SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
Commission file number 0-21976
ATLANTIC COAST AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3621051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
515-A Shaw Road, Dulles, Virginia 20166
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 925-6000
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
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
As of August 8, 1997, there were 7,108,267 shares of common stock, par
value $.02 per share, outstanding.
Part I. Financial Information
Item 1. Financial Statements
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Balance Sheets
December 31, June 30, 1997
(In thousands except for share data and par 1996 (Unaudited)
values)
Assets
Current:
Cash and cash equivalents $ 21,470 $ 21,374
Accounts receivable, net 15,961 20,134
Due from financial institution - 48,250
Expendable parts and fuel inventory, 1,759 2,346
net
Prepaid expenses and other current 2,554 3,128
assets
Total current assets 41,744 95,232
Property and equipment, net of accumulated
depreciation and amortization 16,157 17,311
Preoperating costs, net of accumulated
amortization 225 365
Intangible assets, net of accumulated 2,882 2,746
amortization
Deferred tax asset 3,140 3,140
Debt issuance costs - 1,995
Aircraft deposits 570 15,330
Other assets 40 30
Total assets $ 64,758 $ 136,149
Liabilities and Stockholders' Equity
Current:
Accounts payable $ 3,770 $ 2,633
Notes Payable - 11,000
Line of credit with financial - 7
institution
Current portion of long-term debt 1,319 1,293
Current portion of capital lease 1,497 1,648
obligations
Accrued liabilities 17,376 22,121
Total current liabilities 23,962 38,702
Long-term debt, less current portion 2,407 51,788
Capital lease obligations, less current 3,266 3,180
portion
Deferred credits 486 1,123
Total liabilities 30,121 94,793
Stockholders' equity:
Preferred Stock, $.02 par value per share;
shares authorized 5,000,000; no shares
issued or outstanding in 1996 or 1997 - -
Common stock: $.02 par value per share;
shares authorized 17,000,000; shares
issued 8,498,910 in 1996 and 8,525,934 in 170 171
1997
Class A common stock: nonvoting; par value;
$.02 stated value per share; shares
authorized 6,000,000; no shares issued or - -
outstanding
Additional paid-in capital 37,689 37,820
Less: Common stock in treasury, at cost, (125) (125)
12,500 shares
Accumulated earnings (deficit) (3,097) 3,490
Total stockholders' equity 34,637 41,356
Total liabilities and $ 64,758 $ 136,149
stockholders' equity
See accompanying notes to the consolidated financial statements.
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Statements of Operations
(Unaudited)
Three months ended June 30,
(In thousands) 1996 1997
Revenues:
Passenger $49,565 $52,549
Other 800 671
Total revenues 50,365 53,220
Operating expenses:
Salaries and related costs 11,349 12,137
Aircraft fuel 4,209 4,202
Aircraft maintenance and materials 4,323 3,263
Aircraft rentals 7,392 7,808
Traffic commissions and related fees 7,713 8,690
Depreciation and amortization 648 767
Other 5,692 6,385
Restructuring charges (164) -
(reversals)
Total operating expenses 41,162 43,252
Operating income 9,203 9,968
Other income (expense):
Interest expense (306) (460)
Interest income 22 148
Other income (9) (9)
Total other expense (293) (321)
Income before income tax provision 8,910 9,647
Income tax provision 446 3,762
Net income $8,464 $5,885
Earnings per common and common equivalent
shares:
-primary $0.94 $0.65
-fully diluted $0.94 $0.65
Weighted average common and common
equivalent shares:
-primary 9,005 9,056
-fully diluted 9,005 9,078
See accompanying notes to the consolidated financial statements.
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Statements of Operations
(Unaudited)
Six months ended June 30,
(In thousands) 1996 1997
Revenues:
Passenger $86,696 $93,049
Other 1,526 1,285
Total revenues 88,222 94,334
Operating expenses:
Salaries and related costs 22,000 23,732
Aircraft fuel 7,903 8,527
Aircraft maintenance and materials 7,985 7,008
Aircraft rentals 14,459 15,110
Traffic commissions and related fees 13,765 15,038
Depreciation and amortization 1,289 1,487
Other 10,926 12,427
Restructuring charges (reversals) (426) -
Total operating expenses 77,901 83,329
Operating income 10,321 11,005
Other income (expense):
Interest expense (549) (650)
Interest income 46 293
Other expense (9) (13)
Total other expense (512) (370)
Income before income tax provision 9,809 10,635
Income tax provision 482 4,048
Net income $9,327 $6,587
Earnings per common and common equivalent
shares:
-primary $1.04 $0.73
-fully diluted $1.04 $0.73
Weighted average common and common
equivalent shares:
-primary 8,964 9,048
-fully diluted 8,968 9,072
See accompanying notes to the consolidated financial statements.
Atlantic Coast Airlines, Inc.
and Subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended June 30,
(In thousands) 1996 1997
Cash flows from operating activities:
Net income $9,327 $6,587
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,292 1,487
Provision for uncollectible accounts 30 45
Amortization of finance costs 14 27
Amortization of deferred credits - (49)
Loss on disposal of fixed assets - 348
Changes in operating assets and liabilities:
Accounts receivable (5,194) (4,218)
Expendable parts and fuel inventory 255 (587)
Prepaid expenses and other current assets (826) (574)
Preoperating costs - (258)
Accounts payable 248 (1,137)
Accrued liabilities 870 4,745
Net cash provided by operating activities 6,016 6,416
Cash flows from investing activities:
Purchase of property and equipment (697) (1,946)
Proceeds from sales of fixed assets 16 -
(Increase) decrease in deposits 121 (3,750)
Net cash used in investing activities (560) (5,696)
Cash flows from financing activities:
Payments of long-term debt (668) (645)
Payments of capital lease obligations (506) (770)
Net increase in lines of credit 3,646 7
Due from financial institution - (48,250)
Increase in long term debt - 50,000
Increase in deferred credits 396 686
(Increase) decrease in intangible assets (107) (1,975)
Proceeds from exercise of stock options 288 131
1995 cumulative preferred dividends paid in (335) -
1996
Redemption of Series A cumulative convertible
preferred stock (3,825) -
Net cash used in financing activities (1,111) (816)
Net (decrease) increase in cash and cash 4,345 (96)
equivalents
Cash and cash equivalents, beginning of period 8,396 21,470
Cash and cash equivalents, end of period $12,741 $21,374
See accompanying notes to the consolidated financial statements.
