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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
Form 10-K
_________________
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
X SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _______________ to _____________
Commission file number 0-11720
AIR TRANSPORTATION HOLDING
COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1206400
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
3524 Airport Road
Maiden, North Carolina 28650
(Address of principal executive offices) (Zip Code)
(704) 377-2109
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.25 per share
(Title of Class)
__________________
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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of May 31, 1996, computed by reference to the average of the
closing bid and asked prices for such stock on such date, was $3,837,960. As
of the same date, 2,613,433 shares of Common Stock, no par value, were
outstanding.
PART I
Item 1. Business.
Air Transportation Holding Company, Inc., incorporated under the laws of
the State of Delaware in 1980 (the "Company"), operates through three wholly
owned subsidiaries, Mountain Air Cargo, Inc., a North Carolina corporation
("MAC"), CSA Air, Inc., a North Carolina corporation ("CSA"), and Mountain
Aircraft Services, LLC, a North Carolina limited liability company ("MAS").
The principal place of business of the Company, MAC and MAS is Maiden, North
Carolina, and the principal place of business of CSA is Iron Mountain,
Michigan. The Company through its subsidiaries employs approximately 360
persons, of which approximately 300 are employed by MAC, 50 are employed by
CSA and 10 are employed by MAS.
Effective July 1, 1992, the Company reorganized its subsidiaries. Prior
to such reorganization, the Company directly held the shares of capital stock
of MAC and a corporation then known as CSA Air, Inc. ("Old CSA"), and MAC held
the shares of capital stock of CSA, then known as MS Aircraft Maintenance
Corporation, Inc. In the reorganization, MAC transferred the shares of stock
of CSA to the Company, Old CSA transferred its assets to CSA and Old CSA
merged with and into MAC. Immediately following the reorganization CSA
changed its name to "CSA Air, Inc." In the following discussion of the
Company's business operations, all references to "CSA" include Old CSA.
MAC and CSA operate exclusively as contract carriers for overnight
delivery of small package air freight throughout the eastern half of the
United States and Canada, and in Puerto Rico and the U.S. Virgin Islands.
Over the past six fiscal years, as a consequence of changes in customer
preference, MAC and CSA have shifted their focus away from operating company-
owned aircraft to operating customer-owned aircraft under dry-lease service
contracts. In prior years, MAC's predominant business practice involved
carrying small package air freight in company-owned aircraft under contracts
that provided for a fixed fee per flight regardless of the amount of cargo
carried under so-called "wet lease" arrangements. For the most recent fiscal
year, these operations accounted for 6.0% of the Company's consolidated
revenue, compared to 7.1% for the prior fiscal year. Under the dry-lease
service contracts, the customer leases its aircraft to MAC (or CSA) for a
nominal amount and pays an administrative fee to MAC (or CSA). Under these
arrangements, all direct costs related to the operation of the aircraft
(including fuel, maintenance, landing fees and pilot costs) are passed through
to the customer. For the most recent fiscal year, operations under dry lease
service contracts accounted for 83.1% of the Company's consolidated revenue,
compared to 88.2% for the prior fiscal year.
For the fiscal year ended March 31, 1996, MAC and CSA provided air
delivery service exclusively to Federal Express Corporation ("Federal
Express"). As of March 31, 1996, MAC and CSA operated an aggregate of 93
aircraft under agreements with Federal Express. Separate agreements cover
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the three types of aircraft operated by MAC and CSA for Federal Express --
Cessna Caravan, Fokker F-27 and Short Brothers SD3-30. Cessna Caravan and
Fokker F-27 aircraft are dry-leased from Federal Express, and Short Brothers
SD3-30 aircraft are owned by the Company and operated under "wet-lease"
arrangements with Federal Express. For the fiscal year ended March 31, 1996,
89.1% of the Company's consolidated revenues was attributable to the Company's
operations under these agreements.
Pursuant to such agreements, Federal Express determines the schedule of
routes to be flown by MAC and CSA. As of March 31, 1996, MAC and CSA were
flying approximately 85 routes pursuant to their agreements with Federal
Express.
Agreements with Federal Express are renewable annually and may be
terminated by Federal Express any time upon 15 to 30 days' notice. The
Company believes that the short term and other provisions of its agreements
with Federal Express are standard within the air freight contract delivery
service industry. Loss of Federal Express as a customer would have a material
adverse affect on MAC, CSA and the Company.
In October 1993, the Company organized MAS to sell aircraft parts and
offer engine overhaul management and engine component repair services for
commercial and military aircraft. For the fiscal year ended March 31, 1996,
MAS contributed 10.1% of the Company's consolidated revenues.
On April 15, 1994, the Company announced that it will relocate and expand
the MAC aircraft maintenance facility and MAS engine overhaul management and
repair station facility to North Carolina's new Global TransPark located in
Kinston, North Carolina. This new 66,000 square foot facility is projected to
be completed in August 1996 and will consolidate the Company's aircraft
maintenance and aircraft component repair stations operations currently
located in Anderson, South Carolina and Miami, Florida. On November 16, 1995,
MAC entered into a 21 1/2-year facilities lease with Global TransPark
Foundation, Inc. After an 18-month grace period, rent under the lease will
escalate from $2.25 per square foot to $5.90 per square foot over the life of
the lease.
MAC and CSA operate under separate aviation certifications. MAC is
certified to operate under Part 121 and Part 135 of the regulations of the
Federal Aviation Administration (the "FAA"). This certification permits MAC
to operate aircraft that can carry up to 18,000 pounds of cargo. CSA is
certified to operate under Part 135 of the FAA regulations. This
certification permits CSA to operate aircraft with a maximum cargo capacity of
7,500 pounds.
As a result of the shift from Company-owned aircraft to customer-owned
aircraft, the Company sold the bulk of its owned aircraft in 1989, 1990 and
1991. At the end of the most recent fiscal year, the Company owned three
cargo aircraft.
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MAC and CSA, together, operated or held for sale the following aircraft
as of March 31, 1996:
[CAPTION] Form of Number of
Type of Aircraft Model Year Ownership Aircraft
Cessna Caravan, 208A and 208B
(single turbo prop) 1985-1996 dry lease 71
Fokker F-27 (twin turbo prop) 1968-1981 dry lease 22
Short Brothers SD3-30
(twin turbo prop) 1981 owned 3
__________
Total 96
Of the 96 aircraft fleet, 93 aircraft--that is, the Cessna Caravan and Fokker
F-27 aircraft--are owned by Federal Express. Under the dry-lease service
contracts, certain maintenance expense, including cost of parts inventory, and
maintenance performed by personnel not employed by the Company, is passed
directly to the customer, and the expense of daily, routine maintenance and
aircraft service checks is charged to the customer on an hourly
basis. Accordingly, the Company does not anticipate maintenance expense, such
as engine overhauls, to be material to the Company's operating results.
All FAA Part 135 aircraft, including Cessna Caravan models 208A and 208B,
and Short Brothers SD3-30 aircraft are maintained on FAA approved inspection
programs. The inspection intervals range from 100 to 200 hours. The engines
are produced by Pratt & Whitney, and overhaul periods are based on FAA-
approved schedules. The current overhaul period on the Cessna aircraft is
4,500 hours. The Short Brothers manufactured aircraft are maintained on an
"on condition" maintenance program (i.e., maintenance is performed when
performance deviates from certain specifications) with engine inspections at
each phase inspection and in-shop maintenance at predetermined intervals.
The Fokker F-27 aircraft are maintained under a FAA Part 121 maintenance
program. The program consists of A, B, C, D and I service checks. The engine
overhaul period is 5,700 hours.
The Company operates in highly competitive markets and competes with
approximately 50 other contract cargo carriers in the United States. MAC and
CSA's contracts are renewed on an annual basis. Accurate industry data is not
available to indicate the Company's position within its marketplace (in large
measure because most of the Company's competitors are privately held), but
management believes that MAC and CSA, combined, constitute one of the largest
contract carriers of the type described immediately above.
The Company's operations are not materially seasonal.
4
Governmental Regulation.
