<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _________ to _________
Commission file number 0-10639
METRO AIRLINES, INC.
--------------------
(Exact name of Registrant as specified in its charter)
Delaware 74-2211124
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Post Office Box 612626
DFW Airport, TX 75261-2626
------------------------------------
(Address of principal executive offices)
(214) 929-5117
------------------------------------
(Registrant's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No
--- ----
Check whether the issuer has filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes X No
--- ---
As of October 31, 1996, there were outstanding 23,034,415 shares of New
Common Stock of the Registrant.
Transitional small business disclosure format (check one): Yes No X
--- ---
<PAGE>
PART 1. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
METRO AIRLINES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
October 31, April 30,
1996 1996
----------- ---------
(unaudited)
Current assets:
Cash and cash equivalents $ 101 $ 123
Prepaid expenses and other 66 128
----- -----
Total assets $ 167 $ 251
----- -----
----- -----
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities - accounts payable and other accrued
liabilities $ - $ 11
Payable to Predecessor Company stockholders 167 240
Stockholders' equity:
New common stock, $.01 par value. Authorized 32,000,000
shares; issued and outstanding 23,034,415 shares 230 230
Additional paid-in capital (230) (230)
----- -----
Total stockholders' equity -- --
----- -----
Total liabilities and stockholders' equity $ 167 $ 251
----- -----
----- -----
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
METRO AIRLINES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
Three Months Ended October 31, Six Months Ended October 31,
------------------------------ ----------------------------
1996 1995 1996 1995
---------- ----------- ---------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Operating revenues $ -- $ -- $ -- $ --
Operating expenses -
general and administrative expenses 65 54 107 97
------ ------ ------ ------
Operating loss (65) (54) (107) (97)
Other income:
Interest income 1 9 2 15
Other 32 -- 32 --
------ ------ ------ ------
Total other income 33 9 34 15
Loss before income taxes (32) (45) (73) (82)
Provision for income taxes -- -- -- --
------ ------ ------ ------
Net loss $ (32) $ (45) $ (73) $ (82)
------ ------ ------ ------
------ ------ ------ ------
Loss per common share $ -- $ -- $ -- $ --
------ ------ ------ ------
------ ------ ------ ------
Weighted average number of
common shares outstanding 23,034 23,034 23,034 23,034
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
METRO AIRLINES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended October 31,
----------------------------
1996 1995
---------- --------
(unaudited)
Cash flows from operating activities:
Loss from operations $ (73) $ (82)
Adjustments to reconcile loss to net cash
provided (used) by operating activities:
Changes in assets and liabilities:
Prepaid expenses and other assets 62 358
Accounts payable and other accrued liabilities (11) (9)
---- ----
Net cash provided (used) by operating activities (22) 267
---- ----
Cash flows from investing activities -- --
---- ----
Cash flows from financing activities -- --
---- ----
Net increase (decrease) in cash and cash equivalents (22) 267
Cash and cash equivalents at beginning of period 123 327
---- ----
Cash and cash equivalents at end of period $101 $594
---- ----
---- ----
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
METRO AIRLINES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL INFORMATION
The consolidated financial statements include the accounts of Metro
Airlines, Inc. ("Metro") and its wholly owned subsidiaries, Metroflight, Inc.
("Metroflight") and Metro Leasing, Inc. ("Metro Leasing"). Metroflight and
Metro Leasing were dissolved in June 1996. As used herein, the term
"Company" refers to Metro and its subsidiaries.
The consolidated financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosure normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes that
the disclosure is adequate to prevent the information presented from being
misleading, it is suggested that the consolidated financial statements be
read in conjunction with the audited financial statements and notes thereto
included in the Company's latest Annual Report on Form 10-KSB.
(2) CHAPTER 11 REORGANIZATION
The Company's Joint Plan of Reorganization, as Amended and Modified, (the
"Plan"), was confirmed by the United States Bankruptcy Court for the
Northern District of Texas, Dallas Division (the "Bankruptcy Court") on
December 16, 1993 and the Plan became effective on December 28, 1993 (the
"Effective Date").
