<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 January 31, 1997
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.
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(Exact name of Registrant as specified in its charter)
Delaware 74-2211124
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Post Office Box 612626
DFW Airport, TX 75261-2626
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(Address of principal executive offices)
(972) 929-5117
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(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
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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
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As of January 31, 1997, there were outstanding 23,034,415 shares of New
Common Stock of the Registrant.
Transitional small business disclosure format (check one): Yes No X
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
METRO AIRLINES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
ASSETS
January 31, April 30,
1997 1996
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(unaudited)
Current assets:
Cash and cash equivalents $ 329 $ 123
Prepaid expenses and other 128 128
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Total assets $ 457 $ 251
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities - accounts payable and
other accrued liabilities $ - $ 11
Payable to Predecessor Company stockholders 457 240
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)
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Total stockholders' equity - -
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Total liabilities and stockholders' equity $ 457 $ 251
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See accompanying notes to consolidated financial statements.
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METRO AIRLINES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
Three Months Ended January 31, Nine Months Ended January 31,
------------------------------ -----------------------------
1997 1996 1997 1996
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(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Operating revenues $ - $ - $ - $ -
Operating expenses -
Recovery of receivable
previously written off (352) - (352) -
General and administrative
expenses 63 53 170 150
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Operating income (loss) 289 (53) 182 (150)
Other income:
Interest income 1 4 3 19
Other - - 32 -
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Total other income 1 4 35 19
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Income (loss) before income taxes 290 (49) 217 (131)
Provision for income taxes - - - -
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Net income (loss) $ 290 $ (49) $ 217 $ (131)
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-------- ------- ---------- ---------
Income (loss) per common share $ .01 $ - $ .01 $ (.01)
-------- ------- ---------- ---------
-------- ------- ---------- ---------
Weighted average number of
common shares outstanding 23,034 23,034 23,034 23,034
-------- ------- ---------- ---------
-------- ------- ---------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
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METRO AIRLINES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended January 31,
-----------------------------
1997 1996
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(unaudited)
Cash flows from operating activities:
Income (loss) from operations $ 217 $(131)
Adjustments to reconcile loss to net cash
provided by operating activities:
Changes in assets and liabilities:
Prepaid expenses and other assets - 302
Accounts payable and other accrued
liabilities (11) (10)
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Net cash provided by operating activities 206 161
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Cash flows from investing activities - -
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Cash flows from financing activities - -
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Net increase in cash and cash equivalents 206 161
Cash and cash equivalents at beginning of
period 123 327
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Cash and cash equivalents at end of period $ 329 $ 488
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See accompanying notes to consolidated financial statements.
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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
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$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 January 31, 1997. 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.
(3) INCOME TAXES
Taxes on the Company's income in fiscal 1997 are offset by the utilization
of net operating loss carryforwards.
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 January 31, 1997, the Company had cash and cash equivalents on
hand of approximately $329,000, compared to $123,000 at April 30, 1996.
During the quarter ended January 31, 1997, the Company received a partial
interim distribution of approximately $352,000 from the estate of Metro
Express, the Company's subsidiary that is being liquidated
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by a trustee in Chapter 7 bankruptcy proceedings. The Company has a total
allowed unsecured claim of approximately $5.4 million in the Metro Express
bankruptcy. Although the Company expects to receive a final cash
distribution on its unsecured claim from the liquidation of Metro Express
during 1997, there can be no assurance as to the amount or timing of such
distribution. Any final 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.
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
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
January 31, 1997. The payable has not been reduced by reserves for future
administrative expenses or costs of litigation.
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 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 1998, as well as to pursue the Company's claim against
Metro Express. It is anticipated that the
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Company will be liquidated after all claims have been pursued and realized to
the extent possible. In addition to cash on hand, the Company has certain
other assets, primarily prepaid expenses, that it expects to liquidate at
amounts approximating carrying value.
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.
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<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: March 6, 1997 METRO AIRLINES, INC.
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(Registrant)
/s/ BRIAN K. MILLER
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Brian K. Miller
President
Principal Financial Officer
/s/ MITCHELL E. GASSAWAY
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Mitchell E. Gassaway
Controller
Principal Accounting Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AS OF JANUARY 31, 1997 AND THE COMPANY'S
CONSOLIDATED INCOME STATEMENT FOR THE NINE MONTHS ENDED JANUARY 31, 1997
CONTAINED IN THE COMPANY'S FORM 10-QSB FOR THE QUARTER ENDED JANUARY 31, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 329
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 457
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 457
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 230
<OTHER-SE> (230)
<TOTAL-LIABILITY-AND-EQUITY> 457
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (182)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 217
<INCOME-TAX> 0
<INCOME-CONTINUING> 217
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 217
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
