<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal years ended December 31, 1996 and 1995
- OR -
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________________ to __________________
Commission file number ___________________________________________________
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
WORLD AIRWAYS, INC. EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
(Formerly WORLDCORP, INC. EMPLOYEE SAVINGS AND STOCK OWNERSHIP
PLAN)
B. Name of issuer of the securities held pursuant to the plan and the
address of its principle executive office:
WORLD AIRWAYS, INC.
13873 PARK CENTER ROAD
SUITE 490
HERNDON, VA 22071
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Deferred Stock Purchase Plan Administrative Committee has duly caused this
annual report to be signed by the undersigned thereunto duly authorized.
WORLD AIRWAYS, INC. EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Date: June 30, 1997
By: /s/ Mark S. Lynch
-----------------
Mark S. Lynch
Chief Financial Officer
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
FINANCIAL STATEMENTS AND SCHEDULE
December 31, 1996 and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Index to Financial Statements and Schedule
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report...............................................1
Financial Statements:
Statements of Net Assets Available for Plan Benefits -
December 31, 1996 and 1995.................................2
Statements of Changes in Net Assets Available for Plan Benefits -
For the Years Ended December 31, 1996 and 1995.............3
Notes to Financial Statements......................................4
Schedule of Assets Held for Investment Purposes...................13
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Administrative Committee and Participants
World Airways, Inc. Employee Savings and Stock Ownership Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the World Airways, Inc. Employee Savings and Stock Ownership Plan
(the Plan), formerly the WorldCorp, Inc. Employee Savings and Stock Ownership
Plan, as of December 31, 1996 and 1995, and the related statements of changes in
net assets available for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of December 31, 1996 and 1995, and the changes in net assets available for plan
benefits for the years then ended in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule as of December
31, 1996, of assets held for investment purposes (Schedule I), is presented for
the purpose of additional analysis and is not a required part of the basic
financial statements, but is supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The supplemental schedule,
as of December 31, 1996, has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
June 18, 1997
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1996 and 1995
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------------
World Airways Stock Fund WorldCorp Stock Fund
--------------------------- ------------------------- Other
Allocated Unallocated Allocated Unallocated Investments Total
--------- ------------ --------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Assets
- ------
Cash $ 49,957 $ -- $ 64,056 $ 136,486 $ -- $ 250,499
Investments (aggregate cost
$5,335,147 in 1996 and
$4,658,191 in 1995)
(notes 3 and 4) 180,552 1,285,832 2,005,247 64,056 2,509,809 6,045,496
Loans receivable -- -- -- -- 304,373 304,373
Interest receivable -- -- -- 1,537 1,537 --
Due from WorldCorp Stock
Fund - Unallocated -- -- -- -- -- --
Due from World Airways Stock
Fund - Unallocated 39,215 -- -- -- -- 39,215
Contributions receivable:
Employer 27,707 -- -- 1,520 -- 29,227
Participants -- -- -- -- 40,333 40,333
Interfund receivable -- -- -- 16,616 44,437 61,053
Other receivable -- -- -- -- 80 80
---------- ---------- ---------- ---------- ---------- ----------
297,431 1,285,832 2,069,303 218,678 2,900,569 6,771,813
---------- ---------- ---------- ---------- ---------- ----------
Liabilities
- -----------
Note payable (note 3) -- 641,324 -- 55,400 -- 696,724
Interest payable -- 9,897 -- 2,185 -- 12,082
Due to WorldCorp Stock
Fund - Allocated -- -- -- -- -- --
Due to World Airways Stock
Fund - Allocated -- 39,215 -- -- -- 39,215
Due to WorldCorp, Inc. -- -- -- 138,500 -- 138,500
Interfund payable 16,616 -- -- 21,418 23,019 61,053
Other payable -- -- -- 1,175 561 1,736
---------- ---------- ---------- ---------- ---------- ----------
16,616 690,436 -- 218,678 23,580 949,310
---------- ---------- ---------- ---------- ---------- ----------
Net assets available for
plan benefits $ 280,815 $ 595,396 $2,069,303 $ -- $2,876,989 $5,822,503
========== ========== ========== ========== ========== ==========
<CAPTION>
December 31, 1995
--------------------------------------------------------
WorldCorp Stock Fund
-------------------- Other
Allocated Unallocated Investments Total
--------- ----------- ----------- -----
<S> <C> <C> <C> <C>
Assets
- ------
Cash $ 327,624 $ -- $ -- $ 327,624
Investments (aggregate cost
