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, 1995
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 1 OF 90
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 11, 1996, was $1,122,655,855.
As of March 11, 1996, the Company had 30,662,772 shares of its Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Certain information contained in the Company's Annual Report to Share-
holders for the Fiscal Year Ended December 31, 1995 is incorporated by
reference in Part II of this Form 10-K.
(2) Certain information contained in the Company's Proxy Statement dated March
22, 1996 relating to its Annual Meeting of Shareholders scheduled to be held on
April 24, 1996 is incorporated by reference in Part III of this Form 10-K.
PAGE 2 OF 90
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 170 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 94% of operating revenues in 1995, 90% in 1994
and 82% in 1993, while product sales by the Simulation Division and Visual
Division to unaffiliated customers were six percent of operating revenues in
1995, 10% in 1994 and 18% in 1993. 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 government personnel, (c) aircraft maintenance technician
training, (d) ab-initio (primary) pilot training to qualify individuals for
private and 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
PAGE 3 OF 90
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 equipment, including flight simulators, which
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 67% of the Company's operating revenues
in 1995, 65% in 1994 and 61% in 1993; government crew training accounted for
20% of the Company's operating revenues in 1995, 18% in 1994 and 16% in 1993.
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 visual systems, were three percent of operating revenues in 1995, four
percent in 1994 and 12% in 1993. 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
PAGE 4 OF 90
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, 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.
PAGE 5 OF 90
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 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 continues to expand its training of pilots
employed by 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 commuter 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
PAGE 6 OF 90
and MD-88/87 and Boeing 727, 737, 747, 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 29 major and 30
regional airline flight simulators for these purposes.
In 1995, the Company began construction on a large airline training complex in
Kunming, China, for training of pilot and flight attendant crews of Boeing
737, 757 and 767 aircraft which will also include a twelve story hotel;
acquired four Boeing Aircraft simulators located at Dallas-Ft. Worth, Texas
and Louisville, Kentucky, including its first Boeing 747 simulator and signed
an agreement with Embry-Riddle Aeronautical College for a training, educational
and research facility on its campus to house a Boeing 737 simulator and a
Beech 1900D simulator. In addition, the Company was designated the official
training company for the new EMB-145 regional jet developed by Embraer of
Brazil.
In 1996, the Company purchased Embraer's Ft. Lauderdale, Florida training
facility and its EMB-120 simulator.
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, Alabama 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
PAGE 7 OF 90
fixed-wing aircraft which are used to train Army helicopter pilots to become
fixed-wing pilots. In 1995, the U. S. Army. The related training contract
provides for annual renewals at the U.S. Army's option through 2000. The
contract is valued at $31 million over that period.
In 1995, FlightSafety Services Corporation, a subsidiary of the Company
("Services Corporation"), was awarded a contract modification valued at $54
million over three years for the upgrade of seven C-5 Galaxy simulators owned
by the U.S. Air Force which includes approximately $12 million of product
sales related to visual display systems being produced by the Visual Division.
Services Corporation provides instructors and technicians at four U.S. Air
Force bases where it operates the simulators for training of U.S. Air Force
C-5 A/B transport crews under a contract renewable annually at the
government's option through 1999. Service Corporation's other contracts
include a U.S. Air Force contract for training Air Force KC-135 aerial
refueling aircraft flight crews and C-135 cargo aircraft pilots and flight
engineers. The contract is renewable annually at the government's option
through 2007. The Company operates 19 KC-135 simulators and training devices
used for training at 11 U.S. Air Force bases for aerial refueling and low-level
flight training that permit many flight training maneuvers currently performed
in the aircraft to be more economically accomplished in the simulator. In
addition, Services Corporation has a five year contract that began in 1994 in
support of the U.S. Joint Surveillance Target Attack Radar System (JSTARS)
which involves highly sophisticated aerial surveillance and communications
systems intended to provide real-time information about ground personnel
movements within hostile territories.
Contracts were also awarded to the Company in 1995 by the Military and the FAA
for fixed and rotary wing training.
As noted earlier, 20% of the Company's 1995 operating revenues (18% in 1994 and
16% in 1993) 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.
PAGE 8 OF 90
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, respectively; 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 an aircraft
type-specific curriculum, supplemented by additional courses, such as trouble-
shooting 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 provides
training programs for several international and domestic airlines, including
Olympic Airways, Swissair, Asiana Airlines, Air China, Royal Air Maroc,
Tyrolean Airlines 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 housing facilities 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
PAGE 9 OF 90
preparing them for a career in flying. In 1995,
the United Kingdom's Civil Aviation Authority (CAA) authorized the
FlightSafety Academy to provide Commercial Pilot License and Instrument
Rating courses which will enable the Academy to conduct ab-initio programs
for those airlines and individuals who operate under British aviation
regulations. In conjunction with this authorization, the Company has
established a facility in Coventry, England, where pilots can complete their
training for CAA licenses.
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 flight training for rotary and fixed-
wing student pilots. The helicopter training is complemented by training
services provided at the Company's nearby simulator-equipped Bell Helicopter
Learning Center in Fort Worth, Texas.
5. Maritime Training and Research Through
MarineSafety, the Company provides training to crews from large ocean-going
vessels to inland barge operators owned by business concerns, as well as to the
U.S. 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 1995, MarineSafety designed and installed maritime simulators at the
California Maritime Academy in Valejo, California. MarineSafety has an
agreement which permits use of these simulators by 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 the handling of combat
or support ships under various operating and environmental conditions.
The San Diego facility provides training to U.S. Navy deck officers for
approximately 50 surface ships operated and based in San Diego by the U.S.
Navy under a contract which is renewable annually at the U.S. Navy's option
through 1998. The facility 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.
PAGE 10 OF 90
MarineSafety International Rotterdam, B.V. in Rotterdam, the Netherlands, 51
percent of which is owned by MarineSafety, operates a 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 for ports worldwide.
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 four
simulators in 1995. Two simulators were installed at the Company's learning
centers, one simulator was shipped to the U.S. Government and one simulator
was shipped to an overseas customer. The Simulation Division also provides
maintenance support for the Company's simulators and other training equipment.
In 1996, the Simulation Division plans to deliver 13 flight simulators, all of
which are for Company use. For sales to certain unaffiliated customers 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 help ensure that it receives timely collection of the related account
receivable. The Simulation Division also received an order from Brit air of
France to build a Canadair RJ regional jet simulator.
The Company's Visual Division designs, develops and manufactures, under the
trade name VITAL, computer-generated visual systems and display equipment
that are installed on flight simulators. Approximately 370 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. One ChromaView visual system was shipped in
1995 to an overseas customer. In 1996, the Visual Division expects to
deliver six systems to unaffiliated customers.
PAGE 11 OF 90
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
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
1995, two 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
PAGE 12 OF 90
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. In
addition, 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 or other customers will continue to use training programs
offered by independent contractors such as the Company.
The sale of products, including simulators, training equipment and visual
systems, is a competitive industry both domestically and internationally.
There are several manufacturing companies worldwide that 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 it believes are reasonably priced, easily
maintained and delivered on a timely basis.
9. Number of Persons Employed
As of December 31, 1995, the Company and its subsidiaries had 2,484 full-time
employees. Of these, 978 were instructors in ground school, simulator or
in-flight training, 945 were administrative, clerical and maintenance
personnel, 396 were employees of the Simulation Division, 90 were employees of
the Visual Division and 75 were employees of the Instructional Division.
PAGE 13 OF 90
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 78 President and Chairman of
the Board 45 years
Bruce N. Whitman 62 Executive Vice President and
Director 34 years
Elmer G. Gleske 65 Vice President -
Government Affairs 19 years
Dennis Gulasy(1) 53 Vice President -
Simulation Systems 4 years
Kenneth W.
Motschwiller(2) 39 Vice President - Treasurer 5 years
James S. Waugh 48 Vice President - Marketing 16 years
Mario D'Angelo(3) 43 Controller 5 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 14 OF 90
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 33
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. 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 1,260,000 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 87% 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 15 OF 90
The following table sets forth more detailed information related to the
facilities of the Company:
Approximate Lease
Location Square Feet Expiration Principal Activities
Date
La Guardia Airport 36,000 2000 Corporate offices and
Flushing, New York advanced 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
2201 West Airfield Drive 14,800 1999(5) Advanced learning center
DFW Airport, Texas
Dothan/Houston
County Airport 30,300 2001(6) Advanced learning center
600 FlightSafety Drive
Dothan, Alabama
1600 Dolwick Drive 7,700 1997(7) Advanced learning center
Erlanger, Kentucky
2250 Alliance Blvd. 10,700 1996(8) Primary learning center
Fort Worth, Texas
9601 Trinity Boulevard 16,500 2004(9) Advanced learning center
Fort Worth, Texas
8900 Trinity Boulevard 31,000 (10) Offices of the
Hurst, Texas Instructional Division
Lakeland Airport 17,700 2009(11) Advanced and primary
2949 Medulla Road learning center
Lakeland, Florida
4528 Bishop Lane 28,500 1997(12) Advanced learning center
Louisville, Kentucky
Lambert-St. Louis 12,100 1996(13) Advanced learning center
International Airport
6185 Aviation Drive
St. Louis, Missouri
PAGE 16 OF 90
Le Bourget Airport 36,900 2001(14) Advanced learning center
BP25 Zone d'Aviation
d'Affaires
Building 404
Aeroport Le Bourget, France
Adams Field 725 1996(15) Maintenance learning
Little Rock, Arkansas center
Long Beach Municipal
Airport 27,100 1997(16) Advanced learning center
4330 Donald Douglas Drive
Long Beach, California
4800 NW 36th Street 62,000 1998(17) Advanced learning center
Miami, Florida
Dorval International
Airport 19,100 1999(18) Advanced learning center
9555 Ryan Avenue
Dorval, Montreal
Quebec, Canada
Salt Lake City 23,600 2016(19) Advanced learning center
International Airport
201 N. 2200 W.
Salt Lake City, Utah
San Antonio
International Airport 18,000 2000(20) Advanced learning center
9027 Airport Boulevard
San Antonio, Texas
1505 South 192nd Street 68,600 (21) Advanced learning center
Seattle, Washington
Teterboro Airport 25,400 (22) Advanced learning center
100 Moonachie Avenue
Moonachie, New Jersey
Toledo Express Airport 16,500 2000(23) Advanced learning center
11600 West Airport Road
Swanton, Ohio
95 Garratt Boulevard 18,000 2005(24) Advanced learning center
Downsview, Toronto
Ontario, Canada
Travis Field 43,900 2004(25) Advanced and maintenance
Savannah, Georgia learning centers
Tucson International
Airport 45,000 2006(26) Advanced learning center
1071 E. Aero Park Blvd.
Tucson, Arizona
Vero Beach Municipal
Airport 50,900 2006(27) Primary learning center
PAGE 17 OF 90
2805 Airport Drive
Vero Beach, Florida
Palm Beach
International Airport 38,000 2004(28) Advanced learning center
3887 Southern Boulevard
West Palm Beach, Florida
Wichita
Mid-Continent Airport 18,000 2006(29) Advanced learning center
2 Learjet Way
Wichita, Kansas
Wichita
Mid-Continent Airport 25,700 2006(30) Advanced learning center
1951 Airport Road
Wichita, Kansas
Wichita
Mid-Continent Airport 30,300 2006(31) Advanced learning center
1851 Airport Road
Wichita, Kansas
9720 East Central Avenue 63,000 2015(32) Advanced learning center
Wichita, Kansas
9525 East Central Avenue 17,900 (33) Maintenance learning
Wichita, Kansas center
1962 Midfield Road 17,000 2020(34) Maintenance learning
Wichita, Kansas center
William B. Hobby Airport 36,600 (35) Advanced learning center
7525 Fauna Street
Houston, Texas
New Castle County Airport39,500 2010(36) Advanced learning center
155 N. duPont Highway
New Castle, Delaware
2700 North
Hemlock Circle 110,000 (37) Offices and plant of the
Broken Arrow, Oklahoma Simulation Division,
manufacturing facility
for training equipment
5695 Campus Parkway 30,000 (38) Offices and plant of the
St. Louis, Missouri Visual Division,
manufacturing facility
for visual systems
7700 East 38th Street 25,000 (39) Former manufacturing
Tulsa, Oklahoma facilities now used
for Company storage
344 Aquidneck Avenue 17,400 (40) MarineSafety
Middletown, Rhode Island Marine learning center
32nd Street Naval Station 4,800 (41) MarineSafety
PAGE 18 OF 90
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 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, Embraer 120, DC-9
and MD-80 simulators.
(4) This building, constructed on land owned by the Company, houses C-12 and
U-21 simulators.
(5) The Company leases space at Dallas-Ft. Worth airport and houses Boeing 727
and 737 simulators.
(6) 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.
(7) The Company leases space to house its Boeing 727-200 and Embraer 120
simulators.
(8) The Company leases space to house fixed-wing and rotary-wing aircraft and
provides primary flight training.
(9) This facility was constructed by the Company on land leased from
Bell Helicopter Textron to house the Company's Bell Helicopter learning center.
(10) This building was purchased to house the offices of the Company's
Instructional Systems Division.
(11) 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.
(12) The Company leases space to house its Boeing 747 simulator.
(13) This facility is on land leased from the City of St. Louis and houses
the Company's Sabreliner learning center.
(14) 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, Fokker 100 and Dash-8 simulators.
(15) The Company leases space to house its Falcon Maintenance learning center.
(16) 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-80 and 88/87, Cessna 300/400 series, Citation, King Air, and
Gulfstream II simulators.
(17) 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.
(18) 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.
(19) This building was constructed by the Company on property leased from
Salt Lake City and houses a Boeing 737 simulator.
(20) This building was constructed on land leased from the San Antonio Airport
Authority and houses regional airline simulators.
(21) The Company purchased this land and building which houses eight major and
regional airline simulators.
PAGE 19 OF 90
(22) This building was constructed on land owned by the Company, is adjacent to
Teterboro Airport, and houses the Company's Falcon Jet learning center.
(23) This building, which houses Citation and King Air simulators, was
constructed by the Company on property leased from the Toledo Express
Airport Authority.
