<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 September 30, 1997
-----------------------------------------------
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 November 1, 1997, there were 55,209,976 shares of Common Stock of
the Registrant outstanding.
<PAGE>
VALUJET, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
Page No.
--------
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
- ------- --------------------
Consolidated Balance Sheets - December 31, 1996 and September 30, 1997 (Unaudited) 3
Consolidated Statements of Operations - Three months ended September 30, 1996 and 1997 (Unaudited);
Nine months ended September 30, 1996 and 1997 (Unaudited) 5
Consolidated Statements of Cash Flows - Nine months ended September 30, 1996 and 1997 (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 11
-----------------------------------
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 16
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 17
- ------- -----------------------------------
SIGNATURES
EXHIBITS
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ------- --------------------
VALUJET, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, September 30,
1996 1997
------------ -------------
ASSETS (Note) (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $150,012,695 $123,209,923
Accounts receivable, less allowance
of $838,000 and $1,291,000 at December 31,
1996 and September 30, 1997, respectively 7,014,702 7,774,890
Notes receivable 0 12,700,000
Inventories of parts 6,607,307 7,812,121
Prepaid expenses 8,066,792 688,491
Income taxes receivable 36,440,653 12,684,240
Assets held for disposition 42,060,242 0
Other current assets 839,040 1,763,661
------------ ------------
Total current assets 251,041,431 166,633,326
Property and equipment, at cost
Flight equipment 126,829,882 174,671,425
Other property and equipment 65,662,504 67,455,689
Deposits on flight equipment
purchase contracts 14,534,895 19,442,895
------------ ------------
207,027,281 261,570,009
Less allowance for depreciation (44,455,397) (66,372,100)
------------ ------------
162,571,884 195,197,909
Debt issuance costs 3,573,561 10,344,740
------------ ------------
Total assets $417,186,876 $372,175,975
============ ============
</TABLE>
Note: The balance sheet at December 31, 1996 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, September 30,
1996 1997
------------- --------------
(Note) (Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 3,221,542 $ 3,652,706
Accrued liabilities 22,718,555 31,701,436
Air traffic liability 3,813,583 8,912,432
Deferred tax liability 1,298,400 485,400
Current maturities of long-term debt 33,246,302 9,125,000
Debt on assets held for sale 18,188,222 0
------------ ------------
Total current liabilities 82,486,604 53,876,974
Long-term debt less current maturities 193,271,800 233,833,268
Deferred income taxes payable 18,028,835 3,046,835
Stockholders' equity:
Common stock, $.001 par value: 54,876 55,006
1,000,000,000 shares authorized: issued
and outstanding - 54,875,610 at December 31,
1996 and 55,005,740 at September 30, 1997
Additional paid-in capital 77,236,447 77,600,497
Retained earnings 46,108,314 3,763,395
------------ ------------
Total stockholders' equity 123,399,637 81,418,898
------------ ------------
Total liabilities and stockholders' equity $417,186,876 $372,175,975
============ ============
</TABLE>
Note: The balance sheet at December 31, 1996 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
September 30, September 30,
1996 1997
------------------- --------------
<S> <C> <C>
Operating revenues:
Passenger $ 16,890 $ 53,569,962
Cargo 0 582,203
Other 294,029 2,261,112
------------- -------------
Total operating revenues 310,919 56,413,277
Operating expenses and other, net:
Flight operations 339,049 5,094,049
Aircraft fuel 45,000 13,521,439
Maintenance 6,748,554 16,265,898
Station operations 253,672 12,857,477
Passenger services 2,692 2,552,467
Marketing and advertising 415,891 2,888,417
Sales and reservations 52,957 4,543,931
General and administrative 2,784,562 3,129,216
Employee bonus 0 0
Depreciation 85,047 8,260,604
Arrangement fee for aircraft transfers (1,175,000) 0
Gain on sale of assets (2,334,678) (224,945)
Rebranding expenses 0 325,077
Shutdown and other nonrecurring expenses 23,039,576 0
------------- -------------
Total operating expenses and other, net 30,257,322 69,213,630
------------- -------------
Operating loss (29,946,403) (12,800,353)
Interest expense (income):
Interest expense 7,198,351 7,131,350
Interest income (2,274,930) (1,644,463)
------------- -------------
Total interest expense, net 4,923,421 5,486,887
------------- -------------
Loss before income taxes (34,869,824) (18,287,240)
Provision for income taxes (12,925,000) (3,675,000)
------------- -------------
Net loss ($21,944,824) ($14,612,240)
============= =============
Net loss per share ($0.40) ($0.27)
============= =============
Weighted average shares outstanding 54,690,157 54,984,451
============= =============
</TABLE>
See accompanying notes.
