UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year
ended December 31, 1994
Commission file number: 1-6222
FLIGHTSAFETY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
New York 11-1671001
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
Marine Air Terminal, La Guardia 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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of Company's
knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
Exhibit Index on page 26
<PAGE>
The aggregate market value of the voting stock held by non-
affiliates of the Company, based on the closing price of such stock on the
New York Stock Exchange on March 13, 1995, was $947,044,239.
As of March 13, 1995, the Company had 31,325,878 shares of its
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Certain information contained in the Company's Annual Report to
Shareholders for the Fiscal Year Ended December 31, 1994 is
incorporated by reference in Part II of this Form 10-K.
(2) Certain information contained in the Company's Proxy Statement
dated March 24, 1995 relating to its Annual Meeting of
Shareholders scheduled to be held on April 26, 1995 is incorporated by
reference in Part III of this Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
FlightSafety International, Inc., a New York corporation (the
"Company"), was organized in 1951. The Company is engaged in the business
of providing high technology training to operators of aircraft and
ships. The Company owns and operates the largest civil aviation simulator
fleet in the world, consisting of more than 165 simulators and training
devices.
The Company operates primarily in one industry segment which is
training. The Company is also engaged in the design, manufacture and sale
of full-motion flight simulators and other training equipment through its
Simulation Systems Division (the "Simulation Division") and visual
displays and systems for flight simulators through its Visual Simulation
Systems Division (the "Visual Division"). The Company's Instructional
Systems Division (the "Instructional Division") develops classroom
presentation systems, interactive computer-based software, courseware and
manuals primarily for the Company's educational and training activities
and is not considered an industry segment.
Training revenues amounted to 90% of operating revenues in 1994,
82% in 1993 and 86% in 1992, while product sales by the Simulation
Division and Visual Division (for 1994 and 1993 only) to unaffiliated
customers were 10% of operating revenues in 1994, 18% in 1993 and 14% in
1992. Sales of products to unaffiliated customers developed by the
Instructional Division were not material for these periods and were
included in the Company's training revenues. Further financial
information regarding the Company's industry segments (including
identifiable assets by segment) can be found in the Company's consolidated
financial statements (and notes thereto) which are incorporated by
reference in Part II of this Form 10-K.
The Company's activities include (a) advanced pilot training in
the operation of aircraft and air traffic control procedures, (b) air crew
training for military and other governmental personnel, (c) aircraft
maintenance technician training, (d) ab-initio (primary) pilot training
to qualify individuals for private or commercial pilot licenses, (e) ship
handling and related training through the Company's wholly-owned subsidiary,
MarineSafety International, Inc. ("MarineSafety"), (f) the design
and manufacture of full-motion flight simulators and other training
equipment through the Company's Simulation Division, (g) the design
and manufacture of visual displays and systems used for flight simulators
through the Company's Visual Division and (h) the development of
instructional methods and materials through its Instructional Division.
Much of the Company's training is conducted on simulators, which
incorporate advanced computer-based technology to replicate, with a high
degree of accuracy, certain sights, sounds, movements and control
responses in order to reproduce the total environment experienced by the
operator of a particular aircraft or ocean-going vessel. Such simulators
are used in the Company's aviation and marine training programs.
Through the Simulation Division, the Company manufactures training equip
-ment, including flight simulators, and is complemented by the Visual
Division which produces visual systems for flight simulators, both of
which are primarily for use in the Company's training operations and for
sale to unaffiliated parties.
Advanced pilot training accounted for 65% of the Company's
operating revenues in 1994 and 61% in 1993 and 1992; government crew
training accounted for 18% of the Company's operating revenues in 1994,
16% in 1993 and 17% in 1992.
The Company's training activities are conducted primarily in the
United States. The Company also maintains two learning centers in Canada,
one learning center in Paris, France and one learning and research
center in Rotterdam, the Netherlands. Many foreign aircraft operators use
the Company's U.S. learning centers to train their crews. Export product
sales, consisting of simulators and visuals, were four percent of
operating revenues in 1994, 12% in 1993 and 10% in 1992. Further
information regarding the Company's export sales can be found in the
Company's consolidated financial statements (and notes thereto) which are
incorporated by reference in Part II of this Form 10-K.
1. Advanced Pilot Training
The Company's advanced pilot training consists of initial and
recurrent courses in the operation and performance of various aircraft.
A majority of this training is provided to pilots employed by corporations
and in general business aviation. Such training includes ground school
instruction in air traffic control and international flight procedures,
navigation, meteorology, crew resource management, Federal Aviation
Administration ("FAA") regulations and aircraft performance and systems.
Training is also conducted on full-motion simulators, which replicate the
in-flight performance and characteristics of a particular aircraft, and
on training devices, including cockpit systems simulators and cockpit
procedures trainers, which familiarize the student with general flight
procedures and cockpit instruments. In-flight instruction is normally
provided in the customer's own aircraft, although the Company occasionally
leases aircraft for this purpose. The Company uses its own aircraft when
providing primary pilot training.
The most significant aspect of the Company's advanced pilot
training program is the training conducted on sophisticated simulators.
Such simulators recreate the pilot's total cockpit environment, including
all flight instrumentation. The cockpit section of the simulator is
connected to computers which reproduce the conditions and movements of
actual flight for the trainee who sits at the controls within the
cockpit. A large hydraulically powered platform, together with the
instruments within the cockpit, is connected to complex digital computer
systems which move the cockpit and adjust the instrument readings in
response to either the actions of the trainee or those of the instructor
at a separate control station. The instructor may program the computers
to change flight conditions, aircraft performance and airport approaches
as desired. Training in a simulator enables a pilot to practice and
perfect procedures and techniques (including emergency maneuvers which
would be hazardous to attempt in actual flight) in a controlled
environment, eliminating the danger of using the aircraft itself and at
a substantial cost reduction. In addition, Federal Aviation
Administration ("FAA") regulations related to certain sophisticated
simulators (Level "C" and Level "D") have expanded the permissible use of
such simulators in pilot evaluation and certification such that many
certifications can be achieved without flying the actual aircraft.
The Company maintains agreements with more than 20 aircraft
manufacturers pursuant to which the manufacturer has designated the
Company as its authorized training organization. Under these agreements,
the Company provides initial training to crews of aircraft purchased from
the manufacturer at a fixed fee per aircraft paid by the manufacturer.
Many of the Company's learning centers are located near a manufacturer's
factory or service center which facilitates access to technical
information provided during training. This decentralized system is also
designed to locate learning centers near actual and potential customers.
Advanced pilot training is offered to flight crews (pilots, co- pilots
and engineers) in order to (i) instruct such crews in the
operation of new or different types of aircraft thereby enabling them to
obtain "type ratings", where applicable, on their pilots' licenses and
(ii) keep such crews proficient by providing recurrent training courses
in the latest safety and flight procedures relating to such aircraft.
Pursuant to certain FAA regulations for pilot checking, testing and
certification, no person may act as a pilot-in-command of an aircraft
unless such person has accomplished a flight review within the preceding
24 months and, if the aircraft is type certificated for more than one
required pilot, such person must have satisfactorily completed prescribed
proficiency checks within the preceding 12 months. At the pilot's option,
both the 12-month and 24-month proficiency checks can be accomplished in
an FAA Level "C" or Level "D" approved simulator. In addition, depending
on the type of operation, the flight crewmember may be required to
complete periodic recurrent training. All of this recurrent training can
also be accomplished in an FAA-approved Level "C" or Level "D" simulator.
In addition to training provided pursuant to agreements with
aircraft manufacturers, the Company provides training for type-ratings and
recurrent training courses pursuant to agreements with the air crew
member's employer. Under such agreements, the customer pays an annual
course fee which provides for training to proficiency of up to two
different types of aircraft and incorporates training in simulators.
Alternatively, the customer may elect to pay for each course or training
as taken rather than enter into such agreements.
The Company also expanded its training of pilots employed by some
domestic and foreign commercial air carriers (both regional and major
carriers) with the addition of new concept air carriers and continues to
provide access to its training equipment to pilots employed by other air
carriers in which they provide their own instruction. FAA regulations
require all pilots employed by domestic commercial carriers flying
aircraft above a certain weight to pass examinations with respect to their
proficiency in handling the type of aircraft which they fly and to undergo
recurrent training every six months. While the majority of air carriers,
particularly the major airlines, provide all training (including
simulator-based training) necessary to enable their pilots to comply with
FAA requirements, certain major airlines have used the Company's Airbus
A-310, Fokker 100, McDonnell Douglas ("MD") DC-9, MD-80 and MD-88/87 and
Boeing 727, 737, 757 and 767-300ER simulators for this purpose. Foreign
air carriers, while not subject to the same FAA regulations, also
engage the Company to provide their pilots with initial training and
recurrent courses in various types of aircraft. In addition, regional
airlines utilize the Company's Piper Navajo, Fairchild Metro II, III, and
23 de Havilland Twin Otter, Dash 7 and Dash 8, Embraer 120, Saab-340, ATR
42/72, Beech 1900, Shorts 360 and BAe Jetstream 31/32 simulators to
provide required training for their pilots. The Company owns and
operates 26 major and 30 regional airline flight simulators for these
purposes.
In 1994, the Company completed construction of a new 45,000 square
foot Learjet learning center in Tucson, Arizona which will have more than
triples the capacity of the center it replaces. The Company also
added three business and four regional airline simulator to its other
learning centers.
2. Government Pilot and Crew Training
The Company provides training for pilots and other crew members
operating aircraft for agencies of the United States government at
substantially all of its learning centers. In addition, the Company has
several learning centers, including its Dothan and Daleville learning
centers, which are primarily dedicated to military training. The
Company's customers include the U.S. Air Force, Army, Navy, Marine Corps
and Coast Guard, and pilots employed by the National Aeronautics and Space
Administration, the FAA, the U.S. Customs Service, the Drug Enforcement
Administration and various other government agencies.
The Dothan, Alabama learning center is located near the United
States Army Aviation Center at Fort Rucker. Hangars are located at this
facility to house classroom and repair facilities for a fleet of fixed- wing
aircraft which are used to train Army helicopter pilots to become
fixed-wing pilots. The U. S. Army has renewed its existing contract that
will total $31 million in revenue over a five-year period.
The Company was also awarded a five-year contract for C-12C/D/F
pilot training to be provided at its Daleville, Alabama learning center
which houses five simulators for training military personnel on these
versions of the King Air 200 business aircraft.
FlightSafety Services Corporation, a subsidiary of the Company
("Services Corporation"), received a five-year, two-phase contract
in support of the U.S. Joint Surveillance Target Attach Radar System (Joint
STARS) which involves highly sophisticated aerial surveillance and
communications systems intended to provide real-time information about
ground personnel movements deep within hostile territory. Services
Corporation also has two significant contracts, renewable annually at the
government's option through 1999 and 2007, respectively, pursuant to which
Services Corporation operates seven government-owned C-5A/B simulators
and provides instructors and technicians at four U.S. Air Force bases for
training of U.S. Air Force C-5A/B transport crews.
The other contract is for training of U.S. Air Force C-135 cargo
aircraft pilots and flight engineers and for Air Force KC-135 aerial
refueling aircraft flight crew training. The 19 simulators are used for
training at 11 U.S. Air Force bases for aerial refueling and low-level
flight training and permit many flight training maneuvers currently
performed in the aircraft to be more economically accomplished in the
simulator. In addition, the Company provides computer-based training at
three U.S. Air Force Reserve bases.
The U.S. Air Force and the Navy awarded contracts to the Company
in 1994 for the training of C-20H (Gulfstream) pilots and flight
engineers. Additionally contracts were awarded in 1994 by NASA for pilot
and technician training of Gulfstream, Learjet and King Air aircraft and
by the FAA for various aircraft.
As noted earlier, 18% of the Company's 1994 operating revenues (16%
in 1993 and 17% in 1992) were attributed to U.S. Government pilot and crew
training. In general, contracts with agencies of the U.S. Government are
subject to renewal, renegotiation and termination at the election of the
U.S. Government.
3. Maintenance Technician Training
The Company provides maintenance training to aircraft technicians
for a wide range of aircraft at most of its learning centers and at
customer locations around the world. In addition, the Company maintains
four learning centers dedicated to maintenance technician training. Two
of these centers are located in Wichita, Kansas and provide training for
Beech and Cessna aircraft technicians; a third center is located in
Savannah, Georgia and provides training for Gulfstream aircraft
technicians; and a fourth center is located in Little Rock, Arkansas and
provides Falcon Jet technician training. In addition, the Company continues
to add additional maintenance courses and programs at its other
learning centers. The Company now offers more than 150 maintenance
training courses. Maintenance technicians can choose from a type-specific
core curriculum, supplemented by additional courses, including
troubleshooting training programs that use computer graphics to provide
high fidelity training environments for technicians to practice and
enhance troubleshooting skills using manufacturer's data rather than the
actual equipment.
4. Primary Pilot Training
The Company provides primary pilot training necessary to enable
qualified individuals to obtain private, commercial or airline transport
licenses with single-engine, multi-engine and instrument fixed-wing and
rotary-wing ratings. Such training is conducted in the classroom, in
electronic trainers and in aircraft owned by the Company, but does not
involve the use of sophisticated simulators. The Company currently
conducts most of its primary training operations, except helicopter
training, at the FlightSafety Academy in Vero Beach, Florida. The
FlightSafety Academy currently provides training programs for several
international and domestic airlines, including Olympic Airways, Swissair,
Asiana Airlines, Air China, Royal Air Maroc, Chicago Express and other
airlines. The Company maintains facilities at Vero Beach, Florida for
fueling, maintenance and storage of its own light fixed-wing aircraft as
well as dormitories for its students. The Company has developed the
FlightSafety Academy into a training facility where only students planning
a career in professional flying are enrolled providing an environment
where airline-sponsored "ab-initio" (primary) and self-funded students are
given instruction devoted solely to preparing them for a career in flying.
The Company has two other primary learning centers at Lakeland,
Florida and Alliance Airport in Fort Worth, Texas. The Lakeland learning
center provides full-service flight training for fixed-wing student
pilots and the Fort Worth Learning center provides full-service training
for rotary and fixed-wing student pilots. The helicopter training
complements training services provided at the Company's nearby simulator-
equipped Bell Helicopter Learning Center.
5. Maritime Training and Research
Through MarineSafety, the Company provides training to crews of large ocean-
going vessels owned by business concerns, as well as the
United States Navy, Coast Guard and Merchant Marine Academy. Simulation
research studies are also performed by MarineSafety, including studies to
assist in determining channel dredging requirements and waterway and port
improvements.
In 1987, the U.S. Department of Transportation ( the "DOT")
assigned the management and operations of its Computer Aided Operations
Research Facility (CAORF) at Kings Point, New York to MarineSafety.
A full-mission ship simulator at Kings Point simulates the control bridge
of large ocean going vessels and, through advanced engineering techniques,
simulates the actual operating conditions experienced by the crews
of such vessels. The shiphandling training simulator thus provides
training in a controlled environment without the potential hazard and
expense of using an actual ship. At Kings Point, MarineSafety also
operates two restricted visibility bridge simulators, devoted exclusively
to training deck officers in vessel maneuvers and navigation, which use
automated collision avoidance systems during conditions of restricted
visibility.
In 1994 MarineSafety entered into an agreement with the California
Maritime Academy to provide two simulators at the Academy's installation
in Valejo, California. Operation of the simulators is scheduled to
begin in April 1995 and the simulators will be available to MarineSafety
for training of its customers. MarineSafety also provides ship-handling
simulator training for the U.S. Navy at MarineSafety's facilities in
Newport, Rhode Island and San Diego, California. The Newport facility
houses four ship-handling simulators that are used to train approximately
800 Naval officers each year, many from the Navy's nearby Surface
Warfare Officers' School, in handling combat or support ships under many
operating and environmental conditions. The U.S. Navy may renew this
contract each year through 1996.
The San Diego facility provides training to U.S. Navy deck officers
for approximately 50 surface ships operated by the U.S. Navy. The
contract is renewable annually at the U.S. Navy's option through 1998.
The center has a full-mission bridge simulator and a bridge wing
simulator, and is used to perform commercial training when not in use by
the Navy.
In 1994, MarineSafety International Rotterdam, B.V. in Rotterdam,
the Netherlands, began operations in a new maritime research and training
center that houses six simulators for the training of ship's officers,
harbor pilots, cadets and vessel traffic controllers and conducts maritime
research projects. North Sea Ferries has signed an agreement to train its
Masters and chief officers at the Rotterdam facility. A contract was also
signed to train captains and crews of the new 900-ft. high-speed container
ships. MarineSafety is the majority shareholder of MarineSafety
International Rotterdam B.V.
<PAGE>
6. Manufacture of Training Equipment
The Simulation Division manufactures flight simulators and other
advanced training devices, including cockpit systems simulators and
cockpit procedures trainers, for installation at the Company's learning
centers and for sale by the Company to unaffiliated parties. The
Simulation Division delivered eight simulators in 1994. Seven simulators
were installed at the Company's learning centers and one simulator was
shipped to the U.S. Government. The Simulation Division also delivered
five OH-58D Helicopter Cockpit Procedure Trainers to Fort Rucker, Alabama
for U.S. Army combat training. The Simulation Division also provides
maintenance support for the Company's simulators and other training
equipment.
In 1995, the Simulation Division plans to deliver nine flight
simulators, of which seven are for Company use, one for the U.S.
Government and one for an overseas customer. Five helicopter training
devices for the U.S. Army are also currently being manufactured. The
Company requires cash deposits, progress payments and/or letters of credit
for the simulators which the Simulation Division manufactures for
export in order to ensure that it receives timely collection of the
related account receivable.
The Company's Visual Simulation Systems Division designs, develops
and manufactures, under the trade name VITAL, computer-generated visual
systems and display equipment that are installed on flight simulators.
Approximately 360 VITAL visual systems have been delivered to customers
around the world. The new generation VITAL VIII ChromaView visual system
creates more realistic scenes through a photo-imagery-based technology.
Three Vital VIII visual systems were shipped in 1994 to an overseas
customer.
7. Design and Development of Training Systems
The Instructional Division provides the initial analysis of system
training and performance requirements and designs and develops classroom
presentation systems, courseware, interactive computer-based software
and manuals primarily for use in the Company's educational and training
activities. The Instructional Division also produces training manuals and
other instructional materials for the U.S. military and the FAA. Many of
the Instructional Division's training systems use high technology
applications and task performance requirements.
8. Competition
The Company faces competition in each of its training services.
There are numerous training organizations located throughout the United
States which provide primary flight training to the public. In the
area of advanced pilot training, the customers served by the Company are
also served by the larger airlines (which often train their own pilots and
provide training to pilots of other airlines), by government agencies
(which often train their own flight personnel) and by other commercial
training organizations. The Company also faces competition from numerous
training organizations that do not use simulators in their training
programs. In addition, there are many organizations that provide training
and may operate simulators for aircraft for which the Company also
provides simulator-based flight training. The Company is also aware of
a number of domestic and foreign-based organizations and corporations
which provide shiphandling training.
The Company competes principally by attempting to provide the best,
most accessible and reasonably priced training service available. The
Company is continually improving the quality of its services for business
and commercial aviation and developing new and innovative products for its
customers. In 1994, seven new simulators were added to the Company's
fleet. The products manufactured by the Simulation Division and Visual
Division are at the leading edge of aircraft simulation, employing such
features as digital control loading and weather radar; digitized sound and
automated voice systems; automatic testing features and advanced
hydrostatic motion systems and touch-screen instructor stations. The
Company also attempts to conveniently locate its training facilities near
existing and potential customers.
In addition, the Company has designed new programs to support a
renewed emphasis on total quality in all areas of training development and
delivery. All of the Company's instructors participate in programs
designed to maintain and upgrade their teaching skills on a continuing
basis. Other programs have been designed to better meet the specific
requirements of individual customers and to deliver a broader range of
services and support.
The Company believes that the growing complexity and operating cost
of the new generation of aircraft make training with simulators highly
desirable. Moreover, the substantial capital costs and long lead time
involved in obtaining appropriate simulators suggest that certain commercial
airlines might prefer to use flight training programs utilizing
simulators offered by independent contractors rather than maintain and
operate the training equipment themselves. There can be no assurance,
however, that these commercial airlines will continue to use training
programs offered by independent contractors such as the Company.
The sale of products, including simulators and visual systems, is
a competitive industry both domestically and internationally. There are
several manufacturing companies worldwide that have the same ability as
the Company to design and manufacture a complete flight simulator,
including a visual system. There are also a number of companies that can
manufacture either a simulator or a visual system, but do not have the
capability to do both.
The Company competes in the sale of products primarily by offering
training devices and visual systems that are reasonably priced, easily
maintained and delivered on a timely basis. The 1993 acquisition of the
Visual Division enhanced the Company's ability to manufacture and sell a
complete simulator or total training system.
9. Number of Persons Employed
As of December 31, 1994, the Company and its subsidiaries had 2,246
full-time employees. Of these, 858 were instructors in ground school,
simulator or in-flight training, 848 were administrative, clerical and
maintenance personnel, 392 were employees of the Simulation Division, 88
were employees of the Visual Division and 60 were employees of the
Instructional Division.
<PAGE>
10. Executive Officers
Each executive officer of the Company serves at the pleasure of
the Company's Board of Directors and, subject to removal, holds office
until the regular meeting of the Board of Directors which follows the
annual meeting of shareholders and until his successor has been
appointed and qualified. The following table sets forth certain
information with respect to the executive officers of the Company.
Years
Position
Name Age Position with Company Held
Albert L. Ueltschi 77 President and Chairman of the
Board 44 years
Bruce N. Whitman 61 Executive Vice President and
Director 33 years
Elmer G. Gleske 64 Vice President - Government
Affairs 18 years
Dennis Gulasy(1) 52 Vice President - Simulation
Systems 3 years
Kenneth W. Motschwiller(2) 38 Vice President - Treasurer 4
years
James S. Waugh 47 Vice President - Marketing 15
years
Mario D'Angelo(3) 42 Controller 4 years
______________________
(1) Mr. Gulasy was elected Vice President-Simulation Systems of the
Company in September 1992. Mr. Gulasy has also been General
Manager of the Company's Simulation Division since 1985. Prior
thereto, Mr. Gulasy held various positions with the Company.
(2) Prior to becoming Vice President-Treasurer, Mr. Motschwiller was
Controller of the Company from December 1983 until July 1991.
(3) Prior to becoming Controller, Mr. D'Angelo was Assistant
Controller of the Company from September 1988 until July 1991.
Prior thereto, Mr. D'Angelo held various positions with the
Company.
<PAGE>
ITEM 2. PROPERTIES
The Company's corporate offices are located at the Marine Air
Terminal, La Guardia Airport, Flushing, New York 11371. In addition,
there are four flight simulators, and related training facilities,
located at the La Guardia Airport facility. Including this facility, the
Company currently operates 32 advanced and maintenance technician learning
centers and two primary learning centers in various cities throughout the
United States, one advanced learning center in France, two advanced
learning centers in Canada and one marine training and research center in
the Netherlands. FlightSafety Services Corporation provides training
at U.S. Air Force bases in facilities furnished by the U.S. government and
maintains its administrative office in Littleton, Colorado. The
Simulation Division maintains its offices and plant in Broken Arrow,
Oklahoma. The Visual Division maintains its offices and plant in St.
Louis, Missouri. The Instructional Division maintains its general offices
in Hurst, Texas.
In the aggregate, the Company occupies approximately 1,233,000
square feet of building space which is devoted to office and
administrative purposes, classrooms, repair service, maintenance
facilities, the housing of simulators and aircraft, the design and
manufacturing of simulators, visual displays and systems and other
training equipment, the development of classroom presentation systems,
manuals, interactive computer-based programs and the design and production
of instructional systems. Approximately 93% of the facilities owned
or leased by the Company are presently utilized for these purposes. The
remaining space is being put to various temporary uses and is potentially
available for expansion of the Company's operations. The Company
considers its facilities well maintained, in good operating condition,
adequately insured and satisfactory for their various uses.
