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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: March 31, 2000 Commission File Number 0-26582
WORLD AIRWAYS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-1358276
(State of incorporation) (I.R.S. Employer Identification Number)
13873 Park Center Road, Suite 490, Herndon, VA 20171
(Address of Principal Executive Offices)
(703) 834-9200
(Registrant's telephone number)
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_______
The number of shares of the registrant's Common Stock outstanding on April 28,
2000 was 10,179,419.
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<PAGE>
WORLD AIRWAYS, INC.
MARCH 31, 2000, QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets, March 31, 2000 and December 31, 1999
Condensed Statements of Operations,
Three Months Ended March 31, 2000 and 1999
Condensed Statement of Changes in Stockholders' Deficiency,
Three months ended March 31, 2000
Condensed Statements of Cash Flows,
Three months ended March 31, 2000 and 1999
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
WORLD AIRWAYS, INC.
CONDENSED BALANCE SHEETS
ASSETS
(in thousands)
(unaudited)
March 31, December 31,
2000 1999
----------- -----------
CURRENT ASSETS
Cash and cash equivalents, including
restricted cash of $1,766 at
March 31, 2000 and $2,387 at
December 31, 1999 $ 6,025 $ 11,725
Short-term marketable investments 1,175 681
Accounts receivable, less allowance for
doubtful accounts of $1,848 at March
31, 2000 and December 31, 1999 7,114 11,225
Prepaid expenses and other current assets 5,585 6,647
------- -------
Total current assets 19,899 30,278
------- -------
EQUIPMENT AND PROPERTY
Flight and other equipment 85,930 90,150
Equipment under capital leases 9,463 10,262
------- -------
95,393 100,412
Less: accumulated depreciation
and amortization 38,265 38,306
------- -------
Net equipment and property 57,128 62,106
------- -------
ASSETS HELD FOR SALE 1,296 1,315
LONG-TERM OPERATING DEPOSITS 13,681 13,414
MARKETABLE INVESTMENTS 1,144 1,688
OTHER ASSETS AND DEFERRED CHARGES, NET 887 935
------- -------
TOTAL ASSETS $ 94,035 $ 109,736
======= =======
(Continued)
<PAGE>
WORLD AIRWAYS, INC.
CONDENSED BALANCE SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
(in thousands except share amounts)
(unaudited)
March 31, December 31,
2000 1999
----------- -----------
CURRENT LIABILITIES
Notes payable $ 4,368 $ 5,079
Current maturities of long-term
obligations 4,708 6,096
Accounts payable 11,190 19,453
Unearned revenue 3,467 4,152
Accrued maintenance in excess of
reserves paid 11,041 7,923
Accrued salaries and wages 8,646 8,510
Accrued taxes 2,687 2,835
Other accrued liabilities 324 1,127
------- -------
Total current liabilities 46,431 55,175
------- -------
LONG-TERM OBLIGATIONS, NET OF CURRENT MATURITIES 51,214 52,112
OTHER LIABILITIES
Deferred gain from sale-leaseback
transactions, net of accumulated
amortization of $22,572 at March 31,
2000 and $22,269 at December 31, 1999 4,454 3,083
Accrued maintenance in excess of reserves paid 11,400 14,884
Accrued post-retirement benefits 2,992 2,907
Deferent rent 11,783 11,413
------- -------
Total other liabilities 30,629 32,287
------- -------
TOTAL LIABILITIES 128,274 139,574
------- -------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.001 par value (5,000,000
shares authorized; no shares issued or
outstanding -- --
Common stock, $.001 par value (40,000,000
shares authorized; 12,147,000 shares
issued; 10,179,000 shares outstanding at
March 31, 2000 and 6,446,000 shares
outstanding at December 31, 1999) 12 12
Additional paid-in capital 23,841 46,857
Deferred compensation, employee salary
exchange program (4,163) --
Accumulated deficit (40,743) (35,972)
Treasury stock, at cost (1,968,ooo shares
at March 31, 2000 and 5,701,000 shares
at December 31, 1999) (13,186) (40,735)
-------- --------
Total stockholders' deficiency (34,239) (29,838)
-------- --------
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 94,035 $ 109,736
======= ========
See accompanying Notes to Condensed Financial Statements
<PAGE>
WORLD AIRWAYS, INC.
