UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the nine months ended
September 30, 1995
Commission File Number: 1-6222
FLIGHTSAFETY INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)
New York 11-1671001
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
Marine Air Terminal, LaGuardia Airport
Flushing, New York
11371
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: 718-565-4100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock (par value $.10 per share) New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
As of November 1, 1995, the Company had 30,855,101
shares of its common stock outstanding.
FLIGHTSAFETY INTERNATIONAL, INC.
INDEX
PART I - FINANCIAL INFORMATION
Page
Item 1 - Financial Statements
Consolidated Balance Sheets at September 30, 1995
and December 31, 1994 3 - 4
Consolidated Statements of Income,
Nine months Ended September 30, 1995 and 1994 5
Consolidated Statements of Income,
Three Months Ended September 30, 1995 and 1994 6
Consolidated Statements of Cash Flows,
Nine months Ended September 30, 1995 and 1994 7
Notes to Consolidated Financial Statements
as of September 30, 1995 8 - 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 11
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURES 13
Page 2 of 13
<TABLE>
<CAPTION>
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
September 30, December 31,
1995 1994
Current assets: <C> <C>
Cash $ 4,121,000 $ 2,062,000
Short-term investments stated at
cost which approximates market value 216,529,000 194,930,000
Accounts receivable, less allowance
for doubtful accounts of $1,535,000
($1,433,000 in 1994) 59,919,000 59,718,000
Inventory 6,554,000 14,330,000
Prepaid expenses and
other current assets 7,729,000 10,336,000
Total Current Assets 294,852,000 281,376,000
Equipment and facilities, at cost 864,425,000 806,651,000
Less - accumulated depreciation
and amortization (371,642,000) (336,590,000)
492,783,000 470,061,000
Intangible and other assets 40,745,000 41,492,000
Total assets $828,380,000 $792,929,000
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 13
<TABLE>
<CAPTION>
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES and SHAREHOLDERS' EQUITY
(UNAUDITED)
September 30, December 31,
1995 1994
Current liabilities: <C> <C>
Current portion of long-term debt $ 1,759,000 $ 1,759,000
Accounts payable and accrued expenses 42,957,000 36,648,000
Income taxes payable 4,580,000 8,230,000
Unearned income for contract training 37,066,000 32,566,000
Total current liabilities 86,362,000 79,203,000
Long-term debt 38,404,000 39,813,000
Deferred income taxes 109,650,000 108,308,000
Other liabilities 6,043,000 5,201,000
Total liabilities 240,459,000 232,525,000
Shareholders' equity:
Common stock - par value $.10
Authorized - 100,000,000 shares
Issued and outstanding -
30,884,301 shares
(31,315,429 in 1994) 3,088,000 3,132,000
Capital in excess of par value 36,065,000 33,217,000
Retained earnings 550,570,000 525,661,000
589,723,000 562,010,000
Less - restricted stock compensation (1,802,000) (1,606,000)
Total shareholders' equity 587,921,000 560,404,000
Total liabilities and
shareholders' equity $828,380,000 $792,929,000
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 13
<TABLE>
<CAPTION>
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Nine Months Ended September 30,
1995 1994*
Revenues:
<C> <C>
Training revenues $219,361,000 $196,073,000
Product sales 15,327,000 21,668,000
234,688,000 217,741,000
Costs and expenses:
Salaries and wages 57,368,000 54,079,000
Depreciation and amortization 37,037,000 34,821,000
General and administrative 23,065,000 18,536,000
Operating expenses 22,113,000 18,657,000
Cost of product sales 11,444,000 18,673,000
151,027,000 144,766,000
Income from operations 83,661,000 72,975,000
Other income (expense):
Interest and other income 9,485,000 8,278,000
Interest expense (2,210,000) (1,626,000)
Income before income taxes 90,936,000 79,627,000
Income taxes 30,504,000 28,653,000
Net income for the period $ 60,432,000 $ 50,974,000
Net income per share $ 1.93 $ 1.60
Average shares outstanding 31,290,479 31,796,596
</TABLE>
See accompanying notes to consolidated financial statements.
*Reclassified to conform with 1995 presentation.
Page 5 of 13
<TABLE>
<CAPTION>
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended September 30,
1995 1994*
Revenues:
<C> <C>
Training revenues $73,212,000 $63,997,000
Product sales 4,251,000 6,489,000
77,463,000 70,486,000
Costs and expenses:
Salaries and wages 19,984,000 17,503,000
Depreciation and amortization 12,607,000 11,847,000
General and administrative 7,857,000 6,071,000
Operating expenses 7,490,000 6,877,000
Cost of product sales 2,450,000 5,481,000
50,388,000 47,779,000
Income from operations 27,075,000 22,707,000
Other income (expense):
Interest and other income 3,269,000 3,044,000
Interest expense (731,000) (425,000)
Income before income taxes 29,613,000 25,326,000
Income taxes 10,258,000 9,090,000
Net income for the period $19,355,000 $16,236,000
Net income per share $ .62 $ .51
Average shares outstanding 31,218,890 31,594,709
</TABLE>
See accompanying notes to consolidated financial statements.