<PAGE>
The following table sets forth more detailed information related
to the facilities of the Company:
Approximate Lease
Location Square Feet Expiration Date Principal Activities
La Guardia Airport 36,000 2000 Corporate
offices and advanced
Flushing, New York pilot learning
center
4619 Le Bourget Drive 25,700 (1) Advanced
learning center
Berkeley, Missouri
Wiley Post Airport 10,100 1996(2) Advanced
learning center
7310 N.W. 50th Street
Bethany, Oklahoma
1804 Hyannis Court 27,300 1997(3) Advanced
learning center
College Park, Georgia
24 Industrial Boulevard 16,500 (4) Advanced
learning center
Daleville, Alabama
Dothan/Houston County Airport 30,300 2001(5) Advanced
learning center
600 FlightSafety Drive
Dothan, Alabama
1600 Dolwick Drive 7,700 1997(6) Advanced
learning center
Erlanger, Kentucky
2250 Alliance Blvd. 10,700 1995(7) Primary
learning center
Fort Worth, Texas
9601 Trinity Boulevard 16,500 2004(8) Advanced
learning center
Fort Worth, Texas
8900 Trinity Boulevard 23,000 (9) Offices of the
Instructional
Hurst, Texas Division
Lakeland Airport 17,700 2009(10) Advanced
and primary learning
2949 Medulla Road center
Lakeland, Florida
Lambert-St. Louis 12,100 1996(11) Advanced
learning center
International Airport
6185 Aviation Drive
St. Louis, Missouri
Le Bourget Airport 36,900 2001(12) Advanced
learning center
BP25 Zone d'Aviation d'Affaires
Building 404
Aeroport Le Bourget, France
Adams Field 725 1995(13) Maintenance learning center
Little Rock, Arkansas
4900 E. Conant Street 11,700 1995(14) Advanced
learning center
Long Beach, California
Long Beach Municipal Airport 27,100 1997(15) Advanced
learning center
4330 Donald Douglas Drive
Long Beach, California
4800 NW 36th Street 62,000 1998(16) Advanced
learning center
Miami, Florida
Dorval International Airport 19,100 1999(17) Advanced
learning center
9555 Ryan Avenue
Dorval, Montreal
Quebec, Canada
Salt Lake City 23,600 2016(18) Advanced
learning center
International Airport
201 N. 2200 W.
Salt Lake City, Utah
San Antonio International Airport 18,000 2000(19) Advanced
learning center
9027 Airport Boulevard
San Antonio, Texas
1505 South 192nd Street 68,600 (20) Advanced
learning center
Seattle, Washington
Teterboro Airport 25,400 (21) Advanced
learning center
100 Moonachie Avenue
Moonachie, New Jersey
Toledo Express Airport 16,500 2000(22) Advanced
learning center
11600 West Airport Road
Swanton, Ohio
95 Garratt Boulevard 18,000 2005(23) Advanced
learning center
Downsview, Toronto
Ontario, Canada
Travis Field 43,900 2004(24) Advanced
and maintenance
Savannah, Georgia learning centers
Tucson International Airport 45,000 2006(25) Advanced
learning center
1071 E. Aero Park Blvd.
Tucson, Arizona
Vero Beach Municipal Airport 50,900 2006(26) Primary
learning center
2805 Airport Drive
Vero Beach, Florida
Palm Beach International Airport 38,000 2004(27) Advanced
learning center
3887 Southern Boulevard
West Palm Beach, Florida
Wichita Mid-Continent Airport 18,000 2006(28) Advanced
learning center
2 Learjet Way
Wichita, Kansas
Wichita Mid-Continent Airport 25,700 2006(29) Advanced
learning center
1951 Airport Road
Wichita, Kansas
Wichita Mid-Continent Airport 30,300 2006(30) Advanced
learning center
1851 Airport Road
Wichita, Kansas
9720 East Central Avenue 63,000 2015(31) Advanced
learning center
Wichita, Kansas
9525 East Central Avenue 17,900 (32) Maintenance
learning center
Wichita, Kansas
1962 Midfield Road 17,000 2020(33) Maintenance learning center
Wichita, Kansas
William B. Hobby Airport 36,600 (34) Advanced
learning center
7525 Fauna Street
Houston, Texas
New Castle County Airport 39,500 2010(35) Advanced
learning center
155 N. duPont Highway
New Castle, Delaware
2700 North Hemlock Circle 101,200 (36) Offices and
plant of the
Broken Arrow, Oklahoma Simulation
Division,
manufacturing
facility
for training
equipment
5695 Campus Parkway 30,000 (37) Offices and
plant of the
St. Louis, Missouri Visual Division,
manufacturing facility for
visual systems
7700 East 38th Street 25,000 (38) Former
manufacturing facilities
Tulsa, Oklahoma now used for
Company storage
U.S. Merchant Marine Academy 22,000 (39) MarineSafety
Computer Aided Operations Research and
marine
Research Facility learning center
Steamboat Road
Kings Point, New York
344 Aquidneck Avenue 17,400 (40) MarineSafety
Middletown, Rhode Island Marine learning
center
32nd Street Naval Station 4,800 (41) MarineSafety
Building 3149 Marine learning
center
San Diego, California
Wilhelminakade 701 34,000 (42) MarineSafety
3OO7 GG Rotterdam Research and
Netherlands Marine learning
center
10184 West Bellview Avenue 11,700 1997 Services
Corporation
Littleton, Colorado Administrative
offices
_________________________
(1) This building was constructed by the Company on land owned by the
Company and currently houses McDonnell Douglas MD-80 and DC-9
simulators, Boeing 727 simulators, Metro II and III simulators,
a Jetstream 31/32 simulator and a SAAB-340 simulator.
(2) This building was constructed by the Company on land leased from
the Oklahoma County Industrial Authority to house the Company's
Commander aircraft learning center.
(3) The Company leases space to house its JetStar, King Air and
Embraer 120 simulators.
(4) This building, constructed on land owned by the Company, houses
C-12 and U-21 simulators.
(5) The Company constructed hangars on land leased from the
Dothan/Houston County Airport Authority. A fleet of fixed-wing
aircraft is maintained at this facility.
(6) The Company leases space to house its Boeing 727-200 and Embraer
120 simulators.
(7) The Company leases space to house fixed-wing and rotary-wing
aircraft and provides primary flight training.
(8) This building was constructed by the Company on land leased from
Bell Helicopter Textron to house the Company's Bell Helicopter
learning center.
(9) This building was purchased to house the offices of the Company's
Instructional Systems Division.
(10) This building was constructed by the Company on land leased from
the City of Lakeland, Florida to house the Company's Piper
Aircraft learning center and also provides non-career primary
aviation training.
(11) This facility is on land leased from the City of St. Louis and
houses the Company's Sabreliner learning center.
(12) The Company constructed a building on land leased from Aeroport
de Paris. This building houses Falcon 10, 20, 50 and 900, King
Air, Citation V, Embraer 120 and Dash-8 simulators.
(13) The Company leases space to house its Falcon Maintenance learning
center.
(14) These premises, leased from McDonnell Douglas Corporation, house
an MD-80 learning center.
(15) This building was constructed by the Company on land leased from
the City of Long Beach to house the Company's Boeing 737-300,
McDonnell Douglas MD 88/87, Cessna 300/400 series, Citation,
King Air, and Gulfstream II simulators.
(16) The Company leases space from the Dade County Airport to house
simulators for the Airbus A-310, Citation, Boeing 727 and 757 and
McDonnell Douglas DC-9 and MD-88.
(17) This building was constructed by the Company to house its
Challenger learning center. It is located on premises leased from
the City of Dorval for a term expiring in May 1999, renewable at
the Company's option for up to four additional five-year terms.
(18) This building was constructed by the Company on property leased
from Salt Lake City and houses a Boeing 737 simulator.
(19) This building was constructed on land leased from the San Antonio
Airport Authority and houses regional airline simulators.
(20) The Company purchased this land and building which houses eight
major and regional airline simulators. The Company is using
34,000 square feet and leasing the remaining space to third
parties.
(21) This building was constructed on land owned by the Company, is
adjacent to Teterboro Airport and houses the Company's Falcon Jet
learning center.
(22) This building, which houses Citation and King Air simulators, was
constructed by the Company on property leased from the Toledo
Express Airport Authority.
(23) The Company constructed a building on land leased from de
Havilland Inc. and houses simulators for such manufacturer's
aircraft.
<PAGE>
(24) Two buildings were constructed by the Company on property leased
from Gulfstream American Corporation to house the Company's
Gulfstream pilot and maintenance learning centers.
(25) The Company constructed a building on land leased from Learjet
Corporation for housing its Tucson Learning Center. The Company
can extend the lease at its option to 2048.
(26) Three buildings, containing a total of 28,500 square feet of space
and the land on which they are situated, are owned by the Company.
The remaining property is held under a lease expiring in 2006.
A fleet of light-fixed wing aircraft is maintained here to provide primary
pilot training.
(27) This building was constructed by the Company on land leased from
Palm Beach County to house Sikorsky helicopter and Learjet
simulators.
(28) This building was constructed by the Company on land leased from
the Wichita Airport Authority to house the Company's Wichita
Learjet learning center.
(29) This building, which houses the Company's Cessna learning center,
is located on approximately one acre of land leased from the
Wichita Airport Authority.
(30) This building was constructed by the Company on land leased from
the Wichita Airport Authority to house the Company's Cessna
Citation learning center.
(31) The Company leases space from the Beech Aircraft Corporation to
house its Beech learning center.
(32) This building was constructed by the Company on land owned by the
Company to house the Company's Beech Maintenance learning center.
(33) This building was constructed by the Company on land leased from
the Wichita Airport Authority to house the Company's Cessna
Maintenance learning center.
(34) This building is located on two acres of land owned by the Company
and houses the Company's Houston learning center at which
simulator training for several types of aircraft is conducted.
(35) This building is located on land leased from the New Castle County
Airport and houses both business and regional aircraft simulators.
(36) Seven acres of land and a building are owned by the Company in
Broken Arrow. This building houses the Company's Simulation
Division which manufactures training equipment.
(37) This building and land is owned by the Company and houses the
Visual Division which manufacturers visual systems.
(38) This building and land is owned by the Company and is used
primarily for storage.
(39) This facility is leased under a cooperative agreement with the
U.S. Maritime Administration to provide marine simulation research
and training.
(40) This building, constructed on five acres of land owned by the
Company, houses four marine simulators.
(41) The Company houses two marine simulators at this facility in space
provided by the U.S. Navy.
(42) This building is leased from the municipality of Rotterdam and
houses six marine simulators.
____________________________
The Company's rent expense for 1994 was $1,811,000.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in litigation relating to claims arising
out of its operations in the normal course of business. Such claims
against the Company are generally covered by insurance. It is the opinion
of management that uninsured liability, if any, resulting from existing
litigation and claims will not have a material adverse effect on the
Company's business or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
The information set forth under the caption "Common Stock Price
Range and Dividend Information" on page 1 of the Company's Annual Report
to Shareholders for the Fiscal Year Ended December 31, 1994 (the "1994
Annual Report") is incorporated herein by reference. No other information
contained in the 1994 Annual Report shall be deemed to be filed with the
Commission, except as expressly stated herein.
On February 19, 1993, the Board of Directors authorized a stock
repurchase program for up to three million shares of the Company's common
stock. On December 3, 1993, the Board of Directors authorized an increase
in the stock repurchase program to four million shares. As of March 13,
1995, 3,291,700 shares of the Company's Common Stock had been repurchased
pursuant to this program.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Five Year Financial
Highlights" on page 1 of the 1994 Annual Report is incorporated herein by
reference
.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The information set forth under the caption "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
on page 14 of the 1994 Annual Report is incorporated herein by reference
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and notes thereto, together
with the report thereon of Price Waterhouse LLP, independent accountants,
dated January 31, 1995, appearing on pages 15 to 25 of the 1994 Annual
Report are incorporated herein by reference. With the exception of the
information incorporated by reference in Items 5, 6 and 7 and this Item
8 of this Form 10-K, the 1994 Annual Report is not to be deemed filed as
part of this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information concerning the directors of the Company set forth
on page 2 of the Proxy Statement dated March 24, 1995 relating to the
Company's Annual Meeting of Shareholders scheduled to be held on April 26,
1995 (the "1995 Proxy Statement") under the caption "Election of
Directors," and the information concerning compliance with Section 16(a)
of the Securities Exchange Act of 1934, as amended, set forth on pages 11
and 12 of the 1995 Proxy Statement under the caption "Compliance With
Section 16(a) of the Exchange Act" are incorporated herein by reference.
No other information contained in the 1995 Proxy Statement shall be deemed
to be filed with the Commission, except as expressly stated herein.
Information relating to the executive officers of the Company is
set forth in Item 1, section 10, of this Form 10-K under the caption
"Executive Officers".
ITEM 11. DIRECTORS' AND EXECUTIVE OFFICERS' COMPENSATION
The information regarding directors' compensation set forth on
pages 3 through 4 of the 1995 Proxy Statement under the caption
"Committees, Meetings and Compensation of the Board of Directors," and the
information regarding executive officers' compensation set forth on pages
5 through 10 of the 1995 Proxy Statement under the caption "Executive
Compensation" other than the information set forth on pages 5 through
7 and pages 10 and 11 under the captions "Report of the Compensation
Committee on Executive Compensation" and "Five-Year Stock Performance
Graph," respectively, are incorporated herein by reference.<PAGE>
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Set forth below is certain information relating to each person
known to the Company to be the beneficial holder of more than five
percent of the Company's Common Stock as of March 13, 1995.
Percentage of
Name and Address of Amount and Nature of Outstanding Common Stock
Beneficial Owner Beneficial Ownership Owned as of March 13, 1995
Albert L. Ueltschi 9,617,040 (1) 30.7%
Marine Air Terminal
La Guardia Airport
Flushing, NY 11371
Putnam Investment, Inc. 4,129,572 (2) 13.2%
One Post Office Square
Boston, MA 02109
FMR Corp. 3,093,300 (3) 9.9%
82 Devonshire Street
Boston, MA 02109
(1) Includes 9,616,540 shares held pursuant to a revocable trust for which Mr.
Ueltschi is the sole beneficiary during his lifetime and 500 shares held
pursuant to a partnership. Does not include approximately
1,513,000 shares beneficially owned by various members of Mr. Ueltschi's
family, in respect of which Mr. Ueltschi disclaims beneficial ownership.
(2) Putnam Investment, Inc., is a wholly-owned subsidiary of Marsh and McLennan.
Putnam Investment Inc.'s subsidiaries, Putnam Investment Management, Inc., and
the Putnam Advisory Company, Inc., are investment advisors to investment
companies. This represents the number of shares owned as of December 31,
1994 as indicated in a Schedule 13G filed by Putnam Investment, Inc., with
the Securities and Exchange Commission (SEC) on January 23, 1995. Putnam
has shared power to vote or to direct the vote for 375,560 shares and has
shared power to dispose or to direct the disposition of all the shares.
(3) FMR Corp. is a holding company and its subsidiary, Fidelity Management &
Research Company, is an investment advisor to investment companies. This
represents the number of shares owned as of December 31, 1994, as indicated
in a Schedule 13(G) filed by FMR with the SEC on February 13, 1995. FMR has
neither sole nor shared voting power with respect to such shares and has
sole power to dispose of such shares.
____________________
(b) The information regarding beneficial ownership of shares of the Company's
Common Stock as of March 13, 1995 by the directors and named executive officers
of the Company (those named in the Summary Compensation Table on page 8 of the
1995 Proxy Statement), and by all directors and executive officers of the
Company as a group, set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" on page 4 of the 1995 Proxy
Statement, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
a. List of documents filed as part of this Form 10-K:
Page In 1994
Annual
Report to
Shareholders
1. Financial Statements
Report of Independent Accountants 25
Consolidated Statements of Income
for each of the three years in the period ending December 31, 1994 15
Consolidated Balance Sheets at December 31, 1994 and 1993
16
Consolidated Statements of Cash Flows for each of the
three years in the period ending December 31, 1994 17
Notes to Consolidated Financial Statements 18-25
2. Financial Statement Schedules - 1994, 1993 and 1992 Page In
This
Form 10-K
Report of Independent Accountants on Financial Statement Schedules 27
I. Marketable Securities 30-35
V. Property, Plant and Equipment 36
VI. Accumulated Depreciation, Depletion
and Amortization of Property, Plant and Equipment 37
VIII. Valuation and Qualifying Accounts 38
X. Supplementary Income Statement Information 39
Financial statement schedules not included in this Form 10-K have been
omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto.
ITEM 14(a) 3. EXHIBITS
3) (a) Certificate of Incorporation of the Company, as amended, filed as
Exhibit 3(a) to theCompany's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 (the "1993 Form 10-K"), is incorporated herein by
reference.
(b) The By-Laws of the Company, as amended, filed as Exhibit 3(b) to
the 1993 Form 10-K, is herein incorporated by reference.
10) (a) Company's 1979 Stock Option Plan, with first and second amendments
thereto, filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991 (the "1991 Form 10-K"), is incorporated
herein by reference.
(b) Company's Employee Stock Purchase Plan, as amended April 27, 1994.
(c) Company's 1982 Incentive Stock Option Plan with first and second
amendments thereto, filed as Exhibit 10(k) to the 1991 Form 10-K, is
incorporated herein by reference.
(d) Company's 1984 Restricted Stock Compensation Plan, and first amendment
thereto, filed as Exhibit 10(l) to the 1991 Form 10-K, is incorporated herein
by reference.
(e) Company's Retirement Plan for Non-Employee Directors, and first amendment
thereto.
(f) Company's 1992 Stock Option Plan, filed as Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992, (the
"1992 Form 10-K") is incorporated herein by reference.
(g) Change of Control severance agreement for Executive Officers.
13) Company's Annual Report to Shareholders for the Fiscal Year Ended
December 31, 1994.
21) Subsidiaries of the Company.
23) Consent of Independent Accountants.
ITEM 14 (b). No reports on Form 8-K were filed with the Commission by
the Company during the fiscal year ended December 31, 1994.
ITEM 14 (c). See Item 14 (a)(3) above.
ITEM 14 (d). See Item 14 (a)(2) above.
<PAGE>
Report of Independent Accountants on Financial Statement Schedules
To the Board of Directors of FlightSafety International, Inc.
Our audits of the consolidated financial statements referred to in our report
dated January 31, 1995 appearing on page 25 of the 1994 Annual Report to
Shareholders of FlightSafety International, Inc. (which report and
consolidated financial statements are incorporated by reference in
this Annual Report on Form 10-K) also included an audit of the Financial
Statement Schedules listed in Item 14(a) (2) of this Form 10-K. In our
opinion, such Financial Statement Schedules present fairly, in all material
respects, the information set forth therein when read in conjunction with
the related consolidated financial statements.
PRICE WATERHOUSE LLP
New York, New York
January 31, 1995
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized.
FLIGHTSAFETY INTERNATIONAL, INC.
(Company)
Date: March 27, 1995 By: /s/ Albert L. Ueltschi
Albert L. Ueltschi
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this Form
10-K has been signed below by the following persons on behalf of the Company and
in the capacities and on the dates indicated.
Date: March 27, 1995 By: /s/ Albert L. Ueltschi
Albert L. Ueltschi
Chairman of the Board,
Director and President
(Principal Executive Officer)
Date: March 27, 1995 /s/ George B. Beitzel
George B. Beitzel
Director
Date: March 27, 1995 /s/ Charles R. Longsworth
Charles R. Longsworth
Director
Date: March 27, 1995 /s/ Edward E. Hood, Jr.
Edward E. Hood, Jr.
Director
Date: March 27, 1995 /s/ John A. Morgan
John A. Morgan
Director
Date: March 27, 1995 /s/ Bruce N. Whitman
Bruce N. Whitman
Director and Executive Vice President
Date: March 27, 1995 /s/ Kenneth W. Motschwiller
Kenneth W. Motschwiller
Vice President - Treasurer
(Principal Financial Officer)
Date: March 27, 1995 /s/ Mario D'Angelo
Mario D'Angelo
Controller
(Principal Accounting Officer)<PAGE>
Exhibit (21)
Subsidiaries of FlightSafety International, Inc.
Percentage owned
Jurisdiction of by Company
Name of Subsidiary Incorporation (Directly or Indirectly)
FlightSafety Capital Corporation Delaware 100%
MarineSafety International, Inc. New York 100%
MarineSafety International Rotterdam B.V. Netherlands 51%
FlightSafety Canada, Ltd/Ltee Canada 100%
FlightSafety International, S.A.R.L. France 100%
FlightSafety New York, Inc. New York 100%
FlightSafety Properties, Inc. Delaware 100%
FlightSafety Services Corporation Delaware 100%
FlightSafety Texas, Inc. Delaware 100%
FlightSafety China, Inc. Delaware 100%
Kunming FlightSafety Aviation
Training Company, Limited China 85%
<PAGE>
<TABLE>
SCHEDULE I
<CAPTION>
FLIGHTSAFETY INTERNAT'L, INC.
