quarter 1996. This increase in expense
was primarily due to the Company's continuing expansion as evidenced by the
addition of three cities at the beginning of May. The Company also experienced
an increase in legal and consulting costs.
Employee bonuses for the second quarter 1995 and the second quarter 1996 were
accrued at approximately 14% and (5%), respectively, of pretax, pre-bonus
income. The negative accrual is a result of reducing the year-to-date accrual
given the second quarter results. The actual amount to be paid out and the form
of such pay-out are at the sole discretion of the Company's Board of Directors.
Depreciation expense includes depreciation on aircraft and ground equipment,
but does not include any amortization of start-up and route development costs as
all of these costs are expensed as incurred. Depreciation expense increased
116% from $3,105,000 in the second quarter 1995 to $6,695,000 in the second
quarter 1996 as additional aircraft and other property have been acquired. The
Company operated 28 aircraft with an average acquisition price of approximately
$3.4 million at the end of the second quarter 1995 as compared to 51 aircraft
with an average acquisition price of approximately $4.8 million at the end of
the second quarter 1996. Also, certain depreciation expense on unused assets is
included in the shutdown and other nonrecurring expenses line item.
Shutdown and other nonrecurring expenses include those expenses that are
identified as relating to the May 11, 1996 accident, the extraordinary FAA
review of operations and the subsequent reduced schedule and shutdown. These
expenses include extra maintenance costs, labor, hotel expenses, facility rental
on unused facilities, certain passenger related expenses, depreciation on unused
assets, unusual maintenance costs due to the FAA inspections, the FAA fee to be
paid, reservations expenses related to refunds, and various consulting and legal
expenses.
Other expenses (income), net includes interest income and interest expense.
During the second quarter of 1996, interest expense exceeded interest income by
approximately $3,543,000 due to increasing debt levels attributable to the
acquisition of aircraft and the completion of the issuance of $150 million
10.25% Senior Notes due 2001. The Company also recognized income of $14.7
million related to gains from insurance proceeds on loss of aircraft and an
arrangement fee for aircraft transfers.
Year-to-date over year-to-date comparison
- -----------------------------------------
Operating revenues
Total operating revenues increased approximately 29% ($43,553,000) from the
six months ended June 30, 1995 to the six months ended June 30, 1996. This
increase was due to several factors. The average number of flights increased
from
14
<PAGE>
156 flights per day to 222 flights per day during the same period as the Company
placed into service additional aircraft and commenced service to additional
markets. Total available seat miles (ASMs) increased 47% from the six months
ending June 30, 1995 to the six months ending June 30, 1996 and revenue
passenger miles (RPMs) increased 21% during the same period. The increases in
ASMs and RPMs were attributable to increasing service levels prior to the
accident.
The load factor for the first six months of 1996 was approximately 57%
compared to approximately 69% for the first six months of 1995 due to a 17%
increase in passengers and a 47% increase in ASMs over the same period. The
load factor was also negatively impacted by the accident on May 11, 1996 and
schedule unreliability during intensive FAA scrutiny. Meanwhile, the average
fare increased to $72.75 for the six months ending June 30, 1996 from $65.63 for
the six months ended June 30, 1995 primarily due to the Company's decision not
to reduce gross fares upon the expiration of the 10% federal excise tax on air
transportation as of January 1, 1996. The Company did, however, match the lower
fares of the industry in February, but in March returned fares to near their
previous levels.
Expenses
Expenses for flight operations per ASM increased from approximately .40c per
ASM for the six months ended June 30, 1995 to .56c per ASM for the six months
ended June 30, 1996 as the Company spent approximately $2.0 million to
subcontract replacement aircraft due to two of the Company's aircraft requiring
substantial unplanned repairs. Both of these aircraft were put back into
scheduled service in the second quarter 1996. These expenses were also
impacted by the reduction in schedule shortly after the May 11 accident and the
subsequent shutdown of operations on June 17, 1996.
Aircraft fuel cost increased approximately 73% from the first six months of
1995 to the first six months of 1996 primarily due to an increase in the cost of
fuel and a 47% increase in ASMs. The Company's average fuel cost increased from
approximately $.60 per gallon for the six months ended June 30, 1995 to
approximately $.70 per gallon for the six months ended June 30, 1996 while fuel
burn per block hour decreased from 880 gallons to 846 gallons over the same
period. Approximately $.04 per gallon of this increase was due to the expiration
as of October 1, 1995 of the airlines' exemption to a certain excise tax applied
to fuel. Fuel expenses were also impacted by additional ferrying and
positioning flights made necessary as a result of the FAA intensive
investigation.
Maintenance expenses increased 61% from the first six months of 1995 to the
first six months of 1996. Maintenance expenses in prior periods were lower as a
result of the Company having a fewer number of aircraft, and since each aircraft
acquired by the Company entered service immediately following a scheduled
maintenance check, no scheduled maintenance was required during the first
several months of each aircraft's operations. Due to the Company's use of a
continuous overhaul program, the Company's aircraft are generally scheduled for
some level of overhaul procedures within twelve months of the purchase date.
The Company's maintenance expenses were also negatively impacted by the
intensive FAA investigation beginning shortly after the May 11, 1996 accident.
