Frontier Airlines 2004 Annual Report Download

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Republic Airways Holdings Electronic EDGAR Proof
Job Number:
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NOT DEFINED
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Company Name:
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NOT DEFINED
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Form Type:
10
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K
Reporting Period / Event Date:
12
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31
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2004
Customer Service Representative:
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NOT DEFINED
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This proof may not fit on letter
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sized (8.5 x 11 inch) paper. If copy is cut off, please print to a larger format, e.g., legal
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sized (8.5 x 14 inch) paper or oversized (11
x 17 inch) paper.
Accuracy of proof is guaranteed ONLY is printed to a PostScript printer using the correct PostScript driver for that printer make and model.
(this header is not part of the document)

Table of contents

  • Page 1
    Republic Airways Holdings Electronic EDGAR Proof Job Number: Company Name: Form Type: Reporting Period / Event Date: Customer Service Representative: -NOT DEFINED-NOT DEFINED10-K 12-31-2004 -NOT DEFINED- This proof may not fit on letter-sized (8.5 x 11 inch) paper. If copy is cut off, please ...

  • Page 2
    ... Id Sub Filer Ccc Contact Name Contact Phone Number Reporting Period Global Enclosed File Count Internet Address 10-K NASD 0001159154 k#kkkk8k Beth A. Taylor 317-246-2612 12-31-2004 11 [email protected] [email protected] Documents 10-K form10k.htm Republic Airways Holdings Form 10-K for Year...

  • Page 3
    ...="SubDocument_conformedName_"> form10k.htm 10-K Republic Airways Holdings Form 10-K for Year Ended December 31, 2004

  • Page 4
    ...> performancechart.jpg GRAPHIC Stock performance chart

  • Page 5
    [email protected] off

  • Page 6
    ...(as defined in Exchange Act Rule 12b-2). Yes o No x The aggregate market value of Common Stock held by non-affiliates (based upon the closing sale price of the Common Stock on the NASDAQ National Market System) June 30, 2004 was approximately $71,250,000. Indicate the number of shares outstanding of...

  • Page 7
    ...Results of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Part III Directors and Executive Officers of the...

  • Page 8
    ...required to place into service for United, by June 2005, subject to delivery of aircraft from the manufacturer, 23 70-seat regional jets. These jets will fly, as United Express flights, the routes that United designates. Currently, as Republic Airline is not yet certified to fly aircraft, Chautauqua...

  • Page 9
    ...operating strategy. As of December 31, 2004, we offered scheduled passenger services on approximately 700 daily flights to 73 cities in 31 states and the Bahamas. The following illustrates the routes we currently fly for our code-share partners: US Airways Express Service AmericanConnection Service...

  • Page 10
    Delta Connection Service United Express Service 5

  • Page 11
    ..., under our US Airways, American, United and Delta code-share agreements, our passengers participate in frequent flyer programs of the major airline, and the major airline provides additional services such as reservations, ticket issuance, ground support services, slot rights and gate access. 6

  • Page 12
    ... 31, 2004, Chautauqua was providing 230 flights per day as US Airways Express between New York, Boston, Philadelphia, Pittsburgh, Indianapolis, Washington, D.C. and designated outlying cities. US Airways provides reservation, check-in, baggage-handling, ground-support and other passenger services...

  • Page 13
    ...31, 2004, Chautauqua operated 15 ERJ-140 regional jets for American under a fixed-fee code-share agreement. As of December 31, 2004, Chautauqua provided 85 flights per day as AmericanConnection between St. Louis and designated outlying cities. American provides reservation services, tickets, baggage...

  • Page 14
    ... an agreed performance level. American may only exercise this right three times during the term of the code -share agreement. The agreement may be subject to termination for cause prior to that date under various circumstances including: • a change in the regulations governing air carriers that...

  • Page 15
    ... services, baggage handling and other ground support, tickets and similar items with respect to the flights we operate for them and Delta controls scheduling, ticket prices and seat inventories with respect to such flights. In exchange for providing the designated number of flights and performing...

  • Page 16
    ... stock or that of Chautauqua (with limited exceptions) (which we refer to as a change in control), Delta shall have the right to extend the term of the code-share agreement for an additional ten years beyond the applicable termination date of the agreement. The agreement may be subject to early...

  • Page 17
    ...ERJ-145 aircraft to provide United Express Service in markets to be determined by United. United provides reservation, check-in, ground-support and other passenger services and also controls seat inventories. Under the code-share agreement, United retains all air fares, cargo rates, mail charges and...

