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, 1997
[ ] 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 07960
MORRISTOWN, NEW JERSEY (Zip Code)
(Address of principal 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: 6,394,872
Outstanding as of August 7, 1997
<PAGE>
Part 1 - FINANCIAL INFORMATION
LYNTON GROUP, INC. AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION
PERIOD ENDED JUNE 30, 1997
ITEM PAGE
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets -
June 30, 1997 and September 30, 1996 3
Condensed Consolidated Statements of Operations -
For the Three and Nine months ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows -
For the Nine months ended June 30, 1997 and 1996 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,
1997 1996
(UNAUDITED (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH $671,191 $1,268,475
ACCOUNTS RECEIVABLE 1,997,052 2,336,549
INVENTORIES (NOTE 2) 896,146 822,339
PREPAIDS AND OTHER CURRENT ASSETS 213,634 396,605
TOTAL CURRENT ASSETS 3,778,023 4,823,968
PROPERTY, PLANT AND EQUIPMENT 17,850,339 17,386,419
LESS ACCUMULATED DEPRECIATION
AND AMORTIZATION 4,524,421 3,977,517
13,325,918 13,408,902
FUNDS HELD IN ESCROW 150,000 150,000
AIRCRAFT HELD FOR RESALE (NOTE 2) 1,870,233 -
INVESTMENT IN JOINTLY-OWNED COMPANY
HELD FOR RESALE 1,262,106 1,182,376
LONG-TERM GROUND LEASE, LESS
ACCUMULATED AMORTIZATION 1,948,547 1,992,606
GOODWILL, LESS ACCUMULATED AMORTIZATION 2,179,935 2,213,635
OTHER ASSETS AND DEFERRED CHARGES,
LESS ACCUMULATED AMORTIZATION 539,918 601,690
$25,054,680 $24,373,177
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES $3,441,275 $4,249,476
ADVANCES FROM CUSTOMERS AND
DEFERRED REVENUE 1,413,550 1,713,217
CURRENT PORTION OF CAPITAL LEASE
OBLIGATIONS 38,503 34,225
CURRENT PORTION OF LONG-TERM DEBT 1,402,209 986,506
TOTAL CURRENT LIABILITIES 6,295,537 6,983,424
MORTGAGE NOTE DUE TO MASSACHUSETTS MUTUAL 6,985,508 7,441,711
LONG-TERM DEBT DUE TO FINOVA CAPITAL 3,644,796 3,839,198
SENIOR SUBORDINATED CONVERTIBLE DEBENTURES 833,333 895,000
AIRCRAFT FINANCING NOTE DUE TO G.E. CAPITAL 1,617,761 -
DEFERRED REVENUE 780,000 960,000
OTHER LONG-TERM DEBT 681,931 854,974
STOCKHOLDERS' EQUITY:
COMMON STOCK 1,918,462 1,918,462
ADDITIONAL PAID-IN CAPITAL 9,779,823 9,779,823
ACCUMULATED DEFICIT (7,503,956) (8,233,475)
TRANSLATION ADJUSTMENT 32,833 (54,592)
4,227,162 3,410,218
COMMON STOCK HELD IN TREASURY (11,348) (11,348)
TOTAL STOCKHOLDERS' EQUITY 4,215,814 3,398,870
$25,054,680 $24,373,177
</TABLE>
SEE ACCOMPANYING NOTES.