Station operations expenses increased approximately 58% ($12,020,000) from
the six months ended June 30, 1995 to the six months ended June 30, 1996,
primarily due to an increase in the number of cities served, an increase in the
number of departures and the disruption of service during the second quarter of
1996. Departures increased from approximately 28,030 during the first six
months of 1995 to 39,875 during the first six months of 1996, and the average
cost per departure increased from approximately $736 to approximately $819 over
the same period primarily as a result of irregular operations due to weather
during the first quarter 1996 and irregular operations due to FAA inspections
during the second quarter 1996.
Passenger services expenses for the first six months of 1996 increased
approximately 105% over the first six months of 1995 as the number of departures
rose approximately 42% and the number of passengers increased approximately 17%.
The Company also spent more on hotel costs and training. Hotel expenditures
increased due to the Company operating a schedule which required more overnight
stays by flight crew, the impact of severe weather which caused unplanned
overnight stays during the first quarter of 1996 and the disruption in service
during the second quarter of 1996. Additional training expenses were incurred
to train flight crews to operate the MD-80 series aircraft which were placed
into service during the second quarter.
Marketing and advertising expenses, as a percentage of revenues, decreased
from 3.7% in the first six months of 1995 to 3.4% in the first six months of
1996 due to the Company halting all advertising as of May 11, 1996.
15
<PAGE>
Sales and reservations expenses increased 24% from the six months ended June
30, 1995 to the six months ended June 30, 1996 as the number of bookings
increased approximately 10%. Sales and reservations expenses were also impacted
by the severe weather during the first quarter 1996 as additional agents were
utilized to answer flight information calls and were also impacted by the
disruption in service during the second quarter 1996.
General and administrative expenses increased 87% from the six months ended
June 30, 1995 to the six months ended June 30, 1996. This increase in expense
was primarily due to the Company's continuing expansion and increases in legal
and consulting costs.
Depreciation expense increased 136% from $5,604,000 for the first six months
of 1995 to $13,211,000 for the first six months of 1996 as additional aircraft
and other property have been acquired.
Other expenses (income), net includes interest income and interest expense.
During the six months ended June 30, 1996 interest expense exceeded interest
income by approximately $4,100,000 due to increasing debt levels attributable to
the acquisition of aircraft and the issuance during April of $150 million of
10.25% Senior Notes due 2001. The Company also recognized income of $14.7
million related to gains from insurance proceeds and an arrangement fee for
aircraft transfers.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1996, the Company used cash flow in
operating activities of approximately $8.8 million and used cash of
approximately $116.7 million to acquire property and equipment (of which
approximately $70.6 million was funded through the issuance of long-term debt).
On April 17, 1996, the Company closed a private offering of $150,000,000
principal amount of 10 1/4% Senior Unsecured Notes due April 15, 2001. Interest
is payable on the Notes semi-annually. The Indenture under which the Notes have
been issued provides for certain limitations on the ability of the Company and
its subsidiaries to incur additional indebtedness, pay dividends and make
certain investments. As of June 30, 1996, the Company had cash and cash
equivalents of approximately $208 million and working capital of approximately
$185.0 million.
As of June 30, 1996, the Company's fleet consists of 43 DC-9-30 aircraft,
four MD-80 aircraft and four DC-9-21 aircraft, with an additional four DC-9-30
series aircraft and six MD-80 series aircraft currently under contract for
delivery during the remainder of 1996. The Company is actively trying to sell
all of the MD-80 aircraft, the four DC-9-21 aircraft and two of the four DC-9-30
aircraft scheduled to deliver. The Company is also actively trying to sell or
lease up to 15 of its DC-9-30 aircraft that may not be in the Company's short-
term operating plans.
The Company has contracted with McDonnell Douglas for the purchase of 50 MD-
95 aircraft, at a cost of approximately $1.0 billion, for delivery in 1999 to
2002. Approximately $60,000,000 of this amount will be paid in progress
payments during 1996 to 1998. The balance of the purchase price after all
progress payments will need to be paid or financed upon delivery of each
aircraft. If the Company exercises its option to acquire up to an additional 50
MD-95 aircraft, additional payments could be required beginning in this period.
The Company expects to finance at least 80% of the cost of each of these
aircraft. Although McDonnell Douglas has agreed to provide assistance with
respect to the financing of aircraft to be acquired, the Company will be
required to obtain the financing from other sources. The Company believes that
aircraft related debt financing, coupled with the assistance to be provided by
McDonnell Douglas, should be available when needed.
There is no assurance that the Company will be able to obtain sufficient
financing on attractive terms. If it is unable to do so, the Company could be
required to modify its aircraft acquisition plans or to incur higher than
anticipated financing costs, which could have a material adverse effect on the
Company's results of operations and cash flows.
The Company's compliance with Stage 3 noise requirements will require
substantial additional capital expenditures over the next several years. By
December 31, 1999, all of the Company's aircraft must be brought into compliance
with Stage 3 requirements. The Company intends to meet its Stage 3 noise
requirement obligations by installing hush kits on Stage 2 aircraft and
acquiring Stage 3 aircraft. The Company expects that the FAA certified hush
kits will cost approximately $1.8 million per aircraft or approximately $46.8
million for a fleet of 25 non-hushed DC-9-32 aircraft as of June 30, 1996. Any
disposition of Stage 2 aircraft would reduce this obligation. The Company
expects to finance a portion of the cost of these hush kits and to make the
balance of payments on these hush kits out of its working capital. The Company
expects to pay the debt service on such loans out of working capital generated
from operations during the term of the financing. The phase
16
<PAGE>
in period for full compliance with Stage 3 (until December 31, 1999) and the
term of the financing will allow the Company to spread the payments for Stage 3
compliance over a number of years.
