EXPRESSJET HOLDINGS INC - 10-Q Quarterly Report

UNITED STATES

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, 2002
		or
[ ]		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 1-31300

EXPRESSJET HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		76-0517977 (I.R.S. Employer Identification No.)

1600 Smith Street, Dept. HQSCE Houston, Texas (Address of principal executive offices)		77002 (Zip Code)

713-324-2639
(Registrant's telephone number, including area code)

NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether 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.

X Yes

As of October 18, 2002, 64,000,000 shares of common stock were outstanding.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

EXPRESSJET HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)

		Three Months Ended September 30,
		Three Months Ended September 30,

		2002			2001

Operating Revenue................................................	$	270,149		$	250,559

Operating Expenses:
Wages, salaries and related costs.....................		58,075			56,763
Aircraft rentals.................................................		50,688			43,937
Aircraft fuel......................................................		26,046			29,144
Maintenance, materials and repairs....................		24,070			39,154
Other rentals and landing fees...........................		21,207			16,575
Ground handling...............................................		18,429			19,299
Depreciation and amortization...........................		6,088			5,839
Outside services..............................................		4,698			4,933
Hull and war risk related insurance.....................		4,678			518
Government grant.............................................		(381	)		(12,100	)
Other operating expenses.................................		19,166			20,236

		232,764			224,298

Operating Income..................................................		37,385			26,261

Nonoperating Income (Expense):
Interest expense, net........................................		(2,919	)		(7,310	)
Interest income................................................		845			647
Other, net........................................................		62			91

		(2,012	)		(6,572	)

Income before Income Taxes and Dividends.............		35,373			19,689
Income Tax Expense.............................................		(13,724	)		(7,777	)

Income before Dividends........................................		21,649			11,912

Dividends on Mandatorily Redeemable Preferred Stock of Subsidiary....................................................		(173	)		-

Net Income...........................................................	$	21,476		$	11,912

Basic and Diluted Earnings per Common Share.......	$	0.34		$	0.22

Shared Used in Computing Basic and Diluted Earnings per Common Share.............................		64,000			54,000

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Table of Contents

EXPRESSJET HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)

		Nine Months Ended September 30,
		Nine Months Ended September 30,

		2002			2001

Operating Revenue...............................................	$	805,094		$	755,590

Operating Expenses:
Wages, salaries and related costs....................		176,142			157,452
Aircraft rentals.................................................		145,662			124,520
Aircraft fuel.....................................................		72,986			87,254
Maintenance, materials and repairs...................		72,630			108,275
Other rentals and landing fees..........................		64,635			55,301
Ground handling..............................................		54,851			55,052
Depreciation and amortization...........................		21,900			17,024
Outside services..............................................		14,425			16,727
Hull and war risk related insurance....................		13,850			2,422
Government grant............................................		(541	)		(12,100	)
Other operating expenses................................		59,228			63,796

		695,768			675,723

Operating Income................................................		109,326			79,867

Nonoperating Income (Expense):
Interest expense, net.......................................		(10,461	)		(18,975	)
Interest income...............................................		2,937			1,282
Other, net.......................................................		108			(232	)

		(7,416	)		(17,925	)

Income before Income Taxes and Dividends............		101,910			61,942
Income Tax Expense............................................		(39,631	)		(24,509	)

Income before Dividends........................................		62,279			37,433

Dividends on Mandatorily Redeemable Preferred Stock of Subsidiary...................................................		(319	)		-

Net Income..........................................................	$	61,960		$	37,433

Basic and Diluted Earnings per Common Share......	$	1.03		$	0.69

Shared Used in Computing Basic and Diluted Earnings per Common Share............................		60,081			54,000

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

EXPRESSJET HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)

ASSETS		September 30,			December 31,
		2002			2001

		(Unaudited)
Current Assets:
Cash and cash equivalents.........................	$	146,782		$	71,877
Accounts receivable, net............................		14,044			7,368
Amounts due from Continental Airlines, Inc.		1,464			14,235
Spare parts, supplies and other, net............		30,474			37,889

