<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
Commission File Number 0-15495
MESA AIR GROUP, INC.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Nevada 85-0302351
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3753 Howard Hughes Parkway, Suite 200, Las Vegas 89109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (702) 892-3773
</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 / /
On May 14, 1997 the Registrant had outstanding 28,294,584 shares of Common
Stock.
1
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1.
MESA AIR GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1997 1996 1997 1996
------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues:
Passenger $ 123,037 $ 118,237 $ 241,912 $ 235,165
Freight and other 2,373 2,737 4,909 5,837
------------------------------------------------------------
Total operating revenues 125,410 120,974 246,821 241,002
------------------------------------------------------------
Operating expenses:
Flight operations 45,705 43,796 87,683 88,360
Maintenance 21,482 19,265 42,775 38,689
Aircraft and traffic servicing 21,409 19,786 41,806 36,874
Promotion and sales 17,984 18,033 35,576 36,149
General and administrative 5,778 7,106 12,736 14,627
Depreciation and amortization 8,482 4,664 17,025 10,378
------------------------------------------------------------
Total operating expenses 120,840 112,650 237,601 225,077
------------------------------------------------------------
Operating income 4,570 8,324 9,220 15,925
------------------------------------------------------------
Non-operating income (expenses):
Interest expense (6,897) (1,520) (13,593) (3,141)
Interest income 503 406 1,045 1,052
Other 205 11,763 277 11,446
------------------------------------------------------------
Total non-operating income (expenses) (6,189) 10,649 (12,271) 9,357
------------------------------------------------------------
Earnings (loss) before income taxes (1,619) 18,973 (3,051) 25,282
Income tax expense (benefit) (630) 7,108 (1,186) 9,543
------------------------------------------------------------
Net earnings (loss) $ (989) $ 11,865 $ (1,865) $ 15,739
============================================================
Average common and common equivalent
shares outstanding 28,265 30,696 28,263 32,199
============================================================
Net earnings (loss) per common and
common equivalent share $ (0.03) $ 0.39 $ (0.07) $ 0.49
============================================================
</TABLE>
2
<PAGE> 3
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
March 31 September 30
1997 1996
------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 48,852 $ 54,720
Marketable securities 5,599 5,300
Receivables, principally traffic 50,293 41,105
Expendable parts and supplies, net 27,482 26,956
Prepaid expenses and other current assets 9,510 6,394
------------------------
Total current assets 141,736 134,475
Property and equipment, net 465,718 452,273
Lease and equipment deposits 10,913 10,889
Intangibles, net 50,955 53,538
Other assets 22,289 27,316
------------------------
Total assets $691,611 $678,491
=======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital leases $ 17,043 $ 17,127
Accounts payable 18,214 13,811
Income taxes payable 1,650 3,708
Air traffic liability 5,295 4,789
Other accrued expenses 16,692 24,180
------------------------
Total current liabilities 58,894 63,615
Long-term debt and capital leases, excluding current portion 361,276 338,278
Deferred credits and accrued liabilities 23,868 29,538
Deferred income taxes 22,857 22,394
Stockholder's equity:
Preferred stock of no par value, 2,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock of no par value, 75,000,000
shares authorized; 28,294,584 and 28,243,382
shares issued and outstanding 101,346 100,876
Unrealized gain on marketable securities, net 3,950 2,507
Retained earnings 119,420 121,283
------------------------
Total stockholders' equity 224,716 224,666
------------------------
Total liabilities and stockholders' equity $691,611 $678,491
=======================
</TABLE>
3
<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended March 31
<TABLE>
<CAPTION>
1997 1996
------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (1,865) $ 15,738
Adjustments to reconcile net earnings to
net cash flows from operation activities:
Depreciation and amortization 17,025 10,377
Reserve for contingent liabilities -- 10,000
(Gain) Loss on sale of securities -- (22,008)
Amortization of deferred credits (846) (1,382)
Stock bonus plan 348 565
Changes in assets and liabilities:
Receivables (9,187) (863)
Inventories (526) (85)
Prepaid expenses and other current assets (3,116) (20)
Accounts payable 4,403 (3,399)
Other accrued liabilities (6,541) 2,162
------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES (305) 11,085
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,198) (14,457)
Proceeds from sale of property and equipment 1,803 7,154
Proceeds from sale of marketable securities 1,000 36,861
Intangibles -- --
Other assets 5,027 (2,689)
Lease and equipment deposits (900) 2,163
Collection of notes receivable -- --
------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES 2,732 29,032
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt and
obligations under capital leases (8,826) (9,204)
Proceeds from issuance of common stock 122 419
Stock buyback program -- (53,711)
Proceeds from deferred credits 409 2,900
------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES (8,295) (59,596)
------------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (5,868) (19,479)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 54,720 53,675
------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 48,852 $ 34,196
========================
</TABLE>
4
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended March 31
Supplemental disclosures of cash flow information:
<TABLE>
<CAPTION>
Cash paid during the period for: 1997 1996
-------------------------
<S> <C> <C>
Interest $13,593 $ 3,141
Income taxes 1,241 4,034
</TABLE>
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year
ending September 30, 1997.
