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, 1998 and 1997
- 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 401(K) SAVINGS PLAN
(Formerly WORLD AIRWAYS, 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 20171
<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 401(K) SAVINGS PLAN
Date: July 15, 1999
By: /s/ Gilberto M. Duarte, Jr.
Gilberto M. Duarte
Chief Financial Officer
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE 401(K) SAVINGS PLAN
FINANCIAL STATEMENTS AND SCHEDULES
DECEMBER 31, 1998 AND 1997
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE 4O1(K) SAVINGS PLAN
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Independent Auditors' Report
Financial Statements:
Statements of Net Assets Available for Plan Benefits -
December 31, 1998 and 1997
Statements of Changes in Net Assets Available for Plan Benefits -
For the Years Ended December 31, 1998 and 1997
Notes to Financial Statements
Schedule of Assets Held for Investment Purposes -
As of December 31, 1998
Schedule of Reportable Transactions -
For the year ended December 31, 1998
Schedule of Nonexempt Transactions -
For the year ended December 31, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Administrative Committee and Participants
World Airways, Inc. Employee 4O1(K) Savings Plan:
We have audited the accompanying statements of net assets available for plan
benefits of the World Airways, Inc. Employee 4O1(K) Savings Plan (the Plan),
(formerly the World Airways, Inc. Employee Savings and Stock Ownership Plan), as
of December 31, 1998 and 1997, 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, 1998 and 1997, 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 schedules of assets held for
investment purposes as of December 31, 1998 (Schedule I), reportable
transactions for the year ended December 31, 1998 (Schedule II), and schedule of
nonexempt transactions for the year ended December 31, 1998 (Schedule III) are
presented for the purpose of additional analysis and are not a required part of
the basic financial statements, but are 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
schedules are the responsibility of the Plan's management. The supplemental
schedules have been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
KPMG LLP
Washington, D.C.
July 13, 1999
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE 4O1(K) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------------------------------------------------
World Airways Stock Fund WorldCorp Stock Fund
------------------------- -------------------------- Other
Allocated Unallocated Allocated Unallocated Investments Total
--------- ----------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets
Cash $ -- $ 21,424 $ -- $ -- $ -- $ 21,424
Investments (aggregate cost
$5,261,354 in 1998) 136,789 7,194 252 -- 3,575.494 3,719,729
Loans receivable -- -- -- -- 203,137 203,137
Contributions receivable:
Employee -- -- -- -- 19,465 19,465
Employer -- -- -- -- 5,812 5,812
Due from World Airways, Inc. -- 5,668 -- -- -- 5,668
--------- ---------- ---------- ----------- --------- ---------
Total assets 136,789 34,286 252 -- 3,803,908 3,975,235
--------- ---------- ---------- ----------- --------- ---------
Liabilities
Due to WorldCorp, Inc. -- 34,286 -- -- -- 34,286
---------- ---------- ---------- ----------- --------- ----------
Total Liabilities -- 34,286 -- -- -- 34,286
---------- ---------- ---------- ----------- --------- ----------
Net assets available for
plan benefits $ 136,789 $ -- $ 252 $ -- $3,803,908 $3,940,949
========== ========== ========== =========== ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE 4O1(K) SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
DECEMBER 31, 1998 AND 1997
(CONTINUED)+
<TABLE>
<CAPTION>
December 31, 1997
--------------------------------------------------------------------------------------
World Airways Stock Fund WorldCorp Stock Fund
------------------------- -------------------------- Other
Allocated Unallocated Allocated Unallocated Investments Total
--------- ----------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Assets
- ------
Cash $ 58,592 $ -- $ -- $ 45,873 $ -- $ 104,465
Investments (aggregate cost
$5,352,003 in 1997) 809,629 392,363 374,431 -- 3,156,934 4,733,357
