**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-Q**

 

**ý****QUARTERLY REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE**

**SECURITIES EXCHANGE ACT OF1934.**

 

**For the quarterly period ended June 30, 2002**

 

**OR**

 

**o****TRANSITION REPORT PURSUANTTO SECTION 13 OR 15(d) OF THE**

**SECURITIES EXCHANGE ACT OF1934**

 

**For the transition period from           to          **

 

**Commission File No: 0-17895**

 

**MESABA HOLDINGS, INC.**

 

Incorporated under the laws of Minnesota

 

| **41-1616499**                   |
|----------------------------------|
| (I.R.S. Employer  ID No.)        |
|                             |
| **7501  26th Avenue South**      |
| **Minneapolis,  MN  55450** |
| **(612)  726-5151**              |

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15 (d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

                                                                Yesý           No o

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.

 

| **Class**                              |   | **Outstanding as of August 5, 2002** |
|----------------------------------------|--------|--------------------------------------|
| Common Stock Par value  $.01 per share |   | 20,298,141                           |

 

 

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PART I. FINANCIALINFORMATION

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Statements in this Quarterly Report on Form 10-Q under the caption“Management’s Discussion and Analysis of Financial Condition and Results ofOperations” as well as oral statements that may be made by the Company or byofficers, directors or employees of the Company acting on the Company’s behalf,that are not historical fact may constitute “forward looking statements” withinthe meaning of Section 27A of the Securities Act of 1933, as amended, andSection 21E of the Securities Exchange Act of 1934, as amended.  Such forward looking statements involvefactors that could cause the actual results of the Company to differ materiallyfrom historical results or from any results expressed or implied by suchforward-looking statements.  The Companycautions the public not to place undue reliance on forward-looking statements,which may be based on assumptions and anticipated events that do notmaterialize.  For a discussion of thefactors, which could cause the Company’s actual results to differ fromforward-looking statements, please see Item 1 of the Company’s Form 10-K forthe year ended March 31, 2002.

 

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Item 1.CONSOLIDATED FINANCIAL STATEMENTS

 

MESABA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share information)

 
|                                             |   | **June 30,  2002** |    | **March 31,  2002** |   |
|--------------------------------------------------|--------|--------------------|---------|---------------------|--------|
|                                             |   | **(Unaudited)**    |    |                |   |
| ASSETS                                           |   |               |    |                |   |
|                                             |   |               |    |                |   |
| CURRENT  ASSETS:                                 |   |               |    |                |   |
| Cash  and cash equivalents                       |   | $                  | 20,686  |                | $      | 31,250 |   |
| Short  term investments                          |   | 45,955             |    | 67,774              |   |
| Accounts  receivable, net                        |   | 43,030             |    | 41,202              |   |
| Inventories,  net                                |   | 7,384              |    | 7,600               |   |
| Prepaid  expenses and deposits                   |   | 6,942              |    | 5,094               |   |
| Deferred  income taxes and other                 |   | 9,610              |    | 9,701               |   |
| Total  current assets                            |   | 133,607            |    | 162,621             |   |
|                                             |   |               |    |                |   |
| PROPERTY  AND EQUIPMENT:                         |   |               |    |                |   |
| Flight  equipment                                |   | 76,039             |    | 74,686              |   |
| Other  property and equipment                    |   | 34,019             |    | 32,103              |   |
| Less:  Accumulated depreciation and amortization |   | (60,633            | )       | (56,174             | )      |
| Net  property and equipment                      |   | 49,425             |    | 50,615              |   |
|                                             |   |               |    |                |   |
| LONG  TERM INVESTMENTS                           |   | 35,684             |    | 4,068               |   |
| OTHER  ASSETS, net                               |   | 8,357              |    | 8,550               |   |
|                                             |   | $                  | 227,073 |                | $      | 225,854 |   |

 

The accompanying notes to the interim condensed consolidated financialstatements are an integral part of these condensed consolidated balance sheets.

 

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MESABA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(In thousands, except share and per share information)

 
|                                                                                                         |   | **June 30,  2002** |    | **March 31,  2002** |   |
|--------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|---------------------|--------|
|                                                                                                         |   | **(Unaudited)**    |    |                |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                    |   |               |    |                |   |
|                                                                                                         |   |               |    |                |   |
| CURRENT  LIABILITIES:                                                                                        |   |               |    |                |   |
| Accounts  payable                                                                                            |   | $                  | 10,188  |                | $      | 13,184 |   |
| Accrued  liabilities-                                                                                        |   |               |    |                |   |
| Payroll                                                                                                      |   | 8,686              |    | 9,537               |   |
| Maintenance                                                                                                  |   | 17,555             |    | 16,529              |   |
| Deferred  income                                                                                             |   | 2,485              |    | 2,485               |   |
| Other,  primarily property and income taxes                                                                  |   | 6,330              |    | 3,046               |   |
|                                                                                                         |   |               |    |                |   |
| Total  current liabilities                                                                                   |   | 45,244             |    | 44,781              |   |
|                                                                                                         |   |               |    |                |   |
| OTHER  NONCURRENT LIABILITIES                                                                                |   | 7,002              |    | 7,701               |   |
|                                                                                                         |   |               |    |                |   |
| SHAREHOLDERS’  EQUITY:                                                                                  |   |               |    |                |   |
| Common  stock,  $.01 par value; 60,000,000  shares authorized, 20,298,141 shares issued and outstanding |   | 203                |    | 203                 |   |
| Paid-in  capital                                                                                             |   | 50,508             |    | 50,508              |   |
| Warrants                                                                                                     |   | 16,500             |    | 16,500              |   |
| Other  comprehensive loss                                                                                    |   | (142               | )       | (21                 | )      |
| Retained  earnings                                                                                           |   | 107,758            |    | 106,182             |   |
| Total  shareholders’ equity                                                                             |   | 174,827            |    | 173,372             |   |
|                                                                                                         |   | $                  | 227,073 |                | $      | 225,854 |   |

 

The accompanying notes tothe interim condensed consolidated financial statements are an integral part ofthese condensed consolidated balance sheets.