Under the Federal Aviation Act of 1958, as amended, the FAA has safety
jurisdiction over flight operations generally, including flight equipment,
flight and ground personnel training, examination and certification, certain
ground facilities, flight equipment maintenance programs and procedures,
examination and certification of mechanics, flight routes, air traffic control
and communications and other matters. The FAA also has power to suspend or
revoke for cause the certificates it issues and to institute proceedings for
imposition and collection of fines for violation of federal aviation
regulations. The Company has secured appropriate operating certificates and
airworthiness certificates for all aircraft operated by it.
During the most recent fiscal year, the Company underwent periodic
routine FAA reviews of MAC and CSA's operating procedures and flight and
maintenance records; no violations of procedures or recordkeeping were
reported.
The Airline Deregulation Act of 1978 created a new class of domestic
certificated all-cargo carriers. Pursuant to such certificate, aircraft of
specified size may be operated within the United States, without restriction
on routes.
The Company has been subject to FAA regulation since the commencement of
its business activities. The FAA is concerned with safety and the regulation
of flight operations generally, including equipment used, ground facilities,
maintenance, communications and other matters. The FAA can suspend or revoke
the authority of air carriers or their licensed personnel for failure to
comply with its regulations and can ground aircraft if questions arise
concerning airworthiness. The Company, through its subsidiaries, holds all
operating airworthiness and other FAA certificates that are currently required
for the conduct of its business, although these certificates may be suspended
or revoked for cause.
The FAA has authority under the Noise Control Act of 1972, as amended, to
monitor and regulate aircraft engine noise. The aircraft operated by the
Company are in compliance with all such regulations promulgated by the FAA.
Moreover, because the Company does not operate jet aircraft noncompliance is
not likely. Such aircraft also comply with standards for aircraft exhaust
emissions promulgated by the Environmental Protection Agency pursuant to the
Clean Air Act of 1970, as amended.
Because of the extensive use of radio and other communication facilities
in its aircraft operations, the Company is subject to the Federal
Communications Act of 1934, as amended.
Maintenance and Insurance.
The Company, through its subsidiaries, maintains its aircraft under the
appropriate FAA standards and regulations.
5
The Company has secured public liability and property damage insurance in
excess of minimum amounts required by the United States Department of
Transportation. The Company has also obtained all-risk hull insurance on
Company-owned aircraft.
The Company maintains cargo liability insurance, workers' compensation
insurance and fire and extended coverage insurance, for leased as well as
owned facilities and equipment.
Item 2. Properties.
The Company leases the Little Mountain Airport in Maiden, North Carolina
from a corporation whose stock is owned by David Clark, J. Hugh Bingham,
William H. Simpson and John J. Gioffre, officers and directors of the Company,
and three unaffiliated third parties. The facility consists of approximately
65 acres with one 3000 foot landing strip, approximately 20,000 square feet of
hangar space and approximately 9,700 square feet of office space. The
operations of the Company and MAC are headquartered at this facility. The
lease for this facility was renewed in May 1996, and is currently scheduled to
expire on May 31, 2001, and may be renewed for an additional five-year period.
In connection with the renewal, the monthly rental payment for this facility
increased to $8,073.
The Company also leases approximately 800 square feet of office space and
approximately 6,000 square feet of hangar space at the Ford Airport in Iron
Mountain, Michigan. CSA's operations are headquartered at these facilities.
These facilities are leased under an annually renewable agreement with a
monthly rental payment, as of March 31, 1996, of approximately $1,000.
On November 16, 1995, the Company entered into a twenty-one and a half
year premises and facilities lease with Global TransPark Foundation, Inc. to
lease approximately 53,000 square feet of a new 66,000 square foot aircraft
hangar, shop and office facility to be built at the North Carolina Global
TransPark in Kinston, North Carolina. Rent under this lease increases over
time as follows: the first 18 months, no rent; the next 5-year period, $2.25
per square foot; the next 5-year period, $3.50 per square foot; the next 5-
year period, $4.50 per square foot; and the final 5-year period, $5.90 per
square foot. The Company anticipates occupying this facility commencing in
August 1996.
The Company operates a maintenance facility in Anderson, South Carolina,
leasing approximately 2,200 square feet of office space and approximately
22,000 square feet of hangar space. Such facilities are leased on a month-to-
month basis. As of March 31, 1996, the monthly rental payment for this
facility was $3,000.
The Company operates a maintenance facility in Miami, Florida, leasing
approximately 4,700 square feet of hangar space. The lease expires in April
1998, and the monthly rental payment is $2,500.
As of March 31, 1995, the Company leased hangar space at 15 other
6
locations for aircraft storage. Such hangar space is leased at prevailing
market terms.
The table of aircraft presented in Item 1 lists the aircraft operated by
the Company's subsidiaries and the form of ownership.
Item 3. Legal Proceedings.
The Company is not aware of any pending or threatened lawsuits that if
adversely decided would have a material adverse effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders.
PART II
Item 5. Registrant's Common Equity and Related Stockholder Matters.
The Company's common stock is publicly traded in the over-the-counter
market under the NASDAQ symbol "AIRT."
As of May 31, 1996, the number of holders of record of the Company's
Common Stock was approximately 720. Over-the-counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commissions
and may not necessarily represent actual transactions. The range of high and
low bid quotations per share for the Company's common stock from April 1994
through March 1996 (which quotations have been adjusted to reflect the one-
for-five reverse split effected on May 16, 1994) is as follows:
[CAPTION] Common Stock
Quarter Ended High Low
June 30, 1994 . . . . . . . . . . . 7 3/16 4 1/4
September 30, 1994 . . . . . . . . 4 3/4 4
December 31, 1994 . . . . . . . . . 4 1/2 3 3/4
March 31, 1995 . . . . . . . . . . 3 7/8 3 3/4
June 30, 1995 . . . . . . . . . . . 4 1/8 3 7/8
September 30, 1995. . . . . . . . . 4 1/2 3 3/4
December 31, 1995 . . . . . . . . . 4 3/4 3 3/4
March 31, 1996. . . . . . . . . . . 4 1/2 3 3/4
In January 1992 and May 1993, the Company paid a cash dividend on its
Common Stock of $.01 per share (pre-reverse stock split, or $.05 per share
post-reverse stock split). On June 15, 1994, following the Company's one-for-
five reverse split of shares of its Common
Stock, the Company paid a cash dividend of $.06 per share ($.012 per pre-split
share). On May 31, 1995, the Company paid a cash dividend of $.07
7
per share. On April 22, 1996, the Company paid a cash dividend of $.08 per
share. Prior to January 1992, the Company had not paid a dividend. The
Company's Board of Directors intends to review the Company's operating
results, financial condition, capital requirements and other factors in
determining whether to pay cash dividends in the future.
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
Selected Financial Data. SELECTED FINANCIAL DATA
(in thousands except per share
data)
Year Ended March 31,
1996 1995 1994 1993 1992
Operating revenues $36,101 $32,951 $30,674 $26,776 $20,097
Earnings before extraordinary
credit and change in accounting
principle 1,612 1,598 1,579 1,504 823
Extraordinary credit - - - 309 392
Change in accounting principle - - 715 - -
Net earnings 1,612 1,598 2,294 1,813 1,215
Net earnings per share (1):
Earnings before extraordinary
credit and change in
accounting principle $ .53 $ .48 $ .47 $ .47 $ .26
Extraordinary credit - - - .09 .12
Change in accounting principle - - .22 - -
Net earnings $ .53 $ .48 $ .69 $ .56 $ .38
Total assets $10,220 $10,161 $ 8,550 $ 7,147 $ 4,770
Long-term debt, including
current portion $ 10 $ 14 $ 20 $ 241 $ 524
Stockholders' equity $ 7,414 $ 7,130 $ 6,642 $ 4,493 $ 2,756
Average common shares
outstanding (1) 3,020 3,312 3,348 3,210 3,190
Dividends declared per
common share (1)(2) $ .15 $ .06 $ .05 $ - $ .05
Dividends paid per
common share (1)(2) $ .07 $ .06 $ .05 $ - $ .05
(1) - All common share and dividend data reflect the one-for-five reverse
stock split effective May 16, 1994.
8
(2) - On April 25, 1995 the Company declared a $.07 per common share special
cash dividend, which was paid on May 31, 1995. On February 1, 1996 the
Company declared an $.08 per common share special cash dividend, paid April
22, 1996.
Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations. The Company's revenue is primarily generated
through its air cargo subsidiaries, Mountain Air Cargo, Inc. (MAC) and CSA
Air, Inc. (CSA), which are short-haul express air freight carriers flying
nightly contracts for a major express delivery company out of 78 cities,
principally located in 30 states in the eastern half of the United States and
in Canada, Puerto Rico, and the Virgin Islands. In 1993, the Company
organized Mountain Aircraft Services, LLC. (MAS) to engage in the sale of
commercial aircraft parts and provide aircraft engine overhaul management and
component repair services. Revenues from this operation contributed
approximately $3,629,000 and $1,236,000 to the Company's revenues in fiscal
1996 and 1995, respectively.
Under the terms of MAC and CSA's dry-lease service contracts (which
currently cover approximately 96% of the revenue aircraft operated), the
Company passes through to its customer certain cost components of its
operations without markup. The cost of fuel, landing fees, outside
maintenance, aircraft certification and conversion, parts and certain other
direct operating costs are included in operating expenses and billed to the
customer as cargo and maintenance revenue at no additional mark-up to the
customer.
The following table summarizes the changes and trends in the Company's
expenses as a percentage of revenue:
Fiscal Year Ended March 31
1996 1995 1994
Operating revenue (in thousands) $36,101 $32,951 $30,674
Expense as a percentage
of revenue: % % %
Flight operations 35.05 36.81 37.81
Maintenance 46.73 43.50 42.42
General and administrative 10.63 10.90 10.90
Depreciation and amortization 1.34 1.40 1.08
Interest, net - - 0.03
Total costs and expenses 93.75% 92.61% 92.24%
9
Fiscal 1996 vs 1995. Consolidated revenue increased $3,150,000 (9.6%) to
$36,101,000 for the fiscal year ended March 31, 1996 compared to the prior
fiscal year. Fiscal 1996's revenue increase resulted primarily from a
$2,393,000 (193.6%) increase in parts brokering and quick engine change
revenue related to the expansion of MAS, and an increase in the number of
customer-owned aircraft operated by the Company, partially offset by a
decrease in maintenance billing.
Operating expenses increased $3,338,000 (10.9%) to $33,843,000 for fiscal
1996 compared to fiscal 1995. The increase in operating expenses consisted of
the following changes: cost of flight operations increased $522,000 (4.3%)
primarily due to an increase in pilot staffing and airport fees; maintenance
expense increased $2,556,000 (17.8%), primarily as a result of increases in
cost of sales related to aircraft parts sold by MAS and increased use of
outside contract services; depreciation increased $26,000 (5.4%); general and
administrative expense increased $234,000 (6.5%) as a result of increased
staffing at MAS, cost associated with the Company's future relocation of
maintenance operations and increased employee benefits, salary and wage rates.
The $263,000 increase, in fiscal 1996, in non-operating income reflects a
gain on disposal of Company-owned aircraft.
Pretax earnings increased $75,000 (3.1%) to $2,520,000 for fiscal 1996
compared to 1995. The increases were due to the gain on disposal of Company-
owned aircraft, income on Company investments and increased earnings generated
by MAS, partially offset by increased operating and administration cost, and
decreased cargo aircraft maintenance revenue.
The provision for income taxes increased $60,000 (7.1%) to $908,000 for
fiscal 1996 compared to fiscal 1995. Fiscal 1996 experienced an increased
effective Federal tax rate due to the full utilization of certain net
operating loss carryforwards during the third quarter of fiscal 1995.
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes" as of the beginning of fiscal 1994, and
the cumulative effect of this change was reported in the Consolidated
Statements of Earnings for Fiscal 1994. The cumulative effect on fiscal 1994
net earnings of adoption of $715,000 ($.22 per share) reflects the impact of
"temporary differences" between amounts of assets and liabilities for
financial reporting purposes and such amounts as measured by tax laws, and the
future utilization of net operating loss and alternative minimum tax credit
carryforwards. In addition, the cumulative effect of adoption reduced
goodwill by $320,000, which reflects the effect of future utilization of pre-
acquisition loss carryforwards.
Because of the Company's dependence upon a single customer and
uncertainty as to the future allocation of taxable income among subsidiaries
to which the separate-return limitation applies, the Company has provided a
valuation allowance against gross deferred tax assets as of March 31, 1996.
Of the $170,000 valuation allowance approximately $152,000 is related to
potential benefits from pre-acquisition carryforwards, while approximately
$18,000 is related to other deferred benefits. Reductions in the valuation
allowance derived from utilization of pre-acquisition net operating loss
10
carryforwards of $401,000 have been credited directly to goodwill during the
1996 fiscal year. Changes in the valuation allowance, related to future
utilization of post-acquisition net operating losses, reduced the provision
for income taxes by $115,000 during the 1996 fiscal year.
As of March 31, 1996, the Company had federal net operating loss
carryforwards available for tax return purposes of approximately $500,000.
These carryforwards expire in 1997. The potential utilization of these
carryforwards is subject to the separate return limitation rules pursuant to
Treasury regulations.
Fiscal 1995 vs 1994. Consolidated revenue increased $2,277,000 (7.4%)
to $32,951,000 for the fiscal year ended March 31, 1995 compared to the prior
fiscal year. The increase in 1995 revenue primarily resulted from a
$1,152,000 increase in cargo revenue generated by Company-owned aircraft and a
$903,000 increase in revenue related to the expansion of MAS.
Operating expenses increased $2,220,000 (7.8%) to $30,505,000 for fiscal
1995 compared to fiscal 1994. The increase in operating expenses consisted of
the following changes: cost of flight operations increased $535,000 (4.6%) as
a result of increases in pilot and flight personnel and costs associated with
fuel, travel, and landing fees (primarily related to Company-owned aircraft)
which were partially offset by decreased aircraft lease costs; maintenance
expense increased $1,320,000 (10.1%) primarily as a result of increased
outside maintenance, inside personnel and cost of parts purchased for MAS,
offsetting decreases in
parts purchases and contract service costs; depreciation and amortization
increased $128,000 (38.8%) due to additional depreciation related to the
acquisition of aircraft, computer
system hardware, and maintenance and office equipment; the general and
administrative expense increase of $238,000 (7.1%) resulted from increases in
operational and clerical staffing related to expansion of MAS and increased
levels of administrative service required by the
Company's principal customer, increases in professional fees and stockholder
expense (including expense of special stockholder meeting held in May 1994)
and general increases in salary and wage rates.
Interest expense decreased $8,000 (92.0%) for fiscal 1995 compared to
fiscal 1994 due to the repayment of debt.
Pretax earnings increased $59,000 to $2,445,000 for fiscal 1995. The
pretax earnings increase was primarily related to the increased level of cargo
revenue generated by Company-owned aircraft and earnings generated by the
Company's brokerage and engine overhaul management services.
Provision for income taxes increased $41,000 (5.0%) to $848,000 in 1995.
The increase was due to the full utilization of post-acquisition net operating
loss carryforwards, resulting in higher Federal income tax rates, on certain
Company income starting in the second quarter of fiscal 1995. The provision
for income taxes for the fiscal years ended March 31, 1995 and 1994 were
different from the Federal statutory rates due to state tax provisions and
changes to the deferred tax valuation allowance.
11
Changes in the valuation allowance, related to future utilization of
post-acquisition net operating losses, reduced the provision for income taxes
by $112,000 during the 1995 fiscal year.
Liquidity and Capital Resources. As of March 31, 1996 the Company's
working capital amounted to $5,662,000, an increase of $1,185,000 compared to
March 31, 1995. The net increase, primarily resulted from profitable
operations, disposal of aircraft and earnings on investments, as reflected by
a $723,000 increase in cash and investments, a $790,000 decrease in accounts
payable and a $456,000 increase in inventory, partially offset by a
$233,000 decrease in accounts receivable and a $351,000 increase in accrued
expenses and
taxes. The March 31, 1996 cash and short-term investments included $3,266,000
invested primarily in bonds, commercial paper and mutual funds.