As of June 30, 1996, the Company's long-term debt related to asset financing
was $162.4 million, with respect to which the Company's aircraft and certain
other equipment are pledged as security. Certain debt bears interest at fixed
rates ranging from 6.8% to 9.78% per annum and is repayable in consecutive
monthly or quarterly installments over a four- to ten-year period. During the
second quarter 1996, the Company prepaid $5.8 million of fixed rate debt without
penalty. The notes prepaid had interest rates ranging from 9.93% to 11.5%.
Certain other notes with an aggregate unpaid principal balance of approximately
$15.6 million as of June 30, 1996, have a variable rate of interest based on the
London interbank offered rate (LIBOR) plus 1.85% to 3% (1.85% at June 30, 1996
and December 31, 1995) based on the Company's compliance with specific financial
ratios concerning leverage and fixed charge coverage. Certain other notes have
a variable rate of interest based on LIBOR plus a range of 1.15% to 1.50%. A
substantial portion of the secured notes require prepayment if specific
financial ratios (concerning debt to equity, net worth, fixed charge coverage
and current ratio) are not maintained. During the period since the Company's
suspension of operations, the Company has continued to make all payments under
its secured debt when due and the Company has not received any notices of
default from its creditors. The Company has purchased all of its aircraft and
consequently, has no lease commitments relating to its aircraft fleet. All of
such aircraft financing debt will mature by May 2006. The Company anticipates
that it will be in violation of certain covenants related to some of its
aircraft secured debt by September 30, 1996, as a result of the Company's
suspension of operations subsequent to the accident of Flight 592. The Company
expects to enter into negotiations with the affected lenders in an effort to
avoid any declarations of default. There can be no assurance that such
negotiations will be successful.
During the period of the Company's suspended operations the Company has
furloughed more than 90% of its personnel to reduce costs during this period.
Although the Company has sufficient cash assets to pay its recurring obligations
and debt service for an extended period of time, the Company's failure to resume
flight operations may result in defaults under the Company's secured debt and
the acceleration of the Company's debt. In such event, there can be no
assurance that the Company would be able to satisfy all of its obligations on a
timely basis. The Company is unable to predict with certainty when the
appropriate governmental agencies will approve the recommencement of the
Company's flight operations.
17
<PAGE>
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
- -----------------------------
As a result of the Company's issuance of 10 1/4% Senior Notes due 2001 on
April 17, 1996, the Company has entered into an Indenture which limits the
amount of dividends that may be paid with respect to the Company's Common Stock.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
The annual meetings of Stockholders of the Company were held on May 23, 1996.
At the meeting, the entire Board of Directors of the Company was reelected by
the following votes: (1) Don Chapman: Shares Voted For - 45,498,996, Shares
Withholding Authority - 184,615; (2)Timothy P. Flynn: Shares Voted For -
45,523,722, Shares Withholding Authority -159,889;(3)Maurice J. Gallagher, Jr.:
Shares Voted For - 45,535,556, Shares Withholding Authority - 148,055;(4) Lewis
H. Jordan: Shares Voted For - 45,535,343, Shares Withholding Authority -
148,268;(5) Robert L. Priddy: Shares Voted For - 45,535,041, Shares Withholding
Authority - 148,570. In addition, the Company's 1996 Stock Option Plan was
approved by the Stockholders at the meeting by a vote of 35,128,892 shares for
approval of the plan, 5,448,284 shares against approval of the plan and 94,947
shares abstaining.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) The following exhibits are filed as part of this report. The exhibit
numbers refer to Item 601 of Regulation S-K.
10 - Consent Order In the Matter of ValuJet Airlines, Inc. with United
States Department of Transportation, Federal Aviation Administration
11 - Statement Re: Computation of Earnings Per Share
(b) Reports on Form 8-K. A Form 8-K dated April 17, 1996, was filed during the
quarter ended June 30, 1996, reporting the closing of a private offering of
$150,000,000 principal amount of 10 1/4% Senior Notes due 2001.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VALUJET, INC.
Date: August 12, 1996 /s/ Robert L. Priddy
--------------------------------------------------
Robert L. Priddy
Chairman of the Board and Chief Executive Officer
Date: August 12, 1996 /s/ Michael D. Acks
--------------------------------------------------
Michael D. Acks
Controller and Chief Accounting Officer
19
<PAGE>
EXHIBIT 10
UNITED STATES DEPARTMENT OF TRANSPORTATION
FEDERAL AVIATION ADMINISTRATION
ATLANTA, GEORGIA
In the Matter of: ValuJet Airlines, Inc.
