¡/2ÿñH2d 1$&%*ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿñ'AIRNET SYSTEMS, INC.,ñ'CONDENSED CONSOLIDATED BALANCE SHEETS&ñ'In thousands, except share datañ^JUNE 30,ñ^DECEMBER 31, ñ^2000 ñ^1999 ñ'ASSETSñ^(UNAUDITED)ñ'Current assets:!ñ'Cash and cash equivalents ñ"$1,664 ñ"$1,667ñ'Accounts receivable:ñ 'Trade, less allowances ñ "16,261 ñ "14,919/ñ 'Shareholders, affiliates, and associates ñ "337 ñ "154 ñ 'Inventory and spare parts ñ "7,058 ñ "10,426ñ 'Taxes refundable ñ "1,551 ñ "2,382ñ 'Deferred taxes ñ "1,286 ñ "934ñ'Deposits and prepaids ñ"1,608 ñ"1,733ñ"-------------------ñ"------------------ñ'Total current assets ñ"29,765 ñ"32,215!ñ'Net property and equipment ñ"83,739 ñ"84,733ñ'Other assets:0ñ'Goodwill, net of accumulated amortization ñ"7,746 ñ"7,9209ñ'Other intangibles, net of accumulated amortization ñ"318 ñ"375+ñ'Investment in partnerships and other ñ"1,967 ñ"2,234ñ"-------------------ñ"------------------ñ'TOTAL ASSETSñ"$123,535ñ"$127,477ñ"===================ñ"==================+ñ'LIABILITIES AND SHAREHOLDERS' EQUITYñ'Current liabilities:ñ'Accounts payable ñ"$4,989 ñ"$5,203'ñ'Salaries and related liabilities ñ"4,230 ñ"2,792ñ 'Accrued expenses ñ "1,846 ñ "1,206ñ!'Deferred taxes ñ!"46 ñ!"196'ñ"'Current portion of notes payable ñ""29 ñ""29ñ#"-------------------ñ#"------------------ ñ$'Total current liabilities ñ$"11,140 ñ$"9,426*ñ&'Notes payable, less current portion ñ&"26,205 ñ&"33,919ñ''Deferred tax liability ñ'"11,398 ñ'"10,381ñ)'Shareholders' equity::ñ+'Preferred shares, $.01 par value; 10,000,000 shares7ñ,'authorized; and no shares issued and outstandingñ,"-ñ,"-Cñ-'Common shares, $.01 par value; 40,000,000 shares authorized;5ñ.'and 12,753,000 shares issued at June 30, 2000ñ/'and December 31, 1999 ñ/"128 ñ/"128!ñ0'Additional paid-in-capital ñ0"78,006 ñ0"78,182ñ1'Retained earnings ñ1"18,548 ñ1"15,207Cñ2'Treasury shares, 1,870,000 and 1,343,000 shares held at cost;ñ3'at June 30, 2000 and December 31, 1999, respectivelyñ3"(21,890)ñ3"(19,766)ñ4"-------------------ñ4"------------------!ñ5'Total shareholders' equity ñ5"74,792 ñ5"73,751ñ6"-------------------ñ6"------------------1ñ7'TOTAL LIABILITIES AND SHAREHOLDERS' EQUITYñ7"$123,535ñ7"$127,477ñ8"===================ñ8"==================?ñ9'See notes to condensed consolidated financial statementsñ;'AIRNET SYSTEMS, INC.ñ<'CONDENSED CONSOLIDATED +ñ='STATEMENTS OF OPERATIONS - Unaudited*ñ>'In thousands, except per share datañ?^THREE MONTHSñ?^THREE MONTHSñ?^SIX MONTHSñ?^SIX MONTHS ñ@^ ENDED ñ@^ ENDED ñ@^ ENDED ñ@^ ENDEDñA^JUNE 30,ñA^JUNE 30,ñA^JUNE 30,ñA^JUNE 30, ñB^2000 ñB^1999 ñB^2000 ñB^1999ñC'NET REVENUES,ñD'Air transportation, net of excise taxñE'Bank deliveryñE"$25,825ñE"$25,104ñE"$50,905ñE"$49,534ñF'Express delivery ñF"8,874 ñF"6,291 ñF"17,298 ñF"12,183&ñG'Fixed base and other operations ñG"126 ñG"371 ñG"296 ñG"571ñH"---------------ñH"---------------ñH"--------------ñH"--------------ñI'TOTAL NET REVENUES ñI"34,825 ñI"31,766 ñI"68,499 ñI"62,288ñK'COSTS AND EXPENSESñL'Air transportation ñL"26,210 ñL"23,391 ñL"52,719 ñL"46,394ñM'Fixed base operations ñM"335 ñM"307 ñM"616 ñM"562*ñN'Selling, general and administrative ñN"4,415 ñN"3,770 ñN"8,384 ñN"7,524ñO"---------------ñO"---------------ñO"--------------ñO"--------------ñP'TOTAL COSTS AND EXPENSES ñP"30,960 ñP"27,468 ñP"61,719 ñP"54,480ñQ"---------------ñQ"---------------ñQ"--------------ñQ"--------------ñR'Income from operations ñR"3,865 ñR"4,298 ñR"6,780 ñR"7,808ñS'Interest expense ñS"590 ñS"597 ñS"1,216 ñS"1,219ñT"---------------ñT"---------------ñT"--------------ñT"--------------!