The Company's accounts receivable and inventory financing line provides
credit in the aggregate of up to $2,250,000 to September 1996. The Company
anticipates renewing the line of credit in 1996. Loans under the line of
credit bear interest at the lender's prime rate.
Substantially all of the Company's assets, excluding aircraft, have been
pledged as collateral under this financing arrangement. As of March 31, 1996,
the Company was in a net investment position against its credit line.
Management believes that funds anticipated from operations and existing credit
facilities will provide adequate cash flow to meet the Company's future
financial needs.
The respective years ended March 31, 1996, 1995 and 1994 resulted in the
following changes in cash flow: Operating activities provided $1,778,000,
$3,047,000, and $1,693,000; investing activities used $1,830,000, $299,000,
and $1,008,000; and financing activities used $1,114,000, $1,115,000 and
$367,000 respectively. Net cash and cash equivalents decreased $1,167,000 for
the year ended March 31, 1996, and increased $1,633,000 and $318,000 for the
years ended March 31, 1995 and 1994 respectively.
Cash provided by operating activities was $1,268,000 less for the year
ended March 31, 1996 compared to 1995, primarily due to reductions in accounts
payable. Cash used in investing activities for the year ended March 31, 1996
was approximately $1,532,000 more than 1995, principally due to the Company's
purchase of short-term investments in 1996. The primary use of cash in
investing activities in 1995 related to the acquisition of two aircraft. Cash
used in financing activities was $1,000 less in 1996 compared to 1995. The
primary use of cash in investing activities for 1995 related to the Company's
purchases of short-term investments in 1996.
During the fiscal year ended March 31, 1996 the Company repurchased
238,500 shares of its common stock at a total cost of $1,011,043. Pursuant to
its previously announced stock repurchase program, $821,000 remains available
for repurchase of common stock.
The Company's planned relocation of aircraft maintenance and repair
operations to Kinston, North Carolina is scheduled for August 1996. Costs asso-
ciated with the relocation are projected to reduce the Company's cash flow by
approximately $500,000 in fiscal 1997. Other than the above relocation there
12
are, currently, no commitments for significant capital expenditures and none
are anticipated during the fiscal year ending March 31, 1997.
Company stockholders approved, at a special stockholders' meeting held
May 4, 1994, a consolidation of common shares via a one-for-five reverse stock
split, which became effective May 16, 1994. The following cash dividend data
gives effect to the reverse stock split. The Company paid, on June 15, 1994,
a special cash dividend of $.06 per common share to shareholders of record May
20, 1994, and paid a $.07 per common share special cash dividend on May 31,
1995 to shareholders of record May 8, 1995. The Company also paid a $.08 per
common share special cash dividend on April 22, 1996 to shareholders of record
April 2, 1996.
Impact of Inflation. The Company believes the impact of inflation and
changing prices on its revenues and net earnings will not have a material
effect since the major cost
components of its operations, consisting principally of fuel, crew and certain
maintenance costs, are reimbursed, without markup, under current contract
terms.
Item 8. Financial Statements and Supplementary Data.
The following pages present the consolidated financial statements of the
Company and the independent auditors' report thereon.
13
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Air Transportation Holding Company, Inc.
Denver, North Carolina
We have audited the accompanying consolidated balance sheets of Air
Transportation Holding Company, Inc. and subsidiaries as of March 31, 1996 and
1995, and the related consolidated statements of earnings, stockholders'
equity, and cash flows for each of the three years in the period ended March
31, 1996. These financial statements are the responsibility of the Company'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, such consolidated financial statements present fairly, in all
material respects, the financial position of Air Transportation Holding
Company, Inc. and subsidiaries as of March 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the three years in the
period ended March 31, 1996 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
June 10, 1996
Charlotte, North Carolina
14
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
1996 1995
ASSETS (Note 3)
CURRENT ASSETS:
Cash and cash equivalents $ 2,213,841 $ 3,380,885
Short-term investments 1,889,819 -
Accounts receivable, less allowance for
doubtful accounts of $44,000 in 1996
and $38,000 in 1995 3,133,670 3,366,286
Parts and supplies inventory 725,503 269,653
Assets held for sale 20,646 40,646
Prepaid expenses 40,679 450
Deferred tax asset (Note 7) 440,000 440,000
Total Current Assets 8,464,158 7,497,920
PROPERTY AND EQUIPMENT (Notes 3 and 4):
Furniture, fixtures and improvements 2,084,027 1,893,924
Flight equipment and rotables inventory 1,164,807 1,419,740
3,248,834 3,313,664
Accumulated depreciation and amortization (1,678,980) (1,271,750)
Property and equipment, net 1,569,854 2,041,914
EXCESS OF COST OVER NET ASSETS OF SUBSIDIARY
ACQUIRED, net of amortization of $807,000
(1996) and $1,202,000 (1995) (Notes 1 and 7) 33,834 429,167
OTHER ASSETS 124,387 56,435
DEFERRED TAX ASSET (Note 7) 27,838 135,620
TOTAL $10,220,071 $10,161,056
See notes to consolidated financial statements.
15
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
1996 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,003,081 $ 1,574,438
Accrued expenses (Note 2, 5, and 8) 1,555,284 1,401,275
Income taxes payable (Note 7) 238,113 41,054
Current maturities of long-term debt 5,976 4,437
Total Current Liabilities 2,802,454 3,021,204
LONG-TERM DEBT, less current maturities
(Notes 3 and 4) 3,649 9,838
COMMITMENTS (Note 4)
STOCKHOLDERS' EQUITY (Note 5):
Preferred stock, $1 par value; authorized
10,000,000 shares; none issued
Common stock, par value $.25; authorized
4,000,000 shares; issued 2,725,433 shares
in 1996 and 2,865,933 shares in 1995 681,358 716,483
Additional paid-in capital 7,299,045 7,891,108
Deficit (566,435) (1,477,577)
Total Stockholders' Equity 7,413,968 7,130,014
TOTAL $10,220,071 $10,161,056
See notes to consolidated financial statements
16
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For Year Ended March 31
1996 1995 1994
OPERATING REVENUE (Note 6):
Cargo $19,129,860 $18,283,842 $17,050,465
Maintenance 13,104,829 13,149,946 12,919,773
Aircraft services and other 3,865,859 1,517,184 703,670
36,100,548 32,950,972 30,673,908
OPERATING EXPENSES:
Flight operations 12,653,601 12,131,978 11,597,475
Maintenance and brokerage 16,888,729 14,332,419 13,012,291
General and administrative
(Note 8) 3,815,987 3,582,055 3,344,489
Depreciation and amortization 484,711 458,619 330,515
33,843,028 30,505,071 28,284,770
OPERATING INCOME 2,257,520 2,445,901 2,389,138
NON-OPERATING EXPENSE (INCOME):
Interest 981 661 8,227
Other (263,508) (313) (5,352)
(262,527) 348 2,875
EARNINGS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 2,520,047 2,445,553 2,386,263
INCOME TAXES (Note 7) 908,000 848,000 807,000
EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 1,612,047 1,597,553 1,579,263
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (Note 7) - - 715,000
NET EARNINGS $ 1,612,047 $ 1,597,553 $ 2,294,263
NET EARNINGS PER COMMON SHARE (Note 5):
Earnings before cumulative effect of
change in accounting
principle $ 0.53 $ 0.48 $ 0.47
Cumulative effect of change in
accounting principle - - 0.22
Net earnings $ .53 $ 0.48 $ 0.69
WEIGHTED AVERAGE SHARES
OUTSTANDING 3,019,831 3,312,387 3,347,689
See notes to consolidated financial statements.
17
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock (Note 6) Additional
Paid-In
Shares Amount Capital Deficit
Balance, March 31, 1993 2,912,433 $728,108 $8,279,308 $(4,514,500)
Cash dividend
($.05 per share) - - - (145,622)
Net earnings - - - 2,294,263
Balance, March 31, 1994 2,912,433 728,108 8,279,308 (2,365,859)
Repurchase and retirement
of common stock (278,500) (69,625) (563,450) (534,525)
Exercise of stock options 232,000 58,000 175,250 -
Cash dividend
($.06 per share) - - - (174,746)
Net earnings - - - 1,597,553
Balance, March 31, 1995 2,865,933 716,483 7,891,108 (1,477,577)
Repurchase and retirement
of common stock (238,500) (59,625) (669,563) (281,855)
Exercise of stock options 98,000 24,500 77,500 -
Cash dividend paid
($.07 per share) - - - (200,615)
Cash dividend declared
($.08 per share) (218,435)
Net earnings - - - 1,612,047
Balance, March 31, 1996 2,725,433 $ 681,358 $7,299,045 $ (566,435)
See notes to consolidated financial statements.
