SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____to_____
Commission file number: 0-6867
LYNTON GROUP, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-2688055
(State or other jurisdiction (I.R.S. Employer
of Identification Number)
incorporation or organization)
9 AIRPORT ROAD
MORRISTOWN MUNICIPAL AIRPORT
MORRISTOWN, NEW JERSEY 07960
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (201) 292-9000
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
Indicate the number of shares outstanding of each of the Issuer's
classes of common stock, as of the latest practicable date:
Common, $.30 par value per share: 1,962,177
Outstanding as of August 1, 1996
<PAGE>
Part 1 - FINANCIAL INFORMATION
LYNTON GROUP, INC. AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
PERIOD ENDED JUNE 30, 1996
ITEM PAGE
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets -
June 30, 1996 and September 30, 1995 3
Condensed Consolidated Statements of Operations -
For the Three and Nine months ended June 30, 1996
and 1995 4
Condensed Consolidated Statements of Cash Flows -
For the Nine months ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and results of operations 7-8
2
<PAGE>
LYNTON GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1995
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH $177,983 $137,322
ACCOUNTS RECEIVABLE 1,603,162 1,948,368
DUE FROM AFFILIATES 13,558 156,396
INVENTORIES 1,064,179 1,019,810
PREPAIDS AND OTHER CURRENT ASSETS 386,235 299,181
TOTAL CURRENT ASSETS 3,245,117 3,561,077
PROPERTY, PLANT AND EQUIPMENT 17,238,173 17,280,678
LESS ACCUMULATED DEPRECIATION AND
AMORTIZATION 3,856,076 3,453,387
13,382,097 13,827,291
DUE FROM AFFILIATE 191,308 191,308
FUNDS HELD IN ESCROW 150,000 150,000
INVESTMENT IN JOINTLY-OWNED COMPANY 1,187,301 1,201,248
LONG-TERM GROUND LEASE, LESS 2,007,292 2,051,351
ACCUMULATED AMORTIZATION
GOODWILL, LESS ACCUMULATED 2,229,643 2,284,408
AMORTIZATION
OTHER ASSETS AND DEFERRED CHARGES, 578,651 656,257
LESS ACCUMULATED AMORTIZATION
$22,971,409 $23,922,940
LIABILITIES AND STOCKHOLDERS'EQUITY
(NET CAPITAL DEFICIENCY)
CURRENT LIABILITIES:
REVOLVING CREDIT FACILITIES $46,887 $240,533
ACCOUNTS PAYABLE AND ACCRUED 3,812,657 3,949,928
LIABILITIES
ADVANCES FROM CUSTOMERS AND 1,141,065 1,167,103
DEFERRED REVENUE
CURRENT PORTION OF CAPITAL LEASE 20,996 26,701
OBLIGATIONS
CURRENT PORTION OF LONG-TERM DEBT 1,643,475 924,580
TOTAL CURRENT LIABILITIES 6,665,080 6,308,845
LONG-TERM DEBT DUE TO HM HOLDINGS,INC. 6,605,923 6,605,923
MORTGAGE NOTE DUE TO MASS. MUTUAL 7,587,419 8,009,310
SENIOR SUBORDINATED CONVERTIBLE 1,666,667 2,500,000
DEBENTURES
OTHER LONG-TERM DEBT 281,011 295,618
STOCKHOLDERS' EQUITY:
SERIES C PREFERRED 10 10
SERIES D PREFERRED 20 20
COMMON STOCK 588,653 587,153
ADDITIONAL PAID-IN CAPITAL 8,324,555 8,321,055
ACCUMULATED DEFICIT (8,661,375) (8,624,285)
TRANSLATION ADJUSTMENT (86,554) (80,709)
TOTAL STOCKHOLDERS' EQUITY 165,309 203,244
$22,971,409 $23,922,940
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
LYNTON GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30 JUNE 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET REVENUES $7,599,927 $8,191,211 $19,990,310 $23,928,008
EXPENSES:
DIRECT COSTS 5,861,048 6,701,509 15,934,729 19,578,253
SELLING, GENERAL AND 708,902 1,009,541 2,077,065 2,792,959
ADMINISTRATIVE
DEPRECIATION 165,032 262,496 495,122 728,215
AMORTIZATION OF 31,363 46,888 94,139 138,281
GOODWILL AND GROUND
LEASE
OPERATING INCOME 833,582 170,777 1,389,255 690,300
AMORTIZATION OF DEBT 34,869 34,869 104,606 104,581
DISCOUNT AND ISSUANCE
COSTS
INTEREST 378,536 470,099 1,160,053 1,351,235
EQUITY IN INCOME OF (235,316) - (8,175) -
JOINTLY-OWNED COMPANY
INCOME (LOSS) BEFORE 655,493 (334,191) 132,771 (765,516)
PROVISION FOR INCOME
TAXES
INCOME TAX PROVISION - - - -
NET INCOME (LOSS) 655,493 (334,191) 132,771 (765,516)
LESS DIVIDENDS ON (56,007) (71,044) (169,861) (171,478)
PREFERRED STOCK
NET INCOME (LOSS) $599,486 ($405,235) ($37,090) ($936,994)
ATTRIBUTABLE TO
COMMON STOCK
NET INCOME (LOSS) PER
SHARE OF COMMON STOCK
PRIMARY $0.33 ($0.21) $0.07 ($0.48)
FULLY-DILUTED (1) $0.23 ($0.21) $0.00 ($0.48)
</TABLE>
SEE ACCOMPANYING NOTES.