(24) The Company constructed a building on land leased from de Havilland, Inc.
and houses simulators for such manufacturer's aircraft.
(25) 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.
(26) 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.
(27) 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.
(28) This building was constructed by the Company on land leased from Palm
Beach County to house Sikorsky helicopter and Learjet simulators.
(29) This building was constructed by the Company on land leased from the
Wichita Airport Authority to house the Company's Wichita Learjet learning
center.
(30) This building, which houses the Company's Cessna learning center, is
located on approximately one acre of land leased from the Wichita Airport
Authority.
(31) This building was constructed by the Company on land leased from the
Wichita Airport Authority to house the Company's Cessna Citation learning
center.
(32) The Company leases space from the Beech Aircraft Corporation to house
its Beech learning center.
(33) This building was constructed by the Company on land owned by the Company
to house the Company's Beech Maintenance learning center.
(34) This building was constructed by the Company on land leased from the
Wichita Airport Authority to house the Company's Cessna Maintenance learning
center.
(35) 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.
(36) This building is located on land leased from the New Castle County Airport
and houses both business and regional aircraft simulators.
(37) 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.
(38) This building and land is owned by the Company and houses the Visual
Division which manufacturers visual systems.
(39) This building and land is owned by the Company and is used primarily
for storage.
(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 1995 was $1,849,000.
PAGE 20 OF 90
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
have generally been 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 21 OF 90
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, 1995 (the "1995 Annual Report") is
incorporated herein by reference. No other information contained in the
1995 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. On September 12, 1995, the Board
of Directors authorized an additional four million shares, increasing the total
number of shares which the Company is authorized to repurchase to eight million
shares. As of March 11, 1996, 4,075,800 shares of the Company's Common Stock
had been repurchased and retired 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 1995 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 pages 16 and 17
of the 1995 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
29, 1996, appearing on pages 18 to 28 of the 1995 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 1995 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 22 OF 90
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 22, 1996 relating to the Company's Annual
Meeting of Shareholders scheduled to be held on April 24, 1996 (the "1996
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 page 12 of the 1996 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 1996 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 1996 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 1996
Proxy Statement under the caption "Executive Compensation," other than the
information set forth on pages 5 through 7 and page 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 23 OF 90
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
ITEM 12 (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 11, 1996.
Percentage of
Name and Address of Amount and Nature of Outstanding
Beneficial Owner Beneficial Ownership Common Stock
Owned as of
March 11, 1996
- ------------------------ ------------------------- -----------------
Albert L. Ueltschi 9,612,483 (1) 31.3%
Marine Air Terminal
La Guardia Airport
Flushing, NY 11371
FMR Corp. 3,267,000 (2) 10.6%
82 Devonshire Street
Boston, MA 02109
Putnam Investment, Inc. 2,474,046 (3) 8.1%
One Post Office Square
Boston, MA 02109
(1)Includes 9,611,983 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 1,451,000 shares
beneficially owned by various members of Mr. Ueltschi's family, in respect
of which Mr. Ueltschi disclaims beneficial ownership.
(2) FMR Corp.'s address is: 82 Devonshire Street, Boston, MA 02109. FMR Corp.
is a holding company and its subsidiary, Fidelity Management & Research Company,
has certain investment managers who are considered beneficial owners of the
Company's common stock, which stock was acquired for investment purposes by
such investment managers for certain of their advisory clients. This
represents the number of shares owned as of December 31, 1995 as indicated in a
Schedule 13G filed by FMR with the SEC on January 10, 1996. FMR has sole
power to vote or to direct the vote for 211,200 shares and has sole power to
dispose or direct the disposition of all the shares.
(3) 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. have certain
investment managers who are considered beneficial owners of the Company's
common stock, which stock was acquired for investment purposes by such
investment managers for certain of their advisory clients. This represents
the number of shares owned as of December 31, 1995 as indicated in a
Schedule 13G filed by Putnam Investment, Inc. with the Securities and
Exchange Commission (SEC) on January 15, 1996. Putnam has shared power to
vote or to direct the vote for 30,753 shares and has shared power to dispose
or to direct the disposition of all the shares.
PAGE 24 OF 90
____________________
ITEM 12 (b). The information regarding beneficial ownership of shares of the
Company's Common Stock as of March 11, 1996 by the directors and
named executive officers of the Company (those named in the
Summary Compensation Table on page 8 of the 1996 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 1996 Proxy
Statement, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PAGE 25 OF 90
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 1995
Annual
Report to
1.Financial Statements Shareholders
Report of Independent Accountants 28
Consolidated Statements of Income
for each of the three years in the
period ending December 31, 1995 18
Consolidated Balance Sheets at
December 31, 1995 and 1994 19
Consolidated Statements of Cash Flows
for each of the three years in the period
ending December 31, 1995 20
Notes to Consolidated Financial Statements 21-28
Page In
This
2.Financial Statement Schedules - Form 10-K
1995, 1994 and 1993
Report of Independent Accountants on
Financial Statement Schedules 28
I. Marketable Securities 31-36
V. Property, Plant and Equipment 37
VI.Accumulated Depreciation, Depletion
and Amortization of Property,
Plant and Equipment 38
VIII.Valuation and Qualifying Accounts 39
X.Supplementary Income Statement Information 40
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.
PAGE 26 OF 90
ITEM 14(a)3. EXHIBITS
3) (a) Certificate of Incorporation of the Company, as amended, filed
as Exhibit 3(a) to the Company'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 fiscal 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, filed as Exhibit 10(b) to the Company's Annual report on
Form 10-K for the fiscal year ended December 31, 1994 (the
"1994 Form 10-K"), is incorporated herein by reference.
(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, filed as exhibit 10(e) to the 1994 Form 10-K
is incorporated herein by reference.
(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,
filed as Exhibit 10(g) to the 1994 Form 10-K, is incorporated
herein by reference.
13) Company's Annual Report to Shareholders for the Fiscal Year Ended
December 31, 1995.
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, 1995.
ITEM 14 (c). See Item 14 (a)(3) above.
ITEM 14 (d). See Item 14 (a)(2) above.
PAGE 27 OF 90
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 29, 1996 appearing on page 28 of the 1995 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 29, 1996
PAGE 28 OF 90
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 29, 1996 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 29, 1996 By: /s/ Albert L. Ueltschi
Albert L. Ueltschi
Chairman of the Board,
Director and President
(Principal Executive Officer)
Date: March 29, 1996 /s/ George B. Beitzel
George B. Beitzel
Director
Date: March 29, 1996 /s/ Charles R. Longsworth
Charles R. Longsworth
Director
Date: March 29, 1996 /s/ Edward E. Hood, Jr.
Edward E. Hood, Jr.
Director
Date: March 29, 1996 /s/ John A. Morgan
John A. Morgan
Director
Date: March 29, 1996 /s/ Bruce N. Whitman
Bruce N. Whitman
Director and
Executive Vice President
PAGE 29A OF 90
Date: March 29, 1996 /s/ Kenneth W. Motschwiller
Kenneth W. Motschwiller
Vice President - Treasurer
(Principal Financial Officer)
Date: March 29, 1996 /s/ Mario D'Angelo
Mario D'Angelo
Controller
(Principal Accounting Officer)
PAGE 29B OF 90
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%
FlightSafety South Africa Ltd. South Africa 100%
FlightSafety U.K. Ltd. United Kingdom 100%
PAGE 30 OF 90
<TABLE>
[MULTIPLIER]1,000
SCHEDULE I
FLIGHTSAFETY INTERNATIONAL, INC.
MARKETABLE SECURITIES
AS OF DECEMBER 31, 1995
{ALL FIGURES IN THOUSANDS}
# OF MARKET AMOUNT
SHRS VAL OF AT
OR COST EACH WHICH
CREDIT UNITS- OF ISSUE CARRIED
NAME OF ISSUER AND ENHANCE- PRINC- EACH @ BAL IN THE
TITLE OF EACH ISSUE MENT INSTITUTION PAL ISSUE SHEET BAL
AMOUNT DATE SHEET
(1) (4) (2) (2) (3) (3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
AL HEALTH & FIN 1,200 1,210 1,211 1,210
ALACHUA CNTY FL SD INSURED MBIA 675 579 579 579
ALASKA INDL DEV EXP 1,640 1,651 1,657 1,651
AK ST HSG FIN AUTH 500 501 505 501
AK STUDENT LOAN INSURED AMBAC 100 103 104 103
ALLEGHENY PA AIRPORT INSURED MBIA 950 977 981 977
ALLEGEHENY HOSPITAL 250 256 256 256
ALLEG CNTY PA I D A L.O.C. PNC BANK 1,825 1,825 1,825 1,825
ARIZONA ST UNIVERSITY PRE-REF FED GOV'T 500 518 519 518
AUSTTX WATER & SEWER PRE-REF FED GOV'T 375 409 410 409
AUSTTX WATER & SEWER 250 266 261 266
BELL CNTY TX HEALTH G.I.C. SUN LIFE CANADA 2,000 2,000 1,999 2,000
BRAZOS TX HIGHER ED OVER-COLL 400 2,654 2,662 2,654
BROWARD CNTY FL PRE-REF FED GOV'T 500 519 523 519
BROWARD CNTY FL COLLATERAL 1ST IND FED S&L 965 966 1,002 966
BROWARD CNTY FL COLLATERAL GNMA & FNMA 400 400 400 400
CAL POLLUTION CTL L.O.C. US NATL BANK 355 355 361 355
CHARLESTON S C INDL L.O.C. MORGAN G'TY 1,800 1,800 1,800 1,800
CIN OH SCH DIST 225 226 226 226
CLARK CNTY NV AIRPORT 210 218 215 218
CLARK CNTY NV SCH DIST 1,150 1,156 1,156 1,156
CONN ST HSG 100 101 102 101
CONN ST HSG L.O.C. NATIONAL AUSTLA 965 965 969 965
DADE CNTYFL HFA MF MTG L.O.C. SUMITOMO BNK LTD 1,000 1,000 1,003 1,000
DECATUR BAINBRIDGE L.O.C. LASALLE NATL BNK 250 250 255 250
DELAVAN DARIEN WISC 700 700 700 700
DELAWARE ST HEALTH INSURED MBIA 1,000 1,015 1,021 1,015
DELAWARE ST HSG INSURED AMBAC 155 155 155 155
DELAWARE ST HSG 170 170 171 170
DES MOINES IOWA JOBS 220 222 226 222
EL PASO TX JAIL INSURED FGIC 375 376 375 376
ELKHORN WISC SCH TX 700 700 700 700
ESSEX CNTY NY IDA 2,150 2,150 2,149 2,150
FARMERS BRANCH TX PRE-REF FED GOV'T 470 487 491 487
FARMINGTON NEW MEXICO PRE-REF FED GOV'T 1,115 1,162 1,169 1,162
FLORIDA HSG FIN AUTH COLLATERAL GNMA & FNMA 265 265 266 265
FULTON CNTY GA DEV L.O.C. WACHOVIA BANK 1,300 1,300 1,300 1,300
FULTON CNTY GA G/O 2,425 2,443 2,446 2,443
PAGE 31 OF 90
GALVESTON TX HSG INSURED FGIC 200 199 201 199
GEORGETOWN SC PCR 3,000 3,000 2,996 3,000
GEORGIA MUNI ELEC 1,740 1,789 1,800 1,789
GLENDALE ARIZ REV L.O.C. CHASE MANHATTAN 1,000 1,000 1,000 1,000
GOOSE CREEK TX INSURED MBIA 500 501 501 501
GREENE CNTY MO INDL L.O.C. UNION BANK SWIT 450 450 450 450
HARRIS CNTY TX HLTH 500 503 501 503
HAWAII ST RFDG U/T 300 304 305 304