$5,335,147 in 1996 and
$4,658,191 in 1995)
(notes 3 and 4) 3,432,588 3,091,812 1,890,390 8,414,790
Loans receivable -- -- 204,548 204,548
Interest receivable -- -- 3,631 3,631
Due from WorldCorp Stock
Fund - Unallocated 119,363 -- -- 119,363
Due from World Airways Stock
Fund - Unallocated -- -- -- --
Contributions receivable:
Employer 53,384 -- -- 53,384
Participants 26,450 -- 78,319 104,769
Interfund receivable -- -- 6,322 6,322
Other receivable -- -- 6,272 6,272
---------- ---------- ---------- ----------
3,959,409 3,091,812 2,189,482 9,240,703
---------- ---------- ---------- ----------
Liabilities
- -----------
Note payable (note 3) -- 1,323,721 -- 1,323,721
Interest payable -- 45,916 -- 45,916
Due to WorldCorp Stock
Fund - Allocated -- 119,363 -- 119,363
Due to World Airways Stock
Fund - Allocated
Due to WorldCorp, Inc. 64,501 -- -- 64,501
Interfund payable 2,449 -- 3,873 6,322
Other payable 9,871 -- 8,096 17,967
---------- ---------- ---------- ----------
76,821 1,489,000 11,969 1,577,790
---------- ---------- ---------- ----------
Net assets available for
plan benefits $3,882,588 $1,602,812 $2,177,513 $7,662,913
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
December 31, 1996
----------------------------------------------------------------------------
World Airways Stock Fund WorldCorp Stock Fund
------------------------ ------------------------ Other
Allocated Unallocated Allocated Unallocated Investments Total
--------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Additions:
Investment income:
Net realized/unrealized
appreciation (depreciation)
in fair value of
investments (note 4) $ (827) $735,887 $(2,296,113) $(1,305,381) $ 143,479 $(2,722,955)
Interest income -- -- -- -- 93,296 93,296
Company contributions -- 130,832 -- 224,646 -- 355,478
Participants' contributions -- 25,996 -- 150,325 353,048 529,369
Rollovers from other plans -- -- -- -- 235,978 235,978
Allocation of common shares
at market value (note 3) 281,642 -- 605,110 -- -- 886,752
--------- -------- ----------- ----------- ---------- -----------
Total additions 280,815 892,715 (1,691,003) (930,410) 825,801 (622,082)
--------- -------- ----------- ----------- ---------- -----------
Deductions:
Interest expense -- 15,634 -- 67,144 -- 82,778
Other expenses -- 43 -- 61 -- 104
Allocation of common shares
at market value (note 3) -- 281,642 -- 605,110 -- 886,752
Distributions to participants -- -- 122,282 87 126,325 248,694
--------- -------- ----------- ----------- ---------- -----------
Total deductions -- 297,319 122,282 672,402 126,325 1,218,328
--------- -------- ----------- ----------- ---------- -----------
Net increase in net assets
available for plan benefits 280,815 595,396 (1,813,285) (1,602,812) 699,476 (1,840,410)
--------- -------- ----------- ----------- ---------- -----------
Net assets available for plan benefits:
Beginning of year -- -- 3,882,588 1,602,812 2,177,513 7,662,913
--------- -------- ----------- ----------- ---------- -----------
End of year $ 280,815 $595,396 $ 2,069,303 $ -- $2,876,989 $ 5,822,503
========= ======== =========== =========== ========== ===========
<CAPTION>
December 31, 1995
--------------------------------------------------
WorldCorp Stock Fund
-------------------- Other
Allocated Unallocated Investments Total
--------- ----------- ----------- -----
<S> <C> <C> <C> <C>
Additions:
Investment income:
Net realized/unrealized
appreciation (depreciation)
in fair value of
investments (note 4) $ 855,374 $1,003,146 $ 124,216 $1,982,736
Interest income -- -- 86,606 86,606
Company contributions -- 354,500 -- 354,500
Participants' contributions -- 119,624 315,299 434,923
Rollovers from other plans -- -- 1,945 1,945
Allocation of common shares
at market value (note 3) 929,332 -- -- 929,332
---------- ---------- ---------- ----------
Total additions 1,784,706 1,477,270 528,066 3,790,042
---------- ---------- ---------- ----------
Deductions:
Interest expense -- 114,125 -- 114,125
Other expenses -- -- -- --
Allocation of common shares
at market value (note 3) -- 929,332 -- 929,332
Distributions to participants 236,881 -- 328,383 565,264
---------- ---------- ---------- ----------
Total deductions 236,881 1,043,457 328,383 1,608,721
---------- ---------- ---------- ----------
Net increase in net assets
available for plan benefits 1,547,825 433,813 199,683 2,181,321
---------- ---------- ---------- ----------
Net assets available for plan benefits:
Beginning of year 2,334,763 1,168,999 1,977,830 5,481,592
---------- ---------- ---------- ----------
End of year $3,882,588 $1,602,812 $2,177,513 $7,662,913
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 1996 and 1995
1. Description
-----------
The following brief description of the World Airways, Inc. Employee Savings
and Stock Ownership Plan (the "Plan" or "ESSOP"), formerly the WorldCorp,
Inc. Employee Savings and Stock Ownership Plan (the "WorldCorp Plan"), as
amended, is provided for general information purposes only. Participants
should refer to the Plan Agreement for a more complete description.
