UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
AirTran Holdings, Inc.
(Exact name of registrant as specified in its charter)
State of Incorporation: Nevada
9955 AirTran Boulevard, Orlando, Florida 32827
(Address of principal executive offices) (Zip Code)
(407) 251-5600
(Registrant’s telephone number, including area code)
| Commission file number: 1-15991 | I.R.S. Employer Identification No: 58-2189551 |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨
As of April 29, 2005 there were approximately 86,809,000 shares of the registrant’s common stock outstanding.
Form 10-Q
For the Quarter Ended March 31, 2005
INDEX
| Page | ||||
| PART I. FINANCIAL INFORMATION | ||||
| Item 1. | Financial Statements | |||
| 3 | ||||
| Condensed Consolidated Balance Sheets - March 31, 2005 (unaudited) and December 31, 2004 |
4 | |||
| 6 | ||||
| Notes to Condensed Consolidated Financial Statements (unaudited) |
7 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 17 | ||
| Item 4. | Controls and Procedures | 18 | ||
| PART II. OTHER INFORMATION | ||||
| Item 1. | Legal Proceedings | 18 | ||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 18 | ||
| Item 3. | Defaults Upon Senior Securities | 18 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 18 | ||
| Item 5. | Other Information | 19 | ||
| Item 6. | Exhibits | 19 | ||
2
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Operating Revenues: | ||||||||
| Passenger |
$ | 289,136 | $ | 233,503 | ||||
| Cargo |
596 | — | ||||||
| Other |
9,975 | 7,903 | ||||||
| Total operating revenues |
299,707 | 241,406 | ||||||
| Operating Expenses: | ||||||||
| Salaries, wages and benefits |
78,333 | 62,842 | ||||||
| Aircraft fuel |
85,438 | 51,540 | ||||||
| Aircraft rent |
44,582 | 35,936 | ||||||
| Maintenance, materials and repairs |
23,290 | 19,010 | ||||||
| Distribution |
15,251 | 11,948 | ||||||
| Landing fees and other rents |
18,042 | 13,873 | ||||||
| Aircraft insurance and security services |
5,253 | 5,314 | ||||||
| Marketing and advertising |
9,516 | 7,602 | ||||||
| Depreciation |
4,318 | 2,884 | ||||||
| Other operating |
25,125 | 20,181 | ||||||
| Total operating expenses |
309,148 | 231,130 | ||||||
| Operating Income (Loss) | (9,441 | ) | 10,276 | |||||
| Other (Income) Expense: | ||||||||
| Interest income |
(2,347 | ) | (1,004 | ) | ||||
| Interest expense |
4,943 | 4,647 | ||||||
| Other expense, net |
2,596 | 3,643 | ||||||
| Income (Loss) Before Income Taxes | (12,037 | ) | 6,633 | |||||
| Income tax (benefit) expense |
(4,008 | ) | 2,520 | |||||
| Net Income (Loss) | $ | (8,029 | ) | $ | 4,113 | |||
| Earnings (Loss) per Common Share | ||||||||
| Basic |
$ | (0.09 | ) | $ | 0.05 | |||
| Diluted |
$ | (0.09 | ) | $ | 0.05 | |||
| Weighted-average Shares Outstanding | ||||||||
| Basic |
86,743 | 84,285 | ||||||
| Diluted |
86,743 | 88,532 | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
3
Condensed Consolidated Balance Sheets
(In thousands)
| March 31, 2005 |
December 31, 2004 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents |
$ | 258,691 | $ | 307,493 | ||||
| Restricted cash |
8,853 | 7,854 | ||||||
| Short-term investments |
104,325 | 26,975 | ||||||
| Accounts receivable, less allowance of $677 and $627 at March 31, 2005 and December 31, 2004, respectively |
27,379 | 19,376 | ||||||
| Spare parts, materials and supplies, less allowance for obsolescence of $1,056 and $987 at March 31, 2005 and December 31, 2004, respectively |
23,939 | 28,311 | ||||||
| Deferred income taxes |
7,442 | 7,442 | ||||||
| Prepaid expenses and other current assets |
17,729 | 14,613 | ||||||
| Total current assets |
448,358 | 412,064 | ||||||
| Property and Equipment: | ||||||||
| Flight equipment |
299,561 | 294,966 | ||||||
| Less: Accumulated depreciation |
(35,416 | ) | (34,036 | ) | ||||
| 264,145 | 260,930 | |||||||
| Purchase deposits for flight equipment |
82,496 | 69,833 | ||||||
| Other property and equipment |
83,061 | 82,854 | ||||||
| Less: Accumulated depreciation |
(31,722 | ) | (29,682 | ) | ||||
| 51,339 | 53,172 | |||||||
| Total property and equipment |
397,980 | 383,935 | ||||||
| Other Assets: | ||||||||
| Intangibles resulting from business acquisition |
8,350 | 8,350 | ||||||
| Trade names |
21,567 | 21,567 | ||||||
| Debt issuance costs |
7,379 | 7,607 | ||||||
| Deferred income taxes - noncurrent |
20,717 | 16,708 | ||||||
| Other assets |
60,205 | 55,500 | ||||||
| Total other assets |
118,218 | 109,732 | ||||||
| Total assets | $ | 964,556 | $ | 905,731 | ||||
(Continued on next page)
4
AirTran Holdings, Inc.