- ----------------
FAA Enforcement Investigative Reports
96SO110070 96SO110076 96SO110089 96SO110097 96S0O10099 96SO110102
96SO110109 96SO110111 96SO110115 96SO110116 96SO110117 96SO110118
96SO110119 96SO110120 96SO110121 96SO110122 96SO110123 96SO110124
96SO110125 96SO110126 96SO110127 96SO110129 96SO110134 96SO110135
CONSENT ORDER
-------------
Considering the Enforcement Investigative Reports enumerated above, the Federal
Aviation Administration (FAA) has concluded that ValuJet Airlines, Inc.,
("ValuJet") under its authority to operate as an air carrier under Part 121 of
the Federal Aviation Regulations (FAR) (14 C.F.R. 121), conducted airworthiness
and aircraft maintenance related activities, and flight operations, contrary to
and in violation of the FAR's, as specified in Attachment 1.
The FAA acknowledges ValuJet's cooperative attitude and its commitment to return
to airline operations at the highest level of safety. In consideration of the
foregoing, the FAA and ValuJet have reached an agreement on this matter under
which both are willing to accept the issuance of this Consent Order to avoid
potential litigation and expedite the resumption of ValuJet's
operations.
The FAA acknowledges that ValuJet's execution of, and payment in accordance
with, this Consent Order does not constitute or imply an admission by ValuJet of
the facts, circumstances, and regulatory violations averred in Attachment 1 of
this Consent Order.
This Consent Order is issued under the authority contained in 49 U.S.C. Sections
46105, 46301 and 44709, and 14 C.F.R. 13.13.
ValuJet agrees that it will pay to the FAA $2,000,000 (two million dollars) as
remedial, not punitive, payment representing and reflecting the costs incurred
by the FAA to investigate, review, establish, reinspect, and ultimately enforce
this consent order. ValuJet agrees that this consent order only addresses
reimbursement to the FAA and does not constitute a penalty for any possible
violations of federal regulations, and does not constitute a penalty of any kind
for purpose of criminal violations, including any violations of federal criminal
law.
1
<PAGE>
ValuJet agrees that it shall not raise any claim or defense based on, or because
of, this consent order or any payments made pursuant to this consent order,
including, but not limited to, double jeopardy, excessive fines, collateral
estoppel, and equitable estoppel, in any civil action brought by any government
agency other than the FAA, and in any criminal action brought by any government
agency.
ValuJet does not, by agreeing to the entry of this consent order, waive its
right to contest on the merits any and all allegations of criminal violations or
conduct.
The FAA agrees that, except for violations of regulations concerning hazardous
materials and civil aviation security, it will not pursue any civil penalty for
any violation of the regulations known by FAA as of the date and time of the
execution of this agreement.
ACCORDINGLY, it is hereby Ordered as follows:
1. In accordance with its responsibility to promote and regulate the safety of
air transportation and the public interest, the FAA issues this Consent
Order. In accordance herewith, ValuJet will cease all revenue service under
14 CFR Part 121 on or before 11:59 p.m. EST on June 17, 1996. ValuJet
further agrees to deposit its Air Carrier Operating Certificate to the
Atlanta Flight Standard District Office (FSDO) on or before 11:59 p..m. EST
on June 19, 1996. The FSDO will maintain possession of the certificate
until such time as the FAA determines that ValuJet is qualified and capable
of exercising the privileges of the holder of an Air Carrier Operating
Certificate. The FAA agrees to accommodate ValuJet, in accordance with
regulations and FAA directives, to reposition aircraft, establish pilot
qualifications , and maintain pilot currency.
2. ValuJet agrees to pay $2,000,000 (two million dollars) to the Federal
Aviation Administration by check or money order and addressed or delivered
to the FAA Southern Region, Office of Assistant Chief Counsel as follows:
a) $500,000 (five hundred thousand dollars) paid at the time
of the execution of this agreement.
b) The balance of $1,500,000 (one million five hundred thousand dollars)
paid within ten days of the date operations are resumed, or within 60
days of the date of execution of this agreement, whichever comes
first.
2
<PAGE>
3. ValuJet agrees to present a plan to the Atlanta Flight Standards District
Office (FSDO), in accordance with Attachment 2, specifying the methods and
schedule to satisfactorily demonstrate its qualifications to hold an Air
Carrier Operating Certificate. ValuJet specifically agrees that its initial
plan will be limited to operations and maintenance of 15 specific aircraft
under 14 CFR Part 121.
4. ValuJet hereby waives any and all rights to appeal or otherwise seek
judicial review of this Consent Order. However, both parties retain the
right to judicially enforce the provisions hereof in the appropriate
federal court.
FOR FAA:
/s/ Eddie L. Thomas 6/18/96
- --------------------------------- --------------
Eddie L. Thomas Date
Assistant Chief Counsel
FAA Southern Region
FOR VALUJET AIRLINES, INC.:
/s/ Marshall S. Filler 6/18/96
- --------------------------------- --------------
Marshall S. Filler Date
Counsel for ValuJet Airlines, Inc.
3
<PAGE>
ATTACHMENT 1
------------
1. In March 1996, ValuJet failed to document the specifics of the corrosion
tasks performed in its Corrosion Control and Prevention Program on at least two
aircraft.
2. On or about May 25, 1996, a ValuJet mechanic released for return to service
N913VV, DC-9-32, after inspecting the nosewheel compartment, when the cover for
the external power connection in that compartment was missing.