ATLANTIC COAST AIRLINES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 1997, and for the three months ended June
30, 1997, is unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements included herein have been
prepared by Atlantic Coast Airlines, Inc. ("ACAI") and its subsidiary,
Atlantic Coast Airlines, (together, the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. The information furnished in the consolidated financial
statements includes normal recurring adjustments and reflects all
adjustments which are, in the opinion of management, necessary for a
fair presentation of such consolidated financial statements. Results
of operations for the three and six month periods presented are not
necessarily indicative of the results to be expected for the year
ending December 31, 1997. Certain amounts as previously reported have
been reclassified to conform to the current year presentation. Certain
information and footnote disclosures normally included in the
condensed consolidated financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements
should be read in conjunction with the consolidated financial
statements, and the notes thereto, included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards. Results of operations and financial position
will be unaffected by implementation of these new standards.
Statement of Financial Accounting Standards ("SFAS") 130, "Reporting
Comprehensive Income", establishes standards for the reporting and
displaying of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as
other financial statements.
SFAS 131, "Disclosures about segments of a Business Enterprise",
establishes standards for the way that public enterprises report
information about operating segments in annual financial statements
and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in
assessing performance.
Both of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative
information for earlier years to be restated. Due to the recent
issuance of these standards, management has been unable to fully
evaluate the impact, if any, they may have on future financial
statement disclosures.
Recently, the American Institute of Certified Public Accountants
issued a proposed statement of position on accounting for start-up
costs, including preoperating costs related to the introduction of new
fleet types by airlines. The proposed accounting guidelines would
require companies to expense start-up costs as incurred. If the
Financial Accounting Standards Board approves the proposed guidelines,
as expected, the guidelines will take effect in December 1997.
Presently, the Company intends to defer certain start-up costs related
to the introduction of the regional jets and to amortize such costs to
expense ratably over four years. The Company will expense preoperating
costs, beginning January 1, 1998, should the proposed guidelines
become effective as scheduled. Thus, if the proposed guidelines become
effective, the Company will expense its previously capitalized start-
up costs in the first quarter of 1998, and such costs will be expensed
rather than capitalized when incurred in the future.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31, June 30,
(In thousands) 1996 1997
Improvements to aircraft $2,350 $2,366
Flight equipment, primarily rotable parts 14,014 14,553
Maintenance and ground equipment 3,380 3,449
Computer hardware and software 1,464 1,796
Furniture and fixtures 296 417
Leasehold improvements 619 1,548
22,123 24,129
Less: Accumulated depreciation and
amortization 5,966 6,818
$16,157 $17,311
3. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
December 31, June 30,
(In thousands) 1996 1997
Accrued payroll and employee benefits $4,929 $6,602
Accrued income taxes 103 4,115
Air traffic liability 2,703 1,461
Reservations and handling 2,454 2,344
Engine overhaul costs 3,311 3,125
Fuel 1,196 953
Other 2,680 3,521
$17,376 $22,121
4. DEBT
Pursuant to a Purchase Agreement exercised on June 27, 1997, between
the Company and Alex. Brown & Sons, Incorporated and The Robinson-
Humphrey Company, Inc. as Initial Purchasers, on July 2, 1997, the
Company issued $50.0 million aggregate principal amount of 7.0%
Convertible Subordinated Notes due July 1, 2004 (the "Notes"), under
Rule 144A of the Securities Act of 1933, and received net proceeds of
approximately $48.3 million related to the sale of the Notes. On July
18, 1997 the Company issued an additional $7.5 million aggregate
principal amount of the Notes to cover over-allotments, and received
net proceeds of $7.3 million related to the exercise of the over-
allotment option.
The Notes are convertible into shares of Common Stock, par value $0.02
of the Company (the "Common Stock") by the holders at any time after
sixty days following the latest date of original issuance thereof and
prior to maturity, unless previously redeemed or repurchased, at a
conversion price of $18.00 per share, subject to certain adjustments.
Interest on the Notes is payable on April 1 and October 1 of each
year, commencing October 1, 1997. The Notes are not redeemable by the
Company until July 1, 2000. Thereafter, the Notes will be redeemable,
at any time, on at least 15 days notice at the option of the Company,
in whole or in part, at the redemption prices set forth in the
Indenture dated July 2, 1997, in each case, together with accrued
interest. The Notes are unsecured and subordinated in right of payment
in full to all existing and future Senior Indebtedness.
On April 1, 1997, the Company executed a short-term promissory note
for deposits related to the acquisition of Canadair Regional Jets
("CRJs") for $11.0 million at an 8% annual interest rate due July 15,
1997. The promissory note was paid in full on July 2, 1997 from the
proceeds of the Notes issued on June 27, 1997 as described above.
During July 1997 the Company retired $3.1 million of other high
interest rate debt from the proceeds of the Notes.
5. COMMITMENTS
In June 1997, the Industrial Development Authority of Loudoun County,
Virginia ("IDA") approved a $9.4 million tax exempt bond issue in
connection with the Company's proposed construction of a maintenance
facility at the Washington-Dulles International Airport ("Washington
Dulles"). These bonds were issued by the IDA under a variable interest
rate structure for a twenty-five year term and are collateralized by
the maintenance facility and a letter of credit issued by one of the
Company's financial institutions. The Company will be obligated to pay
rent for the facility and the underlying land leasehold, the proceeds
from which the IDA will make the required interest and sinking fund
payments.
6. INCOME TAXES
The Company's estimated effective tax rate for the second quarter of
1997 was 39.0% and is approximately equal to the statutory rate. The
Company estimates that the combined state and federal effective tax
rate will increase slightly during the third and fourth quarters of
1997 due to revisions in estimates and permanent differences between
taxable and book income.