18
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Year Ended March 31
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 1,612,047 $ 1,597,553 $ 2,294,263
Adjustments to reconcile net earnings
to net cash provided by operating activities
Cumulative effect of change in
accounting principle - - (715,000)
Depreciation and amortization 484,711 458,619 330,515
Other - - (5,352)
Change in deferred tax asset 107,782 104,180 355,000
Charge in lieu of income taxes
credited to goodwill 323,346 275,468 214,000
Changes in assets and liabilities
which provided (used) cash:
Accounts receivable 232,616 (344,082) (236,631)
Parts and supplies inventory (455,850) (168,833) (13,280)
Other assets (88,180) (4,709) (6,122)
Accounts payable (789,792) 834,037 (485,581)
Accrued expenses 154,009 264,334 (20,686)
Income taxes payable 197,059 29,941 (18,254)
Total adjustments 165,701 1,448,955 (601,391)
Net cash provided by operating
activities 1,777,748 3,046,508 1,692,872
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (204,172) (1,048,851) (758,932)
Proceeds from sale of equipment 263,508 - 30,552
Loans (to) from officers - 750,000 (280,000)
Short-term investments (1,889,819) - -
Net cash used in investing activities(1,830,483) (298,851) (1,008,380)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt (4,651) (5,935) (221,098)
Payment of cash dividend (200,615) (174,746) (145,622)
Repurchase of common stock (1,011,043) (1,167,600) -
Exercise of stock options 102,000 233,250 -
Net cash used in financing activities(1,114,309) (1,115,031) (366,720)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (1,167,044) 1,632,626 317,772
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 3,380,885 1,748,259 1,430,487
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 2,213,841 $ 3,380,885 $ 1,748,259
19
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 981 $ 1,233 $ 9,347
Income taxes 346,873 338,562 275,703
Non-Cash financing activity -
dividend accrual 218,435 - -
See notes to consolidated financial statements
AIR TRANSPORTATION HOLDING COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1996, 1995, AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principal Business Activity - The Company, through its operating
subsidiaries, is an air cargo carrier specializing in the overnight delivery
of small package air freight, for a major express delivery company out of 78
cities principally located in 30 states in the eastern half of the U.S. and in
Canada, Puerto Rico, and the Virgin Islands. The Company also provides
aircraft parts, engine overhaul management and component repair services.
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries,
Mountain Air Cargo, Inc., CSA Air, Inc., and Mountain Aircraft Services, LLC.
All significant intercompany transactions and balances have been
eliminated.
Use of Estimates - The preparation of the Company's 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 reportedamounts of revenues and
expenses during the reporting period. Actual results Investments could differ
from those estimates.
Parts and Supplies Inventory - Parts and supplies inventory are carried
at the lower of average cost or market. In accordance with industry
practice, the Company includes in current assets parts and supplies, although
a certain portion of these inventories are not expected to be used within one
year.
Property and Equipment - Property and equipment is stated at cost or, in
the case of equipment under capital leases, the present value of future lease
payments. Rotables inventory represents aircraft parts which are repairable
and are, therefore, capitalized and depreciated over their estimated useful
lives. Depreciation and amortization are provided on a straight-line basis
over estimated useful lives of 3-9 years for property and equipment. Assets
held for sale are carried at the lower of cost or estimated realizable
value.
20
Excess of Cost Over Net Assets of Subsidiary Acquired - Excess of cost
over net assets of subsidiary acquired represents the difference between the
fair value of the Company's stock issued and the carrying value of the net
asset deficiency of an acquired business as of the acquisition date. The
excess is being amortized on a straight-line basis over a 40 year period.
The Company periodically evaluates the value of the carrying amount of
goodwill using estimates of future cash flows and operating earnings of the
business acquired. Adjustments to the carrying amount, or amortization period
of goodwill, will be made if the earnings and cash flow outlook do not support
the current carrying value.
Investments - The Company has a cash management program which provides
for the investment of excess cash balances. Investments at March 31, 1996
represent available-for-sale securities carried at fair value (which
approximates cost).
Investments consist primarily of commercial paper, bonds, and mutual
funds.
Cargo and Maintenance Revenue - Cargo revenue is recognized at the time
the route is completed, and maintenance revenue is recognized when the service
has been performed.
Operating Expenses Reimbursed by Customer - The Company, under the terms
of its dry lease service contracts, passes through to its major customer
certain cost components of its operations without markup. The cost of fuel,
landing fees, outside maintenance
and certain other direct operating costs are included in operating
expenses and billed to the customer, as cargo and maintenance revenue, at
cost.
Net Earnings Per Common Share - Earnings per share have been compiled by
dividing net earnings by the weighted average number of common shares
outstanding, including common shares issuable under employee stock options
which are considered common share equiva-lents. There were no material
differences between primary and fully diluted earnings per share. (see Reverse
Stock Split below)
Reverse Stock Split - Company stockholders, at a special stockholders
meeting held May 4, 1994, approved, effective May 16, 1994, a one-for-five
reverse stock split of the Company's common shares. All 1996, 1995 and 1994
common stock par values, share balances, earnings per share and dividends have
been restated to reflect the reverse stock split.
Cash Equivalents - Cash equivalents consist of liquid investments with
maturities of three months or less when purchased.
21
Income Taxes - The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes" as of the beginning of
fiscal 1994, and the cumulative effect of this change in accounting principle
is reported in the Consolidated Statements of Earnings for Fiscal 1994. The
cumulative effect on net earnings of adoption of $715,000 ($.22 per share)
reflects the impact of "temporary differences" between amounts of assets and
liabilities for financial reporting purposes and such amounts as measured by
tax laws, and the future utilization of net operating loss and alternative
minimum tax credit carryforwards. In addition, the cumulative effect of
adoption reduced goodwill by $320,000, which reflects the effect of future
utilization of pre-acquisition loss carryforwards.
Effect of New Accounting Standards - In October 1995, the Financial
Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based
Compensation". Under SFAS No. 123, companies are permitted to either adopt
this new standard and record expenses of stock options and other stock-based
employee compensation plans based on their fair value at date of grant or
continue to apply Accounting Principles Board ("APB") Opinion No. 25 and
increase footnote disclosure. The Company has decided to continue to apply
APB Opinion No. 25, and in fiscal 1997, to increase footnote disclosure to
include the pro forma impact on net earnings and earnings per share based on
the application of the fair value based method of accounting.
Reclassification - Certain amounts have been reclassified for 1995 and
1994 to conform to the 1996 presentation.
2. ACCRUED EXPENSES
Accrued expenses consist of the following:
MARCH 31,
1996 1995
Salaries, Wages and Related Items $ 684,440 $ 648,685
Profit Sharing 409,000 402,079
Other 461,844 350,511
$1,555,284 $1,401,275
3. FINANCING ARRANGEMENTS
The Company's accounts receivable and inventory financing line provides
for credit up to the lesser of $2,250,000 or the sum of 85% of eligible
accounts receivable and 35% of inventory (up to $400,000 maximum inventory
borrowing). Amounts advanced bear interest at the prime rate payable upon
demand. The prime rate at March 31, 1996 was 8 1/4%. Any advances are
collateralized by a first lien on accounts receivable, inventories (including
inventory classified as assets held for sale) and certain equipment. There
were no advances outstanding as of March 31, 1996 or 1995.
