UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
|
|
|
|
|
Date of Report (Date of earliest event reported):
|
|
November 17, 2006
|
|
|
|
(November 10, 2006)
|
AIRNET SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
|
|
|
|
|
|
|
Ohio
|
|
1-13025
|
|
31-1458309
|
|
(State or other jurisdiction of
|
|
(Commission File Number)
|
|
(IRS Employer Identification No.)
|
|
incorporation)
|
|
|
|
|
7250 Star Check Drive, Columbus, Ohio 43217
(Address of principal executive offices) (Zip Code)
(614) 409-4900
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address,
if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. Entry into a Material Definitive Agreement
As previously disclosed in “ITEM 5 – Other Information” of Part II of the Quarterly Report on Form
10-Q for the quarterly period ended September 30, 2006 (the “September 30, 2006 Form 10-Q”) of
AirNet Systems, Inc. (“AirNet”), as a result of the $24.6 million non-cash impairment charge
recorded as of September 30, 2006 (which is described in Note 2 of the Notes to Condensed
Consolidated Financial Statements (Unaudited) included in “ITEM 1 – Financial Statements” of Part I
of the September 30, 2006 Form 10-Q), AirNet was not in compliance with certain terms of the
Amended and Restated Credit Agreement, dated as of May 28, 2004, as previously amended by the
Change in Terms Agreement, effective as of November 12, 2004, the Second Change in Terms Agreement,
effective as of March 24, 2005, the Third Change in Terms Agreement, effective as of November 10,
2005 and the Fourth Change in Terms Agreement, effective as of March 28, 2006 (collectively, the
“Amended Credit Agreement”), including the fixed charge coverage ratio and the leverage ratio
calculated as of September 30, 2006, and AirNet would not have been in compliance with the minimum
consolidated tangible net worth requirement as of December 31, 2006.
On November 10, 2006, AirNet and its lenders under the Amended Credit Agreement agreed to modify
the terms and conditions of the Amended Credit Agreement pursuant to a Fifth Change in Terms
Agreement. The Fifth Change in Terms Agreement modified the fixed charge coverage ratio, the
leverage ratio, and the minimum consolidated tangible net worth financial covenants in such a
manner that, on a going-forward basis, the impairment charge recorded as of September 30, 2006 (the
“September 2006 impairment charge”), in and of itself, would not cause a default of these financial
covenants in the future. The Fifth Change in Terms Agreement also reduced the amount of the
secured revolving credit facility under the Amended Credit Agreement from $25 million to $15
million. The foregoing description of the Fifth Change in Terms Agreement is qualified by
reference to the full text of the Fifth Change in Terms Agreement, a copy of which is filed with
this Current Report on Form 8-K as Exhibit 4.1. At the same time as the Fifth Change of Terms
Agreement was entered into, AirNet and its lenders executed a waiver of any defaults or potential
defaults under the Amended Credit Agreement which occurred, or may have occurred, as a result of
AirNet’s failure to comply with the foregoing covenants due to the September 2006 impairment
charge. A copy of the waiver letter is filed with this Current Report on Form 8-K as Exhibit 4.2.
Item 2.02. Results of Operations and Financial Condition
.
On November 14, 2006, AirNet issued a news release reporting results for the three and nine
months ended September 30, 2006. The November 14, 2006 news release is furnished herewith as
Exhibit 99.1 and is incorporated herein by reference.
Item 7.01. Regulation FD Disclosure.
On November 14, 2006, AirNet issued a news release reporting results for the three and nine
months ended September 30, 2006. The November 14, 2006 news release is furnished herewith as
Exhibit 99.1 and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(a) through (c): Not Applicable
2
(d)
Exhibits
: The following exhibits are included with this Current Report on Form 8-K:
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
4.1
|
|
Fifth Change in Terms Agreement, effective as of November 10,
2006, by and between AirNet Systems, Inc. and The Huntington
National Bank, in its capacity as administrative agent for and
on behalf of the lenders from time to time party to the Amended
and Restated Credit Agreement dated as of May 28, 2004, as
amended
|
|
|
|
|
|
4.2
|
|
Waiver Letter, dated as of November 10, 2006, by and between
AirNet Systems, Inc. and The Huntington National Bank, in its
capacity as administrative agent for and on behalf of the
lenders from time to time party to the Amended and Restated
Credit Agreement dated as of May 28, 2004, as amended
|
|
|
|
|
|
99.1
|
|
News Release issued by AirNet Systems, Inc. on November 14, 2006
|
[Remainder of page intentionally left blank;
signature on following page]
3
SIGNATURE
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 hereunto duly authorized.
|
|
|
|
|
|
|
|
|
AIRNET SYSTEMS, INC.
|
|
|
|
|
|
|
|
Dated: November 17, 2006
|
|
By:
|
|
/s/ Gary W. Qualmann
|
|
|
|
|
|
|
|
|
|
|
|
Gary W. Qualmann
|
|
|
|
|
|
Chief Financial Officer,
|
|
|
|
|
|
Treasurer and Secretary
|
4
Exhibit 4.1
FIFTH CHANGE IN TERMS AGREEMENT
THIS FIFTH CHANGE IN TERMS AGREEMENT (this “Change in Terms”), is made and entered into
effective as of November 10, 2006, by and between AirNet Systems, Inc., an Ohio corporation
(“Borrower”) and The Huntington National Bank, a national banking association, with a banking
office at 41 South High Street, Columbus, Ohio 43215, in its capacity as administrative agent
(“Agent”) for and on behalf of the Lenders from time to time party to the Credit Agreement
described below. Each capitalized term used but not otherwise defined herein shall have the meaning
ascribed to it in the Credit Agreement.
BACKGROUND INFORMATION
A. Pursuant to the Amended and Restated Credit Agreement dated as of May 28, 2004 (as
amended by the First Change in Terms, the Second Change in Terms, the Third Change in Terms, and
the Fourth Change in Terms, and as the same may be further amended, modified, supplemented,
extended, restated or replaced from time to time, the “Credit Agreement”) among Borrower, the
Lenders, and the Agent, the Lenders agreed to provide certain credit facilities to the Borrower
(collectively, the “Loans”).