Total Current Assets...............................		192,764			131,369

Property and Equipment:
Owned property and equipment:
Flight equipment.....................................		193,777			189,496
Other.....................................................		83,189			70,371

		276,966			259,867
Less: Accumulated depreciation.............		(68,387	)		(55,215	)

		208,579			204,652

Capital Leases:
Flight equipment.....................................		10,643			10,643
Other.....................................................		4,917			4,917

		15,560			15,560
Less: Accumulated amortization.............		(2,255	)		(1,410	)

		13,305			14,150

Total Property and Equipment..................		221,884			218,802

Deferred Income Taxes...................................		24,288			59,519
Reorganization Value In Excess of Amounts
Allocable to Identifiable Assets, net.............		12,789			12,789
Airport Operating Rights, net...........................		4,756			4,944
Long-term Note Receivable..............................		5,000			-
Other Assets, net...........................................		471			2,328

Total Assets..........................................	$	461,952		$	429,751

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Table of Contents

EXPRESSJET HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)

LIABILITIES AND		September 30,			December 31,
STOCKHOLDERS’ DEFICIT		2002			2001

		(Unaudited)
Current Liabilities:
Current maturities of note payable to Continental Airlines, Inc..........................	$	75,066		$	-
Current maturities of capital leases.............		2,136			2,026
Accounts payable......................................		10,220			15,147
Accrued maintenance and repair liabilities...		9,642			14,651
Accrued payroll and related costs...............		21,847			17,770
Accrued other liabilities..............................		35,109			29,240

Total Current Liabilities............................		154,020			78,834

Note Payable to Continental Airlines, Inc..........		300,446			552,312

Capital Leases...............................................		4,952			6,568

Other Long Term Liabilities..............................		4,546			6,398

Mandatorily Redeemable Preferred Stock of Subsidiary................................................		5,000			-

Stockholders’ Deficit:
Preferred stock - $.01 par, one share authorized, issued, and outstanding.........		-			-
Common stock - $.01 par, 200,000,000 shares authorized, 64,000,000 and 54,000,000 shares issued and outstanding, respectively.........................		640			540
Additional paid-in capital............................		159,748			14,460
Accumulated deficit...................................		(167,400	)		(229,361	)

Total Stockholders’ Deficit.......................		(7,012	)		(214,361	)

Total Liabilities and Stockholders’ Deficit..	$	461,952		$	429,751

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Table of Contents

EXPRESSJET HOLDINGS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)

		Nine Months Ended September 30,

		2002			2001


Net Cash Flows from Operating Activities............................	$	129,890		$	73,830

Cash Flows from Investing Activities:
Capital expenditures....................................................		(38,513	)		(51,491	)
Purchase of flight equipment from Continental Airlines, Inc.............................................		-			(14,205	)
Proceeds from the transfer of flight equipment to Continental Airlines, Inc. ...........................................		15,341			-
Proceeds from disposition of equipment.........................		1,424			747

Net cash used in investing activities...........................		(21,748	)		(64,949	)

Cash Flows from Financing Activities:
Advance from Continental Airlines, Inc...........................		-			71,000
Gross proceeds from issuance of common stock............		160,000			-
Payments related to IPO underwriting discounts and other expenses..................................................		(14,612	)		-
Payments on note payable to Continental Airlines, Inc....		(176,800	)		-
Payments on capital lease obligations...........................		(1,506	)		(1,298	)
&nbs


PART I.	FINANCIAL INFORMATION	PAGE
Item 1.	Financial Statements:
	Consolidated Statements of Operations (Unaudited): Three and nine months ended September 30, 2002 and 2001	3
	Consolidated Balance Sheets: September 30, 2002 (Unaudited) and December 31, 2001	5
	Consolidated Condensed Statements of Cash Flows (Unaudited): Nine months ended September 30, 2002 and 2001	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	26
Item 4.	Controls and Procedures	27
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 2.	Changes in Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Submission of Matters to a Vote of Security Holders	28
Item 5.	Other Information	28
Item 6.	Exhibits and Reports on Form 8-K	28
	Signature	30
	Certifications	31
	Index to Exhibits	33