<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------- ---------------
Commission file number 1-5896
HUDSON GENERAL CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-1947395
- - - - ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 GREAT NECK ROAD, GREAT NECK, NEW YORK 11021
------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (516) 487-8610
NOT APPLICABLE
- - - - -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (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
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $1.00 per share: 1,252,802 shares outstanding at
January 30, 1995.
Page 1 of 18
<PAGE> 2
PART I - FINANCIAL STATEMENTS
2
<PAGE> 3
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1994 1993 1994 1993
----------------------------- ---------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . $33,177,000 $30,715,000 $64,525,000 $59,533,000
----------- ----------- ----------- -----------
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . . . . 26,193,000 24,171,000 51,628,000 46,820,000
Depreciation and amortization . . . . . . . . . . 1,759,000 1,815,000 3,296,000 3,467,000
Selling, general & administrative . . . . . . . . 3,562,000 3,211,000 6,916,000 6,262,000
Interest . . . . . . . . . . . . . . . . . . . . . 158,000 352,000 351,000 716,000
----------- ----------- ----------- -----------
Total costs and expenses . . . . . . . . . . . 31,672,000 29,549,000 62,191,000 57,265,000
----------- ----------- ----------- -----------
Earnings before equity in loss of
joint venture, provision for income taxes
and cumulative effect of change in the
method of accounting for income taxes . . . . . . 1,505,000 1,166,000 2,334,000 2,268,000
Equity in loss of joint venture . . . . . . . . . . (663,000) (466,000) (1,145,000) (862,000)
----------- ----------- ----------- -----------
Earnings before provision for income taxes and
cumulative effect of change in the method of
accounting for income taxes . . . . . . . . . . . 842,000 700,000 1,189,000 1,406,000
Provision for income taxes . . . . . . . . . . 209,000 307,000 321,000 327,000
----------- ----------- ----------- -----------
Earnings before cumulative effect of change in
the method of accounting for income taxes . . . . 633,000 393,000 868,000 1,079,000
Cumulative effect of change in the method of
accounting for income taxes . . . . . . . . . . . - - - 450,000
----------- ----------- ----------- -----------
Net earnings . . . . . . . . . . . . . . . . . . . $ 633,000 $ 393,000 $ 868,000 $ 1,529,000
=========== =========== =========== ===========
Earnings per share, primary:
Earnings before cumulative effect of change in
the method of accounting for income taxes . . . . $ .50 $ .32 $ .69 $ .87
Cumulative effect of change in the method of
accounting for income taxes . . . . . . . . . . . - - - .36
----- ----- ----- -----
Net earnings . . . . . . . . . . . . . . . . . . . $ .50 $ .32 $ .69 $1.23
===== ===== ===== =====
Earnings per share, fully diluted:
Earnings before cumulative effect of change in
the method of accounting for income taxes . . . . $ .43 $ .32 $ .67 $ .78
Cumulative effect of change in the method of
accounting for income taxes . . . . . . . . . . . - - - .21
----- ----- ----- -----
Net earnings . . . . . . . . . . . . . . . . . . $ .43 $ .32 $ .67 $ .99
===== ===== ===== =====
Cash dividends per common share . . . . . . . . . . $ .25 $ - $ .25 $ -
===== ===== ===== =====
Weighted average common and common equivalent
shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . 1,263,000 1,243,000 1,262,000 1,243,000
=========== =========== =========== ===========
Fully diluted . . . . . . . . . . . . . . . . . . 2,148,000 2,128,000 2,151,000 2,128,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31 June 30
1994 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 4,202,000 $ 6,727,000
Accounts and notes receivable - net . . . . . . . . . . . . . . . . . . . 17,596,000 14,628,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 976,000 904,000
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . 841,000 1,090,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 2,946,000 2,946,000
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 26,561,000 26,295,000
Property, equipment and leasehold rights at cost,
less accumulated depreciation and amortization . . . . . . . . . . . . . . 32,959,000 31,047,000
Investment in Hawaii joint venture - net . . . . . . . . . . . . . . . . . 15,576,000 15,621,000
Long-term receivables - net . . . . . . . . . . . . . . . . . . . . . . . . 2,861,000 3,138,000
Other assets - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 797,000 862,000
Excess cost over fair value of net assets acquired . . . . . . . . . . . . 853,000 926,000
----------- -----------
$79,607,000 $77,889,000
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,629,000 $ 8,652,000
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 963,000 1,224,000
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . 18,745,000 18,079,000
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 29,337,000 27,955,000
----------- -----------
