Ï/2ÿñH4 d 1$&%*ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿñ'AIRNET SYSTEMS, INC."ñ'CONSOLIDATED BALANCE SHEETS*ñ'In thousands, except per share datañ^December 31,ñ^December 31, ñ^2000 ñ^1999 ñ'ASSETSñ'Current assets:!ñ'Cash and cash equivalentsñ"$ 1,118ñ"$ 1,667ñ 'Accounts receivable:1ñ 'Trade, less allowances of $601 and $598 at/ñ 'December 31, 2000 and 1999, respectively ñ "16,279 ñ "14,919"ñ 'Shareholders and associates ñ "99 ñ "154 ñ 'Inventory and spare parts ñ "6,618 ñ "10,426ñ'Taxes refundable ñ"283 ñ"2,382ñ'Deferred taxes ñ"314 ñ"738ñ'Deposits and prepaids ñ"1,473 ñ"1,733ñ'Total current assets ñ"26,184 ñ"32,019!ñ'Net property and equipment ñ"86,600 ñ"84,733ñ'Other assets:Cñ'Goodwill, net of accumulated amortization of $1,041 and $7152ñ'at December 31, 2000 and 1999, respectively ñ"7,705 ñ"7,920Añ'Other intangibles, net of accumulated amortization of $489=ñ'and $2,264 at December 31, 2000 and 1999, respectively ñ"233 ñ"375*ñ'Investment in partnership and other ñ"1,811 ñ"2,234ñ'TOTAL ASSETSñ"$ 122,533ñ"$ 127,281+ñ 'LIABILITIES AND SHAREHOLDERS' EQUITYñ!'Current liabilities:ñ"'Accounts payableñ""$ 4,456ñ""$ 5,203'ñ#'Salaries and related liabilities ñ#"3,271 ñ#"2,792ñ$'Accrued expenses ñ$"1,873 ñ$"1,206'ñ%'Current portion of notes payable ñ%"33 ñ%"29 ñ''Total current liabilities ñ'"9,633 ñ'"9,230*ñ)'Notes payable, less current portion ñ)"22,686 ñ)"33,919ñ*'Deferred tax liability ñ*"11,369 ñ*"10,381ñ,'Shareholders' equity:6ñ-'Preferred shares, $.01 par value; 10,000 shares7ñ.'authorized; and no shares issued and outstanding ñ."-- ñ."--?ñ/'Common shares, $.01 par value; 40,000 shares authorized;>ñ0'and 12,753 shares issued at December 31, 2000 and 1999 ñ0"128 ñ0"128!ñ1'Additional paid-in-capital ñ1"77,702 ñ1"78,182ñ2'Retained earnings ñ2"22,462 ñ2"15,207;ñ3'Treasury shares, 1,840 and 1,343 shares held at cost2ñ4'at December 31, 2000 and 1999, respectivelyñ4"(21,447)ñ4"(19,766)ñ5"---------ñ5"---------!ñ6'Total shareholders' equity ñ6"78,845 ñ6"73,751ñ7"---------ñ7"---------1ñ9'TOTAL LIABILITIES AND SHAREHOLDERS' EQUITYñ9"$ 122,533ñ9"$ 127,281ñ:"=========ñ:"=========5ñ<'See notes to consolidated financial statementsñ>'AIRNET SYSTEMS, INC.,ñ?'CONSOLIDATED STATEMENTS OF OPERATIONS*ñ@'In thousands, except per share datañA^Year Ended ñA^Year Ended ñA^Year Ended ñB^December 31,ñB^December 31,ñB^December 31, ñC^2000 ñC^1999 ñC^1998ñD'NET REVENUESRñE'Air transportation, net of excise tax of $4,216, $3,592, and $3,106 for theCñF'years ended December 31, 2000, 1999, and 1998, respectively:ñG'Check deliveryñG"$ 100,070ñG"$ 98,951ñG"$ 93,206ñH'Express delivery ñH"34,483 ñH"28,714 ñH"19,109&ñI'Fixed base and other operations ñI"650 