  • Page 18
    ...are operated as code-share partners of major airlines, but also face competition from low-fare airlines and major airlines on some of our routes. The principal competitive factors in the regional airline industry are fare pricing, customer service, routes served, flight schedules, aircraft types and...

  • Page 19
    ... the current code-share agreements or that we could successfully fly under our own flight designator code. For the years ended December 31, 2004 and 2003, respectively, US Airways accounted for 41% and 40% of our passenger revenues, Delta accounted for 35% and 29% of our passenger revenues, American...

  • Page 20
    ...in the code-share agreements. US Airways and United have filed to reorganize their respective businesses under Chapter 11 of the bankruptcy code. Further, Delta has announced in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, that if it fails to achieve a competitive cost...

  • Page 21
    ... on our financial condition, results of operations and the price of our common stock. Under the terms of our jet code-share agreement with US Airways, if we are unable to provide scheduled flights as a result of a strike by our employees, they are only required to pay us for certain fixed costs for...

  • Page 22
    ...'s current hub airports. United's hub airports are Denver, Washington-Dulles, Los Angeles, Chicago-O'Hare, Seattle and San Francisco. Our code-share partners may be restricted in increasing the level of business that they conduct with us, thereby limiting our growth. In general, the pilots' unions...

  • Page 23
    ... competitiveness for future business opportunities. Our business could be harmed if we lose the services of our key personnel. Our business depends upon the efforts of our chief executive officer, Bryan K. Bedford, and our other key management and operating personnel. American can terminate its code...

  • Page 24
    ...our pilots, flight attendants and maintenance technicians sometimes leave to work for larger airlines, which generally offer higher salaries and more extensive benefit programs than regional airlines are financially able to offer. Should the turnover of employees, particularly pilots and maintenance...

  • Page 25
    ... International Airport, which results in significant price competition in the Indianapolis market, one of our major markets. Competition in the eastern United States markets, which we service from US Airways' hubs in New York, Boston, Philadelphia and Washington, D.C. and from Delta's hub in Orlando...

  • Page 26
    ... code-share agreements and severely interrupt our business operations. Additional laws, regulations, taxes and airport rates and charges have been proposed from time to time that could significantly increase the cost of airline operations or reduce revenues. For instance, "passenger bill of rights...

  • Page 27
    ... board of directors is responsible for appointing members of our management team, these provisions could in turn affect any attempt to replace the current management team. In addition, these provisions could deprive our stockholders of opportunities to realize a premium on the shares of common stock...

  • Page 28
    ...and aircraft handling in St. Louis for all AmericanConnection and American Eagle regional jet operations in that hub. We also provide all US Airways Express airport gate and ground handling at the Indianapolis International airport. Our partners provide ticket handling and ground support services in...

  • Page 29
    ...board of directors and will depend upon our future earnings, our capital requirements, bank financing, financial condition and other relevant factors. Chautauqua 's credit facility with Bank of America Business Capital does not limit its ability to pay dividends to Republic Airways unless Chautauqua...

  • Page 30
    ... the consolidated financial statements and related notes included elsewhere in the Form 10-K. 2004 Statement of Operations Data: Total operating revenues Operating expenses: Wages and benefits Aircraft fuel Passenger fees and commissions Landing fees Aircraft and engine rent Maintenance and repair...

  • Page 31
    23

  • Page 32
    ... board of directors declared a 200,000:1 stock split. All per share amounts, number of shares and options outstanding in the consolidated financial statements have been adjusted for the stock split. (5) Revenue passengers multiplied by miles flown. (6) Passenger seats available multiplied by miles...

  • Page 33
    (11) Excludes two Saab 340 aircraft held for sale at December 31, 2002 and 2003 and one as of December 31, 2004, one leased Saab 340 aircraft at December 31, 2002. 24

  • Page 34
    ... required to place into service for United by June 2005, subject to delivery of aircraft from the manufacturer, 23 70-seat regional jets. These jets will fly, as United Express flights, the routes that United designates. Currently, as Republic Airline is not yet certified to fly aircraft, Chautauqua...

  • Page 35
    ... recently reported operating losses and has announced that if it fails to achieve a competitive cost structure it will need to restructure through bankruptcy. In December 2004, in exchange for, among other things, Delta extending the term of its code -share agreement and canceling previously issued...