Loans receivable -- -- -- -- 288,923 288,923
Due from World Airways Stock
Fund - Allocated -- 6,138 -- -- -- 6,138
Due from World Airways, Inc. -- 26 -- -- -- 26
Contributions receivable:
Employer 39,606 -- -- -- -- 39,606
Participants -- -- -- -- 741 741
Interfund receivable -- -- -- 92,252 10,129 102,381
Other receivables -- -- -- -- 3,075 3,075
-------- ------- ------- ------- --------- ---------
Total assets 907,827 398,527 374,431 138,125 3,459,802 5,278,712
-------- ------- ------- ------- --------- ---------
Liabilities
- -----------
Margin loan -- 231,324 -- -- -- 231,324
Interest payable -- 2,966 -- -- -- 2,966
Due to World Airways Stock
Fund - Unallocated 6,138 -- -- -- -- 6,138
Due to participants -- 3,098 -- -- -- 3,098
Due to Trustee -- 3,075 -- -- -- 3,075
Due to WorldCorp, Inc. -- -- -- 137,421 -- 137,421
Interfund payable 92,252 -- -- -- 10,129 102,381
Other payables -- -- -- 704 1,065 1,769
-------- ------- ------- ------- --------- ---------
Total liabilities 98,390 240,463 -- 138,125 11,194 488,172
-------- ------- ------- ------- --------- ---------
Net assets available for
plan benefits $809,437 $158,064 $374,431 $ -- $ 3,448,608 $ 4,790,540
======= ======= ======= ======== ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE 4O1(K) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Year Ended December 31, 1998
--------------------------------------------------------------------------------------
World Airways Stock Fund WorldCorp Stock Fund
------------------------- -------------------------- Other
Allocated Unallocated Allocated Unallocated Investments Total
--------- ----------- --------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Additions:
Investment income (loss):
Net realized/unrealized
appreciation
(depreciation)
in fair value
of investments $(851,258) $ (120,735) $ (317,709) $ -- $ 81,424 $(1,208,278)
Interest income -- -- -- -- 165,966 165,966
Loan interest payments -- -- -- -- 23,622 23,622
Company contributions -- 150,037 -- -- 96,550 246,587
Participants' contributions -- 68,241 -- -- 571,711 639,952
Rollovers from other plans -- -- -- -- 9,673 9,673
Gain - extinguishment
of liability 192 16,256 -- -- -- 16,448
Allocation of common shares
at market value 264,442 -- -- -- -- 264,442
--------- --------- ---------- ---------- --------- ----------
Total additions (deductions) (586,624) 113,799 (317,709) -- 948,946 158,412
--------- --------- ---------- ---------- --------- ----------
Deductions:
Interest expense -- 6,994 -- -- -- 6,994
Other expenses -- 427 -- -- -- 427
Terminated employee loans -- -- -- -- 64,177 64,177
Allocation of common shares
at market value -- 264,442 -- -- -- 264,442
Distributions to participants 86,024 -- 56,470 -- 529,469 671,963
------- --------- ---------- ---------- --------- ---------
Total deductions 86,024 271,863 56,470 -- 593,646 1,008,003
------- --------- ---------- ---------- --------- ---------
Net increase (decrease) in
net assets available for
plan benefits (672,648) (158,064) (374,179) -- 355,300 (849,591)
Net assets available for
plan benefits:
Beginning of year 809,437 158,064 374,431 -- 3,448,608 4,790,540
--------- ---------- ---------- --------- ---------- ----------
End of year $ 136,789 $ -- $ 252 $ -- $ 3,803,908 $ 3,940,949
========= ========== =========== ========= ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE 4O1(K) SAVINGS PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Year Ended December 31, 1997
--------------------------------------------------------------------------------------
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 $ (136,123) $ (84,935) $(1,498,385) $ -- $ 356,144 $(1,363,299)
Interest income -- -- -- -- 102,134 102,134
Company contributions -- 270,919 -- -- -- 270,919
Participants' contributions -- 132,511 -- -- 379,684 512,195
Rollovers from other plans -- -- -- -- 137,306 137,306
Allocation of common shares
at market value (note 3) 708,272 -- -- -- -- 708,272
--------- --------- ---------- --------- --------- ---------
Total additions 572,149 318,495 (1,498,385) -- 975,268 367,527
--------- --------- ----------- --------- --------- ---------
Deductions:
Interest expense -- 47,555 -- -- -- 47,555
Contract discontinuance fee -- -- -- -- 34,075 34,075
