-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cdy3b8Hu8Hoi/hZCHx7Offo2+15UVzPQTZVWb22NM6cfR+eUXqBAVkbJbj+Rp8FX U7PSukrs8EjyFbsxo3AN2Q== 0001047469-98-030943.txt : 19980814 0001047469-98-030943.hdr.sgml : 19980814 ACCESSION NUMBER: 0001047469-98-030943 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIRNET SYSTEMS INC CENTRAL INDEX KEY: 0001011696 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 311458309 STATE OF INCORPORATION: OH FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13025 FILM NUMBER: 98684656 BUSINESS ADDRESS: STREET 1: 3939 INTERNATIONAL GATEWAY CITY: COLUMBUS STATE: OH ZIP: 43219 BUSINESS PHONE: 6142379777 MAIL ADDRESS: STREET 1: 3939 INTERNATIONAL GATEWAY STREET 2: 3939 INTERNATIONAL GATEWAY CITY: COLUMBUS STATE: OH ZIP: 43219 10-Q 1 10-Q 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 June 30, 1998 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 0-28428 AIRNET SYSTEMS, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Ohio 31-1458309 - ---------------------------------------- ------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3939 International Gateway, Columbus, Ohio 43219 ------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (614) 237-9777 ------------------------------------------------------------------------ (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 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 --- --- Common Shares, $.01 Par Value, Outstanding as of August 3, 1998 - 12,605,220 AIRNET SYSTEMS, INC. FORM 10-Q FOR QUARTER ENDED JUNE 30, 1998 PART I: FINANCIAL INFORMATION Item 1 Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997. . 3 Condensed Consolidated Statements of Operations for the three and six months ended June 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Item 3 Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . 11 PART II: OTHER INFORMATION Items 1 through 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS AIRNET SYSTEMS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31, (IN THOUSANDS, EXCEPT SHARE DATA) 1998 1997 ----------- ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $713 $2,125 Accounts receivable: Trade, less allowances 11,742 10,967 Shareholders, affiliates, and associates 149 86 Spare parts and supplies 6,295 6,053 Deposits and prepaids 5,874 5,848 -------- -------- Total current assets 24,773 25,079 Net property and equipment 74,193 67,578 Other assets: Intangibles, net of accumulated amortization 5,347 5,426 Investment in partnerships and other 7,824 5,903 -------- -------- Total assets $112,137 $103,986 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $3,798 $4,033 Salaries and related liabilities 1,565 1,606 Accrued expenses 725 1,311 Taxes payable 750 2,386 Deferred taxes 229 229 Current portion of notes payable 24 24 -------- -------- Total current liabilities 7,091 9,589 Notes payable, less current portion 14,194 9,706 Deferred taxes 4,291 4,431 Shareholders' equity: Preferred shares, $.01 par value; 10,000,000 shares authorized; and no shares issued and outstanding - - Common shares, $.01 par value; 40,000,000 shares authorized; 12,753,400 shares issued at June 30, 1998 and December 31, 1997 127 127 Additional paid-in-capital 79,152 79,779 Retained earnings 10,393 5,787 Treasury shares, held at cost; 150,730 shares at June 30, 1998 and 263,570 shares at December 31, 1997 (3,111) (5,433) -------- -------- Total shareholders' equity 86,561 80,260 -------- -------- Total liabilities and shareholders' equity $112,137 $103,986 -------- -------- -------- --------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3 AIRNET SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, (IN THOUSANDS, EXCEPT PER SHARE DATA) 1998 1997 1998 1997 -------- -------- -------- --------- NET REVENUES Air transportation Check delivery $23,416 $18,829 $45,786 $36,909 Small package delivery 4,396 3,913 8,310 7,626 Fixed base operations 296 320 584 762 ------- ------- ------- ------- Total net revenues 28,108 23,062 54,680 45,297 COSTS AND EXPENSES Air transportation 19,712 14,976 38,927 29,680 Fixed base operations 198 293 373 576 Selling, general and administrative 2,670 1,985 4,942 4,080 ------- ------- ------- ------- Total costs and expenses 22,580 17,254 44,242 34,336 ------- ------- ------- ------- Income from operations 5,528 5,808 10,438 10,961 Acquisition termination charge 2,350 - 2,350 - Interest expense 258 - 455 1 ------- ------- ------- ------- Income before income taxes 2,920 5,808 7,633 10,960 Provision for income taxes 1,167 2,304 3,027 4,364 ------- ------- ------- ------- Net income $1,753 $3,504 $4,606 $6,596 ------- ------- ------- ------- ------- ------- ------- ------- Net income per common share $0.14 $0.28 $0.37 $0.52 Net income per common share - assuming dilution $0.14 $0.28 $0.36 $0.52
