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 MARCH 31, 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 of (I.R.S. Employer
incorporation or organization) Identification Number)
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 May 1, 1996
<PAGE>
Part 1 - FINANCIAL INFORMATION
LYNTON GROUP, INC. AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
PERIOD ENDED MARCH 31, 1996
ITEM PAGE
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets -
March 31, 1996 and September 30, 1995 3
Condensed Consolidated Statements of Operations -
For the Three and Six months ended March 31, 1996
and 1995 4
Condensed Consolidated Statements of Cash Flows -
For the Six months ended March 31, 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>
MARCH 31, SEPTEMBER 30,
1996 1995
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH $134,437 $137,322
ACCOUNTS RECEIVABLE 1,415,061 1,948,368
DUE FROM AFFILIATES 16,746 156,396
INVENTORIES 934,659 1,019,810
PREPAIDS AND OTHER CURRENT ASSETS 357,810 299,181
TOTAL CURRENT ASSETS 2,858,713 3,561,077
PROPERTY, PLANT AND EQUIPMENT 17,141,863 17,280,678
LESS ACCUMULATED DEPRECIATION AND
AMORTIZATION 3,674,718 3,453,387
13,467,145 13,827,291
DUE FROM AFFILIATE 191,308 191,308
FUNDS HELD IN ESCROW 150,000 150,000
INVESTMENT IN JOINTLY-OWNED COMPANY 932,664 1,201,248
LONG-TERM GROUND LEASE, LESS 2,021,979 2,051,351
ACCUMULATED AMORTIZATION
GOODWILL, LESS ACCUMULATED 2,241,618 2,284,408
AMORTIZATION
OTHER ASSETS AND DEFERRED CHARGES, 604,519 656,257
LESS ACCUMULATED AMORTIZATION
$22,467,946 $23,922,940
LIABILITIES AND STOCKHOLDERS'EQUITY
(NET CAPITAL DEFICIENCY)
CURRENT LIABILITIES:
REVOLVING CREDIT FACILITIES 452,696 $240,533
ACCOUNTS PAYABLE AND ACCRUED 3,707,145 3,949,928
LIABILITIES
ADVANCES FROM CUSTOMERS AND 788,415 1,167,103
DEFERRED REVENUE
CURRENT PORTION OF CAPITAL LEASE 23,227 26,701
OBLIGATIONS
CURRENT PORTION OF LONG-TERM DEBT 1,684,890 924,580
TOTAL CURRENT LIABILITIES 6,656,373 6,308,845
LONG-TERM DEBT DUE TO HM HOLDINGS,INC. 6,605,923 6,605,923
MORTGAGE NOTE DUE TO CONNECTICUT MUTUAL 7,730,573 8,009,310
SENIOR SUBORDINATED CONVERTIBLE 1,666,667 2,500,000
DEBENTURES
OTHER LONG-TERM DEBT 258,795 295,618
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 (9,260,861) (8,624,285)
TRANSLATION ADJUSTMENT (102,762) (80,709)
TOTAL STOCKHOLDERS' EQUITY (NET (450,385) 203,244
CAPITAL DEFICIENCY)
$22,467,946 $23,922,940
</TABLE>
SEE ACCOMPANYING NOTES.
3
<PAGE>
LYNTON GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31 MARCH 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET REVENUES $6,037,094 $7,546,416 $12,390,383 $15,736,797
EXPENSES:
DIRECT COSTS 5,043,122 6,619,407 10,073,681 12,876,744
SELLING, GENERAL AND 672,556 885,066 1,368,163 1,783,418
ADMINISTRATIVE
DEPRECIATION 163,198 223,093 330,090 465,719
AMORTIZATION OF GOODWILL 31,371 44,894 62,776 91,393
AND GROUND LEASE
OPERATING INCOME 126,847 (226,044) 555,673 519,523
(LOSS)
AMORTIZATION OF DEBT 34,868 34,868 69,737 69,712
DISCOUNT AND ISSUANCE
COSTS
INTEREST 391,648 435,818 781,517 881,136
EQUITY IN LOSS OF 50,263 - 227,141 -
JOINTLY-OWNED COMPANY
LOSS BEFORE PROVISION (349,932) (696,730) (522,722) (431,325)
FOR INCOME TAXES
INCOME TAX PROVISION - - - -
NET LOSS (349,932) (696,730) (522,722) (431,325)
LESS DIVIDENDS ON (41,813) (52,487) (113,854) (100,434)
PREFERRED STOCK
NET LOSS ATTRIBUTABLE ($391,745) ($749,217) ($636,576) ($531,759)
TO COMMON STOCK
NET LOSS PER SHARE OF
COMMON STOCK PRIMARY
AND FULLY-DILUTED (1) ($0.20) ($0.38) ($0.32) ($0.27)
</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 SIX
MONTHS ENDED MARCH 31, 1996 AND 1995 AND ARE, THEREFORE, EXCLUDED FROM THE
COMPUTATION OF EARNINGS PER SHARE FOR THESE PERIODS.
