/2H-d 1$&%*'AIRNET SYSTEMS, INC.,'CONDENSED CONSOLIDATED BALANCE SHEETS&'In thousands, except share data ' ^SEPTEMBER 30, ^ DECEMBER 31, ^2000 ^1999 'ASSETS^(UNAUDITED)'Current assets: 'Cash and cash equivalents "$3,064 "$1,667'Accounts receivable: 'Trade, less allowances  "17,036  "14,919/ 'Shareholders, affiliates, and associates  "136  "154 'Inventory and spare parts  "9,543  "10,426 'Taxes refundable  "614  "2,382 'Deferred taxes  "631  "934'Deposits and prepaids "1,782 "1,733"----------------"---------------'Total current assets "32,806 "32,215!'Net property and equipment "83,206 "84,733'Other assets:0'Goodwill, net of accumulated amortization "7,659 "7,9209'Other intangibles, net of accumulated amortization "295 "375+'Investment in partnerships and other "1,884 "2,234"----------------"---------------'Total assets"$125,850"$127,477"================"===============+'LIABILITIES AND SHAREHOLDERS' EQUITY'Current liabilities:'Accounts payable "$5,176 "$5,203''Salaries and related liabilities "3,306 "2,792 'Accrued expenses  "2,469  "1,206!'Deferred taxes !"243 !"196'"'Current portion of notes payable ""29 ""29#"----------------#"--------------- $'Total current liabilities $"11,223 $"9,426*&'Notes payable, less current portion &"27,397 &"33,919''Deferred tax liability '"10,425 '"10,381)'Shareholders' equity::*'Preferred shares, $.01 par value; 10,000,000 shares7+'authorized; and no shares issued and outstanding+"-+"-C,'Common shares, $.01 par value; 40,000,000 shares authorized;:-'and 12,753,000 shares issued at September 30, 2000.'and December 31, 1999 ."128 ."128!/'Additional paid-in-capital /"77,909 /"78,1820'Retained earnings 0"20,518 0"15,207C1'Treasury shares, 1,861,000 and 1,343,000 shares held at cost@2'at September 30, 2000 and December 31, 1999, respectively2"(21,750)2"(19,766)3"----------------3"---------------!4'Total shareholders' equity 4"76,805 4"73,7516"----------------6"---------------17'TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY7"$125,8507"$127,4778"================8"===============?:'See notes to condensed consolidated financial statements<'AIRNET SYSTEMS, INC.='CONDENSED CONSOLIDATED +>'STATEMENTS OF OPERATIONS - Unaudited*?'In thousands, except per share data@^THREE MONTHS ENDED@^THREE MONTHS ENDED@^NINE MONTHS ENDED@^NINE MONTHS ENDEDA^SEPTEMBER 30A^SEPTEMBER 31A^SEPTEMBER 30,A^SEPTEMBER 30, B^2000 B^1999 B^2000 B^1999C'NET REVENUES,D'Air transportation, net of excise taxE'Bank deliveryE"$24,809E"$24,980E"$75,714E"$74,514F'Express delivery F"8,794 F"8,321 F"26,092 F"20,504&G'Fixed base and other operations G"172 G"237 G"468 G"809H"------------H"------------H"------------H"------------I'TOTAL NET REVENUES I"33,775 I"33,538I"102,274 I"95,827K'COSTS AND EXPENSESL'Air transportationM'Wages and benefits M"4,105 M"4,397 M"13,493 M"12,337N'Aircraft fuel N"2,868 N"3,153 N"8,615 N"8,425O'Aircraft maintenance O"2,372 O"1,742 O"6,905 O"5,876+P'Ground couriers and outside services P"7,251 P"6,693 P"21,030 P"18,260Q'Depreciation Q"3,364 Q"2,962 Q"10,250 Q"8,336R'Other operating R"6,037 R"6,630 R"18,423 R"18,738S'Fixed base operations S"212 S"288 S"827 S"851*T'Selling, general and administrative T"3,719 T"5,408 T"12,104 T"12,931U"------------U"------------U"------------U"------------V'TOTAL COSTS AND EXPENSES V"29,928 V"31,273 V"91,647 V"85,754W"------------W"------------W"------------W"------------X'Income from operations X"3,847 X"2,265 X"10,627 X"10,073Y'Interest expense Y"563 Y"582 Y"1,779 Y"1,801Z"------------Z"------------Z"------------Z"------------!['Income before income taxes ["3,284 ["1,683 ["8,848 ["8,272!\'Provision for income taxes \"1,313 \"690 \"3,536 \"3,381]"------------]"------------]"------------]"------------+^'INCOME BEFORE CUMULATIVE EFFECT OF A%_'CHANGE IN ACCOUNTING PRINCIPLE _"1,971 _"993 _"5,312 _"4,8910a'Cumulative effect of writing off start-upb'costs, net of taxb"-b"-b"-b"(2,488)d"------------d"------------d"------------d"------------e'NET INCOME e"$1,971 e"$993 e"$5,312 e"$2,403f"============f"============f"============f"============*h'Income per common share - basic andi'assuming dilution+j'Income before cumulative effect of a%k'change in accounting principle k"$0.18 k"$0.09 k"$0.48 k"$0.43'l'Cumulative effect of writing offm'start-up costsm"-m"-m"- m"(0.22)n"------------n"------------n"------------n"------------o'Net income o"$0.18 o"$0.09 o"$0.48 o"$0.21p"============p"============p"============p"============?r'See notes to condensed consolidated financial statementst'AIRNET SYSTEMS, INC.u'CONDENSED CONSOLIDATED,v' STATEMENTS OF CASH FLOWS - Unauditedw'In thousandsx^NINE MONTHS ENDEDx^NINE MONTHS ENDEDy^SEPTEMBER 30,y^SEPTEMBER 30, z^2000 z^1999{'OPERATING ACTIVITIES:|'Net income |"$5,312 |"$2,4036}'Adjustments to reconcile net income to net cash2~'provided by (used in) operating activities:6'Cumulative effect of writing off start-up costs"- "2,488'Depreciation "10,349 "8,438"'Amortization of intangibles "394 "658'Deferred taxes "394 "(728)2'Provision for losses on accounts receivable "127 "285$'Loss on disposition of assets "83 "32C'Cash provided by (used in) operating assets and liabilities:'Accounts receivable"(2,225)"(3,555) 'Inventory and spare parts "883"(1,435)'Prepaid expenses "(49) "596'Accounts payable "(27) "276'Accrued expenses "1,262"(1,742)'Taxes refundable "1,768 "3,359''Salaries and related liabilities "514 "1,602'Other, net "311 "77"------------"------------0'Net cash provided by operating activities "19,096 "12,754'INVESTING ACTIVITIES:*'Purchases of property and equipment"(9,288)"(13,750)-'Payments for covenants not to compete "(15) "(170)4'Proceeds from sales of property and equipment "382 "12"------------"------------,'NET CASH USED IN INVESTING ACTIVITIES"(8,921)"(13,908)'FINANCING ACTIVITIES:7'Proceeds from 1996 Incentive Stock Plan programs "162 "218F'Net borrowings (repayments) under the revolving credit facility"(6,500) "900"'Repayment of long-term debt "(22) "(20)"'Purchase of treasury shares"(2,418)"-"------------"------------:'NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES"(8,778) "1,098"------------"------------&'Net increase (decrease) in cash "1,397 "(56)7'Cash and cash equivalents at beginning of period "1,667 "1,142"------------"------------1'CASH AND CASH EQUIVALENTS AT END OF PERIOD "$3,064 "$1,086"============"============?'See notes to condensed consolidated financial statements