Allocation of common shares
at market value -- 708,272 -- -- -- 708,272
Distributions to participants 43,527 -- 196,487 -- 369,574 609,588
-------- -------- ----------- --------- -------- ---------
Total deductions 43,527 755,827 196,487 -- 403,649 1,399,490
-------- -------- ----------- --------- -------- ---------
Net increase (decrease) in
net assets available for
plan benefits 528,622 (437,332) (1,694,872) -- 571,619 (1,031,963)
Net assets available for
plan benefits:
Beginning of year 280,815 595,396 2,069,303 -- 2,876,989 5,822,503
-------- -------- ---------- --------- --------- ---------
End of year $ 809,437 $ 158,064 $ 374,431 $ -- $ 3,448,608 $ 4,790,540
======== ======== ========== ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
WORLD AIRWAYS, INC.
EMPLOYEE 4O1(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
1. Description
The following brief description of the World Airways, Inc. Employee 401(K)
Savings Plan (the "Plan") formerly the World Airways, Inc. Employee
Savings and Stock Ownership Plan (the "ESSOP"), 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 the operations
of World Airways, Inc. ("World Airways" or the "Company").
(a) General
Effective July 1, 1998, the Plan was amended and became the World
Airways Employee 401(k) Savings Plan. All participants became 100%
vested in the World Airways and WorldCorp, Inc. ("WorldCorp") Stock
Funds at June 30, 1998, and the Stock Funds were closed for future
contributions.
The Plan is a defined contribution plan covering substantially all
full-time employees of the Company not covered by collective
bargaining agreements and is subject to the applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended
(ERISA).
The Plan originally purchased WorldCorp, Inc. common shares using the
proceeds from a borrowing (see Note 3) guaranteed by WorldCorp. The
borrowing was repaid through Company and participant contributions to
the Plan. As the Plan made each payment of principal, an appropriate
number of shares of stock were allocated to eligible employees'
accounts in accordance with applicable regulations under the Code.
Beginning October 1, 1996, the borrowing became collateralized by
exchanged shares of World Airways stock. The shares of WorldCorp
common stock collateralizing the borrowing were released and World
Airways became the guarantor of the borrowing. The lender had no
rights against shares once they were allocated under the ESSOP.
Accordingly, the financial statements of the Plan 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).
Effective October 31, 1997, the Trustee of the Plan was changed from
CIGNA to Prudential. Accordingly, the balance in the Other
Investments (as hereinafter defined) was transferred from CIGNA to
Prudential, and all subsequent contributions made to the Other
Investment funds were invested in Prudential mutual and investment
funds.
The Plan is an individual account plan under which a participant's
benefits are based on the amounts deferred by the participant into
the Plan 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
All employees of World Airways, Inc. not covered by collective
bargaining agreements, 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.
(c) Contributions
Each year, participants may contribute from 1% to 20% of pre-tax
annual compensation, as defined in the plan (Salary Deferral
Contributions).
Until June 30, 1998 World Airways contributed to the World Airways
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). Effective July 1, 1998 the Company
contributes 33% of a participant's contribution up to $10,000 to
other investment funds. Additional discretionary contributions may be
made at the option of the World Airways' Board of Directors
(Discretionary Contributions).
(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 year ended December 31, 1997
participants forfeited $12,673 of WorldCorp common stock and $15,189
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 Plan, to the sum of all participants'
total compensation, as defined in the Plan.
(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 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 partcipant (either a
single lump sum payment or in the form of a qualified annuity).