MARKETABLE SECURITIES
AS OF DECEMBER 31, 1994
MARKET VALUE AMOUNT AT
# OF OF EACH AT WHICH
NAME OF SHARES COST ISSUE AT CARRIED
ISSUER AND OR UNITS OF BALANCE IN THE
TITLE OF CREDIT PRINC EACH SHEET BALANCE
EACH ISSUE ENHANCEMENT INSTITUTION AMOUNT ISSUE DATE SHEET
(1)(4) (2) (2) (3) (3)
<S> <C> <C> <C> <C> <C> <C>
ALLIANCE Cap MGT OVERCOLL MUNIBONDS 60 3,000,000 3,000,000 3,000,000
Ala HSG FIN AUTH INSURED FHA/VA 100,000 99,200 99,300 99,200
Ala HLTH FIN AUTH 1,200,000 1,240,224 1,229,304 1,240,224
ALASKA INDDEVEXP 375,000 382,785 379,459 382,785
ALBUQUERQUE NM APRT 250,000 253,744 252,940 253,744
ALBUQUERQUE NM INSURED MBIA 1,000,000 1,048,302 1,045,620 1,048,302
Ariz TRASNSN 500,000 505,352 501,505 505,352
Ariz ST UNIV PRE-REFNDD FED GOVT 500,000 534,966 524,220 534,966
ATLANTIC HIGHLANDS NJ G/O 418,400 415,710 416,806 415,710
AUSTIN TEX RFDG PRE-REFNDD FED GOVT 350,000 362,328 358,278 362,328
AUSTINTX WTR&SWR PRE-REFNDD FED GOVT 375,000 433,116 419,895 433,116
AUSTIN TX WTR&SWR 500,000 535,259 547,025 535,259
BALTIMORE MD CON INSURED FGIC 490,000 491,404 491,014 491,404
BERGENFIELD BANS NJ G/O 2,297,000 2,280,645 2,291,143 2,280,645
BOONTON NJ G/O 2,200,000 2,179,188 2,191,508 2,179,188
BOULDER LARIMER 1,300,000 1,337,632 1,323,790 1,337,632
BRAZOS TX HGRED OVERCOLL STDT LOANS 2,450,000 2,461,815 2,414,479 2,461,815
BROWARD CNTY FL HSG COLL 1STINDFEDS&L1,000,000 1,002,231 1,001,750 1,002,231
BROWARD CNTY FL HSG COLL GNMA&FNMA 580,000 580,000 567,843 580,000
BROWARDCYFLSCHBRDINSURED AMBAC 985,000 985,000 977,002 985,000
NBROWARDCTYFLHOSPPRE-REFNDD FED GOVT 1,520,000 1,628,804 1,605,090 1,628,804
CAL HLTH 1,000,000 1,020,000 1,020,000 1,020,000
CAL POLLCTL LOC USNATBANK 520,000 520,000 525,216 520,000
CAL POLLCTL LOC WLSFARGO BNK 415,000 415,000 410,244 415,000
CAL ST VET - CA G/O 500,000 505,411 503,380 505,411
CAMBRIA TWP&WTR LOC BANQ PARIBAS 500,000 497,075 497,165 497,075
CARBON CTY UTAH PRE-REFNDD FED GOVT 415,000 430,235 427,139 430,235
CHICAGO ILL MET INSURED FGIC 250,000 250,000 250,000 250,000
CLERMONTOH HOSP INSURED AMBAC 1,000,000 1,054,232 1,048,260 1,054,232
CLOISTER BANS NJ G/O 885,000 880,053 881,681 880,053
COBB CNTY&MARIT PRE-REFNDD FED GOVT 750,000 799,010 788,835 799,010
COLLINSVLLILLST PRE-REFNDD FED GOVT 1,000,000 1,073,090 1,062,890 1,073,090
COLORADO HFA S-FINSURED FSA 1,040,000 1,040,000 1,040,000 1,040,000
CONWAY ARK HOSP PRE-REFNDD FED GOVT 1,300,000 1,391,350 1,382,563 1,391,350
COOK CTY ILL LOC NATWEST 550,000 560,452 555,566 560,452
COOK CTY ILLS/F INSURED MBIA 700,000 715,224 707,000 715,224
CRANFORD TWPBAN NJ G/O 700,000 693,651 697,172 693,651
DEL ST HLTH INSURED MBIA 1,000,000 1,048,323 1,038,150 1,048,323
DEL ST HSG INSURED FSA 2,130,000 2,130,000 2,110,606 2,130,000
DENVER CITY&A/P INSURED FGIC 1,000,000 1,000,000 1,002,610 1,000,000
DENVER CITY&A/P LOC SANWA&
SUMITOMO 2,000,000 2,006,392 1,992,070 2,006,392
DES MOINES IOWA PRE-REFNDD FED GOVT 400,000 426,567 421,948 426,567
WASH DC PRE-REFNDD FED GOVT 2,000,000 2,086,340 2,084,040 2,086,340
ESCAMBIA CNTY FLA COLL GNMA 265,000 265,000 266,171 265,000
FARMERS BRCH TX INSURED MBIA 600,000 608,325 604,776 608,325
FARMINGTON NMEX PRE-REFNDD FED GOVT 1,115,000 1,257,776 1,256,014 1,257,776
FLORIDA HFA COLL GNMA&FNMA 300,000 300,000 299,988 300,000
FULTON CNTYUNLIMITTXG/O 1,500,000 1,550,832 1,532,460 1,550,832
GE Cap CORP INSURED MBIA 299,627 299,627 299,627 299,627
GEORGIA MUN ELEC 1,225,000 1,249,500 1,249,500 1,249,500
GOOSE CREEK TX INSURED MBIA 500,000 513,481 506,875 513,481
GRAND RAPIDS DAM 2,000,000 2,004,070 1,982,500 2,004,070
HAWAII ST APRT INSURED FGIC 370,000 376,973 373,859 376,973
HENRY CTYGAHOSP PRE-REFNDD FED GOVT 2,180,000 2,316,696 2,298,070 2,316,696
HOBOKEN NJ INSURED FSA 1,090,000 1,127,394 1,115,125 1,127,394
HORSHAM TWP&SWR PRE-REFNDD FED GOVT 295,000 303,850 303,850 303,850
ILL DEV FIN ATH LOC AMER NATL 1,000,000 1,000,000 1,000,000 1,000,000
ILL HLTH FACS PRE-REFNDD FED GOVT 3,965,000 4,101,128 4,094,374 4,101,128
ILL HSG DEV PURCH AGRMT CITIBANK 500,000 500,000 500,000 500,000
ILL HSG DEV 1,715,000 1,715,000 1,684,977 1,715,000
ILL ST REG G/O PRE-REFNDD FED GOVT 2,300,000 2,440,745 2,404,501 2,440,745
ILL ST SALES TX 1,300,000 1,306,990 1,298,544 1,306,990
ILL ST STUD LN 500,000 503,162 502,300 503,162
INDEPENDENCE POLL 650,000 649,382 640,582 649,382
INDIANA HLTHFAC INSURED MBIA 400,000 402,124 398,908 402,124
INTERMTN PWR PRE-REFNDD FED GOVT 450,000 467,790 464,751 467,790
IOWA STUD LN CORP 500,000 501,002 500,480 501,002
JACKSONVLE ELEC PRE-REFNDD FED GOVT 500,000 511,935 499,425 511,935
JEFFRSN PARISH INSURED MBIA 500,000 512,156 510,000 512,156
JOHNSON CNTY KS PRE-REFNDD FED GOVT 1,000,000 1,036,400 1,018,430 1,036,400
KANSAS CITY MET PRE-REFNDD FED GOVT 500,000 529,042 523,625 529,042
KENTUCKY ST TPKE 1,110,000 1,110,000 1,110,000 1,110,000
KNOX CY TENN PRE-REFNDD FED GOVT 500,000 507,900 506,655 507,900
LANE CNTY ORE G/O 500,000 526,532 518,380 526,532
LOGANSPT IN ELE INSURED MBIA 1,000,000 1,053,796 1,038,590 1,053,796
LOS ALAMOS UTIL INSURED FSA 2,000,000 2,000,000 1,994,120 2,000,000
LA PUB FAC 3,000,000 3,009,618 3,001,621 3,009,618
LA ST SER C G/O 725,000 729,760 728,364 729,760
LA ST ENG INSURED FGIC 890,000 900,184 897,001 900,184
LA SALES TX INSURED AMBAC 1,000,000 1,033,995 1,030,810 1,033,995
LA ST RECOV 470,000 488,610 485,548 488,610
LOUISVLL KY ARP LOC NATCTYBNK 2,000,000 2,000,000 2,000,000 2,000,000
MSR PUBPWR CA ETM FED GOVT 484,500 475,296 474,505 475,296
MAINE ST EDL STUD LN 500,000 505,880 504,765 505,880
MARICOPA CNTY AZ 2,150,000 2,284,685 2,276,182 2,284,685
MARICOPA CNTY SCH DIST 500,000 508,454 504,780 508,454
MARYLAND ST CDA 1,500,000 1,500,000 1,492,285 1,500,000
MD HLTH&ED INSURED CGIC 500,000 521,144 513,860 521,144
MA ED FIN LN INSURED AMBAC 245,000 245,000 245,000 245,000
MA ST HLTH&ED COLL GNMA&FNMA 490,000 490,000 499,274 490,000
MA ST HLTH&ED INSURED MBIA 250,000 255,000 256,203 255,000
MA ST PORT AUTH PRE-REFNDD FED GOVT 4,280,000 4,450,974 4,419,992 4,450,974
MA ST WATER LOC BANK OF
NOVA SCOTIA 1,000,000 1,000,000 1,000,000 1,000,000
METRO FAIR&EXPO INSURED MBIA 500,000 519,120 517,995 519,120
METRO PIER INSURED AMBAC 1,000,000 978,742 981,000 978,742
MICH ST BLDG INSURED MBIA 1,000,000 1,002,142 1,000,750 1,002,142
MICH ST HSG DEV COLL FED GOVT 1,595,000 1,595,000 1,595,000 1,595,000
MINN STATE COP 615,000 616,166 610,388 616,166
MISS STUDENT LN OVERCOLL STDT LOANS 2,000,000 2,000,000 1,973,940 2,000,000
MO ECO DEV LOC UNION BK
SWITZERLD 1,505,000 1,505,000 1,505,000 1,505,000
MONEY MARKET @ BROKERS 1,557,102 1,557,102 1,557,102 1,557,102
MONTANA ST STUD LN 470,000 473,663 471,176 473,663
MONTGRY CNTY INSURED FGIC 2,000,000 2,000,000 2,000,000 2,000,000
NEBRASKA HIGH ED 990,000 991,600 993,486 991,600
NEW HAMPSHIRE BB 1,435,000 1,460,193 1,454,258 1,460,193
N M EDL AUTH OVERCOLL STNT LOANS 300,000 300,000 289,233 300,000
NEW ORL EXHIB INSURED AMBAC 500,000 498,545 500,000 498,545
NEW YORK ST MTG AGY 1,300,000 1,300,000 1,300,000 1,300,000
NEW YORK ST THRUWAY 1,510,000 1,507,614 1,505,877 1,507,614
NCAROLINA EASTMUNIPWR 2,115,000 2,115,000 2,090,600 2,115,000
N SLOPE BORO INSURED MBIA 1,000,000 977,488 979,160 977,488
NHAMPTION PA INSURED AMBAC 600,000 626,184 619,572 626,184
NEERNPA LTH&EDINSURED AMBAC 250,000 250,000 249,085 250,000
NUVEENPERFAMP OVERCOLL MUNIBONDS 2,000,000 1,996,600 2,000,000 1,996,600
OHIO AIR QUAL LOC CANA IMPL 2,000,000 2,001,080 1,950,380 2,001,080
OWENSBR ELEC INSURED AMBAC 500,000 482,300 475,950 482,300
PANHNDL PLNS LOC SALLIE MAE 3,000,000 2,999,920 2,994,560 2,999,920
PASA CALM/F INSURED FSA 4,135,000 4,200,662 4,085,463 4,200,662
PENNPICA INSURED FGIC 350,000 350,000 349,069 350,000
PENN ST PRE-REFNDD FED GOVT 250,000 257,110 255,928 257,110
PENN IDA INSURED AMBAC 2,780,000 2,787,146 2,777,172 2,787,146
PENN PSB ETM FED GOVT 130,000 130,500 130,861 130,500
PHNX AZ INDL COLL GNMA 65,000 65,000 65,738 65,000
PIEDMONT PWR& PRE-REFNDD FED GOVT 500,000 515,000 515,000 515,000
PUERTO RICO PRE-REFNDD FED GOVT 415,000 440,660 439,082 440,660
PUTNAMINVT OVERCOLL MUNIBNDS 40 2,000,000 2,000,000 2,000,000
RI STUD LN OVERCOLL STUD LOANS 1,000,000 1,000,000 1,000,000 1,000,000
RICHLND CY SC INSURED CGIC 500,000 500,000 482,575 500,000
RICHMND VA HSGINVEST AGRT BAYERISCHE 4,760,000 4,760,000 4,760,000 4,760,000
STJOSESPH HOS INSURED MBIA 1,400,000 1,492,890 1,472,296 1,492,890
STLOU MO MFC LOC SANWA BNK 1,650,000 1,648,014 1,614,206 1,648,014
SANJOSE CA RD INSURED MBIA 1,000,000 1,000,000 1,000,000 1,000,000
SAVH GA HSG LOC AMSTHBNK NA 400,000 400,000 400,000 400,000
SCTTSDL AZ IDAINSURED AMBAC 250,000 251,224 250,783 251,224
SEATTLE MUNI MET 900,000 939,450 923,310 939,450
SHRVPRT WATER INSURED FGIC 1,000,000 956,539 959,310 956,539
S CAROLINA ST EDL 1,000,000 1,023,400 1,000,200 1,023,400
SOUTH COLUMBIA BA 1,000,000 1,041,975 1,038,860 1,041,975
SD HSG 1,635,000 1,635,000 1,620,920 1,635,000
SD STUD LN 500,000 534,224 520,400 534,224
S TEX HIGHR EDOVERCOLL STUDLNS 1,000,000 1,000,000 980,590 1,000,000
SPARTANBURG CNTY G/O 405,000 414,685 412,493 414,685
SWARTMORE BORO PRE-REFNDD FED GOVT 2,000,000 2,115,295 2,109,600 2,115,295
TEMPE ARIZONA PRE-REFNDD FED GOVT 500,000 534,246 523,510 534,246
TENN ST G/O 500,000 501,251 499,740 501,251
TEXAS WTR RES FIN AUTH 1,000,000 1,028,977 1,019,350 1,028,977
UINTAH CNTY UTAH 175,000 187,826 188,799 187,826
UNIT MIT MUNI TRUST #7 1,165,446 83,771 307,969 83,771
UPPER ALLEGHENY ETM FED GOVT 3,125,000 3,125,000 3,087,120 3,125,000
UTAH ST HSG FIN AUTH 2,550,000 2,545,880 2,544,760 2,545,880
UTAH ST SCH DIST GIC SWSSBNKCO 1,465,000 1,519,348 1,502,314 1,519,348
UT ST BRD REG INSURED AMBAC 250,000 250,000 248,925 250,000
US TREASURY - (FED GOVT) 1,000,000 987,622 985,300 987,622
VANKAMPEN MERIT OVERCOL MUNI BONDS 56 2,798,820 2,800,000 2,798,820
VIRGINIA ED LN AUTH 1,000,000 1,009,030 996,620 1,009,030
VIRGINIA ST HSG DEV 7,565,000 7,557,266 7,516,901 7,557,266
WALDWICK NJ BANS - ST G/O 1,286,900 1,277,712 1,282,937 1,277,712
WASHINGTON ST PUB PWR 1,145,000 1,141,597 1,116,132 1,141,597
WAYNE CHRTR AP INSURED MBIA 1,350,000 1,350,000 1,304,748 1,350,000
WSTRN MN POWER PRE-REFNDD FED GOVT 2,000,000 2,134,824 2,118,841 2,134,824
WILMINGTON DEL PRE-REFNDD FED GOVT 250,000 260,537 259,818 260,537
WNCHSTR VAIDA PRE-REFNDD FED GOVT 425,000 449,832 445,676 449,832
WISCONSIN HSG&ECON 6,750,000 6,751,386 6,567,494 6,751,386
WISCONSIN ST WATER 540,000 545,060 541,274 545,060
WYOMING CDA S/F 1,430,000 1,430,000 1,416,705 1,430,000
194,929,536
===========193,765,448
===========194,929,536
===========
(1) Most of these marketable securities have a "put" feature which allows
FlightSafety International, Inc. to sell such securities, normally at par
value to the issuer or its agent.
(2) These marketable securities have an additional credit enhancement in
addition to the issuer's credit. The credit enhancemenent are as follows:
"COLL": these securities have an asset pledged to a lender unitl
a loan is repaid. If the borrower defaults the lender has
the legal right to seize the collateral and sell it to pay
off the loan.
"Escrowed": these securities are secured by agencies of the
U.S. Government.
"GIC": these securities have a guaranteed investment contract which
is an obligation of an insurance company or a bank to pay
a fixed amount of interest on designated interest dates
and to pay the full principal upon maturity.
"Insured": these securities are insured against credit risk by an
unaffiliated bond insurance company.
"Investment Agt: these securities are guaranteed by a financial institution,
who have received the bond proceeds to invest until the
project is commenced.
"LOC": these securities have a letter of credit from a financial
institution that normally promises to pay the interest and
bond par value if the issuer is unable to make interest and
principal payments.
"OVERCOL: these securities have an asset pledged in excess of
requirements.
"Pre-REFNDD": these securities are escrowed in obligations of agencies of
the U.S. Government.
(3) This represents the unamortized cost, net of any premium and
discount amortization.
(4) These marketable securities can be liquidated on short notice if
FlightSafety International, Inc. requires such funds.
</TABLE>
<TABLE>
SCHEDULE V
FLIGHTSAFETY INTERNATIONAL, INC.
Property, Plant, And Equipment
<CAPTION>
Balance at Transfers of Balance at
beginning Additions completed Sales and end of
of period at cost constr'tion retirements Other period
Year ended December 31, 1994:
<S> <C> <C> <C> <C> <C> <C>
Land 2,498,000 147,000 2,645,000
Building (1) 61,239,000 1,687,000 3,743,000 (3,000) 66,666,000
Simulators
& training
equipment 587,297,000 5,643,000 44,574,000 (1,505,000) 636,009,000
Furniture,
fixtures
and
equipment 30,095,000 2,700,000 0 (499,000) 32,296,000
Leasehold
improvements 5,253,000 0 1,082,000 (167,000) 6,168,000
Contruction
in Progress 58,026,000 54,240,000(49,399,000) 0 62,867,000
744,408,000 64,417,000 0 (2,174,000) 806,651,000
Year ended December 31, 1993:
Land 2,498,000 2,498,000
Building(1) 60,112,000 563,000 517,000 (1,000) 48,000 61,239,000
(2)
Simulators
& training
equipment 535,029,000 4,362,000 50,294,000(2,388,000) 587,297,000
Furniture,
fixtures
and
equipment 20,689,000 7,513,000 51,00 (171,000 2,013,000 30,095,000
(2)
Leasehold
improvements 4,708,000 219,000 326,000 5,253,000
Contruction
in Progress 57,867,000 51,347,000(51,188,000) 58,026,000
680,903,000 64,004,000 0(2,560,000) 2,061,000 744,408,000
Year ended December 31, 1992:
Land 2,323,000 175,000 2,498,000
Building (1) 59,229,000 357,000 526,000 60,112,000
Simulators
& training
equipment 479,412,000 4,785,000 51,144,000 (312,000) 535,029,000
Furniture,
fixtures
and
equipment 19,289,000 1,705,000 713,000(1,018,000) 20,689,000
Leasehold
improvements 2,631,000 194,000 2,039,000 (156,000) 4,708,000
Contruction
in Progress 51,215,000 61,249,000(54,597,000) 57,867,000
614,099,000 68,290,000 0(1,486,000) 680,903,000
(1) Includes $41,107,000 at December 31, 1994 constructed on leased land
($36,969,000 at December 31, 1993 and $36,288,000 at December 31, 1992).
(2) Represents reclassification of assets previously included in
intangible asset.
</TABLE>
<TABLE>
SCHEDULE VI
FLIGHTSAFETY INTERNATIONAL, INC.
Accumulated Depreciation, Depletion And Amortization
Of Property, Plant And Equipment
<CAPTION>
Additions
Balance at charged Balance at
beginning to cost Sales and end of
of period & expenses retirements Other period
Year ended December 31, 1994:
<S> <C> <C> <C> <C> <C>
Building 17,113,000 2,069,000 (3,000) 19,179,000
Simulators
& training
equipment 254,469,000 38,649,000 (1,044,000) 292,074,000
Furniture,
fixtures
and
equipment 17,197,000 5,808,000 (472,000) 22,533,000
Leasehold
improvements 2,251,000 720,000 (167,000) 2,804,000
291,030,000 47,246,000 (1,686,000) $336,590,000
(1)
Year ended December 31, 1993:
Building 14,825,000 2,289,000 (1,000) 17,113,000
Simulators
& training
equipment 218,115,000 38,741,000 (2,387,000) 254,469,000
Furniture,
fixtures
and
equipment 12,551,000 2,934,000 (159,000) 1,871,000 17,197,000
(2)
Leasehold
improvements 1,728,000 523,000 2,251,000
247,219,000 44,487,000 (2,547,000) 1,871,000 $291,030,000
(1)
Year ended December 31, 1992:
Building 12,664,000 2,161,000 14,825,000
Simulators
& training
equipment 183,755,000 34,615,000 (255,000) 218,115,000
Furniture,
fixtures
and
equipment 11,538,000 2,000,000 (987,000) 12,551,000
Leasehold
improvements 1,570,000 315,000 (157,000) 1,728,000
209,527,000 39,091,000 (1,399,000) $247,219,000
(1)
(1) Depreciation and amortization of equipment and facilities:
1994 1993 1992
Depreciation:
charged to expenses 45,064,000 42,711,000 38,139,000
capitalized or charged
to cost of product sales 2,182,000 1,776,000 952,000
Total depreciation 47,246,000 44,487,000 39,091,000
Amortization:
charged to expenses 1,647,000 1,626,000 1,812,000
capitalized or charged
to cost of product sales 1,002,000 674,000 120,000
Total amortization 2,649,000 2,300,000 1,932,000
Total depreciation and amortization 49,895,000 46,787,000 41,023,000
(2) Represents reclassification of amount previously included in accumulated
amortization of intangibles assets.
</TABLE>
<TABLE>
SCHEDULE VIII
FLIGHTSAFETY INTERNATIONAL, INC.
Valuation And Qualifying Accounts
Allowance For Doubtful Accounts
<CAPTION>
Balance at Write-offs Balance at
beginning Charged to and end of
of period expenses (collections) period
<S> <C> <C> <C> <C>
(1)
Year ended December 31, 1994: $1,442,000 $352,000 $361,000 $1,433,000
Year ended December 31, 1993: $1,146,000 $519,000 $223,000 $1,442,000
Year ended December 31, 1992: $1,078,000 $513,000 $445,000 $1,146,000
(1) Accounts written off as uncollectible, net of collections of
previously written off account receivables.
</TABLE>
<TABLE>
SCHEDULE X
FLIGHTSAFETY INTERNATIONAL, INC
Supplementary Income Statement Information
<CAPTION>
Year Ended December 31,
Charged to: 1994 1993 1992
<S> <C> <C> <C>
Maintenance and repairs Expense $18,744,000 $18,452,000 $17,395,000
</TABLE>
EXHIBIT 10(b)
FLIGHTSAFETY INTERNATIONAL, INC.
EMPLOYEE STOCK PURCHASE PLAN,
AS AMENDED APRIL 27, 1994
Section 1. Purpose. The purpose of this Plan (the "Plan") is to
provide an opportunity for employees of FlightSafety International, Inc.
(the "Company") and any subsidiary (a "Subsidiary") that is (i) designated
by the Board of Directors of the Company (the "Board") and (ii) meets the
requirements of Section 424(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), to purchase Common Stock (the "Stock") of the Company
and thereby have an additional incentive to contribute to the prosperity of
the Company. It is the intention of the Company to have the Plan qualify
as an "Employee Stock Purchase Plan" under Section 423 of the Code, and the
Plan shall be construed in accordance with such purpose.
Section 2. Eligibility. Any person regularly employed by the
Company or its Subsidiaries shall be eligible to participate in the Plan on
an Offering Date (as hereinafter defined), provided that as of such Offering
Date he shall have completed at least seventeen consecutive months of full-
time employment with the Company or a Subsidiary. For purposes of the
Employee Stock Purchase Plan, the term "full-time" when used in connection
with an employee's eligibility to participate, means employment which
customarily involves more than 20 hours per week and more than five months
in a calendar year. No employee may participate in an offering under the
Plan if after giving effect to an option granted in such offering such
employee would own (within the meaning of the Code) shares of Stock,
including Stock which he may purchase under outstanding options, possessing
5 percent or more of the total combined voting power or value of all classes
of stock of the Company or any Subsidiary. All employees who participate
in the Plan shall have the same rights and privileges thereunder.
Section 3. Offering. The maximum number of shares of Stock which
may be issued pursuant to the Plan shall be 1,112,500 shares. The shares
of stock sold by the Company pursuant to the Plan shall be either authorized
but unissued shares or shares acquired by the Company and held in its
treasury. The Stock Purchase Plan Committee (the "Committee"), established
pursuant to Section 11 hereof, may designate any amount of such shares for
offering at any of the Offering Dates, as hereinafter defined. In the event
of a stock split, stock dividend, combination or recapitalization of shares
of Stock subsequent to the effective date of the Plan, the maximum number
of shares of Stock for which rights to purchase may therefore be granted
under the Plan will be, pursuant to action taken by the Board,
proportionately increased or decreased, and such other action will be taken
as in the opinion of the Board of the Company will be appropriate under the
circumstances.
Offerings of Stock under the Plan shall commence July 1, 1977 and
terminate June 30, 1997 (the "Offering Period"). During such period options
will be granted each July 1 in 1977 through 1996 (the "Offerings Dates") to
eligible employees who elect to participate in the Plan under Section
4. Each option shall expire on the June 30 following the year in which the
option was granted. The number of shares of Stock to be subject to each
option shall be fixed in full shares as of each Offering Date and shall be
that number of shares of Stock resulting from the division of the option
price hereinafter specified in the next paragraph into the percentage (up
to a maximum of 10%) of each Participant's annual gross basic compensation
rate on such Offering Dates which the Participant commits through payroll
deductions as provided in Section 4 hereof.
The option price under each option shall be the lower of: (1) 85% of
the closing price of the Stock on the New York Stock Exchange (or the
principal exchange on which such shares are traded at that time) on the date
such option is granted, or (ii) 85% of such closing price on the date of
exercise, and may be adjusted pursuant to Section 7 hereof.
No option shall be granted which would permit a Participant's right
to purchase stock of any class of the Company under all employee Stock
Purchase Plans of the Company and any Subsidiary to accrue (as specified in
Section 423 of the Code) at a rate which exceeds $25,000 of fair market
value of such stock (determined at the time such option is granted) during
each calendar year in which such option will be outstanding at any time.
If options granted on any Offering Date would be exercisable for an
aggregate number of shares of Stock that exceeds the maximum number of
shares offered on any Offering Date, the options so granted and the number
of shares which may be purchased under such options shall be reduced on a
pro rata basis in as nearly a uniform manner as shall be practicable and
equitable. In such event, payroll deductions shall also be reduced or
refunded accordingly and the Company shall give written notice of such
reduction or refund to each Participant affected thereby.
Section 4. Participation. An eligible employee may become a
participant in the Plan ("Participant") by filing on or before an applicable
Offering Date of grant a completed payroll deduction authorization form
provided by the Company. Employees may authorize payroll deductions at the
rate of any whole percentage up through 10% of their gross basic
compensation (excluding any overtime, bonuses, or other extra compensation).
Payroll deductions in accordance with such authorization shall commence on
the applicable Offering Date and shall end one year thereafter. All payroll
deductions may be held by the Company and commingled with its other
corporate funds. A separate account for each Participant shall be
maintained by the Company under the Plan and the amount of each
Participant's payroll deductions shall be credited to such account.