5
<PAGE>
VALUJET, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------
September 30, September 30,
1996 1997
-------------- ------------------
<S> <C> <C>
Operating revenues:
Passenger $ 183,547,708 $ 133,877,328
Cargo 2,707,764 1,709,284
Other 5,267,744 5,514,043
------------- -------------
Total operating revenues 191,523,216 141,100,655
Operating expenses:
Flight operations 13,271,766 13,998,252
Aircraft fuel 39,182,578 33,373,347
Maintenance 38,167,172 40,905,713
Station operations 32,894,975 35,342,716
Passenger services 7,626,481 6,369,631
Marketing and advertising 6,922,628 8,115,476
Sales and reservations 15,495,002 11,344,657
General and administrative 10,945,982 9,272,145
Employee bonus 1,245,000 0
Depreciation 13,296,135 20,507,926
Arrangement fee for aircraft transfers (13,036,294) 0
Gain from insurance recovery (2,814,785) 0
Gain on sale of assets (2,334,678) (274,545)
Rebranding expenses 0 325,077
Shutdown and other nonrecurring expenses 54,662,986 9,338,000
------------- -------------
Total operating expenses 215,524,948 188,618,395
------------- -------------
Operating loss (24,001,732) (47,517,740)
Interest expense (income):
Interest expense 15,822,366 19,854,122
Interest income (6,799,164) (4,912,943)
------------- -------------
Total interest expense, net 9,023,202 14,941,179
------------- -------------
Loss before income taxes (33,024,934) (62,458,919)
Provision for income taxes (12,173,000) (20,114,000)
------------- -------------
Net loss ($20,851,934) ($42,344,919)
============= =============
Net loss per share ($0.38) ($0.77)
============= =============
Weighted average shares outstanding 54,646,157 54,922,522
============= =============
</TABLE>
See accompanying notes.
6
<PAGE>
VALUJET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
September 30, September 30,
1996 1997
-------------- -------------
<S> <C> <C>
Operating activities:
Net loss ($20,851,934) ($42,344,919)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation 22,199,949 23,356,441
Provision for uncollectible accounts 3,187,931 2,181,299
Gain from disposal of assets (5,149,463) (274,545)
Deferred income taxes 0 (14,982,000)
Changes in operating assets and liabilities:
Accounts receivable 4,523,838 (2,941,487)
Notes receivable 0 (12,700,000)
Other current assets (3,176,650) 5,248,866
Accounts payable and accrued liabilities (19,360,555) 10,717,969
Air traffic liability (19,508,594) 5,098,849
Income taxes payable (14,647,451) 22,943,413
------------- -------------
Net cash used in operating activities (52,782,929) (3,696,114)
Investing activities:
Proceeds from disposal of equipment 75,801,874 3,216,853
Purchases of property and equipment (135,225,048) (17,357,941)
------------- -------------
Net cash used in investing activities (59,423,174) (14,141,088)
Financing activities:
Issuance of long-term debt 222,694,800 72,418,306
Proceeds from sale of common stock 2,528,653 364,180
Payment of long-term debt (61,978,247) (81,748,056)
------------- -------------
Net cash provided by (used in) financing activities 163,245,206 (8,965,570)
------------- -------------
Net increase (decrease) in cash and cash equivalents 51,039,103 (26,802,772)
Cash and cash equivalents at beginning of period 127,947,096 150,012,695
------------- -------------
Cash and cash equivalents at end of period $ 178,986,199 $ 123,209,923
============= =============
</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 September 30, 1997 and December 31, 1996,
the results of operations for the three and nine month periods ended September
30, 1997 and September 30, 1996, and cash flows for the nine month periods
ended September 30, 1997 and September 30, 1996. 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 31, 1997, and amendments thereto.
The results of operations for the three and nine month periods ended
September 30, 1997 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. See Note G.
<TABLE>
<CAPTION>
C. LONG-TERM DEBT
December 31, September 30,
1996 1997
------------- -------------
(Unaudited)
<S> <C> <C>
Senior notes due 2001................... $150,000,000 $150,000,000
Senior secured notes due 2001........... 0 80,000,000
Promissory notes due 1998 through 2001.. 94,706,324 12,958,268
Less current maturities................. (33,246,302) (9,125,000)
Less debt on assets held for sale....... (18,188,222) 0
------------ ------------
$193,271,800 $233,833,268
============ ============
</TABLE>
In August, 1997, the Company completed the private placement of $80 million of
10 1/2% senior secured notes due April 15, 2001. All of the Company's secured
debt with financial maintenance covenants was repaid with a portion of the
proceeds of this offering. Certain aircraft, together with the installed
engines related thereto, three spare engines and four hush kits after their
purchase by AirTran Airlines serve as collateral for the senior secured notes.
Interest on the Company's $150 million senior notes and $80 million senior
secured notes is payable semi-annually on April 15 and October 15 at 10 1/4% and
10 1/2%, respectively, per annum. Certain other debt bears interest at fixed
rates ranging from 8.0% to 9.78% per annum and is repayable in consecutive
monthly or quarterly installments over a two- to four-year period. Certain
other notes have a variable rate of interest based on the London interbank
offered rate (LIBOR) plus 2.26% to 2.75%.
D. COMMITMENTS AND CONTINGENCIES
On May 11, 1996, the Company suffered a tragic loss involving Flight 592. The
accident resulted in extensive media coverage calling into question the safety
of low-fare airlines in general and the Company in particular. In response to
the accident, the Federal Aviation Administration (FAA) conducted an
extraordinary review of the Company's operations. On June 17, 1996 the Company
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 was able to satisfy the FAA as to various regulatory compliance concerns
and the payment of $2,000,000 to the FAA to compensate it for the cost of the
special inspections. The
8
<PAGE>
Company satisfied the FAA's requirements and received FAA clearance during
August 1996. The Company received its determination of fitness from the
Department of Transportation on September 25, 1996 and restarted operations on
September 30, 1996. See Note H 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.
Numerous 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
under a reservation of rights and is providing the defense 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 Company's
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.
Although the Company believes, based on the information currently available to
it, that such coverage is sufficient to cover claims arising out of the loss of
Flight 592 and that the insurers have sufficient financial strength to pay
claims, there can be no assurance that the total amount of judgments and
settlements will not exceed the amount of insurance available therefor or that
all damages awarded will be covered by insurance.
