<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
[X] Quarterly Report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2000.
[_] Transition Report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2000.
For the transition period from ________________ to ________________
Commission File No: 0-26914
AirTran Holdings, Inc.
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 58-2189551
------------------------------ -----------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
9955 AirTran Boulevard, Orlando, Florida 32827
----------------------------------------------------
(Address of principal executive offices) (Zip code)
(407) 251-5600
--------------
(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 [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of April 17, 2000, there were 65,724,146 shares of Common Stock of the
Registrant outstanding.
<PAGE>
AIRTRAN HOLDINGS, INC.
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations - Three months ended March 31, 2000 and 1999.............. 3
Condensed Consolidated Balance Sheets - March 31, 2000 and December 31, 1999.............................. 4
Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 2000 and 1999.............. 6
Notes to Condensed Consolidated Financial Statements...................................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 9
Item 3. Quantitative and Qualitative Disclosures About Market Risks............................................... 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings......................................................................................... 14
Item 6. Exhibits and Reports on Form 8-K.......................................................................... 14
</TABLE>
2
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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AirTran Holdings, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands except per share data)
(Unaudited)
For the three months ended
March 31,
2000 1999
--------- ---------
Operating revenues:
Passenger $ 128,535 $ 115,013
Cargo 1,089 1,147
Other 2,784 3,713
--------- ---------
Total operating revenues 132,408 119,873
Operating expenses:
Salaries, wages and benefits 32,767 28,142
Aircraft fuel 29,020 13,761
Maintenance, materials and repairs 15,523 24,757
Commissions 8,794 8,800
Landing fees and other rents 7,032 6,187
Marketing and advertising 4,510 5,617
Aircraft rent 1,897 1,341
Depreciation 5,098 7,344
Other operating 15,929 14,923
--------- ---------
Total operating expenses 120,570 110,872
--------- ---------
Operating income 11,838 9,001
Interest (income) expense:
Interest income (77) (421)
Interest expense 8,888 5,963
--------- ---------
Interest expense, net 8,811 5,542
--------- ---------
Income before income taxes 3,027 3,459
Income tax expense 125 405
--------- ---------
Net income $ 2,902 $ 3,054
========= =========
Basic earnings per share $ 0.04 $ 0.05
========= =========
Diluted earnings per share $ 0.04 $ 0.05
========= =========
See accompanying notes to consolidated financial statements.
3
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AirTran Holdings, Inc.
Condensed Consolidated Balance Sheets
(in thousands except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
Assets 2000 1999
------ ----------- ------------
Current assets: (Unaudited) (Audited)
<S> <C> <C>
Cash and cash equivalents $ 74,314 $ 58,102
Restricted cash 25,791 18,069
Accounts receivable, less allowance of $805 and $927 at
March 31, 2000 and December 31, 1999, respectively 15,653 7,599
Spare parts, materials and supplies, less allowance for obsolescence
of $2,370 and $2,260 at March 31, 2000 and December 31, 1999,
respectively 10,346 5,816
Prepaid expenses 10,509 14,058
----------- ------------
Total current assets 136,613 103,644
Property and equipment:
Flight equipment 246,076 244,662
Less: Accumulated depreciation (8,551) (4,973)
----------- ------------
237,525 239,689
Purchase deposits for flight equipment 19,424 22,562
Other property and equipment 25,538 24,914
Less: Accumulated depreciation (14,123) (13,436)
----------- ------------
11,415 11,478
----------- ------------
268,364 273,729
Other assets:
Intangibles resulting from business acquisition 38,450 38,862
Unexpended debt proceeds - 39,232
Debt issuance costs 7,180 5,733
Other assets 7,960 5,814
----------- ------------
Total assets $ 458,567 $ 467,014
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements. (Continued)
4
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AirTran Holdings, Inc.