These financial statements should be read in conjunction with the
Company's consolidated financial statements and footnotes included in the
annual report for the year ended September 30, 1996.
2. The consolidated financial statements include the accounts of Mesa Air
Group, Inc. and its wholly owned subsidiaries Mesa Airlines, Inc., WestAir
Holding, Inc., Air Midwest, Inc., Mesa Leasing, Inc., MAGI Insurance,
Ltd., MPD, Inc. and FCA, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.
3. Income tax expense (benefit) is based upon Mesa's annual effective tax
rate of 38.6 percent.
4. Legal Proceedings:
See Part II. Item 1.
6
<PAGE> 7
Item 2.
MESA AIR GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
GENERAL
Mesa Air Group, Inc. (collectively referred to herein as "Mesa" or the
"Company") is the largest independently owned regional airline in the world
(based upon passenger enplanements), serving 182 cities in 30 states and the
District of Columbia. Mesa operates a fleet of 185 aircraft as America West
Express, Mesa Airlines, United Express and USAir Express.
Mesa's business strategy is to achieve sustained, profitable growth by
utilizing focused operating strategies to service routes not generally served
by major air carriers. Mesa implements its strategy by carefully evaluating
market demand on the routes it serves and utilizes its fleet of aircraft to
meet that demand. In addition, Mesa is able to expand the markets it serves
under existing code-sharing agreements with certain of the major air carriers
to benefit from the name recognition, reservation systems and marketing and
promotional efforts of these carriers. Mesa operates a fleet of new and
efficient aircraft and performs most maintenance and overhaul work at its own
facilities. Mesa seeks to maximize gross revenues by managing fares and flight
schedules to increase yields and by developing new markets.
The following tables set forth year-to-year comparisons for the periods
indicated below:
OPERATING DATA
<TABLE>
<CAPTION>
Three Months Ended
March 31
1997 1996
----------------------------
<S> <C> <C>
Passengers 1,557,497 1,549,865
Available seat miles (000) 600,517 613,407
Revenue passenger miles (000) 328,201 338,826
Load factor 54.7% 55.2%
Yield per revenue passenger mile 37.5 (cents) 34.9 (cents)
Operating cost per available seat mile 20.1 (cents) 18.4 (cents)
Revenue per available seat mile 20.9 (cents) 19.7 (cents)
Average stage length (miles) 170 168
Number of aircraft in fleet 185 174
Gallons of fuel consumed (000) 18,155 16,710
Block hours flown 140,217 135,422
Departures 148,400 151,465
</TABLE>
7
<PAGE> 8
FINANCIAL DATA
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------------------------------
1997 1996
------------------------------ -----------------------------
Cost per Percent of total Cost per Percent of total
ASM operating revenues ASM operating revenues
-------- ------------------ -------- ------------------
<S> <C> <C> <C> <C>
Flight operations 7.5 cents 36.3% 7.1 cents 36.2%
Maintenance 3.6 cents 17.1% 3.1 cents 15.9%
Aircraft and traffic servicing 3.6 cents 17.1% 3.2 cents 16.4%
Promotion and sales 3.0 cents 14.3% 3.0 cents 14.9%
General and administrative 1.0 cents 4.6% 1.2 cents 5.9%
Depreciation and amortization 1.4 cents 6.8% 0.8 cents 3.9%
---------- ----- --------- -----
Total operating expenses 20.1 cents 96.1% 18.4 cents 93.1%
Interest expense 1.1 cents 5.5% 0.2 cents 1.3%
</TABLE>
OPERATIONS
Operating Revenues:
Passenger revenues increased by 4.1% to $123.0 million, average fare increased
by 3.6% to $79.00 and passengers carried increased by 0.5% to 1.56 million.