B. Borrower and Agent entered into a certain Change in Terms Agreement dated November 12,
2004, pursuant to which certain terms and provisions of the Credit Agreement were modified (the
“First Change in Terms”).
C. Borrower and Agent entered into a certain Second Change in Terms Agreement dated March 24,
2005, pursuant to which certain terms and provisions of the Credit Agreement were further modified
(the “Second Change in Terms”).
D. Borrower and Agent entered into a certain Third Change in Terms Agreement dated November
21, 2005, pursuant to which certain terms and provisions of the Credit Agreement were further
modified (the “Third Change in Terms”).
E. Borrower and Agent entered into a certain Fourth Change in Terms Agreement dated March 28,
2006, pursuant to which certain terms and provisions of the Credit Agreement were further modified
(the “Fourth Change in Terms”).
F. Borrower, having failed to comply with the financial covenants required pursuant to Section
6.24 of the Credit Agreement, has requested that Agent waive the Default existing under the Credit
Agreement as a result of Borrower’s failure to maintain such financial covenants, and acting upon
the authority of the Required Lenders, Agent has agreed to do so on certain conditions, including
without limitation, that Borrower enter into this Change in Terms.
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, Agent
and Borrower hereby agree as follows:
1.
Change in Terms
. The Credit Agreement, and, to the extent applicable, the other Loan
Documents, are hereby modified to provide as follows:
(a) The definition of “
Consolidated EBIT
,” as set forth in Section 1.1 of the
Credit Agreement, is hereby revised and replaced in its entirety by the following:
“
Consolidated EBIT
” means, with respect to any period, Consolidated
Net Income
plus
, (a) to the extent deducted from revenues in determining
Consolidated Net Income, (i) Consolidated Interest Expense, (ii) income tax
expense, calculated for the Borrower and its Subsidiaries on a consolidated
basis, and (iii) extraordinary losses (determined in accordance with
Agreement Accounting Principles) incurred other than in the ordinary course
of business, calculated for the Borrower and its Subsidiaries on a
consolidated basis,
plus
(b) for the fiscal quarter ending September 30,
2006 only, an amount equal to $24,560,000.00 (which reflects the non-cash
impairment charge recognized by Borrower in the fiscal quarter ending
September 30, 2006),
minus,
to the extent included in Consolidated Net
Income, extraordinary gains (determined in accordance with Agreement
Accounting Principles) realized other than in the ordinary course of
business, calculated for the Borrower and its Subsidiaries on a consolidated
basis.
(b) The definition of “
Consolidated EBITDA
,” as set forth in Section 1.1 of the
Credit Agreement, is hereby revised and replaced in its entirety by the following:
“
Consolidated EBITDA
” means with respect to any period, Consolidated
Net Income
plus
, (a) to the extent deducted from revenues in determining
Consolidated Net Income, (i) Consolidated Interest Expense, (ii) income tax
expense, calculated for the Borrower and its Subsidiaries on a consolidated
basis, (iii) depreciation, calculated for the Borrower and its Subsidiaries
on a consolidated basis, (iv) amortization, calculated for the Borrower and
its Subsidiaries on a consolidated basis; and (v) extraordinary losses
(determined in accordance with Agreement Accounting Principles) incurred
other than in the ordinary course of business, calculated for the Borrower
and its Subsidiaries on a consolidated basis,
plus
(b) for the fiscal
quarter ending September 30, 2006 only, an amount equal to $24,560,000.00
(which reflects the non-cash impairment charge recognized by Borrower in the
fiscal quarter ending September 30, 2006),
minus,
to the extent included in
Consolidated Net Income, extraordinary gains (determined in accordance with
Agreement Accounting Principles) realized other than in the ordinary course
of business, calculated for the Borrower and its Subsidiaries on a
consolidated basis.
(c) The Aggregate Revolving Commitment is hereby reduced to $15,000,000, and, as a
result of the foregoing reduction, (i) the Revolving Commitment of HNB shall hereafter be
$9,375,000, (ii) the Revolving Commitment of JPMorgan Chase Bank, N.A., successor by merger
to Bank One, N.A. (Main Office Columbus) shall hereafter be $5,625,000, and (iii) the
amounts set forth on the signature pages to the Credit Agreement shall be replaced with the
foregoing amounts.
(d) Section 6.24.3 of the Credit Agreement is hereby revised and replaced in its
entirety by the following:
“Section 6.24.3
Minimum Tangible Net Worth
. The Borrower will at all
times maintain Consolidated Tangible Net Worth of not less than (i) as of
Borrower’s fiscal year-end 2006, $30,000,000.00, and (ii) as of the last day
of each of Borrower’s fiscal years thereafter, that amount which is equal to
the sum of the minimum Consolidated Tangible Net Worth required to be
maintained by Borrower in accordance with this Section as of the last day of
Borrower’s prior fiscal year, and 50% of Consolidated Net Income for such
prior fiscal year; provided that if such Consolidated Net Income is negative
in any fiscal year, the amount added in the subsequent fiscal year shall be
zero.
(e) The Borrower has, with the consent of Agent and the Lenders, changed the name of
its Subsidiary, Jetride, Inc., an Ohio corporation (“Jetride”), to 7250 STARCHECK, INC.
Each reference in the Loan Documents to Jetride shall mean 7250 STARCHECK, INC., an Ohio
corporation formerly known as Jetride, Inc., and the obligations of such entity under the
Loan Documents, including without limitation,
the Subsidiary Guaranty and the Security Agreements, as applicable, shall continue in
full force and effect notwithstanding said name change.
2.