In May 1997, SabreTech filed a Complaint for declaratory judgment and other
relief against the Company. The action seeks a determination that SabreTech is
not liable to the Company for the accident involving Flight 592 as a result of
language contained in certain of the contracts between the parties and that the
Company is liable to SabreTech for damages that it has suffered. The Company
intends to vigorously defend this lawsuit and to assert all claims it has
against SabreTech.
On August 30, 1996, Metropolitan Nashville Airport Authority filed suit
against the Company in State Court in Tennessee for breach of contract and a
declaratory judgment for an anticipatory breach. The Nashville Airport
Authority seeks damages of approximately $2.6 million. The dispute involves
whether the Company was entitled to exercise a termination right contained in
its lease agreement. Management believes the ultimate resolution will not have
a material adverse effect on the Company's financial position or results of
operations.
In May 1997, the State of Florida filed suit against the Company and its
insurers in the United States District Court for the Southern District of
Florida seeking recovery of costs incurred relating to the accident involving
Flight 592. The Company does not believe that it is obligated for such amounts
and has filed a motion to dismiss this lawsuit.
From time to time, the Company is engaged in litigation arising in the
ordinary course of business. The Company does not believe that any such pending
litigation will have a material adverse effect on its results of operations or
financial condition.
E. PROPOSED MERGER
On July 10, 1997, the Company entered into a merger agreement with Airways
Corporation ("Airways"). Under the merger agreement (which remains subject to,
among other things, shareholder approval by both companies), the Company will
acquire Airways through a merger of Airways with and into the Company (the
"Merger"). The purchase price to be paid by the Company in the Merger will
consist of approximately 9.1 million shares of Common Stock of the Company.
Upon completion of the Merger, the Company intends to change its name to AirTran
Holdings, Inc. In connection with the merger, the Company has loaned Airways
$12,700,000, which bears interest at 10% to 12% per annum and is due in December
1997 (if the merger is consummated) or March 1998 (if the merger is not
consummated by November 30, 1997).
F. ASSETS HELD FOR DISPOSITION
During 1996, as a result of the loss of Flight 592 and the consent order with
the FAA which required the Company to reestablish operations with up to 15
aircraft and subjected further expansion of the Company's operations to FAA and
DOT
9
<PAGE>
approval, the Company's management decided to sell or lease certain of its
aircraft. Those aircraft which the Company decided to sell were removed from
operations and were classified in the balance sheet as assets held for
disposition and were stated at the lower of carrying amount or fair value less
cost to sell. Such aircraft were available for sale and an active sales program
was initiated. The fair value, as estimated by the current market value of
these aircraft, less cost to sell exceeded the carrying amount of such aircraft.
At June 30, 1997, as a result of the pending merger with Airways and the
resulting opportunities for the Company to expand its services, the Company's
management decided to make the remaining aircraft classified as assets held for
disposition available for a return to its operating specifications. Each of
AirTran Airlines (formerly ValuJet Airlines) and AirTran Airways, Inc. (Airways'
operating subsidiary) has the necessary authority to conduct flight operations,
including a Certificate of Public Convenience and Necessity from the DOT and an
operating certificate from the FAA. All remaining aircraft classified as assets
held for disposition were reclassified to flight equipment at their carrying
amount at June 30, 1997 and will continue to be depreciated over their remaining
depreciable lives.
G. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997 the Financial Accounting Standards Board issued a new
accounting pronouncement, SFAS No. 128, "Earnings per Share", which will change
the current method of computing earnings per share. The new standard requires
presentation of "basic earnings per share" and "diluted earnings per share"
amounts, as defined. SFAS No. 128 will be effective for the Company's quarter
and year ending December 31, 1997, and, upon adoption, all prior-period earnings
per share data presented shall be restated to conform with the provisions of the
new pronouncement. Application earlier than the Company's quarter ending
December 31, 1997 is not permitted.
Pro forma basic and diluted earnings per share for the three months and nine
months ended September 30, 1996 and 1997 calculated under the provisions of SFAS
No. 128 are as follows:
<TABLE>
<CAPTION>
Quarter Ended September 30, Nine Months Ended September 30,
1996 1997 1996 1997
-------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
Basic earnings per share $(0.40) $(0.27) $(0.38) $(0.77)
Diluted earnings per share (0.40) (0.27) $(0.38) (0.77)
</TABLE>
H. SHUTDOWN AND OTHER NONRECURRING EXPENSES
Costs associated with the loss of Flight 592 and excess operating costs
related to the reduced schedule and grounded aircraft for the nine months ended
September 30, 1997 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 through September 1996 are included in shutdown and other
nonrecurring expenses. No such costs were incurred in the three months ended
September 30, 1997.
A summary of such costs is as follows:
<TABLE>
<CAPTION>
Quarter Ended September 30, Nine Months Ended September 30,
1996 1997 1996 1997
------------ ------------- ----------- -----------------
<S> <C> <C> <C> <C>
Maintenance $ 9,019,000 $ 0 $16,874,000 $7,300,000
Depreciation 7,424,000 0 8,904,000 2,038,000
Legal/consulting 1,930,000 0 8,247,000 0
Facilities rental 1,841,000 0 5,950,000 0
Wages/Salaries 1,763,000 0 5,679,000 0
FAA payment 0 0 2,000,000 0
Other 1,063,000 0 7,009,000 0
----------- ----- ----------- ----------
$23,040,000 $ 0 $54,663,000 $9,338,000
=========== ===== =========== ==========
</TABLE>
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS
The following chart indicates the service offered by the Company as of various
dates between January 1, 1996 and September 30, 1997:
<TABLE>
<CAPTION>
Number
Total Number Number of Peak of Cities
As of of Aircraft Day Flights Served
- ------------------- ------------ --------------- ----------
<S> <C> <C> <C>
January 1, 1996 42 268 26
March 31, 1996 47 286 28
June 30, 1996 51 0 Service suspended to all markets as of
June 17, 1996
September 30, 1996 46 (1) 16 Service resumed on September 30, 1996
to Atlanta, Fort Lauderdale, Orlando, Tampa,
Washington, D.C.