Long-term debt, subordinated . . . . . . . . . . . . . . . . . . . . . . . 29,000,000 29,000,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,655,000 1,711,000
----------- -----------
Total noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . 30,655,000 30,711,000
----------- -----------
Stockholders' Equity:
Serial preferred stock (authorized 100,000 shares
of $1 par value) - none outstanding . . . . . . . . . . . . . . . . . . . - -
Common stock (authorized 7,000,000 shares of $1 par
value) - issued and outstanding 1,252,802 and
1,250,802 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,253,000 1,251,000
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,745,000 6,717,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,270,000 12,716,000
Equity adjustments from foreign currency
translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,653,000) (1,461,000)
----------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . 19,615,000 19,223,000
----------- -----------
$79,607,000 $77,889,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1994 1993
---------------------------------
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Earnings before cumulative effect of change in
the method of accounting for income taxes . . . . . . . . . . . . . . . . $ 868,000 $ 1,079,000
Adjustments to reconcile earnings before cumulative
effect of change in the method of accounting for
income taxes to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 3,296,000 3,467,000
Increase (decrease) in deferred income tax liabilities
excluding cumulative effect of change in the method of
accounting for income taxes . . . . . . . . . . . . . . . . . . . . . . . (70,000) 148,000
Equity in loss of joint venture . . . . . . . . . . . . . . . . . . . . . . 1,145,000 862,000
Capitalization of interest costs on Hawaii
joint venture advances . . . . . . . . . . . . . . . . . . . . . . . . . (672,000) (453,000)
Gain on sale or disposal of equipment . . . . . . . . . . . . . . . . . . . (192,000) (84,000)
Change in other current assets and liabilities:
Accounts and notes receivables - net . . . . . . . . . . . . . . . . . . (3,060,000) (1,306,000)
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . 249,000 478,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 988,000 1,262,000
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . (260,000) (43,000)
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . 441,000 2,695,000
Increase in inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . (78,000) (305,000)
Decrease in other assets . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 89,000
Decrease in long-term receivables . . . . . . . . . . . . . . . . . . . . . 277,000 11,000
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,000 64,000
----------- -----------
Net cash provided by operating activities . . . . . . . . . . . . . . . 3,062,000 7,964,000
----------- -----------
Cash flows from investing activities:
Purchases of property, equipment and leasehold rights . . . . . . . . . . . (5,535,000) (5,162,000)
Proceeds from sale of property and equipment . . . . . . . . . . . . . . . . 420,000 382,000
Advances to Hawaii joint venture . . . . . . . . . . . . . . . . . . . . . . (429,000) (660,000)
----------- -----------
Net cash used by investing activities . . . . . . . . . . . . . . . . . (5,544,000) (5,440,000)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . 30,000 -
Principal repayments of borrowings . . . . . . . . . . . . . . . . . . . . - (1,833,000)
----------- -----------
Net cash provided (used) by financing activities . . . . . . . . . . . 30,000 (1,833,000)
----------- -----------
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . (73,000) (98,000)
----------- -----------
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . (2,525,000) 593,000
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . 6,727,000 6,376,000
----------- -----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . $ 4,202,000 $ 6,969,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements were
prepared in accordance with generally accepted accounting principles and
include all adjustments which, in the opinion of management, are necessary
to present fairly the consolidated financial position of Hudson General
Corporation and Subsidiaries (the Company) as of December 31, 1994 and June
30, 1994, and the results of operations for the three and six months, and
cash flows for the six months, ended December 31, 1994 and 1993. In the
opinion of management, all necessary adjustments that were made are of a
normal recurring nature.
The accounting policies followed by the Company are stated in Note 1 to the
Company's consolidated financial statements in the 1994 Hudson General
Corporation Annual Report filed under Item 8 to Form 10-K for the Company's
fiscal year ended June 30, 1994.
2. The Company is a partner in a joint venture (the Venture) which was formed
to acquire, develop and sell approximately 4,000 contiguous acres of land
in Hawaii. The Company accounts for its investment in the Venture under
the equity method of accounting.