ñI"1,033 ñI"1,366ñK'TOTAL NET REVENUESñK"135,203ñK"128,698ñK"113,681ñM'COSTS AND EXPENSESñO'Air transportationñQ'Wages and benefits ñQ"17,621 ñQ"16,389 ñQ"13,871ñR'Aircraft fuel ñR"11,226 ñR"11,307 ñR"10,160ñS'Aircraft maintenance ñS"8,831 ñS"7,625 ñS"7,407+ñT'Ground couriers and outside services ñT"27,961 ñT"25,438 ñT"21,301ñU'Depreciation ñU"13,680 ñU"11,391 ñU"10,101 ñV'Other ñV"24,170 ñV"25,165 ñV"19,953ñW'Fixed base operations ñW"1,103 ñW"1,089 ñW"853*ñX'Selling, general and administrative ñX"16,112 ñX"17,237 ñX"13,782ñZ'TOTAL COSTS AND EXPENSESñZ"120,704ñZ"115,641 ñZ"97,428ñ\'Income from operations ñ\"14,499 ñ\"13,057 ñ\"16,253%ñ]'Acquisition termination charge ñ]"-- ñ]"-- ñ]"5,570ñ^'Interest expense ñ^"2,283 ñ^"2,477 ñ^"1,336!ñ`'Income before income taxes ñ`"12,216 ñ`"10,580 ñ`"9,347!ña'Provision for income taxes ña"4,961 ña"4,308 ña"3,711;ñd'INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE ñd"7,255 ñd"6,272 ñd"5,636Hñf'Cumulative effect of accounting change, net of $1,735 tax benefit ñf"--ñf"(2,488) ñf"--ñi'NET INCOMEñi"$ 7,255ñi"$ 3,784ñi"$ 5,636<ñk'Income per common share - basic and assuming dilution;ñl'Income before cumulative effect of accounting changeñl"$ 0.66ñl"$ 0.55ñl"$ 0.469ñm'Cumulative effect of accounting change, net of tax ñm"-- ñm"(0.22) ñm"--ño'Net incomeño"$ 0.66ño"$ 0.33ño"$ 0.465ñr'See notes to consolidated financial statementsñt'AIRNET SYSTEMS, INC.,ñu'CONSOLIDATED STATEMENTS OF CASH FLOWSñv'In thousandsñw^Year Endedñw^Year Endedñw^Year Endedñx^ December 31,ñx^December 31,ñx^December 31, ñy^2000 ñy^1999 ñy^1998ñ{'OPERATING ACTIVITIESñ|'Net incomeñ|"$ 7,255ñ|"$ 3,784ñ|"$ 5,6366ñ}'Adjustments to reconcile net income to net cash(ñ~'provided by operating activities:-ñ'Cumulative effect of accounting change ñ"-- ñ"2,488 ñ"--ñ€'Depreciation ñ€"13,810 ñ€"11,525 ñ€"10,209"ñ'Amortization of intangibles ñ"692 ñ"789 ñ"1,067ñ‚'Deferred taxes ñ‚"1,413 ñ‚"766 ñ‚"4,2182ñƒ'Provision for losses on accounts receivable ñƒ"171 ñƒ"504 ñƒ"150$ñ„'Loss on disposition of assets ñ„"68 ñ„"102 ñ„"55Cñ…'Cash provided by (used in) operating assets and liabilities:ñ†'Accounts receivableñ†"(1,476)ñ†"(2,338)ñ†"(1,574) ñ‡'Inventory and spare parts ñ‡"3,808ñ‡"(1,040)ñ‡"(3,333)ñˆ'Prepaid expenses ñˆ"260 ñˆ"1,015 ñˆ"112ñ‰'Start-up costs ñ‰"-- ñ‰"--ñ‰"(2,165)ñŠ'Accounts payable ñŠ"(747) ñŠ"(727) ñŠ"1,448'ñ‹'Salaries and related liabilities ñ‹"479 ñ‹"1,508 ñ‹"(324)ñŒ'Accrued expenses ñŒ"668ñŒ"(2,684) ñŒ"2,168ñ'Taxes payable ñ"2,099 ñ"3,553ñ"(6,423)ñŽ'Other, net ñŽ"101 ñŽ"257 ñŽ"7420ñ'NET CASH PROVIDED BY OPERATING ACTIVITIES ñ"28,601 ñ"19,502 ñ"11,986ñ’'INVESTING ACTIVITIESKñ”'Acquisition of Mercury Business Services, Inc., net