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
(in thousands except per share amounts)
(unaudited)
2000 1999
----------- ----------
OPERATING REVENUES
Flight operations $ 61,849 $ 65,155
Other 157 171
------- -------
Total operating revenues 62,006 65,326
------- -------
OPERATING EXPENSES
Flight operations 17,874 19,286
Maintenance 11,028 11,273
Aircraft rent and insurance 17,361 20,120
Fuel 5,947 5,217
Flight operations subcontracted
to other carriers 3,347 619
Commissions 1,551 1,855
Depreciation and amortization 1,707 2,012
Sales, general and administrative 7,052 7,133
------- -------
Total operating expenses 65,867 67,515
------- -------
OPERATING LOSS (3,861) (2,189)
------- -------
OTHER INCOME (EXPENSE)
Interest expense (1,345) (1,697)
Interest income 211 217
Other, net 224 963
------- -------
Total other expense (910) (517)
------- -------
NET LOSS $ (4,771) $ (2,706)
======= =======
NET LOSS PER SHARE
Basic $ (0.60) $ (0.39)
======= =======
Diluted $ (0.60) $ (0.39)
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 7,891 7,000
======= =======
Diluted 7,891 7,000
======= =======
See accompanying Notes to Condensed Financial Statements
<PAGE>
WORLD AIRWAYS, INC.
CONDENSED STATEMENTS OF CHANGES
IN STOCKHOLDERS' DEFICIENCY
Three Months Ended March 31, 2000
(in thousands except share amounts)
(unaudited)
<TABLE>
<CAPTION>
Additional Treasury Total
Common Paid-in Accumulated Deferred Stock, Stockholders'
Stock Capital Deficit Compensation at Cost Deficiency
--------- --------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 $ 12 $ 46,857 $(35,972) $ -- $(40,735) $(29,838)
Issuance of 3,733,000 shares of
restricted common stock
under Employee Salary
Exchange Program -- (23,072) -- (4,456) 27,528 --
Amortization of deferred compensation
and accrual of changes in
Employee Salary Exchange Program -- -- -- 293 21 314
Amortization of warrants -- 56 -- -- -- 56
Net Loss -- -- (4,771) -- -- (4,771)
------- -------- -------- ------- -------- --------
Balance at March 31, 2000 $ 12 $ 23,841 $(40,743) $ (4,163) $(13,186) $(34,239)
======= ======== ======== ======= ======== ========
See accompanying Notes to Condensed Financial Statements
</TABLE>
<PAGE>
WORLD AIRWAYS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
Three Months Ended March 31,
( in thousands)
(unaudited)
2000 1999
---------- ---------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD $ 11,725 $ 16,893
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (4,771) (2,706)
Adjustments to reconcile net loss to cash
provided (used) by operating activities:
Depreciation and amortization 1,707 2,011
Deferred gain recognition (303) (265)
Other 414 78
Increase (decrease) in cash resulting from change
in operating assets and liabilities net of
effects of non-cash transactions:
Accounts receivable 4,111 (3,573)
Deposits, prepaid expenses and other assets 795 (55)
Accounts payable, accrued expenses and
other liabilities (8,989) 5,045
Unearned revenue (685) 1,406
------- -------
Net cash provided (used) by operating activities (7,721) 1,941
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to equipment and property (1,274) (296)
Proceeds from disposal of equipment and property 143 110
Maturities of marketable investment 49 --
------- -------
Net cash used by investing activities (1,082) (186)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in line of credit borrowing
arrangement, net (711) 943
Repayment of debt (2,961) (4,395)
Issuance of debt 675 --
Proceeds of sale/leaseback transaction 6,100 --
------- -------
Net cash provided (used) by financing activities 3,103 (3,452)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,700) (1,697)
------- -------
CASH AND CASH EQUIVALENT $ 6,025 $ 15,196
======== =======
See accompanying Notes to Condensed Financial Statements
<PAGE>
WORLD AIRWAYS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. Management believes that all adjustments necessary for a fair statement of
results have been included in the Condensed Financial Statements for the
interim periods presented, which are unaudited. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates and the results
of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2000.
These interim period Condensed Financial Statements and accompanying
footnotes should be read in conjuction with the Financial Statements
contained in World Airways' Annual Report on Form 10-K/A for the year
ended December 31, 1999.
2. Notes Payable
The Company has a Credit Agreement with GMAC Financial Corporation
("GMAC") expiring in March 2001. The Agreement contains covenants related
to the Company's financial condition and operating results. The Company
was not in compliance with two of the covenants at March 31, 2000, but it
subsequently obtained approval for a waiver Amendment for them from GMAC.