The summary balance sheets for the Venture are as follows:
<TABLE>
<CAPTION>
December 31 June 30
1994 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Cash and equivalents $ 161,000 $ 121,000
Land and development costs 26,434,000 26,255,000
Mortgages, accounts and notes receivable 8,963,000 10,197,000
Other assets - net 5,107,000 4,778,000
---------- -----------
$40,665,000 $41,351,000
=========== ===========
Notes payable $ 4,115,000 $ 4,759,000
Partner advances and accrued interest payable 40,878,000 38,664,000
Accounts payable and accrued expenses 1,798,000 1,765,000
Partners' deficit (6,126,000) (3,837,000)
----------- -----------
$40,665,000 $41,351,000
=========== ===========
</TABLE>
Summary results of operations for the Venture are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1994 1993 1994 1993
--------------------------- ---------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales (net of discounts) $ 63,000 $ 63,000 $ 159,000 $ 131,000
----------- ---------- ----------- -----------
Cost of sales - - - -
Selling, general and administrative 570,000 726,000 1,128,000 1,300,000
Interest - net 819,000 269,000 1,321,000 555,000
----------- ---------- ----------- ----------
Total costs 1,389,000 995,000 2,449,000 1,855,000
----------- ---------- ----------- ----------
Loss $(1,326,000) $ (932,000) $(2,290,000) $(1,724,000)
=========== ========== =========== ===========
</TABLE>
The Company's 50% share of the Venture's results were losses of $663,000
and $466,000 for the three months ended December 31, 1994 and 1993,
respectively, and $1,145,000 and $862,000 for the six months ended December
31, 1994 and 1993, respectively, and have been included in "Equity in loss
of joint venture" in the accompanying consolidated statements of earnings.
The Company's partner in the Venture is Oxford Kohala, Inc. (Oxford
Kohala), a subsidiary of Oxford First Corporation (Oxford First). Under the
Restated Joint Venture Agreement dated April 29, 1981, as amended (the
Agreement), the partners have agreed to make equal advances to the Venture
for all costs necessary for the orderly development of the land and to
share profits and losses equally. During the six months ended December 31,
1994, the Company advanced $429,000 as its 50% share of the Venture's
required fundings. On October 13, 1994, Oxford First filed for
reorganization under Chapter 11 of the Bankruptcy Code. Pursuant to an
order of the Bankruptcy Court dated November 28, 1994, Oxford First
(through its subsidiary, The Oxford Finance Companies, Inc.) was permitted
to transfer funds to Oxford Kohala in an amount not to exceed $180,000 with
respect to the period October 1, 1994 through December 31, 1994 and
$195,000 with respect to the period January 1, 1995
6
<PAGE> 7
through March 31, 1995 to enable Oxford First to honor its obligation to
make funds available to Oxford Kohala so that Oxford Kohala can make its
share of advances required by the Venture. The Company, at present, is
unable to determine whether the Bankruptcy Court will authorize Oxford
First to transfer funds to Oxford Kohala subsequent to March 31, 1995, or
whether any transfers authorized by the Bankruptcy Court will be sufficient
in order for Oxford Kohala to make its share of future advances to the
Venture. Should Oxford Kohala be unable to make its share of such advances
to the Venture, the Company has the option to make any additional advances
necessary up to the limits set forth in its revolving credit agreement (the
Credit Agreement) with a group of banks (see Note 4). Oxford Kohala did
not file for reorganization under Chapter 11 of the Bankruptcy Code. The
Company's total advances to the Venture (including accrued interest) at
December 31, 1994 were $20,439,000.
3. Accrued expenses and other liabilities consisted of the following:
<TABLE>
<CAPTION>
December 31 June 30
1994 1994
----------- ------------
(Unaudited)
<S> <C> <C>
Salaries and wages $ 4,020,000 $ 5,137,000
Interest 965,000 956,000
Insurance 4,683,000 3,607,000
Operating expenses payable 3,438,000 2,748,000
Other 5,639,000 5,631,000
----------- -----------
$18,745,000 $18,079,000
=========== ===========
</TABLE>
4. The Credit Agreement contains various restrictions, among which are
provisions restricting the Company from paying cash dividends or
purchasing, redeeming or retiring its stock unless consolidated tangible
net worth (TNW), as defined, is greater than $16,500,000 both immediately
before and after giving effect to such dividend, purchase, redemption or
retirement. Furthermore, any such payments are limited to an annual amount
not to exceed the lesser of (i) $1,200,000 or (ii) 50% of consolidated net
income, as defined, for the most recently ended fiscal year. On November
18, 1994, the Board of Directors of the Company declared a regular
semi-annual dividend of 25 cents per share of common stock, aggregating
$313,200, which was paid on January 4, 1995. At December 31, 1994, after
giving effect to the dividend, the Company's TNW was $20,415,000. Pursuant
to the Credit Agreement the Company may advance up to $2,000,000 to the
Venture in any fiscal year or up to $4,000,000 during the term of the
Credit Agreement, net of any distributions received from the Venture by the
Company during such periods. Since the inception of the Credit Agreement
the Company has increased its net advances to the Venture by $1,500,000.