 

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MESABA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share information)

(Unaudited)

 
|                                      |   | **Three  Months Ended June 30,** |    |
|-------------------------------------------|--------|----------------------------------|---------|
|                                      |   | **2002**                         |    | **2001** |   |
| OPERATING  REVENUES:                      |   |                             |    |   |   |
| Passenger                                 |   | $                                | 109,030 |   | $ | 112,304 |   |
| Other                                     |   | 4,324                            |    | 2,922 |   |
| Total  operating revenues                 |   | 113,354                          |    | 115,226 |   |
|                                      |   |                             |    |   |   |
| OPERATING  EXPENSES:                      |   |                             |    |   |   |
| Wages  and benefits                       |   | 31,789                           |    | 31,524 |   |
| Aircraft  fuel                            |   | 5,707                            |    | 6,676 |   |
| Aircraft  maintenance                     |   | 19,512                           |    | 20,559 |   |
| Aircraft  rents                           |   | 26,502                           |    | 25,611 |   |
| Landing  fees                             |   | 1,662                            |    | 1,671 |   |
| Insurance  and taxes                      |   | 4,325                            |    | 1,607 |   |
| Depreciation  and amortization            |   | 4,863                            |    | 4,919 |   |
| Administrative  and other                 |   | 12,767                           |    | 15,872 |   |
| Total  operating expenses                 |   | 107,127                          |    | 108,439 |   |
|                                      |   |                             |    |   |   |
| Operating  income                         |   | 6,227                            |    | 6,787 |   |
|                                      |   |                             |    |   |   |
| NONOPERATING  INCOME (EXPENSE):           |   |                             |    |   |   |
| Interest  expense                         |   | —                           |    | (53 | ) |
| Write  down of investment                 |   | (2,751                           | )       | — |   |
| Other,  net                               |   | 833                              |    | 1,245 |   |
| Other  income (loss), net                 |   | (1,918                           | )       | 1,192 |   |
|                                      |   |                             |    |   |   |
| Income  before provision for income taxes |   | 4,309                            |    | 7,979 |   |
|                                      |   |                             |    |   |   |
| PROVISION  FOR INCOME TAXES               |   | 2,733                            |    | 3,308 |   |
| NET  INCOME                               |   | $                                | 1,576   |   | $ | 4,671 |   |
|                                      |   |                             |    |   |   |
| NET  INCOME PER SHARE:                    |   |                             |    |   |   |
| Earnings  per share – Basic          |   | $                                | 0.08    |   | $ | 0.23 |   |
| Earnings  per share – Diluted        |   | $                                | 0.08    |   | $ | 0.22 |   |
|                                      |   |                             |    |   |   |
| WEIGHTED  AVERAGE SHARES OUTSTANDING:     |   |                             |    |   |   |
| Basic                                     |   | 20,298                           |    | 20,288 |   |
| Diluted                                   |   | 20,417                           |    | 20,824 |   |

 

The accompanying notes to the interim condensedconsolidated financial statements are an integral part of these condensedconsolidated financial statements.

 

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MESABA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 
|                                                                               |   | **Three  Months Ended June 30,** |   |
|------------------------------------------------------------------------------------|--------|----------------------------------|--------|
|                                                                               |   | **2002**                         |   | **2001** |   |
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                             |   |                             |   |   |   |
| Net  income                                                                        |   | $                                | 1,576  |   | $ | 4,671 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities- |   |                             |   |   |   |
| Depreciation  and amortization                                                     |   | 4,863                            |   | 4,919 |   |
| Write  down of investment                                                          |   | 2,751                            |   | — |   |
| Amortization  of deferred credits                                                  |   | (699                             | )      | (559 | ) |
| Changes  in current operating items:                                               |   |                             |   |   |   |
| Accounts  receivable, net                                                          |   | (1,828                           | )      | (1,137 | ) |
| Inventories,  net                                                                  |   | 216                              |   | (829 | ) |
| Prepaid  expenses and deposits                                                     |   | (1,848                           | )      | 274 |   |
| Accounts  payable and other                                                        |   | 222                              |   | (2,500 | ) |
| Net  cash provided by operating activities                                         |   | 5,253                            |   | 4,839 |   |
|                                                                               |   |                             |   |   |   |
| CASH  FLOWS FROM INVESTING ACTIVITIES:                                             |   |                             |   |   |   |
| Purchases  of short term investments                                               |   | (2,818                           | )      | (32,098 | ) |
| Sales  of short term investments                                                   |   | 21,886                           |   | 31,994 |   |
| Purchases  of long term investments                                                |   | (34,954                          | )      | — |   |
| Sales  of long term investments                                                    |   | 3,338                            |   | — |   |
| Purchases  of property and equipment, net                                          |   | (3,269                           | )      | (5,994 | ) |
| Net  cash used in investing activities                                             |   | (15,817                          | )      | (6,098 | ) |
|                                                                               |   |                             |   |   |   |
| CASH  FLOWS FROM FINANCING ACTIVITIES:                                             |   |                             |   |   |   |
| Repayment  of capital lease obligations                                            |   | —                           |   | (57 | ) |
| Net  cash used in financing activities                                             |   | —                           |   | (57 | ) |
|                                                                               |   |                             |   |   |   |
| NET  DECREASE IN CASH AND CASH EQUIVALENTS                                         |   | (10,564                          | )      | (1,316 | ) |
|                                                                               |   |                             |   |   |   |
| CASH  AND CASH EQUIVALENTS:                                                        |   |                             |   |   |   |
| Beginning  of period                                                               |   | 31,250                           |   | 18,916 |   |
| End  of period                                                                     |   | $                                | 20,686 |   | $ | 17,600 |   |
| SUPPLEMENTARY  CASH FLOW INFORMATION:                                              |   |                             |   |   |   |
| Cash  paid during period for:                                                      |   |                             |   |   |   |
| Interest                                                                           |   | $                                | — |   | $ | 53 |   |
| Income  taxes                                                                      |   | $                                | 957    |   | $ | 2,052 |   |

 

The accompanying notes to the interim condensedconsolidated financial statements are an integral part of these condensedconsolidated financial statements.