Interested parties should refer to the 10-K filings registered with the SEC
for a description of World Airways' and WorldCorp's operations.
(a) General
-------
Effective February 2, 1989, WorldCorp, Inc. ("WorldCorp") adopted the
WorldCorp Plan for the benefit of eligible employees. Effective October
1, 1996, the Board of Directors of World Airways, Inc. ("World Airways"
or the "Company") adopted an Employee Savings and Stock Ownership Plan.
The ESSOP is an amendment and continuation of the WorldCorp Plan. As a
result of various business developments, the vast majority of the
participants in the WorldCorp Plan were World Airways employees. For
that reason, WorldCorp and World Airways agreed that World Airways
should assume WorldCorp's obligation under the WorldCorp Plan. In
connection with that action, the Trustees exchanged 182,832 unallocated
shares of WorldCorp common stock held by the WorldCorp Plan for 180,478
shares of World Airways common stock.
The WorldCorp Plan is designed as a stock bonus plan which qualifies
for favorable tax treatment under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and as an employee stock
ownership plan under Section 4975 (e)(7) of the Code and is subject to
the applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended (ERISA). In addition, the Plan includes a "cash
or deferred arrangement" under Section 401(k) of the Code. The purpose
of the Plan is to provide participating employees with an interest in
the ownership of common stock, to encourage them to save funds on a
tax-favored basis and to provide them with the opportunity to
accumulate capital for their future economic security.
The WorldCorp Plan originally purchased WorldCorp common shares using
the proceeds from a borrowing (see Note 3) guaranteed by WorldCorp. The
borrowing is repaid through Company and participant contributions to
the Plan. As the Plan makes each payment of principal, an appropriate
number of shares of stock are allocated to eligible employees' accounts
in accordance with applicable regulations under the Code.
Beginning October 1, 1996, the borrowing became collateralized by the
exchanged shares of World Airways stock. The WorldCorp common stock
collateralizing the borrowing were released and World Airways became
the guarantor of the borrowing. The lender has no rights against shares
once they are allocated under the ESSOP. Accordingly, the financial
statements of the ESSOP for the years 1996 and 1995 present separately
the assets and liabilities and changes therein pertaining to the
accounts of employees with vested rights in allocated stock (allocated)
and stock not yet allocated to employees (unallocated).
The ESSOP is an individual account plan under which a participant's
benefits are based on the amounts deferred by the participant into the
ESSOP as well as the matching and discretionary contributions made by
World Airways. Any expenses, gains and losses which are allocable to
such accounts increase or reduce the individual account balances.
(b) Eligibility
-----------
4
<PAGE>
WORLD AIRWAYS, INC
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Notes to Financial Statements
All employees of World Airways, Inc. not covered by collective
bargaining agreements, as well as certain employees of WorldCorp, Inc.
and WorldCorp Investments, Inc., are eligible to participate beginning
on the January 1st, April 1st, July 1st, or October 1st coinciding with
or next following the date they attain age 21 and complete at least six
months of service (in which they are credited with at least 500 hours
of service). Employees whose terms of service are covered by collective
bargaining agreements or whose terms of service are to be negotiated by
a collective bargaining agent are not eligible to participate unless
the terms of such collective bargaining agreements specifically provide
for participation in the ESSOP.
(c) Contributions
-------------
Each year, participants may contribute from 1% to 10% of pre-tax annual
compensation, as defined in the ESSOP (Salary Deferral Contributions).
