UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the six months ended
JUNE 30, 1995
Commission File Number: 1-6222
FLIGHTSAFETY INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)
New York 11-1671001
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
Marine Air Terminal, LaGuardia Airport
Flushing, New York 11371
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: 718-565-4100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock (par value $.10 per share) New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Company (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 Company
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of July 31, 1995, the Company had 31,293,778
shares of its common stock outstanding.
FLIGHTSAFETY INTERNATIONAL, INC.
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1 - Financial Statements
Consolidated Balance Sheets at June 30, 1995
and December 31, 1994 3 - 4
Consolidated Statements of Income,
Six Months Ended June 30, 1995 and 1994 5
Consolidated Statements of Income,
Three Months Ended June 30, 1995 and 1994 6
Consolidated Statements of Cash Flows,
Six Months Ended June 30, 1995 and 1994 7
Notes to Consolidated Financial Statements
as of June 30, 1995 8 - 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 11
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURES 13
Page 2 of 13
<TABLE>
<CAPTION>
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
June 30, December 31,
1995 1994
Current assets:
<C> <C>
Cash $ 2,260,000 $ 2,062,000
Short-term investments stated at
cost which approximates
market value 221,208,000 194,930,000
Accounts receivable, less allowance
for doubtful accounts of
$1,439,000 ($1,433,000 in 1994) 65,113,000 59,718,000
Inventory 8,735,000 14,330,000
Prepaid expenses and other
current assets 7,817,000 10,336,000
Total current assets 305,133,000 281,376,000
Equipment and facilities, at cost 847,534,000 806,651,000
Less - accumulated depreciation
and amortization (360,621,000) (336,590,000)
486,913,000 470,061,000
Intangible and other assets 41,033,000 41,492,000
Total assets $833,079,000 $792,929,000
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 13
<TABLE>
<CAPTION>
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES and SHAREHOLDERS' EQUITY
(UNAUDITED)
June 30, December 31,
1995 1994
Current liabilities:
<C> <C>
Current portion of long-term debt $ 1,759,000 $ 1,759,000
Accounts payable and
accrued expenses 39,640,000 36,648,000
Income taxes payable 3,578,000 8,230,000
Unearned income for contract training 39,295,000 32,566,000
Total current liabilities 84,272,000 79,203,000
Long-term debt 38,413,000 39,813,000
Deferred income taxes 108,884,000 108,308,000
Other liabilities 6,432,000 5,201,000
Total liabilities 238,001,000 232,525,000
Shareholders' equity:
Common stock - par value $.10
Authorized - 100,000,000 shares
Issued and outstanding -
31,360,954 shares
(31,315,429 in 1994) 3,136,000 3,132,000
Capital in excess of par value 35,402,000 33,217,000
Retained earnings 558,035,000 525,661,000
596,573,000 562,010,000
Less - restricted stock compensation (1,495,000) (1,606,000)
Total shareholders' equity 595,078,000 560,404,000
Total liabilities and
shareholders' equity $833,079,000 $792,929,000
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 13
<TABLE>
<CAPTION>
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended June 30,
1995 1994*
Revenues:
<C> <C>
Training revenues $146,149,000 $132,076,000
Product sales 11,076,000 15,179,000
157,225,000 147,255,000
Costs and expenses:
Salaries and wages 37,384,000 36,576,000
Depreciation and amortization 24,430,000 22,974,000
General and administrative 14,707,000 12,468,000
Operating expenses 15,124,000 11,777,000
Cost of product sales 8,994,000 13,192,000
100,639,000 96,987,000
Income from operations 56,586,000 50,268,000
Other income (expense):
Interest and other income 6,216,000 5,234,000
Interest expense (1,479,000) (1,201,000)
Income before income taxes 61,323,000 54,301,000
Income taxes 20,246,000 19,563,000
Net income for the period $ 41,077,000 $ 34,738,000
Net income per share $ 1.31 $ 1.09
Average shares outstanding 31,327,275 31,877,554
</TABLE>
See accompanying notes to consolidated financial statements.
*Reclassified to conform with 1995 presentation.