(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 Plan 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 Plan to discontinue its contributions at any time
and to terminate the Plan subject to the provisions of ERISA. In the
event of Plan 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 Plan 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 all funds
other than the CIGNA Guaranteed Long-Term Fund are stated at fair
value as determined by quoted market rates. 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 Plan loan (see
note 3) to the extent that employee and employer contributions are
insufficient to make such payments.
(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. Margin Loan
The Plan entered into a margin loan by agreement dated January 10, 1995
from Scott & Stringfellow Investment Corporation (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 shares of World
Airways common stock. The S&S Loan was paid in full on May 28, 1998.
4. Investments
The Plan includes the investment funds described below as of December 31,
1998.
(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 Plan continues to hold the shares of WorldCorp common
stock that were allocated to the participants' accounts. No
additional shares of WorldCorp common stock will be allocated under
the Plan. The Plan held 252,453 and 374,431 shares of WorldCorp
common stock with a $0.001 and $1.00 quoted market price per share at
December 31, 1998 and 1997, respectively. On February 12, 1999,
WorldCorp filed a petition for protection from its creditors under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court
for the District of Delaware.
(b) World Airways Stock Fund
The World Airways' Stock Fund was established October 1, 1996 and the
remaining unallocated shares in the WorldCorp Stock Fund were
exchanged for 180,478 shares of World Airways common stock. Employees
could purchase World Airways stock through salary deferral
contributions through June 30, 1998. The purchase price for the
period ended June,30, 1998 was adjusted monthly and ranged from $3.88
to $5.88. The purchase price for the year ended December 31, 1997 was
adjusted monthly and ranged from $4.31 to $4.80. 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. The Plan held 136,881 and
174,835 shares of World Airways common stock with a $1.00 and $6.875
quoted price per share at December 31, 1998 and 1997, respectively.
(c) Prudential Government Securities Trust/Money Market Fund
The Government Securities Trust/Money Market invests (through
Prudential) in United States Government securities and purchases only
securities with remaining maturities of 13 months or less and limits
the dollar-weighted average maturity of its portfolio to 90 days or
less. There were 96 participants contributing to this fund at
December 31, 1998.
(d) Prudential Small Company Value Class A Fund
The Small Company Fund - Class A seeks capital growth and invests
(through Prudential) primarily in common stocks selected for their
potential for high return on equity, increasing earnings, increasing
or expected dividends, and low P/E ratio. The fund typically invests
in firms that have market values under $1 billion. There were 95
participants contributing to this fund at December 31, 1998.
(e) Prudential Equity-Income Class A Fund
The Equity-Income Fund - Class A seeks both current income and
capital appreciation and invests (through Prudential) at least 65% of
assets in common stocks and convertible securities that provide
income returns higher than those of the S&P 500 or the NYSE Composite
index. There were 67 participants contributing to this fund at
December 31, 1998.
(f) Putnam International Growth Class A Fund
The International Growth Fund - Class A seeks capital appreciation
and invests (through Prudential) 65% of their assets in equity
securities of companies located outside North America. The fund may
invest in both developed and emerging markets. There were 92
participants contributing to this fund at December 31, 1998.
(g) George Putnam Fund of Boston A
The George Putman Fund of Boston - Class A seeks capital appreciation
and current income and invests (through Prudential) in any type of
security. The fund ordinarily invests no more than 75% of assets in
common stocks and convertibles. There were 52 participants
contributing to this fund at December 31, 1998.
(h) Prudential Stock Index Z Fund
The Stock Index Z Fund seeks to replicate the performances of the S&P
500 index and normally invests (through Prudential) at least 80% of
assets in securities listed on the S&P 500 index. There were 103
participants contributing to this fund at December 31, 1998.
(i) Kemper Horizon 20+ Class A Fund
The Horizon 20+ Portfolio - Class A seeks growth of capital and
invests (through Prudential) at least 80% of assets in equities; it
may invest the balance in investment-grade debt. There were 36
participants contributing to this fund at December 31, 1998.