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4 AIRNET SYSTEMS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended June 30, (IN THOUSANDS) 1998 1997 ------- ------- Operating activities Net income $4,606 $6,596 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 4,839 4,119 Amortization of intangibles 251 144 Deferred taxes (140) 4,364 Provision for losses on accounts receivable 65 20 Loss (gain) on disposition of assets 48 56 Cash provided by (used in) operating assets and liabilities: Accounts receivable (902) (2,570) Spare parts and supplies (242) (814) Prepaid expenses (26) (1,430) Accounts payable (235) (294) Accrued expenses (587) (913) Taxes payable (1,636) - Salaries and related liabilities (42) 260 Other, net (1,726) (215) ------- ------- Net cash provided by operating activities 4,273 9,323 Investing activities Purchases of property and equipment (11,788) (10,718) Payments for covenants not to compete (139) (145) Acquisition of Pacific Air Charter, Inc., net of cash acquired (34) (164) Proceeds from sales of property and equipment 288 419 ------- ------- Net cash used in investing activities (11,673) (10,608) Financing activities Exercise of stock options 1,500 345 Net borrowings under the revolving credit facility 4,500 - Repayment of long-term debt (12) (920) ------- ------- Net cash provided by (used in) financing activities 5,988 (575) ------- ------- Net decrease in cash (1,412) (1,860) Cash and cash equivalents at beginning of period 2,125 9,631 ------- ------- Cash and cash equivalents at end of period $713 $7,771 ------- ------- ------- -------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5 AIRNET SYSTEMS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION AirNet Systems, Inc. and its subsidiaries (the "Company") operate a fully integrated national air transportation network which provides delivery service of time-critical shipments for customers in the U.S. banking industry and other industries requiring late night pickup with early morning delivery of small packages. The Company also offers retail aviation fuel sales and related ground services for customers in Columbus, Ohio. The accompanying unaudited condensed consolidated financial statements include the accounts of AirNet Systems, Inc. and its subsidiaries. These financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. These financial statements should be read in conjunction with the year ended December 31, 1997 consolidated financial statements of AirNet Systems, Inc. contained in the Annual Report on Form 10-K (File No. 0-28428) for additional disclosures including a summary of the Company's accounting policies, which have not changed. The financial information included herein reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the results of interim periods. Operating results for the three and six months ended June 30, 1998 are not necessarily indicative of the results to be expected for the year ending December 31, 1998. The preparation of the condensed consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes thereto. Actual results could differ from those estimates. 2. ACQUISITION TERMINATION CHARGE On June 17, 1998, the Company announced that it had terminated an agreement to acquire Q International Courier, Inc. ("Quick"). The Company had incurred $2,350,000 of costs in conjunction with the planned acquisition, all of which were expensed upon the termination of the agreement. 6 3. NET INCOME PER SHARE The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share data):
Three Months Ended Six Months Ended June 30, June 30, ------------------------ ----------------------- 1998 1997 1998 1997 -------- -------- ------- -------- Numerator: Net income $1,753 3,504 $4,606 $6,596 Denominator: Basic - weighted average shares outstanding 12,585 12,634 12,557 12,628 Diluted Stock options - associates, officers, directors 216 74 200 42 Adjusted weighted average shares outstanding 12,801 12,708 12,757 12,670 Net income per share - basic $ .14 $ .28 $ .37 $ .52 Net income per share - assuming dilution $ .14 $ .28 $ .36 $ .52
4. RECENT ACCOUNTING PRONOUNCEMENTS The Company capitalizes costs related to the start-up activities associated with new business initiatives, such as introduction of the premium products line of business. Costs associated with these initiatives, such as personnel costs, outside services and administrative support services are capitalized as start-up costs. During the three and six months ended June 30, 1998, the Company capitalized approximately $1,041,000 and $1,938,000, respectively, of such costs, for a total of $4,686,000 of start-up costs recorded on its balance sheet, included in other assets, at June 30, 1998. The start-up phase for the premium products has been completed. No further costs are expected to be capitalized related to the products. In April 1998, AcSEC issued Statement of Position No. 98-5, "Reporting on the Costs of Start-Up Activities". This SOP will require all companies to write-off, as a cumulative effect of a change in accounting principle, any previously capitalized start-up costs. This SOP will be effective for the Company in the first quarter of 1999. In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement No. 131, "Disclosures About Segments of an Enterprise and Related Information". Statement No. 131, which will become effective for the Company's 1998 year end reporting, establishes requirements for reporting information about operating segments in annual and interim statements. This statement may require a change in the Company's financial reporting; however, the extent of this change, if any, has not been determined. 5. SUBSEQUENT EVENTS On August 11, 1998, the Company completed the purchase of Mercury Business Services, Inc., an express delivery management service located in Boston, for approximately $2,000,000 and 118,000 AirNet Common Shares. 