Participants may discontinue participation in the Plan, in which
event the amount credited to their accounts shall thereupon be paid to them
with 6% per annum simple interest. In the event Participants terminate
their employment with the Company or a Subsidiary for any reason (including
death) prior to the expiration of the one-year option period, their
participation in the Plan shall terminate and all amounts credited to their
accounts with interest shall thereupon be paid to them or their estates,
except that if Participants' employment is terminated not more than three
months immediately preceding the date upon which their stock would be
purchased pursuant to Section 5, the Participants or their estates may elect
to leave amounts then credited to their accounts in the Plan until such
stock purchase.
Section 5. Purchase of Stock. Upon the expiration of each
one-year option period, Participants' options shall be exercised automati
cally for the purchase of that number of full shares of Stock which the
accumulated payroll deductions credited to their accounts at that time will
purchase at the applicable price specified in Section 3. Notwith standing
the foregoing, Participants may by written notice to the Company prior to
the expiration of the one-year option period elect to terminate such options
and withdraw all accumulated payroll deductions credited to their accounts
with interest, or to exercise their options for a specified number of full
shares less than the number which may be purchased pursuant to Section 3.
Section 6. Payment and Delivery. Upon the exercise of an
option, the Company will deliver to the Participants the Stock purchased
upon such exercise and the balance of any amount of payroll deductions
credited to their accounts not used for such purchase with interest. The
Participants may elect to have such unused cash balance credited to their
accounts for the next option period, if they are Participants therein. The
Company shall retain the amount of payroll deductions used to purchase the
Stock in full payment therefore and such Stock shall thereupon be fully paid
and non-assessable. Except as otherwise provided herein, no Participant
shall have any voting, dividend or other stockholder rights with respect to
shares subject to any option granted under the Plan until such option is
exercised and such shares are issued to them.
Section 7. Recapitalization. If after the grant of an option but
prior to the purchase of the Stock thereunder, there shall be any increase
or decrease in the amount of outstanding shares of Stock by reason of a
stock split, stock dividend, combination or recapitalization of such shares,
the number of shares to be purchased pursuant to such option and the option
price per share will be proportionately increased or decreased, and such
other action will be taken as in the opinion of the Board will be
appropriate under the circumstances.
Section 8. Merger or Liquidation. In the event of a dissolution or
liquidation of the Company or a merger or consolidation in which the Company
is not the surviving corporation, the Plan shall terminate upon the date of
approval of such dissolution, liquidation, merger or consolidation by the
Company's shareholders. The exercise date of all options outstanding under
the Plan shall be exercised in the manner provided in Section 5 as though
such approval date constituted the expiration of the normal one-year option
period.
Section 9. Transferability. Options granted to Participants may not
be assigned, transferred, pledged or otherwise disposed of in any way, and
any such attempted assignment, transfer, pledge or other disposition shall
be null and void and without effect.
<PAGE>
Section 10. Amendment or Termination of the Plan. The Board may
at any time and from time to time amend or terminate the Plan, provided that
no such amendment or termination may adversely affect the rights of any
Participant under outstanding options under this Plan, and provided
further that no amendment shall be effective unless shareholder approval has
been obtained if such approval is required (i) in order for the Plan to meet
the conditions specified in Rule 16b-3(a) under the Securities and Exchange
Act of 1934, as amended, or (ii) by any other provision of applicable
law.
Section 11. Administration. The Plan shall be administered by a
Committee of at least three members who shall be appointed by the Board. The
Committee shall have full power and authority to promulgate such rules and
regulations as it deems necessary for the proper administration of the
Plan, to interpret the provisions and supervise the administration of the
Plan, and to take all action in connection therewith or in relation thereto
as it deems necessary or advisable. Decisions of the Committee shall be
made by a majority of its members and shall be final and binding upon all
Participants. Any decision reduced to writing and signed by a majority of
the members of the Committee shall be fully effective as if it had been made
at a meeting of the Committee duly held. The Company will pay all expenses
incurred in the administration of the Plan.
EXHIBIT 10(e)
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
OF FLIGHTSAFETY INTERNATIONAL, INC.
ARTICLE I.
Section 1.1 - Purpose: The purpose of the Retirement Plan for Non-Employee
Directors of FlightSafety International, Inc. is to provide non-employee
directors with pension benefits at retirement.
ARTICLE II.
DEFINITIONS AND CONSTRUCTION
Section 2.1 Definitions: The following definitions shall apply
for purposes of the Plan, unless a different meaning is plainly indicated
by the context:
(a) "Accrued Benefit": The amount determined in
accordance with Article IV, Section 4.1 for Retirement at the Normal
Retirement Date and Article IV, Section 4.2 for Retirement for Disability.
(b) "Annual Retainer": the annual amount payable to
a Director for serving on the Board, excluding (i) any annual amount payable
to a Director for serving on a committee of the Board and (ii) any per
meeting fee paid for attending meetings of the Board or a committee thereof.
(c) "Board": The Board of Directors of the Company,
as constituted from time to time.
(d) "Code": The Internal Revenue Code of 1986, as
amended from time to time, and the applicable rulings and regulations
thereunder (including the corresponding revisions of any succeeding law).
(e) "Company": FlightSafety International, Inc. a New
York Corporation, its successors and assigns.
(f) "Director": Any non-employee director of the
Company. A director of the Company who is also an employee of the Company
or any of its subsidiaries shall not be considered a Director under this
Plan.
(g) "Disability": A condition of incapacity due to
physical or mental illness as a result of which a Participant is unable to
perform his duties and responsibilities as a Director for a period of six
consecutive months.
(h) "Disability Retirement Pension": The Pension that
Participants are entitled to receive upon fulfilling all of the requirements
under Section 4.2.
(i) "Effective Date": December 8, 1988.
(j) "Eligible Spouse": The husband or wife to whom the
Participant had been legally married throughout the six-month period ending
on the earlier of 1) the Participant's Normal Retirement Date or 2) the date
of the Participant's death.
(k) "ERISA": Public Law No. 93-406, the Employee
Retirement Income Security Act of 1974, as amended from time to time.
(l) "Normal Retirement Date": The date upon which the
Participant attains age 70.
(m) "Normal Retirement Pension": The Pension that
Participants are entitled to receive upon fulfilling all of the requirements
under Section 4.1.
(n) "Participant": A Director participating in the
Plan in accordance with the provisions of Article III or a former Director
entitled to receive a Pension under the Plan.
(o) "Pension": A series of semi-annual amounts, as described in Article IV
hereof, which are payable to a person who is
entitled to receive benefits under the Plan.
(p) "Plan": The Retirement Plan for Non-Employee
Directors of FlightSafety International, Inc. as amended from time to time.
(q) "Plan Year": The twelve-month period commencing
on December 8, and ending on December 7.
(r) "Retirement": Termination of service as a Director
for any reason other than death after a Participant has fulfilled all
requirements for a Normal Retirement Pension pursuant to Section 4.1 or a
Disability Retirement Pension pursuant to Section 4.2. Retirement shall be
considered as commencing on the day immediately following a Participant's
last day of service as a Director.
(s) "Service": The period of a Participant's service
as a Director of the Company considered in the determination of his
eligibility for benefits under the Plan in accordance with Section 3.1.
(t) "Year of Service": A twelve-month period commencing on the anniversary
date of a Director's election to the Board.
Section 2.2 - Construction of Language: Whenever appropriate in
the Plan, words used in the singular may be read in the plural, words used
in the plural may be read in the singular, and words importing the masculine
gender may read as referring equally to the feminine or the neuter. Any
reference to an Article or Section number shall refer to an Article or
Section of the Plan unless otherwise indicated.
<PAGE>
ARTICLE III.
PARTICIPATION AND SERVICE
Section 3.1 - Participation: All Directors on the Effective Date
of the Plan shall be eligible to participate in the Plan as of the Effective
Date. All other Directors shall become Participants in this Plan on the
date they are elected Directors of the Company. Any Director who was
previously an employee of the Company shall be eligible to participate in
the Plan upon his retirement as an employee of the Company, provided that
he remains a Director following such retirement.
ARTICLE IV.
PENSION
Section 4.1 - Normal Retirement Pension: Upon a Participant's
Normal Retirement Date, regardless of whether such Participant is still then
serving as a Director, such Participant shall become entitled to receive an
annual Normal Retirement Pension, equal to one hundred percent (100%) of the
Annual Retainer payable to him as a Director immediately prior to the date
of his Retirement.
Section 4.2 - Disability Retirement Pension: In the event that a
Participant shall retire as a Director of the Company prior to his Normal
Retirement Date by reason of his Disability, such Participant shall be
granted a Disability Retirement Pension. The annual amount of such
Participant's Disability Retirement Pension shall be equal to one hundred
(100%) of the Annual Retainer payable to him as a Director on the date of
his Retirement by reason of Disability, without reduction for Retirement
prior to his Normal Retirement Date.
Section 4.3 - Payment of Pension: A Participant's Normal Retirement Pension
or Disability Retirement Pension shall be paid in semi-annual installments,
each installment equalling 1/2 of his annual Pension.
The first installment of such Pension shall be paid to a Participant on the
first day of the semi-annual period commencing January 1 or July 1, as the
case may be, next following the month in which he actually terminates his
Service with the Company as a Director.
Section 4.4 - Termination of Service: In no event shall any
Pension be paid to a Participant prior to actual termination of Service.
In the event a Participant does not retire at his Normal Retirement Date,
but continues to serve as a Director of the Company beyond such date, his
Pension shall be determined based upon his Annual Retainer on the date of
his Retirement; it being understood, however, that his Pension shall not be
otherwise increased by reason of the fact that he continued to serve as a
Director after the date he was entitled to receive a Normal Retirement
Pension hereunder.
Section 4.5 - Duration of Payments: Payment of a Normal Retirement
Pension or a Disability Retirement Pension shall be made to a Participant
(or to his Eligible Spouse, if any, in accordance with Article V hereof) for
a number of years equal to the shorter of the Participant's Years of Service
or Ten Years, or, in the event such Participant dies prior to receiving all
of such payments, as provided in Section 5.1.
Section 4.6 - Death of Participant: Upon the death of a
Participant all of his interest in or right to Pension benefits shall cease
except as set forth under the provisions of Article V.
ARTICLE V.
JOINT AND SURVIVOR PENSION
Section 5.1 - 100% Joint and Survivor Pension: If a Participant
has an Eligible Spouse on the date his Pension payments commence, his
Pension shall be paid in the form of a 100% Joint and Survivor Pension.
Under such Pension, if a Participant dies prior to receiving all of
the payments to which he would otherwise have been entitled under Section
4.5, said payments shall be made to his Eligible Spouse, if any, until all
of such payments have been made or such Eligible Spouse shall die, whichever
shall first occur. If at the time of the Participant's death there is no
Eligible Spouse surviving such Participant, the Company's obligations under
the Plan to such Participant shall cease.
Section 5.2 - Death Prior to Retirement:
(a) (1) If a Participant dies prior to Retirement
(regardless of whether he has attained his Normal Retirement Date) and
leaves surviving an Eligible Spouse, he shall automatically be deemed, as
of the date of his death, to have:
(i) been entitled to receive a Normal Retirement Pension, and
(ii) retired.
The Pension shall be paid in the form of a 100% Joint and Survivor
Pension, as described in Section 5.1, and the deceased Participant's
surviving Eligible Spouse shall thereupon become entitled to receive a
Pension thereunder.
ARTICLE VI.
ADMINISTRATION
Section 6.1 - Administration: The Plan shall be administered by
the Board.
Section 6.2 - Duties: The Board shall perform the required duties
and it shall have the necessary powers of administering the Plan and
carrying out the provisions thereof.
Section 6.3 - Powers: The powers of the Board shall be as follows:
(a) To determine any question arising in connection
with the Plan, and its decision or action in respect thereof shall be final,
conclusive, and binding upon the Company, and the Participant.
(b) To engage the services of counsel or attorney (who
may be counsel or attorney for the Company), if it deems necessary, and such
other agents or assistants as it deems advisable for the proper administration
of the Plan.
(c) To receive from the Company and from Participants
such information as shall be necessary for the proper administration of the
Plan.
Section 6.4 - Claims Procedure: The Board shall make all determinations as
to the right of any person to a Pension. Any denial by
the Board of the claim for benefits under the Plan by a Participant or his
Eligible Spouse shall be stated in writing by the Board and delivered or
mailed to the Participant or his Eligible spouse, as the case may be. Such
notice shall set forth the specific reasons for the denial, written to the
best of the Board's ability in a manner that may be understood without legal
or actuarial counsel. In addition, the Board shall afford a reasonable
opportunity to any Participant or his Eligible Spouse whose claim for
benefits has been denied for a review of the decision denying the claim.
Section 6.5 - Records and Reports: The Board shall exercise such
authority and responsibility as it deems appropriate in order to comply with
ERISA and governmental regulations issued thereunder relating to the
following: records of Participants' Service, Accrued Benefits and the
percentage of such benefits which are nonforfeitable under the Plan;
notifications to Participants; and any applicable reports to the Department
of Labor or other government agencies.
Section 6.6 - Expenses: All expenses of the Plan shall be borne
by the Company.
ARTICLE VII.
AMENDMENT OR TERMINATION OF PLAN
Section 7.1 - Amendment or Termination of the Plan: The Board
reserves the right to (i) amend the Plan at any time and from time to time
by any such amendment or amendments to this Plan as it deems appropriate or
(ii) terminate the Plan at any time; provided, however, that any amendment
or termination of the Plan shall not adversely affect the Pension accrued
by a Participant as of the date of such amendment or termination without the
prior written consent of the Participant (or, if such Participant is not
then living, his Eligible Spouse, if any).
ARTICLE VIII
SUCCESSOR EMPLOYER AND MERGER AND
CONSOLIDATION OF PLANS
Section 8.1 - Successor Company: Subject to Section 7.1 hereof,
in the event of a dissolution, merger, consolidation, or reorganization of
the Company, provision may be made by which the Plan will be continued by
the successor; and, in that event, such successor shall be substituted for
the Company under the Plan. The substitution of the successor shall
constitute an assumption of Plan liabilities by the successor, and the
successor shall have all of the powers, duties and responsibilities of the
Company under the Plan.
ARTICLE IX.
MISCELLANEOUS
Section 9.1 - Status: This Plan is not intended to satisfy the
requirements for qualification under Section 401(a) of the Code. It is
intended to be an unfunded, non-qualified defined benefit plan which is
exempt from the regulatory requirements of ERISA. The Plan shall be
construed and administered so as to effectuate this intent.
Section 9.2 - Governing Law: The Plan shall be construed and
enforced in accordance with the laws of the State of New York, except to the
extent that such laws are preempted by the federal laws of the United States
of America.
Section 9.3 - Headings: The headings of Articles and sections are
included solely for convenience of reference. If there is any conflict
between such headings and the text of the Plan, the text shall control.
Section 9.4 - Nonalienation of Benefits: the right to receive a
benefit under the Plan shall not be subject in any manner to anticipation,
alienation or assignment, nor shall such right be liable for or subject to
debts, contracts, liabilities, engagements or torts.
Section 9.5 - No Right of Service: Nothing contained in this Plan
shall give any Director the right to remain as Director.
FIRST AMENDMENT
TO THE RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS OF
FLIGHTSAFETY INTERNATIONAL, INC.
WHEREAS, FlightSafety International, Inc., a New York corporation
(the "Company"), has heretofore maintained the Retirement Plan for Non-Employee
Directors of FlightSafety International, Inc. (the "Plan") for the benefit of
its non-employee directors; and
WHEREAS, the Company considers it advisable to amend the Plan in
the following respect; and
WHEREAS, the Board of Directors, pursuant to Article VII of the
Plan, has the authority to amend the Plan;
NOW THEREFORE, effective as of June 14, 1994 (the "Effective
Date"), the Company hereby amends the Plan to provide as follows:
1. Section 4.5 of the Plan is hereby amended by deleting the word
"Payment" the first place it appears therein and substituting therefor, "Subject
to the provisions of Section 4.7 hereof, payment."
2. A new Section 4.7 is added to the Plan, reading in its
entirety as follows:
"Section 4.7 Change in Control: Upon the occurrence of
a "Change in Control" (as defined below), payment of a Normal Retirement Pension
or a Disability Retirement Pension shall be made to a Participant (or to his
Eligible Spouse, if any, in accordance with Article V hereof) for ten years, or
in the event such Participant dies prior to receiving all of such payments, as
provided in Section 5.1.
For purposes of this Section 4.7, a "Change in Control"
shall be deemed to have occurred if the conditions set forth in any one of the
following subsections shall have occurred:
(a) any "Person" (as defined below) is or be comes the "Beneficial Owner"
(as defined below), directly or indirectly, of securities of the Company (not
including in the securities benefi cially owned by such Person any securities
acquired directly from the Company or
its affiliates) representing 30% or more of the combined voting power of the
Company's then outstanding securities (other than any Beneficial Owner with
such voting power as of June 14, 1994); or
(b) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board and any new
director (other than a director designated by a Person who has entered into an
agreement with the Company to effect a transaction described in clause (a), (c)
or (d) of this subsection) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to constitute
a majority thereof; or
(c) the shareholders of the Company approve a
merger or consolidation of the Company with any other corporation, other
than (i) a merger or consolidation which would result
in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company, at least 75% of the combined voting
power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation,
or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no Person acquires more than 50% of the combined voting power of
the Company's then outstanding securities; or
(d) the shareholders of the Company approve a
plan of complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or substantially
all the Company's assets.
"Person" shall have the meaning given in Section 3(a)(9) of the
Securities Exchange Act of 1934,as amended from time to time (the "Exchange
Act"), as modified and used in Sections 13(d) and 14(d) thereof; however, a
Person shall not include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its subsidiaries, (iii) an underwriter temporarily
holdings securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
of the Company.
"Beneficial Owner" shall have the meaning defined in Rule 13d-3
under the Exchange Act."
3. Section 5.1 of the Plan is hereby amended by adding the words
"or Section 4.7, as the case may be," following the words "Section 4.5" where
they appear in the second paragraph thereof.
Thus done and signed as of the Effective Date in the presence of
the undersigned and competent witness, who hereunto sign their name.
WITNESSES: FLIGHTSAFETY INTERNATIONAL, INC.
_____________________ By:____________________________
_____________________
EXHIBIT 10(g)
FLIGHTSAFETY INTERNATIONAL, INC.
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT, dated December 2, 1994, is made by
and between FLIGHTSAFETY INTERNATIONAL, INC., a New York corporation (the
"Company"), and (the "Executive").
The Executive is presently employed by the Company as Vice
President-Treasurer.
The Board recognizes that the Executive's contribution to the
growth and success of the Company has been substantial. The Board desires to
reinforce and encourage the continued attention and dedication to the Company
of the Executive as a member of the Company's management, in the best interest
of the Company and its stockholders.
In order to effect the foregoing, the Company and the
Executive wish to enter into this severance agreement ("Agreement") on the
terms and conditions set forth below. Accordingly, in consideration of the
premises and the respective covenants and agreements of the parties herein
contained, and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Defined Terms. The definition of capitalized terms used
in this Agreement is provided in the last Section hereof.
2. Term of Agreement. This Agreement shall commence on the
date hereof and shall continue in effect through December 31, 1995; provided
that, commencing on January 1, 1996 and each January 1 thereafter, the term of
this Agreement shall automatically be extended for one additional year unless,
not later than September 30 of the preceding year, the Company or the Executive
shall have given notice not to extend this Agreement or a Change in Control
shall have occurred prior to such January 1; provided, however, that if a
Potential Change in Control or a Change in Control shall have occurred during
the term of this Agreement (even if subsequent to a notice not to extend), this
Agreement shall continue in effect for a period of not less than twelve (12)
months beyond the month in which the later of such Potential Change in Control
or Change in Control occurred.
3. Company's Covenants. In order to induce the Executive to
remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the condi
tions described herein, to pay the Executive the "Severance Payments" described
in Section 6.1 hereof and the other payments and benefits described herein in
the event the Executive's employment with the Company is terminated within one
(1) year following a Change in Control and during the term of this Agreement.
No amount or benefit shall be payable under this Agreement unless there shall
have been (or, under the terms hereof, there shall be deemed to have been) such
a termination of the Executive's employment with the Company following a Change
in Control. This Agreement shall not be construed as creating an express or
implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right
to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the term of this Agreement, the Executive
will remain in the employ of the Company until the earliest of (i) a date which
is six (6) months from the date of such Potential Change of Control, (ii) the
date of a Change in Control, (iii) the date of termination by the Executive of
the Executive's employment for Good Reason (determined by treating the
Potential Change in Control as a Change in Control in applying the definition
of Good Reason), by reason of death, Disability or Retirement, or (iv) the
termination by the Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
5.1 During the term of this Agreement and following a Change
in Control, during any period that the Executive fails to perform the
Executive's full-time duties with the Company as a result of incapacity due to
physical or mental illness, the Company shall pay the Executive's full salary
to the Executive at the rate in effect at the commencement of any such period,
together with all compensation and benefits payable to the Executive under the
terms of any compensation or benefit plan, program or arrangement maintained by
the Company during such period, until the Executive's employment is terminated
by the Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the term of this Agreement, the
Company shall pay the Executive's full salary to the Executive through the Date
of Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during such period. The
Company shall pay the Executive's normal post-termination compensation and
benefits to the Executive as such payments become due. Such post-termination
compensation and benefits shall be determined under, and paid in accordance
with, the Company's retirement, insurance and other compensation or benefit
plans, programs and arrangements.
6. Severance Payments.
6.1 The Company shall pay the Executive the payments
described in this Section 6.1 (the "Severance Payments") upon the termination
of the Executive's employment within one (1) year following a Change in Control
and during the term of this Agreement, in addition to the payments and benefits
described in Section 5 hereof, unless such termination is (i) by the Company
for Cause, (ii) by reason of death, Disability or Retirement, or (iii) by the
Executive without Good Reason. The Executive's employment shall be deemed to
have been terminated following a Change in Control by the Company without Cause
or by the Executive with Good Reason if the Executive's employment is termi
nated prior to a Change in Control without Cause at the direction or request of
a Person who has entered into an agreement with the Company the consummation of
which will constitute a Change in Control or if the Executive terminates his
employment with Good Reason prior to a Change in Control (determined by treat
ing a Potential Change in Control as a Change in Control in applying the
definition of Good Reason) if the circumstance or event which constitutes Good
Reason occurs at the direction or request of such Person.
(A) In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination, the
Company shall pay, within five (5) days after the Date of Termination,
to the Executive a lump sum severance payment, in cash, equal to the
sum of three times (i) the Executive's annual base salary in effect
immediately prior to the occurrence of the event or circumstance upon
which the Notice of Termination is based and (ii) the greater of the
amount paid to the Executive as bonus compensation for the year
preceding the year in which the Date of Termination occurs and the
amount of bonus compensation that would have been paid to the
Executive for such year if 100% of the Performance Percentage
applicable to the bonus award had been realized.
(B) In lieu of Company Shares issuable upon exercise
of outstanding Options (which Options shall be cancelled upon the
making of the payment referred to below), the Company shall pay the
Executive a lump sum amount, in cash, equal to the product of (i) the
excess of (x) in the case of ISOs granted after the date hereof, the
closing price of Company Shares as reported on the New York Stock
Exchange Composite Tape on or nearest the Date of Termination (or, if
not listed on such exchange, on the nationally recognized exchange or
quotation system on which trading volume in Company Shares is
highest), or (y) in the case of all other Options, the higher of such
closing price or the highest per share price for Company Shares
actually paid in connection with any Change in Control, over the per
share exercise price of each such Option held by the Executive
(whether or not then fully exercisable), times (ii) the number of
Company Shares covered by each such Option.
(C) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the Executive with
life, disability, accident and health insurance benefits substantially
similar to those which the Executive is receiving immediately prior to
the Notice of Termination (without giving effect to any reduction in
such benefits subsequent to a Potential Change in Control or a Change
in Control which reduction constitutes Good Reason). Benefits otherwise
receivable by the Executive pursuant to this Section 6.1(C) shall
be reduced to the extent comparable benefits are actually received by
or made available to the Executive without cost during the twelve (12)
month period following the Executive's termination of employment (and
any such benefits actually received by the Executive shall be reported
to the Company by the Executive).
(D) The restrictions on all Restricted Shares shall lapse
upon the occurrence of a Change in Control.