December 31, 1996 43 (2) 124 18
March 31, 1997 42 (3) 148 21
June 30, 1997 42 (4) 184 24
September 30, 1997 42 (5) 200 22
</TABLE>
(1) Of which 4 had been approved for service by the FAA
(2) Of which 15 had been approved for service by the FAA
(3) Of which 24 had been approved for service by the FAA
(4) Of which 30 had been approved for service by the FAA
(5) Of which 31 had been approved for service by the FAA
On May 11, 1996, ValuJet tragically lost its Flight 592 en route from
Miami to Atlanta. There were no survivors. The accident resulted in extensive
media coverage calling into question the safety of low-fare airlines in general
and the Company in particular. In response to the accident, the FAA conducted
an extraordinary review of the Company's operations. On June 17, 1996, the
Company entered into a consent order with the FAA under which the Company agreed
to suspend operations until such time as the Company was able to satisfy the FAA
as to various regulatory compliance concerns identified by the FAA as a result
of its intensive inspections of the Company's operations. On August 29, 1996,
the FAA returned the Company's operating certificate and the Department of
Transportation ("DOT") issued a "show cause" order regarding the Company's
fitness as an air carrier. The DOT gave its final approval on September 26,
1996, and the Company resumed operations with service between Atlanta and four
other cities on September 30, 1996.
On July 10, 1997, the Company entered into a merger agreement with
Airways Corporation ("Airways"). Under the merger agreement (which remains
subject to stockholder approval by both companies), the Company will acquire
Airways through a merger of Airways with and into the Company. In anticipation
of the Merger, the name of ValuJet Airlines has been changed to "AirTran
Airlines." Upon completion of the Merger, the Company intends to change its
name to AirTran Holdings, Inc. and Airways' operating subsidiary (AirTran
Airways, Inc. or "AirTran") will continue to operate under its current name. The
Company may move its headquarters to Airways' existing headquarters in Orlando,
Florida. While the Company intends to initially operate AirTran Airlines and
AirTran Airways under separate operating certificates, it may also merge these
two operating subsidiaries at a later date.
The Company believes that the Airways acquisition will enable it to
operate more competitively and profitably in the eastern United States. Like
ValuJet Airlines, AirTran operates lower cost, used aircraft and targets fare
conscious leisure
11
<PAGE>
travelers with a limited flight frequency, no-frills product. Both airlines
rely on achieving and maintaining operating costs below industry averages in
order to offer low fares. The Company believes that the combined entity can
achieve significant financial and operating synergies and cost savings in the
first twelve months after the Merger by eliminating certain redundant
operations, reducing personnel and taking advantage of economies of scale in
maintenance operations and fuel purchasing. The 11 Boeing 737-200 aircraft
operated by AirTran will provide increased revenue opportunities for the Company
through their longer flight range and greater seating capacity as compared with
the Company's DC-9 aircraft. The Company expects that the change in name and
product image that will accompany the Merger will further increase its revenue
opportunities. In addition, the Company believes that the Airways acquisition
will afford it a competitive advantage in the consolidating airline industry.
The purchase price to be paid by the Company in the Merger will
consist of approximately 9.1 million shares of common stock of the Company. The
Merger will also result in an increase in the consolidated debt of the Company
of $9.4 million as of September 30, 1997 (which amount reflects the preexisting
debt of Airways), and the assumption by the Company on a consolidated basis of
certain off balance sheet operating lease obligations of Airways. In addition,
as a result of the Merger, a loan of $12.7 million from the Company to AirTran
will be converted into an intercompany loan. As part of the Merger, the Company
will acquire cash and cash equivalents and restricted cash held by Airways of
approximately $15.2 million, as of September 30, 1997. The Company will also
acquire all other assets of Airways, including four Boeing 737's currently owned
by Airways, three of which are Stage 3 aircraft, Airways' fixed based
operations, located in Grand Rapids, Minnesota and Airways' hangar, located in
Orlando, Florida. There can be no assurance that the Merger will be consummated
or that the Company will be able to realize the expected benefits from the
Merger if it is consummated.
As a result of the accident, the ensuing extraordinary review of the
Company's operations by the FAA, the suspension of operations in June 1996 and
the current and prospective FAA imposed limitation on the number of aircraft
that may be operated by the Company, the Company's results for periods prior to
May 11, 1996 are not necessarily indicative of the results to be expected in
future periods. The Company's operations for the first, second and third
quarters 1997 may not be indicative of future operations as a result of the
reduced level of service, the Company's ownership of more aircraft than may be
used and additional infrastructure to support larger operations during the
first, second and third quarters of 1997. The following is a description of the
revenues and costs incurred by category for the three months ended September 30,
1997 compared to the three months ended June 30, 1997. Any comparison of the
Company's results of operations for the quarter ended September 30, 1997 with
the quarter ended September 30, 1996 would not be meaningful as the Company had
only one day of operations during the quarter ended September 30, 1996.