3. On May 6, 1996, ValuJet personnel inappropriately referred to an MEL
provision concerning Aux Fuel Tank Quantity Gauges to defer maintenance on the
Aux Tank Fuel Pumps, for which circuit breakers had popped in operation.
4. On or about March 22, 1996, ValuJet Flight #274 from Atlanta, Georgia, to
Columbus, Ohio, experienced an in-flight loss of cabin pressurization resulting
in a emergency descent. ValuJet failed to report the malfunction of the
pressurization system and the resulting emergency action on a Mechanical
Reliability Report as required by ValuJet Standard Practice No. 8170.
5. ValuJet failed to inspect Contract Fueling Agency equipment, storage
facilities, and records at Boston for a period of approximately eight months
prior to March 27, 1996, and at Savannah for a period of approximately six
months prior to May 9, 1996. ValuJet's Standard Practice 8908 requires that
periodic checks of the Contract Fueling Agency's equipment and storage
facilities be performed at least monthly and reported to the Chief Inspector.
6. On March 27, 1996, ValuJet personnel failed to properly follow
troubleshooting procedures specified in the maintenance manual concerning
engine drive generators.
7. On or about May 17,1996, ValuJet N919VV was ferried from DFW to ATL for
service on the main cabin door's gust lock. The aircraft was subsequently
returned to service without conclusive documentation that this non-deferrable
discrepancy had been corrected.
8. On or about May 11, 1996, an inspection of the training and qualifications
records revealed that a Pilot in Command Line Check entry was not signed and
dated by the ValuJet Reviewing Official and that the Check Airman failed to
sign a Flight Safety Proficiency Check. The same inspection revealed that a
Second in Command Line Check entry on the Pilot Training Records Checklist was
not signed and dated by the ValuJet Reviewing Official and that a Flight Safety
Training Record contained entries for only four simulator sessions, not the
required six or more.
9. On or about June 8, 1995, the nose landing gear on ValuJet N930VV failed to
retract after takeoff from Boston-Logan Airport and failed to properly extend
prior to the unscheduled landing back at Boston-Logan Airport. ValuJet
maintenance personnel found
4
<PAGE>
the aircraft safe for a ferry flight to Dulles Airport, provided the aircraft
be ferried with the landing gear in the down position as required in ValuJet's
Standard Practice (8165.4(a)(3) and (4)). During the ferry flight, the flight
crew cycled the landing gear up and down several times. ValuJet maintenance
personnel at Dulles Airport subsequently "noted" that the gear was functioning
normally, and returned the aircraft to revenue service with no further action.
10. On or about July 23, 1995, a discrepancy was entered in ValuJet N930VV's
permanent maintenance record that the main cabin door would not overcenter lock
with the handle. ValuJet maintenance personnel cleared the discrepancy by
adjusting the locking mechanism, but failed to insure that the repair received
a Required Inspection and certification by an authorized person as required
under ValuJet Standard Practice 8100.4(f).
11. On March 16, 1996, an entry was made in the aircraft logbook for N905VJ, a
DC-9-32, indicating that the #1 engine cowl and had a hole in it. ValuJet
improperly deferred the discrepancy and assigned the item to a non-routine work
card. ValuJet's Standard Practice Manual, Section 8218.2, prohibits deferral
of items which affect airworthiness. A hole in the engine cowl affects
airworthiness in that it degrades the operation of the engine fire protection
system. ValuJet operated N905VJ on eight (8) flights when the aircraft was in
unairworthy condition by reason of the hole in the engine cowl.
12. On June 3, 1996, an entry was made in the flight log of N942VV, a DC-9-32,
indicating that a hydraulic accumulator pressure gauge had hydraulic fluid
inside the face of the gauge. ValuJet improperly deferred the discrepancy and
issued the above item deferral number DSO4585, to be complied with on the next
"C" check. ValuJet's Standard Practice Manual, Section 8218.2, prohibits
deferral of items which affect airworthiness. Hydraulic fluid inside the face
of the hydraulic accumulator pressure gauge affects airworthiness in that
overall performance could be degraded and continued operation could cause a
loss of hydraulic system pressure. ValuJet operated N942VV on seven (7)
flights when it was not in airworthy condition by reason of the improper
deferral of the hydraulic accumulator pressure gauge.
13. On or about July 30, 1995, the flight log indicated that aircraft N919VV,
a DC-9 traveling from IAD to RDU, was struck by two birds on the two right
outboard leading edge slats. Maintenance inspected the aircraft as required by
Chapter 5 of the Aircraft Maintenance Manual, but did not record the results of
their inspection in their log book or file a Special Inspection Compliance
Record to Quality Assurance as required by ValuJet Standard Practice 8115.
14. Between June 5, 1995 and March 14, 1996, the weather radar system on
N930VV was written up in the Aircraft Maintenance Record as inoperative by
flight crews thirty-one times without effective repair.
15. On or about October 28, 1995, the flight log indicated that aircraft
N919VV, traveling from IAD to RDU, was struck by lightning on the nose cone.
A mechanic signed off on the nose cone without completing all of the required
inspection and maintenance practices as
5
<PAGE>
required by Chapter 5 of the Aircraft Maintenance Manual or filing a Special
Inspection Compliance Record to Quality Assurance as required by ValuJet
Standard Practice 8115.