 

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MESABA HOLDINGS,INC.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIALSTATEMENTS

(In thousands unlessotherwise noted)

(Unaudited)

 

The condensed consolidated financial statements included herein havebeen prepared by Mesaba Holdings, Inc. (the “Company”), without audit, pursuantto the rules and regulations of the Securities and Exchange Commission.  The information furnished in the condensedconsolidated financial statements includes normal recurring adjustments andreflects all adjustments, which are, in the opinion of management, necessaryfor a fair presentation of such consolidated financial statements.  The Company’s business is seasonal and,accordingly, interim results are not indicative of results for a fullyear.  Certain information and footnotedisclosures normally included in financial statements prepared in accordancewith generally accepted accounting principles have been condensed or omittedpursuant to such rules and regulations, although the Company believes that thedisclosures are adequate to make the information presented not misleading.  It is suggested that these condensedconsolidated financial statements be read in conjunction with the consolidatedfinancial statements for the year ended March 31, 2002, and the notes thereto,included in the Company’s Annual Report on Form 10-K filed with the Securitiesand Exchange Commission.

 

1. Basis of Presentation

 

The condensed consolidated financial statements include the accounts ofthe Company and its subsidiary, Mesaba Aviation, Inc. (“Mesaba”).   All significant intercompany balances havebeen eliminated in consolidation.

 

2. Agreements withNorthwest 

 

Mesaba operates as a regional air carrier providing scheduled passengerand airfreight service as Mesaba Airlines/Northwest Airlink and MesabaAirlines/Northwest Jet Airlink under two separate agreements with NorthwestAirlines, Inc. (“Northwest”) to 103 cities in the United States and Canada fromNorthwest’s hub airports, Minneapolis/St. Paul, Detroit, and Memphis.

 

Under the Airline Services Agreement (the “Airlink Agreement”), Mesabaoperates SAAB 340 jet-prop aircraft for Northwest.  This agreement provides for exclusive rights to designatedservice areas and extends through June 30, 2007, automatically renewingindefinitely thereafter.  EitherNorthwest or Mesaba may terminate the Airlink Agreement on 365 days notice.  In addition, Mesaba purchases fuel, reservationsystems, and ground handling and other services from Northwest.  For these services, Mesaba paid to Northwest$4.9 million and $6.8 million for the three months ended June 30, 2002 and2001, respectively.

 

Under the Regional Jet Services Agreement (the “Jet Agreement”), Mesabaoperates Avro RJ85 (“RJ85”) regional jets for Northwest.  This agreement extends through April 30,2007, automatically renewing indefinitely thereafter.  Northwest may terminate the Jet Agreement on April 25, 2004 withat least 180 days or up to 365 days prior notice.  Under the Jet Agreement, Mesaba is not required to provide fueland airport and passenger related services.

 

7

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Under the agreements, all Mesaba flights appear in Northwest’stimetables and Mesaba receives ticketing and certain check-in, baggage andfreight-handling services from Northwest at certain airports.  Mesaba also benefits from its relationshipwith Northwest through advertising and marketing programs.  The Airlink Agreement and Jet Agreementprovide for certain incentive payments from Northwest to Mesaba based onachievement of certain operational or financial goals.  Such incentives totaled $2.0 millionand $1.5 million for the three months ended June 30, 2002 and 2001,respectively, and are included in passenger revenues in the accompanyingcondensed consolidated statements of operations.  Approximately 74% and 69% of the June 30, 2002 and March 31, 2002accounts receivable balances in the accompanying condensed consolidated balancesheets are due from Northwest.

 

Although Mesaba maintainsan expanding air system serving different markets, loss of Mesaba’s affiliationwith Northwest or Northwest’s failure to make timely payment of amounts owed toMesaba or to otherwise materially perform under the Airlink or Jet Agreementswould have a material adverse effect on the Company’s operations, financialposition and cash flows.  Northwest andMesaba review contract compliance on a periodic basis.

 

3.               Investments

 

Investments consist principally of municipal securities and corporatebonds and are classified as available-for-sale as of June 30, 2002 and March31, 2002.  Available-for-saleinvestments are reported at fair value with unrealized gains and lossesexcluded from operations and reported as a separate component of shareholders’equity, except for other-than-temporary impairments, which are reported as acharge to current operations and result in a new cost basis for the investment.  As of June 30, 2002, the Company recorded another-than-temporary impairment of $2.8 million on one investment andestablished a new cost basis for the investment of $.7 million.  Any further changes to the value of theinvestment will be recorded within the condensed consolidated statement ofoperations.  The Company classifiesinvestments that mature within one year as short term.  Investments with maturity date greater thanone year are classified as long term.