Available seat miles (ASMs) declined by 2.1% to 600.5 million, while revenue
per available seat mile (RASM) increased by 6.1% to 20.9 cents.
Operating Expenses:
Flight Operations:
Flight operations expense increased to $45.7 million from $43.8 million in the
prior year. The primary causes of this increase were a $3.2 million increase in
the cost of fuel, a $4.0 million increase in pilot salaries, lodging and
training expense plus approximately $400,000 of expense incurred in the process
of centralizing dispatch and training facilities. These increases were
partially offset by a reduction in aircraft lease expense caused by purchasing
69 aircraft previously financed by operating leases. Of the $4.0 million
increase in pilot costs, $1.5 million related to an increase in pilot salary
and benefits granted under the new pilot contract, $1.2 million related to an
increase in the number of pilots employed and $1.3 million was for pilot
lodging and training expenses.
Maintenance Expense:
Maintenance expense increased by $2.2 million from $19.3 million to $21.5
million. Approximately $925,000 of the $2.2 million increase relates to an
increase in wages comprised of approximately $365,000 representing an increase
in the number of maintenance employees and approximately $560,000 related to an
increase in the average salaries of maintenance employees. The increase in
employees is primarily the result of additional maintenance personnel required
by new Federal Aviation Regulations, to begin the
8
<PAGE> 9
CRJ operation in Fort Worth and an increase in the number of aircraft in the
fleet. The percentage increase in average salary is the result of a wage
increase granted to the Company's mechanics.
Aircraft and Traffic Service Expense:
- ------------------------------------
Aircraft and traffic servicing expense increased to $21.4 million from $19.8
million. Of this $1.6 million increase, approximately $900,000 related to an
increase in the number of station agents employed and approximately $600,000
related to an 8.6% increase for station agents. Mesa has increased the number
of employees as well as their wages to improve customer service levels,
primarily in the Denver markets. The Company is currently evaluating these cost
increases and is working to standardize the number of employees necessary to
provide proper customer service.
General and Administrative Expense:
- ----------------------------------
General and administrative expense declined by $1.3 million to $5.8 million
primarily as a result of a reduction in the management incentive bonus accrual.
Depreciation, Amortization and Interest Expense:
- -----------------------------------------------
Depreciation and amortization increased by $3.8 million to $8.5 million and
interest expense increased by $5.4 million to $6.9 million. The increase in
interest expense, depreciation and amortization is primarily the result of the
purchase, in May 1996, of 69 aircraft which were previously financed under
operating leases, and an increase in the number of aircraft, in addition to the
69 aircraft previously mentioned, financed by debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and marketable securities at March 31, 1997 were $54 million
compared to $60 million at September 30, 1996. Cash, cash equivalents and
marketable securities are intended to be used for working capital, acquisitions
and capital expenditures.
Mesa had receivables of $50 million at March 31, 1997 which consist primarily
of amounts due from code-sharing partners United and USAir. Under the terms of
the United and USAir agreement, Mesa receives a substantial portion of its
revenues through the Airline Clearing House. Mesa has two code-sharing
agreements with United: one for Mesa and one for WestAir. The code-sharing
agreements governing the West Coast and Pacific Northwest operations have
different rates established per a formula as agreed between the parties for
each market ("pro-rate markets"). An increasing portion of Mesa's routes in
the Pacific Northwest and Los Angeles have become "contract markets" which,
unlike pro-rate markets, may be terminated upon 90 days notice by either United
or Mesa/WestAir. If a significant number of contract markets were to be
terminated, it could have a material adverse impact on the Company.
Mesa currently has a $20 million line of credit, renewable annually, of which
approximately $16 million is available. This line of credit is used primarily
to facilitate the issuance of letters of credit.