22
4. LEASE COMMITMENTS
The Company has capital lease obligations for office equipment and also
has operating lease commitments for office equipment and its office and
maintenance facilities. The Company leased its central office and maintenance
facilities from a company controlled by Company officers for $7,000 per month
under a five year lease which expires in May 1996. Effective June 1996, the
lease was renewed for an additional five-year period at $8,073 per month. The
Company is scheduled to relocate and expand its maintenance and repair
facilities to North Carolina's new Global TransPark (GTP) located in Kinston,
N.C. in August 1996. The lease for this facility is to be twenty one and one
half years, but may be cancellable by the Company upon the occurance of
certain events. Under the terms of the lease, the Company will pay rent,
after an 18 month grace period, per square foot escalating from $2.25 to $5.90
over the remaining life of the lease.
At March 31, 1996, future minimum annual rental payments under capital
leases and operating leases, including the GTP lease, with initial or
remaining terms of more than one year are as follows:
Capital Operating
Leases Leases
1997 $ 6,372 $ 132,525
1998 3,717 146,399
1999 216,805
2000 216,805
2001 216,805
Thereafter 3,943,428
Total minimum lease payments 10,089 $4,872,767
Less amount representing interest, at 5.7% 464
Present value of lease payments 9,625
Less current maturities 5,976
Long-term maturities $ 3,649
Rent expense for operating leases amounted to $177,000 (1996), $179,000
(1995), and $149,000 (1994). Rent expense to related parties was $84,000
(1996, 1995, and 1994).
5. STOCKHOLDERS' EQUITY
In 1984, the Company created a class of preferred stock, $1 par value.
The Company may issue up to 10,000,000 shares of preferred stock, in one or
more series, on such terms and with such rights, preferences and limitations
as determined by the Board of Directors. No preferred shares have been issued
as of March 31, 1996.
23
The Company has granted options to purchase 447,000 and 130,000 shares of
common stock to certain Company employees at a price of $1.00 and $1.25 per
share, respectively. As of March 31, 1996, options totaling 330,000 shares
have been exercised and 247,000 shares remain available and exercisable
through outstanding options. The Company has reserved an aggregate of 247,000
common shares for issuance upon exercise of these stock options.
The Company has announced its intention to repurchase the Company's
common stock under a share repurchase program. At March 31, 1996, the Company
may expend up to $821,000 under this program.
6. REVENUES FROM MAJOR CUSTOMER
Approximately 90% of the Company's revenues are derived from services
performed for a major air express company.
7. INCOME TAXES
The provision for income taxes was based upon the liability method in
1996, 1995 and 1994 and consists of:
YEAR ENDED MARCH 31,
1996 1995 1994
Current:
Federal $ 296,000 $ 273,000 $ 44,000
State 182,000 195,000 194,000
Total current 478,000 468,000 238,000
Charge in lieu of Federal taxes 430,000 380,000 569,000
Total $ 908,000 $ 848,000 $ 807,000
Pre-acquisition net operating loss carryforwards have been utilized for
federal income tax purposes for fiscal years 1996, 1995 and 1994. The income
tax benefit ($323,000) in 1996, $275,000 in 1995 and $214,000 in 1994) derived
from these pre-acquisition net operating loss carryforwards has been accounted
for as a reduction of goodwill. The consolidated income tax provision was
different from the amount computed using the statutory Federal income tax rate
for the following reasons:
1996 1995 1994
Income tax provision at U.S.
statutory rate $841,000 $765,000 $745,000
State income taxes 182,000 195,000 194,000
Reduction in valuation allowance (115,000) (112,000) (132,000)
Income tax provision $908,000 $848,000 $807,000
The tax effect of temporary differences and net operating loss carryfor-
wards that gave rise to the Company's deferred tax asset at March 31, 1996 and
1995 are as follows:
24
1996 1995
Net operating loss carryforwards $ 163,849 $ 715,166
Alternative minimum tax credit carryforwards - 91,565
Fixed assets 420,392 115,409
Other 53,850 261,820
638,091 1,183,960
Less: Valuation allowance (170,253) (608,340)
Deferred tax asset $ 467,838 $ 575,620
The deferred tax asset is broken down between current and noncurrent
amounts in the accompanying 1996 and 1995 consolidated balance sheets
according to the classification of the related asset and liability or, in the
case of tax loss carryforwards, based on their expected utilization date.
The Company has recorded a valuation allowance in order to reduce its
deferred tax asset to an amount which is more likely than not to be realized.
Of the $170,000 valuation allowance at March 31, 1996, approximately $152,000
relates to pre-acquisition carryforwards while approximately $18,000 is
related to other deferred
benefits. Reductions in the valuation allowance derived from utilization of
pre-acquisition carryforwards of $323,000 and $275,000 have been credited
directly to goodwill during the 1996 and 1995 fiscal years, respectively.
Changes in the valuation allowance, related to future utilization of post-
acquisition net operating losses, reduced the provision for income taxes by
$115,000 and $112,000, respectively, during the 1996 and 1995 fiscal years.
At March 31, 1996, the Company has federal net operating loss carryforw-
ards available for tax purposes of approximately $500,000. These
carryforwards expire in 1997. The potential utilization of these pre-
acquisition carryforwards is subject to the separate return limitation rules
pursuant to Treasury regulations. These carryforwards, to the extent
realized, will result in a reduction of goodwill, until goodwill is reduced to
zero.
8. EMPLOYEE BENEFITS
The Company has a 401K defined contribution plan (AirT 401(K) Retirement
Plan). All employees of the Company are eligible to participate in the plan.
The Company's contribution to the 401(K) plan for the years ended March 31,
1996, 1995 and 1994 was $210,052, $171,298, and $142,593, respectively.
The Company, in each of the past three years, has paid a discretionary
profit sharing bonus in which all employees have participated. The Company's
March 31, 1996, 1995, and 1994 expense was $409,000, $397,000 and $388,000,
respectively.
25
Effective January 1, 1996 the Company entered into supplemental
retirement agreements with certain key executives of the Company, to provide
for a monthly benefit upon retirement. The following table sets forth the
funded status of the plan at March 31, 1996.
Vested Benefit Obligation $ 913,847
Accumulated Benefit Obligation $ 913,847
Projected Benefit Obligation $ 913,847
Plan Assets at Fair Value $ -
Projected Benefit Obligation greater
than plan assets (913,847)
Prior service cost not yet recognized 871,737
Accrued pension cost recognized in the
consolidated balance sheet $ (42,110)
The projected benefit obligation was determined using an assumed
discount rate of 7%. The liability relating to these benefits has been
included in accrued expenses in the accompanying financial statements.
Net periodic pension expense for 1996 included the following:
Service Cost $ 6,838
Interest Cost 15,212
Amortization 20,060
Net periodic pension cost $ 42,110
9. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(in thousands except per share data)
FIRST SECOND THIRD FOURTH
1996 QUARTER QUARTER QUARTER QUARTER
Operating Revenues $8,364 $8,694 $8,762 $10,281
Gross Profit 812 504 663 541
Net Earnings 520 301 353 438
Net Earnings Per Share $ .17 $ .10 $ .12 $ .15
FIRST SECOND THIRD FOURTH
1995 QUARTER QUARTER QUARTER QUARTER
Operating Revenues $8,051 $8,081 $8,121 $8,698
Gross Profit 652 693 613 487
Net Earnings 431 433 384 350
Net Earnings Per Share $ .13 $ .13 $ .11 $ .11
26
Item 9. Disagreements on Accounting and Financial Disclosure.
The Company had no disagreements on accounting or financial
disclosure matters with its independent certified public accountants to report
under this Item 9.
PART III
Item 10. Directors and Executive Officers of the Registrant.
J. Hugh Bingham, age 50, has served as Senior Vice President of the
Company since June 1990, as Executive Vice President from June 1983 to June
1990, and as a director since March 1987. Mr. Bingham also serves as an
Executive Vice President and a director of MAC and of CSA and as President of
MAS.
David Clark, age 73, has served as Chairman of the Board of Directors of
the Company and as Chairman of the Board of all the Company's subsidiaries
since June 23, 1983. From June 23, 1983, Mr. Clark also served as the
Company's, and each of its subsidiaries', Chief Executive Officer and from the
spring of 1984 until June 1990, he served as the Company's President.
Mr. Clark is also Chairman of the Board of MAC and of CSA. He has served for
the past five years as President of a real estate development concern with
interests in North Carolina.