HAWAII ST HBR CAP IMPR INSURED FGIC 715 719 724 719
HAWAII ST HSG FIN AUTH BANK OF AMERICA 1,000 1,000 1,000 1,000
HENRY CNTY GA HOS PRE-REF FED GOV'T 2,180 2,254 2,276 2,254
HONOLULU HAWAII G/O 200 199 200 199
ILLINOIS HSG DEV AUTH 2,650 2,649 2,660 2,649
ILLINOIS DEV FIN AUTH INSURED CONNIE LEE 1,750 1,748 1,751 1,748
ILLINOIS ST REG PRE-REF FED GOV'T 2,300 2,363 2,365 2,363
ILLINOIS ST DED TX 500 525 518 525
ILL ST STUD LOAN 2,000 2,010 2,006 2,010
INDIANA BOND BANK 30 30 30 30
INDIANA HEALTH FAC 735 735 737 735
INTERNAT'L FALLS PWR 155 155 154 155
IOWA STUDENT LOAN INSURED AMBAC 200 202 203 202
IOWA STUDENT LOAN 325 325 326 325
JASPER CNTY MO L.O.C. CHASE MAN BANK 2,100 2,100 2,100 2,100
JAY TOWN MAINE SLD WST 2,700 2,702 2,695 2,702
JOHNSON CNTY KS PRE-REF FED GOV'T 1,000 1,005 1,002 1,005
JOPLIN MO IND DEV AUTH L.O.C. UNION BANK SWIT 1,165 1,165 1,165 1,165
KENTUCKY DEV FIN AUTH 1,405 1,292 1,317 1,292
KENTUCKY HIGHER ED E.T.M. FED GOV'T 825 835 837 835
KENTUCKY HIGHER ED 1,880 1,895 1,893 1,895
KENTUCKY INT LOCAL 200 200 200 200
KING CNTY WASH RFDG 580 584 581 584
LANE CNTY OREGON G/O 500 500 500 500
LE SUEUR HENDERSN 550 550 550 550
LEE CNTY FL SEWER 200 209 212 209
LEE CNTY FL SLD WST INSURED MBIA 570 587 588 587
LOGANSPORT IN ELEC INSURED MBIA 1,000 1,000 1,000 1,000
LOUISIANA HSG FIN AUTH L.O.C. PRMR BANK OF LA 330 330 330 330
LOUISIANA STUDENT LOAN OVER-COLL 4,000 4,002 4,011 4,002
PAGE 32 OF 90
LOUISIANA ST G/O INSURED FGIC 1,240 1,245 1,247 1,245
LOUISIANA ST SALES TX INSURED AMBAC 1,000 1,010 1,019 1,010
LOUISIANA ST SALES TX 1,570 1,593 1,597 1,593
MAINE FIN AUTH ECO DEV L.O.C. NATIONAL WEST'R 1,660 1,660 1,660 1,660
MAINE HEALTH & ED L.O.C. SUMITOMO BNK LTD 215 215 214 215
MARICOPA CNTY ARIZONA 1,000 1,002 1,007 1,002
MARIETTA GA HSG COLL & LOC GNMA & G'N S/L 1,000 1,000 1,000 1,000
MARION CNTY IN HOSP 1,435 1,455 1,454 1,455
MARION CNTY S C HOSP INSURED CONNIE LEE 235 235 235 235
MARTIN CNTY FL IDA 450 452 452 452
MARYLAND ST C D A 2,045 2,045 2,045 2,045
MARYLAND HEALTH & ED LOC & INS'D MD NAT BK & CGIC 500 500 500 500
MASSA EDL FIN LN AUTH INSURED AMBAC 445 445 449 445
MASSA ST HEALTH & ED COLLATERAL GNMA & FNMA 490 490 493 490
CITY MIAMI HSG AUTH 355 355 357 355
MICHIGAN HIGHER ED INSURED AMBAC 365 365 366 365
MICHIGAN ST HSG COLLATERAL FNMA 1,785 1,777 1,777 1,777
MICHIGAN ST HSG INSURED MBIA 470 470 473 470
MIDWAY TX IND SCH DIST 445 423 432 423
MINNEAPOLIS MINN INSURED AMBAC 100 102 102 102
MINNEAPOLIS C D R L.O.C. NW BANK MINN 180 181 182 181
MINNESOTA ST HSG INSURED FGIC 1,000 1,000 1,001 1,000
MIS HIGHER ED 2,000 2,056 2,052 2,056
MIS ST G/O 100 100 100 100
MISSOURI HSG S/F 100 100 100 100
MISSOURI ECO DEV L.O.C. UNION BANK SWIT 1,090 1,090 1,090 1,090
MONTANA ST HIGHER ED 195 196 196 196
MONEY MARKET @ BROKRS 1,732 1,732 1,732 1,732
NEBRASKA HIGHER ED 990 990 1,006 990
NEENAH WISC JT SCH 3,800 3,809 3,807 3,809
NEW JERSEY ECO DEV L.O.C. NATIONAL WEST'R 1,000 1,000 1,004 1,000
NEW JERSEY WST WTR 285 286 285 286
NEW MEXICO EDL ASST OVER-COLL 600 602 602 602
NEW YORK CITY G/O L.O.C. MORGAN G'TY 500 500 500 500
N Y S MORTAGE AGENCY 820 820 826 820
N BROWARD FL HOSPITAL PRE-REF FED GOV'T 1,520 1,565 1,565 1,565
N C ELEC MUNI PWR 1,000 1,000 999 1,000
N C MEDICAL CARE 280 288 287 288
PAGE 33 OF 90
NORTH DAKOTA HFA 1,845 1,845 1,836 1,845
NORTH TEX HIGHER ED INSURED AMBAC 2,000 2,045 2,085 2,045
NOREASTERN PA H & E INSURED AMBAC 250 250 250 250
NUVEEN PERF AMP OVER-COLL 0 1,996 2,000 1,996
OHIO ST AIR QUALITY L.O.C. CADN IMP'L BANK 2,000 2,000 2,008 2,000
OHIO ST INDL DEV AUTH L.O.C. PNC BANK 360 360 360 360
OH STATE PUB FIN AUTH 700 724 725 724
OHIO ST WATER DEV PRE-REF FED GOV'T 425 433 432 433
OHIO ST WATER DEV L.O.C. UNION BANK SWIT 1,900 1,904 1,900 1,904
OREGON ST HSG 500 500 500 500
OWENSBORO KY ELEC INSURED AMBAC 500 500 499 500
OWENSBORO KY ELEC INSURED MBIA 430 414 403 414
PASADENA CAL M/F HSG INSURED FSA 4,135 4,165 4,175 4,165
PENINSULA PORTS VA L.O.C. NATIONS BANK 2,065 2,037 2,069 2,037
PENN ECO DEV FIN AUTH L.O.C. PNC BANK 3,250 3,250 3,250 3,250
PENNSYLVANIA PICA INSURED FGIC 350 350 352 350
PENNSYLVANIA ST COPS 1,000 1,001 1,005 1,001
PENNSYLVANIA CTFS INSURED AMBAC 6,550 6,550 6,550 6,550
PHIL PA WATER PRE-REF FED GOV'T 500 517 518 517
PHOENIX AZ ST&HWY E.T.M. FED GOV'T 685 706 712 706
PORT SEATTLE REV 350 335 349 335
PROVO UTAH ELEC REV E.T.M. 200 202 200 202
RHODE ISLAND HSG 975 975 986 975
ROCK ISLAND CNTY ILL INSURED MBIA 170 181 184 181
ROSEMONT ILLINOIS 225 225 225 225
RUTHERFORD CNTY TN L.O.C. CHASE MAN BANK 1,400 1,400 1,400 1,400
SAINT JOSEPH CNTY IND 500 490 498 490
ST LOUIS MO M F C L.O.C. SANWA BANK 950 948 951 948
SEATTLE MUNI MET 900 907 908 907
SHREVEPORT LA MTG E.T.M. FED GOV'T 305 309 306 309
S C EDUC 1,000 1,009 1,006 1,009
S C ELEC 1,760 1,787 1,792 1,787
S C PUB FIN INSURED AMBAC 2,560 2,560 2,595 2,560
S DAKOTA HSG 635 635 634 635
S D STUDENT LN 415 435 429 435
SOUTHERN MINN PWR PRE-REF FED GOV'T 50 51 51 51
SPARTANBURG CNTY S C 405 405 405 405
SULLIVAN TN HSG & HSP INSURED MBIA 200 200 200 200
PAGE 34 OF 90
TACOMA WA REFUSE 1,720 1,740 1,725 1,740
TEMPE ARIZONA PRE-REF FED GOV'T 500 518 518 518
TENNESSEE HSG DEV INSURED MBIA 335 336 335 336
TEX ST VETS HSG 895 900 908 900
TEX WATER RES FIN AUTH 1,590 1,604 1,605 1,604
UINTAH CNTY POLL CTRL PRE-REF FED GOV'T 1,275 1,331 1,338 1,331
U S TREASURY STRIP FED GOV'T 1,600 1,575 1,571 1,575
UPPER ALLEGHENY PA E.T.M. FED GOV'T 3,125 3,125 3,127 3,125
UTAH ST SCH DIST G.I.C. SWISS BANK CORP 1,465 1,472 1,477 1,472
UTAH ST HSG FIN AUTH 1,540 1,540 1,561 1,540
VA ED LN AUTH E.T.M. FED GOV'T 1,250 1,255 1,260 1,255
VA HSG DEV AUTH 8,030 8,025 8,104 8,025
WASH HEALTH L.O.C. MORGAN G'TY 1,500 1,500 1,500 1,500
WASH HEALTH INSURED AMBAC 1,000 1,013 1,016 1,013
WASH PUB PWR 900 897 901 897
WAYNE CHARTER A/P INSURED MBIA 1,350 1,350 1,352 1,350
WEST BABYLON UFSD 1,665 1,666 1,666 1,666
WESTERN MN PWR PRE-REF FED GOV'T 2,000 2,040 2,040 2,040
WINCHESTER VA I D A PRE-REF FED GOV'T 425 433 433 433
WISCONSIN HSG 4,815 4,815 4,823 4,815
WISCONSIN TRANS 555 561 560 561
WYOMING C D A 3,915 3,915 3,922 3,915
- --------------------------------------------------------------------------------
194032 194538 194032
=====================
PAGE 35 OF 90
(1) Most of these marketable securities have a "put" feature which allows
FlightSafety International, Inc. to sells to the issuer or its agent.
(2) These marketable securities have an additional credit enhancement in
addition to the issuers credit. The credi
"Collateral":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.
"G.I.C.": 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 these securities are guaranteed by a financial
institution, who have received the bond proceeds to
invest until the project is commenced.
"L.O.C.": 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.
"Over coll": these securities have an asset pledged in excess of
requirements.
"Pre-ref": 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>
PAGE 36 OF 90
<TABLE>
[MULTIPLIER]1,000
Schedule V
FLIGHTSAFETY INTERNATIONAL, INC.
Property, Plant, And Equipment
Transfers
Balance at of compl- Sales and Balance at
beginning Additions eted con- retire- end of
of period at cost struction ments Other period
--------- --------- --------- --------- ------- ----------
Year ended
December 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Land $ 2,645 $ 2,645
Buildings (1) 66,666 $ 1,016 $ 758 $ 68,440
Simulators
& Training
Equipment 636,009 14,070 14,811 (1,601) 663,289
Furniture,
Fixtures &
Equipment 32,296 3,865 5,922 (716) 41,367
Leasehold
Improvements 6,168 235 1,106 7,509
Contruction-
in-Progress 62,867 70,788 (22,597) 111,058
-------- -------- --------- --------- -------
$806,651 $ 89,974 $ 0 $ (2,317) $ 894,308
======== ======== ========= ========= =========
Year ended
December 31, 1994:
Land $ 2,498 $ 147 $ 2,645
Buildings (1) 61,239 1,687 $ 3,743 $ (3) 66,666
Simulators
& Training
Equipment 587,297 5,643 44,574 (1,505) 636,009
Furniture,
Fixtures &
Equipment 30,095 2,700 0 (499) 32,296
Leasehold
Improvements 5,253 0 1,082 (167) 6,168
Contruction-
In-Progress 58,026 54,240 (49,399) 0 62,867
-------- -------- --------- --------- ---------
$744,408 $ 64,417 $ 0 $ (2,174) $ 806,651
======== ======== ========= ========= =========
Year ended
December 31, 1993:
Land $ 2,498 $ 2,498
Buildings (1) 60,112 $ 563 $ 517 $ (1) $ 48(2) 61,239
Simulators
& Training
Equipment 535,029 4,362 50,294 (2,388) 587,297
Furniture,
Fixtures &
Equipment 20,689 7,513 51 (171) 2,013(2) 30,095
Leasehold
Improvements 4,708 219 326 5,253
Contruction-
In-Progress 57,867 51,347 (51,188) 58,026
-------- -------- --------- -------- ------ --------
$680,903 $ 64,004 $ 0 $ (2,560) $2,061 $744,408
======== ======== ========= ======== ====== ========
(1) Includes $41,932,000 at December 31, 1995 constructed on leased land
($41,107,000 at December 31, 1994 and $36,969,000 at December 31, 1993)
(2) Represents reclassification of assets previously included
in intangible assets
PAGE 37 OF 90
</TABLE>
<TABLE>
[MULTIPLIER]1,000
FLIGHTSAFETY INTERNATIONAL, INC.
Accumulated Depreciation, Depletion And Amortization Schedule IV
Of Property, Plant And Equipment
Additions
Balance at charged Balance at
beginning to cost and Sales and end of
of period & expenses retirements Other period
--------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C> <C>
Year ended
December 31, 1995:
Buildings $ 19,179 $ 2,800 $ $ 21,979
Simulators
& Training
Equipment 292,074 42,778 (1,600) 333,252
Furniture,
Fixtures &
Equipment 22,533 3,909 (716) 25,726
Leasehold
Improvements 2,804 730 3,534
--------- --------- ----------- ------- ----------
$ 336,590 $ 50,217 (1) $ (2,316) $ 0 $ 384,491
========= ========= =========== ======= ==========
Year ended
December 31, 1994:
Buildings $ 17,113 $ 2,069 $ (3) $ 19,179
Simulators
& Training
Equipment 254,469 38,649 (1,044) 292,074
Furniture,
Fixtures &
Equipment 17,197 5,808 (472) 22,533
Leasehold
Improvements 2,251 720 (167) 2,804
--------- --------- ----------- ------- -----------
$ 291,030 $ 47,246 (1) $ (1,686) $ 0 $ 336,590
========= ========= =========== ======= ===========
Year ended
December 31, 1993:
Buildings $ 14,825 $ 2,289 $ (1) $ 17,113
Simulators
& Training
Equipment 218,115 38,741 (2,387) 254,469
Furniture,
Fixtures &
Equipment 12,551 2,934 (159) $ 1,871 (2) 17,197
Leasehold
Improvements 1,728 523 2,251
--------- --------- ----------- ------- ----------
$ 247,219 $ 44,487 (1) $ (2,547) $ 1,871 $ 291,030
========= ========= =========== ======= ==========
1995 1994 1993
(1) Depreciation and amortization
of equipment and facilities:
Depreciation:
charged to expenses $ 47,874 $ 45,064 $ 42,711
capitalized or charged
to cost of product sales 2,343 2,182 1,776
--------- --------- ---------
Total depreciation 50,217 47,246 44,487
Amortization:
charged to expenses 1,630 1,647 1,626
capitalized or charged
to cost of product sales 1,019 1,002 674
--------- --------- ---------
Total amortization 2,649 2,649 2,300
--------- --------- ---------
Total depreciation and amortization $ 52,866 $ 49,895 $ 46,787
========= ========= =========
(2) Represents reclassification of amount previously included in accumulated
amortization of intangibles assets
</TABLE>
PAGE 38 OF 90
<TABLE>
[MULTIPLIER]1,000
Schedule VIII
FLIGHTSAFETY INTERNATIONAL, INC.
Valuation And Qualifying Accounts
Allowance For Doubtful Accounts
Balance at Write-offs Balance at
beginning Charged to and end of
of period expenses (collections) (1) period
<S> <C> <C> <C> <C>
Year ended
December 31, 1995: $ 1,433 $ 581 $ 532 $ 1,482
Year ended
December 31, 1994: $ 1,442 $ 352 $ 361 $ 1,433
Year ended
December 31, 1993: $ 1,146 $ 519 $ 223 $ 1,442
(1) Accounts written off as uncollectible, net of collections of previously
written off account receivables.