World Airways contributes to the World Airways Stock Fund (and through
October 1, 1996 WorldCorp contributed to the WorldCorp Stock Fund) at
least 50% of a participant's contributions to that fund and 33% of a
participant's contributions to other investment funds (Matching
Contributions). Additional discretionary contributions may be made at
the option of the World Airways' Board of Directors (Discretionary
Contributions).
Participant contributions may be used to acquire shares of World
Airways' common stock or may be invested among Other Investments
established by the Board of Trustees (see note 4). Matching and
Discretionary Contributions are invested exclusively in the World
Airways Stock Fund as of October 1, 1996 and in the WorldCorp Stock
Fund prior to that date.
(d) Vesting
-------
A participant's interest in his Salary Deferral Contributions and
actual earnings thereon is 100% vested at all times.
A participant's interest in his Matching Contributions and
Discretionary Contributions is 100% vested in the case of his
disability, death or retirement (attainment of age 65). In the event of
termination of employment for any other reason, vested interest in such
amounts is determined under a graduated four-year vesting schedule
based on years of service: 25% vested after one year; 50% vested after
two years; 75% vested after three years; and 100% vested after four
years. Any nonvested amounts will be forfeited and reallocated to
remaining participants' accounts in proportion to their relative
compensation. For the years ended December 31, 1996 and 1995,
participants forfeited $23,522 and $12,568, respectively, of WorldCorp
common stock. For the year ended December 31, 1996, participants
forfeited $2,223 of World Airways common stock.
(e) Allocation of Discretionary Contributions and Forfeitures
---------------------------------------------------------
Discretionary contributions and forfeitures are allocated to active
participants based upon the ratio of the individual participant's
compensation, as defined in the ESSOP, to the sum of all participants'
total compensation, as defined in the ESSOP.
(f) Allocation of Income and Realized and Unrealized Gains and Losses on
--------------------------------------------------------------------
Investments
-----------
Investment income and realized and unrealized gains and losses on
investments are allocated to each
5
<PAGE>
WORLD AIRWAYS, INC
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Notes to Financial Statements
participant based upon the participant's account balance in proportion
to all participants' account balances.
(g) Distributions
-------------
After termination of employment, the value of a participant's vested
interest in his accounts will be distributed at the time requested by
the participant, and in the manner determined by the Benefits
Committee.
(h) Participant Loans
-----------------
A participant who is an employee may request a loan from the portion of
his accounts invested in the Other Investments (see Note 4), in an
amount not to exceed the lesser of (1) $50,000, (2) 50% of the vested
balance of his accounts, or (3) the vested portion of his accounts
invested in the Other Investments. The minimum amount of a participant
loan is $1,000. Only one loan may be outstanding at any time.
(i) Administrative Expenses
-----------------------
Certain administrative costs of the ESSOP are paid by World Airways.
(j) Plan Termination
----------------
Although it has not expressed any intent to do so, World Airways has
the right under the ESSOP to discontinue its contributions at any time
and to terminate the ESSOP subject to the provisions of ERISA. In the
event of ESSOP termination, participants will become 100 percent vested
in their accounts.
2. Summary of Significant Accounting Policies
------------------------------------------
(a) Basis of Presentation
---------------------
The financial statements of the ESSOP are prepared under the accrual
method of accounting.
(b) Investments
-----------
Investments in WorldCorp, Inc. stock and World Airways, Inc. stock are
stated at fair value as determined by quoted market value as of the
last business day of the plan year. Investments in the CIGNA Stock
Market Index Fund, Fidelity Advisor Growth Opportunities Fund, and
Fidelity Advisor Income and Growth Fund are stated at fair value as
determined by quoted market rates as reported by the Trustee. The CIGNA
Guaranteed Long-Term Fund, a group annuity contract, is carried at
contract value (which approximates fair value), as determined by the
Trustee (see Note 4).
Investment transactions are reported on a trade date basis. Realized
gains and losses are reported on the average cost method.
(c) Discretionary Contributions
---------------------------
Discretionary contributions from World Airways are made in an amount
necessary to pay principal and interest due on the ESSOP loan (see note
3) to the extent that employee and employer contributions are
insufficient to make such payments.
6
<PAGE>
WORLD AIRWAYS, INC
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Notes to Financial Statements
(d) Payment of Benefits
-------------------
Benefits are recorded when paid.