John J. Gioffre, age 52, has served as Vice President-Finance and Chief
Financial Officer of the Company since April 1984 and as Secretary/Treasurer
of the Company since June 1983. He has served as a director of the Company
since March 1987. Mr. Gioffre also serves as Vice-President, Secre-
tary/Treasurer and a director of MAC and CSA and as Vice President-Finance,
Treasurer and Secretary of MAS.
H. Wayne Ross, age 51, has served as President of CSA since October 1988.
William H. Simpson, age 48, has served as Executive Vice President of
the Company since June 1990, as Vice President from June 1983 to June 1990,
and as a director of the Company since June 20, 1985. Mr. Simpson is also the
President and a director of MAC, a director of CSA and Executive Vice
President of MAS.
Menda J. Street, age 44, has served as Vice President of MAC since 1984,
and in various other capacities at MAC since 1979.
Claude S. Abernethy, Jr., age 69, was elected as director of the Company
in June 1990. For the past five years, Mr. Abernethy has served as a Senior
Vice President of Interstate/Johnson Lane Corporation, a securities brokerage
and investment banking firm. Mr. Abernethy is also a director of Inter-
state/Johnson Lane Corporation and Carolina Mills, Inc.
Sam Chesnutt, age 62, was elected a director of the Company in August
1994. Mr. Chesnutt serves as President of Sam Chesnutt and Associates, an
agribusiness consulting firm. From November 1988 to December 1994, Mr.
Chesnutt served as Executive Vice President of AgriGeneral Company, L.P., an
agribusiness firm.
27
Walter Clark, age 39, was elected a director of the Company in April
1996. Mr. Clark has been self-employed in the real estate development
business since 1985.
J. Leonard Martin, age 59, was elected a director in August 1994. Mr.
Martin is currently an independent aviation consultant. From April 1994 to
June 1995, Mr. Martin has served as Chief Operating Officer of Musgrave
Machine & Tool, Inc., a machining company. From January 1989 to April 1994,
Mr. Martin served as a consultant to the North Carolina Air Cargo Authority in
connection with the establishment of the Global TransPark air cargo facility
in Kinston, North Carolina.
From 1955 through 1988 Mr. Martin was employed by Piedmont Airlines, a
commercial passenger airline, in various capacities, ultimately serving as
Senior Vice President-Passenger Services.
George C. Prill, age 73, has served as a director of the Company since
June 1982, as Chief Executive Officer and Chairman of the Board of Directors
from August 1982 until June 1983, and as President from August 1982 until
spring 1984. Mr. Prill has served as an Editorial Director for General
Publications, Inc., a publisher of magazines devoted to the air transportation
industry, since November 1992 and was retired from 1990 until that time. From
1979 to 1990, Mr. Prill served as President of George C. Prill & Associates,
Inc., of Charlottesville, Virginia, which performed consulting services for
the aerospace and airline industry. Mr. Prill has served as President of
Lockheed International Company, as Assistant Administrator of the FAA, as a
Senior Vice President of the National Aeronautic Association and Chairman of
the Aerospace Industry Trade Advisory Committee.
Terry Sanford, age 78, was elected a director in August 1994. Mr.
Sanford is President Emeritus of Duke University, a position held since 1985,
and has been a Professor of Public Policy at the Terry Sanford Institute of
Public Policy at Duke University since 1992. In addition, since 1993,
Mr. Sanford has been a partner of The Sanford Law Firm in Raleigh, North
Carolina. From 1986 to 1993, Mr. Sanford served as a United States Senator
representing the State of North Carolina. Mr. Sanford serves on the board of
directors of IMC, Inc., the parent of Golden Corral Corporation.
Walter Clark is David Clark's son.
The officers of the Company and its subsidiaries each serve at the
pleasure of the Board of Directors.
Each director receives a director's fee of $500 per month and an
attendance fee of $500 is paid to outside directors for each meeting of the
board of directors or a committee thereof.
28
To the Company's knowledge, based solely on review of the copies of
reports under Section 16(a) of the Securities Exchange Act of 1934 that have
been furnished to the Company and written representations that no other
reports were required, during the fiscal year ended March 31, 1996 all
executive officers, directors and greater than ten-percent beneficial owners
have complied with all applicable Section 16(a) filing requirements, except
that Mr. Chesnutt was a few days late in filing one report with respect to an
acquisition transaction.
Item 11. Executive Compensation.
The following table sets forth a summary of the compensation paid during
each of the three most recent fiscal years to Mr. Clark, as Chief Executive
Officer, and to each of the other individuals who were executive officers on
March 31, 1996 with total compensation of $100,000 or more.
SUMMARY COMPENSATION TABLE
All Other
Annual Compensation Compensation
Name and Principal Position Year Salary ($) Bonus ($) ($)
David Clark 1996 155,749 59,583 -
Chief Executive Officer 1995 144,738 59,345 -
1994 136,381 55,494 (1)
J. Hugh Bingham 1996 124,953 67,583 -
Senior Vice President 1995 107,177 67,845 -
1994 102,153 37,747 -
John J. Gioffre 1996 97,426 49,937 -
Vice President 1995 99,898 52,134 -
1994 90,443 28,747 -
William H. Simpson 1996 160,204 73,583 -
Executive Vice President 1995 149,221 79,845 -
1994 140,537 77,494 -
Menda J. Street 1996 93,316 38,291 -
Vice President of MAC 1995 89,283 39,422 -
1994 84,113 36,747 -
____________________________
(1) During the fiscal year ended March 31, 1994, the Company made certain
loans to Mr. Clark. See "Item 13 - Certain Relationships and Related
Transactions."
29
The following table sets forth the number of shares of Common Stock
underlying unexercised options at March 31, 1996 held by each of the executive
officers listed in the Summary Compensation Table. The table also includes
the value of such options at March 31, 1996 based upon the closing bid price
of the Company's Common Stock in the over-the-counter market on that date
($4.00 per share) and the exercise price of the options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Securities Value of
Shares Underlying Unexercised
Acquired Value Unexercised In-the-Money Options
On Realized Options at FYE(#) at FY-End ($)
Exer- Exer- Unexer- Exer- Unexer-
Name cise # ($) cisable cisable cisable cisable
David Clark - - - - - -
J. Hugh Bingham 14,000 42,000 78,000 - 312,000 -
John J. Gioffre 8,000 24,000 42,000 - 168,000 -
William H. Simpson 20,000 60,000 108,000 - 432,000 -
Menda J. Street - - 15,000 - 60,000 -
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock (determined in accordance with Rule 13d-3
of the Securities and Exchange Commission) of the Company as of May 15, 1996
by each person that beneficially owns five percent or more of the shares of
Common Stock. Each person named in the table has sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned,
except as otherwise set forth in the notes to the table.
30
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Amount and Nature of
Title of Name and Address of Beneficial Ownership Percent
Class Beneficial Owner as of May 31, 1996 of Class
Common Stock, David Clark, Trustee 1,294,826(1) 49.5%
par value $.25 P.O. Box 488
per share Denver, N.C.
Thomas B. Henson, Trustee 1,294,826(1) 49.5%
1900 Independence Center
101 North Tryon Street
Charlotte, N.C. 28246
William H. Simpson 261,580(2) 9.9%
P.O. Box 488
Denver, N.C.
32
Kennedy Capital Mgmt, Inc.(3) 229,438 8.8%
425 North Ballas Road
St. Louis, Missouri 63141
____________________________
(1) Shares held pursuant to a revocable trust established by David Clark
under an Agreement dated August 21, 1995.
(2) Includes 1,200 shares held jointly with J. Hugh Bingham, and 108,000
shares under options granted by the Company.
(3) Information regarding Kennedy Capital Management, Inc. is based upon
information provided by Kennedy Capital Management Inc. to the
Company on June 17, 1996.
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock of the Company by each director of the
Company and by all directors and officers of the Company as a group as of
May 15, 1996. Each person named in the table has sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned,
except as otherwise set forth in the notes to the table.