6.2 Notwithstanding any other provisions of this Agreement,
in the event that any payment or benefit received or to be received by the
Executive in connection with a Change in Control or the termination of the
Executive's employment (whether pursuant to the terms of this Agreement or any
other plan, arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the Company or such
Person) (all such payments and benefits, including the Severance Payments,
being hereinafter called "Total Payments") would be subject (in whole or part),
to the Excise Tax, then the Severance Payments shall be reduced to the extent
necessary so that no portion of the Total Payments is subject to the Excise Tax
(after taking into account any reduction in the Total Payments provided by
reason of section 280G of the Code in such other plan, arrangement or agree
ment) if (A) the net amount of such Total Payments, as so reduced, (and after
deduction of the net amount of federal, state and local income tax on such
reduced Total Payments) is greater than (B) the excess of (i) the net amount of
such Total Payments, without reduction (but after deduction of the net amount
of federal, state and local income tax on such Total Payments), over (ii) the
amount of Excise Tax to which the Executive would be subject in respect of such
Total Payments. For purposes of determining whether and the extent to which
the Total Payments will be subject to the Excise Tax, (i) no portion of the
Total Payments the receipt or enjoyment of which the Executive shall have
effectively waived in writing prior to the Date of Termination shall be taken
into account, (ii) no portion of the Total Payments shall be taken into account
which in the opinion of tax counsel selected by the Company does not constitute
a "parachute payment" within the meaning of section 280G(b)(2) of the Code
(including by reason of section 280G(b)(4)(A) of the Code) and, in calculating
the Excise Tax, no portion of such Total Payments shall be taken into account
which constitutes reasonable compensation for services actually rendered,
within the meaning of section 280G(b)(4)(B) of the Code, in excess of the Base
Amount allocable to such reasonable compensation, and (iii) the value of any
non-cash benefit or any deferred payment or benefit included in the Total Pay
ments shall be determined by the Company in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. Prior to the payment date set forth
in Section 6.3 hereof, the Company shall provide the Executive with its
calculation of the amounts referred to in this Section and such supporting
materials as are reasonably necessary for the Executive to evaluate the
Company's calculations. If the Executive objects to the Company's calcula
tions, the Company shall pay to the Executive such portion of the Severance
Payments (up to 100% thereof) as the Executive determines is necessary to
result in the Executive receiving the greater of clauses (A) and (B) of this
Section.
6.3 The payments provided for in Section 6.1 (other than
Section 6.1(C)) and 6.2 hereof shall be made not later than the fifth (5th) day
following the Date of Termination; provided that, if the amounts of such pay
ments cannot be finally determined on or before such day, the Company shall pay
to the Executive on such day an estimate, as determined in good faith by the
Company, of the minimum amount of such payments to which the Executive is
clearly entitled and shall pay the remainder of such payments as soon as the
amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code). At the
time that payments are made under this Section, the Company shall provide the
Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Company has received from outside
counsel, auditors or consultants (and any such opinions or advice which are in
writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal
fees and expenses incurred by the Executive as a result of a termination which
entitles the Executive to the Severance Payments (including all such fees and
expenses, if any, incurred in disputing any such termination or in seeking in
good faith to obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent attributable to
the application of section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the term of this Agreement, any purported termination of the Executive's
employment (other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party hereto in
accordance with Section 10 hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
Further, a Notice of Termination for Cause is required to include a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting of the Board which was
called and held for the purpose of considering such termination (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination", with respect
to any purported termination of the Executive's employment after a Change in
Control and during the term of this Agreement, shall mean (i) if the Execu
tive's employment is terminated for Disability, thirty (30) days after Notice
of Termination is given (provided that the Executive shall not have returned to
the full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of
a termination by the Company, shall not be less than thirty (30) days (except
in the case of a termination for Cause) and, in the case of a termination by
the Executive, shall not be less than fifteen (15) days nor more than sixty
(60) days, respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided that,
the Date of Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the term of this Agreement, and
such termination is disputed in accordance with Section 7.3 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, any
bonus payments) and continue the Executive as a participant in all compensa
tion, benefit and insurance plans in which the Executive was participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement
(other than those due under Section 5.2 hereof) and shall not be offset against
or reduce any other amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Execu
tive's employment by the Company is terminated during the term of this
Agreement, the Executive is not required to seek other employment or to attempt
in any way to reduce any amounts payable to the Executive by the Company
pursuant to Section 6 or Section 7.4. Further, the amount of any payment or
benefit provided for in Section 6 (other than Section 6.1(C)) or Section 7.4
shall not be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, by offset against
any amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Executive's estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
FlightSafety International, Inc.
Marine Air Terminal
LaGuardia Airport
Flushing, New York 11371
Attention: President
To the Executive:
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York. All
references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
Sections 6 and 7 shall survive the expiration of the term of this Agreement.
12. Validity. The invalidity or unenforce-ability or any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration. All claims by the
Executive for benefits under this Agreement shall be directed to and determined
by the Board and shall be in writing. Any denial by the Board of a claim for
benefits under this Agreement shall be delivered to the Executive in writing
and shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Board shall afford a reasonable
opportunity to the Executive for a review of the decision denying a claim and
shall further allow the Executive to appeal to the Board a decision of the
Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in New York, New York in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
the Executive shall be entitled to seek specific performance of the Executive's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(A) "Base Amount" shall have the meaning defined in section
280G(b)(3) of the Code.
(B) "Beneficial Owner" shall have the meaning defined in Rule
13d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors of the Company.
(D) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination for Good
Reason by the Executive pursuant to Section 7.1) after a written demand for
substantial performance is delivered to the Executive by the Board, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties, or (ii) the
willful engaging by the Executive in conduct which is demonstrably and materi
ally injurious to the Company or its subsidiaries, monetarily or otherwise.
For purposes of clauses (i) and (ii) of this definition, no act, or failure to
act, on the Executive's part shall be deemed "willful" unless done, or omitted
to be done, by the Executive not in good faith and without reasonable belief
that the Executive's act, or failure to act, was in the best interest of the
Company.
(E) A "Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have been
satisfied:
(i) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or
its affiliates) representing 30% or more of the combined
voting power of the Company's then outstanding securities
(other than any Beneficial Owner with such voting power as
of the date of this Agreement); or
(ii) during any period of two consecutive
years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director designated by a Person who has entered into an
agreement with the Company to effect a transaction described
in clause (i), (iii) or (iv) of this paragraph) whose election
by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was previ
ously so approved, cease for any reason to constitute a majority thereof; or
(iii) the shareholders of the Company ap
prove a merger or consolidation of the Company with any other
corporation, other than (i) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, at least 75% of
the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
(iv) the shareholders of the Company approve
a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or substantially
all the Company's assets.
Notwithstanding the foregoing, a Change in Control shall not include any event,
circumstance or transaction occurring during the six-month period following a
Potential Change in Control which results from the action of any entity or
group which includes, is affiliated with or is wholly or partly controlled by
one or more executive officers of the Company, including the Executive (a "Man
agement Group"); provided that, such action shall not be taken into account for
this purpose if it occurs within a six-month period following a Potential
Change in Control resulting from the action of any Person which is not a
Management Group.
(F) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(G) "Company" shall mean FlightSafety International, Inc., a
New York corporation, and any successor to its business and/or assets which
assumes and agrees to perform this Agreement by operation of law, or otherwise
(except in determining, under Section 15(E) hereof, whether or not any Change
in Control of the Company has occurred in connection with such succession).
(H) "Company Shares" shall mean shares of common stock of the
Company or any equity securities into which such shares have been converted.
(I) "Date of Termination" shall have the meaning stated in
Section 7.2 hereof.
(J) "Disability" shall be deemed the reason for the termina
tion by the Company of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the Executive shall
have been absent from the full-time performance of the Executive's duties with
the Company for a period of six (6) consecutive months, the Company shall have
given the Executive a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Executive shall not
have returned to the full-time performance of the Executive's duties.
(K) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(L) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(M) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(N) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) of any one of the following acts by the Company, or
failures by the Company to act, unless, in the case of any act or failure to
act described in paragraph (i), (v), (vi), (vii), or (viii) below, such act or
failure to act is corrected prior to the Date of Termination specified in the
Notice of Termination given in respect thereof:
(i) the assignment to the Executive of any
duties inconsistent with the Executive's status as a senior
executive officer of the Company or a substantial adverse
alteration in the nature or status of the Executive's responsibilities
from those in effect immediately prior to the
Change in Control;
(ii) a reduction by the Company in the
Executive's annual base salary as in effect on the date hereof
or as the same may be increased from time to time;
(iii) the relocation of the Company's princi
pal executive offices to a location outside the New York City
Metropolitan Area (or, if different, the metropolitan area in
which such offices are located immediately prior to the Change
in Control) or the Company's requiring the Executive to be
based anywhere other than the Company's principal executive
offices except for required travel on the Company's business
to an extent substantially consistent with the Executive's
present business travel obligations;
(iv) the failure by the Company, without the
Executive's consent, to pay to the Executive any portion of
the Executive's current compensation, or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company,
within seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue
in effect any compensation plan in which the Executive
participates immediately prior to the Change in Control which
is material to the Executive's total compensation, including
but not limited to any stock option, restricted stock, stock
appreciation right, incentive compensation, bonus and other
plans or any substitute plan(s) adopted prior to the Change in
Control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect
to such plan, or the failure by the Company to continue
the Executive's participation therein (or in such substitute
or alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level
of the Executive's participation relative to other participants,
as existed at the time of the Change in Control;
(vi) the failure by the Company to continue
to provide the Executive with benefits substantially similar
to those enjoyed by the Executive under any of the Company's
pension, life insurance, medical, health and accident, or
disability plans in which the Executive was participating at
the time of the Change in Control, the taking of any action by
the Company which would directly or indirectly materially
reduce any of such benefits or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the time of the Change in
Control, or the failure by the Company to provide the Executive with the number
of paid vacation days to which the Executive is entitled on the basis of years
of service with the Company in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control; or
(vii) any purported termination of the
Executive's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
9.1; for purposes of this Agreement, no such purported termination
shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
(O) "ISOs" shall mean options qualifying as incentive stock
options under section 422 of the Code.
(P) "Notice of Termination" shall have the meaning stated in
Section 7.1 hereof.
(Q) "Options" shall mean options for Company Shares granted
to the Executive under the Company's 1979 Stock Option Plan, 1982 Stock Option
Plan and 1992 Stock Option Plan, other than ISOs granted on or before the date
of this Agreement and ISOs which have not become exercisable on the Date of
Termination.
(R) "Performance Percentage" shall mean the percentage of the
bonus base of the Executive's annual salary determined by the Compensation
Committee of the Board of Directors to have been achieved by the Executives.
(S) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries, (iii) an underwriter temporari
ly holding securities pursuant to an offering of such securities, or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of stock of the
Company.
(T) "Potential Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:
(i) the Company enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control;
(ii) the Company or any Person publicly an
nounces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control;
(iii) any Person after the date of this
Agreement becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 15% or more
of the combined voting power of the Company's then outstanding
securities (other than (i) a person who acquires voting
securities of the Company by devise or by operation of the
laws of descent and distribution or interstate succession from
any Person who is a Beneficial Owner with such voting power as of the date of
this Agreement or (ii) any Person who acquires securities with such voting
power directly from the Company or its affiliates); or
(iv) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(U) "Restricted Shares" shall mean Company Shares awarded
pursuant to the 1984 Restricted Stock Compensation Plan of the Company.
(V) "Retirement" shall be deemed the reason for the termina
tion by the Company or the Executive of the Executive's employment if such
employment is terminated in accordance with the Company's retirement policy,
not including early retirement, generally applicable to its salaried employees,
as in effect immediately prior to the Change in Control, or in accordance with
any retirement arrangement established with the Executive's consent with
respect to the Executive.
(W) "Severance Payments" shall mean those payments described
in Section 6.1 hereof.
(X) "Shares" shall mean shares of the common stock, $.10 par
value, of the Company.
(Y) "Total Payments" shall mean those payments described in
Section 6.2 hereof.
FLIGHTSAFETY INTERNATIONAL, INC.
By
Name:
Title:
ANNUAL REPORT
Selected pages from the Annual Report of FlightSafety International for 1994
<TABLE>
Five Year Financial Highlights
FlightSafety International, Inc.
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Training
Revenues $271,743,000 $244,784,000 $239,434,000 $229,777,000 $234,790,000
Product
Sales 29,556,000 52,312,000 39,001,000 37,864,000 38,092,000
Operating
Revenues 301,299,000 297,096,000 278,435,000 267,641,000 272,882,000
Operating
Costs and
Expenses 147,603,000 151,575,000 132,362,000 131,101,000 125,409,000
Depreci-
ation and
Amorti-
zation 46,711,000 44,337,000 39,951,000 36,337,000 30,937,000
Income
from
Operations 106,985,000 101,184,000 106,122,000 100,203,000 116,536,000
Income Taxes 41,491,000 43,135,000 45,706,000 38,152,000 44,064,000
(2)
Net Income 74,475,000 66,414,000 82,309,000 72,442,000 84,732,000
(2) (3) (4)(5)
Net Income
per Share $2.35 $2.01 $2.39 $2.11 $2.48
(2) (3) (4)(5)
Cash
Dividends
Declared
per Share $.44 $.38 $.32 $.26 $.22
Total Assets 792,929,000 753,934,000 814,486,000 690,594,000 620,998,000
Long-term
Debt 39,813,000 41,572,000 44,630,000 29,653,000 35,086,000
Shareholders
Equity 560,404,000 526,433,000 564,409,000 490,433,000 423,234,000
(1) (1)
Purchase of
Equipment
and
Facilities 64,417,000 64,004,000 68,290,000 49,458,000 78,932,000
Working
Capital 202,173,000 178,125,000 231,503,000 184,458,000 126,737,000
(1) Shareholders equity was reduced by $29.2 million in 1994 and $94.2 million
in 1993 to reflect the repurchase of approximately 0.8 million and 2.5 million
shares, respectively, of the Company s common stock.
(2) Due to an increase in the federal income tax rate in 1993, additional
deferred income tax liabilities of $3.4 million, or 10 cents per share, were
recorded in 1993 related to temporary differences that arose in prior years.
(3) In July 1992, the Company sold its minority financial interest in a
European venture to the majority shareholder for a pre-tax gain of $12.6 million
which increased net income by $7.7 million, or 22 cents per share.
(4) In 1990, the Company realized a pre-tax loss of $5.9 million on sales of
marketable securities which decreased net income by $3.7 million, or 11 cents
per share.
(5) Reflects implementation of Statement of Financial Accounting Standards
No.96- Accounting for Income Taxes, which increased net income by $9.0 million,
or 26 cents per share, in 1990.
</TABLE>
<TABLE>
Common Stock Price Range and Dividend Information
<CAPTION>
1994
<S> <C> <C> <C>
Dividends
Quarter High Low Paid
First 43 5/8 33 5/8 $.10
Second 39 1/4 35 1/4 $.10
Third 39 1/8 35 3/4 $.10
Fourth 41 1/2 36 7/8 $.12
1993
Dividends
Quarter High Low Paid
First 43 7/8 34 1/4 $.09
Second 42 3/8 34 3/4 $.09
Third 40 1/2 32 5/8 $.09
Fourth 36 7/8 33 1/8 $.10
FlightSafety International, Inc. common stock is listed on the New York Stock
Exchange and is traded under the symbol FSI.
There were approximately 10,800 shareholders on January 12, 1995, including
individual participants in security position listings. Dividends have been paid
each quarter since the start of the cash dividend program in the third quarter
of 1976.
</TABLE>
Page 1
Management's Discussion and Analysis
of Results of Operations and Financial Condition
Results of Operations 1994 Compared with 1993
Training revenues increased by $27.0 million, or 11 percent, in 1994 as compared
to 1993. Business aviation training revenues increased by $10.6 million
primarily because of increased demand for the Company s training services.
Commercial airline training revenues increased by $4.5 million as demand from
South American customers increased and from the continued expansion of the
Company s Airline New Hire Program. Primary flight training revenues increased
by $2.0 million, primarily from more individual pilots seeking careers as
professional pilots. There was also an increase in training revenues of $7.8
million from two aircrew training systems contracts with the U.S. Air Force. The
most significant of which was for training of KC-135 tanker aircraft crews, and
included contract revenues of $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.
Product sales in 1994 decreased $22.8 million, or 44 percent, from 1993. The
decrease in product sales was primarily attributable to a decrease in market
demand and customer orders for equipment being produced by the Company s
Simulation Systems Division.
Total expenses decreased $1.6 million, or one percent, in 1994 as compared to
1993. Salary expense increased $6.6 million principally due to additional
personnel hired for the U.S. Air Force KC-135 contract and the retroactive
salary paid as indicated above. Depreciation and amortization increased by $2.4
million due to a full year of depreciation on simulators added in 1993 and a
partial year of depreciation for simulators added in 1994. General and
administrative expenses increased by $3.3 million primarily because of costs
associated with the KC-135 contract with the U.S. Air Force and increases in
employee benefit costs. Operating expenses increased by $1.9 million primarily
from increases in costs of training supplies and simulator maintenance. Cost of
product sales decreased by $15.7 primarily from the related decrease in product
sales. Research and development expenditures incurred by the Visual Simulation
Systems Division amounted to $1.2 million in 1994 ($3.2 million in 1993) and are
included in cost of product sales. The decrease in gross profit margin of
product sales to 19.5% in 1994 from 24.6% in 1993 was principally due to an
increased percentage of sales to the U.S. Government which have lower profit
margins.
Interest and other income increased by $0.8 million in 1994 as compared to 1993
principally due to proceeds from the corporate owned life insurance policies.
Interest expense increased primarily from higher interest rates in 1994 on the
Company s borrowings and increases in borrowings against the cash surrender
value of corporate owned life insurance policies.
Income taxes decreased by $1.6 million, or four percent, in 1994 as compared to
1993 due primarily to the additional deferred income tax liability recorded in
1993 offset by increased taxable income in 1994 as compared to 1993. The
effective income tax rate decreased to 35.8% in 1994 from 39.4% in 1993
primarily due to the previously mentioned deferred income taxes recorded in
1993.
Earnings per share and net income increased by 17 percent and 12 percent to
$2.35 per share from $2.01 per share and $74,475,000 from $66,414,000 in 1994 as
compared to 1993, respectively. The higher percentage increase of earnings per
share than net income is a result of the Company s stock repurchase program and
its corresponding effect on the weighted average shares outstanding.
In December 1994, the Company divested itself of PowerSafety International, Inc.
to focus on its core business. The divestiture had no significant effect on the
Company s financial statements.
Inflation continued to increase operating costs and costs of equipment and
facilities during 1994. The Company expects to recover its additional costs due
to inflation with increases in volume and prices.
Financial Condition
In 1994, $118.4 million of cash was provided by operations and $10.3 million was
provided by additional borrowings against the cash surrender value of corporate
owned life insurance. Cash was principally used to purchase equipment and
facilities ($64.4 million), repurchase common stock ($29.2 million), purchase
short-term investments ($16.0 million), pay dividends ($13.9 million) and pay
corporate owned life insurance premiums ($7.5 million).
Accounts receivable at December 31, 1994 increased by $10.8 million, or 22
percent, from December 31, 1993 due primarily to an increase in amounts billed
in the 1994 fourth quarter as compared to the 1993 fourth quarter.
In 1995, the Company expects to spend in excess of $55 million for additional
equipment and facilities. If appropriate market conditions exist, the Company
will continue to repurchase shares of its common stock. The Board of Directors
increased the shares authorized for the stock repurchase program from 3,000,000
shares to 4,000,000 shares on December 3, 1993. The Company expects to fund
these items with cash provided by operations and short-term investments. As of
December 31, 1994, the Company had repurchased 3,291,700 shares of its common
stock.
Results of Operations 1993 Compared with 1992
Training revenues increased by $5.4 million, or two percent, in 1993 as compared
to 1992. Business aviation training revenues increased by $6.3 million primarily
because of new business aircraft simulators that were added and increases in
initial training related to new aircraft deliveries in the fourth quarter of
1993. Commercial airline training revenues increased by $3.9 million as demand
from South American and Asian customers increased and as a result of the
continued success of the Company s New Hire Program. There was also an increase
in training revenues of $10.2 million from a contract with the U.S. Air Force to
train KC-135 tanker aircraft crews. These increases were offset by lower
revenues of $8.9 million from the U.S. Air Force C-5 contract and $2.9 million
in primary flight training.
Product sales in 1993 increased $13.3 million, or 34 percent, from 1992. The
increase in product sales was primarily attributable to sales of visual systems
by the Visual Simulation Systems Division which was acquired in January 1993.
Total expenses increased $23.6 million, or 14 percent, in 1993 as compared to
1992. Salary expense increased $6.7 million principally due to additional
personnel hired for the U.S. Air Force KC-135 contract. Depreciation and
amortization increased by $4.4 million due to a full year of depreciation on
simulators added in 1992 and a partial year of depreciation for simulators added
in 1993. General and administrative expenses increased primarily because of
costs associated with the KC-135 contract with the U.S. Air Force. These
increases were offset by a net decrease in operating expenses of $0.5 million
primarily due to a $3.6 million reduction of effort for the U.S. Air Force C-5
contract offset by increases in operating expenses from the KC-135 contract.
Cost of product sales increased by $11.8 million principally due to sales of
visual systems. Research and development expenditures incurred by the Visual
Simulation Systems Division amounted to $3.2 million and are included in cost of
product sales. The decrease in gross profit margin to 24.6% in 1993 from 29.1%
in 1992 was principally due to the research and development expenditures in cost
of product sales.
Interest and other income decreased by $1.7 million in 1993 as compared to 1992
principally due to lower investment balances in 1993 resulting from funds used
for the Company s stock repurchase program. Interest expense decreased primarily
from lower interest rates in 1993 on the Company s borrowings against the cash
surrender value of corporate-owned life insurance policies.
Page 14
<TABLE>
Consolidated Statements of Income
<CAPTION>
Year ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Revenues:
Training revenues $271,743,000 $244,784,000 $239,434,000
Product sales 29,556,000 52,312,000 39,001,000
301,299,000 297,096,000 278,435,000
Costs and Expenses:
Salaries and wages 71,479,000 64,923,000 58,268,000
Depreciation
and amortization 46,711,000 44,337,000 39,951,000
General
and administrative 27,144,000 23,868,000 22,612,000
Operating expenses 25,173,000 23,317,000 23,817,000
Cost of product sales 23,807,000 39,467,000 27,665,000
194,314,000 195,912,000 172,313,000
Income from operations 106,985,000 101,184,000 106,122,000
Other income (expense):
Gain on sale of interest
in European venture 12,600,000
Interest and
other income 11,303,000 10,539,000 12,259,000
Interest expense (2,322,000) (2,174,000) (2,966,000)
Income before
income taxes 115,966,000 109,549,000 128,015,000
Income taxes 41,491,000 43,135,000 45,706,000
Net income for the year $ 74,475,000 $ 66,414,000 $ 82,309,000
Net income per share $2.35 $2.01 $2.39
Averageshares outstanding 31,706,635 33,089,261 34,409,501
The accompanying Notes to Consolidated Financial Statements are an
integral part of these financial statements.