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------------------------
June 30, 1997 September 30, 1997
--------------------------------------- -------------------------------------
Percent of Per Percent of Per
Amount Revenues ASM Amount Revenues ASM
----------- ------------ ------ ------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
(000) (000)
Total operating revenues $47,759 100.0% 6.82c $56,413 100.0% 6.61c
======= ===== ==== ======= ===== ====
Expense Category:
- -----------------
Flight operations $ 4,801 10.1% 0.69c 5,094 9.0% 0.59c
Aircraft fuel 10,716 22.4 1.53 13,521 24.0 1.58
Maintenance 10,534 22.1 1.50 16,266 28.8 1.91
Station operations 12,132 25.4 1.73 12,858 22.8 1.51
Passenger services 2,122 4.4 0.30 2,552 4.5 0.30
Marketing and advertising 2,875 6.0 0.41 2,888 5.1 0.34
Sales and reservations 3,723 7.8 0.53 4,544 8.1 0.53
General and administrative 3,347 7.0 0.48 3,129 5.6 0.37
Employee bonuses 0 0.0 0.00 0 0.0 0.00
Depreciation 7,362 15.4 1.05 8,261 14.6 0.97
Nonrecurring expenses 0 0.0 0.00 0 0.0 0.00
Other expenses, net 4,811 10.1 0.69 5,587 9.9 0.65
------- ----- ---- ------- ----- ----
Total expenses $62,423 130.7% 8.91c $74,700 132.4% 8.75c
======= ===== ==== ======= ===== ====
</TABLE>
12
<PAGE>
Quarter over quarter comparison
- -------------------------------
OPERATING REVENUES
- ------------------
Total operating revenues for the quarter ended September 30, 1997 were
approximately $56.4 million as compared to $47.8 million for the quarter ended
June 30, 1997. The increase from second quarter 1997 to third quarter 1997 is a
result of the Company's increased service level during the third quarter of
1997. The Company flew 853 million ASMs during the third quarter of 1997 as
compared to 701 million ASMs during the second quarter of 1997. The Company's
load factors for the three month periods ending September 30, 1997 and June 30,
1997 were 51.6% and 54.9%, respectively. The Company believes that the lower
load factor in the third quarter 1997 is due to a lower load factor in September
1997. The Company's average fare was $62.39 for the three months ending
September 30, 1997 and $58.92 for the three months ending June 30, 1997.
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 are included in flight operations. Flight operations expenses were
lower, on a per ASM basis, for the quarter ended September 30, 1997 than the
quarter ended June 30, 1997 due to increased service levels over which to spread
the cost of hull insurance.
Aircraft fuel expenses include both the direct cost of the fuel as
well as the costs of delivering fuel into the aircraft. Fuel expense, on a per
ASM basis, was higher for the third quarter 1997 than the second quarter 1997
due to an increase in fuel burn from 837 gallons per hour to 849 gallons per
hour. The average price of fuel remained constant at $0.67 per gallon.
Maintenance expenses include all administrative costs of the
maintenance department as well as normal recurring maintenance performed during
the year. Expenses for engine overhaul and certain scheduled heavy maintenance
procedures are included in this cost. Maintenance expenses for the quarter
ended September 30, 1997 were higher, on a per ASM basis, than the quarter ended
June 30, 1997 due to the timing of certain heavy maintenance procedures.
Station operations expense includes all expenses incurred at the
airports, as well as station operations administration and liability insurance.
Station operations expenses were lower, on a per ASM basis, for the third
quarter 1997 than the second quarter 1997 due to increased service levels during
the third quarter 1997.
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 remained flat as a percentage of revenue and on a per ASM basis from
second quarter 1997 to the third quarter 1997.
Marketing and advertising expenses include all advertising expenses
and wages and benefits for the marketing department. Marketing and advertising
expenses for the third quarter 1997, as a percentage of revenue, were lower
than the second quarter 1997 due to reduced advertising in the third quarter
1997 due to a brand relaunch planned at the end of the third quarter 1997 with
most significant expenses scheduled to be incurred during the fourth quarter
1997.
Sale 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 for the quarter ended
September 30, 1997 were 8.1% of revenue as compared to 7.8 % for the quarter
ended June 30, 1997. The increase from the second quarter 1997 to the third
quarter 1997 is due to additional costs incurred related to a change in
reservation systems used by the Company.
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, bad debts,
accounting and other miscellaneous expenses. General and administrative costs
for the third quarter 1997 were lower, on a per ASM basis, than the second
quarter 1997 due to the increased service levels during the third quarter 1997
over which to spread these costs.
There was no expense recorded in the second or third quarter 1997
related to bonuses as the Company did not have income. The actual amount to be
paid and the form of such payout 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
13
<PAGE>
start-up and route development costs as all of these costs are expensed as
incurred. Depreciation expense for the quarter ended September 30, 1997 was
higher than the quarter ended June 30, 1997 due to the return of aircraft to
operating specifications (previously classified as assets held for sale) as well
as additional purchases of property and equipment during the third quarter 1997.
During the quarter ended September 30, 1997, interest expense exceeded
interest income by approximately $5.5 million due to increasing debt levels
attributable to the completion in August 1997 of the issuance of $80 million 10
1/2 % senior secured notes due 2001. Also included in other expense, net for
the third quarter 1997 is a $225,000 gain on the sale of engines and $325,000 of
rebranding expenses (new signage, uniforms,etc.).