</TABLE>
PAGE 39 OF 90
<TABLE> Schedule X
[MULTIPLIER]1,000
FLIGHTSAFETY INTERNATIONAL, INC
Supplementary Income Statement Information
Year Ended December 31,
<S> <C> <C> <C> <C>
Charged to: 1995 1994 1993
Maintenance and repairs Expense $ 22,570 $ 18,744 $ 18,452
</TABLE>
PAGE 40 OF 90
FlightSafety International Annual Report
1995
PAGE 41 OF 90
FlightSafety International provides high-technology training to operators
of aircraft and ships. Total training systems are used which include
sophisticated simulators and training devices, computer-based training
and, most importantly, professional instructors. These total training
systems enable our customers to learn, practice and perfect normal and
emergency procedures
under controlled conditions. The Company's worldwide clients include
corporations, airlines, the military and government agencies.
PAGE 42 OF 90
<TABLE>
[MULTIPLIER]1,000
Five Year Financial Highlights
FlightSafety International, Inc.
(AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Training Revenues $307,051 $271,743 $244,784 $239,434 $229,777
Product Sales 18,742 29,556 52,312 39,001 37,864
Operating Revenues 325,793 301,299 297,096 278,435 267,641
Operating Costs
and Expenses 159,624 147,603 151,575 132,362 131,101
Depreciation
and Amortization 49,504 46,711 44,337 39,951 36,337
Income from Operations 116,665 106,985 101,184 106,122 100,203
Income Taxes 42,679 41,491 43,135(2) 45,706 38,152
Net Income 84,516 74,475 66,414(2) 82,309(3) 72,442
Net Income per Share $2.71 $2.35 $2.01(2) $2.39(3) $2.11
Cash Dividends Declared
per Share $.52 $.44 $.38 $.32 $.26
Total Assets 844,435 792,929 753,934 814,486 690,594
Long-term Debt 38,054 39,813 41,572 44,630 29,653
Shareholders' Equity 603,001(1) 560,404(1) 526,433(1) 564,409 490,433
Purchase of Equipment
and Facilities 89,974 64,417 64,004 68,290 49,458
Working Capital 202,329 202,173 178,125 231,503 184,458
(1) Shareholders' equity was reduced by $29.5 million in 1995 ($29.2
million in 1994 and $94.2 million in 1993) to reflect the repurchase of
approximately 0.6 million shares in 1995 (0.8 million and 2.5 million
shares in 1994 and 1993, 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.
</TABLE>
Common Stock Price Range
and Dividend Information
1995
Dividends
Quarter High Low Paid
First 46 3/4 37 1/2 $.12
Second 49 1/4 45 5/8 $.12
Third 49 1/8 44 $.12
Fourth 52 1/2 44 3/4 $.14
1994
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
FlightSafety International, Inc. common stock is listed on the New York
Stock Exchange and is traded under the symbol FSI. There were
approximately 10,300 shareholders on January 17, 1996, 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.
The best safety device in any aircraft
is a well-trained pilot.
page 1
PAGE 43 OF 90
Letter to
Our Shareholders
Dear Shareholder:
FlightSafety International achieved record operating
revenues and earnings for the year 1995. Revenues were $325.8 million,
compared with $301.3 million in 1994. Net income was $84.5 million;
1994 posted net income of $74.5 million. Net income per share increased
to $2.71
versus the $2.35 reported in 1994.
While the financial results from the past year were satisfying, 1995
was particularly noteworthy for the important agreements and
technological advances made, and programs begun by your Company
during the period. These will have a continuing, positive impact on
earnings for years to come.
You can read about your Company's many activities in the
following pages of this report, but I would like to note here several
particularly significant items.
Commercial aviation has begun to flourish in the Asia-Pacific
region, and your Company is deeply involved in that expansion. In 1995
we committed to develop a large airline training facility in Kunming,
China. Scheduled to open early next year, the center will comprise a
three-story pilot and flight attendant training center and a 12-story hotel
for flight crew lodging. The center will begin operating with advanced
FlightSafety simulators for the Boeing 737-300 and Boeing 757/767 and
with flight attendant training devices for cabin service and emergency
evacuation.
Additionally, during the past year China Eastern Airlines renewed
its contract for pilot training using our Airbus A300 and Fokker 100
simulators, and agreed to send its first class of cadets to the FlightSafety
Academy in Vero Beach, Florida. Cadet classes from Air China and
China's Civil Aviation Flying College trained at the Academy in 1995.
Last year we signed agreements with ValuJet, a new and
successful carrier based in Atlanta, creating an alliance of great
significance. The contracts call for FlightSafety to conduct all of the
carrier's pilot training, from recruitment evaluation, to crew resource
management, to line certification. In effect, we have become ValuJet's
training department and now instruct over 400 of the carrier's pilots
annually.
We prize ValuJet's trust and will make whatever adjustments in
equipment, programs and personnel necessary to meet the carrier's
expanding training requirements. For example, we recently relocated an
MD-80 simulator to Atlanta to accommodate the company's rapid
growth.
Our record of service to ValuJet will demonstrate FlightSafety's
eagerness and ability to satisfy the most rigorous airline training
demands, and to do so for less than the cost a carrier would incur
operating its own in-house training department. Once they analyze the
cost-effectiveness of our service, we anticipate more new and existing
carriers will invite us to handle their training as well. We believe the
outsourcing of crew training will become standard practice among
airlines in the future, and, in turn, a significant business development
for your company.
Overall airline activity within the United States is expanding.
Furthermore, the FAA has imposed high training standards on regional
carriers, which will result in even greater demand for simulators.
To keep pace we acquired training centers at Dallas-Fort Worth
International and in Louisville, Kentucky, adding four Boeing simulators,
including the first 747, to our inventory. We also assumed over 40
customer contracts in that transaction.
Our airliner simulator fleet continues to grow. This year's
simulator additions will include Boeing 777, Saab 2000, Beech 1900D,
and two de Havilland Dash-8s. In 1997 another ten airline simulators
will be delivered.
Late last year we were pleased to be designated as the official
training company for the new EMB-145 regional jet being developed by
Embraer of Brazil. As a part of our agreement with the manufacturer, we
will construct a new training center in Fort Lauderdale and equip it with
simulators for the EMB-145 and EMB-120.
The United Kingdom's Civil Aviation Authority (CAA) authorized the
FlightSafety Academy to provide Commercial Pilot License and
Instrument Rating courses. This hard-won sanction enables the Academy
to offer ab initio pilot programs to those airlines and individuals who
operate under rules based on British aviation regulations. We also
established a facility in Coventry, England, where pilots can complete
training for their CAA license. The new center will also be a base for
further service to the European community.
A significant development for business aviation in recent years has
been the growth of fractional ownership. Under this concept an aircraft is
owned in part by several companies and then operated within a fleet of
such aircraft by an aviation enterprise. Fractional ownership is proving
popular among companies new to business aviation and is expected to
grow further in importance.
Executive Jet Aviation, which launched fractional ownership with
its NetJets, is an industry leader and one of our valued, full-service
customers. Last year, in cooperation with EJA, we developed Service
Excellence Training to help pilots refine their skills in interacting with
passengers.
Additionally, we were selected by Business Jet Solutions, a new
fractional ownership company owned by AMR Combs and Bombardier, to
provide training for its pilots.
page 2
PAGE 44 OF 90
The company is expected to employ more than 200 pilots over the next few years.
More good news in large fleet training came early this year with the
signing of an agreement with Petroleum Helicopters Inc. The Louisiana-
based company's 250 aircraft constitute the world's largest commercial
helicopter fleet.
Business aviation has long been our core market,
and our service to corporate flight departments is ever-
increasing. Last year we added Level "D" simulators for the Learjet 60
and Citation V Ultra to our fleet. This year we will bring a Gulfstream III
and V, Falcon 2000 and Bell 430, and four other business aircraft
simulators on line. Four more will follow in 1997.
Our classrooms show clear evidence of our long-term commitment
to our customers as well. Last year we began introducing new animated
visuals and 3D-style graphics that increase learning comprehension by
making training more interactive and efficient.
The training of military and government flight crews is one of the
cornerstones of our business. Last year your Company won several
important contracts from the armed services and FAA for fixed and
rotary wing instruction.
One of the largest federal contracts was to upgrade
the seven C-5 Galaxy simulators owned by the U.S. Air Force and
operated by FlightSafety. The contract is valued at $54 million over a
three-year period.
Last year we installed our new-generation VITAL ChromaView
visual system on a Boeing 737 and two Boeing 777 simulators operated
by Japan's ANA-All Nippon Airways. The system, which provides
uninterrupted imagery of unprecedented fidelity, has also been selected
by Brit air for its new FlightSafety-built Canadair Regional Jet simulator,
and by two Chinese carriers as well.
MarineSafety installed an advanced, full-mission bridge simulator
at the California Maritime Academy. Also worth noting is the Bridge
Resources Management program conducted at MarineSafety's Rotterdam
facility. This innovative course parallels the disciplines instilled in
FlightSafety's well-received aviation Crew Resource Management
program.
We believe that this kind of cross-fertilization of training concepts
and technologies will play an increasing role in our future as other
industries grow to understand the value of sophisticated instruction.
Last year, for example, Honda asked us to develop a troubleshooting
training course for Honda and Acura automobile technicians. It is in our
long-term interest to search for similar training opportunities outside the
aviation and maritime industries, and we will do so.
In looking to the future, your Company agreed to establish an
advanced flight training center on the Daytona Beach, Florida, campus of
Embry-Riddle Aeronautical University. The facility will serve as an
educational, training, and research center and will include Level "D"
simulators for Boeing 737-300 and Beech 1900D aircraft.
By aligning ourselves with the academic community and with
young people who aspire to careers in aviation, we can help ensure their
success and our own.
At its September 12, 1995, meeting, the Board of Directors agreed
to double our stock repurchase program authorization to 8 million
shares from 4 million shares. The Board is optimistic about your
Company's long-term prospects and, coupled with our strong financial
condition, believes repurchase of our common stock is an excellent
investment for the Company. As of this date, the Company has
repurchased 4 million shares since announcing the initial authorization
in February 1993.
One of the best investments your Company can make is in good
people. And I am proud to say our employees are the most knowledgeable
and the most dedicated in the industry. I thank them for their
professionalism.
We have instituted a Revenue Growth Sharing Program under
which employees have the opportunity to receive a percentage of their
learning center's increased revenues over the previous year. We
anticipate this program will not only increase revenues, but will help
further solidify the excellent staffs at the centers.
In summary, thanks to you, our customers and our shareholders,
we have the people, the programs, the wherewithal and the vision to keep
FlightSafety in the forefront of the training industry. We value your faith
and confidence in us and will continue to work hard to see your trust
rewarded.
A. L. Ueltschi
President
February 23, 1996
page 3
PAGE 45 OF 90
Leading aviation insurance executive Harold Clark,
CEO of USAIG, advocates the benefits of FlightSafety training.
From Harold Clark's perspective as Chairman/CEO of United States
Aircraft Insurance Group - America's largest insurer of corporate aircraft
- - FlightSafety training is good insurance.
"It's all very clear when you look at it," he says. "On the whole, corporate
aviation accidents are very rare. But some 70-90% of the accidents that
do occur involve pilot error. And good training addresses the root causes
of these mistakes. It does so by building proficiency where it really
counts - in areas such as decision-making, emergency procedures, crew
resource management, systems knowledge, and the timely and proper
response to system failures."
By "good" training, Clark means training in the risk-free environment of a
full-flight simulator. "Only 35% of the emergency procedures in an
aircraft manual can be performed safely in the aircraft, versus 100% in
the simulator," Clark says. "And there are many other reasons, including
the 'replay' advantage. The simulator allows for efficient repetition of
cockpit events until the pilot's response is what it must be."
Regarding the issue of costs, Clark observes that "training is the way to
become more professional and more proficient at a time when the
increasing sophistication of aircraft requires the pilot to have more
knowledge and more skill. But since we know that increased training
leads to fewer losses, the pilots who train regularly receive our best
combination of coverage and rates."
Clark's strong advocacy of high-technology aviation training is reflected
in his company's own practices. The pilots who fly the company's
corporate jet train at FlightSafety every six months.
page 4
PAGE 46 OF 90
FlightSafety International 1995
The Year in Review
page 5
PAGE 47 OF 90
Business Aviation Training: Reinforcing a Position of Leadership. Last
year's success in business aviation training reflects a commitment to the
Company's core market and the source of approximately 50% of its
training revenues. FlightSafety's longstanding leadership was reinforced
by adding new simulators and significant new programs.
Long-Term Agreements. Business Jet Solutions, an AMR Combs and
Bombardier company, signed a long-term agreement for its pilots to
maintain proficiency at FSI Learning Centers dedicated to Canadair
Challenger and Learjet aircraft. The contract will result in training to
support the organization's air charter operations and its flagship "Flexjet"
fractional ownership program, which is expected to employ more than
200 pilots over the next few years.
New Simulators, Expanded Capacities. The Company has pioneered the
advancement of simulation for business aircraft and regional airliners by
designing and building the very first flight simulators for these aircraft
types. Last year, FSI further expanded its business aviation training fleet
through the installation of two additional Level "D" simulators for
business aircraft: a Learjet 60 at the Tucson Learning Center and a
Citation V Ultra at the Citation Learning Center in Wichita.
An FSI-built Citation II simulator became the first for business aircraft to
be installed at the Company's Miami Airline Training Center. The
simulator serves Citation I/II operators located in Central and Latin
America, as well as Asia and Europe.
The IDEAL Classroom. A major innovation in classroom technology,
developed by the Company, saw its debut at FSI's
page 6
PAGE 48 OF 90
Savannah Center for Gulfstream pilot and maintenance technician training.
Referred to as the IDEAL Classroom (Interactive Databased Environment for
Accelerated Learning), the technology and its configuration comprise the
Company's latest version of the most productive possible learning environment.