(j) The PIMCo Total Return Class A Fund
The Total Return Fund - Class A seeks total return consistent with
preservation of capital and invests (through Prudential) 65% of
assets in debt sercurities and mortgage related securities. There
were 20 participants contributing to this fund at December 31, 1998.
The Trustee 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:
December 31,
1998 1997
---------- -----------
WorldCorp Stock Fund $ -- $ 374,431
World Airways Stock Fund -- 1,201,992
Prudential Government Securities
Trust/Money Market 743,001 3,095,139
Prudential Small Company Value
Class A Fund 283,993 --
Prudential Equity Income Class
A Fund 288,745 --
Putnam International Growth Class
A Fund 382,593 --
George Putnam Fund of Boston A 650,898 --
Prudential Stock Index Z Fund 1,034,371 --
<PAGE>
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, 1998 and 1997.
<TABLE>
<CAPTION>
Prudential
Gov't
Securities Prudential George
Trust Small Prudential Putnam Putnam Prudential Kemper PIMCo Total
Money Company Equity Int'l Fund Stock Horizon Total Other
Market Value Income Growth of Boston Index 20+ Return Participant Invest-
Fund A Fund A Fund A Fund A Fund Z Fund A Fund A Fund Loans ments
----- ------ ------ ------ ------ ------ ------ ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
Assets
- ------
Cash $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -
Investments 743,001 283,993 288,745 382,593 650,898 1,034,371 84,439 107,453 - 3,575,494
Loans receivable - - - - - - - - 203,137 203,137
Due from World Airways - - - - - - - - - -
Interfund accounts - - - - - - - - - -
Contributions receivable:
World Airways 924 785 552 587 930 1,540 320 174 - 5,812
Participants 3,095 2,628 1,849 1,966 3,114 5,158 1,071 584 - 19,465
------- ------- ------- ------- ------- --------- ------ ------- ------- ---------
747,020 287,406 291,146 385,146 654,942 1,041,069 85,830 108,212 203,137 3,803,908
------- ------- ------- ------- ------- --------- ------ ------- ------- ---------
Liabilities
- -----------
Due to WorldCorp
Inc. - - - - - - - - - -
------- ------- ------- ------- ------- --------- ------- ------- ------- ---------
Net assets available
for plan benefits 747,020 287,406 291,146 385,146 654,942 1,041,069 85,830 108,212 203,137 3,803,908
======= ======= ======= ======= ======= ========= ======= ======= ======= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Prudential
Government Prudential George
Securities Small Prudential Putnam Putnam Prudential Kemper PIMCo
Trust/ Company Equity Int'l Fund Stock Horizon Total Total
Money Market Value Income Growth of Boston Index 20+ Return Other
Fund A Fund A Fund A Fund A Fund Z Fund A Fund A Fund Investments
---------- ------ ------ ------ ------- ------- ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1997
Assets
- ------
Cash $ - $ - $ - $ - $ - $ - $ - $ - $ -
Investments 3,095,138 9,590 6,008 5,332 12,947 22,341 2,847 2,731 3,156,934
Loans receivable 288,923 - - - - - - - 288,923
Interfund receivable 10,129 - - - - - - - 10,129
Other receivables 3,075 - - - - - - - 3,075
Due from World Airways - - - - - - - - -
Contributions receivable:
World Airways - - - - - - - - -
Participants 741 - - - - - - - 741
--------- ------ ------ ------ ------ ------ ------ ------ ---------
3,398,006 9,590 6,008 5,332 12,947 22,341 2,847 2,731 3,459,802
--------- ------ ------ ------ ------ ------ ------ ------ ---------
Liabilities
- -----------
Interfund payable 227 1,437 1,129 393 1,256 4,778 231 678 10,129
Margin loan - - - - - - - - -
Other payables 1,065 - - - - - - - 1,065
Due to WorldCorp, Inc. - - - - - - - - -