(e) Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires the plan administrator to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results may differ from those
estimates.
3. Purchase of WorldCorp, Inc. Common Stock and Note Payable
---------------------------------------------------------
On February 21, 1989, the Plan acquired 450,000 shares of common stock from
Mrs. Violet June Daly, the former Vice Chairman of the Board, and on March
29, 1989, the Plan acquired 450,000 shares of common stock from the Estate
of Edward J. Daly, a former principal stockholder. The purchase price in
each transaction was $4.00 per share for a total of $3.6 million. The Plan
initially obtained the funds for the stock purchased through a loan from
WorldCorp ("Plan Loan"). On May 24, 1989, the Plan Loan was refinanced
through a new loan ("Bank Loan") from American Security Bank, N.A. (the
"Lender") in the amount of $3,600,000 pursuant to the terms of a Loan and
Security agreement, dated May 24, 1989, by and between the Plan and the
Lender.
During 1994, WorldCorp (the guarantor of the Bank Loan) was not in
compliance with certain financial covenants set forth in the Bank Loan and
the bank required WorldCorp to pay in full the Bank Loan. On August 24,
1994, WorldCorp paid to the Lender $1,740,895 in complete satisfaction of
all obligations of the Plan under the Bank Loan. The Plan and WorldCorp
agreed that in consideration for WorldCorp's repayment of the Bank Loan, the
Plan would repay to WorldCorp the amount of the Bank Loan. The Plan and
WorldCorp entered into a Loan and Pledge Agreement further evidenced by a
promissory note (the "Plan Note") dated August 24, 1994, in the amount of
$1,740,895 issued to WorldCorp by the Plan. In connection therewith, the
Plan pledged 433,500 shares of Common Stock to WorldCorp as collateral for
the Plan Note, subject to release of shares in connection with each
quarterly principal payment.
The Plan refinanced the Plan Note through a margin loan by agreement dated
January 10, 1995, from Scott & Stringfellow Investment Corp ("S&S") (the
"S&S Loan"). The S&S Loan was collateralized by the unallocated shares of
WorldCorp common stock. Effective October 1, 1996, the unallocated shares of
WorldCorp common stock collateralizing the loan were exchanged for World
Airways common stock. The S&S Loan is a non-recourse loan and as such the
only assets of the ESSOP subject to the loan are the unallocated shares.
Under the terms of the S&S Loan, S&S will release the pledged shares as they
become allocated. To the extent such release of pledged shares violates the
margin requirements of the S&S Loan, World Airways will provide collateral
or make a contribution adequate to meet such margin requirements or cure any
resulting default. The maintenance equity requirement, the value of the
pledged shares, for the S&S Loan is 40%. In the event that the stock price
closes at $4.00 or lower for five consecutive trading days, the maintenance
equity requirement will increase to 50%, and it will increase to 60% if the
stock closes at $3.00 per share for five consecutive trading days. In the
event that the stock price closes at $2.00 or lower, the shares will be
moved to a cash account and the outstanding balance must be repaid in full
within 24 hours. The S&S Loan is due May 23, 1998. World Airways has agreed
to act as guarantor of the S&S Loan, has agreed to make loans or
contributions to the ESSOP as necessary, and has agreed for the benefit of
S&S to maintain the effectiveness of any registration statement with respect
to the pledged shares.
7
<PAGE>
WORLD AIRWAYS, INC
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Notes to Financial Statements
4. Investments
-----------
The ESSOP includes six investment funds as of December 31, 1996--the World
Airways Stock Fund, the WorldCorp Stock Fund and four other funds
collectively referred to as Other Investments: The CIGNA Guaranteed Long-
Term Fund, the CIGNA Stock Market Index Fund, the Fidelity Advisor Growth
Opportunities Fund and the Fidelity Advisor Income and Growth Fund.