  • Page 36
    ... includes the costs of travel agent commissions, computer reservation system fees and certain fees paid to US Airways for aircraft ground and passenger handling and use of the US Airways aircraft facilities and services with respect to turboprop pro-rate revenue sharing flights performed on behalf...

  • Page 37
    ... warrants issued in December 2004, will be amortized over the term of the Delta code-share agreement, as amended, resulting in an annual non-cash charge of approximately $334,000. (2) The exercise price is subject to downward adjustment, if we issue additional shares of our common stock in certain...

  • Page 38
    ... divided by available seat miles. (5) Cost of aircraft fuel, including fuel taxes and into-plane fees. (6) Hours from takeoff to landing, including taxi time. (7) Average number of hours per day that an aircraft flown in revenue service is operated (from gate departure to gate arrival). Effects...

  • Page 39
    Stabilization Act. Our losses as a direct result of the September 11, 2001, terrorist attacks exceeded the amount of compensation we received under the Stabilization Act. 29

  • Page 40
    ... to a 27.2% increase in full time equivalent employees to support the increased regional jet operations and an increase in the costs of providing employee benefits. The cost per available seat mile increased to 2.3¢ in 2004 compared to 2.2¢ for 2003. Aircraft fuel expense increased 48.4%, or $36...

  • Page 41
    ... $52.5 million for 2002 due to a 31.6% increase in full time equivalent employees to support the increased regional jet operations and an increase in the costs of providing employee benefit plans. Wages and benefits cost per available seat mile remained unchanged at 2.2 ¢ for 2003 compared to 2002...

  • Page 42
    ...of offering expenses. As a result of our code-share agreements with Delta and United, which require us to significantly increase our fleet of regional jets, we will significantly increase our cash requirements for debt service and lease payments. As of December 31, 2004, we had $46.2 million in cash...

  • Page 43
    ...able to do so. As of December 31, 2004, our code-share agreements required that we acquire (subject to financing commitments) and place into service an additional 28 regional jets over the next 18 months. Embraer's current list price of these 28 regional jets is approximately $752.2 million. We have...

  • Page 44
    ... February 2005. Option pricing models require estimates of dividend yield, a risk free rate commensurate with the warrant term, stock volatility and the expected life of the warrant. Each of these variables has been determined based upon relevant industry market data, our strategic business plan and...

  • Page 45
    ...the termination of our code-share agreement with them. (3) Includes impairment loss and accrued aircraft return costs of $10,160 recorded in the third quarter of 2003. New Accounting Standards In December 2004, the Financial Accounting Standards Board issued SFAS No. 123(R), Share-Based Payment, as...

  • Page 46
    ... stock in connection with Delta entering into a code-share agreement with Republic Airline. The deferred warrant charges, excluding charges with respect to the warrants issued in December 2004, will be amortized over the term of the Delta code-share agreement, as amended, resulting in an annual non...

  • Page 47
    ... SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Republic Airways Holdings Inc. We have audited the accompanying consolidated balance sheets of Republic Airways Holdings Inc. and subsidiaries (the "Company") as of December 31, 2004 and...

  • Page 48
    REPUBLIC AIRWAYS HOLDINGS INC. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2003 (In thousands, except share and per share amounts) 2004 ASSETS Current Assets: Cash and cash equivalents Receivables-net of allowance for doubtful accounts of $3,869 and $819, respectively Inventories ...

  • Page 49
    REPUBLIC AIRWAYS HOLDINGS INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002 (In thousands, except per share amounts) 2004 OPERATING REVENUES: Passenger Contract termination fee Other Total operating revenues OPERATING EXPENSES: Wages and benefits Aircraft ...

  • Page 50
    REPUBLIC AIRWAYS HOLDINGS INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002 (In thousands) ...34,049 Balance at December 31, 2003 Stock compensation expense Common stock offering, net Exercise of employee stock options Warrants issued Warrants ...

  • Page 51
    REPUBLIC AIRWAYS HOLDINGS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 and 2002 (In thousands) 2004 OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization Debt issue costs and...

  • Page 52
    ... with United, Chautauqua offers passenger and air freight service from United's hub airports in Chicago, Illinois and Washington D.C. Under the US Airways code-share agreement, which expires in 2012, Chautauqua provides service to designated areas utilizing jet aircraft. The US Airways code-share...

  • Page 53
    ... choose to terminate the agreement. United is attempting to reorganize its business under Chapter 11 of the bankruptcy code. The Company continues to operate its normal flight schedules with US Airways and United. Delta has recently reported operating losses primarily due to an uncompetitive cost...