Truth of Representations and Warranties; No Defaults
. Borrower hereby represents
and warrants that the following are true and correct as of the date of this Change in Terms:
(a) After giving effect to that certain letter agreement (herein, the “Waiver”) dated
of even date herewith by and among Borrower, the Guarantors and Agent and the waiver
provided therein, the representations and warranties of Borrower and the Guarantors
contained in the Loan Documents to which each is a party are true and correct on and as of
the date of this Change in Terms as if made on and as of such date, unless stated to relate
to a specific earlier date;
(b) No event or condition exists which constitutes a breach, Default or Unmatured
Default under the Loan Documents;
(c) All financial information heretofore provided to Agent and/or the Lenders in
connection with the indebtedness made pursuant to the Loan Documents is true, accurate and
complete in all material respects;
(d) Neither this Change in Terms nor any other document, certificate or written
statement furnished to Agent and/or the Lenders in connection with the indebtedness
evidenced and secured by the Loan Documents contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements contained herein
and therein not misleading;
(e) Borrower and the Guarantors have full power and authority (i) to execute, deliver
and perform, or to acknowledge and agree to the terms and provisions of, this Change in
Terms, as applicable, and (ii) to incur the obligations provided for herein, all of which
have been duly authorized by all necessary and proper corporate and limited liability
company action, as applicable;
(f) No consent, waiver or authorization of, or filing with, any person or any
governmental authority is required to be made or obtained by Borrower or the Guarantors in
connection with the borrowings under the Loan Documents, or the execution, delivery,
performance, validity or enforceability of this Change in Terms;
(g) This Change in Terms and the Loan Documents constitute the legal, valid and binding
obligation of Borrower and the Guarantors enforceable against them in accordance with the
terms hereof and thereof, as applicable; and
(h) The execution and delivery by Borrower and the Guarantors of this Change in Terms
and the performance by Borrower and the Guarantors of the Loan Documents to which each is a
party, as modified by this Change in Terms and by the Waiver: (i) do not and will not
violate any law or regulation; (ii) do not and will not violate any order, decree or
judgment by which Borrower or the Guarantors, as applicable, are bound; (iii) do not and
will not violate or conflict with, result in a breach of or constitute (with notice, lapse
of time, or otherwise) a default under any material agreement, mortgage, indenture or other
contractual obligation to which Borrower or any of the Guarantors is a party, or by which
Borrower’s or any of the Guarantors’ properties are bound; and (iv) do not and will not
result in the creation or imposition of any lien upon any property or assets of Borrower or
any of the Guarantors.
3.
Ratification of Loan Documents
. This Change in Terms constitutes only a
modification of the Credit Agreement and the other Loan Documents and Borrower hereby acknowledges,
ratifies and confirms all of the provisions thereof, except as herein expressly modified, including
provision for the acceleration of the maturity of the Loans, and for the enforcement by Agent
and/or the Lenders of all remedies any of them may have according to law. In addition, Borrower
acknowledges, ratifies and confirms any and all security interests previously granted in connection
with the Loans as continuing in full force and effect.
4.
No Course of Dealing; Waiver
. Borrower expressly acknowledges and agrees that the
execution of this Change in Terms shall not constitute a waiver of, and shall not preclude the
exercise of, any right, power or remedy granted to Agent and/or the Lenders in the Loan Documents,
or as provided by law, except to the extent expressly provided herein. No previous modification,
extension or compromise entered into with respect to any indebtedness of Borrower to Agent and/or
the Lenders shall constitute a course of dealing or be inferred or construed as constituting an
express or implied understanding to enter into any future modification, extension or compromise,
whether or not the same was in writing. No past, present or future delay on the part of Agent
and/or any Lender in exercising any right, power or remedy shall operate as a waiver thereof, or
otherwise prejudice Agent’s or any Lender’s rights, powers or remedies.
5.
Promise to Pay
. Borrower hereby covenants and promises to pay to the order of
Agent, the unpaid principal balance of the Loans, together with interest as provided in the Credit
Agreement and the other Loan Documents, and hereby promises to perform all of the covenants,
conditions, stipulations and agreements as contained in the Loan Documents and in any other
document or instrument executed in connection therewith or referencing the same (as modified by
this Change in Terms).
6.
Setoffs, Claims and Defenses
. Borrower hereby certifies that, as of the date
hereof, it has no setoffs, counter-claims or other defenses of any nature whatsoever to the payment
of any part of the obligations owed to Agent and/or any Lender as of the date of execution of this
Change in Terms.
7.
Governing Law
. This Change in Terms shall be interpreted and construed in
accordance with and governed by the laws of the State of Ohio (without respect to conflict of law
principles). Further, the parties hereto intend that this Change in Terms shall be in compliance
with all applicable laws and shall be enforceable in accordance with its terms. If any provision
of this Change in Terms shall be illegal or unenforceable with respect to the Loan Documents, such
provision shall be deemed cancelled to the extent necessary, but the remaining provisions shall not
be affected hereby.
8.
Further Assurances
. Borrower and the Guarantors further agree to execute and
deliver any and all further documents and to take any and all other steps or actions reasonably
deemed necessary by Agent to effectuate this Change in Terms.
9.
Affirmation of Other Obligors
. Upon the request of Agent, Borrower shall obtain
the acknowledgment and acceptance by each other party obligated in any way with respect to the
Loans or otherwise in connection with the credit extended pursuant to the Credit Agreement,
including, without limitation, the Guarantors and any other guarantor, co-borrower, pledgor or
other accommodation party or party granting collateral security for the Loans and other obligations
under the Loan Documents and otherwise, that the obligations and agreements of each such party to
the Lenders and/or the Agent under the Loan Documents, as applicable, or otherwise, shall continue
in full force and effect with respect to the indebtedness evidenced and secured by the Loan
Documents, irrespective of any modification made in this Change in Terms, which acknowledgement and
acceptance shall be in a writing executed by each such party and satisfactory to Agent.
10.