As of March 31, 1997, the Company had aggregate indebtedness of $378 million
payable to various parties under promissory notes issued in connection with the
purchase of 110 aircraft. The notes have interest rates ranging from 6.3
percent to 7.9 percent, maturities ranging through 2009 and require monthly
principal installments aggregating approximately $1.5 million.
In addition, the Company has significant lease obligations on existing
aircraft operated by the Company. These leases are classified as operating
leases and therefore are not reflected as liabilities on the balance sheet. At
March 31, 1997, 75 aircraft were leased by the Company with terms ranging up to
16-1/2 years.
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<PAGE> 10
Aircraft lease expense for the quarter ended March 31, 1997 was $11.4 million.
Future lease payments due under all aircraft operating leases were
approximately $260 million at March 31, 1997.
Mesa is planning to continue to operate its two Fokker 70 aircraft through
July 7, 1997 at existing lease rates. In addition, Mesa has agreed to pay
time-related costs for use of the aircraft through the date of return.
Mesa had an aircraft order with Bombardier, Inc. to acquire 25 de Havilland
Dash 8-200 aircraft worth $262.5 million with deliveries, which were scheduled
to begin in early 1996, through March 1998. Due to production delays, the
delivery schedule was not met and Mesa was granted an option to cancel up to
five of the 25 aircraft on order. As of March 31, 1997, Mesa had taken delivery
of 12 Dash 8-200 aircraft. The Dash 8-200 aircraft purchase agreement provides
for a spare parts supply program, which includes all parts to maintain the
aircraft, excluding engines and propellers, for a period of seven years. Mesa
will pay a fixed hourly charge per flight hour for this spare parts supply
program.
On April 23, 1997 Mesa gave notice to Bombardier of its decision to exercise the
option to cancel five of the Dash 8-200 aircraft on order and also gave notice
of the cancellation of its order for the eight remaining undelivered Dash 8-200
aircraft. Bombardier and Mesa are engaged in discussions to arrange a
commercial resolution of this cancellation that management believes will result
in no penalty to Mesa. Mesa does not believe there will be a substantial impact
on its operations or aircraft fleet requirements as a result of these
cancellations. The potential impact on operations and fleet requirements due to
cancellation of a portion of the aircraft order is a forward looking statement
that involves a number of risks and uncertainties which could cause actual
results to differ materially from the forward looking statement including,
among other factors, the success of the CRJ on routes which might have been
served by Dash 8-200 aircraft, and the availability of additional aircraft at
affordable rates presently used in other markets.
In January 1997, Mesa and Bombardier executed an agreement to acquire 16
Canadair Regional 50-passenger jet aircraft ("CRJs") worth approximately $320
million with deliveries to begin in February 1997. As of March 31, 1997, Mesa
had taken delivery of one CRJ aircraft. Mesa will trade in 12 Embraer Brasilia
aircraft for the 16 Canadair Regional jet aircraft on order. An $8.3 million
deposit has been made to Bombardier, Inc. related to this commitment, and
Bombardier will participate as needed to provide financing for the CRJs to be
acquired by Mesa. Mesa has options to acquire an additional 32 CRJ aircraft.
Costs approximating $1.0 million were incurred during the quarter ended
March 31, 1997 to establish an independent jet service, originating out of Fort
Worth, Texas operating as "Mesa Airlines". Some additional costs related to the
Fort Worth, Texas operation will be incurred as the operation expands to
include additional markets. Mesa commenced scheduled service between Fort Worth
and Houston, Texas on May 5, 1997.
Mesa is continuing the process of centralizing its operations. Mesa anticipates
incurring some additional costs in completing its centralization and expects
the process to be essentially complete by September 30, 1997.
During December 1995, the Federal Aviation Administration (FAA) announced
regulations which require commuter airlines with aircraft of 10 or more
passenger seats operating under Federal Aviation Regulations (FAR) Part 135
rules to begin operating those aircraft under FAR Part 121 regulations by the
end of March 1997. As of March 31, 1997, Mesa had completed the FAR Part 121
transition.