(1) THE SERIES C CONVERTIBLE PREFERRED STOCK AND THE RELATED
DIVIDEND EFFECT HAD AN ANTI-DILUTIVE EFFECT ON EARNINGS PER SHARE
FOR THE THREE AND THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
AND ARE, THEREFORE, EXCLUDED FROM THE COMPUTATION OF EARNINGS PER
SHARE FOR THESE PERIODS.
4
<PAGE>
LYNTON GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $132,771 ($765,516)
ADJUSTMENTS TO RECONCILE NET LOSS TO
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
DEPRECIATION AND AMORTIZATION 693,867 971,077
GAIN ON DISPOSAL OF FIXED ASSETS - (455,264)
LOSS ON SALE OF AIRCRAFT HELD FOR - 310,226
RESALE
EQUITY IN INCOME OF JOINTLY-OWNED COMPANY (8,175) -
CHANGE IN CERTAIN ASSETS AND
LIABILITIES:
ACCOUNTS RECEIVABLE 315,933 337,802
DUE FROM/TO AFFILIATES (NET) 171,039 352,257
INVENTORIES (58,997) 308,131
AIRCRAFT HELD FOR RESALE - 1,289,750
PREPAIDS AND OTHER ASSETS (90,983) (315,058)
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (273,135) (978,790)
ADVANCES FROM CUSTOMERS AND DEFERRED (7,030) (196,564)
REVENUES
NET CASH PROVIDED BY OPERATING 875,290 858,051
ACTIVITIES
CASH FLOW FROM INVESTING ACTIVITIES:
PROCEEDS FROM DISPOSAL OF FIXED ASSETS - 1,391,953
CAPITAL EXPENDITURES (NET) (86,542) (197,280)
NET CASH (USED) PROVIDED BY INVESTING (86,542) 1,194,673
ACTIVITIES
CASH FLOW FROM FINANCING ACTIVITIES:
CAPITAL LEASE OBLIGATIONS (NET) (20,171) (22,230)
DIVIDENDS PAID ON PREFERRED STOCK - (171,478)
PROCEEDS FROM ISSUANCE OF COMMON STOCK 5,000 -
PROCEEDS OF BORROWINGS FROM HM - 500,000
HOLDINGS, INC.
REPAYMENTS OF REVOLVING CREDIT - (834,569)
FACILITIES
REPAYMENT OF NOTES PAYABLE AND LONG- (732,916) (1,526,999)
TERM DEBT
NET CASH USED BY FINANCING ACTIVITIES (748,087) (2,055,276)
EFFECT OF EXCHANGE RATE CHANGES ON CASH - -
INCREASE (DECREASE) IN CASH 40,661 (2,552)
CASH, BEGINNING OF PERIOD 137,322 143,689
CASH, END OF PERIOD $177,983 $141,137
SUPPLEMENTAL INFORMATION
INTEREST PAID $1,168,031 $1,337,960
TAXES PAID $- $-
</TABLE>
5
<PAGE>
LYNTON GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1996
Note 1. BASIS OF PRESENTATION
The accompanying unaudited condensed 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 nine month period
ended June 30, 1996 are not necessarily indicative of the results
that may be expected for the year ending September 30, 1996. The
balances as of September 30, 1995 in the accompanying balance
sheets, have been derived from the audited financial statements
as of such date. For further information, refer to the
consolidated financial statements and footnotes thereto included
in the Lynton Group, Inc. (the "Company") Annual Report on Form
10-K for the year ended September 30, 1995.