*Reclassified to conform with 1995 presentation.
Page 6 of 13
<TABLE>
<CAPTION>
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
1995 1994*
Increase (decrease) in cash
<C> <C>
Cash flows from operating activities:
Net income $60,432,000 $50,974,000
Items in net income not using cash:
Depreciation and amortization 37,037,000 34,821,000
Provision for losses on
accounts receivable 326,000 225,000
Deferred income taxes 2,611,000 3,171,000
Increase in cash surrender
value of corporate-owned life
insurance (1,140,000) (1,237,000)
Other, net 423,000 479,000
Changes in working capital other than cash:
(Increase) in accounts receivable (527,000) (1,100,000)
Decrease in inventory 7,776,000 220,000
Decrease in prepaid expenses and
other current assets 2,607,000 3,097,000
Increase (decrease) in accounts
payable and accrued expenses 6,309,000 (235,000)
Decrease in income taxes payable (3,650,000) (441,000)
Increase in unearned income 4,500,000 5,269,000
Net cash provided by operating activities 116,704,000 95,243,000
Cash flows from investing activities:
Capital expenditures (60,091,000) (45,285,000)
(Increase) in short-term
investments (21,599,000) (15,260,000)
Corporate-owned life insurance
premiums (2,703,000) (832,000)
Other, net 2,878,000 2,470,000
Net cash used in investing activities (81,515,000) (58,907,000)
Cash flows from financing activities:
Repayment of long-term debt (1,409,000) (1,579,000)
Repurchase of common stock (23,728,000) (23,725,000)
Cash dividends (11,847,000) (10,122,000)
Increase in long-term borrowings
against cash surrender value
of corporate-owned life insurance 2,622,000
Exercise of stock options 2,501,000 2,152,000
Effect of tax leases (1,269,000) (1,051,000)
Net cash used in financing activities (33,130,000) (34,325,000)
Net increase in cash 2,059,000 2,011,000
Cash at beginning of period 2,062,000 2,100,000
Cash at end of period $ 4,121,000 $ 4,111,000
</TABLE>
*Reclassified to conform to 1995 presentation
Page 7 of 13
FLIGHTSAFETY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
1) These financial statements, which should be read in conjunction with the
financial statements included in FlightSafety International, Inc.'s Annual
Report to Shareholders for 1994, are unaudited but include all adjustments
of a normal recurring nature that the Company considers necessary for a
fair presentation of the results for such interim period. Results for
interim periods are not necessarily indicative of results for a full year.
<TABLE>
<CAPTION>
2) Debt consists of:
September 30, December 31,
1995 1994
<C> <C>
Industrial development obligations
and other debt due 1995-2012 $40,163,000 $41,572,000
Less - current portion (1,759,000) (1,759,000)
$38,404,000 $39,813,000
</TABLE>
The Company's industrial development obligations have variable rates
between 2.8 and 5.9 percent.
The interest capitalized on major equipment acquisitions for the nine
months ended September 30,1995 was $1,353,000 ($1,038,000 in 1994).
<TABLE>
<CAPTION>
3) The changes in the Company's shareholders' equity account balances in the
current period were as follows:
Capital in
Common Excess of Par Retained
Stock Value Earnings
<C> <C> <C>
Balance at December 31, 1994 $3,132,000 $33,217,000 $525,661,000
Net income for the period 60,432,000
Exercise of options pursuant
to employee stock option plans 8,000 2,848,000
Repurchase of common stock (52,000) (23,676,000)
Dividends declared ($.38 per
share) (11,847,000)
Balance at September 30, 1995 $3,088,000 $36,065,000 $550,570,000
</TABLE>
Page 8 of 13
On September 12, 1995 the Company's Board of Directors authorized the repurchase
of an additional 4,000,000 shares of the Company's outstanding common stock.
The Company is now authorized to repurchase 8,000,000 shares. As of September
30, 1995, 3,812,100 shares had been repurchased and subsequently retired. At
its September meeting, the Company's Board of Directors declared a regular
quarterly cash dividend of 14 cents per share on its common stock payable
November 7, 1995 to shareholders of record on October 16, 1995.
Page 9 of 13
FLIGHTSAFETY INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
During the first nine months of 1995, cash provided by operations was $116.7
million. Cash was principally used to purchase additional equipment and
facilities ($60.1 million), repurchase shares of the Company's common stock
($23.7 million), purchase of short-term investments ($21.6 million) and
payment of dividends ($11.8 million).