5. The Company had an option which was exercisable until January 31, 1994 to
renew the subleases (Subleases) covering its fixed base operation (FBO)
locations at several Canadian airports beyond their October 31, 1994
expiration dates. The renewal option provided that it could only be
exercised for all of the FBO locations. These FBO's had experienced
operating losses, and the Company had previously determined that it would
not renew the Subleases on their present terms and conditions.
Negotiations with the Company's landlord to revise the sublease terms were
not successful, and the Company did not exercise its renewal option.
Accordingly, the term of the Subleases expired on October 31, 1994. At
June 30, 1993, the Company accelerated the amortization of the remaining
carrying value of its sublease rights in the amount of $4,287,000. The
Company's decision not to exercise its renewal option is not expected to
have a further material effect on its consolidated financial position or
results of operations.
6. Certain reclassifications of fiscal 1994 balances have been made to conform
with the fiscal 1995 presentation.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Revenues for the three and six months ended December 31, 1994 increased $2.5
and $5.0 million, or 8.0% and 8.4%, respectively, compared with the
corresponding periods of the previous year. The increase reflects higher: (i)
domestic ground handling service revenues of $2.3 and $5.4 million,
respectively, due primarily to expanded services to new and existing customers
and higher sales volumes of deicing fluid; (ii) domestic aircraft fueling
revenues of $1.2 and $2.2 million, respectively, resulting primarily from
expanded intoplane fueling services at new and existing locations; (iii) ground
transportation revenues of $.4 and $1.1 million, respectively, due mainly to
expanded services to existing customers; and (iv) Canadian ground handling
service revenues of $.4 million for the three months ended December 31, 1994
compared with the same period of the prior year due mainly to a new contract to
provide various winter related aircraft ground handling services at Terminal 1
in Toronto's Lester B. Pearson International Airport (the Toronto Contract).
Partially offsetting the revenue increases were lower: (i) aircraft fueling and
hangar rental revenues in Canada of $1.6 and $2.4 million, respectively, due to
lower volumes of retail fuel sales and the expiration on October 31, 1994 of
the Company's subleases (discussed below) at its Canadian fixed base operations
(FBO's); (ii) Canadian ground handling service revenues of $.8 million for the
six months ended December 31, 1994 compared with the same period of the
previous year due primarily to several airlines electing to provide ground
handling services through subsidiaries or affiliated carriers; and (iii)
revenues due to the effect of fluctuation in the average rates of exchange used
in translating Canadian revenues to their U.S. dollar equivalent.
Costs and expenses for the three and six months ended December 31, 1994
increased $2.1 and $4.9 million, or 7.2% and 8.6%, respectively, compared with
the corresponding periods of the previous year. Operating costs for the three
and six months ended December 31, 1994 increased $2.0 and $4.8 million, or 8.4%
and 10.3%, respectively, compared with the corresponding periods of the
previous year. The
8
<PAGE> 9
increase was attributable to higher: (i) domestic labor and related costs due
primarily to expanded services to new and existing customers; (ii) sales
volumes of deicing fluid; (iii) rental costs due mainly to equipment funded
under operating leases related to expanded intoplane fueling and ground
transportation services; and (iv) domestic maintenance and fuel costs
associated with expansion of the Company's fleet of equipment. Partially
offsetting the increases were lower: (i) labor and related costs associated
with ground handling operations in Canada due mainly to a reduction in
employees associated with several airline customers electing to provide ground
handling services through subsidiaries or affiliated carriers; (ii) fuel and
facility rental costs in Canada due to lower volumes of retail fuel sales and
the expiration on October 31, 1994 of the Company's subleases (discussed below)
at the Company's Canadian FBO's; and (iii) the effect of fluctuation in the
average rates of exchange used in translating Canadian costs to their U.S.
dollar equivalent.
Depreciation and amortization expenses for the three and six months ended
December 31, 1994 decreased $.1 and $.2 million, or 3.1% and 4.9%,
respectively, compared with the corresponding periods of the previous year.
The decrease was due mainly to the elimination of depreciation relating to
equipment which became fully depreciated.