Page 5 of 13
<TABLE>
<CAPTION>
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended June 30,
1995 1994*
Revenues:
<C> <C>
Training revenues $74,805,000 $67,231,000
Product sales 4,589,000 6,778,000
79,394,000 74,009,000
Costs and expenses:
Salaries and wages 18,598,000 17,793,000
Depreciation and amortization 12,469,000 11,581,000
General and administrative 6,884,000 5,702,000
Operating expenses 8,284,000 6,637,000
Cost of product sales 3,668,000 5,800,000
49,903,000 47,513,000
Income from operations 29,491,000 26,496,000
Other income (expense):
Interest and other income 3,102,000 2,792,000
Interest expense (755,000) (511,000)
Income before income taxes 31,838,000 28,777,000
Income taxes 10,925,000 10,238,000
Net income for the period $20,913,000 $18,539,000
Net income per share $ .67 $ .58
Average shares outstanding 31,333,121 31,759,226
</TABLE>
See accompanying notes to consolidated financial statements.
*Reclassified to conform with 1995 presentation.
Page 6 of 13
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
1995 1994
Increase (decrease) in cash
Cash flows from operating activities:
Net income $41,077,000 $34,738,000
Items in net income not using cash:
Depreciation and amortization 24,430,000 22,974,000
Provision for losses on accounts receivable 251,000 150,000
Deferred income taxes 1,422,000 2,238,000
Increase in cash surrender value of
corporate-owned life insurance (760,000) (758,000)
Other, net 307,000 383,000
Changes in working capital other than cash:
(Increase) in accounts receivable (5,646,000) (3,924,000)
Decrease in inventory 5,595,000 804,000
Decrease in prepaid expenses and
other current assets 2,519,000 3,391,000
Increase (decrease) in accounts payable
and accrued expenses 2,992,000 (4,796,000)
Decrease in income taxes payable (4,652,000) (1,729,000)
Increase in unearned income 6,729,000 7,433,000
Net cash provided by operating activities 74,264,000 60,904,000
Cash flows from investing activities:
Capital expenditures (41,549,000) (26,265,000)
(Increase) in short-term investments (26,278,000) (13,560,000)
Other, net 2,505,000 220,000
Net cash used in investing activities (65,322,000) (39,605,000)
Cash flows from financing activities:
Repayment of long-term debt (1,400,000) (1,430,000)
Repurchase of common stock (1,183,000) (13,655,000)
Cash dividends (7,523,000) (6,344,000)
Exercise of stock options 2,192,000 2,137,000
Other, net (830,000) 841,000
Net cash used in financing activities (8,744,000) (18,451,000)
Net increase in cash 198,000 2,848,000
Cash at beginning of period 2,062,000 2,100,000
Cash at end of period $ 2,260,000 $ 4,948,000
Page 7 of 13
FLIGHTSAFETY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
1) These financial statements, which should be read in conjunction with the
financial statements included in FlightSafety International, Inc.'s Annual
Report to Shareholders for 1994, are unaudited but include all adjustments of
a normal recurring nature that the Company considers necessary for a fair
presentation of the results for such interim period. Results for interim
periods are not necessarily indicative of results for a full year.
2) Debt consists of: June 30, December 31,
1995 1994
Industrial development obligations
and other debt due 1995-2012 $40,172,000 $41,572,000
Less - current portion (1,759,000) (1,759,000)
$38,413,000 $39,813,000
The Company's industrial development obligations have variable rates between
2.8 and 5.9 percent.
The interest capitalized on major equipment acquisitions for the six months
ended June 30, 1995 was $929,00 0 ($694,0 00 in 1994).
3)The changes in the Company's shareholders' equity account balances in
the current period were as follows:
Capital In
Common Excess of Retained
Stock Par Value Earnings
Balance at December 31, 1994
$3,132,000 $33,217,000 $525,661,000
Net income for the period 41,077,000
Exercise of options pursuant
to employee stock option plans 7,000 2,185,000
Repurchase of common stock (3,000) (1,180,000)
Dividends declared ($.24 per
share) (7,523,000)
Balance at June 30, 1995 $3,136,000 $35,402,000 $558,035,000
Page 8 of 13
On February 19, 1993, the Company's Board of Directors authorized the re-
purchase of up to 3,000,000 shares of the Company's outstanding common stock.
On December 3, 1993, the Board of Directors increased its authorization to
4,000,000 shares. As of June 30, 1995, 3,316,700 shares had been repurchased
and subsequently retired. At its June meeting, the Company's Board of
Directors declared a regular quarterly cash dividend of twelve cents per
share on its common stock payable August 15, 1995 to shareholders of record on
July 24, 1995.
Page 9 of 13
FLIGHTSAFETY INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
During the first six months of 1995, cash provided by operations was $74.3
million. Cash was principally used to purchase additional equipment and
facilities ($41.5 million), purchase of short-term investments ($26.3
million) and payment of dividends ($7.5 million).