The Plan called for the payment of approximately $4.5 million in cash,
including interest from March 22, 1993 to the date of payment, in
satisfaction of unsecured claims against Metroflight. The Plan also provided
for the cancellation of approximately $22.8 million in unsecured claims
against Metro in exchange for the issuance of approximately 99% of the common
stock of the Reorganized Company to the holders of such claims. The
remaining 1% of the common stock of the Reorganized Company was issued to the
holders of the Predecessor Company's common stock on December 28, 1993. As
used herein, the term "Predecessor Company" refers to the Company prior to
December 28, 1993 and the term "Reorganized Company" refers to the Company
after December 28, 1993.
The stockholders of the Predecessor Company at the Effective Date are
also entitled to receive a special payment of 27 cents per share of the
Predecessor Company's stock (the "Settlement Payment Right"), payable after
all senior claims are paid. The Plan calls for partial payment of the
Settlement Payment Right to be made at such time as the Reorganized Company
has sufficient cash, after deducting certain reserves, to pay at least 50%,
or approximately
-5-
<PAGE>
$775,000, of the total Settlement Payment Right, which is approximately
$1,550,000. The Company currently does not have sufficient resources to
require such a payment. However, in February 1996, the Company made an
interim partial distribution of $.06 per share of the Settlement Payment
Right. The total distributed was approximately $344,000. For purposes of
establishing the liability associated with the Settlement Payment Right, the
Company recorded a payable to Predecessor Company stockholders with a
corresponding charge to the Predecessor Company stockholders' accounts in an
amount equal to the net assets of the Reorganized Company as of the Effective
Date. The payable is adjusted as subsequent income or losses are incurred
since such income or losses increase or reduce the net assets available for
payment of the Settlement Payment Right. Since the Effective Date, this
payable has been reduced by the net cumulative loss incurred from the
Effective Date through October 31, 1996. The payable has not been reduced by
reserves for future administrative expenses or costs of litigation.
The Company accounted for transactions related to the reorganization
proceedings in accordance with Statement of Position 90-7, "Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code," issued by the American
Institute of Certified Public Accountants in November 1990 ("SOP 90-7"). In
connection with its emergence from bankruptcy, the Company adopted fresh start
reporting in accordance with SOP 90-7 and reflected the effects of such adoption
in its consolidated balance sheet as of December 28, 1993.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
PLAN OF OPERATION
Until January 1991, the Company, through its wholly owned subsidiaries,
operated four separate regional passenger airlines and an air cargo carrier.
Since January 1991, the Company has sold or shut down all of its passenger
operations and its cargo operation.
The Company filed for reorganization under Chapter 11 of the Bankruptcy
Code on April 1, 1991. The Company's reorganization plan was confirmed on
December 11, 1992. On December 22, 1992, the Company sold substantially all
of the assets of Metroflight (the "Asset Sale"), its primary operating
subsidiary. The Company currently has no ongoing operations. Since the Asset
Sale, its activities have been limited to the pursuit of certain claims and
implementation of the Plan, which became effective, as modified, on December
28, 1993.
As of October 31, 1996, the Company had cash and cash equivalents on hand
of approximately $101,000, compared to $123,000 at April 30, 1996. During
the quarter ended October 31, 1996, the Company received a refund of
approximately $31,500 of federal fuel taxes paid in previous years. The
refund was recorded as other income when received.