 

4.   Restructuring Charge 

 

During September 2001, Mesaba initiated a reduction in personnel as aresult of the impact of the terrorist attacks of September 11, 2001.  Mesaba recorded a one-time pre-tax charge ofapproximately $1.1 million to cover the expected severance and related costs inthe second quarter of fiscal year 2002. The reduction in personnel was completed by September 30, 2001 andaffected 382 individuals in all areas of Mesaba.** **As of June 30, 2002, Mesaba has paid and charged against theliability approximately $.7 million and reduced the liability by approximately$.3 million in the third quarter of fiscal year 2002 due to the employment ofcertain terminated employees by others. The remaining reserve is approximately $.1 million as of June 30, 2002.

 

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5.   Earnings Per Share

 

Basic earnings per common share is computed by dividing net income bythe weighted average number of shares of common stock outstanding during theperiod.  Diluted earnings per share iscomputed by dividing net income by the sum of the weighted average number ofshares of common stock outstanding plus all additional common stock that wouldhave been outstanding if potentially dilutive common shares related to stockoptions and warrants had been issued. Options and warrants totaling 6,128 and 4,684 were excluded from thecomputation of diluted earnings per share for the three months ended June 30,2002 and 2001, respectively, as the impact would have been anti-dilutive.  The following table reconciles the number ofshares utilized in the earnings per share calculations:

 
|                                                                                                         |   | **Three  Months Ended  June 30,** |   |
|--------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                                                         |   | **2002**                          |   | **2001** |   |
|                                                                                                         |   |                              |   |   |   |
| Net  Income                                                                                                  |   | $                                 | 1,576  |   | $ | 4,671 |   |
| For Earnings Per  Common Share - Basic:                                                                      |   |                              |   |   |   |
| Weighted average  number of issued shares outstanding                                                        |   | 20,298                            |   | 20,288 |   |
| Effect of Dilutive  Securities:                                                                              |   |                              |   |   |   |
| Computed shares  outstanding under the Company’s stock option plan utilizing the treasury  stock method |   | 88                                |   | 92 |   |
| Computed  shares outstanding under warrants issued utilizing the treasury stock method                       |   | 31                                |   | 444 |   |
| For Earnings Per  Common Share - Diluted:                                                                    |   |                              |   |   |   |
| Weighted  average common shares and common share equivalents outstanding                                     |   | 20,417                            |   | 20,824 |   |
| Earnings  Per Share - Basic                                                                                  |   | $                                 | 0.08   |   | $ | 0.23 |   |
| Earnings  Per Share - Diluted                                                                                |   | $                                 | 0.08   |   | $ | 0.22 |   |

 

6.               Comprehensive Income

 

The following table presents the calculation of comprehensiveincome.  Comprehensive income has noimpact on reported net income.  Thecomponents of comprehensive income are as follows:

 
|                                                                       |   | **Three  Months Ended  June 30,** |   |
|----------------------------------------------------------------------------|--------|-----------------------------------|--------|
|                                                                       |   | **2002**                          |   | **2001** |   |
|                                                                       |   |                              |   |   |   |
| Net Income                                                                 |   | $                                 | 1,576  |   | $ | 4,671 |   |
| Unrealized  gains (losses) of investments classified as available for sale |   | (142                              | )      | 49 |   |
| Comprehensive  income                                                      |   | $                                 | 1,434  |   | $ | 4,720 |   |

 

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7.                     NewAccounting Pronouncements

 

On June 1, 2001, the FASB issued SFAS No. 142, “Goodwill and OtherIntangible Assets”.  SFAS No. 142addresses how goodwill and other intangible assets that are acquiredindividually or with a group of other assets (but not those acquired in abusiness combination) should be accounted for in financial statements upontheir acquisition and after they have been initially recognized.  The provisions of SFAS No. 142 are requiredto be applied starting with fiscal years beginning after December 15,2001.  The Company adopted SFAS No. 142on April 1, 2002 and the adoption did not have a material impact on theCompany’s results of operations, financial position or cash flows.

 

The FASB recently issued Statement Nos. 144, 145 and 146.  Management of the Company is in the processof evaluating each of these statements but does not believe the adoption thesestatements will have a material impact on the Company’s results of operations,financial position or cash flows.

 

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Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

Results of Operations for the Three Months Ended June30, 2002 and 2001

(As used herein, “unitcost” means operating cost per available seat mile.  Dollars and shares outstanding are expressed in thousands unlessotherwise noted.)

 

Earnings Summary.The Company reported net income of $1,576 or $0.08 diluted earnings per sharefor the three months ended June 30, 2002, compared to $4,671 or $0.22 dilutedearnings per share for the three months ended June 30, 2001.

 

Operating Revenues.  Total operating revenues decreased 1.6% inthe first quarter of fiscal 2003 to $113,354 from $115,226 in the prior year’sfirst fiscal quarter, and revenue passenger miles decreased 12.4% to 409,742from 467,872.  Revenue per availableseat mile (“RASM”) increased to $0.163 from $0.154 in the previous year’s firstfiscal quarter due to Mesaba’s strong operating performance, the achievement ofthe Northwest contract incentives and increased ground handlingactivities.  Mesaba’s average passengerload factor (percentage of seats filled on each aircraft on average = RPMs /ASMs ) was 58.9% in the first fiscal quarter compared to 62.6% during the sameperiod a year ago.

 
|                                  |   | **Three  months ended June 30,** |   |
|---------------------------------------|--------|----------------------------------|--------|
| **Operating statistics**              |   | **2002**                         |   | **2001** |   |
| Revenue  passengers carried           |   | 1,426,522                        |   | 1,707,415 |   |
| Revenue  passenger miles (000’s) |   | 409,742                          |   | 467,872 |   |
| Available  seat miles (000’s)    |   | 695,487                          |   | 747,714 |   |
| Passenger  load factor                |   | 58.9                             | %      | 62.6 | % |
| Revenue  per available seat mile      |   | $                                | .163   |   | $ | .154 |   |
| Departures                            |   | 58,669                           |   | 68,249 |   |
| Aircraft  in service                  |   | 116                              |   | 109 |   |
|                                       |        |                                  |        |  |  |  |  |