Selling, general and administrative expenses for the three and six months
ended December 31, 1994 increased $.4 and $.7 million, or 10.9% and 10.4%,
respectively, compared with the corresponding periods of the previous year. The
increase reflects higher administrative and related costs associated primarily
with personnel requirements for new and expanded domestic operations as noted
above.
Interest expense for the three and six months ended December 31, 1994
decreased $.2 and $.4 million, or 55.1% and 51.0%, respectively, compared with
the corresponding periods of the previous year due mainly to lower average
outstanding borrowings and the increase in the Company's capitalization of
interest on its advances to the joint venture in Hawaii (the Venture).
9
<PAGE> 10
Earnings before equity in loss of joint venture, provision for income taxes
and cumulative effect of change in the method of accounting for income taxes
for the three and six months ended December 31, 1994, increased $.3 and $.1
million, or 29.1% and 2.9%, respectively, compared with the corresponding
periods of the previous year due mainly to: (i) higher sales volumes of deicing
fluid; (ii) lower interest and depreciation expenses; (iii) improved results
from domestic aircraft fueling services; (iv) the Toronto Contract; and (v)
reduced losses from the Company's Canadian FBO's as a result of the expiration
of the Company's subleases on October 31, 1994. Partially offsetting the
increases were: (i) higher selling, general and administrative expenses; (ii)
higher domestic maintenance and fuel costs as noted above; and (iii) reduced
results from the Company's Canadian ground handling operations for the six
months ended December 31, 1994 compared with the same period of the previous
year.
Results of the Company's aircraft ground handling operations fluctuate
depending upon the flight activity and schedules of customers and the ability
of the Company to deploy equipment and manpower in the most efficient manner to
service such customers.
The Company's snow removal and aircraft deicing services are seasonal in
nature. The results of these operations are normally reflected in the second
and third quarters of the fiscal year, and fluctuate depending upon the
severity of the winter season.
The Company's 50% share of losses from the Venture for the three and six
months ended December 31, 1994 increased $.2 and $.3 million, respectively,
compared with the corresponding periods of the previous year. The Venture's
losses result primarily from a lack of sales of the Venture's land parcels,
which sales have been negatively impacted by general economic conditions and
the cessation of interest capitalization by the Venture on Phase IV of the
Project as of July 1, 1994. As is usual for companies with land development
operations, the contribution to future results from such operations will
fluctuate depending upon land sales closed in each reported period.
10
<PAGE> 11
The state of the North American aviation industry has resulted in
increased competitive pressures on the pricing of aviation services and in the
exploration of alliances between major commercial airline carriers. While
these factors may have an adverse effect on the Company, the state of the
airline industry has resulted in several airlines outsourcing services to
independent aviation service companies, and this trend has provided additional
opportunities for the Company. The Company is unable, at this time, to
evaluate the future effects of these factors. In addition, the economic
climate is having and may continue to have a negative impact upon the sale of
land parcels in Hawaii.
The Company had an option which was exercisable until January 31, 1994
to renew the subleases (Subleases) covering its fixed base operation (FBO)
locations at several Canadian airports beyond their October 31, 1994 expiration
dates. The renewal option provided that it could only be exercised for all of
the FBO locations. These FBO's had experienced operating losses, and the
Company had previously determined that it would not renew the Subleases on
their present terms and conditions. Negotiations with the Company's landlord
to revise the sublease terms were not successful, and the Company did not
exercise its renewal option. Accordingly, the term of the Subleases expired on
October 31, 1994. At June 30, 1993, the Company accelerated the amortization
of the remaining carrying value of its sublease rights in the amount of
$4,287,000. The Company's decision not to exercise its renewal option is not
expected to have a further material effect on its consolidated financial
position or results of operations.
The Company's provision for income taxes for the three months ended
December 31, 1994, decreased $.1 million compared with the corresponding period
of the previous year due mainly to decreased pre-tax earnings in the U.S.
associated with the Company's share of losses from its joint venture in Hawaii.
During the six months ended December 31, 1994 and 1993, the Company utilized
$.5 million of its Canadian depreciation differences and $.8 million of its
Canadian net operating loss carryforwards, respectively, to offset its
provision for foreign income taxes.
11
<PAGE> 12
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, and reported a
benefit of $450,000 as the cumulative effect of the change in the method of
accounting for income taxes. Such benefit was reported inclusive of the effect
of Canadian depreciation differences and net operating loss carryforwards, net
of the related valuation allowance, in the consolidated statement of earnings
for the six months ended December 31, 1993.