31
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
Shares and Percent
of Common Stock
Beneficially Owned
Name Position with Company as of May 15, 1996
No. of Shares Percent
J. Hugh Bingham Senior Vice President, 116,080 (1)(2) 4.3%
Director
David Clark Chairman of the Board of 1,294,826 (3) 49.5%
Directors and Chief
Executive Officer
John J. Gioffre Vice President-Finance, 57,580 (4) 2.2%
Secretary and Treasurer,
Director
William H. Simpson Executive Vice President, 261,580 (1)(5) 9.6%
Director
Claude S. Abernethy, Jr. Director 22,611 *
Sam Chesnutt Director 3,600 *
Walter Clark Director 0 0%
J. Leonard Martin Director 100 (6) *
George C. Prill Director 45,966 1.8%
Terry Sanford Director 0 0%
All directors and N/A 1,823,343 (7) 63.9%
executive officers as a group
(12 persons)
__________________________________________
* Less than one percent.
(1) Includes 1,200 shares jointly held by Messrs. Simpson and Bingham.
(2) Includes 78,000 shares under options granted by the Company to Mr.
Bingham.
(3) Shares held pursuant to a revocable trust established by David Clark
under an Agreement dated August 21, 1995.
(4) Includes 42,000 shares under options granted by the Company to
Mr. Gioffre.
(5) Includes 108,000 shares under options granted by the Company to
Mr.Simpson.
(6) Such 100 shares are held by Mr. Martin's spouse of which shares
Mr.Martin disclaims beneficial ownership.
(7) Includes an aggregate of 243,000 shares of Common Stock members of
such group have the right to acquire within 60 days.
32
Item 13. Certain Relationships and Related Transactions.
The Company leases its corporate and operating facilities at the Little
Mountain, North Carolina airport from Little Mountain Airport Associates, Inc.
("Airport Associates"), a corporation whose stock is owned by David Clark,
J. Hugh Bingham, William H. Simpson, John J. Gioffre and three unaffiliated
third parties. On May 30, 1996, the Company renewed its lease for this
facility, scheduled to expire on that date, for an additional five-year term,
and adjusted the rent to account for increases in the consumer price index.
The lease may be extended for an additional five-year term, with rental
payments to be adjusted to reflect changes in the consumer price index. Upon
the renewal, the monthly rental payment was increased from $7,000 to $8,073.
The Company paid aggregate rental payments of $84,000 to Airport Associates
pursuant to such lease during the fiscal year ended March 31, 1996.
As part of the Company's stock repurchase program, the Company repurchased
certain shares of Common Stock from Messrs. Bingham, Gioffre and Simpson
during fiscal year ended March 31, 1996. On October 16, 1995, the Company
purchased for cash 25,000 shares of Common Stock from Mr. Simpson in a
negotiated transaction at a price of $4.35 per share. On March 15, 1996,
the Company purchased for cash 40,000 shares and 17,500 shares of Common
Stock from Messrs. Bingham and Gioffre, respectively, in negotiated trans-
actions at a price of $4.20 per share. The per share purchase price in
each of the foregoing transactions was equal to the average closing price
per share of the Common Stock as reported by NASDAQ for the 30-day period
prior to the date of repurchase.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
The following documents are filed as part of this report:
1. Financial Statements
The following financial statements are incorporated herein by reference
in Item 8 of Part II of this report:
(i) Independent Auditors' Report.
(ii) Consolidated Balance Sheets as of March 31, 1996 and 1995.
(iii) Consolidated Statements of Earnings for each of the three
years in the period ended March 31, 1996.
(iv) Consolidated Statements of Stockholders' Equity for each of
the three years in the period ended March 31, 1996.
(v) Consolidated Statements of Cash Flows for each of the three
years in the period ended March 31, 1996.
(vi) Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
No schedules are required to be submitted.
33
3. Exhibits
No. Description
3.1 Certificate of Incorporation, as amended, incorporated by
reference to Exhibit 3.1 of the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1994
3.2 By-laws of the Company
4.1 Specimen Common Stock Certificate, incorporated by reference to
Exhibit 4.1 of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31,1994
10.1 Aircraft Dry Lease and Service Agreement dated February 2, 1994
between Mountain Air Cargo, Inc. and Federal Express Corporation, incorporated
by reference to Exhibit 10.13 to Amendment No. 1 on Form 10-Q/A to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 1993
10.2 Loan Agreement among NationsBank of North Carolina, N.A., the
Company and its subsidiaries, dated January 17, 1995, incorporated by
reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for
the period ended December 31, 1994
10.3 Aircraft Wet Lease Agreement dated April 1, 1994 between Mountain
Air Cargo, Inc. and Federal Express Corporation, incorporated by reference to
Exhibit 10.4 of Amendment No. 1 on Form 10-Q/Q to the Company's Quarterly
Report on Form 10-Q for the period ended September 30, 1994
10.4 Adoption Agreement regarding the Company's Master 401(k) Plan and
Trust, incorporated by reference to Exhibit 10.7 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1993*
10.5 Form of options to purchase the following amounts of Common Stock
issued by the Company to the following executive officers during the following
fiscal years ended March 31: *
Number of Shares
Executive Officer 1993 1992 1991
J. Hugh Bingham 150,000 150,000 200,000
John J. Gioffre 100,000 100,000 125,000
William H. Simpson 200,000 200,000 300,000
incorporated by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1993
10.6 Premises and Facilities Lease dated November 16, 1995 between
Global TransPark Foundation, Inc. and Mountain Air Cargo, Inc., incorporated
by reference to Exhibit 10.5 to Amendment No. 1 on Form 10-Q/Ato the Company's
Quarterly Report on Form 10-Q for the period ended December 31, 1995
34
10.7 Employment Agreement dated January 1, 1996 between the
Company,Mountain Air Cargo Inc., CSA Air Inc. and Mountain Aircraft Services,
LLC and David Clark.
10.8 Employment Agreement dated January 1, 1996 between the
Company,Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and
William H. Simpson.
10.9 Employment Agreement dated January 1, 1996 between the
Company,Mountain Air Cargo Inc., CSA Air Inc. and Mountain Aircraft Services,
LLC and John J. Gioffre.
10.10 Employment Agreement dated January 1, 1996 between the
Company,Mountain Air Cargo Inc. and Mountain Aircraft Services, LLC and J.
Hugh Bingham.
11.1 Computation of Primary and Fully Diluted Earnings per Common Share
21.1 List of subsidiaries of the Company, incorporated by reference to
Exhibit 21.1 of the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1994
27.1 Financial Data Schedule
__________________
* Management compensatory plan or arrangement required to be filed as
an exhibit to this report.
b. Reports on Form 8-K.
No Current Reports on Form 8-K were filed in the last quarter of the
fiscal year ended March 31, 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
AIR TRANSPORTATION HOLDING COMPANY, INC.
By: /s/ David Clark
David Clark, Chief Executive Officer
(Principal Executive Officer)
Date: June 20, 1996
35
By: /s/ John J. Gioffre
John J. Gioffre, Vice President - Finance
(Principal Financial and Accounting Officer)
Date: June 20, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Claude S. Abernathy
Claude S. Abernethy, Jr., Director
Date: June 20, 1996
By: /s/ J. Hugh Bingham
J. Hugh Bingham, Director
Date: June 20, 1996
By: /s/ David Clark
David Clark, Director
Date: June 20, 1996
By: /s/ Sam Chesnutt
Sam Chesnutt, Director
Date: June 20, 1996
By: /s/ Walter Clark
Walter Clark, Director
Date: June 20, 1996
By: /s/ John J. Gioffre
John J. Gioffre, Director
Date: June 20, 1996
By: /s/ J. Leonard Martin
J. Leonard Martin, Director
Date: June 20, 1996
36
By: /s/ George C. Prill
George C. Prill, Director
Date: June 20, 1996
By: /s/ William Simpson
William Simpson, Director
Date: June 20, 1996
By: /s/ Terry Sanford
Terry Sanford, Director
Date: June 20, 1996
EXHIBIT INDEX
Sequentially
Exhibit Number Document Numbered Page
3.2 By-laws of the Company 38-49
10.7 Executive employment agreement with David Clark 50-58
10.8 Executive employment agreement with William Simpson 59-70
10.9 Executive employment agreement with John Gioffre 71-81
10.10 Executive employment agreement with Hugh Bingham 82-92
11.1 Computation of Primary and Fully Diluted Earnings
per Common Stock 93
27.1 Financial Data Schedule 94
37