7 AIRNET SYSTEMS, INC ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SAFE HARBOR STATEMENT Certain matters discussed in this Form 10-Q, including, but not limited to, information regarding future economic performance and plans and objectives of the Company's management, are forward-looking statements which involve risks and uncertainties. When used in this document, the words "anticipate", "estimate", "expect", "may", "plan", "project" and similar expressions are intended to be among statements that identify forward-looking statements. Such statements involve risks and uncertainties such as the following, in addition to other factors not listed, which could cause actual results to differ materially from any such forward-looking statement: potential changes by the Federal Aviation Administration ("FAA"), which could increase the regulation of the Company's business or the Federal Reserve, which could change the competitive environment of transporting canceled checks; adverse weather conditions; technological advances and increases in the use of electronic funds transfers; the potential effects of Year 2000 issues as they relate to information and operational systems, including the FAA's air traffic control system; the Company's ability to successfully complete and integrate acquisition targets; as well as other economic, competitive and domestic and foreign governmental factors affecting the Company's markets, prices and other facets of its operations. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. The Company undertakes no responsibility to update for changes related to these or any other factors that may hereafter occur. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997 Revenues were $28.1 million for the three months ended June 30, 1998, an increase of $5.0 million, or 21.9%, over the same period of 1997. Revenues from check delivery increased $4.6 million, or 24.4%. Of the increase, $1.0 million is attributable to price increases effective January 1, 1998 and $3.0 million can be attributed to the acquisitions of Data Air Courier, Inc. ("Data Air"), a national transporter of canceled checks and small packages through a ground delivery network and the commercial airlines in July 1997, and Pacific Air Charter, Inc. ("PAC"), a regional airline in the business of transporting canceled checks in June 1997. The balance is due to increased business activity. Small package delivery revenue increased $0.5 million, or 12.3%. Of the increase, $0.3 million is attributable to the Data Air acquisition and $1.3 million is attributable to new premium product business, offset by a $1.1 million loss of standard service and wholesale business. Total costs and expenses, prior to the acquisition termination charge, were $22.6 million for the three months ended June 30, 1998, an increase of $5.3 million, or 30.9%, over the same period in 1997, resulting in income from operations of $5.5 million for the three months ended June 30, 1998 compared to $5.8 million for the same period of 1997. Air transportation expenses were up $4.7 million, or 31.6%. Selling, general and administrative expenses increased $0.7 million, or 34.5%, for the three month period. In addition, the Company incurred a $2.4 million charge in connection with the write off of costs associated with the efforts to acquire Q International Courier, Inc. ("Quick"). The agreement to acquire Quick was terminated in June 1998. 8 Air transportation costs increased primarily as a result of the acquisition of Data Air and AirNet's emphasis on building its operational infrastructure in anticipation of growth in the small package delivery area. The costs associated with shipping packages on commercial airlines increased $0.9 million over the same quarter of 1997 due to the addition of Data Air check delivery shipments and an increase in SameDay small package shipments, of which a significant portion are moved during daytime hours when AirNet's aircraft do not fly. Ground courier costs increased $1.8 million and courier vehicle costs were up $0.2 million due to the Data Air acquisition and the build up of the infrastructure. Fuel expense increased $0.2 million, or 6.2%, due to increased flying hours, offset by lower fuel prices compared to a year ago. The increased flight hours also contributed to a $0.4 million increase in maintenance expense. Sales, general and administrative expense increased primarily due to more staffing required to handle the administrative functions and general costs assumed with the Data Air and PAC acquisitions. Interest costs were $0.3 million for the quarter ended June 30, 1998. The Company began borrowing on its line of credit in September 1997, after being essentially debt free since its initial public offering in May 1996. SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997 Revenues were $54.7 million for the six months ended June 30, 1998, an increase of $9.4 million, or 20.7%, over the same period of 1997. Revenues from check delivery increased $8.9 million, or 24.1%. Of the increase, $2.0 million is attributable to price increases effective January 1, 1998 and $6.1 million can be attributed to the acquisitions of Data Air and PAC. The