Nine months ended September 30, 1997
- ------------------------------------
The Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 provides a comparison of the Company's operations for the six months
ended June 30, 1997 and June 30, 1996. Since the Company's operations were
suspended for all but one day of third quarter 1996, any comparison of the
Company's operations for the nine months ended September 30, 1997 with the nine
months ended September 30, 1996 (reflecting only six months of active
operations) would not be meaningful.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1997, the Company used cash
flow from operations of approximately $3.7 million, used cash of approximately
$17.4 million to acquire property and equipment and generated cash flow from the
disposal of property and equipment of $3.2 million. Approximately $9.0 million
of cash was used in financing activities. As of September 30, 1997, the Company
had cash and cash equivalents of approximately $123.2 million and working
capital of approximately $112.8 million.
The Company has contracted with the Boeing Company ("Boeing") for the
purchase of 50 MD-95 aircraft, at a cost of approximately $1.0 billion (subject
to adjustments for inflation), for delivery in 1999 to 2002. Approximately $7.6
million and $31.7 million of cash and notes payable will be paid in progress
payments during 1997 and 1998, respectively. The balance of the purchase price
after all progress payments is required 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 will be required. The Company
may finance up to 90% of the cost or appraised value of each of these aircraft.
Although Boeing 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 with the assistance to be provided
by Boeing, aircraft related debt financing should be available when needed.
However, 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 FAA certified hush kits
will cost approximately $2.3 million per aircraft or approximately $55.0 million
for a fleet of 24 non-hushed DC-9-30 aircraft as of September 30, 1997. Any
disposition of Stage 2 aircraft would reduce this obligation. Approximately
$7.3 million of the proceeds from the Company's sale of 10 1/2% senior secured
notes ("10 1/2% Senior Secured Notes") will be used to finance 80% of the cost
of four hush kits.The Company may be able to finance a portion of the cost of
the remaining hush kits to be acquired and plans to make the balance of payments
on these hush kits from cash flow from operations and from cash reserves. The
Company expects to pay the debt service on any such loans out of cash flow
generated from operations during the term of the financing. The phase-in period
for full compliance with Stage 3 (through December 31, 1999) and the expected
terms of financing, if available, should allow the Company to spread the
payments for Stage 3 compliance over a number of years.
During August 1997, the Company completed the issuance of $80 million
of its 10 1/2% Senior Secured Notes due April 15, 2001. Approximately $68.5
million of the proceeds of this new debt issuance was used to prepay and replace
secured debt, including debt to seven bank lenders whose secured aircraft loans
contained various financial maintenance covenants. As a result of this new
financing, the Company no longer has any debt outstanding with financial
maintenance covenants.
As of September 30, 1997, the Company's debt related to asset
financing totaled approximately $93.0 million with respect
14
<PAGE>
to which the Company's aircraft and certain other equipment are pledged as
security. This amount includes the $80 million of 10 1/2% Senior Secured Notes
and approximately $13 million of other aircraft bank mortgage financings. The
Company has purchased all of its aircraft and, consequently, has no lease
commitments relating to its aircraft fleet. In addition, the Company has $150
million of 10 1/4 % senior unsecured notes ("10 1/4% Senior Notes") outstanding.
The principal balances of the 10 1/2% Senior Secured Notes and 10 1/4% Senior
Notes are due in 2001 and interest is payable semi-annually. The Company's debt
(other than the 10 1/4% Senior Notes and 10 1/2% Senior Secured Notes) has final
maturities ranging from 1998 to 2001, with scheduled debt amortization as
follows: remainder of 1997--$1.6 million, 1998--$6.6 million, 1999--$3.0
million, 2000--$1.4 million, 2001--$400,000.
Certain of the Company's secured debt, excluding the 10 1/2% Senior
Secured Notes, bears interest at fixed rates ranging from 8.0% to 9.78% per
annum and is repayable in consecutive monthly or quarterly installments over a
two- to four-year period. Certain other notes have a variable rate of interest
based on the London interbank offered rate (LIBOR) plus 2.26% to 2.75%.
The Company believes that the ValuJet name and image were
significantly impaired by the accident in May 1996, the subsequent suspension of
operations and the resulting adverse media exposure. As a result, the Company
has commenced the implementation of a program to enhance its image. In
anticipation of the Merger and to seek to increase revenue opportunities of both
ValuJet Airlines and AirTran, the parties entered into a Code Share Agreement
and License Agreement in September 1997. The Code Share Agreement permits the
airlines to use a single designator code in the Official Airline Guide and in
reservations systems. The License Agreement provides the Company the non-
exclusive use of the name "AirTran Airlines," AirTran's designator code "FL" and
AirTran's service marks. In order to begin to capitalize on this joint
marketing program, the Company's operating subsidiary, ValuJet Airlines, has
changed its name to AirTran Airlines, is repainting its aircraft with the
AirTran logo and is changing its marketing accordingly. In addition, the
Company is reconfiguring its aircraft to provide 16 business class seats in each
aircraft and will commence to offer advance seat selection beginning in fourth
quarter 1997. This program is being implemented during the second half of 1997
and is expected to result in the incurrence of up to $10 million of expenses for
advertising, promotion, aircraft repainting, the reconfiguration of aircraft to
add business class seating, new signage and new uniforms during the period. If
the Merger is not consummated, the Company's right to use the AirTran name will
expire in May 1998.
In addition, the Company expects to incur an additional $4.0 million
of nonrecurring expenses in the fourth quarter of 1997 attributable to costs
associated with the reactivation into scheduled service of nine DC-9-30
aircraft. Additionally, the Company anticipates reporting larger than usual
maintenance expenditures in the fourth quarter resulting from aircraft
undergoing scheduled maintenance "C" checks.