  • Page 54
    ... balance sheets as of December 31, 2004 and 2003, respectively. Goodwill is accounted for in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, and management makes annual assessments of impairment. The carrying value of goodwill was reviewed by management on January 1, 2004...

  • Page 55
    ... and repair costs are subject to power-by-the-hour contracts with external vendors and are accrued as the aircraft are flown. Use of Estimates-The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to...

  • Page 56
    ..., Accounting for Stock Issued to Employees, was issued. This statement requires compensation costs related to share-based payment transactions to be recognized in the financial statements. With limited exceptions, the amount of compensation cost will be measured based upon the grant date fair value...

  • Page 57
    ... as of December 31: 2004 Accrued wages, benefits and related taxes Accrued maintenance Accrued aircraft return costs (see Note 15) Accrued property taxes Accrued interest payable to non-affiliates Accrued interest payable to affiliates Accrued liabilities to code-share partners Other Total accrued...

  • Page 58
    ... the fourth quarter of 2004. Chautauqua has outstanding letters of credit totaling $4,782 and $2,438 as of December 31, 2004 and 2003, respectively. The American code-share agreement requires a debt sinking fund for Chautauqua's required semi-annual payments. Future maturities of debt are payable...

  • Page 59
    ... 2003. 8. COMMITMENTS As of December 31, 2004 Chautauqua leases forty-nine regional jet aircraft and fourteen spare regional jet engines with varying terms extending through 2020 and terminal space, operating facilities and office equipment with terms extending through 2012. The components of rent...

  • Page 60
    ... of future turboprop lease payments of $2,405 (2005) and $518 (2006) (see Note 15). As of December 31, 2004, the Company's Delta and United code-share agreements require that Chautauqua and Republic Airline acquire and place in service an additional twenty-eight regional jets. The current list price...

  • Page 61
    ... business activities. As of December 31, 2004, management believes, after consultation with legal counsel, the ultimate outcome of any pending legal matters will not have a material adverse effect on the Company's financial position, liquidity or results of operations. Under the American code-share...

  • Page 62
    ... subordinated promissory note (see Note 6) were used by Republic to acquire the common stock of Chautauqua. In June 2004, the Company completed its initial public stock offering. The Company issued 5,000,000 shares of common stock at $13 per share. The net proceeds provided by this offering were $58...

  • Page 63
    ... price is subject to downward adjustment, if we issue additional shares of our common stock in certain instances. In December 2004, the Company and Delta agreed to reduce the amounts of all warrants issued pursuant to the Chautauqua code-share agreement by 45%, which reduced deferred warrant charges...

  • Page 64
    ... of income tax expense at the applicable federal statutory income tax rate to the tax provision as reported for the years ended December 31 are as follows: 2004 Federal income tax expense at statutory rate State income tax expense, net of federal benefit Other Income tax expense $ 25,711...

  • Page 65
    ... flight operations of the affiliated company. The changes in the impairment and accrued aircraft return costs are as follows for the years ended December 31, 2002, 2003 and 2004: Description of Charge Aircraft return costs: Rent differential Lease payments Costs to return aircraft Maintenance...

  • Page 66
    ... Chautauqua code-share agreement, a potential new jet service agreement with Republic Airline for the operation of ERJ-170 and ERJ-190 aircraft, a conditional $125 million dollar equity commitment and up to $110 million in asset related financing. The agreement can be terminated by the Company...

  • Page 67
    ... Executive Vice President and Chief Operating Officer of Chautauqua, and assumed responsibility for all aircraft maintenance, records and engineering. From April 1996 until August 1999 he was employed by Mesaba Airlines, Inc., as its Director of System Operations Control. He is a licensed pilot...

  • Page 68
    ... fiscal 2004 all Section 16(a) filing requirements applicable to its executive officers, directors and greater than ten percent beneficial owners were complied with. ITEM 11. EXECUTIVE COMPENSATION We currently have nine members on our board of directors. Each of our directors holds office until...

  • Page 69
    ... information regarding stock options granted during the year ended December 31, 2004 to our Chief Executive Officer and our other executive officers. Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term Number of Securities Underlying Options Granted Bryan...

  • Page 70
    ...to terms and conditions as the compensation committee may determine. These awards may involve the transfer of actual shares of common stock or the payment in cash or otherwise of amounts based on the value of shares of our common stock. Non-Employee Director Stock Options. Each non-employee director...