</TABLE>
Page 15
<TABLE>
Consolidated Balance Sheets
<CAPTION>
December 31,
Assets 1994 1993
<S> <C> <C>
Current Assets:
Cash $ 2,062,000 $ 2,100,000
Short-term investments 194,930,000 178,949,000
Accounts receivable, less
allowance for doubtful
accounts of $1,433,000
($1,442,000 in 1993) 59,718,000 48,963,000
Inventories 14,330,000 14,605,000
Prepaid expenses and other
current assets 10,336,000 8,586,000
Total Current Assets 281,376,000 253,203,000
Equipment and facilities,
at cost 806,651,000 744,408,000
Less-accumulated depreciation
and amortization (336,590,000) (291,030,000)
470,061,000 453,378,000
Intangible and other assets 41,492,000 47,353,000
$792,929,000 $753,934,000
December 31,
Liabilities and Shareholders Equity 1994 1993
Current Liabilities:
Current portion of
long-term debt $1,759,000 $ 1,819,000
Accounts payable
and accrued expenses 36,648,000 36,964,000
Income taxes payable 8,230,000 5,299,000
Unearned income for
contract training 32,566,000 30,996,000
Total Current Liabilities 79,203,000 75,078,000
Long-term debt 39,813,000 41,572,000
Deferred income taxes 108,308,000 103,515,000
Other liabilities 5,201,000 7,336,000
Total Liabilities 232,525,000 227,501,000
Shareholders Equity:
Common stock-par value $.10 per
share
Authorized-100,000,000
shares
Issued and outstanding-
31,315,429 shares
(32,007,558 in 1993) 3,132,000 3,201,000
Capital in excess of par value 33,217,000 30,778,000
Retained earnings 525,661,000 494,161,000
562,010,000 528,140,000
Restricted stock compensation (1,606,000) (1,707,000)
Total Shareholders Equity 560,404,000 526,433,000
Commitments and contingencies 0 0
$792,929,000 $753,934,000
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
</TABLE>
Page 16
<TABLE>
Consolidated Statements of Cash Flows
<CAPTION>
Year ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net income $ 74,475,000 $ 66,414,000 $82,309,000
Items in net income not using cash:
Depreciation and amortization 46,711,000 44,337,000 39,951,000
Provision for losses
on accounts receivable 300,000 519,000 534,000
Deferred income taxes 6,194,000 12,593,000 4,234,000
Increase in cash surrender value
of corporate owned life insurance,
net of premiums (1,617,000) (1,396,000) (600,000)
Other, net 633,000 833,000 488,000
Changes in working capital
other than cash:
Decrease (increase) in inventory 275,000 (4,747,000) (8,575,000)
(Increase) decrease in
accounts receivable (11,055,000) (8,124,000) 4,137,000
(Increase) in prepaid expense
and other current assets (1,750,000) (129,000) (747,000)
(Decrease) increase in accounts
payable and accrued expenses (316,000) (3,880,000) 8,417,000
Increase (decrease) in
income taxes payable 2,931,000 (1,885,000) 1,335,000
Increase in unearned income 1,570,000 871,000 2,044,000
Net cash provided by
operating activities 118,351,000 105,406,000 133,527,000
Cash flows from investing activities:
Capital expenditures (64,417,000) (64,004,000) (68,290,000)
Corporate owned life
insurance premiums (7,453,000) (7,450,000) (7,310,000)
(Increase) decrease
in short-term investments (15,981,000) 97,416,000 (74,943,000)
Intangible assets arising
from acquisition (6,916,000)
Other 1,124,000 2,785,000 766,000
Net cash (used) provided by
investing activities (86,727,000) 21,831,000 (149,777,000)
Cash flows from financing activities:
Repurchase of common stock (29,172,000) (94,190,000)
Long-term borrowings 25,170,000
Portion of long-term
borrowings withdrawn from
(placed in) construction
fund held by trustee, net 1,971,000 8,216,000 (10,187,000)
Proceeds from short-term borrowings 18,500,000
Repayment of short-term
borrowings and long-term debt (1,819,000) (29,932,000) (9,010,000)
Increase in long-term
borrowings against cash
surrender value of corporate-
owned life insurance 10,273,000
Cash dividends (13,880,000) (12,431,000) (11,018,000)
Exercise of stock options 2,366,000 2,027,000 2,558,000
Effect of tax leases (1,401,000) (1,138,000) (833,000)
Net cash (used) provided by
financing activities (31,662,000)(127,448,000) 15,180,000
Net (decrease) in cash (38,000) (211,000) (1,070,000)
Cash at beginning of year 2,100,000 2,311,000 3,381,000
Cash at end of year $ 2,062,000 $ 2,100,00 $ 2,311,000
The accompanying Notes to Consolidated Financial Statements are an
integral part of these financial statements.
</TABLE>
Page 17
Note Notes to Consolidated Financial Statements
Note 1- Summary of Significant Accounting and Reporting Policies
Consolidation and Reporting
The accompanying financial statements include the accounts of the
Company and its majority-owned subsidiaries.
The Company operates primarily in one industry segment: training.
Training activities include advanced training of professional pilots and crews,
primary training for individuals to obtain private or commercial pilot licenses,
training in the maintenance of aircraft, design and implementation of integrated
training systems and training crews of large ocean-going vessels in ship and
cargo handling. The Company is also engaged in the manufacture and sale of
products including simulators and visual systems. The Company s clients include
corporations, commercial airlines, ship operators, the military and other
government agencies.
Revenues
Revenue from training is recognized when the training is provided except
for revenue from training provided pursuant to annual contracts which is
recognized on the straight-line method over the life of the contract.
Revenues and costs arising from product sales are accounted for principally
under the percentage of completion method.
Depreciation and Amortization
Depreciation is provided on the straight-line method over estimated useful
lives as follows:
simulators, training equipment and spare parts, 4 to 20 years; buildings, 25
to 40 years; and furniture, fixtures and equipment, 4 to 10 years. Leasehold
improvements, including buildings on leased property, are amortized over the
life of the lease or the life of the improvement, whichever is shorter.
Interest is capitalized as an integral component of cost during the
construction period of simulators and facilities and is amortized over
the life of the related assets.
Short-term Investments
Short-term investments consist primarily of state and municipal obligations
and are stated at amortized cost, which approximates market value.
Common Stock Repurchase
The Company records the repurchase of its common stock by reducing the
common stock account by the par value of the common stock purchased and reducing
retained earnings by the amounts in excess of par value. Repurchased common
stock is cancelled and returned to the Company s authorized and unissued
common shares.
Amortization of Intangible Assets
Intangible assets arose principally from the acquisitions of a subsidiary in
1988 and a division in 1993 and are amortized over periods from 3 to 20 years.
Income Taxes
The Company records income taxes in accordance with Statement of
Financial Accounting Standards No.109- Accounting for Income Taxes, which
was adopted in 1993 and had no effect on the Company s financial statements
since the Company had previously recorded income taxes in accordance with
Statement of Financial Accounting Standards No. 96.
Net Income Per Share
Net income per share is based upon the weighted average number of shares
outstanding during each year. Stock options have not been included in the
calculation of net income per share because their inclusion would not have
a significant dilutive effect.
Note 2- Acquisition
On January 29, 1993, the Company purchased the assets of the Visual
Simulation Systems business unit of McDonnell Douglas Corporation. The
assets purchased included accounts receivable, inventory, contracts in
process, furniture, fixtures and various intangible assets arising from
the acquisition. The new Division manufactures computer generated image
display systems for aircraft simulators, under the trade name VITAL, at
its St. Louis, Missouri facility.
Page 18
Notes to Consolidated Financial Statements
<TABLE>
Note 3- Equipment and Facilities
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Simulators, training equipment
and spare parts $636,009,000 $587,297,000
Land and buildings 69,311,000 63,737,000
Furniture, fixtures
and equipment 32,296,000 30,095,000
Leasehold improvements 6,168,000 5,253,000
Construction-in-progress 62,867,000 58,026,000
$806,651,000 $744,408,000
</TABLE>
<TABLE>
Note 4- Income Taxes
<CAPTION>
Analysis of income tax provision Year ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Currently payable $36,698,000 $31,680,000 $42,305,000
Deferred income taxes 6,194,000 12,593,000 4,234,000
Effect of tax leases (1,401,000) (1,138,000) (833,000)
Income taxes as recorded $41,491,000 $43,135,000 $45,706,000
</TABLE>
State and local income taxes amounted to $5,591,000 in 1994 ($5,645,000 in
1993 and $6,760,000 in 1992). Foreign income before taxes and foreign income
taxes were not material. The principal temporary difference generating
deferred income taxes in the current year and past years is depreciation of
equipment and facilities which is recognized in different years for financial
reporting than for tax reporting. Due to an increase in the federal income
tax rate in 1993, additional deferred income tax liabilities of $3.4 million
were recorded in 1993 related to temporary differences that arose in prior
years.
<TABLE>
Analysis of effective tax rate
<CAPTION>
Year ended December 31,
1994 1993 1992
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Federal income tax
at statutory rate $40,588,000 35.0% $38,343,000 35.0% $43,525,000 34.0%
State income taxes,
net of federal
tax benefit 3,634,000 3.1 3,727,000 3.4 4,462,000 3.5
Tax exempt
investment income (3,496,000) (3.0) (2,890,000) (2.6) (3,601,000) (2.8)
Effect of federal
tax rate increase
on previously
provided deferred
income tax
liabilities 3,427,000 3.1
Other, net 765,000 .7 528,000 .5 1,320,000 1.0
Income taxes as
recorded $41,491,000 35.8% $43,135,000 39.4% $45,706,000 35.7%
</TABLE>
The Company does not provide taxes on undistributed earnings of foreign
subsidiaries since the Company anticipates no significant incremental U.S.
income taxes on the repatriation of these earnings due to tax rates in
foreign jurisdictions in which the Company has operations approximating
or exceeding the U.S. statutory income tax rates.
The Company made tax payments of $33.9 million in 1994 ($33.5 million
in 1993 and $40.9 million in 1992).
Page 19
Notes to Consolidated Financial Statements
<TABLE>
Note 5- Long-term Debt
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Industrial development obligations
due 1995-2012 $37,170,000 $37,930,000
Capitalized lease obligation 4,402,000 5,461,000
Less-current portion of
long-term debt (1,759,000) (1,819,000)
$39,813,000 $41,572,000
</TABLE>
The Company s industrial development obligations had variable rates between
2.1 and 5.8 percent during 1994. The weighted average interest rate for the
above borrowings was 3.6 percent in 1994 (3.3 percent in 1993). At December 31,
1994, approximately $15 million of the Company s assets were pledged as
security for the industrial development obligations. Under the most
restrictive covenants, the Company must maintain positive working capital, a
long-term debt to net worth ratio of less than 0.75 to 1.0 and a minimum net
worth of $100 million.
Intangible and other assets include investments in corporate-owned life
insurance which have a cash surrender value of $52.7 million offset by
borrowings against cash surrender values of $30.6 million at December 31,
1994 ($43.6 million and $20.3 million, respectively, at December 31,
1993). In 1994, the interest rate on borrowings against cash surrender value
of corporate owned life insurance was 8.9 percent (9.3 percent in 1993).
The amounts of debt payable in the five years subsequent to 1994 are:
$1,759,000 in 1995 and 1996, $1,259,000 in 1997, $1,224,000 in 1998 and
no debt payable in 1999.
The Company paid interest of $1,506,000 in 1994, $2,402,000 in 1993 and
$2,605,000 in 1992, net of amounts capitalized. The amount of interest
capitalized was $1,484,000 in 1994 ($1,543,000 in 1993 and $2,262,000 in 1992).
Note 6- Retirement Plans
Substantially all employees of the Company and all but one of its domestic
subsidiaries are eligible to participate in the Company s noncontributory
defined benefit retirement plan. Benefits are based principally on years of
service and compensation during an employee s career. An employee becomes
vested upon completion of five years of service or the attainment of age 55
and is entitled to receive a minimum monthly benefit at normal retirement
age. The Company also has a defined Contribution Plan for certain employees.
Pension cost amounted to $1,821,000 in 1994 ($1,799,000 in 1993
and $1,225,000 in 1992).
The Company s funding policy is to contribute amounts sufficient to meet
the requirements of the Employee Retirement Income Security Act of 1974,
plus any additional amounts which the Company may determine to be
appropriate. The assets of the Plan include insurance contracts, marketable
equity securities and mutual funds.
Page 20
<TABLE>
Notes to Consolidated Financial Statements
<CAPTION>
The funded status as of the following measurement dates were:
December 31,
1994 1993 1992
<S> <C> <C> <C>
Plan assets at fair value $24,154,000 $22,212,000 $17,910,000
Actuarial present value
of benefits for service
rendered to date:
Accumulated benefits based
on salaries to date,
including vested benefits
of $17,584,000
($14,998,000 in 1993
and $11,095,000 in 1992) 18,118,000 15,419,000 11,419,000
Additional benefits based
on estimated future
salary levels 5,103,000 6,150,000 4,470,000
Projected
benefit obligation 23,221,000 21,569,000 15,889,000
Plan assets in excess
of projected benefit
obligations 933,000 643,000 2,021,000
Unrecognized net
actuarial (gain) loss 686,000 555,000 (1,296,000)
Unamortized transition
net asset (996,000) (1,060,000) (1,124,000)
Prepaid pension asset
(accrued liability) $ 623,000 $ 138,000 $ (399,000)
Net periodic pension cost
included the following components:
Service cost-benefits
earned during the period $ 1,930,000 $ 1,810,000 $ 1,456,000
Interest cost on
projected benefit
obligation 1,510,000 1,307,000 1,103,000
Actual return on
plan assets 59,000 (2,173,000) (1,750,000)
Net amortization
and deferral (1,678,000) 855,000 416,000
Net pension cost $ 1,821,000 $ 1,799,000 $ 1,225,000
The assumed discount rate in computing the projected benefit obligation
was 7 percent, the assumed rate of compensation increase was 4 percent and
the assumed long-term rate of return on plan assets was 7 percent. Asset
gains and losses are deferred in the year generated and amortized in future
years over the average remaining service period of active participants.
</TABLE>
Page 21
Notes to Consolidated Financial Statements
<TABLE>
Note 7- Shareholders Equity
<CAPTION>
Changes in issued common stock, capital in excess of par value and retained
earnings for the three years ended December 31, 1994 were as follows:
Common Stock
Capital in excess Retained
Shares Amount of par value Earnings
<S> <C> <C> <C> <C>
Balance,
December 31, 1991 34,371,345 $3,437,000 $25,787,000 $462,825,000
Net income 82,309,000
Exercise of stock
options, net 84,145 9,000 2,549,000
Restricted stock
compensation
plan, net 1,118 189,000
Dividends declared (11,018,000)
Balance,
December 31, 1992 34,456,608 3,446,000 28,525,000 534,116,000
Net income 66,414,000
Exercise of stock
options, net 62,321 6,000 2,021,000
Restricted stock
compensation
plan, net 5,529 1,000 232,000
Dividends declared (12,431,000)
Repurchase of
common stock (2,516,900) (252,000) (93,938,000)
Balance,
December 31, 1993 32,007,558 3,201,000 30,778,000 494,161,000
Net income 74,475,000
Exercise of stock
options, net 82,355 8,000 2,358,000
Restricted stock
compensation
plan, net 316 81,000
Dividends declared (13,880,000)
Repurchase of
common stock (774,800) (77,000) (29,095,000)
Balance,
December 31, 1994 31,315,429 $3,132,000 $33,217,000 $525,661,000
On February 19, 1993, the Board of Directors authorized a stock repurchase
program for up to 3,000,000 shares of the Company s common stock.
On December 3, 1993, the Board of Directors increased its authorization
to 4,000,000 shares. As of December 31, 1994, the Company had repurchased
3,291,700 shares of its common stock.
</TABLE>
Note 8- Employee Stock Plans
Stock Option Plans
The Company has three active stock option plans for its key employees, the
"1979 Plan", the "1982 Plan" and the "1992 Plan".
The 1979 Plan provided for awards consisting of non-qualified options for
the purchase of shares of common stock at the market price at date of grant.
Options granted under the 1979 Plan expire ten years from date of grant. As
of December 1989, pursuant to its terms, no further grants of options were
available under the 1979 plan.
The 1982 Plan permitted awards consisting of non-qualified and incentive
stock options at the market price at date of grant. As of August 1992, pursuant
to its terms, no further grants of options were available under the 1982 Plan.
The 1992 Plan permits awards consisting of non-qualified and incentive
stock options for the purchase of up to 600,000 shares of common stock
at the market price at date of grant. Options for 110,340 shares were
granted in 1994 (102,410 in 1993 and 67,275 in 1992). At December 31, 1994,
shares available for future options under the 1992 Plan were 324,975.
Proceeds received from the exercise of options under the plans are credited
to the capital accounts in the year the options are exercised. The plans
permit employeesto tender shares to the Company in lieu of cash for the
exercise of stock options. No amounts are charged or credited to income as a
result of these plans.
Page 22
Notes to Consolidated Financial Statements
<TABLE>
The following tabulation sets forth the activity of the plans for the three
years ended December 31, 1994.
<CAPTION>
Number of Option Price
Options Per Share
<S> <C> <C> <C> <C>
Outstanding at
December 31, 1991 442,220 $13.79 - $47.25
Granted in 1992 67,275 44.13
Exercised in 1992 (46,954) 13.79 - 41.75
Cancelled in 1992 (7,010) 20.71 - 47.25
Outstanding at
December 31, 1992 455,531 13.79 - 47.25
Granted in 1993 102,410 33.81
Exercised in 1993 (14,673) 13.79 - 22.50
Cancelled in 1993 (3,000) 41.75 - 47.25
Outstanding at
December 31, 1993 540,268 13.79 47.25
Granted in 1994 110,340 38.50
Exercised in 1994 (39,571) 13.79 - 22.50
Cancelled in 1994 (17,636) 13.79 - 47.25
Outstanding at
December 31, 1994 593,401 $13.79 - $47.25
<F1>
Under the 1979 Plan, 189,358 options were exercisable at December 31, 1994
(225,411 options at December 31, 1993). Under the 1982 Plan, 89,839 options were
exercisable at December 31, 1994 (67,411 options at December 31, 1993). The
remaining options become exercisable as follows: 25,793 in 1995 and 13,386
in 1996. Under the 1992 Plan, 45,916 options were exercisable at December 31,
1994 (13,287 in 1993). The remaining options become exercisable as follows:
54,897 each year in 1995 through 1997, 42,350 in 1998 and 22,068 in 1999.
<F2>
Employee Stock Purchase Plan
The Company has an employee stock purchase plan which provides for the
granting of options to eligible employees to purchase not more than an aggregate
of 1,012,500 shares of common stock. Options are granted annually on July 1 and
terminate one year from date of grant. The purchase price of the shares is 85
percent of the closing price on the New York Stock Exchange of the common
stock on the date of grant or exercise, whichever is lower. At December31, 1994,
options to purchase approximately 52,000 shares were outstanding. The actual
number of shares issued under the plan in 1994 was 47,177 (48,745 in 1993
and 38,267 in 1992).
<F3>
Restricted Stock Compensation Plan
In 1984, the Board of Directors and shareholders approved the 1984
Restricted Stock Compensation Plan, which permits awards consisting of
restricted stock of up to 900,000 shares of common stock. The Plan contains
various restrictions on the disposition of the shares and the shares issued
are held in escrow by the Company until such time as the restrictions lapse
or they are forfeited. As of December 31, 1994, 101,746 restricted shares are
being held in escrow. The quoted market price of the stock at the date issued
has been recorded as restricted stock compensation and is being amortized over
the time required for each employee to attain normal retirement age. The
amount of compensation expense recorded is not significant to the Company
s financial statements.
</TABLE>
Notes to Consolidated Financial Statements
Note 9- Sale of Minority Interest in European Venture
In July 1992, the Company sold its minority financial interest in a European
venture to the majority shareholder for a pre-tax gain of $12.6 million
which increased net income per share by $7.7 million, or 22 cents per share.
Page 23
Notes to Consolidated Financial Statements
Note 10- Commitments and Contingencies
The Company is obligated under long-term operating leases for offices,
facilities and real property. The future minimum rental payments under these
leases are as follows: $1,619,000 in 1995, $1,387,000 in 1996, $1,155,000 in
1997, $648,000 in 1998, $641,000 in 1999 and $4,589,000 thereafter. These
leases are generally subject to renewal. Rent for 1994 was $1,811,000
($1,790,000 in 1993 and $1,407,000 in 1992).
<TABLE>
Note 11- Industry Segments
<CAPTION>
The Company is predominantly in one industry segment: training. The Company
is also engaged in product sales consisting of simulators, visuals systems and
other high-technology training equipment. Revenue derived from U.S. Government
agencies amounted to $75,583,000 in 1994 ($58,382,000 in 1993 and $59,418,000
in 1992).
Year ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Revenues:
Training $271,743,000 $244,784,000 $239,434,000
Product sales 74,652,000 92,202,000 66,358,000
Intersegment elimination(1) (45,096,000) (39,890,000) (27,357,000)
Total $301,299,000 $297,096,000 $278,435,000
Contribution to
operating income:
Training $101,236,000 $ 88,339,000 $ 94,786,000
Product sales 5,749,000 12,845,000 11,336,000
Total $106,985,000 $101,184,000 $106,122,000
<F1>
(1) Intersegment sales, all of which relate to product sales, are recorded at
cost.
</TABLE>
<TABLE>
Training revenues are predominately earned in the United States. Product
sales to unaffiliated customers are in the following geographic areas.
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
United States $17,407,000 $17,674,000 $10,520,000
Asia 7,730,000 3,742,000 15,303,000
Europe 3,365,000 27,030,000 13,178,000
Other 1,054,000 3,866,000
Total $29,556,000 $52,312,000 $39,001,000
<F1>
At December 31, 1994, the accounts receivable related to product sales were
$11.1 million ($13.4 million in 1993 and $9.4 million in 1992).
The following represents the identifiable assets by segment as of December 31:
1994 1993 1992
Training $534,668,000 $504,763,000 $491,809,000
Product sales 36,040,000 42,531,000 26,537,000
Corporate (2) 222,221,000 206,640,000 296,140,000
Total $792,929,000 $753,934,000 $814,486,000
<F2>
(2) Corporate assets consist primarily of cash, short-term and other
investments and equipment and facilities (net). Capital expenditures
and depreciation and amortization expense relate primarily to the
training industry segment of the Company and are not material with
respect to product sales.
</TABLE>
Page 24
Report of Independent Accountants
To the Board of Directors and Shareholders of
FlightSafety International, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and of cash flows present fairly,
in all material respects, the financial position of FlightSafety International,
Inc. and its subsidiaries at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements
in accordance with generally accepted auditing standards which require that we
plan and perform an audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
New York, New York
January 31, 1995
<TABLE>
1994, 1993 and 1992 Selected Quarterly Financial Information (Unaudited)
<CAPTION>
1994 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
<S> <C> <C> <C> <C>
Revenues $73,246,000 $74,009,000 $70,486,000 $83,558,000
Income from
operations 23,772,000 26,496,000 22,707,000 34,010,000
Net income 16,199,000 18,539,000 16,236,000 23,501,000
Net income per share 51 cents 58 cents 51 cents 75 cents
1993 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Revenues $73,759,000 $78,660,000 $67,853,000 $76,824,000
Income from
operations 24,362,000 26,878,000 20,867,000 29,077,000
Net income 17,238,000 18,505,000 11,035,000(1) 19,636,000
Net income per share 50 cents 56 cents 34 cents(1) 61 cents
1992 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Revenues $69,867,000 $70,941,000 $69,174,000 $68,453,000
Income from
operations 26,766,000 28,640,000 25,910,000 24,806,000
Net income 18,699,000 19,841,000 25,812,000(2) 17,957,000
Net income per share 54 cents 58 cents 75 cents(2) 52 cents
<F1>
(1) Due to an increase in the federal income tax rate, additional deferred
taxes of $3.4 million, or 10 cents per share, were recorded in 1993 related
to increased deferred income tax liabilities for temporary differences recorded
prior to 1993.
<F2>
(2)In July 1992, the Company sold its minority financial interest in a European
venture to the majority shareholder for a pre-tax gain of $12.6 million which
increased net income by $7.7 million, or 22 cents per share.
</TABLE>
Page 25
Board of Directors and Officers
Directors
Albert L. Ueltschi
Chairman
President, FlightSafety International, Inc.
George B. Beitzel*
Senior Vice President and Director, Retired
International Business Machines Corporation
Information Handling Systems,
Equipment and Services
Edward E. Hood, Jr.*
Vice Chairman and Executive
Officer, Retired
General Electric Company
Diversified technology,
manufacturing and services
Charles R. Longsworth*
Chairman, Emeritus
Colonial Williamsburg Foundation
Museum, education, hotel
and restaurant services
John A. Morgan*
Partner
Morgan Lewis Githens & Ahn
Investment Bankers
Bruce N. Whitman
Executive Vice President
FlightSafety International, Inc.
* Member of the Audit Committee
Officers
Albert L. Ueltschi
President
Bruce N. Whitman
Executive Vice President
Elmer G. Gleske
Vice President-Government Affairs
Dennis Gulasy
Vice President-Simulation Systems
Kenneth W. Motschwiller
Vice President-Treasurer
James S. Waugh
Vice President-Marketing
Mario D'Angelo
Controller
Peter P. Mullen
Secretary
Partner,
Skadden, Arps, Slate, Meagher & Flom
Registrar and Transfer Agent
American Stock Transfer and Trust Co., 40 Wall Street, New York, New York 10005
Annual Meeting
The Annual Meeting of Shareholders is scheduled for 4 p.m., Wednesday,
April 26, 1995 at the corporate headquarters, Marine Air Terminal,
LaGuardia Airport, Flushing, New York 11371
Form 10-K
The Form 10-K report to the Securities and Exchange Commission will
be made available to interested persons upon written request to the
Treasurer of the Corporation.