 

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Operating Expenses.  Total operating expenses decreased 1.2% inthe first quarter of fiscal 2003 to $107,127 from $108,439 in the prior year’sfirst fiscal quarter.  Cost peravailable seat mile (“CASM”) increased to $0.154 from $0.145 in the previousyear’s first fiscal quarter due to increased insurance costs, aircraft rentsand labor associated with ground handling activities.  Available seat miles decreased to 695,487 in the first quarter offiscal 2003 from 747,714 in the year earlier quarter due to decreased aircraftutilization.  The significant change in unit cost year over year was due to therelationship of fixed operating costs to reduced aircraft utilization.

 
| **Operating Costs Per  Available Seat Mile (Unit Cost)** |     | **Three  months ended June 30,** |     |
|----------------------------------------------------------|----------|----------------------------------|----------|
|                                                     | **2002** |                             | **2001** |   |
| Wages  and benefits                                      |     | 4.6                              | ¢   | 4.2 | ¢ |
| Aircraft  fuel                                           |     | 0.8                              |     | 0.9 |   |
| Aircraft  maintenance                                    |     | 2.8                              |     | 2.8 |   |
| Aircraft  rents                                          |     | 3.8                              |     | 3.4 |   |
| Landing  fees                                            |     | 0.3                              |     | 0.2 |   |
| Insurance  and taxes                                     |     | 0.6                              |     | 0.2 |   |
| Depreciation  and amortization                           |     | 0.7                              |     | 0.7 |   |
| Administrative  and other                                |     | 1.8                              |     | 2.1 |   |
| Total                                                    |     | 15.4                             | ¢   | 14.5 | ¢ |

 

Wages and benefitsincreased 0.8% to $31,789 in the first quarter of fiscal 2003 from $31,524 inthe first quarter of fiscal 2002 due primarily to increased customer service staffing at the Minneapolis/St. Paul and Detroithub locations.

 

Aircraft fuel decreased 14.5% to $5,707 in the first quarter of fiscal2003 from $6,676 in the first quarter of fiscal 2002 due primarily to thecombined impact of reduced turbo-prop aircraft utilization and fuelconsumption.  Provisions of the AirlinkAgreement with Northwest protect Mesaba from changes in fuel prices.  Mesaba’s actual cost of fuel, includingtaxes and pumping fees, was 83.5 cents per gallon for both periods.  Northwest provides fuel for the jetoperation at its expense.

 

Aircraft maintenance,excluding wages and benefits, decreased 5.1% to $19,512 in the first fiscalquarter of fiscal 2003 from $20,559 in the first quarter of fiscal 2002 dueprimarily to lower aircraft utilization which reduced Mesaba’s flight hourbased maintenance costs.

 

Aircraft rents increased3.5% to $26,502 in the first quarter of fiscal 2003 from $25,611 in the firstquarter of fiscal 2002 due to net addition of seven turbo-prop aircraft.  Mesaba added eleven aircraft from PinnacleAirlines and returned four aircraft to a leasing company over the last twoquarters.

 

Landing fees decreased0.5% to $1,662 in the first quarter of fiscal 2003 from $1,671 for the firstquarter of fiscal 2002 primarily due to offsetting impact of lower flightactivity and increased landing fees charged by airports.  Northwest provides landing fees for the jetoperation at their expense.

 

Insurance and taxesincreased 169.1% to $4,325 in the first quarter of fiscal 2003 from $1,607 forthe first quarter of fiscal 2002 due primarily to increased rates andsurcharges imposed after September 11, 2001.

 

Depreciation and amortizationdecreased 1.1% to $4,863 in the first quarter of fiscal 2003 compared to $4,919in the first quarter of fiscal 2002.

 

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Administrative and otherdecreased 19.6% to $12,767 in the first quarter of fiscal 2003 from $15,872 inthe first quarter of fiscal 2002 due toreduced flight crew training and hotel costs incurred as a result of thereduction in flight activity.

 

Operating Income.  Operating income totaled $6,227 in the firstfiscal quarter of 2003, as compared to operating income of $6,787 a yearago.  Mesaba’s operating margindecreased to 5.5% from 5.9% in the prior year’s first fiscal quarter.

 

Nonoperating Income(Expense). Nonoperating expense increased to $1,918 in the first fiscal quarter offiscal 2003 from income of $1,192 for the first quarter of fiscal 2002 dueprimarily to the recognition of a $2,751 write down of an investment in a  WorldCom bond.  Nonoperating income was also lower due to lower interest ratesearned on the Company’s cash and investments.

 

Provision for IncomeTaxes. The Company’s blended effective tax rate was 63.4% forthe first fiscal quarter of 2002 as compared to 41.5% in the year earlierquarter.  Mesaba adjusts its effectivetax rate quarterly based on forecasted operating results for the fiscal year. * *The effective taxrate increased due to consistent levels of nondeductible expenses being appliedover lower pre-tax earnings.

 

Liquidity and CapitalResources

 

The Company’s working capital decreased to $88.4 million with a currentratio of 2.95 at June 30, 2002 compared to $117.8 million and 3.6 at March 31,2002.  Cash and cash equivalentsdecreased by $10.6 million to $20.7 million at June 30, 2002.  The primary change in the Company’s workingcapital, current ratio and level of cash and cash equivalents is the purchaseof investments with maturities in excess of one year from June 30, 2002.  In February 2002, the Company implemented anew investment policy which reduced investment concentration from ten percentto five percent and allowed its investment managers to purchase investmentswith a maximum maturity of two years from one year and an average portfoliolife to one year from six months.  Longterm investments increased $31.6 million to $35.7 million at June 30, 2002compared to $4.1 million at March 31, 2002.