In anticipation of Mesa's conversion to FAR Part 121 and to address issues
raised in past inspections, the FAA had begun a special review of Mesa's
operations in June 1996. As a result of the special review by the FAA of Mesa's
operations, a consent order was signed in September 1996 assessing a compromise
civil penalty of $500,000. Mesa paid $250,000 of the compromise amount, and the
remaining $250,000 may be waived in September 1997 upon determination that Mesa
is in compliance with provisions of the consent order. Under the consent order,
Mesa has agreed to adopt operational standards that exceed the
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<PAGE> 11
requirements of the Federal Aviation Regulations. The consent order requires
that control of operational areas (maintenance, flight operations and training)
be consolidated under one central management team. The Company has until
September 1997 to complete the specified tasks. At present the Company is in
compliance with all items on the FAA's timetable. During any period of
noncompliance, extensions of time are available for a fee of $5,000 per item
for each 30-day extension.
Mesa presently anticipates ongoing operational costs in order to comply with
FAR Part 121 rules and consent order of approximately $2.5 million per year.
Mesa management is also monitoring the extent of the new costs to be imposed on
its 19- and 30-seat aircraft operations by implementation of additional
operating procedures required by FAR Part 121 which began in March 1997.
Efforts will be made to minimize the cost of these additional procedures while
fully meeting the new requirements.
The costs of compliance to comply with FAA Part 121 and ongoing operational
compliance costs are forward-looking statements that involve a number of risks
and uncertainties which could cause actual results to differ materially from the
forward-looking statements which include, among other factors, promulgation of
future FAA regulations, administrative rules, or informal requests by the FAA
requiring the hiring of additional personnel; the addition of new aircraft
mechanical equipment; the payment of additional fines; and the impact of future
laws or Congressional investigations which could have the effect of increasing
the costs of compliance.
In April 1997 Mesa and the Internal Revenue service (IRS) reached a settlement
of the examination of its federal income tax returns for the years 1989 through
1992. No significant additional expense is expected to be recognized by Mesa as
a result of this settlement.
OTHER EVENTS
In March 1997, Mesa announced an internal reorganization and newly appointed
positions in order to provide greater efficiencies to its organization. The
former operating divisions of Desert Sun Airlines, FloridaGulf Airlines,
Liberty Express and Mountain West along with the marketing and customers
service arms of Air Midwest Airlines and WestAir Commuter Airlines were
replaced with four new divisions aligned with Mesa's code-sharing agreements.
America West Express, Independent, United Express and US Airways Express,
divisions of Mesa Airlines, Inc.
Effective March 1, 1997, in connection with these changes, Bob Dynan, formerly
President of Liberty Express will become President for the United Express
division. Mike Lewis, formerly President of Mountain West Airlines will become
the America West Express division President and Peter Otradovec, formerly
Vice-President of Mesa's Fort Worth system, will take on the position of
President for the Independent division. A search is currently in progress to
select a president for the USAirways Express division.
US Airways has notified Mesa that the service agreement between Mesa and US
Airways may be amended to decrease Mesa's share of joint fares by approximately
3 percent. This proposed amendment to the US Airways Express service agreement
is currently being evaluated by Mesa. An alternative proposal has been
discussed with US Airways which may result in no decrease in US Airways Express
revenue.
Mesa has received and is operating sufficient Dash 8-200 aircraft to provide
the proper capacity for its 1997 summer schedule. As a result, Mesa expects
operations there to improve. However, the high cost of operation at Denver
International Airport are of continuing concern to Mesa management. Therefore,
substantial efforts are currently in process to reduce and control costs of the
Denver system. Expected improvement and increased efficiency in the Denver
operation is a forward-looking statement which involves a number of risks and
uncertainties which could cause actual results to materially differ from the
forward-looking statement. The following is a list of factors, among others,
that could cause actual results
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<PAGE> 12
to materially differ; changes in fuel price, changes in FAA Part 121
regulations increasing pilot turnover or failure to reduce the high costs of
operation in the Denver system resulting in the scheduling of fewer flights.
Should management's efforts to reduce costs in the Denver system not result in
acceptable operating margins, or should certain other operations become
unprofitable as a result of costs imposed by new Part 121 operating
regulations, service levels for unprofitable routes may be reduced and aircraft
transferred to more suitable opportunities or eliminated from the fleet.