3. Subsequent Events
At March 31, 2000, World Airways had 10.2 million shares of Common Stock
outstanding, including 3.7 million restricted shares given to employees
pursuant to the Employee Salary Exchange Program, which began in February
2000. Approximately 66% of the stock is publicly held and 21.6% is held by
WorldCorp, Inc ("WorldCorp"). On April 26, 2000 WorldCorp's Bankruptcy
Plan of Liquidation was approved and it is now expected that WorldCorp's
remaining ownership interest in World Airways will be distributed to
WorldCorp's creditors.
In April 2000 World Airways was informed by NASDAQ that it no longer met
one of the requirements for continued listing on The NASDAQ SmallCap
Market. Subsequently the Company provided NASDAQ with information on the
Company's plan to achieve compliance with the listing requirement, and it
believes it has presented a good case to remain listed. If, after
reviewing the information provided, NASDAQ determines that the Company's
continued listing is not warranted, it is expected a delisting process
will follow. If the Common Stock is delisted from the SmallCap Market, the
Company will seek to be listed on the NASDAQ Bulletin Board or an
alternative national stock exchange.
In May 2000 World Airways received $7 million as a result of a
comprehensive settlement with Malaysian Airline System Berhad ("Malaysian
Airlines") related to a number of aircraft lease and operating agreements,
the last of which was terminated in 1999. The $7 million will be recorded
as a gain in the second quarter of 2000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Part I, Item 2 of this report should be read in conjunction with Part II, Item 7
of World Airways, Inc. ("World Airways" or "the Company") Annual Report on Form
10-K/A for the year ended December 31, 1999. The information contained herein is
not a comprehensive management overview and analysis of the financial condition
and results of operations of the Company, but rather updates disclosures made in
the aforementioned filing.
The Company desires to take advantage of the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 (the "Act"). Therefore, this
report contains forward looking statements that are subject to risks and
uncertainties, including, but not limited to, the reliance on key strategic
alliances, fluctuations in operating results and other risks detailed from time
to time in the Company's filings with the Securities and Exchange Commission.
These risks could cause the Company's actual results for 1999 and beyond to
differ materially from those expressed in any forward looking statements made
by, or on behalf of, the Company.
OVERVIEW
General
For the first quarter of 2000, the Company's operating revenues were $62.0
million, the operating loss was $3.9 million, the net loss was $4.8 million and
the loss per share was $0.60 for both basic and diluted earnings per share
("EPS"). For the comparable period in 1999 the operating revenues were $65.3
million, the operating loss was $2.2 million, the net loss was $2.7 million and
the basic and diluted EPS was a loss of $0.39.
Significant Customer Relationships
During the first three months of 2000, the Company's business relied heavily on
its contracts with the U.S. Air Force's ("USAF") Air Mobility Command ("AMC")
and Garuda. In 2000 these customers provided approximately 43.6% and 25.3%,
respectively, of the Company's revenues and 30.5% and 33.3%, respectively, of
block hours flown. In 1999 AMC and Malaysian Airlines provided approximately
69.8% and 15.4%, respectively, of the Company's revenues and 57.2% and 13.1%,
respectively, of block hours flown.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Total block hours decreased 1,021 hours, or 12.2%, to 7,321 hours in the first
quarter of 2000 from 8,342 hours in 1999, with an average of 10.0 available
aircraft in 2000 and 12.0 available aircraft in 1999. Average daily utilization
(block hours flown per day per aircraft) was 8.1 hours in 2000 and 7.7 hours in
1999. In 2000 wet lease, or ACMI, contracts accounted for 57.2% of the block
hours, a decrease from 63.6% in 1999. The decrease in ACMI hours reflects an
increase in passenger flying that partially offset a decrease in cargo flying.
Cargo ACMI flying decreased primarily as a result of not flying for Malaysian
Airlines in 2000. In 2000 full service flying accounted for 41.1% of the block
hours, an increase from 34.3% in 1999, because of flying for Renaissance
Cruises.
Operating Revenues. Revenues from flight operations decreased $3.4 million, or
5.1%, to $61.8 million in 2000 from $65.2 million in 1999. This decrease is
primarily due to the decrease in aircraft and block hours flown in 2000.
Operating Expenses. Total operating expenses decreased $1.6 million, or 2.4%, in
2000 to $65.9 million from $67.5 million in 1999.