Condensed Consolidated Balance Sheets
(in thousands except per share data)
<TABLE>
<CAPTION>
March 31, December 31,
Liabilities and Stockholders' Equity (Deficit) 2000 1999
---------------------------------------------- ----------- ------------
Current liabilities: (Unaudited) (Audited)
<S> <C> <C>
Accounts payable $ 8,646 $ 10,410
Accrued liabilities 70,032 57,456
Air traffic liability 39,839 23,491
Current portion of long-term debt 15,083 19,569
----------- ------------
Total current liabilities 133,600 110,926
Long-term debt, less current portion 362,025 396,119
Stockholders' equity (deficit):
Preferred stock, $.01 par value per share, 5,000 shares
authorized, no shares issued or outstanding - -
Common stock, $.001 par value per share, 1,000,000
shares authorized, and 65,715 and 65,698 shares
issued and outstanding at March 31, 2000 and
December 31, 1999, respectively 66 66
Additional paid-in capital 150,660 150,589
Accumulated deficit (187,784) (190,686)
----------- ------------
Total stockholders' equity (deficit) (37,058) (40,031)
----------- ------------
Total liabilities and stockholders' equity (deficit) $ 458,567 $ 467,014
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
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AirTran Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
2000 1999
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 2,902 $ 3,054
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 5,874 8,415
Provisions for uncollectible accounts 674 1,785
Deferred income taxes 62 -
Changes in current operating assets and liabilities:
Restricted cash (7,722) (9,901)
Accounts receivable (8,728) (9,821)
Prepaid expenses and deposits (12,380) 2,137
Accounts payable and accrued liabilities 10,812 20,394
Air traffic liability 16,348 14,472
--------- ---------
Net cash flows provided by operating activities 7,842 30,535
Investing activities:
Purchases of property and equipment (40,353) (9,616)
Refund of aircraft purchase deposits - 4,227
Restricted funds for aircraft purchases 39,232 -
--------- ---------
Net cash flows used for investing activities (1,121) (5,389)
Financing activities:
Payments of long-term debt (38,580) (2,189)
Proceeds from sale and leaseback transaction 48,000 666
Proceeds from sale of common stock 71 51
--------- ---------
Net cash flows provided from (used for) financing activities 9,491 (1,472)
--------- ---------
Net increase in cash and cash equivalents 16,212 23,674
Cash and cash equivalents at beginning of period 58,102 10,882
--------- ---------
Cash and cash equivalents at end of period $ 74,314 $ 34,556
========= =========
Supplemental disclosures of cash flow activities:
Cash paid for interest, net of amounts capitalized $ (720) $ (1,389)
========= =========
Cash paid for income taxes $ 750 $ -
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
6
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AirTran Holdings, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
A. Basis of Presentation
In the opinion of management, the accompanying unaudited, consolidated interim
financial statements contain all adjustments, which are of a normal recurring
nature, necessary to present fairly the Company's financial position as of March
31, 2000 and December 31, 1999, the results of operations for the three month
periods ended March 31, 2000 and 1999, and cash flows for the three month
periods ended March 31, 2000 and 1999. 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 for the year ended
December 31, 1999. The results of operations for the three month period ended
March 31, 2000 are not necessarily indicative of the results to be expected for
the full fiscal year.
B. Reclassifications
Certain amounts in the 1999 financial statements have been reclassified to
conform to the current presentation.
C. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share data):
<TABLE>
<CAPTION>
For the three months
ended March 31,
----------------------
2000 1999
------ -------
<S> <C> <C>
Numerator:
Net income $ 2,902 $ 3,054
======= =======
Denominator:
Denominator for basic earnings per share - weighted average shares 65,715 64,915
Effective of dilutive stock options 3,279 2,814
------- -------
Denominator for diluted earnings per share - weighted-average shares
and assumed conversions 68,994 67,729
======= =======
Basic earnings per share $ 0.04 $ 0.05
======= =======
Diluted earnings per share $ 0.04 $ 0.05
------- -------
</TABLE>
7
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D. Fuel Price Risk Management
The Company entered into two fixed rate swap contracts to protect against
increases in jet fuel prices. Under the swap agreements, the Company receives or
makes payments based on the difference between a fixed price and a variable
price for certain fuel commodities. The change in market value of such
agreements has a high correlation to the price changes of the fuel being hedged.
Gains or losses on the fuel hedging agreements are recognized as a component of
fuel expense when the underlying fuel being hedged is used. Gains and losses on
the fuel hedging agreements would be recognized immediately should the changes
in the market value of the agreements cease to have a high correlation to the
price changes of the fuel being hedged. At March 31, 2000, the Company had two
fuel hedging agreements with a broker-dealer on approximately 95.6 million
gallons of fuel products, which represents 25% of its expected fuel needs
through the second quarter of 2000 and 15% of its expected fuel needs
thereafter through September 2004. The fair value of the Company's fuel hedging
agreements at March 31, 2000, representing the amount the Company would receive
upon termination of this agreement, totaled $0.4 million. If in the future, a
fuel swap agreement were terminated, any resulting gain or loss would be
deferred and amortized to fuel expense over the remaining life of the agreement.