Acknowledgment by Lenders
. This Change in Terms shall only be effective upon the
acknowledgment, consent and acceptance by the Required Lenders, which acknowledgement, consent and
acceptance shall be evidenced by execution of this Change in Terms by Lenders constituting the
Required Lenders.
11.
Successors and Assigns
. This Change in Terms shall be binding upon the parties
hereto and their respective successors and assigns, and shall inure to the benefit of Agent and its
successors and assigns.
12.
Costs and Expenses
. Borrower also agrees to reimburse Agent for all costs and
expenses incurred in the preparation, execution and delivery of this Change in Terms, including
reasonable attorneys’ fees.
13.
Titles and Headings
. The titles and headings herein are intended to promote
convenience and are not a part of this Change in Terms for purposes of interpreting and applying
the provisions hereof.
14.
Counterparts
. This Change in Terms may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any of the parties hereto may
execute this Change in Terms by signing any such counterpart. This Change in Terms shall be
effective when it has been executed by Borrower, Agent, the Required Lenders and the Guarantors.
15.
WAIVER OF JURY TRIAL
. BORROWER, GUARANTORS AND AGENT HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS CHANGE IN
TERMS OR ANY OF THE LOAN DOCUMENTS OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
16.
Confession of Judgment
. Borrower and each Guarantor hereby irrevocably authorize
any attorney-at-law, including any attorney-at-law employed or retained by Agent to appear for it
in any action on this Change in Terms or any of the Loan Documents at any time after the same
becomes due as herein or therein provided in any court of record situated in the county where this
warrant was signed (being Franklin County, Ohio), or in the county where each Borrower or such
Guarantor, as the case may be, then resides or can be found, to waive the issuing and service of
process, and confess a judgment in favor of the holder of this Change in Terms and any such Loan
Documents against Borrower and/or such Guarantor, as the case may be, for the amount that may then
be due, with interest at the rate(s) provided for herein, together with the costs of suit, and to
waive and release all errors in said proceedings and the right to appeal from the judgment
rendered. Borrower and each Guarantor consents to the jurisdiction and venue of such court.
Borrower and each Guarantor waive any conflict of interest that any attorney-at-law employed or
retained by Agent may have in confessing judgment hereunder and consents to the payment of a legal
fee to any attorney-at-law confessing judgment hereunder.
IN WITNESS WHEREOF, Borrower and Agent have caused this Change in Terms to be executed
effective as of the day and year first above written.
BORROWER:
AirNet Systems, Inc., an
Ohio corporation
|
|
|
|
|
|
By:
|
/s/ Joel E. Biggerstaff
|
|
|
|
Joel E. Biggerstaff, Chief Executive Officer
|
|
|
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
AGENT:
The Huntington National Bank,
a national banking association, as Agent
|
|
|
|
|
|
By:
|
/s/ John M. Luehmann
|
|
|
|
John M. Luehmann, Vice President
|
|
|
|
|
|
[acknowledgement of Lenders contained on next page]
ACKNOWLEDGMENT OF LENDERS
The undersigned Lenders hereby acknowledge, consent to, and accept all of the provisions of
the foregoing Change in Terms.
|
|
|
|
|
|
|
|
The Huntington National Bank,
a national banking association
|
|
|
|
By:
|
/s/ John M. Luehmann
|
|
|
|
|
John M. Luehmann, Vice President
|
|
|
|
|
|
|
|
|
|
|
JPMorgan Chase Bank, N.A., a national banking
association and successor by merger to Bank One,
N.A.
(Main Office Columbus)
|
|
|
|
By:
|
/s/ Warren Bebinger
|
|
|
|
|
Warren Bebinger, Senior Vice President
|
|
|
|
|
|
|
|
|
[signatures continue on following pages]
ACKNOWLEDGMENT OF GUARANTORS
The undersigned Guarantors hereby acknowledge, accept and agree to each of the provisions of
the foregoing Change in Terms and ratify and confirm that all of the provisions of the Loan
Documents to which each such Guarantor is a party, including, without limitation, the Subsidiary
Guaranty, the Fast Forward Guaranty, the Timexpress Guaranty, as applicable, and the Security
Agreements, and all obligations and liabilities of each such Guarantor in favor of Agent and/or the
Lenders thereunder and otherwise, and all liens, security and other interests granted thereby,
shall continue and remain in full force and effect, irrespective of any provision of the above
Change in Terms, the Waiver, or any other or future modification of the Loan Documents or the terms
of the credit extended, evidenced and secured thereby.
GUARANTORS:
7250 STARCHECK, INC.,
an Ohio corporation formerly known as Jetride, Inc.
|
|
|
|
|
|
By:
|
/s/ Joel E. Biggerstaff
|
|
|
|
Joel E. Biggerstaff, President
|
|
|
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
Float Control, Inc., a
Michigan corporation
|
|
|
|
|
|
By:
|
/s/ Joel E. Biggerstaff
|
|
|
|
Joel E. Biggerstaff, President
|
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
[signatures continue on following pages]
AirNet Management, Inc., an
Ohio corporation
|
|
|
|
|
|
By:
|
/s/ Joel E. Biggerstaff
|
|
|
|
Joel E. Biggerstaff, President
|
|
|
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
Fast Forward Solutions, LLC, an
Ohio limited liability company
|
|
|
|
|
|
By:
|
/s/ Joel E. Biggerstaff
|
|
|
|
Joel E. Biggerstaff, President
|
|
|
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
timexpress.com, inc. an
Ohio corporation
|
|
|
|
|
|
By:
|
/s/ Joel E. Biggerstaff
|
|
|
|
Joel E. Biggerstaff, President
|
|
|
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
Exhibit 4.2
November 10, 2006
Joel E. Biggerstaff, Chief Executive Officer
via hand delivery
AirNet Systems, Inc.