balance is due to increased business activity and increases in total weight shipped. Small package delivery revenue increased $0.7 million, or 9.0%. Of the increase, $0.6 million is attributable to the Data Air acquisition and $2.3 million is attributable to new premium product business, offset by a $1.7 million loss of standard service and wholesale business. These increases in air transportation revenues were offset by a $0.2 million decrease in revenues generated by the Company's retail fuel sales and maintenance division. Total costs and expenses, prior to the acquisition termination charge, were $44.2 million for the six months ended June 30, 1998, an increase of $9.9 million, or 28.9%, over the same period in 1997, resulting in income from operations of $10.4 million for the six months ended June 30, 1998 compared to $11.0 million for the same period of 1997. Air transportation expenses were up $9.2 million, or 31.2%. Selling, general and administrative expenses increased $0.9 million, or 21.1%, for the six month period. In addition, the Company incurred a $2.4 million charge in connection with the write off of costs associated with the efforts to acquire Quick. The agreement to acquire Quick was terminated in June 1998. Air transportation costs increased primarily as a result of the acquisition of Data Air and AirNet's emphasis on building its operational infrastructure in anticipation of growth in the small package delivery area. The costs associated with shipping packages on commercial airlines increased $2.4 million over the same period of 1997 due to the addition of Data Air check delivery shipments and an increase in SameDay small package shipments. Ground courier costs increased $3.6 million and courier vehicle costs were up $0.5 million due to the Data Air acquisition and the build up of the infrastructure. Depreciation expense increased $0.7 million, or 17.1%, due to the increased size of the Company's aircraft fleet, which grew from 110 aircraft at June 30, 1997 to 117 aircraft at June 30, 1998, an increased fleet of ground vehicles and improved management information and telecommunications systems. Fuel expense increased $0.3 million, or 5.2%, due to increased flying hours, offset by lower fuel prices. Despite the increase in the size of the aircraft fleet and the increased flight hours, maintenance expense increased only 5.5% due to unusually good flying weather in the first quarter. 9 Sales, general and administrative expense increased primarily due to more staffing required to handle the administrative functions and general costs assumed with the Data Air and PAC acquisitions. In addition, interest income is down $0.2 million compared to the six months ended June 30, 1997. Interest costs were $0.5 million for the six months ended June 30, 1998. The Company began borrowing on its line of credit in September 1997, after being essentially debt free since its initial public offering in May 1996. LIQUIDITY AND CAPITAL RESOURCES CASH FLOW FROM OPERATING ACTIVITIES. Net cash flow from operating activities was $4.3 million for the six months ended June 30, 1998, compared to $9.3 million for the same period in 1997. The decrease is due to $1.9 million of costs associated with start-up activities and $2.4 million of acquisition costs incurred in 1998 and the reduction of the deferred tax asset in 1997. CURRENT CREDIT ARRANGEMENTS. The Company maintains a credit agreement with a bank that provides a $50.0 million, five year, unsecured revolving credit facility. The credit agreement limits the availability of funds to certain specified percentages of accounts receivable, inventory and the wholesale value of aircraft and equipment. In addition, the agreement requires the maintenance of certain minimum net worth and cash flow levels, imposes certain limitations on payments of dividends, restricts the amount of additional debt and requires prior bank approval for certain acquisitions. At June 30, 1998, the Company had borrowed $14.0 million under the credit facility, which was a $4.5 million increase from the December 31, 1997 balance. INVESTING ACTIVITIES. Capital expenditures totaled $11.8 million for the six months ended June 30, 1998, compared to $10.7 million for the same period in 1997. Approximately $3.4 million was incurred in connection with the purchase of 5 new aircraft, $6.3 million was incurred for aircraft inspections, major engine overhauls and related flight equipment and the remainder was incurred primarily for delivery vehicles and information systems related equipment. The Company anticipates it will have approximately $20.0 million in total capital expenditures in 1998, excluding any acquisitions of new businesses. The Company anticipates it will continue to acquire aircraft and flight equipment as necessary to maintain growth and continue offering quality service to its customers. The Company is currently in discussions with the Port Authority of Columbus (the "Port Authority") to construct a new headquarters facility at the Columbus International Airport. Upon the completion of the new facility, the Company intends to sell its current headquarters to the Port Authority in exchange for credits to be applied to a land lease for the new facility. No definitive agreements have been reached. In