16. On or about August 27, 1995, the flight log indicated that the center
windshield of aircraft N919VV became delaminated in the lower right corner. On
or about August 29, 1995, the windshield panel was replaced after at least 7
passenger-carrying revenue flights were conducted in the interim.
17. On or about July 30, 1995, the flight log indicated that aircraft N919VV
was struck by lightning on the aileron. A temporary repair was made, however,
as of May 29, 1996, the aircraft was used to conduct at least 9 passenger-
carrying revenue flights although no permanent repair had been accomplished and
no form VJ-M036 had been completed.
18. On or about June 5, 1996, the life limits of 4 Turbine Disks in the Pratt
& Whitney JT8D-9A engine installed in N919VV, which are required to be
overhauled on a specified time basis, were being tracked by ValuJet's Records
Master File with incorrect life limits.
19. On or about June 5, 1996, the life limits of 3 Turbine Disks and a
Compressor Disk in the Pratt & Whitney JT8D-9A engine installed in N930VV,
which are required to be overhauled on a specified time basis, were being
tracked by ValuJet's Records Master File with incorrect life limits.
20. During an inspection conducted of ValuJet at Dulles Airport (IAD) on or
about June 1, 1996, ValuJet was unable to produce records of filter changes of
service carts utilized at IAD for hydraulic and engine oil. ValuJet's Standard
Practice No. 8226 requires that all ValuJet equipment used for servicing
hydraulic reservoir and CSD fluid systems have their filters changed every 60
days to prevent contaminants from entering aircraft fluid systems and that such
filter replacement be recorded.
21. Between May 22 and June 1, 1996, ValuJet operated at least seven aircraft
on approximately 79 revenue flights when they were out of compliance with the
lavatory flush motor AD. Additional inspection revealed that a least 9 other
aircraft were not in compliance with the AD.
22. ValuJet failed to comply with AD-95-12-25, which requires an inspection to
prevent chafing of a hole in the FIREX supply pipe of the number one engine.
ValuJet operated aircraft N127NK on 24 flights between May 22 and June 1, 1996,
when it was out of compliance with the AD.
23. On or about February 27, 1996, ValuJet repaired a fuel leak on civil
aircraft N920VV by tightening the screws which secure the wing fuel tank
structural access panels and deferring the discrepancy. The manufacturer's
maintenance manual requires that a torque wrench be used for such repair and
that each screw be tightened to a specific torque value. ValuJet performed the
maintenance with a conventional ratchet and failed to use a torque
6
<PAGE>
wrench. ValuJet also improperly described the leak in the maintenance log
resulting in the wrong part being worked on when the deferred item was
repaired.
24. FAA Inspectors observed that the left gear flap follow-up cables were mis-
routed (the cables were crossed), contrary to ValuJet's DC-9 maintenance
manual, section 9-2750-1-9801, on at least three aircraft.
25. FAA Inspectors determined that ValuJet returned to service at least six
ValuJet aircraft when the flap bus cable either showed obvious signs of
improper tension or had tension below the allowable limit. In addition,
ValuJet assigned a mechanic to conduct the inspection of a flap bus cable on
N913VV when the mechanic was not qualified to do so.
26. An FAA Inspector observed a mechanic performing an "A" check on N917VV and
noted that the tailcone slide was not rigged properly. Upon inquiry by the FAA
Inspector, the mechanic stated that he did not know how it was rigged and that
this was his first aviation job. FAA Inspectors determined that at least three
ValuJet aircraft did not have tailcones rigged properly.
27. On or about May 22, 1996, a ValuJet mechanic released for return to
service N803VV, a DC-9-80, after performing maintenance on the cockpit lighting
system without satisfactorily having performed that work at an earlier date or
under the direct supervision of someone who had appropriate previous
experience.
28. On or about May 22, 1996, a ValuJet mechanic released for return to
service N5342L, a DC-9-32, after inspecting the pilot and copilot instrument
panel secondary latch system, when the mechanic did not know what the secondary
latches were.
29. On or about May 22, 1996, a ValuJet mechanic released for return to
service N5342L, a DC-9-32, after inspecting the E&E compartment, without
detecting that five out of twelve screws were missing from a overhead panel in
that compartment.
30. On or about May 22, 1996, a ValuJet mechanic used a dial pressure gauge to
determine the pressure of the tires on N919VV, a DC-9-32, without determining
the calibration status of the gauge.
31. On or about May 23, 1996, a ValuJet mechanic released for return to
service N529MD, a DC-9-32, after inspection of the flight control system when
there was an improper composite repair of the right hand flap.
32. On or about May 23, 1996, a ValuJet mechanic released for return to
service N919VV, a DC-9-32, after inspection of the flight controlled system
when there was an improper composite repair of the right hand flap.
7
<PAGE>
33. On or about May 25, 1996, a ValuJet mechanic released for return to
service N913VV, DC-9-32, after inspecting the nosewheel compartment, when the
cover for the external power connection in that compartment was missing.
34. On ValuJet aircraft N922VV an FAA Inspector observed that a lavatory fire
extinguisher was not properly installed in that one of the discharge nozzles
was not routed to the trash container. As of June 6, 1996, ValuJet personnel
were unable to provide documentation for installation of this type of fire
extinguishers, which is properly installed on a Boeing 727/737 aircraft.