3939 International Gateway
Columbus, OH 43219
Re: AirNet Systems, Inc. (“AirNet”) Credit Facilities
Dear Mr. Biggerstaff:
We refer to that certain Amended and Restated Credit Agreement (as from time to time amended, the
“Credit Agreement”) dated May 28, 2005, by and among AirNet, The Huntington National Bank, as agent
for and on behalf of the lenders from time to time party thereto (in such capacity, herein
“Agent”), JPMorgan Chase Bank, N.A., successor by merger to Bank One, N.A. (Main Office Columbus)
(“Chase”) and The Huntington National Bank as a lender and the LC Issuer (in such capacity, herein
“Huntington”). Each capitalized term used but not otherwise defined in this letter agreement shall
have the meaning ascribed to it in the Credit Agreement.
We have been advised that, during the third quarter of 2006, AirNet has recognized a $24,560,000.00
non-recurring, non-cash impairment charge related to certain assets (herein, the “Impairment
Charge”). Solely as a result of the impact of the Impairment Charge on AirNet’s financial
statements, AirNet has, as of September 30, 2006, breached the financial covenants set forth in
Sections 6.24.1 (“Fixed Charge Coverage Ratio”) and 6.24.2 (“Leverage Ratio”) of the Credit
Agreement. The existing violation (
which occurred as of September 30, 2006 solely as a result of
the Impairment Charge
) of each of the above referenced financial covenants constitutes a Default
under Section 7.3 of the Credit Agreement and is referred to herein as the “Existing Financial
Covenant Default.” Agent has discussed said Existing Financial Covenant Default with the Lenders,
and hereby provides formal notice of the same to each Lender pursuant to Sections 9.9 and 12.14 of
the Credit Agreement.
Each of Huntington and Chase hereby consent to the waiver by Agent of the Existing Financial
Covenant Default. Huntington and Chase presently constitute Required Lenders for purposes of
consenting to such waiver.
Pursuant to the authority referenced above, Agent, for itself and on behalf of the Lenders, hereby
waives the Existing Financial Covenant Default (notwithstanding Sections 6.24.1, 6.24.2, and 7.3 of
the Credit Agreement as in effect on September 30, 2006 and at all times prior to the date hereof),
and acknowledges that the Impairment Charge alone shall not be deemed to give rise to a Material
Adverse Effect under Section 5.5 of the Credit Agreement,
it being understood and agreed
that
(i) except for the waiver of the Existing Financial Covenant Default, neither the Agent
nor any Lender has granted any waiver of any Default, Unmatured Default, breach or violation of the
Loan Documents (including, without limitation, Section 6.24 thereof) which has occurred and/or is
existing, or may occur and/or be existing in the future; and (ii) the foregoing waiver of the
Existing Financial Covenant Default is contingent upon the execution and delivery by AirNet and the
Guarantors of a certain Fifth Change in Terms Agreement effective as of the date hereof, pursuant
to which certain provisions of the Credit Agreement shall be modified (said Change in Terms
Agreement to constitute one of the “Loan Documents”); and (iii) Agent, for itself and on behalf of
the Lenders hereby reserves all rights with respect to AirNet and the Guarantors under the Loan
Documents, at law or in equity, with respect to any matter, Default or Unmatured Default, now
existing or hereafter arising, existing, occurring or continuing, which does not constitute the
Existing Financial Covenant Default, and, with respect to any such matter, Default or Unmatured
Default, Agent and the Lenders shall at any time be entitled to enforce any of their respective
rights and remedies, under the Loan Documents and otherwise, against AirNet and/or the Guarantors.
Agent, for itself and on behalf of the Lenders, hereby acknowledges and agrees that (i) AirNet’s
notification to Agent of the Existing Financial Covenant Default has satisfied AirNet’s obligation
under Section 6.3 of the Credit Agreement to notify the Lenders of any Default, and (ii) the
recognition of the Impairment Charge shall, for
purposes of the Credit Agreement, not constitute a material decline in the value of the Collateral
under the Security Documents that would give rise to a Default under Section 7.17 of the Credit
Agreement or support a demand from Lenders that additional security be provided under such section.
The foregoing is given
subject to the following
:
1. Each of AirNet, AMI, Float, Jetride (now known as 7250 STARCHECK, INC.), Timexpress and Fast
Forward hereby acknowledge and agree that, (i) after giving effect to the express terms and
provisions of this letter agreement and the waiver of the Existing Financial Covenant Default
provided by the Lenders and Agent herein, each and all of the terms, covenants and conditions of,
and the obligations of each of them under, all Loan Documents shall remain in full force and effect
and each such party ratifies and confirms its obligations under the Loan Documents and each
confession of judgment or cognovit provision contained in the Loan Documents; (ii) upon the request
of Agent or the Required Lenders, each of them shall enter into such additional documents and/or
agreements as are customarily required of credit parties by any of the Lenders in connection with
waivers and/or loan modifications; (iii) neither this letter agreement, the waiver given pursuant
hereto, nor any previous modification, extension or compromise entered into with respect to any
indebtedness of AirNet and/or any Guarantor to Agent and/or the Lenders (whether or not the same
was in writing) shall constitute a course of dealing or be inferred or construed as constituting an
express or implied understanding to enter into any future release, modification, extension, waiver
or compromise; (iv) after giving effect to the express terms and provisions of this letter
agreement and the waiver of the Existing Financial Covenant Default provided by the Lenders and
Agent herein, each of the representations and warranties made in the Loan Documents is true and
correct in all material respects as of the date of this letter agreement (except to the extent the
Impairment Charge could be construed to be a “Material Adverse Effect” under Section 5.5 of the
Credit Agreement); and (v) no event or condition exists which constitutes a Default or Unmatured
Default under the Loan Documents (except for the Existing Financial Covenant Default waived
hereby).
2. Contemporaneously with or prior to the execution of this letter agreement by Agent, Agent shall
have received (i) this letter agreement, fully executed by AirNet and each Guarantor, (ii) the
Fifth Change in Terms Agreement referenced above, fully executed by AirNet and each Guarantor,
(iii) payment of the fees and expenses of the Lenders and Agent in connection with this letter
agreement and the Fifth Change in Terms Agreement, (iv) payment of a loan fee in the amount of
$18,750.00, and (v) all other items and documents reasonably requested by Agent.