12
<PAGE> 13
Liquidity and Capital Expenditures and Commitments
The Company's recurring sources of liquidity are funds provided from
operations and bank lines of credit. The Company has a Revolving Credit
Agreement (the Credit Agreement) with a group of banks which provides for a
revolving credit facility. Pursuant to the Credit Agreement, the Company may
borrow funds up to a limit of $18.3 million (the Limit) until March 31, 1995.
At such time, and at the end of each subsequent quarter, the Limit will be
reduced by one-sixteenth of the Limit that was in effect on December 31, 1994
until December 31, 1998, at which time the Credit Agreement terminates. As of
December 31, 1994, there were no direct borrowings and $3.7 million of letters
of credit were outstanding under the Credit Agreement.
During the six months ended December 31, 1994 and 1993 net cash
provided by operating activities was $3.1 and $8.0 million, respectively. Net
cash used by advances to the Hawaii joint venture was $.4 and $.7 million for
the six months ended December 31, 1994 and 1993, respectively. Capital
expenditures net of proceeds from the sale of property and equipment were $5.1
and $4.8 million for the six months ended December 31, 1994 and 1993,
respectively. At December 31, 1994 cash and cash equivalents were $4.2 million
compared with $6.7 million at June 30, 1994. At December 31, 1994 the Company
had commitments to fund approximately $1.9 million for operating equipment, the
majority of which is expected to be expended during the third quarter of fiscal
1995. Capital expenditures are primarily for equipment and facilities used in
the Company's operations. The Company is unable to determine the extent of
additional future capital expenditures since, as a service company, its capital
expenditure requirements fluctuate depending upon facility requirements and
equipment purchases associated with the Company's ability to successfully
obtain additional contracts.
At December 31, 1994, the Venture had commitments aggregating $3.1
million for project expenditures. Included in this amount is $1.7 million for
the construction of water well equipment and a reservoir by June 30, 1996. It
is currently expected that approximately $50,000 of the Venture's commitments
will
13
<PAGE> 14
be expended during fiscal 1995. Should the Venture be unsuccessful in its
efforts to dispute the imposition on it of a 4% Hawaii excise tax, the Venture
would have to expend an additional amount of up to approximately $.9 million,
which has been previously accrued by the Venture. At December 31, 1994, the
Venture had $161,000 of cash available for its requirements.
During fiscal 1992, the County of Hawaii passed an ordinance pursuant to
which the Venture, after subdivision approvals are obtained, would be able to
develop Phase IV of the project into 1,490 units. Pursuant to such ordinance,
the Venture is required to expend (in addition to the $3.1 million of
commitments noted above) approximately $2.3 million for improvements and
payments related to the project, which are expected to be expended subsequent to
fiscal 1995. However, shortly after passage of the ordinance, a lawsuit against
the County of Hawaii was filed by two local residents of Hawaii (Plaintiffs)
seeking to invalidate such ordinance on various grounds including that the
ordinance was adopted without following State of Hawaii procedure relating to
the preparation of an Environmental Impact Statement. During fiscal 1993, the
Judge in this action granted Plaintiffs' motion for partial summary judgment
without indicating any effect on Phase IV zoning. The County and the Venture
have appealed this ruling. The appeal was heard before the Hawaii Supreme Court
in March 1994, and the Court has taken the matter under advisement. The Venture
cannot, at this time, determine the impact of the Court's ruling on the timing
of development of Phase IV or the expenditures related thereto.
The Joint Venture Agreement provides that the Company and the Partner are
obligated to make equal advances of any of the Venture's required fundings.