 

Investments consist principally of municipal securities and corporatebonds and are classified as available-for-sale as of June 30, 2002 and March31, 2002.  Available-for-saleinvestments are reported at fair value with unrealized gains and lossesexcluded from operations and reported as a separate component of shareholders’equity, except for other-than-temporary impairments, which are reported as acharge to current operations and result in a new cost basis for theinvestment.  The Company classifiesinvestments that mature within one year as short term.  Investments with maturities greater than oneyear are classified as long term.

 

Because of the WorldCom bankruptcy proceedings and current marketvaluation of its bonds, the Company recorded within the three months ended June30, 2002 an other-than-temporary impairment of $2.8 million in the condensedconsolidated financial statements regarding an investment in a WorldCom bond.  Management established a new cost basis forthe WorldCom investment of $.7 million based on the quoted market price as ofJune 30, 2002.  Any further changesto the value of the WorldCom investment will be recorded within the condensedconsolidated statement of operations pending ultimate disposition of theinvestment.  Management does not believethe write down of the WorldCom investment will materially impact the remainderof the Company’s investment portfolio.

 

13

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During the three monthsending June 30, 2002, Mesaba’s fleet consisted of 116 aircraft covered underoperating leases with remaining terms of three months to 15 years and aggregatemonthly lease payments of approximately $9.0 million.  Mesaba has the ability to return to the lessor up to 20turbo-prop aircraft which, if all were returned, would reduce the Mesaba’saggregate monthly lease payment by a total of $.6 million.  Mesaba leases all of its Saab 340 aircraft,either directly from aircraft leasing companies or through subleases withNorthwest under operating leases with original terms up to 17.5 years.  Mesaba leases its RJ85 aircraft fromNorthwest under operating leases with terms of up to 10 years.  Continued funding of the monthly minimumlease payments is ensured as long as the current operating contracts withNorthwest are in effect.

 

Approximately74**%**of the Company’s accounts receivable balance as of June 30, 2002 is due fromNorthwest.  Lossof the Company’s affiliation with Northwest or Northwest’s failure to maketimely payment of amounts owed to the Company or to otherwise materiallyperform under the Airlink or Jet Agreement for any reason would have a materialadverse effect on the Company’s operations and financial results.

 

The Company has historicallyrelied upon cash and cash equivalents, investments and internally generatedfunds to support its working capital requirements.  Management believes that funds from operations will provideadequate resources for meeting non-aircraft capital needs in fiscal 2003.

 

New Accounting Pronouncement

 

On June 1, 2001, the FASB issued SFAS No. 142, “Goodwill and OtherIntangible Assets”.  SFAS No. 142addresses how goodwill and other intangible assets that are acquiredindividually or with a group of other assets (but not those acquired in abusiness combination) should be accounted for in financial statements upontheir acquisition and after they have been initially recognized.  The provisions of SFAS No. 142 are requiredto be applied starting with fiscal years beginning after December 15,2001.  The Company adopted SFAS No. 142on April 1, 2002 and the adoption did not have a material impact on theCompany’s results of operations, financial position or cash flows.

 

The FASB recently issued Statement Nos. 144, 145 and 146.  Management of the Company is in the processof evaluating each of these statements but does not believe the adoption thesestatements will have a material impact on the Company’s results of operations,financial position or cash flows.

 

14

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Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK

 

The Company’s principal market risks are the availability of jet fueland changes in interest rates.

 

The Company has not experienced difficulties with fuel availability andexpects to be able to obtain fuel at prevailing prices in quantities sufficientto meet its future requirements.  As apart of the Airlink Agreement, Northwest bears the economic risk of fuel pricefluctuations for Mesaba’s fuel requirements. As such, the Company reasonably expects that its results of operationswill not be directly affected by fuel price volatility.

 

The Company’s investment policy requires purchasing investments withhigh credit quality issuers and limits the amount of credit exposure to any oneissuer.  The Company’s investmentsprincipally consist of municipal securities and corporate bonds with varyingmaturity dates, all of which are two years or less.  Because of the credit criteria of the Company’s investmentpolicies, the primary market risk associated with these investments is interestrate risk.  The Company does not usederivative financial instruments to manage interest rate risk or to speculateon future changes in interest rates.  A10% increase in interest rates would result in an approximate $275 decrease inthe fair value of the Company’s available-for-sale securities as of June 30,2002, but no material impact on the results of operations or cash flows.

 

Part II.

 

Item 1.    Legal Proceedings

 

On March 2, 2002, Mesaba filed a lawsuit in Minnesota State Courtagainst Federal Insurance Company, a subsidiary of The Chubb Corporation, forcoverage of the business interruption, extra expense and fire suppression forthe Detroit hangar that was destroyed due to a severe storm in May 2000.  The ultimate outcome of this lawsuit cannotbe predicted with certainty.

 

Item 4.  Submissions ofMatters to a Vote of Security Holders.

 

There were no matters submitted to a vote of the Company’s shareholdersduring the three–month period ended June 30, 2002.