The classroom arrangement and supporting computer technology are
designed to deliver the full potential of the new interactive courseware
developed by FSI's Training Systems Division. The touch-screen
interactive technique enables each participant to work through a training
procedure at a workstation monitored by the instructor, who can provide
personal attention as required. The system also facilitates performance
testing on required procedures and the recording of all results by the
instructor through a central control.
New Courses, Programs. In addition to its technological advances, the
Company enriched its training curriculum with new course offerings.
Service Excellence Training was developed as part of an extensive
training program for Executive Jet Aviation, the world's largest
commercial operator of business jets, to complement the personal service
orientation of its crew members. This special workshop-style training is
now available to all FlightSafety customers.
The Company received FAA approval to proceed with the development of
FSI's Advanced Qualification Program (AQP), a proficiency-based training
system that incorporates Crew Resource Management (CRM), Line
Operational Simulation (LOS), and other innovative principles in crew
member training normally available only to pilots of a few major airlines.
The first AQP projects, for the Gulfstream V and Saab 340 aircraft, will
be followed by other aircraft programs.
"The First 30 Seconds," being developed by the Company's Operations
and Standards Division, will be a two-hour pilot enrichment course
developed for introduction in 1996. It provides an overview of takeoff
performance evaluation and the critical go/no go decision.
Unusual Attitude/Loss of Control training was added to most initial and
recurrent pilot training programs. This new
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dimension includes an expanded simulator briefing to discuss cause,
recognition and recovery procedures, followed by event training in the
simulator. A new training seminar, inaugurated at the Teterboro Center, was
developed by FSI and Air Security International and was made available
to corporate pilots and managers to address the growing concern for
aviation security.
Airline Training: Expanding the Territory. Encouraged by growing
demand for training services from the commercial air transport industry
in North America and beyond, the Company acquired two existing airline
flight training centers, expanded its fleet of air carrier simulators, and
continued to win new training contracts from regional and major
carriers.
Dalfort Flight Training Centers Acquired. Further strengthening its
training presence in the North American air transport segment, the
Company acquired the two flight training centers of Dalfort Training. The
facilities are located at Dallas-Fort Worth International Airport in Texas
and near Louisville's airport in Kentucky. The 28,000 square foot, three-
level building at DFW Airport is equipped with three simulators in its
four bays, two Boeing 727-200 and a Boeing 737-200. The two-bay
Louisville Center is equipped with a Boeing 747-200 flight simulator, the
first in the FSI fleet for that aircraft type. The centers are actively serving
a variety of customers, offering certified ground school and simulator
pilot training.
Contracts and Courses. Utilization of the Company's airline training
facilities continued to increase last year as existing contracts were
serviced and new customers were added. Newcastle-based Gill Airways of
the United Kingdom began a pilot-training program at the Houston
Center after the U.K.'s Civil Aviation Authority granted approval of the
center's ATR 42/72 regional airliner simulator. China Eastern Airlines
renewed its contract for pilot training using the Miami Center's Airbus
A300-600 simulator and Wilmington's Fokker 100. The first group of pilots from
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the new Indian regional airline, Gujarat Airways, trained on
the Beech 1900D simulator at the Company's LaGuardia Airport learning
center. Also at LaGuardia, the first participants in FSI's six-week Flight
Dispatcher Course graduated and later passed their FAA dispatcher
licensing examination.
ValuJet Airlines contracted with the Company for Crew Resource
Management (CRM) training at the airline's Atlanta base of operations.
All pilots on the roster will participate in the initial training program.
Pilots joining the carrier will receive CRM training at FSI's Miami Center,
where they prepare for DC-9 flying duties. Other airlines enrolled for
CRM training include Aloha, Avianca/Colombia, and China Airlines.
Late in the year, the Company announced its designation as the official
training company for the new EMB-145 regional jet airliner now being
developed by Embraer - Brasilaira de Aeronautica S/A. An advanced full
flight simulator and a flight training device (FTD) will be provided at a
new FSI Fort Lauderdale, Florida, training center devoted to Embraer.
The Company operates flight simulators for the popular EMB-120
regional airliner in five other locations.
FlightSafety Simulation: Innovation Breeds Success. Responding to
market opportunities, the Company continues to manufacture
simulators and visual systems beyond its own needs for use by outside
customers. In doing so, it has established a reputation for innovation
and a growing presence in the global marketplace for simulation
technology.
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ChromaView Visuals Installed for All Nippon Airways. The Company
completed its installation of three VITAL ChromaView visual systems on
two Boeing 777-200 simulators and one Boeing 737-500 for ANA-All
Nippon at Tokyo's Haneda Airport. ANA, the launch customer for the new
visual system produced by FSI's Visual Simulation Systems in St. Louis,
received approval from JCAB, the Japanese Civil Aviation Bureau.
Currently being installed in new FSI simulators, the new-generation
visual system represents a technical innovation from all previous
commercial products in this area.The five-channel visuals for the Boeing
777 simulators spread across a 225-degree panorama, providing
unprecedented scene content and weather replication, enhanced by
cross-cockpit viewing. The photo-imagery-based system provides a
superior visual environment with new levels of scene detail.
A Saab 2000 for Crossair. The Company also delivered the first full flight
simulator for the Saab 2000 airliner to Crossair, the successful Swiss
regional carrier based in Basel, Switzerland. The Saab 2000 simulator is
installed alongside an FSI Saab 340A/B at the Crossair training facility,
where the initial FSI simulator had a 98.6% dispatch reliability rate
during its first year of operation.
Military and Government Training. The Company's involvement in
military and government training remained strong through new
agreements and add-ons to existing contracts with FSI's wholly owned
subsidiary, FlightSafety Services Corporation.
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Contract Modifications and Systems Upgrades. FSI received a U.S. Air
Force contract modification to upgrade the visual systems on seven
government-owned C-5 full-flight simulators, which the Company
operates for the Air Force Air Mobility Command in support of the FSI-
directed Aircrew Training System for the C-5 aircraft. The order to
upgrade simulators for the C-5, the largest aircraft in the Air Force fleet,
is valued at $52 million. The upgrades, to be accomplished over a three-
year period, will give the Air Mobility Command and their Air Reserve
Components the capability of training their C-5 air crews with the most
advanced technology achievable in flight simulation. The new system will
present realistic inflight training exercises such as full-contact aerial
refueling with the KC-135 refueling aircraft. The seven C-5 simulators
are located at Altus AFB, Oklahoma; Dover AFB, Delaware; Travis AFB,
California; and Westover AFB, Massachusetts.
The Company also received a U.S. Air Force contract for the training of
C-9A (DC-9) air crew, including initial, recurrent, upgrade,
requalification and instructor training. The program, which involves
approximately 250 pilots and 50 flight mechanics, will take place at the
St. Louis Center.
Military units trained by FSI include the C-20B (Gulfstream III) pilots of
the 89th Airlift Wing based at Andrews Air Force Base, near Washington,
D.C. The 89th is responsible for transporting the nation's VIPs.
As in previous years, the Federal Aviation Administration relied on the
Company to train many of the agency's own pilots. The contracts include
pilot initial and recurrent training for most major lines of business jets,
for regional airliners such as the de Havilland Dash-8 and the Beech
1900, for airliner-type aircraft such as the Boeing 737 and MD-80, and
for Sikorsky helicopter training as well.
Careers in the Making: Training for Future Professionals. Through its
New Hire Program and its prestigious flight academy, the Company
served the needs of young pilots seeking a boost along the early phases
of their professional career paths.
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New Hire Program. The success of the Company's innovative New Hire
Program continued last year as more than 25 regional carriers continued
to rely on FSI as a source of well-qualified new pilots. The program
matches carefully screened first-officer candidates with openings at
participating airlines and then provides candidate-funded aircraft-type-
specific training tailored to the airline's requirements. Major participants
in the program include Atlantic Southeast Airlines, Business Express,
Chicago Express, Continental Express, Lone Star, Northwest Airlink,
Vanguard, and ValuJet.
FlightSafety Academy Continues Career Training, Establishes UK
Facility. A tradition of excellence continued at the FlightSafety Academy
in Vero Beach, Florida, as the school provided flight training for bright,
achievement-oriented future professionals. Many of the Academy's cadets
are sponsored by overseas airlines who send students with little or no
flying experience to Vero Beach for primary (ab initio) training followed by
multiple ratings. Consistent customers have included such airlines as
Swissair, Italy's Alitalia, Greece's Olympic Airways, and the Innsbruck-
based Austrian carrier, Tyrolean Airways.
Reflecting expanded connections to the Asia-Pacific Rim, Air China's first
group of cadets in the United States graduated in 1995. China's Civil
Aviation Flying College (CAFC) sent a second group of its students to the
Academy and the first class of cadets from China Eastern Airlines signed
on for early 1996. The Chinese cadets follow a training course tailored to
the exacting requirements of the Civil Aviation Authority of China and
the sponsoring airlines.
The Academy last year established a facility in Coventry, England, after
being approved by Britain's CAA for the training of new pilots for the
Private Pilot License (PPL), Basic Commercial Pilot License (BCPL),
Instrument Rating (IR), and Flying Instructor Rating (FIC). For students
from Europe, the United States provides excellent opportunities for new-
pilot training that significantly reduce the cost of preparing for an airline
career. Florida's flight-cadet-friendly weather conditions, fuel
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prices, and easy airport access provide a superior training environment.
Establishment of the U.K. facility addresses the CAA requirement that
the final flight test for the CAA's Instrument Rating be conducted in
British airspace.
To provide an even smoother transition to first officer training, the
Academy last year introduced its Academy-Master Pilot Course, which
refines and polishes the flying skills required for in-airline-service. The
Academy-Master Pilot designation indicates a clearly recognizable level of
preparedness for the commencement of a professional flying career
through an intensive four-week course that provides understanding and
skillful command of airline pilot duties in the pressurized environment of
a fast-moving regional airline operation. Academy-Master graduates become a
source of applicants for the FSI New Hire Program.
Maintenance Technician Training: New Inroads. Last year saw continued
success in the form of new contracts and new inroads into the
marketplace for FSI Maintenance Technician Training.
Aviaco Troubleshooting. Spain's AVIACO Airlines adopted FSI's
successful troubleshooting training program for its aircraft maintenance
technicians. The Madrid-based carrier is tailoring the program for its
MD-88 maintenance group, using the same computer-based, type-
specific FSI training systems now employed by American Airlines' MD-80
maintenance organization in Tulsa. The troubleshooting program is used
at FlightSafety Learning Centers as an integral part of the maintenance
training curriculum, as well as by other airlines and manufacturers.
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Troubleshooting Adapted for Automobiles. The Company's Advanced
Diagnostic Systems Division in San Antonio is working on a
troubleshooting training application for Honda and Acura automobile
technicians. The computer-based courses utilize procedures that parallel
the service manuals for the cars. Prototype software has been tested
repeatedly and refinements are under way.
MRM Training. The Company introduced a new Maintenance Resource
Management (MRM) course program based on the flight crew CRM
programs that have been effective in enhancing the cockpit working
environment and developing pilot teamwork. Utilizing a highly interactive
workshop format, MRM training covers situational awareness, error
chains, teamwork, decision-making, stress management and, above all,
communication skills.
MarineSafety: A Leader in Maritime Training. FSI's maritime subsidiary,
MarineSafety International, announced the opening of new facilities and
the implementation of significant new training programs.
California Simulator Opening. A full mission bridge simulator was
designed and installed by MarineSafety at the California Maritime
Academy in Vallejo, California. When not in use by cadets of the
Maritime Academy, the simulator is available for use by MSI to provide
refresher training to shipping companies and harbor pilots. The new
simulator uses the latest virtual reality image generator and is capable of
simulating over 30 types of commercial and naval vessels
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in dozens of specific harbors used by MarineSafety's three other locations.
Bridge Resource Management for Holland America Line. Officers of the
seven Holland America Line cruise ships enhanced their Bridge Resource
Management (BRM) skills
in a special training program conducted by MSI at its Rotterdam facility
in The Netherlands. More than a hundred officers have been trained
using the concept pioneered by the aviation industry. The course
includes seminars on such subjects as
situational awareness, passage planning, error-chain analysis,
communications, and teamwork - all closely coupled with simulator
exercises.
Irish Continental Trains for New Ferry. Masters and officers of the new
ferryboat Isle of Innisfree, operated by Irish Continental, participated in
Bridge Resource Management seminars and specialized shiphandling
exercises at MarineSafety in Rotterdam. Elements of the Isle of
Innisfree training program included developing teamwork and
communications among bridge officers, maintaining situational
awareness, detecting and analyzing error chains, and developing the
skills required of the large ferry's bridge crew in navigating relatively
narrow channels. Simulator exercises allowed the officers to practice
docking and undocking at new berths at Holyhead before the ship
entered service in May. Shuttling between Holyhead and Dublin, the Isle
of Innisfree can carry 600 passenger cars and 1,760 passengers per trip.
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Management's Discussion and Analysis
of Results of Operations and Financial Condition
Results of Operations 1995 Compared with 1994
Training revenues increased by $35.3 million, or 13 percent, in 1995 as
compared to 1994. Business aviation training revenues increased by
$10.9 million, or eight percent, primarily because of increased demand
for the Company's training services. Commercial airline training
revenues increased by $6.4 million, or 12 percent, due to the continued
expansion of the Company's Airline New Hire Program, increased
demand from South American customers and additional training
equipment added in 1995. Primary flight training revenues increased by
$1.8 million, or 22 percent, primarily from new training agreements with
foreign airlines and aviation authorities and increases in individual pilots
seeking careers as professional pilots. There was also an increase in U.S.
Government training revenues of $7.9 million from the C-5 aircrew
training system contract and $1.1 million from the KC-135 aircrew
training system contract with the U.S. Air Force. Training revenues for
the year ended December 31, 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 the Company's
KC-135 contract. Excluding this 1994 non-recurring item, total training
revenues increased by $37.2 million or, 14 percent.
Product sales in 1995 decreased $10.8 million, or 37 percent, from 1994.