During the six months ended December 31, 1994, the Company advanced $429,000 as
its 50% share of the Venture's required fundings. It is anticipated that the
Venture's capital commitments will be funded by cash flow from its operations
and advances from the Company and the Partner. It is expected that any
advances which the Company may be required to make to the Venture will be
provided from the Company's cash flow and lines of credit. Pursuant to the
Credit Agreement the Company may advance up to $2.0 million to the Venture in
any fiscal year or up to
14
<PAGE> 15
$4.0 million during the term of the Credit Agreement, net of any distributions
received from the Venture by the Company during such periods. Since the
inception of the Credit Agreement the Company has increased its net advances to
the Venture by $1.5 million. At present, it is anticipated that the advances
required to meet the obligations of the Venture will not exceed the limits set
forth in the Credit Agreement. The Partner, Oxford Kohala, Inc. (Oxford
Kohala), is a subsidiary of Oxford First Corporation (Oxford First). On
October 13, 1994, Oxford First filed for reorganization under Chapter 11 of the
Bankruptcy Code. Pursuant to an order of the Bankruptcy Court dated November
28, 1994, Oxford First (through its subsidiary, The Oxford Finance Companies,
Inc.) was permitted to transfer funds to Oxford Kohala in an amount not to
exceed $180,000 with respect to the period October 1, 1994 through December 31,
1994 and $195,000 with respect to the period January 1, 1995 through March 31,
1995 to enable Oxford First to honor its obligation to make funds available to
Oxford Kohala so that Oxford Kohala can make its share of advances required by
the Venture. The Company, at present, is unable to determine whether the
Bankruptcy Court will authorize Oxford First to transfer funds to Oxford Kohala
subsequent to March 31, 1995 or whether any transfers authorized by the
Bankruptcy Court will be sufficient in order for Oxford Kohala to make its
share of future advances to the Venture. Should Oxford Kohala be unable to
make its share of such advances to the Venture, the Company has the option to
make any additional advances necessary up to the limits set forth in the Credit
Agreement. Oxford Kohala did not file for reorganization under Chapter 11 of
the Bankruptcy Code.
The extent to which advances by the Company to the Venture will be
required in the future, as well as the timing of the return to the Company of
the advances made by it, will depend upon the amount of sales generated by the
Venture, the terms upon which parcels are sold, expenses incurred in the
planning and development of future phases of the project and the ability of the
Partner to fund its obligations under the Joint Venture Agreement. The general
economic climate has negatively impacted the sale of the Venture's land
parcels. Since July 1, 1992 five lots have been sold, three of which were
resales of lots that had been previously foreclosed upon.
15
<PAGE> 16
Distributions, if any, received by the Company with respect to the Venture, net
of advances made by the Company during the applicable period, in excess of $4.0
million in any four consecutive quarters, or in excess of $2.0 million in any
fiscal year, reduce the Limit.
It is expected that the sources of the Company's liquidity, as noted above,
will provide sufficient funding to allow the Company to meet its liquidity
requirements.
16
<PAGE> 17
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company, held on November
18, 1994, the only matter voted upon was the election of directors. All six
incumbent directors of the Company were re-elected. The voting was as follows:
<TABLE>
<CAPTION>
Shares for Which
Name of Nominee Shares Voted For Authority Withheld
--------------- ---------------- ------------------
<S> <C> <C>
Milton H. Dresner 1,179,275 200
Jay B. Langner 1,179,275 200
Edward J. Rosenthal 1,179,275 200
Hans H. Sammer 1,179,275 200
Richard D. Segal 1,179,275 200
Stanley S. Shuman 1,174,575 4,900
</TABLE>
There were no abstentions or broker nonvotes.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
11 Computations of Earnings Per Share Information, Primary
and Fully Diluted, from Earnings Before Cumulative
Effect of Change in the Method of Accounting for Income
Taxes and Net Earnings.
27 Financial Data Schedule
b) Reports on Form 8-K - None
17
<PAGE> 18
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.
HUDSON GENERAL CORPORATION
--------------------------
(Registrant)
Date: February 8, 1995
/s/ JAY B. LANGNER
--------------------------
Jay B. Langner
President
/s/ MICHAEL RUBIN
--------------------------
Michael Rubin
Chief Financial Officer
18
<PAGE> 19
HUDSON GENERAL CORPORATION & SUBSIDIARIES
EXHIBIT INDEX
Exhibit
No. Exhibit
- - - - ----------------------------------------------------------------------------
11 Computations of Earnings Per Share Information,
Primary and Fully Diluted, from Earnings Before
Cumulative Effect of Change in the Method of Accounting
for Income Taxes and Net Earnings
27 Financial Data Schedule
<PAGE> 1
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
PRIMARY - EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGE IN THE METHOD OF ACCOUNTING FOR INCOME TAXES