Please acknowledge the foregoing agreement by signing and returning to us executed counterparts of
this letter agreement.
Very truly yours,
The Huntington National Bank, as Agent
|
|
|
|
|
|
|
By:
|
|
/s/ John M. Luehmann
John M. Luehmann, as Vice President
|
|
|
[signatures continue on following pages]
|
|
|
|
|
|
|
Acknowledged and Agreed
:
|
|
|
|
|
|
|
|
|
AirNet Systems, Inc., an
Ohio corporation
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Joel E. Biggerstaff
Joel E. Biggerstaff, Chief Executive Officer
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
|
|
|
|
|
|
7250 STARCHECK, INC.,
an Ohio corporation formerly known as Jetride, Inc.
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Joel E. Biggerstaff
Joel E. Biggerstaff, President
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
|
|
|
|
|
|
Float Control, Inc., a
Michigan corporation
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Joel E. Biggerstaff
Joel E. Biggerstaff, President
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
[signatures continue on following pages]
|
|
|
|
|
|
AirNet Management, Inc., an
Ohio corporation
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Joel E. Biggerstaff
Joel E. Biggerstaff, President
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
|
|
|
|
|
|
Fast Forward Solutions, LLC, an
Ohio limited liability company
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Joel E. Biggerstaff
Joel E. Biggerstaff, President
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
[signatures continue on following pages]
|
|
|
|
|
|
timexpress.com, inc. an
Ohio corporation
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Joel E. Biggerstaff
Joel E. Biggerstaff, President
|
|
|
WARNING — BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT
PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS
OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE
CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE
AGREEMENT, OR ANY OTHER CAUSE.
[Lender consent contained on next page]
The undersigned Lenders hereby evidence their consent to the foregoing:
|
|
|
|
|
|
JPMorgan Chase Bank, N.A., successor by merger to
Bank One, N.A. (Main Office Columbus),
a national banking association
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ Warren Bebinger
Warren Bebinger, Senior Vice President
|
|
|
|
|
|
|
|
|
The Huntington National Bank,
a national banking association
|
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ John M. Luehmann
John M. Luehmann, Vice President
|
|
|
|
|
|
|
|
cc
|
|
Warren Bebinger, Bank One, N.A. (via facsimile 614-248-5518)
John M. Luehmann, The Huntington National Bank (via facsimile 614-480-5791)
|
Exhibit 99.1
FOR IMMEDIATE RELEASE
|
|
|
|
|
|
|
|
|
CONTACT:
|
|
AirNet Systems, Inc.
|
|
|
|
InvestQuest, Inc.
|
|
|
|
Gary Qualmann
|
|
|
|
Bob Lentz
|
|
|
|
(614) 409-4832
|
|
|
|
(614) 876-1900
|
AirNet Systems, Inc. Reports Third Quarter 2006 Results
COLUMBUS, Ohio — November 14, 2006
— AirNet Systems, Inc. (AMEX: ANS) today reported total net
revenues of $43.0 million for the three months ended September 30, 2006 compared to $42.8 million
for the same period last year. A $1.7 million increase in Express services revenues offset a $1.6
million decline in Bank services revenues. Total net revenues for the first nine months of 2006
were $130.0 million versus $124.8 million a year ago.
AirNet’s cargo airline was originally designed, and continues to operate, primarily to meet the
needs of Bank services customers. As a result of accelerating trends in the implementation of
electronic payment alternatives and electronic alternatives to the physical movement of cancelled
checks, AirNet regularly evaluates potential impairment of long-lived assets used in its airline
operations, consisting primarily of aircraft and its airport hangar and office facility located at
Rickenbacker International Airport. As of September 30, 2006, the undiscounted cash flows
estimated to be generated by those assets including disposal values were determined to be less than
the related carrying values. Therefore, pursuant to the requirements of Statement of Financial
Accounting Standards (“SFAS”) No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets
, AirNet recorded a $24.6 million non-cash impairment charge for the third quarter 2006.
Given current uncertainties in the Company’s business environment, the Company based the impairment
charge on the lower range of the estimated current fair value of its cargo assets provided by third
party appraisal firms. Based on an evaluation of the required valuation allowance for deferred tax
assets, no tax benefit was recognized related to this charge. For the third quarter 2005, AirNet
recognized a $16.1 million non-cash impairment charge in accordance with the requirements of SFAS
No. 144.
For the third quarter 2006, the Company reported a $(20.5) million loss from continuing operations
before interest and income taxes versus a $(11.9) million loss from continuing operations before
interest and income taxes a year ago. Excluding the non-cash impairment charges, income from
continuing operations before interest and income taxes was $4.1 million and $4.2 million,
respectively, for the three months ended September 30, 2006 and 2005.
The Company’s net loss for the third quarter 2006 was $(18.1) million, or $(1.79) per share, versus
a net loss of $(7.9) million, or $(0.78) per share for the third quarter 2005. The Company’s
results for the third quarter 2006 included income from discontinued operations, net of tax, of
$0.3 million, or $0.03 per share, compared to a loss from discontinued operations, net of tax, of
$(0.2) million, or $(0.01) per share, in 2005.
Included in the Company’s third quarter 2006 income from discontinued operations was a $0.6 million
gain on the sale of Jetride, net of tax.
Third Quarter 2006 Results
Revenues
Bank services net revenues declined 5% to $27.6 million for the third quarter 2006 from $29.1
million a year ago. Fuel surcharge revenues and general price increases partially offset a 16%
decline in cancelled check (a check processed for settlement) pounds shipped per flying day
compared to the same period last year. Additionally, there was one less flying day in the third
quarter 2006 compared to a year ago.
