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 June 30, 2003
		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 July 15, 2003, 64,000,000 shares of common stock were outstanding.

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

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

		Three Months Ended June 30,
		Three Months Ended June 30,

		2003			2002

Operating Revenue................................................	$	320,303		$	269,700

Operating Expenses:
Wages, salaries and related costs.....................		68,805			59,161
Aircraft rentals.................................................		61,257			48,210
Aircraft fuel......................................................		35,150			24,710
Maintenance, materials and repairs....................		33,237			24,061
Other rentals and landing fees...........................		24,182			20,971
Ground handling...............................................		22,004			18,719
Depreciation and amortization...........................		4,851			7,898
Outside services..............................................		6,611			5,231
Hull and war risk related insurance.....................		1,075			4,829
Security fee reimbursement...............................		(3,034	)		-
Other operating expenses.................................		21,094			19,514

		275,232			233,304

Operating Income..................................................		45,071			36,396

Nonoperating Income (Expense):
Interest expense, net........................................		(1,972	)		(3,711	)
Interest income................................................		579			1,002
Capitalized interest...........................................		303			254
Other, net........................................................		(30	)		(53	)

		(1,120	)		(2,508	)

Income before Income Taxes and Dividends.............		43,951			33,888
Income Tax Expense.............................................		16,882			13,292

Income before Dividends........................................		27,069			20,596

Dividends on Mandatorily Redeemable Preferred Stock of Subsidiary....................................................		(177	)		(146	)

Net Income...........................................................	$	26,892		$	20,450

Basic and Diluted Earnings per Common Share.......	$	0.42		$	0.33

Shares Used in Computing Basic Earnings per Common Share................................................		64,000			62,132
Shares Used in Computing Diluted Earnings per Common Share.............................		64,004			62,132

Table of Contents

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

		Six Months Ended June 30,
		Six Months Ended June 30,

		2003			2002

Operating Revenue................................................	$	626,865		$	534,945

Operating Expenses:
Wages, salaries and related costs.....................		135,297			118,066
Aircraft rentals.................................................		118,706			94,973
Aircraft fuel......................................................		65,553			46,940
Maintenance, materials and repairs....................		63,149			48,514
Other rentals and landing fees...........................		47,716			43,473
Ground handling...............................................		42,210			36,423
Depreciation and amortization...........................		9,646			15,812
Outside services..............................................		16,110			11,629
Hull and war risk related insurance.....................		2,089			9,173
Security fee reimbursement...............................		(3,034	)		-
Other operating expenses.................................		40,990			38,001

		538,432			463,004

Operating Income..................................................		88,433			71,941

Nonoperating Income (Expense):
Interest expense, net........................................		(4,192	)		(8,141	)
Interest income................................................		1,038			2,091
Capitalized interest...........................................		548			599
Other, net........................................................		(31	)		47

		(2,637	)		(5,404	)

Income before Income Taxes and Dividends.............		85,796			66,537
Income Tax Expense.............................................		32,975			25,907

Income before Dividends........................................		52,821			40,630

Dividends on Mandatorily Redeemable Preferred Stock of Subsidiary....................................................		(352	)		(146	)

Net Income...........................................................	$	52,469		$	40,484

Basic and Diluted Earnings per Common Share.......	$	0.82		$	0.70

Shares Used in Computing Basic Earnings per Common Share.............................		64,000			58,088
Shares Used in Computing Diluted Earnings per Common Share.............................		64,000			58,088

Table of Contents

EXPRESSJET HOLDINGS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)

ASSETS		June 30,			December 31,
		2003			2002

		(Unaudited)
Current Assets:
Cash and cash equivalents.........................	$	118,096		$	120,930
Accounts receivable, net............................		2,441			1,526
Amounts due from Continental Airlines, Inc.		11,005			17,419
Spare parts and supplies, net.....................		25,973			26,842
Prepayments and other..............................		10,066			10,775
Deferred income taxes...............................		-			2,299

Total Current Assets...............................		167,581			179,791

Property and Equipment:
Owned property and equipment:
Flight equipment.....................................		179,823			188,366
Other.....................................................		94,194			89,859

		274,017			278,225
Less: Accumulated depreciation.............		(52,190	)		(68,130	)

		221,827			210,095

Capital Leases:
Flight equipment.....................................		10,643			10,643
Other.....................................................		4,342			4,358

		14,985			15,001
Less: Accumulated amortization.............		(3,040	)		(2,518	)

		11,945			12,483

Total Property and Equipment..................		233,772			222,578

Deferred Income Taxes...................................		10,894			8,835
Reorganization Value In Excess of Amounts
Allocable to Identifiable Assets, net.............		12,789			12,789
Airport Operating Rights, net...........................		4,568			4,693
Note Receivable.............................................		5,000			5,000
Other Assets, net...........................................		508			462

Total Assets..........................................	$	435,112		$	434,148

(continued on next page)

Table of Contents

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

LIABILITIES AND		June 30,			December 31,
STOCKHOLDERS' EQUITY		2003			2002

		(Unaudited)
Current Liabilities:
Current maturities of note payable to Continental Airlines, Inc....................................	$	40,009		$	73,551
Current maturities of long-term debt......................		535			-
Current maturities of capital leases.......................		2,129			2,174
Accounts payable...............................................		4,378			8,153
Accrued payroll and related costs........................		29,208			18,260
Accrued other liabilities.......................................		42,640			45,648
Deferred income taxes........................................		32,736			-

Total Current Liabilities.....................................		151,635			147,786

Long-term Debt........................................................		10,168			-

Note Payable to Continental Airlines, Inc...................		186,958			251,961

Capital Leases........................................................		3,372			4,394

Other Long Term Liabilities.......................................		10,241			9,705

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

Stockholders’ Equity:
Special Voting Preferred stock - $.01 par, one share authorized, issued, and outstanding.........		-			-
Preferred stock - $.01 par, one share authorized, issued, and outstanding..................		-			-
Common stock - $.01 par, 200,000,000 shares authorized, 64,000,000 shares issued and outstanding....................................		640			640
Additional paid-in capital......................................		159,709			159,743
Accumulated deficit............................................		(92,611	)		(145,081	)

Total Stockholders’ Equity................................		67,738			15,302

Total Liabilities and Stockholders’ Equity...........	$	435,112		$	434,148

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

Table of Contents

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

		Six Months Ended June 30,

		2003			2002


Net Cash Flows from Operating Activities............................	$	107,472		$	79,314

Cash Flows from Investing Activities:
Capital expenditures....................................................		(22,467	)		(21,833	)
Proceeds from the transfer of flight equipment to Continental Airlines, Inc. ...........................................		33			12,534
Proceeds from disposition of equipment.........................		1,247			1,377

Net cash used in investing activities...........................		(21,187	)


PART I.	FINANCIAL INFORMATION	PAGE
Item 1.	Financial Statements:
	Consolidated Statements of Operations (Unaudited): Three and six months ended June 30, 2003 and 2002	3
	Consolidated Balance Sheets: June 30, 2003 (Unaudited) and December 31, 2002	5
	Consolidated Condensed Statements of Cash Flows (Unaudited): Six months ended June 30, 2003 and 2002	7
	Notes to Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
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
	Signatures	30
	Certifications	31
	Index to Exhibits	33