--------- ------ ------ ------ ------- ------- ------- ------ ---------
1,292 1,437 1,129 393 1,256 4,778 231 678 11,194
Net assets available for
plan benefits $ 3,396,714 $ 8,153 $ 4,879 $ 4,939 $ 11,691 $ 17,563 $ 2,616 $ 2,053 $3,448,608
========= ====== ====== ====== ======== ======= ====== ====== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
A* B* C* D* E* F* G* H* I* J*
------- ------- -------- -------- ------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1998
Additions:
- ---------
Investment income:
Net realized/
unrealized
appreciation in
fair value of
investments $ (30) $(69,185) $(39,854) $ 29,110 $ (8,251) $ 166,427 $ 4,622 $ (1,415) $ - $ 81,424
Interest income 8,869 29,843 23,444 11,157 61,594 20,759 433 9,865 - 165,964
Company contributions 15,878 13,194 10,026 11,610 14,198 22,995 5,841 2,810 - 96,552
Participants'
contributions 91,091 77,342 54,063 57,717 91,286 151,389 31,520 17,303 - 571,711
Rollovers from other
plans - 949 - 7,617 - 1,107 - - - 9,673
Transfers and
exchanges (2,256,437) 296,411 294,718 270,283 521,542 739,697 50,248 83,538 - -
New loans (37,191) (11,176) (862) (33) (1,607) (33) (1,730) (812) 53,444 -
Loan & interest
payments 30,320 12,376 8,239 4,072 11,752 25,046 2,208 4,662 (75,053) 23,622
Allocation of stock
at market value - - - - - - - - - -
----------- ------- ------- ------- ------- --------- ------ ------- -------- -------
Total additions (2,147,500) 349,754 349,774 391,533 690,514 1,127,387 93,142 115,951 (21,609) 948,946
----------- ------- ------- ------- ------- --------- ------ ------- -------- -------
Deductions:
- ----------
Interest expense - - - - - - - - - -
Other expenses - - - - - - - - - -
Terminated employee
loans - - - - - - - - 64,177 64,177
Allocation of stock
at market value - - - - - - - - - -
Distributions to
participants 213,271 70,501 63,507 11,326 47,263 103,881 9,928 9,792 - 529,469
-------- ------- ------- ------- ------ ------- ------ ------ ------ -------
Total deductions 213,271 70,501 63,507 11,326 47,263 103,881 9,928 9,792 64,177 593,646
-------- ------- ------- ------- ------ ------- ------ ------ ------ -------
Net increase
(decrease) (2,360,771) 279,253 286,267 380,207 643,251 1,023,506 83,214 106,159 (85,766) 355,300
Net assets available
for plan benefits:
Beginning of
year 3,107,791 8,153 4,879 4,939 11,691 17,563 2,616 2,053 288,923 3,448,608
--------- --------- --------- -------- -------- --------- -------- --------- ------- ---------
End of year $ 747,020 $ 287,406 $ 291,146 $385,146 $654,942 $1,041,069 $ 85,830 $ 108,212 $203,137 $3,803,908
========= ========= ========= ======== ======== ========= ======== ======= ======= =========
A* Prudential Government Securities Trust/Money Market Fund
B* Prudential Small Company Value A Fund
C* Prudential Equity Income A Fund
D* Putnam International Growth A Fund
E* George Putnam Fund of Boston A Fund
F* Prudential Stock Index Z Fund
G* Kemper Horizon 20+ Fund
H* PIMCo Total Return A Fund
I* Participant Loans
J* Total Other Investments
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Prudential Prudential George
Government Small Prudential Putnam Putnam Prudential Kemper
Securities Company Equity Int'l Fund Stock Horozon
Trust/Money Value Income Growth of Boston Index 20+
Market Fund A Fund A Fund A Fund A Fund Z Fund A Fund
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Additions:
Investment income:
Net realized/unrealized
appreciation in fair
value of investments $ 5,871 $ 182 $ 165 $ 72 $ 180 $ 580 $ 56 580
Interest income - - - - - - -
Company contributions - - - - - - -
Participants' contributions 12,968 7,971 4,714 4,867 11,511 16,983 2,560