Corporate Brochure
A brochure on the Company and its services will be gladly provided upon
request. Please contact the office of the Treasurer.
Page 26
FlightSafety Learning Centers and Other Locations
Alliance Flight Training Academy
2250 Alliance Blvd.
Fort Worth, Texas 76177
toll free (800) 791-1414
tel (817) 491-9699
fax (817) 491-4002
Helicopter Primary Flight Training plus Add On Ratings
Private through ATP
Bell JetRanger 206B III
Schweizer/Hughes H300C
Atlanta Learning Center
1804 Hyannis Court College Park, Georgia 30337
toll free (800) 889-7916
tel (404) 991-6064
fax (404) 991-5959
Embraer 120
DC-9
JetStar -6, -8, 731
JetStar II
King Air 90, 100, 200 Series
Bethany Learning Center
Wiley Post Airport
7310 N.W. 50th Street
P.O. Box 1640
Bethany, Oklahoma 73008
tel (405) 495-6400
fax (405) 495-6404
Cmdr. Jetprop 840, 900, 980, 1000
Cmdr: Turbo 690, 690A, 690B
Cincinnati Airline Learning Center
1600 Dolwick Drive Erlanger, Kentucky 41018
tel (606) 283-2345
fax (606) 283-2362
Boeing 727
Embraer 120
Daleville Learning Center
600 Industrial Blvd.
Daleville, Alabama 36322
tel (334) 598-4485
fax (334) 598-4488
C-12, C, D, F
U-21, RC-12
Dothan Learning Center
600 FlightSafety Drive
Dothan, Alabama 36303
tel (334) 983-5652
fax (334) 983-1393
A-90/U-21
C-182
FlightSafety Academy
Vero Beach Municipal Airport 2805 Airport Drive
Vero Beach, Florida 32961
toll free (800) 800-1411
tel (407) 567-5178
fax (407) 567-5228
Airline Ab Initio & Transition
tel (407) 778-4992
fax (407) 778-6496
Ab Initio Airline Training
Career-Oriented Primary Flight
Training, Private through Instructor
Fort Worth Learning Center
9601 Trinity Blvd.
Fort Worth, Texas 76053
toll free (800) 379-7413
tel (817) 282-2557
fax (817) 282-8543
Bell 212, 214ST, 222, 222B, 222U, 230, 412
Greater Philadelphia/Wilmington Learning Center
New Castle County Airport
155 N. Dupont Hwy.
New Castle, Delaware 19720
toll free (800) 733-7548
tel (302) 328-7548
fax (302) 322-6664
HS-125/1A-400, /600, /700
Hawker 800/1000
Jet Commander 1121
Westwind 1123,1124
Westwind 2
Astra
ATR 42/72
Fokker 100
Houston Learning Center
William P. Hobby Airport
7525 Fauna Street
Houston, Texas 77061
toll free (800) 927-1521
tel (713) 644-1521
fax (713) 644-2118
MU-2
Embraer 120
King Air 90, 100, 200 Series
Hawker 800
HS-125/700
Falcon 20
Boeing 737
ATR 42/72
Challenger 601-3A
Gulfstream I
LaGuardia Airline Learning Center
Marine Air Terminal
LaGuardia Airport
Flushing, New York 11371
toll free (800) 877-5343
tel (718) 565-4100
fax (718) 565-4174
Beech 1900 Series
Shorts 360
Saab 340
Lakeland Flight Academy
Lakeland Airport
2949 Medulla Road
Lakeland, Florida 33811
toll free (800) 726-5037
tel (813) 646-5037
fax (813) 644-6211
Primary Flight Training plus Add On Ratings, Private through ATP
Cheyenne I, IA, II, IIXL,
III, IIIA, 400
Chieftain
Mojave
Aerostar
Navajo 310, 325, 350
T1020, T1040
King Air
Long Beach Learning Center
Long Beach Municipal Airport 4330 Donald Douglas Drive
Long Beach, California 90808
toll free (800) 487-7670
Corporate Scheduling
tel (310) 420-7670
Airline Scheduling
tel (310) 420-7733
fax (310) 429-1226
Boeing 737
Citation I, II
Cessna 300/400 Series
King Air 90, 100, 200 Series
MD-80
MD-88/87
Gulfstream II
Miami Airline Learning Center
4800 N.W. 36th Street
Miami, Florida 33122
P.O. Box 661198
Miami, Florida 33266-1198
tel (305) 871-8625
fax (305) 871-8659
A310-300/A300-600
MD-88/87
Boeing 727, B757
DC-9
Montreal Learning Center
9555 Ryan Avenue
Dorval, Quebec
Canada H9P 1A2
tel (514) 631-2084
fax (514) 631-2263
Challenger 600, 601, 601-3A
Paris Learning Center
BP 25, Zone d Aviation d Affaires, Bldg. 404
Aeroport du Bourget
93352 Le Bourget CEDEX
France
tel +33 (1) 49-92-19-19
fax +33 (1) 49-92-18-92
Falcon 10/100, 20, 50, 200, 900
King Air 200
Citation I, II, V
Embraer 120
Dash 8
Mooney
St. Louis (Sabreliner)
Learning Center
Lambert-St. Louis International Airport
6185 Aviation Drive
St. Louis, Missouri 63134-0888
toll free (800) 349-5447
tel (314) 731-2040
fax (314) 731-3077
Sabreliner 40/60, 65, 75A/80
St. Louis Airline Learning Center 4619 Le Bourget Drive
St. Louis, Missouri 63134-0888
toll free (800) 258-4351
tel (314) 426-6160
fax (314) 426-2834
Jetstream 31/32
Metro II, III Series
MD-80
DC-9
Saab 340
Boeing 727
Salt Lake City Airline
Learning Center
201 North 2200 West
Salt Lake City, Utah 84116
tel (801) 355-3901
fax (801) 355-3801
Boeing 737
Page 27
San Antonio Airline Learning Center
San Antonio International Airport
9027 Airport Blvd.
San Antonio, Texas 78216
toll free (800) 889-7917
tel (210) 826-6358
fax (210) 826-4008
Metro II, III Series, Metro 23
Saab 340
Mooney
TBM 700
Savannah Learning Center
Savannah Maintenance Learning Center
Travis Field
P.O. Box 2307
Savannah, Georgia 31402
toll free (800) 625-9369
tel (912) 964-6421
fax (912) 964-6430
Gulfstream I, II, III, IV
Seattle Airline Learning Center
1505 South 192nd Street
Seattle, Washington 98148
tel (206) 243-9081
fax (206) 243-0357
Boeing 737, B757, B767
Jetstream 31/32
Embraer 120
Metro III Series
Dash 8
Teterboro Learning Center
Teterboro Airport
100 Moonachie Avenue
Moonachie, New Jersey 07074
toll free (800) 827-8058
tel (201) 939-1810
fax (201) 939-7341
Falcon 10/100, 20/20-731, 50, 200, 900, 2000
Toledo Learning Center
Toledo Express Airport
11600 West Airport Service Road
Swanton, Ohio 43558
toll free(800) 497-4023
tel (419) 865-0551
fax (419) 865-0754
Citation I, II, S/II, III, V, VI, VII
King Air 90, 100, 200 Series
Toronto Airline Learning Center
95 Garratt Blvd.
Downsview, Ontario
Canada M3K 2A5
tel (416) 638-9313
fax (416) 638-3348
de Havilland Twin Otter
Dash 7, Dash 8
Tucson Learning Center
Tucson International Airport
1071 E. Aero Park Blvd.
Tucson, Arizona 85706
toll free (800) 203-5627
tel (602) 889-9538
fax (602) 889-9619
Learjet 20, 30, 50, 60 Series
West Palm Beach Learning Center
Palm Beach International Airport
3887 Southern Blvd.
West Palm Beach, Florida 33406
toll free (800) 769-6763
tel (407) 686-7677
fax (407) 689-7719
Sikorsky S-76 Series
Learjet 30 Series
Composite Structures
Wichita (Beech) Learning Center
9720 E. Central Avenue
Wichita, Kansas 67206
toll free (800) 488-3747
tel (316) 685-4949
fax (316) 685-2476
Beech 1900, C99
Baron 55, 58, 58P/58TC
King Air 90, 100, 200, 300 Series
Bonanza
Duke
Starship
Diamond MU-300
Beechjet 400
Wichita (Beech) Maintenance Learning Center
9525 East Central Avenue
Wichita, Kansas 67206
toll free (800) 808-0976
tel (316) 685-5510
fax (316) 685-2448
Beech 1900, C99
King Air 90, 100, 200, 300 Series
Bonanza
Baron 58
Starship
Diamond MU-300
Beechjet 400
King Air 200 Series Troubleshooting
Starship Composite Repair
Wichita (Cessna) Learning Center
1951 Airport Road
Wichita, Kansas 67209
P.O. Box 12304
Wichita, Kansas 67277
toll free (800) 227-5656
tel (316) 943-2140
fax (316) 943-1017
Cessna 210, 300/400 Series
Conquest I, II
Caravan I, II
Wichita (Cessna) Maintenance Learning Center
1962 Midfield Road
Wichita, Kansas 67209
P.O. Box 12263
Wichita, Kansas 67277
toll free (800) 491-9796
tel (316) 945-0123
fax (316) 945-0161
Cessna 182, R182, 206, 208, 210, T210, P210, 303, 340A, 402C, 406,
414, 421, 425, 441
Citation I, II, S/II, III, V, VI, VII
Composite Repair
Citation 500 Series
CitationJet Troubleshooting
Wichita (Citation) Learning Center
1851 Airport Road
Wichita, Kansas 67209
P.O. Box 12323
Wichita, Kansas 67277
toll free (800) 488-3214
tel (316) 943-3214
fax (316) 943-7651
Citation I, II, S/II, III, V, V Ultra, VI, VII
CitationJet
Wichita (Learjet) Learning Center
2 Learjet Way
Wichita, Kansas 67209
toll free (800) 491-9807
tel (316) 943-3394
fax (316) 943-0314
Learjet 20, 30, 50, 60 Series
Page 28
FLIGHTSAFTEY INTERNATIONAL
PROXY STATEMENT
[Logo]
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Shareholders of
FlightSafety International, Inc., a New York corporation
(the 'Company'), will
be held at the offices of the Company, Marine Air
Terminal, La Guardia
Airport, Flushing, New York 11371, on Wednesday, April 26,
1995, at 4:00 P.M.,
New York City time (with any adjournment or postponement
thereof, the
'Meeting'), for the following purposes:
1. To elect a Board of six Directors, each to
serve until the next
Annual Meeting and until his successor shall have been
duly elected and
qualified;
2. To ratify and approve the appointment by the
Board of Directors of
Price Waterhouse LLP as independent accountants for
the Company for the
year ending December 31, 1995; and
3. To transact such other business as may properly
come before the
Meeting.
The Board of Directors has fixed the close of business
on March 13, 1995
as the record date for the determination of shareholders
entitled to notice of
and to vote at the Meeting.
You are cordially invited to attend the Meeting in
person and vote. Even
if you plan to attend the Meeting in person, you are urged
to complete, sign
and date the enclosed proxy card and to return it promptly
in the prepaid
return envelope provided. If you attend the Meeting in
person, you may then
withdraw your proxy and vote in person if you so desire.
By Order of the
Board of Directors,
PETER P. MULLEN
Secretary
Flushing, New York
March 24, 1995
FLIGHTSAFETY INTERNATIONAL, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished in connection with
the solicitation of
proxies by the Board of Directors of FlightSafety
International, Inc., a New
York corporation (the 'Company'), to be used at the Annual
Meeting of
Shareholders of the Company which is scheduled to be held at the offices of
the Company, Marine Air Terminal, La Guardia Airport,
Flushing, New York
11371, on Wednesday, April 26, 1995, at 4:00 P.M., New
York City time, and any
adjournment or postponement thereof (the 'Meeting'). This
proxy statement, the
accompanying notice and the enclosed proxy card are first
being mailed to
shareholders on or about March 24, 1995.
The Board of Directors does not intend to bring any
matter before the
Meeting except as specifically indicated in the notice,
nor does the Board of
Directors know of any matters which anyone else proposes
to present for action
at the Meeting. If any other matters properly come before
the Meeting,
however, the persons named in the enclosed proxy, or their
duly constituted
substitutes acting at the Meeting, will be authorized to
vote or otherwise act
thereon in accordance with their judgment on such matters.
Shares represented by properly executed proxies
received by the Company in
time for the Meeting will be voted in accordance with the
instructions given
therein. If no instructions are specified in a proxy, the
shares represented
by that proxy will be voted 'For' the election of all six
nominees for the
Board of Directors and 'For' the ratification and approval
of Price Waterhouse
LLP as independent accountants for the Company for the
year ending December
31, 1995.
A shareholder giving a proxy may revoke such proxy at
any time before it
is exercised by giving written notice to the Company
(bearing a date later
than the proxy) or by executing a subsequent proxy
relating to the same
shares, and by filing with or hand delivering to the
Secretary, at the offices
of the Company, such written notice or subsequent proxy at
or before the
taking of the vote at the Meeting. In addition, any
shareholder attending the
Meeting may vote in person whether or not such shareholder
has previously
filed a proxy, although attendance at the Meeting will not
in and of itself
constitute a revocation of a proxy.
The accompanying form of proxy is being solicited on
behalf of the Board
of Directors of the Company. The expenses of solicitation
of proxies for the
Meeting will be paid by the Company. In addition to the
mailing of the proxy
materials, such solicitation may be made in person or by
telephone by
directors, officers and employees of the Company, who will
receive no
additional compensation therefor. Upon request, the
Company will reimburse
brokers, dealers, banks and trustees, or their nominees,
for reasonable
expenses incurred by them in forwarding solicitation
materials to beneficial
owners of shares of the Company's Common Stock.
The Board of Directors has fixed the close of business
on March 13, 1995
as the record date for the Meeting. Accordingly, only
shareholders of record
of the Company's Common Stock at the close of business on
such date will be
entitled to notice of and to vote at the Meeting. On that
date, there were
issued and outstanding 31,325,878 shares of the Company's
Common Stock.
The presence, in person or by proxy, of the holders of
one-third of the
total number of issued and outstanding shares of the
Company's Common Stock
entitled to vote at the Meeting will constitute a quorum.
Shareholders
granting a proxy to vote on one issue but abstaining as to
the other issue
will be counted for the purpose of determining a quorum.
On all matters voted
upon at the Meeting, the holders of shares of the
Company's Common Stock vote
together as a single class, with each record holder
entitled to one vote per
share.
ELECTION OF DIRECTORS
The Board of Directors of the Company has nominated
six candidates to be
elected at the Meeting. Each nominee is currently serving
as a director of the
Company. The directors elected at the Meeting will hold
office until the next
annual meeting of shareholders and until their successors
have been duly
elected and qualified.
Directors shall be elected by a plurality of votes
cast in the election of
directors. Under applicable New York law, in tabulating
the vote, broker
non-votes will be disregarded and will have no effect on
the outcome of the
vote. Unless a contrary instruction is indicated, a
properly executed and
returned proxy will be voted 'For' the election of Messrs.
George B. Beitzel,
Edward E. Hood, Jr., Charles R. Longsworth, John A.
Morgan, Albert L. Ueltschi
and Bruce N. Whitman.
Each nominee has consented to being named in the proxy
statement and to
serve if elected. If, prior to the Meeting, any nominee
should become
unavailable to serve, the shares of the Company's Common
Stock represented by
a properly executed and returned proxy will be voted for a
substitute nominee
designated by the Board of Directors, unless the Board
should determine to
reduce the number of directors pursuant to the Company's
By-laws.
The table below sets forth certain information
concerning the nominees for
election as directors at the Meeting, including such
nominee's positions with
the Company and principal occupation, a brief account of
such nominee's
business experience during the last five years, certain
other directorships
currently held by such nominee, such nominee's age and the
year such nominee
was first elected a director of the Company.
Year First
Positions with the Company,
Principal Elected
Occupation and Other
Directorships Age Director
George B. Beitzel......... Retired (March 1987); prior
thereto, Senior 66 1974
Vice President and Director,
International Business Machines
Corporation, an information handling
systems, equipment and services company. Mr.
Beitzel is Chairman of the Colonial
Williamsburg Foundation and a director of
Bankers Trust Company, Bankers Trust New
York Corporation, Computer Task
Group, Inc., Phillips Petroleum Company,
Phillips Gas Company, Rohm and Haas
Company, Roadway Services, Inc. and Xillix
Technologies Corp. Mr. Beitzel is also
Trustee Emeritus of Amherst College.
Edward E. Hood, Jr........ Retired (February 1993); prior
thereto, Vice 64 1991
Chairman, Executive Officer
and Director, General Electric Company, a
diversified technology, manufacturing
and services company. Mr. Hood is a
director of Lockheed Martin Corp.,
Gerber Scientific,Inc. and Lincoln Electric
Company and is also Chairman of the Board
of Trustees of Rensselaer Polytechnic
Institute.
Charles R. Longsworth..... Chairman Emeritus, Colonial
Williamsburg 65 1985
Foundation, museum,
education, hotel and
restaurant services. Mr. Longsworth is a
director of Public Radio International,
Crestar Financial Corporation, Houghton
Mifflin Company, Roadway Services, Inc.,
Saul Centers, Inc. and Virginia Eastern
Shore Corporation and is
also Chairman of the Board of Trustees of
Amherst College.
John A. Morgan............ Partner, Morgan Lewis Githens
& Ahn, 64 1961
investment bankers. Mr.
Morgan is a director of Masco
Corporation, Masco Industries, Inc., McDermott
International,Inc. and Tri Mas
Corporation.
Albert L. Ueltschi........ Chairman of the Board of
Directors and 77 1951
President of the Company.
Bruce N. Whitman.......... Executive Vice President of
the Company. 61 1962
2
Committees, Meetings and Compensation of the Board of
Directors
The Board of Directors held one special and four
regular meetings during
1994. Each director attended at least 75 percent of the
aggregate number of
meetings of the Board and Committees of the Board of which
he was a member,
except Mr. Morgan.
The Company's Board of Directors has a standing Audit
Committee, Executive
Committee, Nominating Committee, Compensation Committee
and Employee Stock
Purchase Plan Committee. The Audit Committee is composed
of Messrs. Morgan
(Chairman), Beitzel, Hood and Longsworth and recommends to
the Board of
Directors the accounting firm to be appointed as
independent accountants for
the Company; reviews with the Company's management and
independent accountants
the Company's annual operating results; and reviews with
the Company's
independent accountants the scope and results of the audit
and the adequacy of
the Company's internal accounting procedures and systems.
The Audit Committee
met twice during 1994.
The Executive Committee is composed of Messrs.
Ueltschi (Chairman),
Beitzel, Morgan and Whitman, and is authorized to exercise
all of the powers
and authority of the Board except those powers reserved to
the Board of
Directors by law, the Company's Certificate of
Incorporation or By-laws, or by
resolution of the Board of Directors. The Executive
Committee did not meet
during 1994.
The Nominating Committee consists of Messrs. Ueltschi
(Chairman), Beitzel,
Morgan and Whitman, and considers and makes
recommendations to the Board of
Directors of the names of persons to be nominated for
election as directors by
the shareholders of the Company, and also those to be
elected by the Board to
fill vacancies that may arise between annual meetings of
the shareholders of
the Company. The Nominating Committee will consider
nominees recommended by
the Company's shareholders. Any such recommendations
should be mailed to the
Nominating Committee, at the Company's address, and should
include the name,
address and a statement of qualifications of each nominee
as well as the
signed consent of such person to serve if nominated and
elected. The
Nominating Committee did not meet during 1994.
The Compensation Committee consists of Messrs. Beitzel
(Chairman), Hood
and Morgan and considers and makes recommendations to the
Board of Directors
on matters relating to the cash compensation of employees
of the Company,
including, with respect to executive officers, salaries
and bonuses. The
Compensation Committee also administers the Company's 1979
Stock Option Plan,
1982 Incentive Stock Option Plan, 1984 Restricted Stock
Compensation Plan and
1992 Stock Option Plan. The Compensation Committee met
three times during
1994.
The Employee Stock Purchase Plan Committee consists of
Messrs. Ueltschi
(Chairman), Morgan and Whitman, and administers the
Company's Employee Stock
Purchase Plan. The Employee Stock Purchase Plan Committee
did not meet during
1994.
Members of the Board of Directors, who are not
employees of the Company,
currently receive an annual retainer of $22,000 and are
paid $500 per Board or
Committee meeting attended (other than Committee meetings
held on the same day
as a Board meeting). Such directors are reimbursed for
expenses they incur in
attending such meetings. Members of the Board of Directors
who are employees
of the Company do not receive additional compensation for
serving in such
capacity.
The Company maintains a retirement plan for its
non-employee directors
pursuant to which directors of the Company who are not
employees of the
Company and who retire as a director of the Company are
entitled to receive
the semi-annual payments described below after reaching age 70 (or earlier if
their retirement as a director of the Company is due to
disability). Any
director of the Company who serves as an employee of the
Company is eligible
to participate in the plan upon such director's retirement
as an employee of
the Company, provided that such director remains a
director of the Company
following such retirement. Directors are paid semi-annual
amounts under the
plan equal to one-half of the last annual retainer fee
paid to such director
for such director's last active year as a director of the
Company and receive
such payments for the same number of years that such
director served as a
director of the Company or ten years, whichever is
shorter. If a director dies
before retiring or before receiving all scheduled
retirement payments, such
payments are paid to such director's spouse, but only if
such spouse survives
such director and, commencing upon the death of such
director, continue until
all retirement payments which would otherwise have been
paid to such director
have been paid or until such spouse's death, whichever
occurs first.
3
The Company maintains directors and officers liability
insurance which
insures directors and officers of the Company and its
subsidiaries against
certain liabilities incurred by them while serving in such
capacities, and
reimburses the Company for certain indemnification
payments made by the
Company to directors and officers of the Company and its
subsidiaries. This
policy extends through August 15, 1995 at a premium of
$106,800 per year. No
claims have been made under this policy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information set forth on the following table is
furnished as of March
13, 1995 with respect to any person (including any 'group'
as that term is
used in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended
(the 'Exchange Act')), who is known to the Company to be
the beneficial owner
of more than 5% of the Company's Common Stock, as to those
shares beneficially
owned by each of the Company's directors, each of the
Company's executive
officers named in the Summary Compensation Table (see page
9) and all
directors and executive officers of the Company as a
group.
Number of Shares
Beneficially Percent of
Owned Outstanding
as of March 13, Common Stock
Name of Beneficial Owner
1995 as of March 13, 1995
Directors
Albert L. Ueltschi(1).......... 9,617,040(2) 30.7%
George B. Beitzel.............. 3,860(3) *
Edward E. Hood, Jr.............. 1,000 *
Charles R. Longsworth........... 725 *
John A. Morgan.................. 118,885 *
Bruce N. Whitman(4)............. 263,184(5) *
Executive Officers
Kenneth W. Motschwiller......... 22,598(5)(6) *
James S. Waugh.................. 27,615(5) *
Dennis Gulasy................... 31,537(5)(7)
Directors and Executive Officers as a group (11
persons)....................... 10,121,497(5) 32.3%
Putnam Investments, Inc.(8)..... 4,129,572(8) 13.2%
FMR Corp.(9).......................3,093,300(9) 9.9%
---------
* Indicates beneficial ownership of less than 1% of the
shares of Common
Stock outstanding on such date.
(1) The address for Mr. Ueltschi is Marine Air Terminal,
La Guardia Airport,
Flushing, NY 11371. Mr. Ueltschi is also the President
of the Company.
(2) Includes 9,616,540 shares held pursuant to a revocable
trust for which Mr.
Ueltschi is the sole beneficiary during his lifetime
and 500 shares held
pursuant to a partnership. Does not include
approximately 1,513,000 shares
beneficially owned by various members of Mr.
Ueltschi's family, in respect
of which Mr. Ueltschi disclaims beneficial ownership.
(3) Does not include 275 shares beneficially owned by Mr.
Beitzel's spouse, in
respect of which Mr. Beitzel disclaims beneficial
ownership.
(4) Mr. Whitman is also Executive Vice President of the
Company.
(5) Includes shares which the executive officer has the
right to acquire
within 60 days through the exercise of stock options
granted under the
Company's stock option plans. These amounts are as
follows: Mr. Whitman,
14,805 shares; Mr. Motschwiller, 16,516 shares; Mr.
Waugh, 17,050 shares;
Mr. Gulasy, 20,478 shares; and all directors and
executive officers as a
group, 77,512 shares.