7. EARNINGS PER COMMON SHARE
The computation of primary earnings per share is based on the weighted
average number of outstanding common shares during the period plus,
when their effect is dilutive, common stock equivalents consisting of
certain shares subject to stock options. On a fully diluted basis,
both earnings and shares outstanding are adjusted to assume the
conversion of the convertible securities.
On July 2, 1997 the Company repurchased 1.46 million shares of common
stock from British Aerospace. This will have the effect of reducing
the weighted average number of outstanding common shares for both
primary and fully diluted calculations. In addition, the fully diluted
weighted average number of outstanding shares will be increased to
reflect the assumed conversion of the convertible debt by
approximately 3.2 million shares.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Second Quarter Operating Results
Increase
(Decrease)
Three months ended June 30, 1996 1997 % Change
Revenue passengers carried 396,08 424,74 7.2%
9 0
Revenue passenger miles ("RPMs") 96,679 105,37 9.0%
(000's) 2
Available seat miles ("ASMs") (000's) 196,87 208,66 6.0%
0 3
Passenger load factor 49.1% 50.5% 1.4 pts
Break-even passenger load factor 1 40.2% 40.9% 0.7 pts
Revenue per ASM (cents) 25.6 25.5 (0.4%)
Yield (cents) 51.3 49.9 (2.7%)
Cost per ASM (cents) 2 21.0 20.7 (1.4%)
Average passenger fare $125.1 $123.7 (1.1%)
4 2
Average passenger trip length (miles) 244 248 1.6%
Revenue departures 35,235 36,051 2.3%
Revenue block hours 44,023 44,963 2.1%
Aircraft utilization (block hours) 9.7 9.4 (3.1%)
Average cost per gallon of fuel (cents) 80.1 77.3 (3.5%)
Aircraft in service (end of period) 57 60 5.3%
Comparison of three months ended June 30, 1997, to three months ended
June 30, 1996.
Results of Operations
General
In the second quarter of 1997 the Company posted net income
of $5.9 million compared to net income of $8.5 million for the second
quarter of 1996. The Company's second quarter 1997 results reflect a
provision for income taxes which approximates statutory rates as
compared to the second quarter of 1996 which contained a significantly
smaller provision for income taxes due to the existence of a net
operating loss carryforward. In the three months ended June 30, 1997,
the Company earned pretax income of $9.6 million compared to $8.7
million excluding restructuring reversals, in the three months ended
June 30, 1996.
Operating Revenues
The Company's operating revenues increased 5.7% to $53.2
million in the second quarter of 1997 compared to $50.4 million in the
second quarter of 1996. The increase resulted from a 6.0% increase in
ASMs and an increase in load factor of 1.4 percentage points partially
offset by a 2.7% decrease in yield.
The reduction in yield per RPM is related in part to the
existence of the ticket tax in the second quarter of 1997 which was
not in effect during the second quarter of 1996. Revenue per ASM
remained essentially unchanged quarter over quarter. Total passengers
increased 7.2% in the second quarter of 1997 compared to the second
quarter of 1996.
Operating Expenses
The Company's operating expenses increased 4.7% in the
second quarter of 1997 compared to operating expenses before reversals
of restructuring charges for the second quarter of 1996 due primarily
to a 6.0% increase in ASMs. The increased capacity reflects the
addition of two British Aerospace Jetstream - 41 ("J-41") aircraft at
the end of the first quarter of 1997 and two additional J-41s during
the second quarter of 1997 net of one J-41 returned to the
manufacturer in December 1996 which had been loaned to the Company on
an interim basis. Operating expenses also increased due to additional
profit sharing expenses, passenger related costs (traffic commissions
and related fees) and increased aircraft rent. Cost per ASM before
reversals of restructuring charges decreased 1.4% to 20.7 cents during
the second quarter of 1997 compared to 21.0 cents in the second
quarter of 1996.
An unaudited summary of operating expenses as a percentage
of operating revenues and cost per ASM for the three months ended June
30, 1996, and 1997 is as follows:
1996 1997
Percent Cost Percent Cost
of of
Operati per ASM Operatin per ASM
ng g
Revenue (cents) Revenue (cents)
s s
Salaries and related costs 22.5% 5.9 22.9% 5.8
Aircraft fuel 8.4% 2.1 7.9% 2.0
Aircraft maintenance and 8.6% 2.2 6.1% 1.5
materials
Aircraft rentals 14.7% 3.8 14.6% 3.7
Traffic commissions and related 15.3% 3.9 16.3% 4.2
fees
Depreciation and amortization 1.3% .3 1.4% .4
Other 11.3% 2.8 12.1% 3.1
Total (before restructuring
charge charge of reversals)
restructuring
reversals) 82.1% 21.0 81.3% 20.7
ASMs increased 6.0% in the second quarter of 1997 compared
to the second quarter of 1996 as a result of a 2.1% increase in block
hours and the net addition of three J-41 aircraft. Cost per ASM
decreased on a quarter over quarter basis due primarily to the ASM
increase and reductions in aircraft maintenance and materials.
Salaries and related costs per ASM decreased slightly to 5.8
cents for the second quarter of 1997 compared to 5.9 cents for the
second quarter of 1996 despite a 31.8% increase in profit sharing,
additional flight crew hours, and contractual wage increases for
pilots and flight attendants effective March 1, 1997, and May 1, 1996
respectively. In absolute dollars, salaries and related costs
increased 6.9% from $11.3 million in the second quarter of 1996 to
$12.1 million in the second quarter of 1997.
The cost per ASM of aircraft fuel decreased to 2.0 cents in
the second quarter of 1997 compared to 2.1 cents in the second quarter
of 1996. The decrease in fuel cost per ASM resulted from a 3.5%
reduction in the average fuel cost per gallon and increased ASMs.
Aircraft fuel prices fluctuate with a variety of factors, including
the price of crude oil, and future increases or decreases cannot be
predicted with a high degree of certainty. There is no assurance that
future increases will not adversely affect the Company's operating
expenses. In absolute dollars, aircraft fuel expense was $4.2 million
in the second quarter of 1997 and was unchanged from the second
quarter of 1996.