 

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Item 6.  Exhibits and Reports on Form 8-K

 
| (a)  Exhibits                                                                                                                                                                                                                                                                                                                                                                                 |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 3A.  Restated  Articles of Incorporation.   Incorporated by reference to Exhibit 3.1 to the Company’s Form 10-Q  for the quarter ended September 31, 1995.                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 3B.  Articles  of Amendment to the Company’s Articles of Incorporation.  Incorporated by reference to exhibit 3A to  the Company’s 10-Q for the quarter ended September 30, 1997.                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 3C.   Bylaws.  Incorporated by  reference to Exhibit 3.2 to the Form S-4, Registration No. 333-22977.                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 4A.  Specimen  certificate for shares of the Common Stock of the Company.  Incorporated by reference to Exhibit 4A to  the Company’s Form 10-K for the year ended March 31, 1989.                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 4B.  Common  Stock Purchase Warrant dated October 25, 1996 issued to Northwest Airlines,  Inc.  Incorporated by reference to  Exhibit 4A to the Company’s 10-Q for the quarter ended September 30, 1996.                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 4C.  Common  Stock Purchase Warrant dated October 17, 1997 issued to Northwest Airlines,  Inc.  Incorporated by reference to  Exhibit 4A to the Company’s 10-Q for the quarter ended September 30, 1997.                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 9A.   Shareholder’s Agreement regarding election of representative of  Northwest Aircraft Inc. to Board of Directors.  Incorporated by reference to Exhibit 9A to Mesaba’s  Registration Statement on Form S-1, Registration No. 33-820.                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10A. FAA Air Carrier Operating Certificate.  Incorporated by reference Exhibit 10A to  the Company’s Form 10-K for the year ended March 31, 1989.                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10B. 1986 Stock Option Plan (as Amended).  Incorporated by reference to Exhibit 10D  to the Company’s Form 10-K for the year ended March 31, 1990.                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10C. 1991 Director Stock Option Plan.  Incorporated by reference to Exhibit 10(i)  to the Company’s Registration Statement on Form S-8, Registration No.  33-62386.                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10D. CAB Part 298 Registration.  Incorporated by reference to Exhibit 10G  to Mesaba’s Form 10-K for the year ended March 31, 1987.                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10E. Revolving Credit and Term Loan Agreement Dated  as of November 7, 1988 between Norwest Bank Minnesota, N.A. and Mesaba  Aviation, Inc.  Incorporated by  reference to Exhibit 10F to the Company’s Form 10-K for the year ended March  31, 1989.                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10F. Airline Services Agreement between Mesaba Aviation,  Mesaba Holdings, Inc. and Northwest Airlines, Inc. dated July 1, 1997  (certain portions of this agreement are subject to an order granting  confidential treatment pursuant to Rule 24b-2). Incorporated by reference to  Exhibit 10A to the Company’s Form 10-Q for the quarter ended September 30,  1997.                        |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10G. Regional Jet Services Agreement between Mesaba  Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines, Inc., dated  October 25, 1996 (certain provisions of this agreement are subject to an  order granting confidential treatment pursuant to Rule 24b-2).  Incorporated by reference to Exhibit 10A  to the Company’s Form 10-Q for the quarter ended September 30, 1996. |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10H. Foreign Air Carrier Operating Certificates  issued May 6, 1991 by the Canadian Department of Transport.  Incorporated by reference to Exhibit 10H  to the Company’s Form 10-K for the year ended March 31, 1991.                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10I. Facility Lease and Operating Agreement dated  April 18, 1988, between the Metropolitan Airport Commission and Mesaba Aviation,  Inc.  Incorporated by reference to  Exhibit 10K to the Company’s Form 10-K for the year ended March 31,  1989.  Incorporated by reference to  Exhibit 10J to the Company’s Form 10-K for the year ended March 31, 1997.                   |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10J. Ninth Amendment to Revolving Credit and Term  Loan Agreement and Amendment to Revolving Note between Mesaba Aviation, Inc.  and Norwest Bank Minnesota, National Association.  Incorporated by reference to Exhibit 10J to the Company’s Form  10-K for the year ended March 31, 1997.                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10K. Letter of Credit and Reimbursement Agreement  dated as of August 1, 1990 between Mesaba Aviation, Inc. and Norwest Bank  Minnesota, National Association.   Incorporated by reference to Exhibit 10A to the Company’s Form 10-Q  for the quarter ended September 30, 1990.                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10L. Special Facilities Lease dated as of August 1,  1990 between Charter County of Wayne, State of Michigan and Mesaba Aviation,  Inc. Incorporated by reference to Exhibit 10B to the Company’s Form 10-Q for  the quarter ended September 30, 1990.                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10M. Ground Lease dated August 1, 1990 between  Charter County of Wayne, State of Michigan and Mesaba Aviation, Inc.  Incorporated by reference to Exhibit 10C  to the Company’s Form 10-Q for the quarter ended September 30, 1990.                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10N. Combination Leasehold Mortgage, Assignment of  Rents, Security Agreement and Fixture Financing Statement dated as of August  1, 1990 between Mesaba Aviation, Inc. and Norwest Bank Minnesota, National  Association.  Incorporated by  reference to Exhibit 10D to the Company’s Form 10-Q for the quarter ended  September 30, 1990.                                              |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10O. Letter Agreement dated December 24, 1992  relating to the repurchase of shares of Common Stock from Northwest Aircraft,  Inc.  Incorporated by reference to  Exhibit 10EE to the Company’s Form 10-K for the year ended March 31, 1993.                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                               |
| 10P. DOT Certificate of Public Convenience and  Necessity dated October 26, 1992.   Incorporated by reference to Exhibit 10FF of the Company’s Form 10-K  for the year ended March 31, 1993.                                                                                                                                                                                             |

 