Under the Plan, the stockholders of the Predecessor Company at the
Effective Date are entitled to receive a special payment of 27 cents per
share of the Predecessor Company's stock (the "Settlement Payment Right"),
payable after all senior claims are paid. The Plan calls for partial payment
of the Settlement Payment Right to be made at such time as the Reorganized
-6-
<PAGE>
Company has sufficient cash, after deducting certain reserves, to pay at
least 50%, or approximately $775,000, of the total Settlement Payment Right,
which is approximately $1,550,000. The Company currently does not have
sufficient resources to require such a payment. For purposes of establishing
the liability associated with the Settlement Payment Right, the Company
recorded a payable to Predecessor Company stockholders with a corresponding
charge to the Predecessor Company stockholders' accounts in an amount equal
to the net assets of the Reorganized Company at the Effective Date. The
payable is adjusted as subsequent income or losses are incurred since such
income or losses increase or reduce the net assets available for payment of
the Settlement Payment Right. Since the Effective Date, the payable has been
reduced by the cumulative net loss incurred from the Effective Date through
October 31, 1996. The payable has not been reduced by reserves for future
administrative expenses or costs of litigation.
In addition to cash on hand, the Company has certain other assets,
primarily miscellaneous receivables, that it expects to liquidate at amounts
approximating carrying value.
In February 1995, the Company reached an agreement for the settlement of
certain litigation with Aeroflight Holdings, Inc. ("AHI") and its principals,
who are also Predecessor Company stockholders. Under the terms of the
settlement, which was approved by the Bankruptcy Court, all litigation
between the parties has been dismissed and all claims of the Company and AHI
against each other have been released. In addition, the Settlement Payment
Right due the AHI principals has been reduced by 15%, or approximately
$100,000. Further, the terms of the settlement provide that the Company make
an initial partial distribution of at least $250,000 of the Settlement
Payment Right. In February 1996, the Company made an interim partial payment
of $.06 per share of the Settlement Payment Right. The total distributed was
approximately $344,000. The amount and timing of future payments of the
Settlement Payment Right is uncertain.
The Company also has an allowed unsecured claim of approximately $5.4
million in the Chapter 7 bankruptcy proceedings of Metro Express, the
Company's subsidiary that is being liquidated by a trustee. Although the
Company expects to receive a cash distribution on its unsecured claim from
the liquidation of Metro Express, there can be no assurance as to the amount
or timing of such distribution. Any distribution will likely be only a small
percentage of the allowed claim. In addition, the Company's administrative
claim in the Metro Express bankruptcy was allowed in the amount of
approximately $330,000, which was received by the Company in June 1995.
The Company believes that its current cash on hand is sufficient to fund
operating expenses during the implementation of the Plan, which is expected
to last into fiscal 1997, as well as to pursue the Company's claim against
Metro Express. It is anticipated that the Company will be liquidated after
all claims have been pursued and realized to the extent possible.
-7-
<PAGE>
The Company has no commitments for capital expenditures or leases. The
Company currently has no available borrowing capability and it is unlikely
that it would be able to obtain outside financing. Under the terms of the
Plan, the Company is not permitted to pledge any assets owned as of the
effective date of the Plan without approval of a committee representing the
interest of prepetition creditors. All of the Company's available cash,
after payment of administrative expenses, is currently committed to payments
to Predecessor Company stockholders.
-8-
<PAGE>
PART 2. - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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 thereunto duly authorized.
Date: November 26, 1996 METRO AIRLINES, INC.
----------------- -----------------------------
(Registrant)
/s/ BRIAN K. MILLER
-----------------------------
Brian K. Miller
President
Principal Financial Officer
/s/ MITCHELL E. GASSAWAY
-----------------------------
Mitchell E. Gassaway
Controller
Principal Accounting Officer
-9-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AS OF OCTOBER 31, 1996 AND THE COMPANY'S
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED
OCTOBER 31, 1996 CONTAINED IN THE COMPANY'S FORM 10-QSB FOR THE QUARTER ENDED
OCTOBER 31, 1996; AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 101
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 167
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 167
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 230
<OTHER-SE> (230)
<TOTAL-LIABILITY-AND-EQUITY> 167
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 65
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (32)
<INCOME-TAX> 0
<INCOME-CONTINUING> (32)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