Capital expenditures, which are primarily revenue generating assets such as
simulators, are expected to exceed $70 million in 1995. The Company also
expects to continue to purchase shares of its common stock. The Board of
Directors have authorized a stock repurchase program of 4,000,000 shares.
The Company has repurchased and retired 3,316,700 shares as of June 30, 1995.
The Company expects to fund its capital expenditures and stock repurchase
program from cash provided by operations, existing cash and short-term invest-
ments.
Accounts receivable increased by $5.4 million, or 9 percent, since December
31, 1994 primarily due to an increase in amounts billed in the first six
months of 1995. Inventory decreased by $5.6 million, or 39 percent, due
to reductions in commercial orders for new training equipment.
Results of Operations
Training revenues for the six months ended June 30, 1995 increased by $14.1
million, or 11 percent, and 1995 second quarter training revenues increased
by $7.6 million, or 11 percent, compared to the same periods in 1994.
Increases in training revenues for the 1995 periods were experienced in
all areas of the Company's training operations. Training revenues for the
first half of 1994 included approximately $1.9 million related to an
equivalent amount of retroactive salary and benefit expenses from October 1,
1992 paid to employees in accordance with the United States Government Services
Contract Act on one of the Company's contracts. Excluding this non-recurring
item, revenues increased by $16.0 million, or 12 percent, for the six months
ended June 30, 1995 versus 1994.
Product sales, which consist of simulators and visual systems, decreased $4.1
million, or 27 percent, and $2.2 million, or 32 percent, respectively, for
the six and three month periods ended June 30, 1995 compared to the same
periods in 1994 due to decreases in customer orders for equipment being
produced by the Company's Simulation Systems Division.
Total expenses for the six months ended June 30, 1995 increased by $3.7 million,
or four percent. Salary and wages actually increased by $2.5 million, or 7
percent, due to personnel additions and annual salary increases, but appear
to have only increased by $0.8 million because of the additional $1.7 million
in salary expenses incurred in 1994 related to retroactive salary increases
from October 1, 1992 paid in accordance with the United States Services
Contract Act. Depreciation and amortization increased by $1.5 million due to
the addition of new simulators since the first six months of 1994. Operating
expenses increased by $3.3 million primarily due to increases in subcontractor
fees, simulator maintenance costs and training supplies.
Page 10 of 13
General and administrative expenses increased by $2.2 million primarily due
to increases in professional fees, insurance costs and overall increases in
general and administrative costs. These increases were offset by a decrease
in cost of product sales related to the decrease in product sales.
Income taxes for the six and three months ended June 30, 1995 increased
slightly for both periods compared to the 1994 periods. Income taxes, as
a percentage of pre-tax income for the six months ended June 30, 1995
decreased to 33.0 percent in 1995 from 36.0 percent for the same period
in 1994 and decreased to 34.3 percent from 35.6 percent for the three month
periods ended June 30, 1995 and 1994, respectively. The lower effective
income tax rates were due to income tax refunds related to prior years and
advantaged income as a percentage of pre-tax income.
Page 11 of 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 6. Exhibits and Reports on Form 8-K.
EDGAR Article 5 EX-27 EDGAR Financial Data Schedule filed in separate document.
Page 12 of 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLIGHTSAFETY INTERNATIONAL, INC.
Date: August 7, 1995 s/ A.L. UELTSCHI
President
Date: August 7, 1995 s/K. W. MOTSCHWILLER
Vice President/Treasurer
Page 13 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Filing of the Article 5 EX-27 Financial Data Schedule is only a
summarization of some of the information provided in the actual 10-Q
itself. It is meant as a supplement to the 10-Q filed electronically in
order to satisfy the requirements for EDGAR filers only and is not meant
to be a substitute for the 10-Q filing as required by the S.E.C.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,260,000
<SECURITIES> 221,208,000
<RECEIVABLES> 66,552,000
<ALLOWANCES> 1,439,000
<INVENTORY> 8,735,000
<CURRENT-ASSETS> 305,133,000
<PP&E> 847,534,000
<DEPRECIATION> (360,621,000)
<TOTAL-ASSETS> 833,079,000
<CURRENT-LIABILITIES> 84,272,000
<BONDS> 0
<COMMON> 3,136,000
0
0
<OTHER-SE> 593,437,000
<TOTAL-LIABILITY-AND-EQUITY> 833,079,000
<SALES> 157,225,000
<TOTAL-REVENUES> 161,962,000
<CGS> 8,994,000
<TOTAL-COSTS> 100,639,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,479,000
<INCOME-PRETAX> 61,323,000
<INCOME-TAX> 20,246,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,077,000
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