(a) WorldCorp Stock Fund
--------------------
The WorldCorp Stock Fund, which invested exclusively in WorldCorp, Inc.
common stock, was closed as an investment option as of September 30,
1996. The ESSOP will continue to hold the shares of WorldCorp common
stock that were allocated to the participants' accounts before October
1, 1996. No additional shares of WorldCorp common stock will be
allocated under the ESSOP on or after that date. The purchase price for
the period ending September 30, 1996 was adjusted monthly and ranged
from $4.74 to $5.22. The purchase price for the year ending December
31, 1995 was adjusted monthly and ranged from $5.14 to $5.41. For the
period ending September 30, 1996, and the year ending December 31,
1995, WorldCorp provided a 100% matching stock contribution for every
$1.00 invested in WorldCorp common stock and a 331/3% matching stock
contribution for funds invested in Other Investments. The ESSOP held
447,417 and 652,440 shares of WorldCorp common stock with a $4.625 and
$10.00 quoted fair market value per share at December 31, 1996 and
1995, respectively. As of June 18, 1997, the quoted fair market value
of the stock was $2.75 per share, resulting in an unrealized loss since
December 31, 1996 of $838,907 in the market value the shares held as of
December 31, 1996. There were 65 participants contributing to this fund
at December 31, 1995.
(b) World Airways Stock Fund
------------------------
The World Airways' Stock Fund was established October 1, 1996. The
remaining unallocated shares in the WorldCorp Stock Fund were exchanged
for 180,478 shares of World Airways common stock. Employees may
purchase World Airways stock through salary deferral contributions. The
purchase price for the three months ended December 31, 1996 was
adjusted monthly and ranged from $4.72 to $4.89. World Airways provided
a 100% matching stock contribution for every $1.00 invested in World
Airways stock and a 331/3% matching stock contribution for funds
invested in Other Investments. World Airways also made a special
contribution of $50,000 to the ESSOP. The ESSOP held 180,478 shares of
World Airways common stock with a $8.125 quoted fair market value per
share at December 31, 1996. As of June 18, 1997, the quoted fair market
value of the stock was $8 per share, resulting in an unrealized loss
since December 31, 1996 of $22,560 in the market value of shares held
as of December 31, 1996. There were 60 participants contributing to
this fund at December 31, 1996.
(c) CIGNA Guaranteed Long-Term Fund
-------------------------------
The Guaranteed Long-Term Fund, a group annuity contract, invests
(through CIGNA) in long-term, fixed income securities, such as
corporate bonds and commercial mortgages. There were 61 and 76
participants contributing to this fund at December 31, 1996 and 1995,
respectively.
Crediting interest rates are determined at least annually and are based
on returns on new investments, as well as the returns on past
investments still held by the fund. The average yield was 5.5% and
5.91% for the years ending December 31, 1996 and 1995, respectively.
The crediting interest rate was 5.5% and 5.65% at December 31, 1996 and
1995, respectively.
8
<PAGE>
WORLD AIRWAYS, INC
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Notes to Financial Statements
(d) CIGNA Stock Market Index Fund
-----------------------------
The Stock Market Index Fund, a pooled separate account (SA-B), invests
(through CIGNA) in a broadly diversified fund of 500 stocks and futures
designed to achieve results closely aligned to stock market
performance. There were 39 and 29 participants contributing to this
fund at December 31, 1996 and 1995, respectively.
(e) Fidelity Advisor Growth Opportunities Fund
------------------------------------------
The Growth Opportunities Fund, a pooled separate account (SA-55A),
invests (through CIGNA) in shares of the Fidelity Advisor Growth
Opportunities Fund. This fund invests in common stock and convertible
securities of companies which are believed to have long-term growth
potential. There were 62 and 59 participants contributing to this fund
at December 31, 1996 and 1995, respectively.
(f) Fidelity Advisor Income and Growth Fund
---------------------------------------
The Income and Growth Fund, a pooled separate account (SA-35B), invests
(through CIGNA) in shares of the Fidelity Advisor Income and Growth
Fund. This fund invests in fixed-income securities and in equity
securities which pay a combination of dividends and capital gains. There
were 43 and 45 participants contributing to this fund at December 31,
1996 and 1995, respectively.
The Other Investments may engage in limited derivative transactions, such as
futures contracts and options. All derivatives are subject to market risk,
the risk that future changes in market conditions may make an instrument
less valuable.
Investments that represent 5 percent or more of the Plan's net assets are
as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
---------- ----------
<S> <C> <C>
WorldCorp Stock Fund 2,069,303 6,524,400
World Airways Stock Fund 1,466,384 --
CIGNA Guaranteed Long-Term Fund 1,369,830 1,240,753
Fidelity Advisor Growth Opportunities Fund 595,619 --
Fidelity Advisor Income and Growth Fund 343,821 --
</TABLE>
The following tables present the assets, liabilities and changes in net
assets of each of the Other Investments as of and for the years ended
December 31, 1996 and 1995.