The decrease in product sales was primarily attributable to decreases in
equipment being produced for unaffiliated customers by the Company's
Simulation Systems Division. The Division's level of production was
approximately the same as last year's level, with a greater emphasis
toward meeting the Company's training requirements. The Division
expects to deliver 13 simulators in 1996 for Company use.
Total expenses increased $14.8 million, or eight percent, in 1995 as
compared to 1994. Salary and wages increased by
$5.9 million, or eight percent, due to a $7.6 million increase from
personnel additions and annual salary increases, offset by 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 Government Services Contract Act. Depreciation and
amortization increased by $2.8 million due to a full year of depreciation
on simulators added in 1994 and a partial year of depreciation for
simulators added in 1995. Operating expenses increased by $12.4
million primarily from additional costs related to the C-5 training
contract with the U.S. Air Force, increases in simulator and aircraft
maintenance costs and training supplies. General and administrative
expenses increased by $4.1 million primarily due to increases in
employee benefit costs, professional fees, and overall increases in general
and administrative costs related to the increases in business volume.
Cost of product sales decreased by $10.4 million primarily from the
related decrease in product sales. The increase in gross profit margin on
product sales to 28.5% in 1995 from 19.5% in 1994 was principally due
to the completion and acceptance in 1995 of equipment sold to outside
customers.
Interest and other income increased by $2.1 million in 1995 as compared
to 1994 principally due to higher interest rates on short-term
investments and higher average investment balances. Interest expense
increased primarily from higher interest rates in 1995 on the Company's
borrowings and increases in borrowings against the cash surrender value
of corporate-owned life insurance policies.
Income taxes increased by $1.2 million, or three percent, in 1995 as
compared to 1994 due primarily to an increase in income before income
taxes offset by higher tax exempt investment income. The effective
income tax rate decreased to 33.6% in 1995 from 35.8% in 1994
primarily due to a refund of foreign income taxes, lower state income
taxes and an increase in tax advantaged income as a percentage of pre-
tax income.
Earnings per share and net income increased by 15 percent and 13
percent to $2.71 per share from $2.35 per share and $84,516,000 from
$74,475,000 in 1995 as compared to 1994, respectively. The higher
percentage increase in earnings per share is a result of the Company's
stock repurchase program and its corresponding effect on the weighted
average shares outstanding.
Inflation continued to increase operating costs and costs of equipment
and facilities during 1995. The Company expects to recover its additional
costs due to inflation with increases in volume and prices.
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Financial Condition
In 1995, $140.5 million cash was provided by operations. Cash was
principally used to purchase equipment and facilities ($90.0 million),
repurchase the Company's common stock ($29.5 million), pay dividends
($16.2 million) and pay corporate-owned life insurance premiums ($7.5
million).
Accounts receivable at December 31, 1995, increased by $9.9 million, or
17 percent, from December 31, 1994, due primarily to increases in
amounts due from the U.S. Government related to the C-5 contract and
in amounts billed in the 1995 fourth quarter as compared to the 1994
fourth quarter. Inventories at December 31, 1995, decreased by $6.7
million, or 47 percent, from the prior year because of the decrease in
product sales. Accounts payable and accrued expenses at December 31,
1995, increased $14.1 million, or 43 percent, from December 31, 1994,
due to amounts owed to subcontractors related to the C-5 contract and
increased expenditures in the fourth quarter of 1995 as compared to
1994.
In 1996, the Company expects to spend in excess of
$70 million for additional equipment and facilities. The Company also
expects to continue to repurchase shares of its common stock. The Board
of Directors increased the shares authorized for the stock repurchase
program from 4,000,000 shares to 8,000,000 shares on September 12,
1995. The Company expects to fund these items with cash provided by
operations and short-term investments. As of December 31, 1995, the
Company has 4,071,300 shares authorized and remaining for possible
repurchase.
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 these 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 decreases in
equipment being produced for unaffiliated customers 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 $1.2 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 $3.9 million primarily
from increases in costs of training supplies and simulator maintenance.
Costs of product sales decreased by $15.7 million 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 costs 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 has 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.
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<TABLE>
Consolidated
Statements of Income
Year ended December 31,
1995 1994* 1993
<S> <C> <C> <C>
Revenues:
Training revenues $307,051,000 $271,743,000 $244,784,000
Product sales 18,742,000 29,556,000 52,312,000
325,793,000 301,299,000 297,096,000
Costs and Expenses:
Salaries and wages 77,358,000 71,479,000 64,923,000
Depreciation and amortization 49,504,000 46,711,000 44,337,000
Operating expenses 39,654,000 27,243,000 23,317,000
General and administrative 29,204,000 25,074,000 23,868,000
Costs of product sales 13,408,000 23,807,000 39,467,000
209,128,000 194,314,000 195,912,000
Income from operations 116,665,000 106,985,000 101,184,000
Other income (expense):
Interest and other income 13,389,000 11,303,000 10,539,000
Interest expense (2,859,000) (2,322,000) (2,174,000)
Income before income taxes 127,195,000 115,966,000 109,549,000
Income taxes 42,679,000 41,491,000 43,135,000
Net income for the year $ 84,516,000 $ 74,475,000 $ 66,414,000
Net income per share $2.71 $2.35 $2.01
Weighted average shares
outstanding 31,180,998 31,706,635 33,089,261
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
*Reclassified to conform to 1995 presentation.
</TABLE>
page 18
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<TABLE>
Consolidated
Balance Sheets
December 31,
Assets 1995 1994
<S> <C> <C>
Current Assets:
Cash $ 6,128,000 $ 2,062,000
Short-term investments 194,084,000 194,930,000
Accounts receivable, less
allowance for doubtful
accounts of $1,481,000
($1,433,000 in 1994) 69,575,000 59,718,000
Inventories 7,640,000 14,330,000
Prepaid expenses and
other current assets 11,482,000 10,336,000
Total Current Assets 288,909,000 281,376,000
Equipment and facilities, at cost 894,308,000 806,651,000
Less: Accumulated depreciation
and amortization (384,491,000) (336,590,000)
509,817,000 470,061,000
Intangible and other assets 45,709,000 41,492,000
$844,435,000 $792,929,000
</TABLE>
<TABLE>
December 31,
Liabilities and Shareholders' Equity 1995 1994
<S> <C> <C>
Current Liabilities:
Current portion of
long-term debt $ 1,759,000 $ 1,759,000
Accounts payable
and accrued expenses 47,016,000 32,890,000
Dividends payable 4,311,000 3,758,000
Income taxes payable 3,229,000 8,230,000
Unearned income for
contract training 30,265,000 32,566,000
Total Current Liabilities 86,580,000 79,203,000
Long-term debt 38,054,000 39,813,000
Deferred income taxes 111,537,000 108,308,000
Other liabilities 5,263,000 5,201,000
Total Liabilities 241,434,000 232,525,000
Shareholders' Equity:
Common stock-par value
$.10 per share
Authorized-100,000,000 shares
Issued and outstanding-
30,792,681 shares
(31,315,429 in 1994) 3,079,000 3,132,000
Capital in excess of par value 37,092,000 33,217,000
Retained earnings 564,549,000 525,661,000
604,720,000 562,010,000
Restricted stock compensation (1,719,000) (1,606,000)
Total Shareholders' Equity 603,001,000 560,404,000
Commitments and contingencies $844,435,000 $792,929,000
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
</TABLE>
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<TABLE>
Consolidated Statements
of Cash Flows
Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Increase (decrease) in cash
Cash flows from operating
activities:
Net income $ 84,516,000 $ 74,475,000 $ 66,414,000
Items in net income not
using cash:
Depreciation and amortization 49,504,000 46,711,000 44,337,000
Provision for losses on
accounts receivable 581,000 300,000 519,000
Deferred income taxes 4,921,000 6,194,000 12,593,000
Increase in cash surrender
value of corporate-owned life
insurance, net of premiums (1,992,000) (1,617,000) (1,396,000)
Other, net 533,000 633,000 833,000
Changes in working capital
other than cash:
Decrease (increase) in
inventory 6,690,000 275,000 (4,747,000)
(Increase) in accounts
receivable (10,438,000) (11,055,000) (8,124,000)
(Increase) in prepaid expense
and other current assets (1,146,000) (1,750,000) (129,000)
Increase (decrease) in accounts
payable and accrued expenses 14,126,000 (873,000) (3,980,000)
Increase in dividends payable 553,000 557,000 100,000
(Decrease) increase in income
taxes payable (5,001,000) 2,931,000 (1,885,000)
(Decrease) increase in
unearned income (2,301,000) 1,570,000 871,000
Net cash provided by
operating activities 140,546,000 118,351,000 105,406,000
Cash flows from investing activities:
Capital expenditures (89,974,000) (64,417,000) (64,004,000)
Corporate-owned life
insurance premiums (7,455,000) (7,453,000) (7,450,000)
Decrease (increase) in
short-term investments 846,000 (15,981,000) 97,416,000
Intangible assets arising
from acquisition (6,916,000)
Other 3,041,000 1,124,000 2,785,000
Net cash (used) provided by
investing activities (93,542,000) (86,727,000) 21,831,000
Cash flows from financing activities:
Repurchase of common stock (29,538,000) (29,172,000) (94,190,000)
Portion of long-term borrowings
withdrawn from construction
fund held by trustee, net 1,971,000 8,216,000
Repayment of long-term debt (1,759,000) (1,819,000) (29,932,000)
Increase in long-term borrowings
against cash surrender value
of corporate-owned
life insurance 2,622,000 10,273,000
Cash dividends (16,154,000) (13,880,000) (12,431,000)
Exercise of stock options 3,583,000 2,366,000 2,027,000
Effect of tax leases (1,692,000) (1,401,000) (1,138,000)
Net cash used by
financing activities (42,938,000) (31,662,000) (127,448,000)
Net increase (decrease) in cash 4,066,000 (38,000) (211,000)
Cash at beginning of year 2,062,000 2,100,000 2,311,000
Cash at end of year $ 6,128,000 $ 2,062,000 $ 2,100,000
The accompanying Notes to Consolidated Financial Statements are
an integral part of these financial statements.
</TABLE>
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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 in
shiphandling. 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 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.
Management Estimates
The Company prepares its financial statements in accordance with
generally accepted accounting principles, which requires management to
make estimates and assumptions that effect amounts reported in the
financial statements for the reporting period. Actual results could differ
from those based upon such estimates and assumptions. These
estimates and assumptions are revised as necessary.
Note 2 - Equipment and Facilities
<TABLE>
December 31,
1995 1994
<S> <C> <C>
Simulators, training equipment and spare parts $663,289,000 $636,009,000
Land and buildings 71,085,000 69,311,000
Furniture, fixtures and equipment 41,367,000 32,296,000
Leasehold improvements 7,509,000 6,168,000
Construction-in-progress 111,058,000 62,867,000
$894,308,000 $806,651,000
</TABLE>
page 21
PAGE 63 OF 90
<TABLE>
Note 3 - Income Taxes
Analysis of income tax provision
Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Currently payable $39,450,000 $36,698,000 $31,680,000
Deferred income taxes 4,921,000 6,194,000 12,593,000
Effect of tax leases (1,692,000) (1,401,000) (1,138,000)
Income taxes as recorded $42,679,000 $41,491,000 $43,135,000
State and local income taxes amounted to $5,167,000 in 1995
($5,591,000 in 1994 and $5,645,000 in 1993). 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
<TABLE>
Year ended December 31,
1995 1994 1993
Amount % Amount % Amount %
<S> <C> <C> <C> <C> <C> <C>
Federal income tax
at statutory rate $44,518,000 35.0% $40,588,000 35.0% $38,343,000 35.0%
State income taxes,
net of federal
tax benefit 3,359,000 2.7 3,634,000 3.1 3,727,000 3.4
Tax exempt
investment income (4,103,000)(3.2) (3,496,000)(3.0) (2,890,000)(2.6)
Effect of federal
tax rate increase
on previously
provided deferred
income tax
liabilities 3,427,000 3.1
Other, net (1,095,000)(0.9) 765,000 0.7 528,000 0.5
Income taxes
as recorded $42,679,000 33.6% $41,491,000 35.8% $43,135,000 39.4%
</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 $44.1 million in 1995 ($33.9 million in
1994 and $33.5 million in 1993).
page 22
PAGE 64 OF 90
Note 4 - Long-term Debt
<TABLE>
December 31,
1995 1994
<S> <C> <C>
Industrial development obligations due 1996-2012 $36,470,000 $37,170,000
Capitalized lease obligation 3,343,000 4,402,000
Less-current portion of long-term debt (1,759,000) (1,759,000)
$38,054,000 $39,813,000
</TABLE>
The Company's industrial development obligations had variable rates
between 2.8 and 5.9 percent during 1995. The weighted average interest
rate for the above borrowings was 4.4 percent in 1995 (3.6 percent in
1994). Assets pledged as security for the industrial development
obligations are not material.
Intangible and other assets include investments in corporate-owned life
insurance which have a cash surrender value of $62.1 million offset by
borrowings against cash surrender values of $33.2 million at December
31, 1995 ($52.7 million and $30.6 million, respectively, at December 31,
1994). In 1995, the interest rate on borrowings against cash surrender
value of corporate-owned life insurance was 9.3 percent (8.9 percent in
1994).
The amounts of debt payable in the five years subsequent to 1995 are:
$1,759,000 in 1996, $1,259,000 in 1997 and $1,224,000 in 1998 with
no debt payable in 1999 and 2000.
The Company paid interest of $1,832,000 in 1995 ($1,506,000 in 1994
and $2,402,000 in 1993), net of amounts capitalized. The amount of
interest capitalized was $1,798,000 in 1995 ($1,484,000 in 1994 and
$1,543,000 in 1993).
page 23
PAGE 65 OF 90
Note 5 - 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 $1,801,000 in 1995 ($1,821,000 in 1994 and $1,799,000 in 1993).
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.