  • Page 71
    ... may be amended or terminated at any time by our board of directors, subject, however, to stockholder approval in the case of certain material amendments if required by applicable law, such as an increase in the number of shares available under the 2002 Equity Incentive Plan or a change in the class...

  • Page 72
    ... number of factors relating to the particular individual, including the performance of the individual executive, and level of experience, ability and knowledge of the job. Incentives. Incentives generally consist of stock option and cash awards paid to the Company's senior management executives. Non...

  • Page 73
    ... the performance of the Company from May 27, 2004 through December 31, 2004, against the performance of (i) the Composite Index for Nasdaq Stock Market (U.S. Companies) and (ii) an index of companies engaged in air transportation (SIC 4510 -4519), including regional airlines, whose stocks trade on...

  • Page 74
    ... (11 persons)(11) 21,166,386 Delta Air Lines, Inc.(12) 3,435,000 _____ * Less than 1%. (1) For purposes of this table, a person or group of persons is deemed to have "beneficial ownership" of any shares of common stock when such person or persons have the right to acquire them within 60 days after...

  • Page 75
    ...Messrs. Davidson and Jacobs may be deemed to be the beneficial owner of the shares of our common stock owned by WexAir LLC by virtue of being a managing member or general partner of WexAir LLC or each of the members of WexAir LLC. Each of Messrs. Davidson and Jacobs disclaims beneficial ownership of...

  • Page 76
    ... established by the Audit Committee require that the Audit Committee meet with the independent auditor and financial management to review planning, the scope of the proposed services, the procedures to be utilized, and the proposed fees. During 2004, 100% of the tax fees were pre-approved by the...

  • Page 77
    ... for Non-Employee Directors.(i) Form of Option Agreement for Officers.(i) Stock Option Agreement Pursuant to the Republic Airways Holdings Inc. 2002 Equity Incentive Plan, by and between Republic Airways Holdings Inc. and Bryan K. Bedford, dated as of December 27, 2004.(v) Stock Option Agreement...

  • Page 78
    ... among Republic Airways Holdings Inc., Imprimis Investors, LLC, Wexford Spectrum Fund I, L.P., Wexford Offshore Spectrum Fund, Wexford Partners Investment Co. LLC, WexAir LLC, and Delta Air Lines, Inc.(i) Loan and Security Agreement, by and between Fleet Capital Corporation and Chautauqua Airlines...

  • Page 79
    ... 13, 2004.(i) Letter Agreement, by and between United Air Lines, Inc. and Republic Airways Holdings Inc., dated as of July 7, 2004.(ii) Lease Agreement, by and between Chautauqua Airlines, Inc. and the Indianapolis Airport Authority, dated as of December 17, 2004.(viii) Delta Connection Agreement...

  • Page 80
    67

  • Page 81
    ... caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REPUBLIC AIRWAYS HOLDINGS INC. (Registrant) Dated: March 29, 2005 By: /s/ Bryan K. Bedford Bryan K. Bedford Chairman of the Board, Chief Executive Officer and President (principal executive officer) 68

  • Page 82
    ... Title Date Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer) March 29, 2005 /s/ Robert H. Cooper Robert H. Cooper Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) March 29, 2005 /s/ Arthur H. Amron...

  • Page 83
    ... revenues are derived from code-share agreements with US Airways, Inc., Delta Air Lines, Inc., AMR Corp., the parent of American Airlines, Inc. and United Airlines, Inc. as discussed in Note 1 to the consolidated financial statements), appearing in this Annual Report on Form 10-K of Republic Airways...

  • Page 84
    Exhibit 31.1 CERTIFICATION-Chief Executive Officer I, Bryan K. Bedford, certify that: 1. I have reviewed this annual report on Form 10-K of Republic Airways Holdings Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a ...

  • Page 85
    ... material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. COMPANY NAME CORPORATION Date: March 29, 2005 By: /s/ Robert H. Cooper Title Executive Vice President, Chief Financial Officer, Treasure and Secretary

  • Page 86
    ... with the Annual Report of Republic Airways Holdings Inc. (the "Company") on Form 10-K for the year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Bryan K. Bedford, President, Chief Executive Officer and Chairman of the Board of the...

  • Page 87
    ... with the Annual Report of Republic Airways Holdings, Inc. (the "Company") on Form 10-K for the year ended December 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert H. Cooper, Executive Vice President, Chief Financial Officer, Treasurer and...