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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the six months ended
JUNE 30, 1996
Commission File Number: 1-6222
FLIGHTSAFETY INTERNATIONAL, INC.
----------------------------------------------------
(Exact name of registrant as specified in charter)
New York 11-1671001
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
Marine Air Terminal, LaGuardia Airport
Flushing, New York 11371
- - --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: 718-565-4100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- - ------------------- ----------------------
Common Stock (par value $.10 per share) New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Company (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---------- -----------
As of July 31, 1996, the Company had 30,431,024
shares of its common stock
outstanding.
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FLIGHTSAFETY INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
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<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheets at June 30, 1996
and December 31, 1995 3 - 4
Consolidated Statements of Income,
Six Months Ended June 30, 1996 and 1995 5
Consolidated Statements of Income,
Three Months Ended June 30, 1996 and 1995 6
Consolidated Statements of Cash Flows,
Six Months Ended June 30, 1996 and 1995 7
Notes to Consolidated Financial Statements as of June 30, 1996 8 - 9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 11
Item 6 - Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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Page 2 of 12
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FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash $ 3,586,000 $ 6,128,000
Short-term investments stated at cost which
approximates market value 171,548,000 194,084,000
Accounts receivable, less allowance for doubtful
accounts of $1,512,000 ($1,481,000 in 1995) 79,474,000 69,575,000
Inventory 7,634,000 7,640,000
Prepaid expenses and other current assets 7,390,000 11,482,000
---------------- -----------------
Total current assets 269,632,000 288,909,000
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Equipment and facilities, at cost 949,026,000 894,308,000
Less - accumulated depreciation and amortization (411,327,000) (384,491,000)
---------------- -----------------
537,699,000 509,817,000
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Intangible and other assets 53,612,000 45,709,000
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Total assets $860,943,000 $844,435,000
================ =================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 12
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FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES and SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 1,509,000 $ 1,759,000
Accounts payable and accrued expenses 41,041,000 47,016,000
Dividends payable 4,268,000 4,311,000
Income taxes payable 2,557,000 3,229,000
Unearned income for contract training 39,222,000 30,265,000
---------------- ---------------
Total current liabilities 88,597,000 86,580,000
Long-term debt 36,904,000 38,054,000
Deferred income taxes 111,543,000 111,537,000
Other liabilities 4,757,000 5,263,000
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Total liabilities 241,801,000 241,434,000
---------------- ---------------
Shareholders' equity:
Common stock - par value $.10
Authorized - 100,000,000 shares
Issued and outstanding - 30,487,371 shares
(30,792,681 in 1995) 3,049,000 3,079,000
Capital in excess of par value 40,351,000 37,092,000
Retained earnings 577,331,000 564,549,000
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620,731,000 604,720,000
Less - restricted stock compensation (1,589,000) (1,719,000)
---------------- ---------------
Total shareholders' equity 619,142,000 603,001,000
---------------- ---------------
Total liabilities and shareholders' equity $860,943,000 $844,435,000
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 12
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FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------------
1996 1995*
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<S> <C> <C>
Revenues $ 179,901,000 $ 157,225,000
Costs and expenses:
Salaries and wages 43,523,000 37,384,000
Depreciation and amortization 26,386,000 24,430,000
Operating expenses 25,281,000 14,917,000
General and administrative 15,774,000 14,867,000
Cost and expenses of product sales 9,170,000 9,384,000
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120,134,000 100,982,000
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Income from operations 59,767,000 56,243,000
Other income (expense):
Interest and other income 7,196,000 6,559,000
Interest expense (1,511,000) (1,479,000)
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Income before income taxes 65,452,000 61,323,000
Income taxes 23,296,000 20,246,000
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Net income for the period $ 42,156,000 $ 41,077,000
============= =============
Net income per share $ 1.38 $ 1.31
============= =============
Average shares outstanding 30,639,993 31,327,275
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
*Reclassified to conform to 1996 presentation.