A default by the broker-dealer to the swap agreement would expose the Company to
potential fuel price risk on the remaining fuel purchases in that the Company
would be required to purchase fuel at the current fuel price rather than at the
swap agreement exchange rate. The Company does not enter into fuel swap
contracts for trading purposes.
E. Aircraft Purchase Commitments
The Company has contracted with Boeing for the purchase of 50 B717 aircraft for
delivery from 1999 to 2002 of which ten had been delivered as of March 31, 2000.
There can be no assurance that cash provided by operations will be sufficient to
meet the payments for the B717s. If the Company exercises its option to acquire
up to an additional 50 B717 aircraft, additional payments could be required
beginning in 2001. The Company expects to finance at least 85% of the cost of
each of these aircraft. The Company completed a private placement of $178.9
million, EETCs on November 3, 1999. The proceeds were used to purchase the first
ten B717 aircraft. The EETCs bear interest at 10.63% per annum and are payable
in semi-annual installments from April 17, 2000, through April 17, 2017. In
March 2000, the Company entered into a sale and leaseback transaction for two of
these B717 aircraft. Although Boeing has agreed to provide financing support
with respect to the remaining aircraft to be acquired, the Company will be
required to obtain the financing from other sources. The Company believes that
with the support 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 at all. If
the Company is unable to secure acceptable financing, it 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 results of
operations and cash flows.
F. Income Taxes
The Company's effective tax rate was 4.1% for the first quarter of 2000. The
2000 rate results from the expected utilization of a portion of the Company's
$108 million net operating loss ("NOL") carryforwards offset in part by the
application of the tax benefit related to the realization of a portion of the
Airways NOL carryforwards to goodwill. The Company has not recognized any
benefit from the use beyond first quarter 2000 of NOL carryforwards because
management's evaluation of all the available evidence in assessing the
realizability of tax benefits of such loss carryforwards indicates that the
underlying assumptions of future profitable operations contain risks that do not
provide sufficient assurance to recognize such tax benefits currently.
8
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Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
For the three months ended March 31, 2000 and 1999
The following is a table of selected operational statistics and financial data
for the three months ended March 31, 2000 and 1999:
<TABLE>
<CAPTION>
Three Months Ended March 31, Increase
2000 1999 (Decrease)
--------------- ---------------- ----------
<S> <C> <C> <C>
Revenue passengers 1,591,383 1,499,586 6.1%
Revenue passenger miles (1) 855,395,643 811,090,110 5.5%
Available seat miles (2) 1,338,052,268 1,335,911,049 0.2%
Passenger load factor (3) 63.9% 60.7% 3.2 pts.
Break-even load factor (4) 62.4% 58.8% 3.6 pts.
Average yield per revenue passenger mile (5) 15.0 (cents) 14.2 (cents) 5.6%
Passenger revenue per available seat mile (6) 9.6 (cents) 8.6 (cents) 11.6%
Operating cost per available seat mile (7) 9.0 (cents) 8.3 (cents) 8.4%
Average stage length (miles) 532 527 0.9%
Average cost of aircraft fuel per gallon 90.4 (cents) 42.0 (cents) 115.2%
Average daily utilization of each aircraft (hours) (8) 10:42 8:40 23.5%
Number of aircraft in fleet at end of period 49 49 0.0%
</TABLE>
(1) The number of scheduled revenue miles flown by passengers.
(2) The number of seats available for passengers multiplied by the number of
scheduled miles each seat is flown.
(3) The percentage of aircraft seating capacity that is utilized is calculated
by dividing revenue passenger miles by available seat miles.
(4) The percentage of seats that must be occupied by revenue passengers in
order for the Company to break even on a pre-tax income basis.
(5) The average amount one passenger pays to fly one mile.
(6) Passenger revenue divided by available seat miles.
(7) Operating expenses divided by available seat miles.
(8) The average number of hours per day that an aircraft flown in revenue
service is operated.
9
<PAGE>
Summary
We recorded net income of $2.9 million for the three months ended March 31, 2000
compared to net income of $3.1 million for the three months ended March 31,
1999. Our operating income increased $2.8 million to operating income of $11.8
million for the three months ended March 31, 2000, from operating income of $9.0
million in 1999.