9
<PAGE>
WORLD AIRWAYS, INC
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Notes to Financial Statements
<TABLE>
<CAPTION>
Fidelity Fidelity
CIGNA CIGNA Advisor Advisor
Guaranteed Stock Growth Income
Long-Term Market Opportunities and Growth
Fund Index Fund Fund Fund Total
---------- ---------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
- -----------------
Assets
- -----
Investments $ 1,369,830 $ 200,539 $ 595,619 $ 343,821 $ 2,509,809
Loans receivable 304,373 -- -- -- 304,373
Interest receivable 1,537 -- -- -- 1,537
Participants contributions receivable 16,082 6,203 10,979 7,069 40,333
Interfund receivable 25,020 15 19,402 -- 44,437
Other receivable 80 -- -- -- 80
---------- ---------- ---------- --------- ---------
1,716,922 206,757 626,000 350,890 2,900,569
---------- ---------- ---------- --------- ---------
Liabilities
- -----------
Interfund payable -- 803 12,321 9,895 23,019
Other payable 561 -- -- -- 561
---------- ---------- ---------- --------- ---------
561 803 12,321 9,895 23,580
---------- ---------- ---------- --------- ---------
Net assets available for
plan benefits $ 1,716,361 $ 205,954 $ 613,679 $ 340,995 $ 2,876,989
========== ========== ========== ========= =========
DECEMBER 31, 1995
- -----------------
Assets
- ------
Investments $ 1,240,753 $ 131,056 $ 281,550 $ 237,031 $ 1,890,390
Loans receivable 204,548 -- -- -- 204,548
Interest receivable 3,631 -- -- -- 3,631
Participants contributions receivable 35,055 6,842 21,596 14,826 78,319
Interfund receivable 2,449 1,224 1,596 1,053 6,322
Other receivable 6,272 -- -- -- 6,272
---------- ---------- ---------- --------- ---------
1,492,708 139,122 304,742 252,910 2,189,482
---------- ---------- ---------- --------- ---------
Liabilities
- -----------
Interfund payable 3,873 -- -- -- 3,873
Other payable 8,096 -- -- -- 8,096
---------- ---------- ---------- --------- ---------
11,969 -- -- -- 11,969
---------- ---------- ---------- --------- ---------
Net assets available for
plan benefits $ 1,480,739 $ 139,122 $ 304,742 $ 252,910 $ 2,177,513
========== ========== ========== ========= =========
</TABLE>
10
<PAGE>
WORLD AIRWAYS, INC
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Notes to Financial Statements
<TABLE>
<CAPTION>
Fidelity Fidelity
CIGNA CIGNA Advisor Advisor
Guaranteed Stock Growth Income
Long-Term Market Opportunities and Growth
Fund Index Fund Fund Fund Total
---------- ---------- -------------- ---------- -----
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1996
- -----------------
Investment income:
Net realized/unrealized
appreciation (depreciation)
in fair value of investments $ -- $ 31,826 $ 86,193 $ 25,460 $ 143,479
Interest income 93,296 -- -- -- 93,296
Participants' contributions 144,439 49,433 98,009 61,167 353,048
Rollovers from other plans 31,958 7,487 137,831 58,702 235,978
---------- --------- --------- --------- ----------
Total additions 269,693 88,746 322,033 145,329 825,801
---------- --------- --------- --------- ----------
Distributions to participants (72,826) (9,735) (32,916) (10,848) (126,325)
---------- --------- --------- --------- ----------
Transfers 38,755 (12,179) 19,820 (46,396) --
---------- --------- --------- --------- ----------
Net increase (decrease) in net
assets available for plan benefits 235,622 66,832 308,937 88,085 699,476
---------- --------- --------- --------- ----------
Net assets available for plan benefits:
Beginning of year 1,480,739 139,122 304,742 252,910 2,177,513
---------- --------- --------- --------- -----------
End of year $ 1,716,361 $ 205,954 $ 613,679 $ 340,995 $ 2,876,989
========== ========= ========= ========= ===========
DECEMBER 31, 1995
- -----------------
Investment income:
Net realized/unrealized
appreciation (depreciation)
in fair value of investments $ -- $ 35,033 $ 64,062 $ 25,121 $ 124,216
Interest income 86,606 -- -- -- 86,606
Participants' contributions 144,535 14,727 90,108 65,929 315,299
Rollovers from other plans 486 -- -- 1,459 1,945
---------- --------- --------- --------- -----------
Total additions 231,627 49,760 154,170 92,509 528,066
---------- --------- --------- --------- -----------
Distributions to participants (254,167) (5,007) (48,273) (20,936) (328,383)
---------- --------- --------- --------- -----------
Transfers 2,129 (4,463) (3,710) 6,044 --
---------- --------- --------- --------- -----------
Net increase (decrease) in net
assets available for plan benefits (20,411) 40,290 102,187 77,617 199,683
---------- --------- --------- --------- -----------
Net assets available for plan benefits:
Beginning of year 1,501,150 98,832 202,555 175,293 1,977,830
---------- --------- --------- --------- -----------
End of year $ 1,480,739 $ 139,122 $ 304,742 $ 252,910 $ 2,177,513
========== ========= ========= ========= ===========
</TABLE>
11
<PAGE>
WORLD AIRWAYS, INC
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Notes to Financial Statements
5. Tax Status
----------
The Internal Revenue Service has determined and informed the Company by
letter dated June 10, 1996, that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Code (IRC). The Plan has been amended since receiving the determination
letter. However, the Plan administrators and the Plan's tax counsel
believe that the Plan is designed and is currently being operated in
compliance with the applicable provisions of the Internal Revenue Code,
and that the Plan was qualified and the related trust was tax-exempt as
of the financial statement date.