6
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES & OPERATING INCOME
Revenues for the three and nine months ended June 30, 1996
decreased to $7,600,000 and $19,990,000 from revenues of
$8,191,000 and $23,928,000 for the comparable fiscal 1995 period,
a decrease of $591,000 and $3,938,000, or 7% and 16%
respectively. On August 31, 1995 the Company transferred
substantially all the business, assets and liabilities of Dollar
Air and Black Isle to PDG, for 50% of the capital stock of PDG.
Operating results prior to August 31, 1995 reflect full
consolidation of Dollar Air and Black Isle while subsequent to
this date the Company's proportionate share of the results of
operations of PDG are reflected under the equity method of
accounting. The resultant decrease in revenues for the three
months ended June 30, 1996 was largely offset by increases in
flight operations as well as an increase in aircraft sales
transactions. For the nine months ended June 30, 1996, this
decrease in revenues was partly offset by increases in flight
operations revenues.
Operating income for the three and nine months ended June
30, 1996 increased to $834,000 and $1,389,000 compared to
operating income of $171,000 and $690,000 for the three and nine
months ended June 30, 1995, an increase of $663,000 and $699,000,
respectively. For the three months ended June 30, 1996 aircraft
sales transactions increased over the same period last year as
did operating income from maintenance and flight operations. For
the nine months ended June 30, 1996, the improvement primarily
consisted of the reclassification of the operating results of
Dollar Air and Black Isle into equity in jointly-owned company,
improved aircraft sales, the writedown in the same period last
year of an aircraft held for resale and increases in maintenance
and flight operations.
INTEREST
Interest expense for the three and nine months ended June
30, 1996 decreased to $379,000 and $1,160,000 from interest
expense of $470,000 and $1,351,000 for the three and nine months
ended June 30, 1995, a decrease of $91,000 and $191,000,
respectively. These decreases result primarily from the
elimination of bank borrowings for Dollar Air and Black Isle with
the transfer of these companies into PDG, a jointly-owned
company.
EQUITY IN LOSS OF JOINTLY-OWNED COMPANY
For the three and nine months ended June 30, 1996 the
Company recorded income in equity of jointly-owned company of
$235,000 and $8,000 respectively with no comparable amount for
the three and nine months ended June 30, 1995 since the jointly-
owned company commenced operations on August 31, 1995. Operating
results for PDG for the period reflect the seasonal nature of
helicopter operations in Scotland, with reduced customer demand
for helicopter services in the winter months and increases in the
spring and summer. As a substantial portion of PDG costs are
fixed, the result has been operating losses in winter and
operating income in the spring. The amount recorded as equity in
jointly-owned company reflects the Company's proportionate share
of these results.
NET INCOME (LOSS)
Net income for the three months ended June 30, 1996 was
$655,000 as compared to a net loss of $334,000 for the three
months ended June 30, 1995, an improvement of $989,000. This
improvement is due primarily to aircraft sales transactions,
improved maintenance and flight operations results and reduced
borrowing cost of Dollar Air and Black Isle.
7
<PAGE>
Net income for the nine months ended June 30, 1996 was
$133,000, as compared to a net loss of $766,000 for the nine
months ended June 30, 1995, an improvement of $899,000. This
improvement primarily consists of the elimination of the
operating loss and reduction in borrowing cost of Dollar Air and
Black Isle which had been included in last year's results,
improved maintenance and flight operations results and a
provision of $228,000 made in the same period last year related
to the writedown of an aircraft held for resale.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had a working capital deficit
of $3,420,000 as compared to a working capital deficit of
$2,748,000 at September 30, 1995, a decrease in working capital
of $672,000. This reduction in working capital is primarily
attributable to the classification under current liabilities at
June 30, 1996 of $833,000 being the amount to be provided into a
sinking fund for the retirement of the Company's senior
subordinated convertible debentures in December, 1996. The
Company currently has no material commitments for capital
expenditures.
The Company expects to continue meeting all of its
obligations in the coming year by focusing on its established
operations and generating additional cash funding from the
refinancing of Company owned aircraft. In the coming year the
Company will also seek to restructure its debt and preferred
stock obligations in order to reduce its debt service and other
fixed payment requirements and endeavor to raise additional
capital through the sale of equity securities.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
At the present time, there is no material litigation
pending or, to management's, knowledge, threatened
against the Registrant.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
(a) None.