Operating Revenues
Passenger revenues increased by 11.8% or $13.5 million primarily due to a
favorable pricing environment, strong economic conditions and our initiatives to
increase passenger revenue. We have implemented yield management strategies as
well as a published pricing strategy. We also continue to offer assigned
seating, a frequent flier program and business class seating.
Our yield (the average amount a passenger pays to fly one mile) increased by
5.6% to 15.0 cents, which increased revenue by $12.0 million over the first
quarter 1999. Yield increased over last year due in part to a 5.3% higher
average fare. Our traffic, or revenue passenger miles (RPMs), increased 44.3
million or 5.5% on a capacity increase, or available seat mile (ASM), or 0.2% or
2.1 million. The increase in load factor of 3.2 points increased passenger
revenue by $5.9 million from the same period in 1999. However, we continue to
experience aggressive competition that could negatively impact future loads and
yields.
Cargo and other revenue decreased 30.1% or $1.0 million due to a decrease in
U.S. Mail capacity and passenger service fees.
Operating Expenses
Operating expenses increased $9.7 million or 8.7% compared to the first quarter
of 1999. Our operating cost per ASM increased 8.4% to 9.0 cents from 8.3 cents a
year ago primarily as a result of increased fuel costs and salaries, wages and
benefits. Salaries, wages and benefits increased $4.6 million or 16.4% due
primarily to contractual labor rate and seniority increases negotiated in 1998
between the Company and its three major union represented labor groups and an
increase in overall headcount. Aircraft fuel increased year over year by $15.3
million 110.9% primarily due to a 115.2% increase in average fuel prices
partially offset by a 2.1% decrease in fuel consumption. Maintenance, materials
and repairs decreased 37.3% or $9.2 million due to five fewer check lines and
eight fewer engine overhauls as compared to first quarter 1999. The term "check
line" refers to significant maintenance on an airframe and is required by the
FAA based upon various thresholds including aircraft flight hours, certain
cycles or calendar dates. Because these are a function of usage, the timing of
major maintenance overhauls varies from month to month and quarter to quarter.
Additionally, maintenance expense decreased due to completion of the structural
life improvement program in 1999. The allowance for obsolescence increased only
slightly during the quarter ended March 31, 2000 as the increase in spare parts,
materials and supplies related primarily to the new B717 fleet for which little
allowance is currently necessary. Marketing and advertising decreased $0.8
million in print advertising and $0.3 million in radio advertising compared to
first quarter 1999. Aircraft rent increased $0.6 million or 41.5% due to the
sale and leaseback of seven DC-9 aircraft, offset by the return of 5 B737
aircraft in 1999. Depreciation expense decreased 30.6% or $2.2 million primarily
due to the impairment loss recorded in 1999 related to the DC-9 fleet offset by
the delivery of ten B717 aircraft. Other operating expenses increased $1.0
million due to the increases in passenger service charges as a result of more
passengers offset by a $1.1 million decrease in bad debt expense resulting from
improved controls to limit credit card chargebacks. The allowance for doubtful
accounts also decreased as a result of such controls although accounts
receivable increased significantly during the quarter ended March 31, 2000.
10
<PAGE>
Non-operating Expenses
Interest expense, net, increased 59.0% or $3.3 million compared to the three
months ended March 31, 1999. The increase is due to the issuance of $178.9
million of enhanced equipment trust certificates ("EETCs") in the fourth quarter
of 1999. Capitalized interest during the quarter was $1.7 million compared to
$1.5 million during the same quarter of 1999.
Our effective tax rate was 4% and 12% for the first quarter of 2000 and 1999,
respectively. The 2000 rate results from the expected utilization of a portion
of our $108 million net operating loss ("NOL") carryforwards offset in part by
the application of the tax benefit related to the realization of a portion of
the Airways NOL carryforward to goodwill. We have not recognized any benefit
from the use beyond first quarter 2000 of NOL carryforwards because management's
evaluation of all the available evidence in assessing the realizability of tax
benefits of such loss carryforwards indicates that the underlying assumptions of
future profitable operations contain risks that do not provide sufficient
assurance to recognize such tax benefits currently.
Year 2000
In prior years, we discussed the nature and progress of our plans to become Year
2000 ready. In late 1999, we completed our remediation and testing of systems.