The cost per ASM of aircraft maintenance and materials
decreased to 1.5 cents in the second quarter of 1997 compared to 2.2
cents in the second quarter of 1996. During the second quarter of 1997
the Company recognized credits of approximately $0.5 million for
manufacturer penalties related to engine overhauls and dispatch
reliability, and $0.4 million related to reimbursements for engine
spare parts, offset by increased maintenance related to the net
addition of three J-41 aircraft and the expiration of warranty
coverage for certain aircraft. In absolute dollars, aircraft
maintenance and materials expense decreased 32.5% from $4.3 million
in the second quarter of 1996 to $3.3 million in the second quarter of
1997.
The Company's maintenance accounting policy is a combination
of expensing events as incurred and accruals for maintenance events.
Maintenance accruals are estimated on a cost per flight hour or per
cycle basis for all aircraft, including those under warranty.
The cost per ASM of aircraft rentals decreased to 3.7 cents
compared to 3.8 cents for the second quarter of 1996 as a result of
the quarter over quarter increase in ASMs partially offset by
increased rent associated with the net addition of three J-41
aircraft. In absolute dollars, aircraft rentals increased 5.6% from
$7.4 million in the second quarter of 1996 to $7.8 million in the
second quarter of 1997.
The cost per ASM of traffic commissions and related fees
increased to 4.2 cents in the second quarter of 1997 compared to 3.9
cents in the second quarter of 1996 due to a 6.0% increase in
passenger revenue, a 7.2% increase in passengers, and contractual rate
increases in program fees paid to United Airlines, Inc. ("United"). In
absolute dollars, traffic commissions and related fees increased 12.7%
from $7.7 million in the second quarter of 1996 to $8.7 million in the
second quarter of 1997.
The cost per ASM of depreciation and amortization was 0.4
cents in the second quarter of 1997 compared to 0.3 cents in the
second quarter of 1996 despite the acquisition of rotable spare parts
associated with additional aircraft and ground equipment, improvements
to aircraft, facility leasehold improvements and other capital
expenditures since the second quarter of 1996. In absolute dollars,
depreciation and amortization increased 18.4% from $0.6 million in the
second quarter of 1996 to $0.8 million in the second quarter of 1997.
The cost per ASM of other operating expenses increased to
3.1 cents in the second quarter 1997 from 2.8 cents in the second
quarter of 1996 as a result of increased facilities rentals at
Washington-Dulles, and reversals of excess accruals for passenger
claims expense in the second quarter of 1996. In absolute dollars,
other operating expenses increased 12.2% from $5.7 million in the
second quarter of 1996 to $6.4 million in the second quarter of 1997.
As a result of the foregoing components, total cost per ASM
decreased to 20.7 cents in the second quarter of 1997 compared to 21.0
cents before reversals of restructuring charges in the second quarter
of 1996. The second quarter of 1996 included a reversal of excess
restructuring reserves of (0.1) cents per ASM. Total ASMs increased
6.0% and, in absolute dollars, total operating expenses increased 4.7%
from $41.3 million in the second quarter of 1996 to $43.3 million in
the second quarter of 1997.
The Company's combined effective tax rate for state and
federal taxes during the second quarter of 1997 was approximately 39%.
The Company estimates that the effective tax rate will increase
slightly in the third and fourth quarters due to revisions of
estimates and permanent differences between taxable and book income.
In the second quarter of 1997 the Company recorded net
income of $5.9 million compared to net income of $8.5 million for the
second quarter of 1996. The Company's second quarter of 1997 results
reflect a provision for income taxes that assumes an estimated
effective tax rate of approximately 39%, compared to an estimated
effective tax rate of 5% for the second quarter of 1996 due to the
existence of a net operating loss carryforward. In the second quarter
of 1997, the Company earned income before income tax provision of $9.6
million, compared to $8.9 million in the second quarter of 1996.
During the second quarter of 1997, the Company generated operating
income of $10.0 million compared to $9.2 million for the second
quarter of 1996. Results for the second quarter of 1996 include a
reversal of excess restructuring reserves of $0.2 million.
Six Months Operating Results
Increase
(Decrease
)
Six months ended June 30, 1996 1997 % Change
Revenue passengers 695,663 723,759 4.0%
Revenue passenger miles ("RPMs") 169,431 178,613 5.4%
(000's)
Available seat miles ("ASMs") 370,625 395,556 6.7%
(000's)
Passenger load factor 45.7% 45.2% (0.5 pts)
Break-even passenger load factor 40.5% 39.8% (0.7 pts)
Revenue per ASM (cents) 23.8 23.8 0.0%
Yield (cents) 51.2 52.1 1.8%
Cost per ASM (cents) 21.1 21.1 0.0%
Average passenger fare $124.62 $128.56 3.2%
Average passenger trip length 244 247 1.2%
(miles)
Revenue departures 66,769 69,187 3.6%
Revenue block hours 82,880 86,514 4.4%
Aircraft utilization (block hours) 9.7 9.4 (3.1%)
Average cost per gallon of fuel 78.9 81.0 2.7%
(cents)
Aircraft in service (end of period) 57 60 5.3%
Comparison of six months ended June 30, 1997, to six months ended June
30, 1996.
Results of Operations
Operating Revenues
The Company's operating revenues increased 6.9% to $94.3
million in the first six months of 1997 compared to $88.2 million for
the first six months of 1996. The increase resulted from a 6.7%
increase in ASMs as well as a 1.8% increase in yield partially offset
by a decrease in load factor of 0.5 percentage points. The Company's
break-even load factor decreased from 40.5% to 39.8% year over year.
The increase in yield is related to an increase in average
fare of 3.2% from $124.62 in the first half of 1996 to $128.56 in the
first half of 1997, partially offset by the reinstatement of the 10.0%
ticket tax on March 7, 1997, which was not in effect during the first
half of 1996. Revenue per ASM remained essentially unchanged year over
year. Total passengers increased 4.0% in the first half of 1997
compared to the first half of 1996.