Considering the above, the FAA alleges that ValuJet violated the following
sections of the Federal Aviation Regulations:
1. 121.105 in that ValuJet failed to ensure that competent personnel and
adequate facilities and equipment are available at such points along the air
carrier's route as are necessary for the proper servicing, maintenance, and
preventative maintenance of airplanes and auxiliary equipment.
2. 121.135(a) in that ValuJet failed to include in a required manual
instructions and information necessary to allow the personnel concerned to
perform their duties and responsibilities with a high degree of safety.
3. 121.3(a) by engaging in scheduled interstate air transportation within the
48 contiguous United States or the District of Columbia in violation of
appropriate operations specifications.
4. 121.367(a) in that ValuJet's inspection program failed to insure that
maintenance is performed in accordance with the certificate holder's manual.
5. 121.375 in that ValuJet performed maintenance and failed to have a training
program to ensure that each person who determines the adequacy of work done is
fully informed about procedures and techniques and new equipment in use and is
competent to perform his duties.
6. 121.380(a)(2) by failing to keep records documenting performance of the
CPCP.
7. 121.380(a)(2)(iii) by failing to keep accurate records of the time since
last overhaul of all items installed on the aircraft which are required to be
overhauled on a specified time basis.
8. 121.628(a)(5) in that ValuJet aircraft contrary to the applicable
conditions and limitations contained in the ValuJet MEL.
9. 121.683(a)(1) by failing to keep complete pilot training and qualification
records.
8
<PAGE>
10. 121.703(a)(16) in that ValuJet failed to report the occurrence or
detection of the failure, malfunction or defect concerning aircraft components
or systems that result in taking emergency actions during flight.
11. 39.3 by operating a product to which an airworthiness directive applies
without complying with that directive.
12. 43.13(a) by performing maintenance on an aircraft, engine, or appliance
and failure to use the methods, techniques, and practices acceptable to the
Administrator.
13. 43.13(b) by maintaining or altering an aircraft, engine, or appliance and
not doing the work in such a manner and use materials of such a quality that
the condition of the aircraft, airframe, aircraft engine, or appliance worked
on will be at least equal to its original or properly altered condition.
14. 91.7 and 121.153(a)(2) by operating aircraft not in an airworthy
condition.
9
<PAGE>
ATTACHMENT 2
------------
In lieu of responding to the specific findings of the FAA's preliminary interim
report of May 30, 1996, and any other report arising out of the FAA's
inspection activities prior to the date of this agreement, ValuJet Airlines,
Inc., agrees to present a plan to the Atlanta Flight Standards District Office
(FSDO) specifying the methods and schedule to accomplish the following in its
efforts to satisfactorily demonstrate its qualifications to hold an Air Carrier
Operating Certificate as follows:
I. INITIAL PHASE
-------------
Plan of action to return to service. The plan must include:
Schedule of events.
Company operating manuals in one standard format.
Management qualifications and resumes.
Initial compliance statement addressing changes to ValuJet's operations and
manuals.
Maintenance Contractor Audits for vendors performing "N" checks or higher.
II. DOCUMENTATION COMPLIANCE PHASE
------------------------------
This phase will specifically address the following areas:
Training curriculum:
Maintenance personnel.
Inspection personnel.
Ground Handling/Personnel.
Station Personnel.
Hazardous Materials.
Manual: All manuals will be placed in one standard format. All changes to
ValuJet's operations not yet incorporated within ValuJet's manual system shall
be included in the manuals submitted for review. The following specific items
will be addressed:
Operations Manuals:
Stations Operations.
Minimum Equipment List.
Configuration Deviation List.
Maintenance Technical Manuals: All.
10
<PAGE>
Training Contracts.
Maintenance contracts and agreements.
Final compliance statement.
Proving Test (10 hours).
III. DEMONSTRATION PHASE
-------------------
Training facilities.
Hazardous materials training
Maintenance training:
Aircraft conformity inspection.
Main Operations Base.
Main Maintenance Base.
Line/Station Facilities.
Record Keeping: Maintenance aircraft records and maintenance training.
Proving test plan.
In addition, ValuJet agrees to:
1. Publication of General Maintenance Manual procedures which provide for
permanent ValuJet inspectors to oversee each "A" or higher letter check at
every location. For those locations solely conducting "N" checks, a ValuJet
inspector will observe such checks at least once a week. The number of
inspectors should depend upon the level of the inspection to be performed.
This manual revision should include the inspector qualifications, duties and
responsibilities which include quality control of all facets of letter checks,
and reporting procedures. As one of these responsibilities, each letter check
should be co-signed by the inspector certifying the quality of the work
performed prior to return to service. Results of
11
<PAGE>
completed letter check inspections should be reported as part of the ValuJet
CAS program and reviewed at least monthly by management. Problem areas,
adverse trends, and corrective actions should be reported to the FAA PMI
monthly. Unsatisfactory performance detected by the FAA at any station may be
cause for removal of that station from the operations specifications.
2. Prior notification to the Atlanta FSDO of each aircraft scheduled to undergo
a "C" check, major alteration or major repair into each approved repair station
listed on the Operations Specifications. Include the name and location where
the work is to be performed.