Rollovers from other plans - - - - - - -
Allocation of stock
at market value - - - - - - -
---------- ------ ------ ------ ------ ------ -------
Total additions 18,839 8,153 4,879 4,939 11,691 17,563 2,616
---------- ------ ------ ------ ------ ------ -------
Deductions:
Interest expense - - - - - - -
Contract discontinuance fee - - - - - - -
Transfers (3,377,875)
Other expenses - - - - - - -
Allocation of stock
at market value - - - - - - -
Distributions to participants - - - - - - -
----------- ------- ------ ------ ------ ------- -------
Total deductions (3,377,875) - - - - - -
----------- ------- ------ ------ ------ ------- -------
Net increase (decrease) 3,396,714 8,153 4,879 4,939 11,691 17,563 2,616
Net assets available
for plan benefits:
Beginning of year - - - - - - -
----------- ------- ------- ------- -------- -------- -------
End of year $ 3,396,714 $ 8,153 $ 4,879 $ 4,939 $ 11,691 $ 17,563 $ 2,616
=========== ======= ======= ======= ======== ======== =======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CIGNA CIGNA Fidelity
PIMCo Guaranteed Stock Advisor Fidelity
Return Long-Term Market Growth Balanced Total Other
A Fund Fund Fund Opportunities Fund Investments
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Additions:
Investment income:
Net realized/unrealized
appreciation in fair
value of investments $ (49) $ - $ 87,352 $ 179,003 $ 82,732 $ 349,038
Interest income - 102,134 - - - 102,134
Company contributions - - - - - -
Participants' contributions 2,102 94,994 68,918 89,203 62,893 379,684
Rollovers from other plans - 15,903 69,141 39,779 12,483 137,306
Allocation of stock
at market value - - - - - -
------- ---------- --------- --------- --------- ---------
Total additions 2,053 213,031 225,411 307,985 158,108 975,268
------- ---------- --------- --------- --------- ---------
Deductions:
Interest expense - - - - - -
Contract discontinueance fee - 34,075 - - - 34,075
Transfers - 1,639,002 378,532 889,901 470,440 -
Other expenses - - - - - -
Allocations of stock
at market value - - - - - -
Distributions to participants - 256,315 52,833 31,763 28,663 369,574
------- ----------- --------- --------- --------- ---------
Total deductions - 1,929,392 431,365 921,664 499,103 403,649
------- ----------- --------- --------- --------- ---------
Net increase (decrease) 2,053 (1,716,361) (205,954) (613,679) (340,995) 571,619
Net assets available
for plan benefits:
Beginning of year - 1,716,361 205,954 613,679 340,995 2,876,989
------- ----------- -------- --------- --------- ----------
End of year $ 2,053 $ - $ - $ - $ - $3,448,608
======= =========== ======== ========= ========= ==========
</TABLE>
<PAGE>
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 administrator 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:
December 31,
---------------------------
1998 1997
----------- -----------
Net assets available for plan
benefits - financial statements $ 3,940,949 $ 4,790,540
Amounts allocated to withdrawing
participants (22,077) (3,865)
--------- ----------
Net assets available for benefits -
Form 5500 $ 3,918,872 $ 4,786,675
========= ==========
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Year Ended
December 31,
1998
------------
Distributions to participants - financial statements $ 671,963
Add: Amounts allocated to withdrawing participants
at December 31, 1998 22,077
Less: Amounts allocated to withdrawing participants
at December 31, 1997 (3,865)
-----------
Distributions to participants - Form 5500 $ 690,175
===========
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.
<PAGE>
SCHEDULE I
WORLD AIRWAYS, INC.