4
<PAGE>
LYNTON GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30 JUNE 30
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET REVENUES $6,428,379 $6,456,913 $18,511,661 $16,909,193
EXPENSES:
DIRECT COSTS 4,735,813 4,762,846 13,997,248 12,993,745
SELLING, GENERAL
AND ADMINISTRATIVE 833,429 664,090 2,247,634 1,936,932
DEPRECIATION 172,420 165,032 515,615 495,122
AMORTIZATION OF GOODWILL
AND GROUND LEASE 31,918 31,363 95,755 94,139
OPERATING INCOME 654,799 833,582 1,655,409 1,389,255
AMORTIZATION OF DEBT
DISCOUNT AND ISSUANCE
COSTS 19,336 34,869 58,010 104,606
INTEREST 308,462 378,536 823,881 1,160,053
EQUITY IN LOSS OF
JOINTLY-OWNED COMPANY - (235,316) - (8,175)
INCOME BEFORE PROVISION
FOR INCOME TAXES 327,001 655,493 773,518 132,771
INCOME TAX PROVISION 44,000 - 44,000 -
NET INCOME $283,001 $655,493 $729,518 $132,771
LESS DIVIDENDS ON
PREFERRED STOCK - (56,007) - (169,861)
NET INCOME (LOSS)
ATTRIBUTABLE TO
COMMON STOCK $283,001 $599,486 $729,518 ($37,090)
NET INCOME (LOSS) PER SHARE OF COMMON STOCK
PRIMARY $0.04 $0.33 $0.11 $0.07
FULLY-DILUTED $0.04 $0.23 $0.11 $0.00
</TABLE>
SEE ACCOMPANYING NOTES.
5
<PAGE>
LYNTON GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $729,518 $132,771
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO CASH PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION AND AMORTIZATION 669,380 693,867
EQUITY LOSS IN JOINTLY-OWNED COMPANY - (8,175)
CHANGE IN CERTAIN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE 455,536 315,933
DUE FROM/TO AFFILIATES (NET) (30,015) 171,039
INVENTORIES (30,597) (58,997)
PREPAIDS AND OTHER ASSETS 193,758 (90,983)
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (966,450) (273,135)
ADVANCES FROM CUSTOMERS AND DEFERRED
REVENUES (554,836) (7,030)
NET CASH PROVIDED BY OPERATING ACTIVITIES 466,294 875,290
CASH FLOW FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (NET) (312,193) (86,542)
NET CASH USED BY INVESTING ACTIVITIES (312,193) (86,542)
CASH FLOW FROM FINANCING ACTIVITIES:
CAPITAL LEASE OBLIGATIONS (NET) 45,898 (20,171)
PROCEEDS FROM ISSUANCE OF COMMON STOCK - 5,000
REPAYMENT OF NOTES PAYABLE AND LONG-TERM DEBT (844,564) (732,916)
NET CASH USED BY FINANCING ACTIVITIES (798,666) (748,087)
EFFECT OF EXCHANGE RATE CHANGES ON CASH 47,281 -
(DECREASE) INCREASE IN CASH (597,284) 40,661
CASH, BEGINNING OF PERIOD 1,268,475 137,322
CASH, END OF PERIOD $671,191 $177,983
SUPPLEMENTAL INFORMATION
INTEREST PAID $788,671 $1,168,031
TAXES PAID $110,880 $-
</TABLE>
DURING THE NINE MONTHS ENDED JUNE 30, 1997, THE COMPANY PURCHASED AN AIRCRAFT,
WHICH IS NOW BEING HELD FOR RESALE, AND IS BEING FINANCED WITH A NOTE ISSUED
BY G.E. CAPITAL.
SEE ACCOMPANYING NOTES.
6
<PAGE>
LYNTON GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 1997
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, 1997 are not necessarily indicative of the results
that may be expected for the year ending September 30, 1997.
The balances as of September 30, 1996 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,
1996.
Note 2. INVENTORIES AND AIRCRAFT HELD FOR RESALE
Inventories (principally parts) are valued at the
lower of cost (first-in, first-out) or market. Aircraft
held for resale is valued at cost.
7
<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 months ended June 30, 1997
decreased to $6,428,000 from revenues of $6,457,000 for the
comparable fiscal 1996 period, a decrease of $29,000.
Revenues for the nine months ended June 30, 1997 increased
to $18,512,000 from revenues of $16,909,000 for the
comparable fiscal 1996 period, an increase of $1,603,000, or
9.5%. This increase is primarily attributable to an
increase in fuel sales volume and tenant occupancy at the
Company's fixed base operations along with increased
revenues from maintenance operations in the UK.