of cash acquired ñ”"-- ñ”"--ñ”"(1,827)Bñ•'Acquisition of Data Air Courier, Inc., net of cash acquired ñ•"-- ñ•"-- ñ•"(34)*ñ–'Purchases of property and equipmentñ–"(15,825)ñ–"(17,639)ñ–"(18,706)-ñ—'Payments for covenants not to compete ñ—"(15) ñ—"(170) ñ—"(540)4ñ˜'Proceeds from sales of property and equipment ñ˜"79 ñ˜"96 ñ˜"415,ñš'NET CASH USED IN INVESTING ACTIVITIESñš"(15,761)ñš"(17,713)ñš"(20,692)ñœ'FINANCING ACTIVITIES7ñž'Proceeds from 1996 Incentive Stock Plan Programs ñž"195 ñž"293 ñž"1,947FñŸ'Net borrowings (repayments) under the revolving credit facilityñŸ"(11,200)ñŸ"(1,500) ñŸ"25,800"ñ 'Repayment of long-term debt ñ "(29) ñ "(57) ñ "(24)!ñ¡'Purchase of treasury stockñ¡"(2,355) ñ¡"--ñ¡"(20,000):ñ£'NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIESñ£"(13,389)ñ£"(1,264) ñ£"7,723&ñ¦'Net increase (decrease) in cash ñ¦"(549) ñ¦"525 ñ¦"(983)5ñ§'Cash and cash equivalents at beginning of year ñ§"1,667 ñ§"1,142 ñ§"2,125/ñª'CASH AND CASH EQUIVALENTS AT END OF YEARñª"$ 1,118ñª"$ 1,667ñª"$ 1,1425ñ­'See notes to consolidated financial statementsñ¯'AIRNET SYSTEMS, INC.(ñ°'CONSOLIDATED STATEMENTS OF EQUITYñ±'In thousandsñ³^Common Sharesñ³^Common Sharesñ³^Additionalñ´^Number ofñ´^Paid-inñ´^Retainedñ´^Treasury ñµ^Shares ñµ^Amountñµ^Capitalñµ^Earnings ñµ^Shares ñµ^Total ñ·'Balance December 31, 1997 ñ·"12,753 ñ·"$ 128ñ·"$ 79,778ñ·"$ 5,787ñ·"($ 5,433)ñ·"$ 80,260ñ¹'Net income ñ¹"-- ñ¹"-- ñ¹"-- ñ¹"5,636 ñ¹"-- ñ¹"5,636>ñº'Issuance of treasury shares - exercise of stock options ñº"-- ñº"-- ñº"(685) ñº"-- ñº"2,184 ñº"1,499Eñ»'Issuance of treasury shares - Associate Stock Purchase Program ñ»"-- ñ»"-- ñ»"(34) ñ»"-- ñ»"315 ñ»"281;ñ¼'Issuance of treasury shares - acquisition of Mercury ñ¼"-- ñ¼"-- ñ¼"(604) ñ¼"-- ñ¼"2,427 ñ¼"1,823:ñ½'Issuance of treasury shares - associate stock bonus ñ½"-- ñ½"-- ñ½"-- ñ½"-- ñ½"175 ñ½"175ñ¾'Purchase treasury shares ñ¾"-- ñ¾"-- ñ¾"-- ñ¾"--ñ¾"(20,000)ñ¾"(20,000) ñÁ'Balance December 31, 1998 ñÁ"12,753 ñÁ"128 ñÁ"78,455 ñÁ"11,423ñÁ"(20,332) ñÁ"69,674ñÃ'Net income ñÃ"-- ñÃ"-- ñÃ"-- ñÃ"3,784 ñÃ"-- ñÃ"3,784EñÄ'Issuance of treasury shares - Associate Stock Purchase Program ñÄ"-- ñÄ"-- ñÄ"(273) ñÄ"-- ñÄ"566 ñÄ"293 ñÇ'Balance December 31, 1999 ñÇ"12,753 ñÇ"128ñÇ"$ 78,182ñÇ"$ 15,207ñÇ"($19,766)ñÇ"$ 73,751ñÉ'Net Income ñÉ"-- ñÉ"-- ñÉ"-- ñÉ"7,255 ñÉ"-- ñÉ"7,255"ñÊ'Purchase of treasury shares ñÊ"-- ñÊ"-- ñÊ"-- ñÊ"--ñÊ"(2,418)ñÊ"(2,418)BñË'Issuance treasury shares - Associate Stock Purchase Program ñË"-- ñË"-- ñË"(348) ñË"-- ñË"542 ñË"194<ñÌ'Issuance treasury shares - Director Compensation Plan ñÌ"-- ñÌ"-- ñÌ"(132) ñÌ"-- ñÌ"195 ñÌ"63 ñÎ'Balance December 31, 2000 ñÎ"12,753 ñÎ"$ 128ñÎ"$ 77,702ñÎ"$ 22,462ñÎ"($21,447)ñÎ"$ 78,845