As a result of those planning and implementation efforts, we experienced no
significant disruptions in mission critical information technology and
non-information technology systems and believe those systems successfully
responded to the Year 2000 date change. We expensed approximately $800,000
during 1999 in connection with remediating our systems. We are not aware of any
material problems resulting from Year 2000 issues, either with our internal
systems or the products and services of third parties. We will continue to
monitor our mission critical computer applications and those of our suppliers
and vendors throughout the year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed promptly.
Liquidity and Capital Resources
We rely primarily on operating cash flows to provide working capital. We
presently have no lines of credit or other credit facilities. As of March 31,
2000, we had cash and cash equivalents of $74.3 million compared to $58.1
million at December 31, 1999 and working capital of $3.0 million compared to a
working capital deficit of $7.3 million at December 31, 1999. We generally must
satisfy all of our working capital expenditure requirements from cash provided
by operating activities, from external capital sources or from the sale of
assets. Substantial portions of our assets have been pledged to secure various
issues of our outstanding indebtedness. To the extent that the pledged assets
are sold, the applicable financing agreements generally require the sales
proceeds to be applied to repay the corresponding indebtedness. To the extent
that our access to capital is constrained, we may not be able to make certain
capital expenditures or to continue to implement certain other aspects of our
strategic plan, and we may therefore be unable to achieve the full benefits
expected therefrom. Based on the favorable economic conditions of the U.S.
airline industry, we expect to be able to generate positive working capital
through our operations; however, we cannot predict whether the current
11
<PAGE>
favorable economic trends and conditions will continue, or the effects of
competition or other factors, such as increased fuel prices, that are beyond our
control.
As of March 31, 2000, cash and cash equivalents increased from December 31, 1999
by $16.2 million. Operating activities generated $7.8 million in cash. Investing
activities used cash of $1.1 million primarily related to the purchase of two
B717 aircraft, offset by the usage of the remaining prefunded proceeds of the
EETC. Financing activities provided cash of $9.5 million in connection with the
sale and leaseback of two B717 aircraft offset by the related long-term debt
payments.
As of March 31, 2000, our operating fleet consisted of 35 DC-9 aircraft, four
B737 aircraft and ten B717 aircraft. We returned five leased B737 aircraft and,
in addition to seven aircraft sold and leased back (which remain in our
operating fleet), we sold six Stage 2 DC-9 and grounded one B737 aircraft during
1999.
We have contracted with Boeing for the purchase of 50 B717 aircraft for delivery
from 1999 to 2002 of which ten had been delivered as of March 31, 2000. There
can be no assurance that cash provided by operations will be sufficient to meet
the payments for the B717s. If we exercise our option to acquire up to an
additional 50 B717 aircraft, additional payments could be required beginning in
2001. We expect to finance at least 85% of the cost of each of the these
aircraft. We completed a private placement of $178.9 million, EETCs on November
3, 1999. The proceeds were used to purchase the first ten B717 aircraft. The
EETCs bear interest at 10.63% per annum and are payable in semi-annual
installments from April 17, 2000, through April 17, 2017. Although Boeing has
agreed to provide financing support with respect to the remaining aircraft to be
acquired, we will be required to obtain the financing from other sources. We
believe that with the support to be provided by Boeing, aircraft-related debt
financing should be available when needed. However, there is no assurance that
we will be able to obtain sufficient financing on attractive terms, if at all.
If we are unable to secure acceptable financing, we could be required to modify
our aircraft acquisition plans or to incur higher than anticipated financing
costs, which could have a material adverse effect on our results of operations
and cash flows.
As of March 31, 2000, our debt related to asset financing totaled $227.1
million, with respect to which aircraft and certain other equipment are pledged
as security. Included in such amount is $80.0 million of 10.50% Senior Secured
Notes under which interest is payable semi-annually and the $143.0 million of
10.63% enhanced equipment trust certificates, of which a portion of interest and
principal is payable semi-annually. In addition, we have $150.0 million of
10.25% Senior Notes outstanding with interest payable semi-annually. The entire
principal amount of the Senior Notes ($150.0 million) and Senior Secured Notes
($80.0 million) will become due on April 15, 2001. We do not expect to generate
sufficient cash flow from operations to repay all $230.0 million of such debt by
its due date. Accordingly, we will likely to need to refinance all or a portion
of the outstanding debt through additional equity or debt offerings or a
combination thereof. The ability to refinance our debt depends on our future
performance and financial results. Such results are subject to general economic,
financial, competitive, legislative, regulatory, and other factors that are, to
some extent, beyond our control. All or our debts has final maturities ranging
from 2000 to 2017.