Operating Expenses
The Company's operating expenses increased 6.4% in the first
half of 1997 compared to operating expenses before reversals of
restructuring charges in the first half of 1996 due primarily to a
6.7% increase in ASMs. The increased capacity reflects the net
addition of three J-41s since the first half of 1996. Operating
expenses were also increased by additional profit sharing expenses,
passenger related costs (traffic commissions and related fees) and
increased aircraft rent. Cost per ASM before reversals of
restructuring charges was unchanged at 21.1 cents during the first six
months of 1996 and 1997.
An unaudited summary of operating expenses as a percentage
of operating revenues and cost per ASM for the six months ended June
30, 1996, and 1997 is as follows:
1996 1997
Percent Cost Percent Cost
of of
Operati per ASM Operatin per ASM
ng g
Revenue (cents) Revenue (cents)
s s
Salaries and related costs 24.8% 6.0 25.2% 6.1
Aircraft fuel 9.0% 2.1 9.0% 2.1
Aircraft maintenance and 9.1% 2.2 7.4% 1.8
materials
Aircraft rentals 16.4% 3.9 16.0% 3.8
Traffic commissions and related 15.6% 3.7 15.9% 3.8
fees
Depreciation and amortization 1.5% .3 1.6% .4
Other 12.4% 2.9 13.2% 3.1
Total (before restructuring
charge
reversals) 88.8% 21.1 88.3% 21.1
ASMs increased 6.7% in the first half of 1997 compared to
the first half of 1996 as a result of a 4.4% increase in block hours
and the net addition of three aircraft. Cost per ASM remained
unchanged at 21.1 cents during the first half of 1996 and 1997.
Salaries and related costs per ASM increased to 6.1 cents
for the first six months of 1997 compared to 6.0 cents for the first
six months of 1996. The increase resulted primarily from a 27.8%
increase in profit sharing, additional flight crew hours, and
contractual wage increases for pilots and flight attendants effective
March 1, 1997, and May 1, 1996 respectively. In absolute dollars,
salaries and related costs increased 7.9% from $22.0 million in the
first half of 1996 to $23.7 million in the first half of 1997.
The cost per ASM of aircraft fuel was unchanged at 2.1 cents
in the first six months of 1997 compared to the first six months of
1996 despite an increase in the average cost per gallon of fuel of
2.7% and a 4.4% increase in block hours. Aircraft fuel prices
fluctuate with a variety of factors including the price of crude oil,
and future increases or decreases cannot be predicted with a high
degree of certainty. There is no assurance that future increases will
not adversely affect the Company's operating expenses. In absolute
dollars, aircraft fuel expense increased 7.9% from $7.9 million in the
first half of 1996 to $8.5 million dollars in the first half of 1997.
The cost per ASM of aircraft maintenance and materials
decreased to 1.8 cents in the first six months of 1997 compared to 2.2
cents in the first six months of 1996. During the first half of 1997
the Company recognized credits of approximately $0.9 million for
manufacturer penalties related to engine overhauls and dispatch
reliability, and $0.4 million related to reimbursements for engine
spare parts, offset by increased maintenance related to the net
addition of three J-41 aircraft and the expiration of warranty
coverage for certain aircraft. In absolute dollars, aircraft
maintenance and materials expense decreased 12.2% from $8.0 million in
the first half of 1996 to $7.0 million in the first half of 1997.
The cost per ASM of aircraft rentals decreased to 3.8 cents
in the first six months of 1997 compared to 3.9 cents for the first
six months of 1996. The decrease occurred as a result of the increase
in ASMs partially offset by the increased rent associated with the net
addition of three J-41 aircraft. In absolute dollars, aircraft rentals
increased 4.5% from $14.5 million in the first half of 1996 to $15.1
million in the first half of 1997.
The cost per ASM of traffic commissions and related fees
increased to 3.8 cents in the first six months of 1997 compared to 3.7
cents in the first six months of 1996 due to a 7.3% increase in
passenger revenue, a 4.0% increase in passengers, and contractual rate
increases in program fees paid to United. In absolute dollars, traffic
commissions and related fees increased 9.2% from $13.8 million in the
first half of 1996 to $15.0 million in the first half of 1997.
The cost per ASM of depreciation and amortization was 0.4
cents in the first six months of 1997 compared to 0.3 cents in the
first six months of 1996 despite the acquisition of rotable spare
parts associated with additional aircraft and ground equipment,
improvements to aircraft, facility leasehold improvements and other
capital expenditures since the first half of 1996. In absolute
dollars, depreciation and amortization increased 15.4% from $1.3
million in the first half of 1996 to $1.5 million in the first half of
1997.
The cost per ASM of other operating expenses increased to
3.1 cents in the first six months of 1997 from 2.9 cents in the first
six months of 1996 due to increased facilities rentals at the
Washington-Dulles International Airport ("Washington-Dulles"), and
reversals of excess accruals for passenger claims expense in first
half of 1996. In absolute dollars, other operating expenses increased
13.7% from $10.9 million in the first half of 1996 to $12.4 million in
the first half of 1997.
As a result of the foregoing components, total cost per ASM
remained unchanged at 21.1 cents in the first six months of 1997
compared to 21.1 cents before reversals of restructuring charges in
the first six months of 1996. The first six months of 1996 included a
reversal of excess restructuring reserves of (0.1) cents per ASM.
Total ASMs increased 6.7% and, in absolute dollars, total operating
expenses increased 6.4% from $78.3 million in first half of 1996 to
$83.3 million in the second half of 1997.
In the first six months of 1997 the Company recorded net
income of $6.6 million compared to net income of $9.3 million for the
first six months of 1996. The Company's first half of 1997 results
reflect a provision for income taxes that assumes an estimated
effective tax rate of approximately 39%, compared to an estimated
effective tax rate of 5% for the first half of 1996 due to the
existence of a net operating loss carryforward. In the first half of
1997, the Company earned income before income tax provision of $10.6
million, compared to $9.8 million in the first half of 1996. During
the first half of 1997, the Company generated operating income of
$11.0 million compared to $10.3 million for the first half of 1996.