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------ -----------------
1994 1993 1994 1993
------------------ -----------------
(in thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Earnings before cumulative effect of change
in the method of accounting for income taxes
per share - primary . . . . . . . . . . . . . . . . . $ 633 $ 393 $ 868 $1,079
===== ===== ===== ======
Weighted average number of
common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . . 1,263 1,243 1,262 1,243
===== ===== ===== =====
Earnings before cumulative effect of change
in the method of accounting for income taxes
per common and common equivalent share - primary. . . $ .50 $ .32 $ .69 $ .87
===== ===== ===== =====
</TABLE>
<PAGE> 2
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
PRIMARY - NET EARNINGS
<TABLE>
<CAPTION> Three Months Ended Six Months Ended
December 31, December 31,
------------------ ------------------
1994 1993 1994 1993
------------------ ------------------
(in thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Net earnings for computing earnings
per share - primary . . . . . . . . . . . . . . . . . $ 633 $ 393 $ 868 $1,529
====== ====== ====== ======
Weighted average number of
common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . . . 1,263 1,243 1,262 1,243
====== ====== ====== ======
Net earnings per common and
common equivalent share - primary . . . . . . . . . . $ .50 $ .32 $ .69 $ 1.23
====== ====== ====== ======
</TABLE>
<PAGE> 3
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
FULLY DILUTED - EARNINGS BEFORE CUMULATIVE
EFFECT OF CHANGE IN THE METHOD OF ACCOUNTING FOR INCOME TAXES
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
--------------------- --------------------
1994 1993 1994 1993
--------------------- --------------------
(in thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Earnings before cumulative effect of change
in the method of accounting for income taxes
for computing earnings per share - primary . . . . . . $ 633 $ 393 $ 868 $1,079
Reduction of interest expense less applicable
income taxes assuming conversion of 7% convertible
subordinated debentures due 2011 . . . . . . . . . . . 286 286 573 573
------ ------ ------ ------
Earnings before cumulative effect of change in
the method of accounting for income taxes for
computing earnings per share - fully diluted . . . . . $ 919 $ 679 $1,441 $1,652
====== ====== ====== ======
Weighted average number of common and
common equivalent shares outstanding . . . . . . . . . 1,263 1,243 1,266 1,243
Addition from assumed conversion as of the beginning
of each period of the 7% convertible subordinated
debentures outstanding at the end of each period . . . 885 885 885 885
------ ------ ------ ------
Weighted average number of common and common
equivalent shares outstanding on a fully
diluted basis . . . . . . . . . . . . . . . . . . . . 2,148 2,128 2,151 2,128
====== ====== ====== ======
Earnings before cumulative effect of change in the
method of accounting for income taxes per common
and common equivalent share - fully diluted . . . . . $ .43 $ .32 $ .67 $ .78
====== ====== ====== ======
</TABLE>
<PAGE> 4
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
FULLY DILUTED - NET EARNINGS
<TABLE>
<CAPTION> Three Months Ended Six Months Ended
December 31, December 31,
--------------------- ----------------------
1994 1993 1994 1993
--------------------- ----------------------
(in thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Net earnings for computing
earnings per share - primary . . . . . . . . . . . . . . $ 633 $ 393 $ 868 $1,529
Reduction of interest expense less applicable income
taxes assuming conversion of 7% convertible
subordinated debentures due 2011 . . . . . . . . . . . 286 286 573 573
------ ------ ------ ------
Net earnings for computing earnings
per share - fully diluted . . . . . . . . . . . . . . . $ 919 $ 679 $1,441 $2,102
====== ====== ====== ======
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . 1,263 1,243 1,266 1,243
Addition from assumed conversion as of the beginning
of each period of the 7% convertible subordinated
debentures outstanding at the end of each period . . . 885 885 885 885
------ ------ ------ ------
Weighted average number of common and common
equivalent shares outstanding on a fully diluted
basis . . . . . . . . . . . . . . . . . . . . . . . . 2,148 2,128 2,151 2,128
====== ======= ====== ======
Net earnings per common and
common equivalent share - fully diluted . . . . . . . . $ .43 $ .32 $ .67 $ .99
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 4,202,000
<SECURITIES> 0
<RECEIVABLES> 17,596,000<F1>
<ALLOWANCES> 0
<INVENTORY> 976,000
<CURRENT-ASSETS> 26,561,000
<PP&E> 32,959,000<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 79,607,000
<CURRENT-LIABILITIES> 29,337,000
<BONDS> 29,000,000
<COMMON> 1,253,000
0
0
<OTHER-SE> 18,362,000
<TOTAL-LIABILITY-AND-EQUITY> 79,607,000
<SALES> 64,525,000
<TOTAL-REVENUES> 64,525,000
<CGS> 51,628,000
<TOTAL-COSTS> 54,924,000
<OTHER-EXPENSES> 6,916,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 351,000
<INCOME-PRETAX> 2,334,000
<INCOME-TAX> 321,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 868,000
<EPS-PRIMARY> .69
<EPS-DILUTED> .67
<FN>
<F1>AMOUNTS SHOWN NET.
</FN>
</TABLE>