6. Reconciliation of Financial Statements to Form 5500
---------------------------------------------------
The following is a reconciliation of net assets available for plan
benefits per the financial statements to the Form 5500:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
----------- ------------
<S> <C> <C>
Net assets available for plan benefits per the
financial statements $ 5,822,503 $ 7,662,913
Amounts allocated to withdrawing participants (31,874) (9,662)
---------- ----------
Net assets available for benefits per the Form 5500 $ 5,790,629 $ 7,653,251
========= =========
</TABLE>
The following is a reconciliation of benefits paid to participants per
the financial statements to the Form 5500:
<TABLE>
<CAPTION>
Year ended
December 31,
1996
------------
<S> <C>
Distributions to participants per the financial
statements $ 248,694
Add: Amounts allocated to withdrawing participants at
December 31, 1996 31,874
Less: Amounts allocated to withdrawing participants at
December 31, 1995 (9,662)
----------
Distributions to participants per the Form 5500 $ 270,906
==========
</TABLE>
Amounts allocated to withdrawing participants are recorded on the Form
5500 for benefit claims that have been processed and approved for
payment prior to December 31, but not yet paid as of that date.
12
<PAGE>
Schedule I
WORLD AIRWAYS, INC.
EMPLOYEE SAVINGS AND STOCK OWNERSHIP PLAN
Line 27a - Schedule of Assets Held for Investment Purposes
As of December 31, 1996
<TABLE>
<CAPTION>
(e) Current
(a) (b) Identity of Issue (c) Description (d) Cost Value
- ----- ---------------------- ----------------- ------------ ------------
<C> <S> <C> <C> <C>
* CIGNA Guaranteed Long-Term Fund Group Annuity Contract $ 1,369,830 $ 1,369,830
* CIGNA Stock Market Index Fund Pooled Separate Account SA-B 200,539 200,539
Fidelity Advisor Growth
Opportunities Fund Mutual Fund 595,619 595,619
Fidelity Advisor Income and
Growth Fund Mutual Fund 343,821 343,821
* WorldCorp Stock Fund Stock Fund 1,789,668 2,069,303
* World Airways Stock Fund Stock Fund 731,297 1,466,384
Participant Loans Receivable Interest Rate: 8% to 12%
Term: Up To 10 Years 304,373 304,373
NationsBank Cash Account Cash 250,499 250,499
--------- ---------
$ 5,585,646 $ 6,600,368
========= =========
</TABLE>
13
<PAGE>
Exhibit 1
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Trustees
World Airways, Inc. Employee Savings and Stock Ownership Plan:
We consent to incorporation by reference in the registration statement (No.
33-13575) on Form S-8 of World Airways, Inc. of our report dated June 18 , 1997,
relating to the statements of net assets available for plan benefits of the
World Airways Employee Savings and Stock Ownership Plan as of December 31, 1996
and 1995, and the related statements of changes in net assets available for plan
benefits for the years then ended, and related schedule, which report appears in
the December 31, 1996 annual report on Form 11-K of the World Airways, Inc.
Employee Savings and Stock Ownership Plan.
KPMG PEAT MARWICK LLP
Washington, D.C.
June 30, 1997