3. Publication of a GMM revision with more detail regarding the engineering
organization and procedures. It should ensure that duties and responsibilities
are clearly described. Also, instructions to ensure clarity of engineering
orders should be improved, particularly regarding AD compliance.
4. Prior to resuming service, conduct audits of the Stores, Engineering, and
Publications Departments. Report results to ValuJet management and provide a
complete report, including corrective actions, to the FAA PMI.
5. Prior to use of contract maintenance vendors to perform "N" checks or
higher, conduct audits of each such vendor. Provide a copy of each report to
the FAA PMI, including highlights of significant problems identified,
corrective actions taken and ValuJet's analysis.
6. Develop additional procedures to prevent recurrence of repetitive
discrepancies.
7. Establish minimum ValuJet standards for each position in the line
maintenance organization, including those for acting supervisors. Any shift
supervisor must have had a minimum of 2 years previous supervisory airline
maintenance or equivalent experience.
8. Establish staffing standards for ValuJet which assist in determining the
number of mechanics, lead mechanics, and supervisors. Publish these standards,
along with procedures for their implementation, in a ValuJet Standard Practice.
9. Publish procedures which ensure that the regulatory sufficiency for each
manual revision is checked prior to its publication.
10. In order to assist the FAA, ValuJet previously has agreed to provide a
minimum of one CMS (Computerized Management System) Terminal to the Atlanta
FSDO to facilitate surveillance. This terminal is needed for a "read-only"
capability, but will include access to: aircraft discrepancies and corrective
actions, MEL's, dispatch records, publications revision
12
<PAGE>
status, maintenance and flight crew training records, flight duty records,
check airman activity, vendor status, and a key personnel roster with business
telephone numbers.
11. Submit a consolidated document to the Atlanta FSDO containing actions
planned by ValuJet as detailed in your letters from March 5, 1996 to the
current date. This document should contain the specific actions planned, the
person or office responsible, and the estimated date of completion.
FUTURE GROWTH
-------------
Growth of the airline beyond the fifteen aircraft specified in the initial plan
will depend on ValuJet's demonstrating, to the satisfaction of the
Administrator, that it can perform its operations in accordance with Part 121.
The FAA will not unreasonably withhold its approval.
13
<PAGE>
EXHIBIT 11
VALUJET, INC.
COMPUTATION OF EARNINGS PER SHARE (1)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- --------------------------
1995 1996 1995 1996
--------------------------- --------------------------
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average common and common
equivalent shares outstanding during the period
54,452,484 54,663,481 53,835,144 54,625,265
Net effect of dilutive stock options and stock
warrants - based on the treasury stock method 4,939,914 -- 5,579,464 4,962,185
-------------------------------------------------------
Total common and common equivalent shares 59,392,398 54,663,481 59,414,608 59,587,450
=======================================================
Net income (loss) $16,860,044 $(9,573,884) $25,930,656 $ 1,092,890
=======================================================
Net income per share $ 40.28 $ (0.18) $ 0.44 $ 0.02
=======================================================
FULLY DILUTED:
Weighted average common and common
equivalent shares outstanding during the
period 54,452,484 54,663,481 53,835,144 54,625,265
-------------------------------------------------------
Net effect of dilutive stock options and stock
warrants - based on the treasury stock method 5,011,656 -- 5,709,520 5,004,314
=======================================================
Total common and common equivalent shares 59,464,140 54,663,481 59,544,664 59,629,579
Net income $16,860,044 $(9,573,884) $25,930,656 $ 1,092,890
=======================================================
Net income per share $ 0.28 $ (0.18) $ 0.44 $ 0.02
=======================================================
</TABLE>
(1)Common and common equivalent shares and net income per share have been
restated to reflect two two-for-one stock splits payable in the form of
stock dividends on April 10, 1995 and November 21, 1995.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> APR-01-1996 JAN-01-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 207,977,095 207,977,095
<SECURITIES> 0 0
<RECEIVABLES> 2,385,722 2,385,722
<ALLOWANCES> 642,000 642,000
<INVENTORY> 4,516,325 4,516,325
<CURRENT-ASSETS> 219,743,375 219,743,375
<PP&E> 330,919,259 330,991,259
<DEPRECIATION> 33,040,029 33,040,029
<TOTAL-ASSETS> 521,592,046 521,592,046
<CURRENT-LIABILITIES> 62,185,232 62,185,232
<BONDS> 283,200,486 283,200,486
0 0
0 0
<COMMON> 54,671 54,671
<OTHER-SE> 165,347,801 165,347,801
<TOTAL-LIABILITY-AND-EQUITY> 521,592,046 521,592,046
<SALES> 0 0
<TOTAL-REVENUES> 181,217,290 191,212,297
<CGS> 0 0
<TOTAL-COSTS> 107,474,015 199,943,705
<OTHER-EXPENSES> (17,353,864) (19,200,313)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,221,025 8,624,017
<INCOME-PRETAX> (15,123,886) 1,844,888
<INCOME-TAX> (5,550,000) 752,000
<INCOME-CONTINUING> (9,573,886) 1,092,888
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (9,573,886) 1,092,888
<EPS-PRIMARY> (.18) .02
<EPS-DILUTED> (.18) .02
</TABLE>