(6) Includes 1,234 shares held by Mr. Motschwiller as
custodian for his minor
children.
(7) Does not include 1,022 shares beneficially owned by
Mr. Gulasy's spouse,
in respect of which Mr. Gulasy disclaims beneficial
ownership.
(8) Putnam Investment, Inc.'s address is: One Post Office
Square, Boston, MA
02109. Putnam Investment, Inc. is a wholly-owned
subsidiary of Marsh and
McLennan. Putnam Investment, Inc's subsidiaries,
Putnam Investment
Management, Inc. and The Putnam Advisory Company,
Inc., are investment
advisors to investment companies. This represents the
number of shares
owned as of December 31, 1994 as indicated in a
Schedule 13G filed by
Putnam Investment, Inc. with the Securities and
Exchange Commission (SEC)
on January 23, 1995. Putnam has shared power to vote
4
or to direct the vote for 375,560 shares and has
shared power to dispose
or to direct the disposition of all the shares.
(9) FMR Corp.'s address is: 82 Devonshire Street, Boston,
MA 02109. FMR Corp.
is a holding company and its subsidiary, Fidelity
Management & Research
Company, is an investment advisor to investment
companies. This represents
the number of shares owned as of December 31, 1994 as
indicated in a
Schedule 13G filed by FMR with the SEC on February 13,
1995. FMR has
neither sole nor shared voting power with respect to
such shares and has
sole power to dispose of such shares.
EXECUTIVE OFFICERS
Each executive officer of the Company serves at the
pleasure of the
Company's Board of Directors, and, subject to removal,
holds office until the
regular meeting of the Board of Directors which follows
the annual meeting of
shareholders and until his successor has been appointed
and qualified.
The following table sets forth certain information
with respect to the
executive officers of the Company.
Years
Position
Name Age Position with Company Held
--------------------------------------------------------------------------- ----
Albert L. Ueltschi................. 77
President and Chairman of the Board 44 years
Bruce N. Whitman................... 61
Executive Vice President 33 years
Elmer G. Gleske.................... 64
Vice President -- Government Affairs 18 years
Dennis Gulasy(1)................... 52
Vice President -- Simulation Systems 3 years
Kenneth W. Motschwiller(2)......... 38
Vice President -- Treasurer 4 years
James S. Waugh..................... 47
Vice President -- Marketing 15 years
Mario D'Angelo(3).................. 42
Controller 4 years
---------
(1) Mr. Gulasy was elected Vice President -- Simulation
Systems of the Company
on September 17, 1992. Mr. Gulasy has also been
General Manager of the
Company's Simulation Systems Division since 1985.
Prior thereto, Mr.
Gulasy held various positions with the Company.
(2) Prior to becoming Vice President -- Treasurer, Mr.
Motschwiller was
Controller of the Company from December 1983 until
July 1991.
(3) Prior to becoming Controller, Mr. D'Angelo was
Assistant Controller of the
Company from September 1988 until July 1991. Prior
thereto, Mr. D'Angelo
held various positions with the Company.
EXECUTIVE COMPENSATION
Report of the Compensation Committee on Executive
Compensation
Overall Compensation Policy. The Compensation
Committee of the Board of
Directors has three members, all of whom are non-employee
directors. Each
member of the Committee is a 'disinterested director'
within the meaning of
Rule 16b-3 under the Exchange Act. As noted earlier in
this proxy statement,
the Committee is responsible for considering matters
relating to the annual
cash compensation for the Company's executive officers
(including the named
executive officers) and administering the Company's
stock-based employee
benefit plans (other than the Company's Employee Stock
Purchase Plan).
The Company's executive compensation program has been
designed to (i)
provide compensation comparable to that offered by other
companies of similar
size (which are in the geographic area of the Company's
headquarters and the
Standard and Poor's Specialized Services Index which is
used in the stock
performance graph presented below), thereby allowing the
Company to attract
and retain highly qualified executives, (ii) motivate
these executives to
achieve the goals inherent in the Company's business
strategy, (iii) align the
interests of these executives with the long-term interests
of the Company's
shareholders through stock-based employee benefit plans,
(iv) provide a
compensation package that recognizes individual
contributions as well as
overall Company performance and (v) be cost effective. A
basic tenet of the
compensation philosophy of the program is that a
substantial portion of each
executive officer's annual compensation relates to and
must be contingent upon
the
5
performance of the Company, as well as the individual
contributions of such
executive. The Committee believes that the cash
compensation of the executive
officers, consisting of their annual base salary and
annual bonus, are
slightly below the median ranges of such items paid by
companies of a
comparable size in the Company's geographic area and with
other companies in
the Standard and Poor's Specialized Services Index.
The key elements of the Company's executive
compensation program are base
salary, annual bonus, stock option grants and restricted
stock awards. Mr.
Ueltschi, the President of the Company, does not
participate in the Company's
stock option and restricted stock programs. The
Committee's policies with
respect to each of these elements, including the bases for
the compensation
awarded to Mr. Ueltschi, are discussed below. While the
elements of
compensation described below are considered separately,
the Committee takes
into account the full compensation package provided by the
Company to the
individual executive.
Base Salaries. Executive officer base salaries are
reviewed annually by
the Compensation Committee in order to consider any
adjustments for the
upcoming year. Annual salary adjustments are determined by
evaluating the
competitive marketplace, changes in the cost of living,
the Company's current
and historical performance (taking into account changes in
the Company's
business and economic conditions affecting the Company),
the executive's
contributions and any change in the executive's
responsibilities. Mr. Ueltschi
evaluates the performance of the other executive officers
of the Company and
recommends appropriate adjustments for the Compensation
Committee's
consideration.
Within this framework, in making its recommendations
to the Board for 1994
annual salary adjustments, the Compensation Committee
focused on, among other
things, that the base salaries of the Company's executive
officers were less
than 70 percent of the average base salaries of executive
officers of
comparable companies in the Company's geographic area.
After the 1994 base
salary increases, the executive officers' base salaries
were less than 80
percent of the average salaries of executive officers at
such companies. The
base salaries were also increased to allow the Company to
increase the salary
of other personnel to a competitive level since the
salaries being paid to
executive officers of the Company were compressing the
level of salaries which
could be paid to such personnel. The Compensation
Committee independently, and
the Board after receiving the recommendation of the
Compensation Committee
(and without the involvement of any employee director),
evaluates the
performance of Mr. Ueltschi and reaches a determination
regarding his salary.
Similar to the other executive officers, Mr. Ueltschi's
1994 base salary was
also increased but after such increase, was no more than
approximately 70
percent of the average salary of other chief executive
officers of companies
in the Company's geographic area.
Annual Bonus. Annual bonus awards in respect of any
year are considered by
the Compensation Committee in the following March in
conjunction with their
review of the Company's audited financial statements for
the prior year. Bonus
awards are normally paid in two increments; two-thirds
payable upon award and
one-third payable on the first business day of the year
following the award,
subject to the condition that the executive officer be
employed by the Company
at the time of payment unless such employment is
terminated as a result of the
death of such officer.
Annual bonus awards are determined as a percentage
(the 'Performance
Percentage') of the applicable bonus base of the executive
officer's annual
salary (the 'Bonus Base'). Bonus Bases have historically
ranged between 25
percent to 60 percent. In determining the Bonus Base for a
particular
executive officer, the Compensation Committee considers,
among other things,
the length of employment, current responsibilities,
individual contributions
and past bonus history for such executive. In determining
the applicable
Performance Percentage, the Compensation Committee
considers the Company's
overall performance for the preceding year, including the earnings for that
year and for prior years (taking into account general
economic conditions and
the performance of relevant sectors of the economy). In
order to foster a team
approach among senior management, the Performance
Percentage normally does not
vary greatly as between individual executive officers.
Performance Percentages
usually range from 75 percent to 150 percent.
In making its determinations of annual bonus awards in
respect of 1994,
the Compensation Committee focused on, among other things,
the Company's 11
percent increase in training revenues, a 17 percent
increase in net income per
share in 1994 as compared to 1993 and the Company's
executive officers' total
cash compensation being below that of comparable-sized
companies' cash
compensation.
6
The Bonus Bases were all increased due to the 1994 base
salary increases
previously mentioned and the Performance Percentages were
also increased in
1994 for the same reasons for all named executive
officers, except for Mr.
Gulasy. Mr. Ueltschi's annual bonus increased due to both
his Bonus Base and
Performance Percentage increasing due primarily for the
items indicated
earlier.
Stock Option Grants and Restricted Stock Awards. The
objective in granting
stock options and restricted stock is to create an
incentive for grantees with
respect to future performance of the Company, rather than
to reward them for
past contributions. The stock awards are designed to align
the long-term
interests of the Company's executive officers with those
of its shareholders
by creating a direct link between executive compensation
and shareholder
return and by enabling such executives to develop and
maintain a significant,
long-term stock ownership position in the Company's Common
Stock.
Under the Company's 1992 Stock Option Plan, stock
options to purchase
110,340 shares were granted in December 1994 to key
employees of the Company
(including certain named executive officers). Such options
were granted with
an exercise price equal to the closing market price of the
Company's Common
Stock on the date of grant, become exercisable in 20
percent increments on the
first five anniversaries of the date of grant and expire
10 years after the
date of grant.
The Compensation Committee, in considering award
levels, granted to
certain named executive officers, options to purchase a
number of shares of
the Company's Common Stock, based on the closing market
price of the Company's
Common Stock on the date of grant, equal to twice such
executive officer's
1994 base salary. This formula was utilized to
increasingly link executive
officers' total compensation to a greater extent to
shareholder return. The
number of options previously awarded to the executive
officers also was
considered.
Under the Company's 1984 Restricted Stock Plan,
restricted shares were
awarded in June 1994 to key employees of the Company
(including the named
executive officers). Shares of restricted stock generally
vest upon normal
retirement, death or total disability. Recipients of
restricted stock awards
are entitled to receive dividends on such shares as of the
date of the award.
The Compensation Committee, in recommending to the Board
the 1994 restricted
stock awards for executive officers, recommended that each
of the executive
officers participating in the restricted stock program be
awarded a number of
shares of restricted stock equal in value, based on the
closing market price
of the Company's Common Stock on the date of grant, to 10
percent of such
executive's 1994 base salary, which is the percentage that
has been used for
all employees in this program since 1986.
Due to his significant stock ownership in the Company,
Mr. Ueltschi does
not participate in any of the Company's stock-based
employee benefit programs.
Severance Agreements. In 1994, the Company entered
into change in control
severance agreements with the named executive officers,
except Mr. Ueltschi.
The Compensation Committee believes that these agreements
are in the best
interest of the shareholders in order to insure that, in
case of a change in
control event, the Company will have continuity of
management and independent
judgement will be exercised by the named executive
officers to maximize
shareholder value. For additional information on the
severance agreements, see
the description on page 10 of this proxy statement.
Although new federal income tax laws limit the
deductibility of executive
officer compensation if the compensation is above certain
levels, the
Compensation Committee believes that these laws will not
impact the Company's
tax deduction in 1994.
Compensation
Committee
George B.
Beitzel, Chairman
Edward E. Hood,
Jr.
John A. Morgan
7
Summary Compensation Table
The following table sets forth the cash and non-cash
compensation for each
of the last three fiscal years awarded to or earned by the
chief executive
officer of the Company and the four other most highly
compensated executive
officers of the Company at the end of 1994.
SUMMARY COMPENSATION TABLE
Long-Term
------------------------
Annual
Compensation Compensation Awards
---------------------- ------------------------ All
Other
Base
Restricted Stock Compensation
Year Salary(1)
Bonus(2) Stock($)(3) Options(#) ($)(4)
--------- -----------
--------- ----------- ----------- -----------
Albert L. Ueltschi(5) ........ 1994 $ 250,000
$ 150,000 -- -- $ 1,584
President and Chairman of 1993 $ 220,000 $
118,800 -- -- $ 2,257
the Board 1992 $ 220,000 $
118,800 -- -- $ 2,769
Bruce N. Whitman ............. 1994 $ 210,000 $
126,000 $ 21,000 10,910 $ 9,277
Executive Vice President and 1993 $ 190,000 $
102,600 $ 19,000 11,240 $ 11,614
Director 1992 $ 190,000 $
102,600 $ 19,000 4,305 $ 8,960
Kenneth W. Motschwiller ...... 1994 $ 130,000 $
101,400 $ 13,000 6,750 $ 2,120
Vice President-Treasurer 1993 $ 103,000 $
68,000 $ 10,300 6,090 $ 2,507
1992 $ 103,000 $
68,000 $ 10,300 3,000 $ 2,020
James S. Waugh ............... 1994 $ 130,000 $
78,000 $ 13,000 6,750 $ 3,771
Vice President-Marketing 1993 $ 108,000 $
58,300 $ 10,800 6,390 $ 4,729
1992 $ 108,000 $
58,300 $ 10,800 2,447 $ 3,777
Dennis Gulasy ................ 1994 $ 135,000 $
48,600 $ 13,500 -- $ 2,925
Vice President-Simulation 1993 $ 110,000 $
72,600 $ 11,000 6,520 $ 3,493
Systems 1992 $ 107,500 $
72,600 $ 10,500 3,000 $ 2,486
---------
(1) The amounts shown in this column include amounts
deferred pursuant to the
Company's 401(k) plan. There are no Company funds contributed to this
plan.
(2) Annual bonus includes amounts awarded in March of the
following year. Such
bonuses are normally paid two-thirds upon award and,
subject to certain
conditions, one-third on the first business day of the
following year.
(3) The amounts shown in this column represent the market
value of the
restricted stock awarded and were calculated by
multiplying the closing
market price of the Company's Common Stock on the date
of award by the
number of shares awarded. Shares of restricted stock
generally vest upon
normal retirement, death or total disability.
Recipients of restricted
stock awards are entitled to receive dividends on such
shares as of the
date of the award. As of December 31, 1994, the number
and value of the
aggregate restricted stock holdings of each of the
named executive
officers was as follows: Mr. Ueltschi, 0 shares; Mr.
Whitman, 7,992 shares
($324,700); Mr. Motschwiller, 3,644 shares ($148,000);
Mr. Waugh, 4,765
shares ($193,600) and Mr. Gulasy, 3,987 shares
($162,000).
(4) The amounts shown in this column represent (i)
above-market interest in
excess of 120 percent of the applicable federal
long-term rate which was
credited to the executive officer's 1986 deferred
income account and the
amounts for 1994 were: Mr. Ueltschi, $1,365; Mr.
Whitman, $9,058; Mr.
Motschwiller, $1,901; Mr. Waugh, $3,552; and Mr.
Gulasy, $2,706; and (ii)
the dollar value of group term life insurance premiums
of $219 paid by the
Company for each of the named executive officers.
Subject to certain
eligibility requirements, the Company's group term
life insurance is
available to all employees of the Company.
(5) Mr. Ueltschi does not participate in the Company's
restricted stock or
stock option programs.
8
Stock Option Grants Table
The following tables summarize stock options granted
during 1994 to the
named executive officers of the Company.
STOCK OPTION GRANTS IN 1994
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation for
% of Total Options
Option
Stock Granted to All
Exercise Term Compounded Annually
Executive Options Employees
Price Expiration --------------------------------
Officer(1) Granted(2) in 1994(3) ($
Per Share) Date 5% 10%
------------------ ----------- -------------------
------------- ----------- ---------------
---------------
Bruce N. Whitman.. 10,910 9.9% $
38.50 12/02/04 $ 264,200 $ 669,400
Kenneth W.
Motschwiller.... 6,750 6.1% $
38.50 12/02/04 $ 163,400 $ 414,200
James S. Waugh.... 6,750 6.1% $
38.50 12/02/04 $ 163,400 $ 414,200
---------
(1) Mr. Ueltschi does not participate in the Company's
stock option programs.
(2) The options become exercisable to purchase shares of
the Company's Common
Stock at the fair market value of such stock on the
date of grant in 20
percent increments on the first five anniversaries of
the date of the
grant and expire ten years from date of grant.
(3) The Company granted stock options for an aggregate of
110,340 shares to
its employees in 1994.
Stock Option Exercises and Year-End Value Table
The following table summarizes the exercise of stock
options by the named
executive officers and the value of stock options held by
such executives as
of the end of 1994.
AGGREGATED STOCK OPTION EXERCISES IN 1994
AND
VALUE OF STOCK OPTIONS AT END OF 1994
Value of Unexercised
Number of Unexercised In-the-Money Options at
Options at End of 1994 End of Fiscal 1994(2)
Executive Shares Acquired Value
-------------------------- ------------------------
Officer(1) On Exercise Realized
Exercisable Unexercisable Exercisable Unexercisable
----------------------- --------------- ---------
----------- ------------- ----------- -----------
Bruce N. Whitman....... 1,786 $ 21,200
14,805 25,044 $ 15,300 $ 84,400
Kenneth W.
Motschwiller......... - 0 - $ - 0 -
16,516 14,694 $ 195,000 $ 47,500
James S. Waugh......... - 0 - $ - 0 -
17,050 14,771 $ 253,700 $ 49,200
Dennis Gulasy.......... - 0 - $ - 0 -
20,478 8,471 $ 294,900 $ 35,500
---------
(1) Mr. Ueltschi does not participate in the Company's
stock option programs.
(2) Value based on closing market price of the Company's
Common Stock at
December 31, 1994, minus the exercise price,
multiplied by the applicable
number of options.
Pension Plan
The Company maintains a defined benefit pension plan
(the 'Pension Plan')
which covers substantially all of its employees and those
of its North
American subsidiaries, excluding employees of the
Company's subsidiary,
FlightSafety Services Corporation (who participate in such
subsidiary's
defined contribution plan). Full-time employees are
eligible to participate in
the Pension Plan on the December 31st or June 30th
coincident with or next
following such employee's 21st birthday and the completion
of one year of
service. The normal retirement benefit provided by the
Pension Plan is (i) the
benefit accrued by the participant to December 30, 1989,
plus .75% of average
monthly compensation, excluding overtime, multiplied by
the participant's
total number of credited years of service up to 35 less
credited service prior
to December 31, 1989, plus (ii) .75% of such average
monthly compensation in
excess of a specified level of compensation tied to social
security benefits
multiplied by the participant's total number of years of
credited service up
to 35 less credited service prior to December 31, 1989.
When an employee has
completed five years of service with the Company or has
attained age 55, the
9
employee becomes 100% vested under the Pension Plan.
Normal retirement age
under the Pension Plan is 65 and five years of
participation, although early
retirement benefits are available. For the named executive
officers, the
projected annual benefits under the Pension Plan, assuming
(i) retirement at
normal retirement age or deferred retirement and (ii)
current salary levels,
are as follows: Mr. Ueltschi, $59,900; Mr. Whitman,
$44,000; Mr. Motschwiller,
$57,000; Mr. Waugh, $54,500 and Mr. Gulasy, $40,000.
Severance Agreements. On December 2, 1994, the
Compensation Committee of
the Board of Directors authorized the entering into
severance agreements with
each individual named in the Summary Compensation Table
(each such person
being an executive officer) except for Mr. Ueltschi. The
Company believes that
these severance agreements are in the best interest of the
shareholders in
order to insure that, in case of a change in control
event, the Company will
have continuity of management and independent judgement
will be exercised by
the executives to maximize shareholder value. The
severance agreements
continue through December 31, 1995 and are automatically
extended in one-year
increments unless the Company has given prior notice of
termination to the
executive.
In the event, that following a 'Change in Control',
employment is
terminated by the executive officer for 'Good Reason' or
the employee is
involuntarily terminated by the Company other than for
'Cause' (as those terms
are defined in the severance agreements), the severance
agreements generally
provide for: (a) a lump sum cash payment equal to the sum
of three times (i)
the annual base salary and (ii) the amount of bonus
compensation for the year
preceding the year in which the date of termination
occurs; (b) a cash payment
for each outstanding option equal to the amount of the
higher of the closing
price for shares of the Company's Common Stock or the
price actually paid in
connection with any Change in Control over the per share
exercise price of
each such option held by the executive officer (whether or
not then fully
exercisable) times the number of shares covered by each
such option; (c) a
lapse of restrictions on all shares of restricted stock;
and (d) life,
disability, and health insurance benefits for a period of
36 months. Benefits
under the severance agreements are limited to the extent
they would result in
the disallowance of a deduction to the Company under the
Parachute payment
provisions of Section 280G of the Internal Revenue Code.
Five-Year Stock Performance Graph
The annual changes for the five-year period shown in
the following graph
are based on the assumption that $100 had been invested in
the Company's
Common Stock and each index on December 31, 1989, and that
all dividends were
reinvested. The total cumulative dollar return shown on
the graph represents
the value (to the nearest dollar) that such investments
would have had on
December 31, 1994.
10
The stock performance graph in the proxy statement
uses the following
indexes, return values and coordinates:
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company, on the
recommendation of the Audit
Committee, has appointed Price Waterhouse LLP ('Price
Waterhouse') as
independent accountants for the Company for the year
ending December 31, 1995,
subject to ratification by the shareholders of the
Company. Price Waterhouse
has served as independent accountants for the Company
since 1955. The Board of
Directors believes that the retention of the services of
Price Waterhouse is
in the best interests of the Company's shareholders and
recommends that
shareholders approve their appointment. Representatives of
Price Waterhouse
are expected to attend the Meeting and will have an
opportunity to make a
statement, if they desire to do so, and to respond to
questions from the
Company's shareholders.
A majority of the votes cast at the Meeting is
required to ratify the
appointment of Price Waterhouse as independent accountants
for the Company for
the year ending December 31, 1995. Under applicable New
York law, in
determining whether this proposal has received the
requisite number of
affirmative votes, abstentions and broker non-votes will
be disregarded and
will have no effect on the outcome of the vote. Unless a
contrary instruction
is indicated, a properly executed and returned proxy will
be voted FOR the
ratification and approval of Price Waterhouse as
independent accountants for
the Company for the year ending December 31, 1995.
COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT
Section 16(a) of the Exchange Act requires that the
Company's officers and
directors, and persons who own more than 10 percent of the
Company's Common
Stock, file reports of ownership and changes in ownership
on Forms 3, 4 and 5
with the SEC and The New York Stock Exchange, Inc.
Officers, directors and
greater than 10 percent shareholders are also required by
rules of the SEC to
furnish the Company with copies of all Forms 3, 4 and 5
which they file.
11
Based solely on the Company's review of the copies of
such reports it has
received, and written representations from certain
reporting persons that they
were not required to file a Form 5 for 1994, the Company
believes that all
officers, directors and greater than 10 percent
shareholders complied with all
filing requirements applicable to them with respect to
transactions in the
Company's Common Stock during 1994.
SHAREHOLDER PROPOSALS
Under the rules of the SEC, proposals which
shareholders of the Company
intend to present at next year's annual meeting of
shareholders must be
received, in order to be considered at such meeting, by
the Secretary of the
Company, at the Company's executive offices located at
Marine Air Terminal, La
Guardia Airport, Flushing, New York 11371, no later than
the close of business
on November 30, 1995. Shareholder proposals received after
that date will not
be included in the Company's proxy statement or form of
proxy prepared in
connection with such meeting.
ADDITIONAL INFORMATION
The Company's 1994 Annual Report to Shareholders,
which contains financial
statements for the year ended December 31, 1994 and other
information
concerning the operations of the Company, is enclosed with
this proxy
statement, but is not to be regarded as proxy soliciting
materials.
Upon written request, the Company will provide without
charge to each
shareholder of the Company a copy of the Company's Annual
Report on Form 10-K
for its prior fiscal year, as filed with the SEC. Address
all such requests
to: Treasurer, FlightSafety International, Inc., Marine
Air Terminal, La
Guardia Airport, Flushing, New York 11371.
By Order of the
Board of Directors,
PETER P. MULLEN
Secretary
Flushing, New York
March 24, 1995
12
Exhibit (23)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Reg. No.
2-67335, Reg. No. 2-79846, Reg. No. 2-92050 and Reg. No. 33-52998) of
FlightSafety International, Inc. of our report dated January 31, 1995,
appearing on page 25 of the 1994 Annual Report to Shareholders which is
incorporated by reference in this Annual Report on Form 10-K.
We also consent to the incorporation by reference of our report on the
Financial Statement Schedules, which appears on page __27__ of this Form 10-K.
PRICE WATERHOUSE LLP
New York, New York
March 27, 1995
<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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,062,000
<SECURITIES> 194,930,000
<RECEIVABLES> 61,151,000
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0
0
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</TABLE>