12
<PAGE>
Certain other debt bears interest at rates ranging from 5.85% to 11.67% per
annum and is repayable in consecutive monthly or quarterly installments over a
four- to seven-year period. One of these notes, with an aggregate unpaid
principal balance of approximately $1.0 million as of March 31, 2000, has a
variable rate of interest based on the London Interbank Offered Rate ("LIBOR")
plus 1.50% to 3.73%.
Due to the competitive nature of the airline industry, in the event of any
increase in the price of jet fuel, there can be no assurance that we would to be
able to pass on increased fuel prices to our customers by increasing fares.
New Accounting Standards
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities. SFAS
No. 133 is effective for periods beginning after June 15, 2000. We are currently
evaluating SFAS No. 133 and have not yet determined its impact on the
consolidated financial statements.
Forward-Looking Statements
The statements that are contained in this Report that are not historical facts
are "forward-looking statements" which can be identified by the use of forward-
looking terminology such as "expects", "intends", "believes", "will" or the
negative thereof or other variations of these terms or comparable terminology.
We wish to caution the reader that the forward-looking statements contained in
this Report are only estimates or predictions are not historical facts. Such
statements include, but are not limited to:
. our performance in future periods;
. our ability to maintain profitability and to generate working capital from
operations;
. our ability to take delivery of and to finance aircraft;
. the adequacy of our Company's insurance coverage; and
. the results of pending litigation or investigations.
No assurance can be given that future results will be achieved and actual events
or results may differ materially as a result of risks facing our Company or
actual events differing from the assumptions underlying such statements. Such
risks and assumptions include, but are not limited to:
. consumer demand and acceptance of services offered by our Company;
. our ability to achieve and maintain acceptable cost levels;
13
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. fare levels and actions by competitors;
. regulatory matters, general economic conditions; commodity prices; and
. changing business strategy and results of litigation.
Additional information concerning factors that could cause actual results to
vary materially from the future results indicated, expressed or implied in such
forward-looking statements is contained elsewhere in our Form 10-K for the year
ended December 31, 1999.
All forward-looking statements made in connection with this Report are expressly
qualified in their entirety by these cautionary statements. Our Company
disclaims any obligation to update or correct any of its forward-looking
statements.
14
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
------- ----------------------------------------------------------
For discussion of certain market risks related to the Company, see Part I Item,
7A "Quantitative and Qualitative Disclosures about Market Risks", in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999. As of April 1, 2000, the Company has hedged approximately 19% of its
projected 2000 fuel requirements. The approximate amount of fuel hedged by
quarter for the remainder of the year is as follows:
Second Quarter 25%
Third Quarter 15%
Fourth Quarter 15%
There have been no significant developments with respect to derivatives or
exposure to market risk since the disclosure in our Annual Report on Form 10-K.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
------- -----------------
Of the numerous lawsuits that were filed against the Company seeking damages
attributable to those on Flight 592, only one remaining case is being pursued in
a state court in Florida. This case involves a wrongful death action seeking
actual and punitive damages. The Company believes that the $750 million coverage
available with respect to these claims will be sufficient to cover all claims
arising from the accident, which occurred in May 1996. As all claims are handled
independently by the Company's insurance carrier, the Company cannot reasonably
estimate the amount the liability that may 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.
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.
On October 1, 1999, the Company filed suit in the Superior Court of Gwinnett
County, Georgia, against United States Aviation Underwriters, Inc. and United
States Aviation Insurance Group for declaratory relief and damages based on
claims of breach of contract and tortious breach of covenant of good faith and
fair dealing for matters involving litigation related to Flight 592.
From time to time, the Company is engaged in other 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 of operations of
financial condition.
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Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(27) Financial Data Schedule (previously filed on May 10, 2000 with the
original filing of the Company's Quarterly
Report on Form 10-Q)
(b) Reports on Form 8-K:
None.
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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.
AIRTRAN HOLDINGS, INC.
Date: October 20, 2000 /s/ Robert L. Fornaro
------------------------------
Robert L. Fornaro
President
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