<TABLE>
The funded status as of the following measurement dates were:
December 31,
1995 1994 1993
<S> <C> <C> <C>
Plan assets at fair value $31,957,000 $24,154,000 $22,212,000
Actuarial present value of
benefits for service
rendered to date:
Accumulated benefits based
on salaries to date, including
vested benefits of $19,835,000
($17,584,000 in 1994
and $14,998,000 in 1993) 20,576,000 18,118,000 15,419,000
Additional benefits based on
estimated future salary levels 6,533,000 5,103,000 6,150,000
Projected benefit obligation 27,109,000 23,221,000 21,569,000
Plan assets in excess of
projected benefit obligations 4,848,000 933,000 643,000
Unrecognized net actuarial
(gain) loss (2,474,000) 686,000 555,000
Unamortized transition net asset (932,000) (996,000) (1,060,000)
Prepaid pension asset $ 1,442,000 $ 623,000 $ 138,000
- -------------------------------------------------------------------------------
Net periodic pension cost included
the following components:
Service cost-benefits earned
during the period $ 1,931,000 $ 1,930,000 $ 1,810,000
Interest cost on projected
benefit obligation 1,625,000 1,510,000 1,307,000
Actual return on plan assets (5,635,000) 59,000 (2,173,000)
Net amortization and deferral 3,880,000 (1,678,000) 855,000
Net pension cost $ 1,801,000 $ 1,821,000 $ 1,799,000
</TABLE>
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.
page 24
PAGE 66 OF 90
Note 6 - Shareholders' Equity
<TABLE>
Changes in issued common stock, capital in excess of par value and retained
earnings for the three years ended December 31, 1995, were as follows:
Capital in
Common Stock excess of Retained
Shares Amount par value Earnings
<S> <C> <C> <C> <C>
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
Net income 84,516,000
Exercise of stock
options, net 107,806 10,000 3,573,000
Restricted stock
compensation plan, net 6,446 1,000 302,000
Dividends declared (16,154,000)
Repurchase of
common stock (637,000) (64,000) (29,474,000)
------------------------------------------------------
Balance,
December 31, 1995 30,792,681 $3,079,000 $37,092,000 $564,549,000
-----------------------------------------------------
On September 12, 1995, the Board of Directors increased the shares
authorized for the stock repurchase program to 8,000,000 shares from
4,000,000 shares of the Company's common stock. As of December 31,
1995, the Company has 4,071,300 shares authorized and remaining for
possible repurchase.
page 25
PAGE 67 OF 90
Note 7 - 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 95,760 shares were
granted in 1995 (110,340 in 1994 and 102,410 in 1993). At December
31, 1995, shares available for future options under the 1992 Plan were
246,222.
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 employees to 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.
The following tabulation sets forth the activity of the plans for the three
years ended December 31, 1995.
Number of Options Option Price Per Share
<S> <C> <C> <C> <C>
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
Granted in 1995 95,760 50.88
Exercised in 1995 (63,902) 13.79 - 47.25
Cancelled in 1995 (26,965) 33.81 - 47.25
- ------------------------------------------------------------------------------
Outstanding at
December 31, 1995 598,294 $13.79 - $50.88
- ------------------------------------------------------------------------------
Under the 1979 Plan, 145,045 options were exercisable at December 31,
1995 (189,358 options at December 31, 1994). Under the 1982 Plan,
95,593 options were exercisable at December 31, 1995 (89,839 options
at December 31, 1994). The remaining 12,795 options become
exercisable in 1996. Under the 1992 Plan, 86,409 options were
exercisable at December 31, 1995 (45,916 in 1994). The remaining
options become exercisable as follows: 70,189 in 1996 and 1997, 58,902
in 1998, 40,020 in 1999 and 19,152 in the year 2000.
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 1,112,500 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 December 31, 1995, options to purchase
approximately 45,000 shares were outstanding. The actual number of
shares issued under the plan in 1995 was 48,814 (47,177 in 1994 and
48,745 in 1993).
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, 1995, 98,054
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.
page 26
PAGE 68 OF 90
Note 8 - 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: $1,905,000 in 1996, $1,621,000 in 1997,
$1,094,000 in
1998, $745,000 in 1999, $581,000 in 2000 and $3,832,000 thereafter.
These leases are generally subject to renewal. Rent expense for 1995 was
$1,849,000 ($1,811,000 in 1994 and $1,790,000 in 1993).
Note 9 - Industry Segments
The Company is predominantly in one industry segment: training. The
Company is also engaged in product sales consisting of simulators,
visual systems and other high-technology training equipment. Revenue
derived from U.S. Government agencies amounted to $79,696,000 in
1995 ($75,583,000 in 1994 and $58,382,000 in 1993).
Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Revenues:
Training $307,051,000 $271,743,000 $244,784,000
Product sales 75,793,000 74,652,000 92,202,000
Intersegment elimination (1) (57,051,000) (45,096,000) (39,890,000)
Total $325,793,000 $301,299,000 $297,096,000
Contribution to operating income:
Training $111,331,000 $101,236,000 $ 88,339,000
Product sales 5,334,000 5,749,000 12,845,000
Total $116,665,000 $106,985,000 $101,184,000
(1) Intersegment sales, all of which relate to product sales, are
recorded at cost.
Training revenues are predominately earned in the United States.
Product sales to unaffiliated customers are in the following geographic
areas:
1995 1994 1993
<S> <C> <C> <C>
United States $ 9,819,000 $17,407,000 $17,674,000
Asia 5,483,000 7,730,000 3,742,000
Europe 2,606,000 3,365,000 27,030,000
Other 834,000 1,054,000 3,866,000
Total $18,742,000 $29,556,000 $52,312,000
At December 31, 1995, the accounts receivable related to product sales
were $5.3 million ($11.1 million in 1994 and $13.4 million in 1993).
The following represents the identifiable assets by segment as of
December 31:
1995 1994 1993
<S> <C> <C> <C>
Training $585,406,000 $534,668,000 $504,763,000
Product sales 24,324,000 36,040,000 42,531,000
Corporate (2) 234,705,000 222,221,000 206,640,000
Total $844,435,00 0 $792,929,000 $753,934,000
(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.
page 27
PAGE 69 OF 90
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, 1995 and 1994,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, 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 the 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 29, 1996
1995, 1994 and 1993 Selected Quarterly Financial Information (Unaudited)
1995 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
<S> <C> <C> <C> <C>
Revenues $77,831,000 $79,394,000 $77,463,000 $91,105,000
Income from operations 27,095,000 29,491,000 27,075,000 33,004,000
Net income 20,164,000 20,913,000 19,355,000 24,084,000
Net income per share 64 cents 67 cents 62 cents 78 cents
- ------------------------------------------------------------------------------
1994 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
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
- ------------------------------------------------------------------------------
(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.
page 28
PAGE 70 OF 90
FlightSafety
Training Programs
Airbus Industrie
Miami
ATR-42/72
Houston
Greater Philadelphia/Wilmington
Bell Helicopter
Fort Worth
Alliance
Boeing
Seattle
Houston
Salt Lake City
St. Louis
Long Beach
Miami
Cincinnati
Dallas
Louisville
British Aerospace/Jetstream 31
Seattle
St. Louis
Atlanta
Canadair/Challenger
Montreal
Houston
Cessna/Citation
Wichita
Long Beach
Toledo
Paris
Miami
Cessna 200/300/400 Series
Wichita
Long Beach
Dassault FalconJet
Teterboro
Paris
Houston
de Havilland
Toronto
Paris
Seattle
Embraer
Atlanta
Cincinnati
Houston
Seattle
Paris
Fairchild Metro
San Antonio
Seattle
St. Louis
Fokker 100/70
Greater Philadelphia/Wilmington
Paris
Gulfstream
Savannah
Houston
Long Beach
Gulfstream Commander
Bethany
IAI Westwind/Astra
Greater Philadelphia/Wilmington
Learjet
Wichita
Tucson
West Palm Beach
Lockheed Jetstar
Atlanta
McDonnell Douglas
Long Beach
Atlanta
St. Louis
Miami
Mitsubishi
Houston
Wichita
Mooney
San Antonio
Paris
Piper
Lakeland
Raytheon/Beech
Wichita
Toledo
Long Beach
Atlanta
Houston
Paris
Lakeland
Daleville
Dothan
Raytheon/Beech 1900
LaGuardia
Wichita
Raytheon/Hawker/125
Greater Philadelphia/Wilmington
Houston
Saab
San Antonio
St. Louis
LaGuardia
Sabreliner
St. Louis
Shorts 360
LaGuardia
Sikorsky
West Palm Beach
TBM 700
San Antonio
Maritime
Newport
Rotterdam
San Diego
page 29
PAGE 71 OF 90
FlightSafety Learning Centers
Alliance Flight Training
Academy
2250 Alliance Boulevard
Fort Worth, Texas 76177
toll free (800) 791-1414
tel (817) 491-9699
fax (817) 491-4002
Atlanta Learning Center
1804 Hyannis Court
College Park, Georgia 30337
toll free (800) 889-7916
tel (770) 991-6064
fax (770) 991-5959
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
Cincinnati Airline
Learning Center
1600 Dolwick Drive
Erlanger, Kentucky 41018
tel (606) 283-2345
fax (606) 283-2362
Daleville Learning Center
600 Industrial Boulevard
Daleville, Alabama 36322
tel (334) 598-4485
fax (334) 598-4488
Dallas Airline
Learning Center
2201 West Airfield Drive
P.O. Box 612786
DFW Airport, Texas 75261
tel (214) 574-7001
fax (214) 574-7003
Dothan Learning Center
600 FlightSafety Drive
Dothan, Alabama 36303
tel (334) 983-5652
fax (334) 983-1393
Flight Safety 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
Fort Worth Learning Center
9601 Trinity Boulevard
Fort Worth, Texas 76053
toll free (800) 379-7413
tel (817) 282-2557
fax (817) 282-8543
Greater Philadelphia/
Wilmington Learning Center
New Castle County Airport
155 N. Dupont Highway
New Castle, Delaware 19720
toll free (800) 733-7548
tel (302) 328-7548
fax (302) 322-6664
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
LaGuardia Airline
Learning Center
Marine Air Terminal
LaGuardia Airport
Flushing, New York 11371
toll free (800) 877-5343
tel (718) 565-4170
fax (718) 565-4174
Lakeland Flight Academy
Lakeland Airport
2949 Airside Center Drive
Lakeland, Florida 33811
toll free (800) 726-5037
tel (941) 646-5037
fax (941) 644-6211
Long Beach Learning Center Long Beach Municipal Airport
4330 Donald Douglas Drive
Long Beach, California 90808
toll free (800) 487-7670
tel Corp. Sched. (310) 420-7670
fax (310) 429-1226
Louisville Airline
Learning Center
4528 Bishop Lane
Louisville, Kentucky 40218
tel (502) 456-0958
fax (502) 456-0848
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
Montreal Learning Center
9555 Ryan Avenue
Dorval, Quebec
Canada H9P 1A2
tel (514) 631-2084
fax (514) 631-2263
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
page 30
PAGE 72 OF 90
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
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
Salt Lake City Airline
Learning Center
201 North 2200 West
Salt Lake City, Utah 84116
tel (801) 355-3901
fax (801) 355-3801
San Antonio Airline
Learning Center
San Antonio International Airport
9027 Airport Boulevard
San Antonio, Texas 78216
toll free (800) 889-7917
tel (210) 826-6358
fax (210) 826-4008
Savannah Learning Center
Travis Field
P.O. Box 2307
Savannah, Georgia 31402
toll free (800) 625-9369
tel (912) 964-6421
fax (912) 964-6430
Seattle Airline
Learning Center
1505 South 192nd St.
Seattle, Washington 98148
tel (206) 243-9081
fax (206) 243-0357
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
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
Toronto Airline
Learning Center
95 Garratt Boulevard
Downsview, Ontario
Canada M3K 2A5
tel (416) 638-9313
fax (416) 638-3348
Tucson Learning Center
Tucson International Airport
1071 E. Aero Park Boulevard
Tucson, Arizona 85706
toll free (800) 203-5627
tel (602) 889-9538
fax (602) 889-9619
West Palm Beach
Learning Center
Palm Beach International Airport
3887 Southern Boulevard
West Palm Beach, Florida 33406
toll free (800) 769-6763
tel (407) 686-7677
fax (407) 689-7719
Wichita (Raytheon)
Learning Center
9720 E. Central Avenue
Wichita, Kansas 67206
toll free (800) 488-3747
tel (316) 685-4949
fax (316) 685-2476
Wichita (Raytheon)
Maintenance Learning Center
9525 E. Central Avenue
Wichita, Kansas 67206
toll free (800) 808-0976
tel (316) 685-5510
fax (316) 685-2448
Wichita (Cessna)
Learning Center
1951 Airport Road
Wichita, Kansas 67209
toll free (800) 227-5656
tel (316) 943-2140
fax (316) 943-1017
Wichita (Cessna) Maintenance
Learning Center
1962 Midfield Road
Wichita, Kansas 67209
toll free (800) 491-9796
tel (316) 945-0123
fax (316) 945-0161
Wichita (Citation)
Learning Center
1851 Airport Road
Wichita, Kansas 67209
toll free (800) 488-3214
tel (316) 943-3214
fax (316) 943-7651
Wichita (Learjet)
Learning Center
2 Learjet Way
Wichita, Kansas 67209
toll free (800) 491-9807
tel (316) 943-3394
fax (316) 943-0314
page 31
PAGE 73 OF 90
FlightSafety
Headquarters, Divisions and Subsidiaries
MarineSafety International
Newport Learning Center
344 Aquidneck Road
Middletown, Rhode Island 02482
tel (401) 849-0222
fax (401) 849-9264
San Diego Learning Center
P. O. Box 368002
San Diego, California 92136
tel (619) 231-3333
fax (619) 231-2062
MarineSafety Rotterdam B.V.