Express services net revenues increased 12% to $15.2 million for the third quarter 2006 from $13.6
million the prior year. The $1.7 million increase included higher non-charter revenues of $0.9
million and additional fuel surcharge revenues of $0.8 million. There were a higher number of
shipments in the third quarter 2006 compared to the same period last year.
Costs and Expenses
Total costs and expenses were $63.5 million for the third quarter 2006 compared to $54.7 million
for the same period last year, including non-cash impairment charges of $24.6 million and $16.1
million, respectively. Ground courier costs increased $1.6 million to $9.5 million for the third
quarter 2006 from $7.9 million a year ago due to the higher number of shipments for Express
services’ customers compared to the prior year and higher costs reflecting increased fuel prices.
Contracted air costs increased $0.4 million to $4.0 million for the third quarter 2006 from $3.6
million a year ago. This was attributable to additional routes that were outsourced to third-party
operators coupled with additional fuel surcharges from those operators. Aircraft fuel expense was
$7.4 million for the third quarter 2006 compared to $7.0 million a year ago due to higher average
fuel prices. The increase in fuel expense was partially offset by reduced fuel usage attributable
to a reduction in hours flown.
Income Taxes
The third quarter 2006 income tax benefit was $(2.3) million compared to an income tax benefit of
$(4.7) million the prior year. The difference between the two quarterly periods was primarily due
to changes in the valuation allowance for deferred taxes.
Nine-Month Results
Revenues
Bank services revenues were $84.9 million for the first nine months of 2006 compared to $85.3
million a year ago. Fuel surcharge revenues for the 2006 year-to-date period were $3.2 million
higher than the same period last year. There was one less flying day for the nine months ended
September 30, 2006 versus the same period in 2005. Cancelled check pounds shipped per flying day
declined approximately 11% for the 2006 year-to-date period compared to the prior year.
Express services revenues increased 13% to $44.3 million for the first nine months of 2006 from
$39.1 million last year. The $5.2 million increase included higher fuel surcharge revenues of $3.0
million and non-charter revenues of $2.1 million for the 2006 year-to-date period versus a year
ago.
Costs and Expenses
AirNet’s total costs and expenses were $143.3 million for the nine months ended September 30,
2006, compared to $131.8 million for the same period in 2005, including non-cash impairment charges
of $24.6 million and $16.1 million, respectively. Ground courier costs rose $3.0 million to $26.4
million for the 2006 year-to-date period from $23.4 million the prior year due to the increased
number of Express shipments and higher fuel surcharges from ground courier vendors. Contracted air
costs were $12.6 million for the first nine months of 2006 versus $10.5 million last year in
response to the Company’s increased outsourcing of air routes. Aircraft fuel expense increased 9%
to $22.1 million for the 2006 year-to-date period from $20.2 million in the same period of the
prior year.
Interest Expense and Total Debt Outstanding
AirNet’s total debt outstanding at September 30, 2006 was $9.9 million versus $56.0 million at
December 31, 2005. Following completion of the sale of Jetride, Inc. on September 26, 2006, the
Company repaid approximately $28.2 million of aggregate principal outstanding on the term loans
secured by Jetride aircraft. AirNet used the remaining net proceeds to pay expenses and further
reduce debt outstanding under its secured revolving credit facility.
Interest expense declined to $0.2 million from $0.5 million for the three months ended September
30, 2006 and 2005, respectively, and was $1.2 million for the 2006 year-to-date period versus $1.4
million for the same period last year due to lower average loan principal outstanding in 2006.
Income from Continuing Operations Before Interest and Income Taxes
For the first nine months of 2006, the Company reported a $(13.3) million loss from continuing
operations before interest and income taxes compared to a $(7.0) million loss from continuing
operations before interest and income taxes a year ago. Excluding the non-cash impairment charges,
income from continuing operations before interest and income taxes was $11.3 million and $9.1
million, respectively, for the nine months ended September 30, 2006 and 2005.
Income Taxes
The income tax benefit for the first nine months of 2006 was $(44,000) compared to an income tax
benefit of $(3.1) million last year. The primary factor for the year-over-year difference is due
to changes in the valuation allowance for deferred taxes.
Net income (loss)
For the 2006 year-to-date period, the Company’s net loss was $(14.5) million, or $(1.43) per share
versus a net loss of $(4.4) million, or $(0.43) per share, for the same period a year ago. Income
from discontinued operations was $17,000, or $0.00 per share, for the
2006 year-to-date period compared to $0.9 million, or $0.09 per share, last year. Included in the
Company’s income from discontinued operations for the year-to-date 2006 period was a $0.6 million
gain on the sale of Jetride, net of tax.
AirNet Systems, Inc.
AirNet Systems, Inc. focuses the Company’s resources on providing value-added, time-critical
aviation services to a diverse set of customers in the most service-intensive, cost-effective
manner possible. AirNet operates an integrated national transportation network that provides
expedited transportation services to banks and time-critical small package shippers nationwide.