Results for the first half of 1996 include a reversal of excess
restructuring reserves of $0.4 million.
Outlook
This Outlook section and the Liquidity and Capital Resources
section below contain forward-looking statements. In addition,
statements that use words such as "expects", "intends", and
"anticipates" are forward-looking statements. The Company's actual
results may differ from the results discussed in forward-looking
statements. Factors that could cause the Company's future results to
differ materially from the expectations described herein include the
extent to which the Company's operation of Canadair Regional Jets,
Series 200 ER ("CRJ") is coordinated with the marketing and related
agreements between the Company and United (the "United Express
Agreements"), the costs of implementing CRJ service, the response of
the Company's competitors to the Company's business strategy, the
ability of the Company to obtain favorable financing terms for its
aircraft, market acceptance of the new CRJ service, routes and
schedules offered by the Company, the cost of fuel, the weather,
general economic conditions, satisfaction of regulatory requirements,
and the factors discussed below and in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996.
A central element of the Company's business strategy is
expansion of its aircraft fleet. The Company has commitments to
acquire twelve 50-seat CRJs from July 1997 through 1998. The
introduction of these aircraft will expand the Company's business into
new markets. In general, introduction of new markets into the
Company's route system results, at least in the short-term, in
operating expenses that may not be matched by increases in operating
revenues.
In order to operate the CRJs under the "United Express"
name, the Company must obtain United's consent under the United
Express Agreements. The Company has sought United's consent, and is
awaiting United's response regarding incorporating the CRJs into its
existing United Express product. While the Company's fleet currently
operates only under the "United Express" name, the Company believes
that it will be able to operate CRJs successfully regardless of
whether such operation is under the United Express Agreements.
Nonetheless, the Company believes that its results of operations could
be substantially less favorable unless the CRJs are operated under the
United Express Agreements.
The Company will incur significant expenses in its fleet
expansion program, and must complete several training, operational,
and administrative requirements before commencing CRJ service. In
addition, the CRJs will significantly increase the Company's lease
obligations. The Company is exploring various third party lease
financing arrangements for these and other aircraft.
On March 11, 1994, the Aircraft Mechanics Fraternal
Association ("AMFA") was certified by the National Mediation Board
(the "NMB") as the collective bargaining representative elected by
mechanics and related employees of the Company. As of July 1, 1997,
AMFA represented 120 of the Company's employees. The Company and AMFA
have been attempting to negotiate an initial contract under federal
mediation since December 1994, but have failed to reach an agreement.
A tentative agreement was reached with AMFA in June 1997 but failed
ratification by the membership in July 1997. The NMB has indicated
that it favors continuing the negotiations, and the Company
anticipates participating in further negotiations. If at some point,
the NMB should decide that the parties are deadlocked, the NMB may
declare an impasse and a thirty day cooling off period. If an
agreement has not been reached at the conclusion of that period, AMFA
would have the authority to use self-help, including the right to
strike. The Company and AMFA are also engaged in litigation, which is
more fully described below. If that litigation were resolved in AMFA's
favor, AMFA would be in a position to use self-help, even if the NMB
does not declare an impasse.
The Company's contract with the Association of Flight
Attendants ("AFA") became amendable on April 30, 1997. Negotiations
regarding amendments to this contract have been scheduled to begin in
August 1997. The Company expects to continue operating under the terms
of the existing agreement until new terms are negotiated.
The Company is obligated to collect a U.S. transportation
excise tax of 10% of passenger ticket revenue through September 30,
1997. A revised formula for ticket tax collections for travel
commencing October 1, 1997 and thereafter was recently signed into
law. The new tax is comprised of a percentage of revenue plus a per
segment fee adjusted on an annual basis. For the period October 1,
1997, through September 30, 1998, the ticket tax will be equal to 9%
of passenger ticket revenue plus a $1 per flight segment fee. The
Company does not anticipate that this change will have either a
materially adverse or favorable impact on passenger revenues for the
next twelve months.
Liquidity and Capital Resources
The Company's working capital improved significantly during
the first half of 1997 compared to the first half of 1996. As of June
30, 1997, the Company had cash and cash equivalents of $21.4 million
and working capital of $56.5 million compared to $12.7 million and
$10.3 million respectively as of June 30, 1996. During the first half
of 1997, cash and cash equivalents decreased by $0.1 million,
reflecting net cash provided by operating activities of $6.4 million,
net cash used in investing activities of $5.7 million (related to
deposits for the CRJs and purchases of equipment) and net cash used in
financing activities of $0.9 million. As of June 30, 1997, working
capital included a $50.0 million receivable due from the underwriters
for the proceeds related to the sale of the 7.0% Convertible
Subordinated Notes due July 1, 2004 as discussed below. On July 2,
1997, the Company received net proceeds of approximately $48.3 million
related to this receivable. On July 18, 1997, the Company received an
additional $7.3 million in net proceeds from the exercise of the over-
allotment option related to this offering.
Other Financing
The Company has an asset-based lending agreement with a
financial institution that provides the Company with a line of credit
of up to $20.0 million. Borrowings under the line of credit can
provide the Company a source of working capital until proceeds from
ticket coupons are received. The line is collateralized by all of the
Company's receivables and general intangibles, and there were no
borrowings under the line during the first half of 1997. The Company's
access to this line has been reduced by $4.5 million under the terms
of the letter of credit issued in connection with the financing of the
maintenance facility at Washington-Dulles airport. Negotiations
regarding changes in covenants and reduction of collateral
requirements related to the line of credit agreement have been
scheduled to begin in August 1997.
In June 1997, the Industrial Development Authority of
Loudoun County, Virginia approved a $9.4 million tax exempt bond
issuance in connection with the Company's proposed construction of a
maintenance facility at the Washington-Dulles. These bonds were issued
under a variable interest rate structure for a twenty-five year term
including a requirement for a monthly sinking fund provision, and are
collateralized by the maintenance facility and a letter of credit
issued by one of the Company's financial institutions. The letter of
credit is collateralized by $4.5 million of the Company's line of
credit. The Company will be obligated to pay rent for the facility and
the underlying land leasehold, the proceeds from which the IDA will
make the required interest and sinking fund payments.