16

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| 10Q. Stock Purchase Agreement between AirTran  Corporation and Carl R. Pohlad dated as of October 18, 1993.  Incorporated by reference to Exhibit 10 of  the Company’s Form 8-K dated October 19, 1993.                                                                                                                                                                                              |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10R. 1994 Stock Option Plan (as amended July 1,  1997).  Incorporated by reference to  Exhibit 10B to the Company’s Form 10-Q for the quarter ended September 30,  1997.                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10S. Agreement between AirTran Corporation, Mesaba  Aviation, Inc., Northwest Aircraft, Inc., and Northwest Airlines, Inc. dated  May 18, 1995.  Incorporated by  reference to Exhibit 10A of the Company’s Form 8-K as filed May 18, 1995.                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10T. Preliminary Agreement between AirTran  Corporation, Mesaba Aviation, Inc. and Northwest Airlines, Inc. dated March  8, 1995.  Incorporated by reference to  Exhibit 10 of the Company’s Form 8-Kas filed March 8, 1995.                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10U. Term Sheet Proposal for the Acquisition of Saab  340 Aircraft by Mesaba Aviation, Inc. dated March 7, 1996 (certain portions  of this document have been deleted pursuant to an application for  confidential treatment under Rule 24b-2).   Incorporated by reference to Exhibit 10U to the Company’s Form 10-K/A  for the year ended March 31, 1996.                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10V. Letter Agreement regarding Saab 340B Plus  Acquisition Financing dated March 7, 1996 (certain portions of this document  have been deleted pursuant to an application for confidential treatment under  Rule 24b-2). Incorporated by reference to Exhibit 10V to the Company’s Form  10-K/A for the year ended March 31, 1996.                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10W. Letter Agreement of April 26, 1996 relating to  Airline Services Agreement between Mesaba Aviation, Inc. and Northwest  Airlines,  Inc. (certain portions of  this document have been deleted pursuant to an application for confidential  treatment under Rule 24b-2).   Incorporated by reference to Exhibit 10W to the Company’s Form 10-K/A  for the year ended March 31, 1996.        |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10X. Letter Agreement of October 25, 1996 relating  to Regional Jet Services Agreement between Mesaba Aviation, Inc. and  Northwest Airlines, Inc. (certain portions of this document have been deleted  pursuant to an application for confidential treatment under Rule 24b-2).  Incorporated by reference to Exhibit 10A  to the Company’s Form 10-Q/A for the quarter ended September 30, 1996.  |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10Y. Amendment No. 1 to Regional Jet Services  Agreement dated April 1, 1998 between Mesaba Holdings, Inc., Mesaba Aviation,  Inc. and Northwest Airlines, Inc. (certain portions of this document have  been deleted pursuant to an application for confidential treatment under Rule  24b-2). Incorporated by reference to Exhibit 10A to the Company’s Form 10-Q  for the quarter ended June 30, 1998. |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10Z. Amendment No. 2 to Regional Jet Services  Agreement dated June 2, 1998 between Mesaba Holdings, Inc., Mesaba Aviation,  Inc. and Northwest Airlines, Inc. (certain portions of this document have  been deleted pursuant to an application for confidential treatment under Rule  24b-2). Incorporated by reference to Exhibit 10B to the Company’s Form 10-Q  for the quarter ended June 30, 1998.  |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10AA.Lease Agreement, dated as of July 1, 1999,  between Kenton County Airport Board and Mesaba Aviation, Inc.  Incorporated by reference to Exhibit 10AA  to the Company’s Form 10-K for the year ended March 31, 2000.                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10BB.Ground Lease, dated as of September 1, 1999,  between Kenton County Airport Board and Mesaba Aviation, Inc. Incorporated by  reference to Exhibit 10BB to the Company’s Form 10-K for the year ended March  31, 2000.                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 10CC.Letter Agreement, dated November 20, 2001,  between Mesaba Holdings, Inc., Mesaba Aviation, Inc. and Northwest Airlines,  Inc. relating to service expansion and rate reductions.  Incorporated by reference to the Company’s  Form 8-K filed November 23, 2001.                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                           |
| 21. Subsidiaries.   Incorporated by reference to Exhibit 21 to the Company’s Form 10-K for  the year ended March 31, 1997.                                                                                                                                                                                                                                                                           |

 

17

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(b)          Reportson Form 8-K

 

On July 11, 2002, theCompany filed a Form 8-K that disclosed the engagement of Deloitte and ToucheLLP as the Company’s new independent auditor for the fiscal year ending March31, 2003.  Concurrently, the Companyannounced the dismissal of Arthur Andersen LLP as the Company’s independentauditor.

 

18

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SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                   |   | Mesaba Holdings, Inc.                                                                                              |
|------------------------|--------|--------------------------------------------------------------------------------------------------------------------|
|                   |   |                                                                                                               |
| Dated: August 14, 2002 |   | By:                                                                                                                |  /s/ Robert  E. Weil |
|                   |   | Robert E. Weil                                                                                                     |
|                   |   | Vice President, Chief  Financial Officer and  Treasurer (principal financial officer and an authorized  signatory) |
|                   |   |                                                                                                               |
|                   |   |                                                                                                               |

 

CERTIFICATION PURSUANT TO

SECTION 906 OF THESARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Mesaba Holdings, Inc. (the“Company”) on Form 10-Q for the quarterly period ended June 30, 2002, as filedwith the Securities and Exchange Commission on the date hereof (the “Report”),the undersigned hereby certify pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Reportfully complies with the requirements of Section 12(a) or 15(d) of theSecurities Exchange Act of 1934; and (2) the information contained in theReport fairly presents, in all material respects, the financial condition andresults of operations of the Company.

 

 
| Dated: August 14, 2002 |   | By:                                                    | /s/ Paul F. Foley  |
|------------------------|--------|--------------------------------------------------------|--------------------|
|                   |   | Paul F. Foley                                          |
|                   |   | President and  Chief Executive Officer                 |
|                   |   |                                                   |
| Dated: August 14, 2002 |   | By:                                                    | /s/ Robert E. Weil |
|                   |   | Robert E. Weil                                         |
|                   |   | Vice President,  Chief Financial Officer and Treasurer |

 

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