Page 5 of 12
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FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30,
-------------------------------------
1996 1995*
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<S> <C> <C>
Revenues $90,692,000 $79,394,000
Costs and expenses:
Salaries and wages 21,943,000 18,598,000
Depreciation and amortization 13,220,000 12,469,000
Operating expenses 11,112,000 7,820,000
General and administrative 9,024,000 7,264,000
Cost and expenses of product sales 5,083,000 3,890,000
---------------- ---------------
60,382,000 50,041,000
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Income from operations 30,310,000 29,353,000
Other income (expense):
Interest and other income 3,645,000 3,240,000
Interest expense (624,000) (755,000)
---------------- ---------------
Income before income taxes 33,331,000 31,838,000
Income taxes 12,041,000 10,925,000
---------------- ---------------
Net income for the period $21,290,000 $20,913,000
================ ===============
Net income per share $ .70 $ .67
================ ===============
Average shares outstanding 30,557,435 31,333,121
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
*Reclassified to conform to 1996 presentation.
Page 6 of 12
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FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------
1996 1995
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<S> <C> <C>
Increase (decrease) in cash
Cash flows from operating activities:
Net income $42,156,000 $41,077,000
Items in net income not using cash:
Depreciation and amortization 26,386,000 24,430,000
Provision for losses on accounts receivable 250,000 251,000
Deferred income taxes 908,000 1,422,000
Increase in cash surrender value of corporate-owned life
insurance (1,525,000) (760,000)
Other, net (96,000) 307,000
Changes in working capital other than cash:
(Increase) in accounts receivable (10,149,000) (5,646,000)
Decrease in inventory 6,000 5,595,000
Decrease in prepaid expenses and other
current assets 4,092,000 2,519,000
(Decrease) increase in accounts payable and accrued expenses (5,975,000) 2,992,000
(Decrease) in income taxes payable (672,000) (4,652,000)
Increase in unearned income 8,957,000 6,729,000
- - ----------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 64,338,000 74,264,000
- - ----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (54,773,000) (41,549,000)
Decrease (increase) in short-term investments 22,536,000 (26,278,000)
Corporate-owned life insurance premiums and
repayment of borrowings (3,508,000)
Other, net (2,973,000) 2,505,000
- - ----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (38,718,000) (65,322,000)
- - ----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Repayment of long-term debt (1,150,000) (1,400,000)
Repurchase of common stock (20,859,000) (1,183,000)
Cash dividends (8,553,000) (7,523,000)
Exercise of stock options 3,302,000 2,192,000
Other, net (902,000) (830,000)
- - ----------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (28,162,000) (8,744,000)
- - ----------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash (2,542,000) 198,000
Cash at beginning of period 6,128,000 2,062,000
- - ----------------------------------------------------------------------------------------------------------------
Cash at end of period $ 3,586,000 $ 2,260,000
================================================================================================================
</TABLE>
Page 7 of 12
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FLIGHTSAFETY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(UNAUDITED)
1) These financial statements, which should be read in conjunction with
the financial statements included in FlightSafety International, Inc.'s
Annual Report to Shareholders for 1995, are unaudited but include all
adjustments of a normal recurring nature that the Company considers
necessary for a fair presentation of the results for such interim
period. Results for interim periods are not necessarily indicative of
results for a full year.
2) Debt consists of:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Industrial development obligations
and other debt due 1996-2012 $38,413,000 $39,813,000
Less - current portion (1,509,000) (1,759,000)
---------------- ----------------
$36,904,000 $38,054,000
================ ================
</TABLE>
The Company's industrial development obligations have variable rates
between 3.2 and 5.7 percent.
The interest capitalized on major equipment acquisitions for the six
months ended June 30, 1996 was $776,000 ($929,000 in 1995).
3) The changes in the Company's shareholders' equity account balances in
the current period were as follows:
<TABLE>
<CAPTION>
Capital in
Common Excess of Par Retained
Stock Value Earnings
----------------- ------------------ ----------------
<S> <C> <C> <C>
Balance at December 31, 1995 $3,079,000 $37,092,000 $564,549,000
Net income for the period 42,156,000
Exercise of options pursuant to
employee stock option plans 8,000 3,259,000
Repurchase of common stock (38,000) (20,821,000)
Dividends declared (8,553,000)
----------------- ------------------ ----------------
Balance at June 30, 1996 $3,049,000 $40,351,000 $577,331,000
================= ================== ================
</TABLE>
Page 8 of 12
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On September 12, 1995 the Company's Board of Directors authorized the
repurchase of an additional 4,000,000 shares of the Company's
outstanding common stock. The Company is now authorized to repurchase
8,000,000 shares. As of June 30, 1996, 4,313,500 shares had been
repurchased and subsequently retired. At its June meeting, the
Company's Board of Directors declared a regular quarterly cash dividend
of fourteen cents per share on its common stock payable August 6, 1996
to shareholders of record on July 15, 1996.