On July 2, 1997, the Company issued $50.0 million aggregate
principal amount of 7.0% Convertible Subordinated Notes due July 1,
2004 (the "Notes"), under Rule 144A of the Securities Act of 1933. On
July 2, the Company received net proceeds of approximately $48.3
million related to the sale of these Notes. In addition, the Company
granted the initial purchasers a thirty day option to purchase up to
an additional $7.5 million aggregate principal amount of the Notes
solely to cover over-allotments. On July 18, 1997, the Company
received net proceeds of $7.3 million related to the exercise of this
option.
The net proceeds of the offering have been and will be used
to support the introduction of the Company's regional jet fleet,
repurchase 1.46 million shares of the Company's common stock from
British Aerospace at a discount to the market price, and retire higher
interest rate debt, and for general corporate purposes.
The Notes are convertible into shares of Common Stock by the
holders, par value $0.02 of the Company (the "Common Stock"), at any
time after sixty days following the latest date of original issuance
thereof and prior to maturity, unless previously redeemed or
repurchased, at a conversion price of $18.00 per share, subject to
certain adjustments. Interest on the Notes is payable on April 1 and
October 1 of each year, commencing October 1, 1997. The Notes are not
redeemable by the Company until July 1, 2000. Thereafter, the Notes
will be redeemable, at any time, on at least 15 days notice at the
option of the Company, in whole or in part, at the redemption prices
set forth in the Indenture dated July 2, 1997, in each case, together
with accrued interest.
On April 1, 1997, the Company executed a short term
promissory note for deposits related to the acquisition of Canadair
Regional Jets ("CRJs") for $11.0 million at an 8% annual interest rate
due July 15, 1997. The promissory note was paid in full on July 2,
1997 from the net proceeds of the Notes as described above. The $15.0
million deposit is scheduled to be returned to the Company beginning
with the delivery of the seventh CRJ in early 1998 and ending with the
last CRJ scheduled for delivery in September 1998.
On July 2, 1997, the Company repurchased 1.46 million shares
of the Company's common stock from British Aerospace for approximately
$16.9 million from the net proceeds on the sale of the Notes as
described above. The stock was repurchased at a 22.5% discount from
the average of the closing bid prices during the period June 24
through June 30, 1997.
During July 1997, the Company retired $3.1 million of other
high interest rate debt from the proceeds of the Notes.
Aircraft
On January 8, 1997, the Company entered into an agreement
with Bombardier, Inc. to purchase twelve CRJs with options for thirty-
six additional aircraft. The delivery schedule provides for the
Company to take delivery of four aircraft in 1997 commencing in July,
with the remaining eight aircraft to be delivered during 1998. The
first two aircraft were delivered on July 11, and August 13, 1997
respectively.
On February 23, 1997, the Company entered into an agreement
with Aero International (Regional) (the "BA J-41 Agreement") under
which the Company agreed to acquire twelve new J-41s. The BA J-41
Agreement provided for delivery of twelve J-41 aircraft to the Company
beginning in March 1997 and continuing through mid-1999, and the
Company had accepted delivery of four of these aircraft as of May 15,
1997. On May 29, 1997, the J-41's manufacturer, British Aerospace,
announced that it will no longer manufacturer the J-41 as part of its
regular product line. Subsequently, the Company and British Aerospace
entered into a term sheet whereby the Company canceled its order for
the eight additional J-41s. Depending on the market for used J-41s and
the Company's need for additional turboprop aircraft, the Company may
consider selective acquisitions of used J-41s in the future.
In July 1997, the Company entered into agreements with ICX
Capital Corporation for the permanent financing of three of the four J-
41s delivered to the Company during 1997. ICX acquired these aircraft
from British Aerospace with debt provided by Sanwa Business Credit
Corporation, and entered into leveraged leases with the Company. The
term of the leases is 11.5 years.
Capital Equipment and Debt Service
Capital expenditures for the first six months of 1997 were
$2.8 million compared to $0.9 million for the same period of 1996.
Capital expenditures in the first six months of 1997 consisted
primarily of rotable spare parts, facility leasehold improvements,
furniture and fixtures, ground service equipment, computers, and other
office equipment. For the remainder of 1997 the Company anticipates
spending approximately $5.1 million for rotable spare parts related to
the CRJs and J-41 aircraft, ground service equipment, facilities,
computers, and software. Of this amount, approximately $3.0 million of
manufacturer credits will be applied to the purchase of CRJ spare
parts.
Debt service including capital leases as of June 30, 1997,
was $14.6 million compared to $1.8 million in the same period of 1996.
The increase is the result of an $11.0 million promissory note for
deposits on the acquisition of regional jets and $1.8 million in
additional spare parts and engine financing.
Subsequent to June 30, 1997, the Company paid the $11.0
million promissory note and prepaid $3.1 million in existing notes and
capital leases. As a result, debt service will be reduced by $8.2
million for the next twelve month period.
The Company believes that, in the absence of unusual
circumstances, its cash flow from operations, the accounts receivable
credit facility, and other available equipment financing will be
sufficient to meet its working capital needs, capital expenditures,
and debt service requirements for the next twelve months.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board
issued two new disclosure standards. The Company's results of
operations and financial position will be unaffected by implementation
of these new standards.
Statement of Financial Accounting Standards (SFAS) 130,
"Reporting Comprehensive Income", establishes standards for the
reporting and displaying of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include all
changes in equity except those resulting from investments by owners
and distributions to owners. Among other disclosures, SFAS 130
requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements.
SFAS 131, "Disclosures About Segments of a Business
Enterprise", establishes standards for the way that public enterprises
report information about operating segments in annual financial
statements and requires reporting of selected information about
operating segments in interim financial statements issued to the
public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131
defines operating segments as components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
Both of these new standards are effective for financial
statements for periods beginning after December 15, 1997 and require
comparative information for earlier years to be restated. Due to the
recent issuance of these standards, management has been unable to
fully evaluate the impact, if any, they may have on future financial
statement disclosures.