Wilhelminakade 701
P. O. Box 51290
3007 GG Rotterdam
The Netherlands
tel +31-10-486-6654
fax +31-10-484-6071
Instructional Systems Division
8900 Trinity Boulevard
Hurst, Texas 76053
tel (817) 595-5450
fax (817) 595-5479
Simulation Systems Division
2700 North Hemlock Circle
Broken Arrow, Oklahoma 74012
tel (918) 251-0500
fax (918) 251-5597
Training Systems Division
1155 South Semoran Boulevard
Suite 1121
Winter Park, Florida 32792
toll free (800) 829-4992
tel (407) 657-6100
fax (407) 657-0207
Visual Simulation Systems Division
5695 Campus Parkway
St. Louis, Missouri 63042
tel (314) 551-8400
fax (314) 551-8444
FlightSafety Services
Corporation
10184 West Belleview Avenue, Suite 300
Littleton, Colorado 80127
tel (303) 932-3680
fax (303) 932-3699
Washington Office
300 Metropolitan Square
655 Fifteenth Street, N.W.
Washington, D.C. 20005
tel (202) 639-4066
fax (202) 638-2670
Corporate Headquarters
FlightSafety International
Marine Air Terminal
LaGuardia Airport
Flushing, New York 11371
toll free (800) 877-5343
tel (718) 565-4100
fax (718) 565-4134
page 32
PAGE 74 OF 90
FlightSafety
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 24, 1996 at the corporate headquarters, Marine Air Terminal,
LaGuardia Airport, Flushing, New York 11371
Form 10-K:
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 75 OF 90
Marine Air Terminal
LaGuardia Airport
Flushing, New York 11371
tel 718 565 4100
fax 718 565 4134
An equal opportunity employer
PAGE 76 OF 90
FlightSafety International
[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 24, 1996, 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, 1996; 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 11, 1996
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 22, 1996
PAGE 77 OF 90
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 principal
executive offices of the Company, Marine Air Terminal, La Guardia Airport,
Flushing, New York 11371, on Wednesday, April 24, 1996, 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 22, 1996.
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, 1996.
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 11, 1996
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 30,662,772 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.
PAGE 78 OF 90
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 67 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, Caliber System, Inc., Computer
Task Group, Inc., Phillips Petroleum
Company, Rohm and Haas Company, and Xillix
Technologies Corp. Mr. Beitzel is also
Chairman Emeritus of Amherst College.
Edward E. Hood, Jr. ......
Retired (February 1993); prior thereto, Vice 65 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 Emeritus of the Board of
Trustees of Rensselaer Polytechnic
Institute and a Trustee of North Carolina
State University.
Charles R. Longsworth.....
Chairman Emeritus, Colonial Williamsburg 66 1985
Foundation, museum, education, hotel and
restaurant services. Mr. Longsworth is a
director of Public Radio International,
Caliber System, Inc., Crestar Financial
Corporation, Houghton Mifflin Company,
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, 65 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 78 1951
President of the Company.
Bruce N. Whitman..........
Executive Vice President of the Company. 62 1962
2
PAGE 79 OF 90
Committees, Meetings and Compensation of the Board of Directors
The Board of Directors held two special and four regular meetings during
1995. 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 for Mr. Longsworth.
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 1995.
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 1995.
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 1995.
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
1995.
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 also maintains a deferred compensation plan for outside
directors, which enables a director to defer payment of his fees in cash and
stock equivalent units until he leaves the Board.
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
PAGE 80 OF 90
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, 1996 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
11, 1996 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 8) and all
directors and executive officers of the Company as a group.
Number of Shares
Beneficially Percent of
Owned Outstanding
as of March 11, Common Stock
Name of Beneficial Owner 1996 as of March 11, 1996
- --------------------------------------- ---------------- -------------------
Directors
Albert L. Ueltschi(1).............. 9,612,483(2) 31.3%
George B. Beitzel.................. 3,292(3) *
Edward E. Hood, Jr. ............... 1,000 *
Charles R. Longsworth.............. 1,025 *
John A. Morgan..................... 118,885 *
Bruce N. Whitman(4)................ 267,436(5) *
Executive Officers
Kenneth W. Motschwiller............ 27,301(5)(6) *
James S. Waugh..................... 32,386(5) *
Dennis Gulasy...................... 35,131(5)(7)
Directors and Executive Officers as a
group (11 persons)................. 10,160,711(5) 33.1%
FMR Corp.(8)........................... 3,267,000(8) 10.6%
Putnam Investments, Inc.(9).......... . 2,474,046(9) 8.1%
- ---------
* 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 9,611,983 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 1,451,000 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,
21,794 shares; Mr. Motschwiller, 20,523 shares; Mr. Waugh, 21,125 shares;
Mr. Gulasy, 23,349 shares; and all directors and executive officers as a
group, 97,129 shares.
(6) Includes 1,234 shares held by Mr. Motschwiller as custodian for his minor
children.
(7) Does not include 1,182 shares beneficially owned by Mr. Gulasy's spouse,
in respect of which Mr. Gulasy disclaims beneficial ownership.
(8) FMR Corp.'s address is: 82 Devonshire Street, Boston, MA 02109. FMR Corp.
is a holding company and its subsidiary, Fidelity Management & Research
Company, has certain investment managers who are considered beneficial
owners of the Company's common stock, which stock was acquired for
investment purposes by such investment managers for certain of their
advisory clients. This
4
PAGE 81 OF 90
represents the number of shares owned as of December 31, 1995 as indicated
in a Schedule 13G filed by FMR with the SEC on January 10, 1996. FMR has
sole power to vote or to direct the vote for 211,200 shares and has sole
power to dispose or direct the disposition of all the shares.
(9) 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., have certain
investment managers who are considered beneficial owners of the Company's
common stock, which stock was acquired for investment purposes by such
investment managers for certain of their advisory clients. This represents
the number of shares owned as of December 31, 1995 as indicated in a
Schedule 13G filed by Putnam Investment, Inc. with the Securities and
Exchange Commission (SEC) on January 15, 1996. Putnam has shared power to
vote or to direct the vote for 30,753 shares and has shared power to
dispose or to direct the disposition of all the 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
With
Name Age Position Held Company
- ------------------------- -------- ------------------- -----------
Albert L. Ueltschi........ 78 President and
Chairman of the Board 45 years
Bruce N. Whitman.......... 62 Executive Vice President 34 years
Elmer G. Gleske........... 65 Vice President --
Government Affairs 19 years
Dennis Gulasy(1).......... 53 Vice President --
Simulation Systems 4 years
Kenneth W. Motschwiller(2) 39 Vice President --
Treasurer 5 years
James S. Waugh............ 48 Vice President --
Marketing 16 years
Mario D'Angelo(3)......... 43 Controller 5 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.
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
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PAGE 82 OF 90
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 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 below the median ranges of such items paid by companies of 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 1995
annual salary adjustments, the Compensation Committee decided that there would
be no salary increase for any of the executive officers of the Company for
1995 because the executive officers had received significant increases in
their annual salaries in 1994.
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 year, including the earnings for the 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 1995,
the Compensation Committee focused on, among other things, the Company's 13
percent increase in training revenues and a 15 percent increase in net income
per share in 1995 as compared to 1994. The Compensation Committee also
reviewed the total cash compensation of the executive officers in view of a
third-party consultant survey prepared during 1995 of comparable companies and
determined that the Company's executive officers' total cash compensation was
below the median ranges of comparable companies' cash
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PAGE 83 OF 90
compensation levels. The Bonus Bases were increased for each executive officer
due to the above factors. The Performance Percentages were essentially the
same for each executive officer in order to foster a team approach. Mr.
Ueltschi's 1995 annual bonus was higher than in 1994 due to the factors
indicated earlier, primarily his relative compensation as indicated in the
survey.
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
95,760 shares were granted in December 1995 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
1995 base salary except for Mr. Gulasy, where his base salary was utilized.
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 July 1995 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 1995 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 1995 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.
Although 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 1995.
Compensation Committee
George B. Beitzel, Chairman
Edward E. Hood, Jr.
John A. Morgan
7
PAGE 84 OF 90
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 1995.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Awards
Compensation ------------------- All Other
---------------- Compen-
Base Restricted Stock ation($)
Year Salary Bonus Stock($) Options
(1) (2) (3) (#) (4)
---- --------- --------- -------- ------ --------
Albert L. Ueltschi(5)
President and Chair- 1995 $ 250,000 $ 200,000 -- -- $ 1,738
man of the Board 1994 $ 250,000 $ 150,000 -- -- $ 1,584
1993 $ 220,000 $ 118,800 -- -- $ 2,257
Bruce N. Whitman
Executive Vice 1995 $ 210,000 $ 147,000 $ 21,000 8,260 $ 10,920
President and 1994 $ 210,000 $ 126,000 $ 21,000 10,910 $ 9,277
Director 1993 $ 190,000 $ 102,600 $ 19,000 11,240 $ 11,614
Kenneth W. Motschwiller
Vice President -- 1995 $ 130,000 $ 110,500 $ 13,000 5,110 $ 2,066
Treasurer 1994 $ 130,000 $ 101,400 $ 13,000 6,750 $ 2,120
1993 $ 103,000 $ 68,000 $ 10,300 6,090 $ 2,507
James S. Waugh
Vice President -- 1995 $ 130,000 $ 110,500 $ 13,000 5,110 $ 3,676
Marketing 1994 $ 130,000 $ 78,000 $ 13,000 6,750 $ 3,771
1993 $ 108,000 $ 58,300 $ 10,800 6,390 $ 4,729
Dennis Gulasy
Vice President -- 1995 $ 135,000 $ 72,900 $ 13,500 2,650 $ 3,023
Simulation 1994 $ 135,000 $ 48,600 $ 13,500 -- $ 2,925
Systems 1993 $ 110,000 $ 72,600 $ 11,000 6,520 $ 3,493
- ---------
(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, 1995, 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 which
amounts for 1995 were: Mr. Ueltschi, $1,519; Mr. Whitman, $10,701; Mr.
Motschwiller, $1,847; Mr. Waugh, $3,457; and Mr. Gulasy, $2,804; and (ii)
the dollar value of group term life insurance premiums of $219 paid by the
Company for each of the named executive officers. Subject to certain
eligibility requirements, the Company's group term life insurance is
available to all employees of the Company.
(5) Mr. Ueltschi does not participate in the Company's restricted stock or
stock option programs.
8
PAGE 85 OF 90
Stock Option Grants Table
The following tables summarize stock options granted during 1995 to the
named executive officers of the Company.
Stock Option Grants In 1995
Potential Realizable
Value at Assumed
Annual Rates of Stock
Percentage of Price Appreciation
Total Options for Option-Term
Stock Granted to Exercise Expir- Compounded Annually
Executive Options All Employees Price ation -------------------
Officer Granted in 1995 ($/Share) Date 5% 10%
(1) (2) (3)
- --------- ------- ------------- --------- -------- --------------------
Bruce N. Whitman...
8,260 8.6% $ 50.88 12/13/05 $ 264,300 $ 669,700
Kenneth W.
Motschwiller.......
5,110 5.3% $ 50.88 12/13/05 $ 163,500 $ 414,300
James S. Waugh.....
5,110 5.3% $ 50.88 12/13/05 $ 163,500 $ 414,300
Dennis Gulasy......
2,650 2.8% $ 50.88 12/13/05 $ 84,800 $ 214,900
- ---------
(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 95,760 shares to its
employees in 1995.
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 1995.
AGGREGATED STOCK OPTION EXERCISES IN 1995 AND
VALUE OF STOCK OPTIONS AT END OF 1995
# of Unexercised Value of Unexercised
Options at End of In-the-Money Options
1995 at End of Fiscal 1995
Acquired ------------------ ---------------------
Executive On Value Exerci- Unexer- Exerci- Unexer-
Officer(1) Exercise Realized sable cisable sable cisable
- --------------- -------- -------- ------- ------- ------- -------
Bruce N. Whitman...
- 0 - $ - 0 - 21,794 26,315 $ 190,600 $ 230,200
Kenneth W.
Motschwiller.......
- 0 - $ - 0 - 20,523 15,797 $ 376,200 $ 134,000
James S. Waugh.....
- 0 - $ - 0 - 21,125 15,806 $ 456,200 $ 136,000
Dennis Gulasy......
- 0 - $ - 0 - 23,349 8,250 $ 503,000 $ 75,200
- ---------
(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, 1995, 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
9
PAGE 86 OF 90
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 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, $67,300; Mr.
Whitman, $43,900; Mr. Motschwiller, $59,200; Mr. Waugh, $54,000 and Mr.
Gulasy, $39,900.
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 judgment will be exercised by
the executives to maximize shareholder value. The severance agreements
continue through December 31, 1996 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.
10
PAGE 87 OF 90
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, 1990, 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, 1995.
The stock performance graph in the proxy statement uses the following
indexes, return values and coordinates:
[GRAPH]
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, 1996,
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, 1996. 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, 1996.
11
PAGE 88 OF 90
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.
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 1995, the Company believes that all
officers, directors and greater than 10% shareholders complied with all filing
requirements applicable to them with respect to transactions in the Company's
Common Stock during 1995.
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 principal executive offices located at Marine Air
Terminal, La Guardia Airport, Flushing, New York 11371, no later than the
close of business on November 30, 1996. 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 1995 Annual Report to Shareholders, which contains financial
statements for the year ended December 31, 1995 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 22, 1996
12
PAGE 89 OF 90
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 29, 1996,
appearing on page 28 of the 1995 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 28 of this Form 10-K.
PRICE WATERHOUSE LLP
New York, New York
March 29, 1996
PAGE 90 OF 90
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<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-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,128,000
<SECURITIES> 194,084,000
<RECEIVABLES> 71,056,000
<ALLOWANCES> 1,481,000
<INVENTORY> 7,640,000
<CURRENT-ASSETS> 288,909,000
<PP&E> 894,308,000
<DEPRECIATION> (384,491,000)
<TOTAL-ASSETS> 844,435,000
<CURRENT-LIABILITIES> 86,580,000
<BONDS> 0
<COMMON> 3,079,000
0
0
<OTHER-SE> 599,922,000
<TOTAL-LIABILITY-AND-EQUITY> 844,435,000
<SALES> 325,793,000
<TOTAL-REVENUES> 339,182,000
<CGS> 13,408,000
<TOTAL-COSTS> 209,128,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,859,000
<INCOME-PRETAX> 127,195,000
<INCOME-TAX> 42,679,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,516,000
<EPS-PRIMARY> 2.71
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