Operating income for the three months ended June 30,
1997 decreased to $655,000 from an operating income of
$834,000 for the comparable fiscal 1996 period, a decrease
of $179,000. This decrease is primarily attributable to
sales and marketing costs related to a helicopter joint
ownership program. Operating income for the nine months
ended June 30, 1997 increased to $1,655,000 from an
operating income of $1,389,000 for the comparable fiscal
1996 period, an increase of $266,000, or 19.2%. This
increase is primarily attributable to increased operating
income from the Company's fixed base operations along with
increased operating income from maintenance operations in
the UK offset by the sales and marketing costs related to a
helicopter joint ownership program.
INTEREST
Interest expense for the three and nine months ended
June 30, 1997 decreased to $308,000 and $824,000 from
interest expense of $379,000 and $1,160,000 for the
comparable fiscal 1996 periods, a decrease of $71,000 and
$336,000, respectively. This decrease results from lower
levels of borrowings specifically due to the repayment of
debt to HM Holdings in fiscal 1996.
EQUITY IN LOSS OF JOINTLY-OWNED COMPANY
For the three and nine months ended June 30, 1997, no
gain or loss in the Company's equity of jointly-owned
company was recorded. This asset was reclassified as
investment in jointly-owned company held for resale in
fiscal 1996, and therefore, the Company's share of the gain
or loss in the jointly-owned company will no longer be
recognized under the equity method of accounting. For the
three and nine months ended June 30, 1996, the Company
recorded a gain in equity of jointly-owned company of
$235,000 and $8,000.
NET INCOME
Net income for the three months ended June 30, 1997
was $283,000 as compared to a net income of $655,000 for the
three months ended June 30, 1996, a decrease of $372,000.
The decrease is primarily the result of the Company no
longer recording the equity in income of jointly-owned
company. In addition, fiscal 1997 included sales and
marketing costs related to a helicopter joint ownership
program.
Net income for the nine months ended June 30, 1997 was
$730,000 as compared to a net income of $133,000 for the
three months ended June 30, 1996, an increase of $597,000.
This increase is primarily the result of increased operating
income and decreased interest expense from reduced levels of
borrowings.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had a working capital
deficit of $2,518,000 as compared to a working capital
deficit of $2,159,000 at September 30, 1996, a decrease in
working capital of $359,000. This decrease in working
capital is primarily attributable to the increase in the
current portion of long term debt at June 30, 1997, which
includes $61,667 being the amount to be provided into a
sinking fund for the retirement of the Company's senior
subordinated convertible debentures in December 1997 and
$252,000 being the current amount due for the aircraft held
for resale. The Company currently has no material
commitments for capital expenditures.
The Company expects to continue meeting all of its
obligations for the next twelve months by focusing on its
established operations. Cash flows from these operations are
expected to be sufficient to meet all of its operating
requirements and, significantly reduced, debt service
requirements.
Inflation has not significantly impacted the Company's
operations.
9
<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 Company.
Item 2. CHANGES IN SECURITIES
None except for information previously disclosed
in the Quarterly Report on Form 10-Q for the period
ended December 31, 1996.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
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, 1997:
None.