Recently, the American Institute of Certified Public
Accountants issued a proposed statement of position on accounting for
start-up costs, including preoperating costs related to the
introduction of new fleet types by airlines. The proposed accounting
guidelines would require companies to expense start-up costs as
incurred. If the Financial Accounting Standards Board approves the
proposed guidelines, as expected, the guidelines will take effect in
December 1997. Presently, the Company intends to defer certain start-
up costs related to the introduction of the regional jets and to
amortize such costs to expense ratably over four years. The Company
will expense preoperating costs, beginning January 1, 1998, should the
proposed guidelines become effective as scheduled. Thus, if the
proposed guidelines become effective, the Company will expense its
previously capitalized start-up costs in the first quarter of 1998,
and such costs will be expensed rather than capitalized when incurred
in the future.
ATLANTIC COAST AIRLINES, INC.
FISCAL QUARTER ENDED June 30, 1997
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
The Company is a party to routine litigation and FAA
proceedings incidental to its business, none of which is likely to
have a material effect on the Company's financial position.
The Company is a party to an action pending in the United
States District Court for the Southern District of Ohio, Peter J.
Ryerson, administrator of the estate of David Ryerson, v. Atlantic
Coast Airlines, Case No. C2-95-611. This action is more fully
described in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995. The Company believes that all claims
resulting from this litigation remain fully covered under the
Company's insurance policy. On March 10, 1997, the Court granted
Plaintiff's motion to the effect that liability would not be limited
to those damages available under the Warsaw Convention. As of August
12, 1997, the matter has not been set for trial.
The Company is also engaged in litigation with AMFA over
whether AMFA has a right to strike prior to the exhaustion of
mediation pursuant to the Railway Labor Act. This issue arose when the
Company imposed certain unilateral work rule changes during the period
between union certification and an initial collective bargaining
agreement. On December 14, 1995, the U.S. District Court for the
Southern District of New York declined to render a declaratory
judgment requested by AMFA and expressly stated that AMFA was
prohibited from striking at that time. In Aircraft Mechanics Fraternal
Association v. Atlantic Coast Airlines, 55 F.3d 90 (1995), the U.S.
Court of Appeals for the Second Circuit affirmed the District Court's
ruling. AMFA subsequently petitioned the U.S. Court of Appeals for
the Second Circuit to consider whether the Company's actions, although
legal, should allow AMFA to engage in self-help, including the right
to strike. The Second Circuit heard oral arguments on this matter in
January 1997 and, as of August 14, 1997, had not yet rendered its
decision.
The Company is also a party to an action pending in the
United States District Court for the Eastern District of Virginia,
Afzal v. Atlantic Coast Airlines, Civil Action No. 96-1537-A.
Plaintiff alleges that the Company violated Title VII of the Civil
Rights Act of 1964 in terminating his employment as a pilot. The
Company has filed a motion for Summary Judgment, which will be heard
by the Court on August 22, 1997. The case has been set for trial on
September 8, 1997. The Company believes that it has meritorious
defenses; however, there can be no assurance as to the outcome of the
case or that the Company will not incur any liability in connection
with the proceeding.
ITEM 2. Changes in Securities.
Pursuant to a Purchase Agreement exercised on June 27, 1997,
between the Company and Alex. Brown & Sons, Incorporated and The
Robinson-Humphrey Company, Inc. as Initial Purchasers, on July 2,
1997, the Company issued $50.0 million aggregate principal amount of
7.0% Convertible Subordinated Notes due July 1, 2004, under Rule 144A
of the Securities Act of 1933, and received net proceeds of
approximately $48.3 million related to the sale of the Notes. On July
18, 1997 the Company issued an additional $7.5 million aggregate
principal amount of the Notes to cover over-allotments, and received
net proceeds of $7.3 million related to the exercise of the over-
allotment option.
The Notes are convertible into shares of Common Stock, par
value $0.02 of the Company by the holders at any time after sixty days
following the latest date of original issuance thereof and prior to
maturity, unless previously redeemed or repurchased, at a conversion
price of $18.00 per share, subject to certain adjustments. The Notes
are not redeemable by the Company until July 1, 2000. Thereafter, the
Notes will be redeemable, at any time, on at least 15 days notice at
the option of the Company, in whole or in part, at the redemption
prices set forth in the Indenture dated July 2, 1997, in each case,
together with accrued interest. The Notes are unsecured and
subordinated in right of payment in full to all existing and future
Senior Indebtedness.
ITEM 3. Defaults Upon Senior Securities.
None to report.
ITEM 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders of the Company was held
in Herndon, Virginia on June 3, 1997. Of the 8,508,000 shares of
common stock outstanding on the record date, 7,462,314 were present by
proxy. Those shares were voted on the matters before the meeting as
follows:
A. Election of Directors
For Withheld
C. Edward Acker 7,431,208 34,106
Kerry B. Skeen 7,428,298 34,016
Thomas J. Moore 7,428,489 33,825
Robert E. Buchanan 7,431,691 30,623
Joseph W. Elsbury 6,696,291 766,023
James J. Kerley 6,696,309 766,005
James C. Miller 7,431,562 30,752
John M. Sullivan 7,431,745 30,569
ITEM 5. Other Information.
None to report.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
4.17 Indenture dated as of July 2, 1997, between the
Company and First Union National Bank of Virginia.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None to report.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ATLANTIC COAST AIRLINES, INC.
August 14, 1997 By: /S/ Paul H. Tate
Paul H. Tate
Senior Vice President and Chief
Financial Officer
August 14, 1997 By: /S/ Kerry B. Skeen
Kerry B. Skeen
President and Chief Executive
Officer
_______________________________
1 "Break-even passenger load factor" represents the percentage of ASMs
which must be flown by revenue passengers for the airline to break-
even after operating expenses excluding amounts related to
restructuring.
2 "Cost per ASM" represents total operating expenses excluding amounts
related to restructuring divided by ASMs.