SEE ACCOMPANYING NOTES.
4
<PAGE>
LYNTON GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS ($522,722) ($431,325)
ADJUSTMENTS TO RECONCILE NET LOSS TO
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
DEPRECIATION AND AMORTIZATION 462,603 626,824
GAIN ON DISPOSAL OF FIXED ASSETS - (398,265)
EQUITY IN LOSS OF JOINTLY-OWNED COMPANY 227,141 -
CHANGE IN CERTAIN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE 484,651 309,756
DUE FROM/TO AFFILIATES (NET) 182,348 392,320
INVENTORIES 54,903 61,058
AIRCRAFT HELD FOR RESALE - 189,996
PREPAIDS AND OTHER ASSETS (68,399) (430,394)
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (286,882) (860,335)
ADVANCES FROM CUSTOMERS AND DEFERRED (345,367) 70,361
REVENUES
NET CASH PROVIDED (USED) BY OPERATING 188,276 (470,004)
ACTIVITIES
CASH FLOW FROM INVESTING ACTIVITIES:
PROCEEDS FROM DISPOSAL OF FIXED ASSETS - 1,391,953
CAPITAL EXPENDITURES (NET) (38,445) (80,500)
NET CASH (USED) PROVIDED BY INVESTING (38,445) 1,311,453
ACTIVITIES
CASH FLOW FROM FINANCING ACTIVITIES:
CAPITAL LEASE OBLIGATIONS (NET) (13,293) (7,404)
DIVIDENDS PAID ON PREFERRED STOCK - (100,434)
PROCEEDS FROM ISSUANCE OF COMMON STOCK 5,000 -
PROCEEDS OF BORROWINGS FROM HM HOLDINGS,INC. - 500,000
PROCEEDS (REPAYMENTS) OF REVOLVING 223,893 (921,984)
CREDIT FACILITIES
REPAYMENT OF NOTES PAYABLE AND LONG- (368,316) (130,886)
TERM DEBT
NET CASH USED BY FINANCING ACTIVITIES (152,716) (660,708)
EFFECT OF EXCHANGE RATE CHANGES ON CASH - -
(DECREASE) INCREASE IN CASH (2,885) 180,741
CASH, BEGINNING OF PERIOD 137,322 143,689
CASH, END OF PERIOD 134,437 324,430
SUPPLEMENTAL INFORMATION
INTEREST PAID 785,199 872,489
TAXES PAID $- $-
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
LYNTON GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 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 six month period ended March 31, 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 six months
ended March 31, 1996 decreased to $6,037,000
and $12,390,000 from revenues of $7,546,000
and $15,737,000 for the comparable fiscal
1995 period, a decrease of $1,509,000 and
$3,347,000, or 20% and 21% 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. In addition, for
the three and six months ended March 31,
1996, the Company experienced a decrease of
$126,000 and $577,000 respectively, in volume
of aircraft sales transactions as compared to
the same period last year.
Operating income for the three and six
months ended March 31, 1996 increased to
$127,000 and $556,000 compared to an
operating loss of $226,000 and an operating
profit of $520,000 for the three and six
months ended March 31, 1995, an increase of
$353,000 and $36,000, respectively. These
increases primarily consist of the
reclassification of the operating results of
Dollar Air and Black Isle into equity in
jointly-owned company for the current year
partly offset by a decrease in volume of
aircraft sales transactions as compared to
the same period last year. In addition, a
provision of $192,000 was made in the three
months ended March 31, 1995 related to the
writedown of an aircraft held for resale.
INTEREST
Interest expense for the three and six
months ended March 31, 1996 decreased to
$392,000 and $782,000 from interest expense
of $436,000 and $881,000 for the three and
six months ended March 31, 1995, a decrease
of $44,000 and $99,000, 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 six months ended
March 31, 1996 the Company recorded a loss in
equity of jointly-owned company of $50,000
and $227,000 respectively with no comparable
amount for the three and six months ended
March 31, 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. As a
substantial portion of PDG costs are fixed,
the result has been operating losses in these
months and the amount recorded as equity in
jointly-owned company reflects the Company's
proportionate share of these losses.
NET LOSS
Net loss for the three months ended
March 31, 1996 was $350,000 as compared to a
net loss of $697,000 for the three months
ended March 31, 1995, a decrease of $347,000.