Capital expenditures, which are primarily revenue generating assets such as
simulators, are expected to exceed $80 million in 1995. The Board of
Directors continues to be optimistic about the Company's prospects and,
therefore, increased the shares authorized for the stock repurchase program to
8,000,000 shares from 4,000,000 shares on September 12, 1995. The Company has
repurchased and retired 3,812,100 shares as of September 30, 1995. The Company
expects to fund its capital expenditures and stock repurchase program from cash
provided by operations, existing cash and short-term investments.
Short-term investments increased by $21.6 million at September 30, 1995
primarily from cash provided by operating activities. Accounts receivable
remained relatively unchanged since December 31, 1994. Inventory decreased by
$7.8 million, or 54 percent, due to reductions in commercial orders for new
training equipment.
Results of Operations
Training revenues for the nine months ended September 30, 1995 increased by
$23.3 million, or 12 percent, while 1995 third quarter training revenues
increased by $9.2 million, or 14 percent, compared to the same periods in
1994. Increases in training revenues for the 1995 periods were experienced
in all areas of the Company's training operations. Training revenues for
the nine months ended September 30, 1994 included approximately $1.9 million
related to an equivalent amount of retroactive salary and benefit expenses
from October 1, 1992 paid to employees in accordance with the United States
Government Services Contract Act on one of the Company's contracts.
Excluding this non-recurring item, revenues increased by $25.2 million, or
13 percent, for the nine months ended September 30, 1995 versus 1994.
Product sales, which consist primarily of simulators and visual systems,
decreased $6.3 million, or 29 percent, and $2.2 million, or 34 percent,
respectively, for the nine and three month periods ended September 30, 1995
compared to the same periods in 1994 due to decreases in customer orders for
equipment being produced by the Company's Simulation Systems Division. Gross
margins for both the nine month and three month periods ended September 30,
1995 increased primarily because of the completion of some contracts and the
recognition of all revenue and costs related to these contracts.
Total expenses for the nine months ended September 30, 1995 increased by
$6.3 million, or four percent. Salary and wages actually increased by $5.0
million, or 10 percent, due to personnel additions and annual salary
increases, but appears to have only increased by $3.3 million because of the
additional $1.7 million in salary expenses incurred in 1994 related to
retroactive salary increases from October 1, 1992 paid in accordance with the
United States Services Contract Act. Depreciation and amortization increased
by $2.2 million due to the addition of new simulators since the first nine
months of 1995. Operating expenses increased by $3.5 million primarily due
to increases in simulator and aircraft maintenance costs, training
supplies and subcontractor fees.
Page 10 of 13
General and administrative expenses increased by $4.5 million primarily due to
increases in insurance costs, professional fees and overall increases in general
and administrative costs. These increases were offset by a decrease in cost of
product sales related to the decrease in product sales.
Income taxes for the nine and three months ended September 30, 1995 increased
slightly for both periods compared to the 1994 periods. Income taxes, as a
percentage of pre-tax income for the nine months ended September 30, 1995,
decreased to 33.5 percent in 1995 from 36.0 percent for the same period in 1994
and decreased to 34.6 percent from 35.9 percent for the three month periods
ended September 30, 1995 and 1994, respectively. The lower effective income
tax rates were due to income tax refunds related to prior years and an increase
in tax advantaged income as a percentage of pre-tax income.
Page 11 of 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 6. Exhibits and Reports on Form 8-K.
None.
Page 12 of 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLIGHTSAFETY INTERNATIONAL, INC.
Date: November 7, 1995 s/A.L. UELTSCHI
President
Date: November 7, 1995 s/K. W. MOTSCHWILLER
Vice President/Treasurer
Page 13 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Filing of the Article 5 EX-27 Financial Data Schedule is only a
summarization of some of the informaion proviced 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,121,000
<SECURITIES> 216,529,000
<RECEIVABLES> 61,454,000
<ALLOWANCES> 1,535,000
<INVENTORY> 6,554,000
<CURRENT-ASSETS> 294,852,000
<PP&E> 864,425,000
<DEPRECIATION> (371,642,000)
<TOTAL-ASSETS> 828,380,000
<CURRENT-LIABILITIES> 86,362,000
<BONDS> 0
<COMMON> 3,088,000
0
0
<OTHER-SE> 586,635,000
<TOTAL-LIABILITY-AND-EQUITY> 589,723,000
<SALES> 219,361,000
<TOTAL-REVENUES> 234,688,000
<CGS> 11,444,000
<TOTAL-COSTS> 141,542,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,210,000
<INCOME-PRETAX> 90,936,000
<INCOME-TAX> 30,504,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,432,000
<EPS-PRIMARY> 1.93
<EPS-DILUTED> 1.93
</TABLE>