EMPLOYEE 401(K) SAVINGS PLAN
LINE 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
(a) (b) Identity of Issue (c) Description (d) Cost (e) Current
- ----- ---------------------- ----------------- ------------ -----------
<S> <C> <C> <C> <C>
Value
* Prudential Government Securities Trust
Money Market Money Market $ 743,001 $ 743,001
* Prudential Small Company Value Class A Fund Mutual Fund 353,179 283,993
* Prudential Equity Income Class A Fund Mutual Fund 328,600 288,745
* Putnam International Growth Class A Fund Mutual Fund 353,484 382,593
* George Putnam Fund of Boston A Mutual Fund 659,149 650,898
* Prudential Stock Index Z Fund Mutual Fund 867,939 1,034,371
* Kemper Horizon 20+ Class A Fund Mutual Fund 79,817 84,439
* PIMCo Total Return Class A Fund Mutual Fund 108,868 107,453
* WorldCorp Stock Fund Stock Fund 1,009,812 252
* World Airways Stock Fund Stock Fund 554,368 143,983
Participant Loans Receivable Interest Rate: 8% - 12% 203,137 203,137
Term: Up to 10 Years
NationsBank Cash Account Cash 21,424 21,424
--------- ----------
$ 5,282,778 $ 3,944,290
========= ==========
* Parties-in-interest
</TABLE>
<PAGE>
SCHEDULE II
WORLD AIRWAYS, INC.
EMPLOYEE 401(K) SAVINGS PLAN
LINE 27(d) - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Current
Expense Value of
Identity Incurred Asset on
of Party Description Purchase Selling Lease With Cost of Transaction Net Gain
Involved of Asset Price Price Rental Transaction Asset Date or (Loss)
- -------- ------------ --------- --------- ------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Government
Securities
Plan Trust/Money
Trustee Market Fund 1,297,766 554,765 N/A N/A 554,765 554,765 -
Prudential
Small
Company
Plan Value A 502,488 149,488 N/A N/A 158,443 149,488 (8,955)
Trustee Fund
Prudential
Equity
Plan Income A
Trustee Fund 405,402 76,967 N/A N/A 84,393 76,967 (7,426)
Putman
International
Plan Growth A
Trustee Fund 412,189 58,777 N/A N/A 53,830 58,777 4,947
George
Plan Putman Fund
Trustee Of Boston A 759,785 100,816 N/A N/A 98,982 100,816 1,834
Prudential
Plan Stock Index
Trustee Z Fund 996,750 129,385 N/A N/A 119,477 129,385 9,908
</TABLE>
<PAGE>
SCHEDULE III
WORLD AIRWAYS, INC.
EMPLOYEE SAVINGS PLAN
LINE 27e - SCHEDULE OF NONEXEMPT TRANSACTIONS
FOR THE YEAR ENDED DEVEMBER 31, 1998
<TABLE>
<CAPTION>
Description of
Transactions
Including
Maturity Date, Expenses Net Gain
Relationship of Rate of Interest, Incurred Current or (Loss)
Identity of Employer or Other Collateral, Par Purchase Selling Lease With Cost of Value on each
Party Involved Party-In-Interest or Maturity Value Price Price Rental Transaction Asset Of Asset Transaction
- ------------------ ----------------- ----------------- ----------- ----- ------ ----------- ----- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
World Airways, Inc. Plan Sponsor Overdue employee $ 31,265.01 N/A N/A N/A N/A $31,265.01 N/A
contributions not
timely remitted
to the plan
</TABLE>
EXHIBIT 1
CONSENT OF INDEPENDENT AUDITORS
The Board of Trustees
World Airways, Inc. EMPLOYEE 401(K) SAVINGS 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 July 13, 1999,
relating to the statements of net assets available for plan benefits of the
World Airways EMPLOYEE 401(K) SAVINGS PLAN as of December 31, 1998 and 1997, and
the related statements of changes in net assets available for plan benefits for
the years then ended, which report appears in the December 31, 1998 annual
report on Form 11-K of the World Airways, Inc. EMPLOYEE 401(K) SAVINGS PLAN.
KPMG LLP
Washington, D.C.
July 13, 1999