This improvement primarily consists of the
elimination of the operating loss and
reduction in borrowing cost of Dollar Air and
Black Isle, offset by equity in the loss of
jointly-owned company and a provision of
$192,000 in the three months ended March 31,
1995 related to the writedown of an aircraft
held for resale.
Net loss for the six months ended March
31, 1996 was $523,000, as compared to a net
loss of $431,000 for the six months ended
March 31, 1995, an increase of $92,000. This
increase primarily consists of reduced
aircraft sales transactions, equity in the
loss of jointly-owned company partly offset
7
<PAGE>
by the elimination of the operating loss and
reduction in borrowing cost of Dollar Air and
Black Isle and a provision of $192,000 which
was made in the six months ended March 31,
1995 related to the writedown of an aircraft
held for resale,
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had a
working capital deficit of $3,797,000 as
compared to a working capital deficit of
$2,748,000 at September 30, 1995, a decrease
in working capital of $1,049,000. This
reduction in working capital is primarily
attributable to the classification under
current liabilities at March 31, 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
March 31, 1996, the Company had
accrued and unpaid dividends of
$30,000 relating to the Series C
Convertible Preferred Stock and
accrued and unpaid dividends of
$83,854 relating to the Series D
Preferred Stock.
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
On March 6, 1996, an annual
meeting of stockholders was held
for the following purposes (i) to
elect five directors to serve as
the Board of Directors of the
Registrant until the next annual
meeting of stockholders and until
their successors shall be elected
and shall qualify; (ii) to ratify
the selection of Ernst & Young
LLP as the Registrant's
independent auditors for the
fiscal year ending September 30,
1996.
At such annual meeting,
Christopher Tennant, James G.
Niven, Richard Hambro, Nicholas
R.H. Toms and George H.
Hempstead, III, each an incumbent
director, were duly elected as
directors of the Registrant.
Christopher Tennant received
2,066,159 affirmative votes and
19,398 negative votes, Richard
Hambro received 2,066,184
affirmative votes and 19,373
negative votes, and each of James
G. Niven, Nicholas R.H. Toms and
George H. Hempstead, III,
received 2,066,200 affirmative
votes and 19,357 negative votes.
Proposal 2 was duly approved with
2,065,930 affirmative votes,
17,842 negative votes and 1,785
abstentions.
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 March 31, 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: MAY 7, 1996 By: /S/ CHRISTOPHER TENNANT
Christopher Tennant,
President and Chief
Executive Officer
Dated: MAY 7, 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 SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31 MARCH 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE 1,961,344 1,957,177 1,961,344 1,957,177
SHARES OF COMMON STOCK
OUTSTANDING
WEIGHTED AVERAGE - - - -
COMMON STOCK
EQUIVALENTS
AVERAGE SHARES
OUTSTANDING - PRIMARY 1,961,344 1,957,177 1,961,344 1,957,177
EARNINGS PER SHARE
SERIES C PREFERRED - - - -
STOCK (1)
AVERAGE SHARES
OUTSTANDING - FULLY 1,961,344 1,957,177 1,961,344 1,957,177
DILUTED EARNINGS PER
SHARE
PRIMARY & FULLY
DILUTED EARNINGS PER
SHARE (1)
AVERAGE SHARES 1,961,344 1,957,177 1,961,344 1,957,177
OUTSTANDING
NET LOSS ($349,932) ($696,730) ($522,722) ($431,325)
LESS DIVIDEND ON (41,813) (52,487) (113,854) (100,434)
SERIES C & D PREFERRED
STOCK
(391,745) (749,217) (636,576) (531,759)
PER SHARE AMOUNT (1) ($0.20) ($0.38) ($0.32) ($0.27)
</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 SIX MONTHS
ENDED MARCH 31, 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 SIX MONTHS ENDED
MARCH 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-1-1995
<PERIOD-END> MAR-31-1996
<CASH> 134,437
<SECURITIES> 0
<RECEIVABLES> 1,415,061
<ALLOWANCES> 0
<INVENTORY> 934,659
<CURRENT-ASSETS> 2,858,713
<PP&E> 17,141,863
<DEPRECIATION> 3,674,718
<TOTAL-ASSETS> 22,467,946
<CURRENT-LIABILITIES> 6,656,373
<BONDS> 16,261,958
<COMMON> 588,653
0
30
<OTHER-SE> (1,039,068)
<TOTAL-LIABILITY-AND-EQUITY> 22,467,946
<SALES> 12,390,383
<TOTAL-REVENUES> 12,390,383
<CGS> 10,073,681
<TOTAL-COSTS> 11,834,710
<OTHER-EXPENSES> 296,878
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 781,517
<INCOME-PRETAX> (522,722)
<INCOME-TAX> 0
<INCOME-CONTINUING> (522,722)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (522,722)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