As a result of the accident and suspension of operations, several
class action suits have been filed by stockholders against the Company and
various officers and directors alleging, among other things, misrepresentations
under applicable securities laws. The plaintiffs seek unspecified damages based
upon the decrease in market value of shares of the Company's stock. Although
management of the Company intends to defend these actions vigorously, any
litigation contains elements of uncertainty and there can be no assurance that
the Company will not sustain material liability under such or related lawsuits.
Numerous 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 under a reservation of rights. 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 Company's financial statements.
The Company maintains $750 million of liability insurance per occurrence with a
major group of independent insurers that provides facilities for all forms of
aviation insurance for many major airlines. Although the Company 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, there can be no assurance that
the total amount of judgments and settlements will not exceed the amount of
insurance available therefor or that all damages awarded will be covered by
insurance.
Safe Harbor Statements. Statements made by the Company in this Report
regarding the Company's ability to increase its service levels, to maintain its
low cost structure and to become profitable again and with respect to the effect
on the Company of litigation are forward-looking statements and are not
historical facts. Instead they are estimates or projections involving numerous
risks and uncertainties including, but not limited to, governmental approval of
increases in service by the Company, the utilization level of the Company's
aircraft, the level of those costs which are beyond the Company's control, the
effect of the Company's accounting policies, the Company's ability to hire and
retain qualified personnel under its new compensation program and the results of
pending lawsuits. These risks and uncertainties could potentially cause the
Company's
15
<PAGE>
implementation of additional service to be delayed or the Company's costs to
exceed present estimates. The Company disclaims any obligation to update or
correct any of its forward-looking statements.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
Several stockholder class action suits have been filed against the Company and
certain of its executive officers ("Defendants"). The consolidated lawsuits
discussed below seek class certification for all purchasers of stock in the
Company during periods beginning on or after June 1995 and ending on or before
June 18, 1996, and are based on allegedly misleading public statements made by
the Company or omission to disclose material facts in violation of federal
securities laws. A total of 14 stockholder lawsuits have been filed against and
served upon the Company between May 30, 1996 and July 26, 1996. Of these suits,
11 have been filed in the United States District Court for the Northern District
of Georgia and these suits have been consolidated into a single action (In re
-----
ValuJet, Inc.). Another lawsuit filed in the United States District Court for
- -------------
the Middle District of Florida has been transferred to the Northern District of
Georgia and has been consolidated into In re ValuJet, Inc. One additional class
-------------------
action stockholder lawsuit (Davis v. ValuJet Airlines, Inc., et al.) has been
---------------------------------------
filed and served upon the Defendants. Regarding Davis, the Defendants filed a
-----
"Notice of Newly-Filed Case Opposition to Joiner of Michael Acks and Alternative
Motion to Dismiss" on the same grounds that Defendants have moved to dismiss
Plaintiffs' existing Complaint. The Plaintiffs filed their response to this
Alternative Motion to Dismiss on June 19, 1997 and on July 7, 1997 Defendants
replied. All of the Defendants filed a joint Motion to Dismiss the Consolidated
Amended Complaint on December 23, 1996. The Plaintiffs responded to this motion
to dismiss on April 30, 1997. Defendants filed their reply on July 14, 1997.
On November 25, 1996, Plaintiffs filed their Motion for Class Certification. On
January 14, 1997, Defendants filed a "Notice of Stay of Discovery and Other
Proceedings," in which Defendants state that the filing of their Motion to
Dismiss has stayed the issue of class certification pursuant to the Private
Securities Litigation Reform Act. By consent of the parties, Defendants are not
currently obligated to respond to Plaintiffs' Motion for Class Certification,
and if the Court decides that the issue of class certification is not stayed by
the Private Securities Litigation Reform Act, the Defendants have 30 days from
the date of such decision to respond to Plaintiffs' Motion for Class
Certification. Two suits (Cohen et al. v. ValuJet, Inc., et al. and Hepler et
------------------------------------- ---------
al. v. ValuJet, Inc. et al.) have been filed in the State Court of Fulton
- ---------------------------
County, Georgia. On December 23, 1996, all Defendants in both actions, other
than SabreTech, Inc., answered the Complaint and filed a Motion to Dismiss the
Complaint. On May 8, 1997, Plaintiffs responded to this motion. Defendants are
currently working on a response of which there exists no deadline. On May 2,
1997, the Court ordered the consolidation of these two state court actions and
now refers to them as Cohen, et al. v. ValuJet Airlines, Inc. Additionally,
---------------------------------------
Timothy Flynn filed a Motion to Dismiss for lack of personal jurisdiction. By
consent of the parties, the Plaintiffs have until November 12, 1997 to respond
to this motion to dismiss. Although the Company denies that it has violated any
of its obligations under the federal securities laws, there can be no assurance
that the Company will not sustain material liability under such or related
lawsuits.
Numerous lawsuits have been filed against the Company seeking damages
attributable to the deaths of those on Flight 592, and additional lawsuits are
expected. Thus far, approximately 80 such lawsuits have been filed against
ValuJet Airlines, Inc. prior to September 22, 1997. Most of the cases were
initially removed to the federal court. That court, however, remanded the
majority of the actions to the state courts from which they originated and
retained jurisdiction over only seven cases. As a consequence, most of the
cases will proceed in state courts in Florida and Georgia. The Company's
insurance carrier has assumed defense of all of these suits under a reservation
of rights against third parties and the Company and has settled and paid
approximately 50 claims as of October 31, 1997, and is pursuing settlements in
the balance of the claims. In the remaining lawsuits, SabreTech has been named
as a co-defendant as a result of the role that it played in the accident. The
Company maintains a $750 million policy of liability insurance per occurrence.