(b) The Company has 1,000 shares of Series C
Convertible Preferred Stock and 2,000 shares of
Series D Preferred Stock outstanding. The Series C
Convertible Preferred Stock pays a semi-annual
dividend payable out of the assets of the Company
legally available therefor at a rate of $30 per
share, and the Series D Preferred Stock pays a
quarterly cumulative dividend out of the assets of
the Company legally available therefor at a rate
equal to the average interest rate per annum, borne
by the loans outstanding under the Credit Agreement,
as amended, with HM Holdings, Inc. As of June 30,
1996, the Company had accrued and unpaid dividends of
$45,000 relating to the Series C Convertible
Preferred Stock and accrued and unpaid dividends of
$124,861 relating to the Series D Preferred Stock.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
11.0 Statement re Computation of Per Share Earnings
(B) Reports on Form 8-K
Listed below are reports on Form 8-K filed during the
fiscal quarter ended June 30, 1996:
None.
9
<PAGE>
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 undersigned thereunto duly
authorized.
LYNTON GROUP, INC.
Dated: AUGUST 13, 1996 By: /S/ CHRISTOPHER TENNANT
Christopher Tennant, President
and Chief Executive Officer
Dated: AUGUST 13, 1996 By: /S/ MANUS O'DONNELL
Manus O'Donnell, Secretary and
Treasurer (Principal Financial Officer)
10
<PAGE>
Exhibit 11 - Computation of per share earnings
LYNTON GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30 JUNE 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE 1,961,621 1,957,177 1,961,621 1,957,177
SHARES OF COMMON STOCK
OUTSTANDING
WEIGHTED AVERAGE - - - -
COMMON STOCK
EQUIVALENTS
AVERAGE SHARES
OUTSTANDING - PRIMARY 1,961,621 1,957,177 1,961,621 1,957,177
EARNINGS PER SHARE
SERIES C PREFERRED 677,779 - 677,779 -
STOCK (1)
AVERAGE SHARES
OUTSTANDING - FULLY 2,639,400 1,957,177 2,639,400 1,957,177
DILUTED EARNINGS PER
SHARE
PRIMARY EARNINGS PER
SHARE
AVERAGE SHARES 1,961,621 1,957,177 1,961,621 1,957,177
OUTSTANDING
NET INCOME (LOSS) $655,493 ($334,191) $132,771 ($765,516)
LESS DIVIDEND ON - (71,044) - (171,478)
SERIES C & D PREFERRED
STOCK
$655,493 ($405,235) $132,771 ($936,994)
PER SHARE AMOUNT $0.33 ($0.21) $0.07 ($0.48)
FULLY DILUTED EARNINGS
PER SHARE (1)
AVERAGE SHARES 2,639,400 1,957,177 2,639,400 1,957,177
OUTSTANDING
NET INCOME (LOSS) $655,493 ($334,191) $132,771 ($765,516)
ATTRIBUTABLE TO COMMON
STOCK
LESS DIVIDEND ON (41,077) - (124,861) -
SERIES D PREFERRED
STOCK
LESS DIVIDEND ON - (71,044) - (171,498)
SERIES C & D PREFERRED
STOCK
$614,486 ($405,235) $7,910 ($936,994)
PER SHARE AMOUNT (1) $0.23 ($0.21) $0.00 ($0.48)
</TABLE>
(1) THE SERIES C CONVERTIBLE PREFERRED STOCK AND THE RELATED
DIVIDEND EFFECT HAD AN ANTI-DILUTIVE EFFECT ON EARNINGS PER SHARE
FOR THE THREE AND THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
AND ARE, THEREFORE, EXCLUDED FROM THE COMPUTATION OF EARNINGS PER
SHARE FOR THESE PERIODS.
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED
FROM LYNTON GROUP, INC.'S QUARTERLY
REPORT FOR THE NINE MONTHS ENDED
JUNE 30, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-1-1995
<PERIOD-END> JUN-30-1996
<CASH> 177,983
<SECURITIES> 0
<RECEIVABLES> 1,603,162
<ALLOWANCES> 0
<INVENTORY> 1,064,179
<CURRENT-ASSETS> 3,245,117
<PP&E> 17,238,173
<DEPRECIATION> 3,856,076
<TOTAL-ASSETS> 22,971,409
<CURRENT-LIABILITIES> 6,665,080
<BONDS> 15,860,009
<COMMON> 588,653
0
30
<OTHER-SE> (423,374)
<TOTAL-LIABILITY-AND-EQUITY> 22,971,409
<SALES> 19,990,310
<TOTAL-REVENUES> 19,990,310
<CGS> 15,934,729
<TOTAL-COSTS> 18,601,055
<OTHER-EXPENSES> 96,431
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,160,053
<INCOME-PRETAX> 132,771
<INCOME-TAX> 0
<INCOME-CONTINUING> 132,771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132,771
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.00
</TABLE>