The following table lists the aircraft operated by Mesa as of March 31, 1997:
<TABLE>
<CAPTION>
Number of Aircraft
----------------------- Passenger
Type of Aircraft Owned Leased Total Capacity
---------------------------------------------------------
<S> <C> <C> <C> <C>
Beechcraft 1900 108 10 118 19
Embraer Brasilia 2 29 31 30
BAe Jetstream 31 -- 21 21 19
Dash 8-200 -- 12 12 37
Dash 8-300 -- 1 1 50
Fokker 70 -- 2 2 78
CRJ -- 1 1 50
----------------------
Total 110 75 185
----------------------
</TABLE>
ART II. OTHER INFORMATION
Item 1. Legal Proceedings
During 1994, seven shareholder class action complaints were filed in the
United States District Court for the District of New Mexico against
Mesa, certain of its present and former corporate officers and
directors, and certain underwriters who participated in Mesa's June 1993
public offering of common stock. These complaints have been consolidated
by court order, and, after the court granted in part a motion to dismiss
in May 1996, an amended consolidated complaint has been filed alleging
that during various periods the above-named defendants and Mesa's
independent auditor (which has been named as a defendant in the current
complaint) caused or permitted Mesa to issue publicly misleading
financial statements and other misleading statements in annual and
quarterly reports to shareholders, press releases and interviews with
securities analysts. The current complaint alleges that these statements
misrepresented Mesa's financial performance and condition, its business,
the status of its operations, its earnings, its capacity to achieve
profitable growth and its future business prospects, all with the
purpose and effect of artificially inflating the market price of common
stock of Mesa throughout the relevant period. The complaint further
alleges that certain officers and directors of the Company illegally
profited from sales of Mesa common stock during these periods. The
complaint seeks damages against the defendants in an amount to be
determined at trial (including rescission and/or money damages as
appropriate), disgorgement of all insider trading profits earned by
defendants in connection with the sale of common stock of Mesa, and
reasonable attorney, accountant and expert fees. During October 1995,
the court granted class certification in the action.
12
<PAGE> 13
Mesa and the corporate officers and directors deny the allegations
made against them in these lawsuits. Further, Mesa and the corporate
officers and directors believe they have substantial and meritorious
defenses against these allegations and intend to continue to defend
their position vigorously. However, should an unfavorable resolution
of this litigation occur, it is possible that Mesa's future results of
operations or cash flows could be materially affected in a particular
period.
In a related case, in September 1994, a shareholder derivative suit
was filed in the United States District Court for the District of New
Mexico, purportedly on behalf of Mesa. The derivative lawsuit was
dismissed by the Court on August 12, 1996.
Item 2. Change in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders held on March 17, 1997, the
following was approved:
- All directors were elected as listed in the 1997 Proxy Statement
for the 1997 fiscal year.
Voted for Abstain
--------- -------
Larry L. Risley 20,871,167 2,232,795
E. Janie Risley 20,817,282 2,280,020
Jack Braly 20,957,728 2,148,154
Blaine M. Jones 20,886,111 2,220,696
George W. Pennington 20,933,006 2,173,729
Richard C. Poe 20,933,114 2,173,316
J. Clark Stevens 20,886,606 2,218,010
- Approval of selection of KPMG Peat Marwick LLP as independent
auditors for Mesa during fiscal 1997. Voted for: 23,046,481; voted
against: 87,554; abstain: 56,659.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
13
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the duly
authorized undersigned.
MESA AIR GROUP, INC.
Registrant
Date: May 14, 1997 /s/ W. Stephen Jackson
-----------------------------
W. Stephen Jackson
Chief Financial Officer
(Principal Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 55,095
<SECURITIES> 6,199
<RECEIVABLES> 42,112
<ALLOWANCES> 272
<INVENTORY> 25,941
<CURRENT-ASSETS> 140,201
<PP&E> 403,771
<DEPRECIATION> 68,679
<TOTAL-ASSETS> 701,744
<CURRENT-LIABILITIES> 63,184
<BONDS> 0
0
0
<COMMON> 101,346
<OTHER-SE> 124,747
<TOTAL-LIABILITY-AND-EQUITY> 701,744
<SALES> 121,412
<TOTAL-REVENUES> 121,412
<CGS> 116,762
<TOTAL-COSTS> 116,762
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,696
<INCOME-PRETAX> (1,431)
<INCOME-TAX> (556)
<INCOME-CONTINUING> (875)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (875)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