addition, the Company leases a facility located on Columbus International Airport grounds. Upon completion of the Company's new headquarters, this lease is expected to be terminated and the Company is expected to purchase the facility from the Port Authority. On June 17, 1998, the Company announced that it had terminated an agreement to acquire Quick. The Company had incurred $2.4 million of acquisition related costs in conjunction with the original merger plan, all of which were expensed upon the termination of the agreement. On August 11, 1998, the Company signed a definitive agreement to purchase Mercury Business Services, Inc., an express delivery management service located in Boston, for approximately $2,000,000 and 118,000 AirNet Common Shares. The Company anticipates that operating cash and capital expenditure requirements will continue to be funded by cash flow from operations, cash on hand and bank borrowings. 10 SEASONALITY AND VARIABILITY IN QUARTERLY RESULTS The Company's operations historically have been somewhat seasonal and somewhat dependent on the number of banking holidays falling during the week. Because financial institutions are currently the Company's principal customers, the Company's air system is scheduled around the needs of financial institution customers. When financial institutions are closed, there is no need for the Company to operate a full system. The Company's fiscal quarter ending December 31, is often the most impacted by bank holidays (including Thanksgiving and Christmas) recognized by its primary customers. When these holidays fall on Monday through Thursday, the Company's revenue and net income are adversely affected. The Company's annual results fluctuate as well. Operating results are also affected by the weather. The Company generally experiences higher maintenance costs during its fiscal quarter ending March 31. Winter weather requires additional costs for de-icing, hangar rental and other aircraft services. The Company's cash flows are also influenced by the budget cycles of its primary customers. Many financial institutions have calendar year budget cycles and desire to pay for December services prior to year end. This results in increased cash flows for the Company's fiscal quarter ending December 31, but decreased cash flows in January and February. YEAR 2000 IMPACT ON INFORMATION SYSTEMS AND OPERATIONS A small portion of the Company's computer programs was written using two digits rather than four to define the applicable year. As a result, those computer programs have time-sensitive software that recognize a date using "00" as the year 1900 rather than the year 2000. This could cause a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process certain transactions, send invoices or engage in similar normal business activities. The Company has completed an assessment of its computer systems and will have to modify or replace small portions of its software so that all of its computer systems will function properly with respect to dates in the year 2000 and thereafter. The project is expected to be completed by December 31, 1998. Management does not expect costs related to the year 2000 modifications and replacements to be material to the Company's overall operations. The Company has also performed a review of its aircraft to ensure operational compliance with year 2000 date-sensitive components. The Company believes its aircraft and related components are in compliance with such measures. However, the Company is aware that the FAA has announced that it is currently encountering difficulties in modifying its operating systems for compliance with year 2000 issues. If the FAA is not able to correct its year 2000 problems in the appropriate time frame, it could result in a material adverse affect on the Company's ability to schedule and execute aircraft arrivals and departures., ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not Applicable. 11 AIRNET SYSTEMS, INC. PART II - OTHER INFORMATION Item 1. Legal Proceedings. Not Applicable Item 2. Changes in Securities and Use of Proceeds. Not Applicable Item 3. Defaults Upon Senior Securities. Not Applicable Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable Item 5. Other Information. Not Applicable Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: Exhibit No. Description ------------ --------------------- Exhibit 27 Financial Data Schedule (b) Reports on Form 8-K: No reports on Form 8-K were filed during the three months ended June 30, 1998. 12 AIRNET SYSTEMS, INC. SIGNATURES Pursuant to the requirements 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. Dated: August 13, 1998 By: /s/ Eric P. Roy ------------------------------ Eric P. Roy, Executive Vice President (Duly Authorized Officer) (Principal Financial Officer) 13 AIRNET SYSTEMS, INC. INDEX TO EXHIBITS
Exhibit No. Description - ---------- ----------------------------------------- 27 Financial Data Schedule. Filed herewith.
14 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AIRNET SYSTEMS, INC.'S FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 713 0 12,073 183 6,295 24,773 125,741 51,548 112,137 7,091 0 0 0 127 86,434 112,137 584 54,680 373 39,300 7,292 0 455 7,633 3,027 4,606 0 0 0 4,606 .37 .36
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