SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended: September 30, 2003
or
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to _______
Commission File Number 0-26582
WORLD AIRWAYS, INC.
| DELAWARE | 94-1358276 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
The HLH Building, 101 World Drive, Peachtree City, GA 30269
(Address of Principal Executive Offices)
(770) 632-8000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
The number of shares of the registrant’s Common Stock outstanding on October 31, 2003 was 11,397,998.
WORLD AIRWAYS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
TABLE OF CONTENTS
| Page | ||||||
| PART I — FINANCIAL INFORMATION | ||||||
| Item 1. Financial Statements | ||||||
| Condensed Consolidated Balance Sheets, September 30, 2003 (Unaudited) and December 31, 2002 | 3 | |||||
| Condensed Consolidated Statements of Operations (Unaudited), Three Months Ended September 30, 2003 and 2002 | 5 | |||||
| Condensed Consolidated Statements of Operations (Unaudited), Nine Months Ended September 30, 2003 and 2002 | 6 | |||||
| Condensed Consolidated Statement of Changes in Stockholders’ Deficiency (Unaudited), Nine months ended September 30, 2003 | 7 | |||||
| Condensed Consolidated Statements of Cash Flows (Unaudited), Nine months ended September 30, 2003 and 2002 | 8 | |||||
| Notes to Condensed Consolidated Financial Statements | 9 | |||||
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 13 | |||||
| Item 3. Quantitative and Qualitative Disclosures about Market Risk | 18 | |||||
| Item 4. Controls and Procedures | 18 | |||||
| PART II — OTHER INFORMATION | ||||||
| Item 6. Exhibits and Reports on Form 8-K | 18 | |||||
2
ITEM 1. FINANCIAL STATEMENTS
WORLD AIRWAYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(in thousands)
| September 30, | ||||||||||
| 2003 | December 31, | |||||||||
| (unaudited) | 2002 | |||||||||
CURRENT ASSETS |
||||||||||
Cash and cash equivalents, including restricted
cash of $1,750 at September 30, 2003 and
$665 at December 31, 2002 |
$ | 26,366 | $ | 21,504 | ||||||
Accounts receivable, less allowance for doubtful
accounts of $337 at September 30, 2003 and $255 at
December 31, 2002 |
32,597 | 28,391 | ||||||||
Prepaid expenses and other current assets |
7,546 | 5,569 | ||||||||
Total current assets |
66,509 | 55,464 | ||||||||
EQUIPMENT AND PROPERTY |
||||||||||
Flight and other equipment |
76,233 | 74,868 | ||||||||
Equipment under capital leases |
9,463 | 9,463 | ||||||||
| 85,696 | 84,331 | |||||||||
Less: accumulated depreciation and amortization |
46,324 | 42,475 | ||||||||
Net equipment and property |
39,372 | 41,856 | ||||||||
LONG-TERM OPERATING DEPOSITS |
17,769 | 18,513 | ||||||||
OTHER ASSETS AND DEFERRED CHARGES, NET |
1,937 | 1,429 | ||||||||
TOTAL ASSETS |
$ | 125,587 | $ | 117,262 | ||||||
(Continued)
3
WORLD AIRWAYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(continued)
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
(in thousands except share amounts)
| September 30, | ||||||||||
| 2003 | December 31, | |||||||||
| (unaudited) | 2002 | |||||||||
CURRENT LIABILITIES |
||||||||||
Notes payable |
$ | 16,873 | $ | 17,096 | ||||||
Current maturities of convertible debentures |
40,545 | — | ||||||||
Accounts payable |
22,215 | 30,497 | ||||||||
Accrued rent |
9,493 | 17,993 | ||||||||
Unearned revenue |
2,873 | 976 | ||||||||
Accrued maintenance |
3,504 | 2,178 | ||||||||
Accrued salaries and wages |
15,578 | 10,000 | ||||||||
Accrued taxes |
4,578 | 2,663 | ||||||||
Other accrued liabilities |
2,342 | 2,820 | ||||||||
Total current liabilities |
118,001 | 84,223 | ||||||||
Long-term convertible debentures, net of current maturities |
— | 40,545 | ||||||||
Deferred gain from sale-leaseback transactions, net of
accumulated amortization of $2,854 at September 30,
2003 and $2,005 at December 31, 2002 |
3,060 | 3,909 | ||||||||
Accrued post-retirement benefits |
3,235 | 3,235 | ||||||||
Deferred rent |
15,048 | 14,217 | ||||||||
TOTAL LIABILITIES |
139,344 | 146,129 | ||||||||
STOCKHOLDERS’ DEFICIENCY |
||||||||||
Preferred stock, $.001 par value (5,000,000 shares authorized;
no shares issued or outstanding) |
— | — | ||||||||
Common stock, $.001 par value (100,000,000 shares authorized;
12,479,241 shares issued; 11,397,998 shares outstanding at
September 30, 2003 and 11,077,098 at December 31, 2002) |
12 | 12 | ||||||||
Additional paid-in capital |
25,019 | 24,361 | ||||||||
Accumulated deficit |
(25,931 | ) | (40,383 | ) | ||||||
Treasury stock, at cost (1,081,243 shares at September 30, 2003 and
December 31, 2002) |
(12,857 | ) | (12,857 | ) | ||||||
Total stockholders’ deficiency |
(13,757 | ) | (28,867 | ) | ||||||
COMMITMENTS AND CONTINGENCIES |
||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY |
$ | 125,587 | $ | 117,262 | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements
4
WORLD AIRWAYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2003 and 2002
(in thousands except per share data)
(unaudited)
| OPERATING REVENUES | 2003 | 2002 | ||||||||
Flight operations |
$ | 111,038 | $ | 107,273 | ||||||
Other |
1,256 | 650 | ||||||||
Total operating revenues |
112,294 | 107,923 | ||||||||
OPERATING EXPENSES |
||||||||||
Flight |
35,889 | 34,483 | ||||||||
Maintenance |
14,368 | 17,086 | ||||||||
Aircraft costs |
20,979 | 22,598 | ||||||||
Fuel |
18,020 | 17,738 | ||||||||
Flight operations subcontracted to other carriers |
428 | 188 | ||||||||
Commissions |
4,679 | 4,085 | ||||||||
Depreciation and amortization |
1,259 | 1,132 | ||||||||
Sales, general and administrative |
10,798 | 7,840 | ||||||||
Total operating expenses |
106,420 | 105,150 | ||||||||
OPERATING INCOME |
5,874 | 2,773 | ||||||||
OTHER INCOME (EXPENSE) |
||||||||||
Interest expense |
(1,135 | ) | (1,097 | ) | ||||||
Interest income |
92 | 159 | ||||||||
Other, net |
11 | 49 | ||||||||
Total other expense |
(1,032 | ) | (889 | ) | ||||||
EARNINGS BEFORE INCOME TAXES |
4,842 | 1,884 | ||||||||
INCOME TAXES |
3,398 | — | ||||||||
NET EARNINGS |
$ | 1,444 | $ | 1,884 | ||||||
BASIC EARNINGS PER SHARE |
||||||||||
Net earnings |
$ | 0.13 | $ | 0.17 | ||||||
Weighted average shares outstanding |
11,290 | 11,077 | ||||||||
DILUTED EARNINGS PER SHARE |
||||||||||
Net earnings |
$ | 0.11 | $ | 0.17 | ||||||
Weighted average shares outstanding |
18,630 | 15,767 | ||||||||
See accompanying Notes to Condensed Consolidated Financial Statements
5
WORLD AIRWAYS, INC.
CONDENSED STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2003 and 2002
(in thousands except per share data)
(unaudited)
| OPERATING REVENUES | 2003 | 2002 | ||||||||
Flight operations |
$ | 350,329 | $ | 282,817 | ||||||
Other |
2,239 | 1,544 | ||||||||
Total operating revenues |
352,568 | 284,361 | ||||||||
OPERATING EXPENSES |
||||||||||
Flight Operations |
105,862 | 86,257 | ||||||||
Maintenance |
57,051 | 38,855 | ||||||||
Aircraft rent and insurance |
63,727 | 64,649 | ||||||||
Fuel |
58,005 | 43,103 | ||||||||
Flight operations subcontracted to other carriers |
653 | 924 | ||||||||
Commissions |
13,227 | 12,343 | ||||||||
Depreciation and amortization |
4,040 | 3,506 | ||||||||
Sales, general and administrative |
28,646 | 22,619 | ||||||||
Total operating expenses |
331,211 | 272,256 | ||||||||
OPERATING INCOME |
21,357 | 12,105 | ||||||||
OTHER INCOME (EXPENSE) |
||||||||||
Interest expense |
(3,537 | ) | (3,439 | ) | ||||||
Interest income |
282 | 435 | ||||||||
Other, net |
(2 | ) | (269 | ) | ||||||
Total other expense |
(3,257 | ) | (3,273 | ) | ||||||
EARNINGS BEFORE INCOME TAXES |
18,100 | 8,832 | ||||||||
INCOME TAXES |
3,648 | — | ||||||||
NET EARNINGS |
$ | 14,452 | $ | 8,832 | ||||||
BASIC EARNINGS PER SHARE |
||||||||||
Net earnings |
$ | 1.30 | $ | 0.80 | ||||||
Weighted average shares outstanding |
11,159 | 11,070 | ||||||||
DILUTED EARNINGS PER SHARE |
||||||||||
Net earnings |
$ | 0.92 | $ | 0.71 | ||||||
Weighted average shares outstanding |
17,309 | 15,762 | ||||||||
See accompanying Notes to Condensed Consolidated Financial Statements
6
WORLD AIRWAYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ DEFICIENCY
Nine Months Ended September 30, 2003
(in thousands except share amounts)
(unaudited)
| Additional | Treasury | Total | ||||||||||||||||||
| Common | Paid-in | Accumulated | Stock, | Stockholders' | ||||||||||||||||
| Stock | Capital | Deficit | at Cost | Deficiency | ||||||||||||||||
Balance at December 31, 2002 |
$ | 12 | $ | 24,361 | $ | (40,383 | ) | $ | (12,857 | ) | $ | (28,867 | ) | |||||||
Amortization of warrants |
— | 138 | — | — | 138 | |||||||||||||||
Exercise of 320,900 stock options |
— | 280 | — | — | 280 | |||||||||||||||
Tax
benefit of stock option exercise |
240 | 240 | ||||||||||||||||||
Net earnings |
— | — | 14,452 | — | 14,452 | |||||||||||||||
Balance at September 30, 2003 |
$ | 12 | $ | 25,019 | $ | (25,931 | ) | $ | (12,857 | ) | $ | (13,757 | ) | |||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
7
WORLD AIRWAYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2003 and 2002
(in thousands)
(unaudited)
| 2003 | 2002 | |||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD |
$ | 21,504 | $ | 19,540 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||||
Net earnings |
14,452 | 8,832 | ||||||||
Adjustments to reconcile net earnings to net cash
provided by operating activities: |
||||||||||
Depreciation and amortization |
4,040 | 3,506 | ||||||||
Deferred gain recognition |
(849 | ) | (1,608 | ) | ||||||
Loss on sale of property and equipment |
188 | 331 | ||||||||
Other |
614 | 15 | ||||||||
Provision for doubtful accounts receivable |
83 | (284 | ) | |||||||
Increase (decrease) in cash resulting from changes
in operating assets and liabilities:</ | ||||||||||