10
<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 14, 1997 By: /S/ CHRISTOPHER TENNANT
Christopher Tennant,President
and Chief Executive Officer
Dated:AUGUST 14, 1997 By:/S/ PAUL BOYD
Paul Boyd, Principal Financial Officer
11
<PAGE>
Exhibit 11 - Computation of per share earnings
LYNTON GROUP, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C> <C>
WEIGHTED AVERAGE SHARES OF
COMMON STOCK OUTSTANDING 6,394,872 1,961,621 6,394,872 1,961,621
WEIGHTED AVERAGE COMMON
STOCK EQUIVALENTS (1) - - - -
AVERAGE SHARES OUTSTANDING -
PRIMARY EARNINGS PER SAHRE 6,394,872 1,961,621 6,394,872 1,961,621
SERIES C PREFERRED STOCK (1) - 677,779 - 677,779
AVERAGE SHARES OUTSTANDING -
FULLY-DILUTED EARNINGS
PER SHARE 6,394,872 2,639,400 6,394,872 2,639,400
PRIMARY EARNINGS PER SHARE (1)
AVERAGE SHARES OUTSTANDING 6,394,872 1,961,621 6,394,872 1,961,621
NET INCOME $283,001 $655,493 $729,518 $132,771
LESS DIVIDEND ON SERIES C
& D PREFERRED STOCK - - - -
$283,001 $655,493 $729,518 $132,771
PER SHARE AMOUNT (1) $0.04 $0.33 $0.11 $0.07
FULLY-DILUTED EARNINGS PER SHARE (1)
AVERAGE SHARES OUTSTANDING 6,394,872 2,639,400 6,394,872 2,639,400
NET INCOME $283,001 $655,493 $729,518 $132,771
LESS DIVIDEND ON SERIES D
PREFERRED STOCK - (41,007) - (124,861)
$283,001 $614,486 $729,518 $7,910
PER SHARE AMOUNT (1) $0.04 $0.23 $0.11 $0.00
</TABLE>
(1) The options, to purchase shares of Common Stock of the Company, have an
exercise price in excess of the fair value of common stock, for the
three and nine months ending June 30, 1997 and 1996, had an
anti-dilutive effect on earnings per share and are, therefore, excluded
in the computation of earnings per share for these periods.
The warrants, to purchase shares of Common Stock of the Company, had an
exercise price in excess of the fair value of common stock, for the
three and nine months ending June 30, 1996, had an anti-dilutive effect
on earnings per share and are, therefore, excluded in the computation
of earnings per share for that period. All of the warrants issued to HM
Holdings were surrendered to the Company in fiscal 1996 and therefore,
have no effect on the computation of earnings per share for the three
and nine months ending June 30, 1997. All the other remaining warrants,
had an exercise price in excess of the fair value of common stock, for
the three and nine months ending June 30, 1997, had an anti-dilutive
effect on earnings per share and are, therefore, excluded in the
computation of earnings per share for that period.
All of the convertible Series C Preferred Stock were converted to Common
Stock of the Company in fiscal 1996 and therefore, have no effect on the
computation of earnings per share for the three and nine months ending
June 30, 1997.
(2) New accounting pronouncement
In February, 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, EARNINGS SHARE,
which is effective for financial statements for both interim and annual
periods ending after December 15, 1997. Early adoption of the new
standard is not permitted. The new standard eliminates primary and
fully dilutive earnings per share and requires presentation of basic and
diluted earnings per share with disclosure of the methods used to
compute the per share amounts.
Basic earnings per share excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average common
shares outstanding for the period. Diluted earnings per share reflects
the weighted-average common shares outstanding plus the potential effect
of securities or contracts which are convertible to common shares, such
as options, warrants, and convertible debt and preferred stock. The
adoption of this standard is not expected to have a material impact on
earnings per share of the Company.
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM LYNTON GROUP, INC.'S QUARTERLY REPORT FOR THE QUARTER
ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 671,191
<SECURITIES> 0
<RECEIVABLES> 1,997,052
<ALLOWANCES> 0
<INVENTORY> 896,146
<CURRENT-ASSETS> 3,778,023
<PP&E> 17,850,339
<DEPRECIATION> 4,524,421
<TOTAL-ASSETS> 25,054,680
<CURRENT-LIABILITIES> 6,295,537
<BONDS> 13,736,329
<COMMON> 1,918,462
0
0
<OTHER-SE> 2,297,352
<TOTAL-LIABILITY-AND-EQUITY> 25,054,680
<SALES> 18,511,661
<TOTAL-REVENUES> 18,511,661
<CGS> 13,997,248
<TOTAL-COSTS> 16,856,252
<OTHER-EXPENSES> 58,010
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 823,881
<INCOME-PRETAX> 773,518
<INCOME-TAX> 44,000
<INCOME-CONTINUING> 729,518
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 729,518
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