Flight operations expenses include all expenses related directly to the
operation of the aircraft other than aircraft cost, fuel and maintenance. Also
included are expenses related to flight dispatch and flight operations
administration. Flight operations expenses decreased $1.4 million, or 7.3%, in
2000. This decrease resulted primarily from the decrease in aircraft flown.
<PAGE>
Maintenance expenses in the first quarter of 2000 included approximately $1.1
million of costs related to unanticipated corrosion repairs on one aircraft and
expenses related to hail and other accidental damages to another aircraft.
Exclusive of these costs, maintenance expenses would have decreased 12.0%
reflecting the decrease in aircraft operated and resultant 12.2% decrease in
block hours flown year over year.
Aircraft rent and insurance costs decreased $2.8 million, or 13.7%, in 2000.
This decrease resulted from two fewer aircraft and decreases in rent expense for
the Company's MD-11 aircraft negotiated with the aircraft lessors in 1999.
Fuel expenses increased $0.7 million, or 14.0%, in 2000 due to an 11.2% increase
in the average cost of fuel per gallon and a 2.0% increase in the number of
gallons of fuel consumed as a result of more full service flying.
Commissions decreased $0.3 million in 2000, or 16.4%, principally as a result of
a decrease in AMC business.
Depreciation and amortization decreased $0.3 million, or 15.2%, in 2000. This
decrease resulted primarily from a reduction in fixed assets subject to
depreciation.
Sales, general and administrative expenses decreased $0.1 million, or 1.1%, in
2000, primarily as a result of general cost control efforts.
Non-operating income and expense showed a net decrease of $0.4 million in 2000
primarily because of a $1.0 million gain on the sale of a portion of the
Company's interest in an industry-owned organization that was recorded in 1999
and a reduction in debt year over year.
LIQUIDITY AND CAPITAL RESOURCES
The Company is highly leveraged. At March 31, 2000 the Company's cash and
short-term and long-term marketable investments totaled $8.3 million and the
ratio of the Company's current assets to its current liabilities ("current
ratio") was 0.4:1. Also, as of March 31, 2000, the Company had outstanding
long-term debt and capital leases of $51.2 million and notes payable and current
maturities of long term obligations of $9.1 million. In addition, the Company
has significant long-term obligations relating to operating leases for aircraft
and spare engines.
Cash Flows from Operating Activities
Operating activities used $7.7 million of cash in the three months ended March
31, 2000 compared to generating $1.9 million in the comparable period in 1999.
The decrease in 2000 is principally due to the $4.8 million loss incurred for
the quarter and a net decrease of $4.8 million in operating assets and
liabilities. The increase in 1999 is mainly due to increases of $5.0 million in
accounts payable, accrued expenses and other current liabilities and $1.4
million in unearned revenue that more than offset an increase of $3.6 million in
accounts receivable.
Cash Flows from Investing Activities
Investing activities used $1.1 million of cash in the three months ended March
31, 2000, compared to using $0.2 million in the comparable period in 1999. In
both periods cash was used primarily for the purchase of aircraft rotable spare
parts.
Cash Flows from Financing Activities
Financing activities generated $3.1 million of cash in the three months ended
March 31, 2000 compared to using $3.5 million in the comparable period in 1999.
In 2000, the principal transactions were $6.1 million of cash generated by a
sale/leaseback transaction and $3.0 million used to repay debt. In 1999, cash
was used primarily to repay approximately $4.4 million of debt.
OTHER MATTERS
Year 2000
The Company has not incurred any operational problems in 2000 related to
computer programs.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Part I, Item 3 of this report should be read in conjunction with Part II, Item
7a of World Airways, Inc. ("World Airways" or "the Company") Annual Report on
Form 10-K/A for the year ended December 31, 1999. The information contained
herein is not a quantitative and qualitative discussion about market risk the
Company faces, but rather updates disclosures made in the aforementioned filing.
World Airways continues not to have any material exposure to market risks.
<PAGE>
PART IV
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Exhibits
No. Description
27 Financial data schedule for the quarter ended
March 31, 2000. Filed Herewith
(b) Reports on Form 8-K
None
* * * * * * * * * * * * * *
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WORLD AIRWAYS, INC.
By: /s/ Gilberto M. Duarte, Jr.
Principal Accounting and Financial Officer
Date: May 11, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000949240
<NAME> World Airways
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-START> Jan-01-2000
<PERIOD-END> Mar-31-2000
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<CASH> 6,025
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