The Company believes that the coverage will be sufficient to cover all claims
arising from the accident.
In May 1997, SabreTech filed a Complaint for declaratory judgment and other
relief against the Company. The action seeks a determination that SabreTech is
not liable to the Company for the accident involving Flight 592 as a result of
language contained in certain of the contracts between the parties and that the
Company is liable to SabreTech for damages that it has suffered. The Company
intends to vigorously defend this lawsuit and to assert all claims it has
against SabreTech.
On August 30, 1996, Metropolitan Nashville Airport Authority filed suit
against the Company in State Court in Tennessee for breach of contract and a
declaratory judgment for an anticipatory breach. The Nashville Airport
Authority seeks damages of approximately $2.6 million. The dispute involves
whether the Company was entitled to exercise a termination right contained in
its lease agreement.
16
<PAGE>
In May 1997, the State of Florida filed suit against the Company and its
insurers in the United States District Court for the Southern District of
Florida seeking recovery of costs incurred relating to the accident involving
Flight 592. The Company does not believe that it is obligated for such amounts
and has filed a motion to dismiss this lawsuit.
From time to time, the Company is engaged in litigation arising in the
ordinary course of its business. The Company does not believe that any such
pending litigation will have a material adverse effect on its results of
operations or financial condition.
Several governmental inquiries and investigations have been launched in
connection with the loss of Flight 592, including investigations by the DOT, the
NTSB, the U.S. Attorney's Office in Atlanta, Georgia and Miami, Florida and
certain state agencies in Florida. Although the Company does not believe, based
on information currently available to it, that such investigations and inquiries
will result in any finding of criminal wrongdoing on its part, the
investigations have not yet been concluded and the possibility of such a finding
cannot be ruled out. The Company may also be assessed civil penalties in
connection with the accident and/or the results of ensuing investigations. Any
such findings or penalties could be material. In addition, it is possible that
the Company could be indirectly affected by negative publicity related to
charges of wrongdoing, if any, against others acting on behalf of the Company at
the time of the accident.
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.
11 - Statement Re: Computation of Earnings Per Share
(b) Reports on Form 8-K. A Form 8-K dated as of July 10, 1997, was filed with
the Commission to report that the Company entered into a Merger Agreement
with Airways Corporation under which Airways Corporation will, subject to
the satisfaction or waiver of the conditions thereto, merge with and into
the Company. A Form 8-K dated as of August 13, 1997, was filed with the
Commission to report the closing of a private offering of $80,000,000
principal amount of 10 1/2% Senior Secured Notes due 2001.
17
<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: November 5, 1997 /s/ Robert L. Priddy
------------------------------------------------
Robert L. Priddy
Chairman of the Board and Chief Executive Officer
Date: November 5, 1997 /s/ Michael D. Acks
-------------------------------------------------
Michael D. Acks
Controller and Chief Accounting Officer
18
<PAGE>
EXHIBIT 11
VALUJET, INC.
COMPUTATION OF EARNINGS PER SHARE(1)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------------------------------
1996 1997 1996 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY:
Weighted average common and common
equivalent shres outstanding during the
period 54,690,157 54,984,451 54,646,896 54,922,522
Net effect of dilutive stock options and stock
warrants - based on the treasury stock method - - - -
-----------------------------------------------------------
Total common and common equivalent shares 54,690,157 54,984,451 54,646,896 54,922,522
===========================================================
Net income (loss) $(21,944,824) $(14,612,240) $(20,851,934) $(42,344,919)
===========================================================
Net income per share $ (0.40) $ (0.27) $ (0.38) $ (0.77)
===========================================================
FULLY DILUTED:
Weighted average common and common
equivalent shares outstanding during the
period 54,690,157 54,984,451 54,646,896 54,922,522
Net effect of dilutive stock options and stock
warrants - based on the treasury stock method - - - -
-----------------------------------------------------------
Total common and common equivalent shares 54,690,157 54,984,451 54,646,896 54,922,522
===========================================================
Net income $(21,944,824) $(14,612,240) $(20,851,934) $(42,344,919)
===========================================================
Net income per share $ (0.40) $ (0.27) $ (0.38) $ (0.77)
===========================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 123,209,923 123,209,923
<SECURITIES> 0 0
<RECEIVABLES> 9,065,890 9,065,890
<ALLOWANCES> 1,291,000 1,291,000
<INVENTORY> 7,812,121 7,812,121
<CURRENT-ASSETS> 166,633,326 166,633,326
<PP&E> 261,570,009 261,570,009
<DEPRECIATION> 66,372,100 66,372,100
<TOTAL-ASSETS> 372,175,975 372,175,975
<CURRENT-LIABILITIES> 53,876,974 53,876,974
<BONDS> 233,833,268 233,833,268
0 0
0 0
<COMMON> 55,006 55,006
<OTHER-SE> 81,363,892 81,363,892
<TOTAL-LIABILITY-AND-EQUITY> 372,175,975 372,175,975
<SALES> 56,413,277 141,100,655
<TOTAL-REVENUES> 56,413,277 141,100,655
<CGS> 69,213,630 188,618,395
<TOTAL-COSTS> 69,213,630 188,618,395
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,486,887 14,941,179
<INCOME-PRETAX> (18,287,240) (62,458,919)
<INCOME-TAX> (3,675,000) (20,114,000)
<INCOME-CONTINUING> (14,612,240) (42,344,919)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (14,612,240) (42,344,919)
<EPS-PRIMARY> (.27) (.77)
<EPS-DILUTED> (.27) (.77)
</TABLE>