Page 9 of 12
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FLIGHTSAFETY INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
In the first six months of 1996, $64.3 million of cash was provided by
operations and $22.5 million was provided by a reduction in short-term
investments. Cash was principally used for the purchase of additional equipment
and facilities ($54.8 million), repurchase of shares of the Company's common
stock ($20.9 million) and payment of dividends ($8.6 million).
Capital expenditures, which are primarily revenue generating assets such as
simulators, are expected to exceed $100 million in 1996. The Board of Directors
increased the shares authorized for the stock repurchase program to 8,000,000
shares from 4,000,000 shares on September 12, 1995. There were 384,800 shares
repurchased under the program in the first six months of 1996. The Company has
repurchased and retired 4,313,500 shares as of June 30, 1996. The Company
expects to fund its capital expenditures from cash provided by operations and
its stock repurchase program from cash provided by operations, existing cash and
short-term investments.
Accounts receivable increased by $9.9 million, or 14 percent, primarily due to
an increase in amounts billed in the first six months of 1996 as compared to the
1995 six month period.
Results of Operations
Revenues for the six and three month periods ended June 30, 1996 increased by
$22.7 million and by $11.3 million, respectively, an increase of 14 percent for
both periods compared to the same periods in 1995. Increases in training
revenues for the 1996 periods were experienced in all areas of the Company's
training operations. Training revenue increased by $22.3 million, or 15 percent
and $9.3 million, or 12 percent, respectively, for the six and three month
periods ended June 30, 1996. The six and three month training revenue increases
include approximately $11.3 million and $4.3 million, respectively, from an
increase in a U. S. Air Force contract. Product sales increased by $0.3 million,
or three percent, and $2.0 million, or 44 percent, respectively, for the same
six and three month periods ended June 30, 1996.
Total expenses for the six months ended June 30, 1996 increased by $19.2
million, or 19 percent. Salary and wages increased by $6.1 million, or 16
percent, due to personnel additions and salary increases. Depreciation and
amortization increased by $2.0 million due to the addition of new simulators
since the first six months of 1995. Operating expenses increased by $10.4
million primarily due to increases in subcontractor expenses associated with the
increase in the U. S. Air Force contract previously referred to, increases in
training supplies and facility costs. General and administrative expenses
increased by $0.9 million primarily due to increases in professional fees and
overall increases in general and administrative costs. These increases were
offset by a decrease in cost and expenses of product sales due to a greater
level of activity and cost reductions.
Income taxes for the six and three months ended June 30, 1996 increased by $3.1
million and $1.1 million, respectively, for both periods as compared to the 1995
periods. Income taxes, as a percentage of pre-tax income for the six months
ended June 30, 1996 increased to 35.6 percent in 1996 from 33.0 percent for the
same period in 1995 and increased to 36.1 percent from 34.3 percent for the
three month periods ended June 30, 1996 and 1995, respectively. The higher
effective income tax rates were due principally to income tax refunds received
in the first six months of 1995 related to prior years and a decrease in tax
advantaged income as a percentage of pre-tax income.
Page 10 of 12
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 6. Exhibits and Reports on Form 8-K.
None.
Page 11 of 12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLIGHTSAFETY INTERNATIONAL, INC.
Date: August 9, 1996 s/A. L. UELTSCHI
President
Date: August 9, 1996 s/K. W. MOTSCHWILLER
Vice President/Treasurer
Page 12 of 12
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,586,000
<SECURITIES> 171,548,000
<RECEIVABLES> 80,986,000
<ALLOWANCES> 1,512,000
<INVENTORY> 7,634,000
<CURRENT-ASSETS> 269,632,000
<PP&E> 949,026,000
<DEPRECIATION> 411,327,000
<TOTAL-ASSETS> 860,943,000
<CURRENT-LIABILITIES> 88,597,000
<BONDS> 36,904,000
<COMMON> 3,049,000
0
0
<OTHER-SE> 616,093,000
<TOTAL-LIABILITY-AND-EQUITY> 860,943,000
<SALES> 179,901,000
<TOTAL-REVENUES> 179,901,000
<CGS> 9,170,000
<TOTAL-COSTS> 120,134,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,511,000
<INCOME-PRETAX> 65,452,000
<INCOME-TAX> 23,296,000
<INCOME-CONTINUING> 42,156,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,156,000
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.38
</TABLE>