ñU'Income before income taxes ñU"3,275 ñU"3,701 ñU"5,564 ñU"6,589!ñV'Provision for income taxes ñV"1,309 ñV"1,517 ñV"2,224 ñV"2,691ñW"---------------ñW"---------------ñW"--------------ñW"--------------+ñX'INCOME BEFORE CUMULATIVE EFFECT OF A%ñY'CHANGE IN ACCOUNTING PRINCIPLE ñY"1,966 ñY"2,184 ñY"3,340 ñY"3,8980ñ['Cumulative effect of writing off start-upñ\'costs, net of taxñ\"-ñ\"-ñ\"-ñ\"(2,488)ñ^"---------------ñ^"---------------ñ^"--------------ñ^"--------------ñ_'NET INCOME ñ_"$1,966 ñ_"$2,184 ñ_"$3,340 ñ_"$1,410ñ`"===============ñ`"===============ñ`"==============ñ`"==============<ñb'Income per common share - basic and assuming dilution+ñc'Income before cumulative effect of a%ñd'change in accounting principle ñd"$0.18 ñd"$0.19 ñd"$0.30 ñd"$0.34'ñe'Cumulative effect of writing offñf'start-up costsñf"-ñf"-ñf"- ñf"(0.22)ñg"---------------ñg"---------------ñg"--------------ñg"--------------ñh'Net income ñh"$0.18 ñh"$0.19 ñh"$0.30 ñh"$0.12ñi"===============ñi"===============ñi"==============ñi"==============?ñk'See notes to condensed consolidated financial statementsñm'AIRNET SYSTEMS, INC.ñn'CONDENSED CONSOLIDATED +ño'STATEMENTS OF CASH FLOWS - Unauditedñp'In thousandsñp^SIX MONTHSñp^SIX MONTHS  ñq^ ENDED ñq^ENDEDñr^JUNE 30,ñr^JUNE 30, ñs^2000 ñs^1999ñt'OPERATING ACTIVITIES:ñu'Net income ñu"$3,340 ñu"$1,4106ñv'Adjustments to reconcile net income to net cash2ñw'provided by (used in) operating activities:6ñx'Cumulative effect of writing off start-up costsñx"- ñx"2,488ñy'Depreciation ñy"6,951 ñy"5,443"ñz'Amortization of intangibles ñz"263 ñz"437ñ{'Deferred taxes ñ{"516 ñ{"(721)2ñ|'Provision for losses on accounts receivable ñ|"88 ñ|"90$ñ}'Loss on disposition of assets ñ}"80 ñ}"22Cñ~'Cash provided by (used in) operating assets and liabilities:ñ'Accounts receivableñ"(1,613)ñ"(3,729) ñ€'Inventory and spare parts ñ€"3,368ñ€"(1,146)ñ'Prepaid expenses ñ"125 ñ"410ñ‚'Accounts payable ñ‚"(214) ñ‚"(878)ñƒ'Accrued expenses ñƒ"640ñƒ"(2,159)ñ„'Taxes payable ñ„"831 ñ„"2,689'ñ…'Salaries and related liabilities ñ…"1,438 ñ…"1,012ñ†'Other, net ñ†"250 ñ†"82ñ‡"---------------ñ‡"--------------0ñˆ'NET CASH PROVIDED BY OPERATING ACTIVITIES ñˆ"16,063 ñˆ"5,450ñŠ'INVESTING ACTIVITIES:*ñ‹'Purchases of property and equipmentñ‹"(6,049)ñ‹"(8,347)-ñŒ'Payments for covenants not to compete ñŒ"(15) ñŒ"(143)4ñ'Proceeds from sales of property and equipment ñ"12ñ"-ñŽ"---------------ñŽ"--------------,ñ'NET CASH USED IN INVESTING ACTIVITIESñ"(6,052)ñ"(8,490)ñ‘'FINANCING ACTIVITIES:7ñ’'Proceeds from 1996 Incentive Stock Plan programs ñ’"119 ñ’"135Fñ“'Net borrowings (repayments) under the revolving credit facilityñ“"(7,700) ñ“"3,400"ñ”'Repayment of long-term debt ñ”"(14) ñ”"(13)"ñ•'Purchase of treasury sharesñ•"(2,419)ñ•"-ñ–"---------------ñ–"--------------:ñ—'NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIESñ—"(10,014) ñ—"3,522ñ˜"---------------ñ˜"--------------&ñš'Net increase (decrease) in cash ñš"(3) ñš"4827ñ›'Cash and cash equivalents at beginning of period ñ›"1,667 ñ›"1,142ñ"---------------ñ"--------------1ñž'CASH AND CASH EQUIVALENTS AT END OF PERIOD ñž"$1,664 ñž"$1,624ñŸ"===============ñŸ"==============?ñ¡'See notes to condensed consolidated financial statements