The Company’s aircraft are located strategically throughout the United States. To find out more,
visit AirNet’s website at www.airnet.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Except for the historical information contained in this release of AirNet Systems, Inc., the
matters discussed, including, but not limited to, information regarding future economic performance
and plans and objectives of AirNet’s management, are forward-looking statements that involve risks
and uncertainties. When used in this release, the words “believe”, “anticipate”, “estimate”,
“expect”, “intend”, “may”, “plan(s)”, “project” and similar expressions are intended to be among
statements that identify forward-looking statements. Such statements involve risks and
uncertainties which could cause actual results to differ materially from any forward-looking
statement: potential regulatory changes by the Federal Aviation Administration (“FAA”), Department
of Transportation (“DOT”) and Transportation Security Administration (“TSA”), which could increase
the regulation of AirNet’s business, or the Federal Reserve, which could change the competitive
environment of transporting canceled checks; changes in check processing and shipment patterns of
bank customers; the continued acceleration of migration of AirNet’s Bank customers to electronic
alternatives to the physical movement of cancelled checks; AirNet’s ability to reduce its fixed
cost structure in response to declines in revenue, including increasing the number of contracted
air routes to achieve a more variable cost structure; disruptions to operations due to adverse
weather conditions, air traffic control-related constraints or aircraft accidents; potential
further declines in the values of aircraft in AirNet’s fleet and any related asset impairment
charges; potential changes in locally and federally mandated security requirements; increases in
aviation fuel costs not fully offset by AirNet’s fuel surcharge program; acts of war and terrorist
activities; the acceptance of AirNet’s time-critical service offerings within targeted Express
markets; technological advances and increases in the use of electronic funds transfers; the
availability and cost of financing required for operations; and the impact of unusual items
resulting from ongoing evaluation of AirNet’s business strategies; as well as other economic,
competitive and domestic and foreign governmental factors affecting AirNet’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. Please refer to the disclosure included in “Item 1A — Risk Factors” in Part II of the
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2006 and the disclosure
in “Item 1A — Risk Factors” of Part I and the disclosure in the section captioned “Forward-looking
statements” in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of
Operations” in Part II of the Annual Report on Form 10-K for the fiscal year ended December 31,
2005 of AirNet Systems, Inc. for additional details relating to risk factors that could affect
AirNet’s results and cause those results to differ materially from those expressed in
forward-looking statements.
AIRNET SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
- Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
In thousands, except per share data
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
NET REVENUES, NET OF EXCISE TAX
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank services
|
|
$
|
27,559
|
|
|
$
|
29,126
|
|
|
$
|
84,944
|
|
|
$
|
85,264
|
|
|
Express services
|
|
|
15,243
|
|
|
|
13,569
|
|
|
|
44,268
|
|
|
|
39,102
|
|
|
Aviation services
|
|
|
185
|
|
|
|
153
|
|
|
|
834
|
|
|
|
437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
|
42,987
|
|
|
|
42,848
|
|
|
|
130,046
|
|
|
|
124,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wages and benefits
|
|
|
4,719
|
|
|
|
4,883
|
|
|
|
14,430
|
|
|
|
14,974
|
|
|
Aircraft fuel
|
|
|
7,411
|
|
|
|
6,955
|
|
|
|
22,125
|
|
|
|
20,236
|
|
|
Aircraft maintenance
|
|
|
3,737
|
|
|
|
3,855
|
|
|
|
12,021
|
|
|
|
11,532
|
|
|
Contracted air costs
|
|
|
3,968
|
|
|
|
3,552
|
|
|
|
12,576
|
|
|
|
10,484
|
|
|
Ground courier
|
|
|
9,517
|
|
|
|
7,886
|
|
|
|
26,414
|
|
|
|
23,361
|
|
|
Depreciation
|
|
|
2,663
|
|
|
|
3,115
|
|
|
|
8,415
|
|
|
|
9,364
|
|
|
Insurance, rent and landing fees
|
|
|
2,045
|
|
|
|
2,250
|
|
|
|
6,034
|
|
|
|
6,745
|
|
|
Travel, training and other
|
|
|
1,253
|
|
|
|
1,426
|
|
|
|
3,931
|
|
|
|
4,291
|
|
|
Selling, general and administrative
|
|
|
3,686
|
|
|
|
4,707
|
|
|
|
12,923
|
|
|
|
14,798
|
|
|
Net (gain) loss on disposition of assets
|
|
|
(80
|
)
|
|
|
36
|
|
|
|
(92
|
)
|
|
|
(16
|
)
|
|
Impairment of assets
|
|
|
24,560
|
|
|
|
16,073
|
|
|
|
24,560
|
|
|
|
16,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses
|
|
|
63,479
|
|
|
|
54,738
|
|
|
|
143,337
|
|
|
|
131,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before interest
and income taxes
|
|
|
(20,492
|
)
|
|
|
(11,890
|
)
|
|
|
(13,291
|
)
|
|
|
(7,039
|
)
|
|
Interest expense
|
|
|
249
|
|
|
|
548
|
|
|
|
1,222
|
|
|
|
1,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
(20,741
|
)
|
|
|
(12,438
|
)
|
|
|
(14,513
|
)
|
|
|
(8,416
|
)
|
|
Benefit for income taxes
|
|
|
(2,311
|
)
|
|
|
(4,663
|
)
|
|
|
(44
|
)
|
|
|
(3,127
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
|
|
|
(18,430
|
)
|
|
|
(7,775
|
)
|
|
|
(14,469
|
)
|
|
|
(5,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations,
(including 2006 gain on sale of $610 net of tax)
|
|
|
313
|
|
|
|
(158
|
)
|
|
|
17
|
|
|
|
927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(18,117
|
)
|
|
$
|
(7,933
|
)
|
|
$
|
(14,452
|
)
|
|
$
|
(4,362
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share — basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(1.82
|
)
|
|
$
|
(0.77
|
)
|
|
$
|
(1.43
|
)
|
|
$
|
(0.52
|
)
|
|
Discontinued operations
|
|
|
0.03
|
|
|
|
(0.01
|
)
|
|
|
0.00
|
|
|
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share — basic and diluted
|
|
$
|
(1.79
|
)
|
|
$
|
(0.78
|
)
|
|
$
|
(1.43
|
)
|
|
$
|
(0.43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note — The following supplemental financial data is presented to show the
results of operations excluding non-cash charges for impairment of assets.
The Company believes this information is useful and informative to readers
in providing a more complete view of AirNet’s operating results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL FINANCIAL DATA (In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before interest and income taxes
|
|
$
|
(20.5
|
)
|
|
$
|
(11.9
|
)
|
|
$
|
(13.3
|
)
|
|
$
|
(7.0
|
)
|
|
Impairment of assets
|
|
|
24.6
|
|
|
|
16.1
|
|
|
|
24.6
|
|
|
|
16.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before interest, income taxes
and impairment of assets
|
|
$
|
4.1
|
|
|
$
|
4.2
|
|
|
$
|
11.3
|
|
|
$
|
9.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