Condensed Consolidated Balance Sheets (Continued)
(In thousands)
| March 31, 2005 |
December 31, 2004 |
|||||||
| (Unaudited) | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable |
$ | 20,285 | $ | 20,988 | ||||
| Accrued liabilities |
100,583 | 85,047 | ||||||
| Air traffic liability |
140,080 | 87,571 | ||||||
| Current portion of lease obligations |
822 | 886 | ||||||
| Current portion of long-term debt |
13,019 | 12,950 | ||||||
| Total current liabilities |
274,789 | 207,442 | ||||||
| Long-term lease obligations |
14,379 | 14,559 | ||||||
| Long-term debt, less current portion |
283,541 | 285,575 | ||||||
| Other liabilities |
64,357 | 64,119 | ||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock |
— | — | ||||||
| Common stock |
87 | 87 | ||||||
| Additional paid-in-capital |
363,601 | 361,063 | ||||||
| Unearned compensation |
(5,679 | ) | (4,624 | ) | ||||
| Accumulated deficit |
(30,519 | ) | (22,490 | ) | ||||
| Total stockholders’ equity |
327,490 | 334,036 | ||||||
| Total liabilities and stockholders’ equity | $ | 964,556 | $ | 905,731 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
5
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Operating activities: | ||||||||
| Net income (Loss) |
$ | (8,029 | ) | $ | 4,113 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
4,546 | 3,233 | ||||||
| Amortization of deferred gains from sale/leaseback of aircraft |
(1,096 | ) | (1,096 | ) | ||||
| Provisions for uncollectible accounts |
69 | (128 | ) | |||||
| Deferred taxes |
(4,008 | ) | — | |||||
| Other |
1,655 | 1,231 | ||||||
| Changes in current operating assets and liabilities: |
||||||||
| Restricted cash |
(999 | ) | 842 | |||||
| Accounts receivable |
(8,072 | ) | (11,869 | ) | ||||
| Spare parts, materials and supplies |
(409 | ) | (121 | ) | ||||
| Aircraft fuel |
4,712 | 1,956 | ||||||
| Aircraft rent |
(2,728 | ) | (1,926 | ) | ||||
| Other assets |
(6,992 | ) | (5,449 | ) | ||||
| Accounts payable, accrued and other liabilities |
16,167 | 17,407 | ||||||
| Air traffic liability |
52,509 | 46,429 | ||||||
| Net cash provided by operating activities |
47,325 | 54,622 | ||||||
| Investing activities: | ||||||||
| Purchases of property, plant and equipment |
(4,587 | ) | (7,502 | ) | ||||
| Payment of aircraft purchase deposits, net |
(12,663 | ) | (756 | ) | ||||
| Increase in available-for-sale securities |
(77,350 | ) | (174,625 | ) | ||||
| Net cash used for investing activities |
(94,600 | ) | (182,883 | ) | ||||
| Financing activities: | ||||||||
| Payments of lease obligations and long-term debt |
(2,208 | ) | (248 | ) | ||||
| Proceeds from sale of common stock |
681 | 843 | ||||||
| Net cash provided by (used for) financing activities |
(1,527 | ) | 595 | |||||
| Net decrease in cash and cash equivalents |
(48,802 | ) | (127,666 | ) | ||||
| Cash and cash equivalents at beginning of period |
307,493 | 338,707 | ||||||
| Cash and cash equivalents at end of period |
$ | 258,691 | $ | 211,041 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
Our unaudited Condensed Consolidated Financial Statements include the accounts of AirTran Holdings, Inc. (Holdings) and our wholly-owned subsidiaries, including our principal subsidiary, AirTran Airways, Inc. (Airways). All significant intercompany accounts and transactions have been eliminated in consolidation for all periods presented. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments, which are of a normal recurring nature, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) for reports on Form 10-Q. It is suggested that these unaudited interim financial statements be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2004.
The preparation of the accompanying unaudited Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying Notes. Actual results may differ from those estimates and such differences may be material to the Condensed Consolidated Financial Statements.
Business
Airways offers scheduled airline services primarily in short-haul markets principally in the eastern United States.
Our financial and operating results for any interim period are not necessarily indicative of those for the entire year. Air travel in our markets tends to be seasonal, with the highest level of travel occurring during the winter months to Florida and the summer months to the northeastern and western United States.
Reclassification
Certain 2004 amounts have been classified to conform with current presentation. In the Condensed Consolidated Balance Sheet as of December 31, 2004, we began classifying holdings in auction rate notes as “Short-term investments”. Such holdings were previously classified as “Cash and cash equivalents”. Accordingly, in the accompanying Condensed Consolidated Statement of Cash Flows for the period ended March 31, 2004, changes in the amounts of “Short-term investments,” which were previously classified as “Cash and cash equivalents”, are classified as cash flows from investing activities.
Stock-Based Employee Compensation
We have stock-based compensation plans covering officers, directors and key employees. We account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and related interpretations. Accordingly, compensation expense is not recognized for employee stock option grants unless the exercise price is less than the fair value of our common stock on the grant date. Approximately 130,585 shares of common stock were issued pursuant to stock option exercises during the first quarter of