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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995
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)
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Delaware 13-1947395
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 Great Neck Road, Great Neck, N.Y. 11021
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 487-8610
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, $1 par value American Stock Exchange, Inc.
7% Convertible Subordinated Debentures
Due 2011 American Stock Exchange, Inc.
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
Indicate by a checkmark 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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant'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]
Aggregate market value of voting stock held by non-affiliates of Registrant
based on the closing price on August 7, 1995 was $18,253,708.
The number of shares outstanding (net of treasury stock) of the Registrant's
common stock as of August 7, 1995 was 1,157,202 shares.
Specific portions of the following documents are incorporated herein by
reference in the parts hereof indicated, and only such specific portions are to
be deemed filed as part of this report:
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Document Part
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1995 Proxy Statement of Registrant (to be filed with
the Commission pursuant to Regulation 14A no later than 120 days
after the close of its fiscal year) III
Registrant's 1995 Annual Report to Shareholders I, II, IV
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PART I
ITEM 1. BUSINESS
General Development of Business
Hudson General Corporation (the "Company" or "Registrant") was
organized in Delaware in 1961. The Company is principally engaged in providing
a broad range of services to the aviation industry. The services, which are
conducted by the Company and its subsidiaries, include aircraft ground
handling; aircraft deicing; aircraft fueling; ground transportation services;
snow removal; fuel management; cargo warehousing; ramp sweeping and glycol
recovery; the sale, leasing and maintenance of ground support equipment;
specialized maintenance services and the leasing of hangar, office and tie-down
space to private aircraft owners. On October 31, 1994, the Company ceased its
fixed base operations in Canada (see Note 4 to Item 14(a)(1) Financial
Statements). In addition to its aviation services, the Company is a 50%
partner with Oxford First Corporation in a joint venture for the development
and sale of land on the Island of Hawaii (see Note 6 to Item 14(a)(1) Financial
Statements).
Narrative Description of Business
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. Additional information required to be
provided under this item is incorporated by reference from pages 3-8 of the
Registrant's 1995 Annual Report to Shareholders.
General Information
The Company does not spend a material amount for research or
development activities.
During the years ended June 30, 1995, 1994, and 1993, sources
of
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the Company's revenues which exceeded 10% of consolidated revenues in any year
were: aircraft ground handling services (including deicing) $74,334,000,
$68,291,000 and $67,811,000; aircraft fueling services (including fixed base
operations) $22,923,000, $21,936,000 and $23,586,000; ground transportation
services $23,802,000, $22,171,000 and $20,567,000; and snow removal services
$3,706,000, $17,871,000 and $8,933,000, respectively (Note: Foreign revenues
included above are translated at the average rates of exchange in their
respective fiscal years).
No customer of the Company accounted for more than 10% of
consolidated revenues during fiscal 1995.
The Company's services are generally subject to competitive
bidding, and the Company competes principally with airlines and other aviation
services companies, some of which are larger and have resources greater than
the Company. The major bases of competition are the prices at which services
are offered and the quality and efficiency in the performance of services.
The compliance with federal, state and local provisions which
have been enacted or adopted regulating the discharge of materials into the
environment has not to date had a material effect upon the Company's capital
expenditures, results of operations or competitive position. However, the
federal government and many state and local governments have enacted or
proposed legislation and regulations with respect to storage facilities for
fuel, petroleum-based products and chemicals, the disposal of hazardous waste
materials, storm water discharges, and financial responsibility for possible
liability exposures relating to fuel storage facilities. Compliance with such
legislation and regulations has resulted in expenditures by the Company,
including expenditures for the testing, decommissioning and/or replacement of
certain of its fuel and deicing fluid storage facilities, and the clean-up of
fuel spills. The Company is presently engaged in several such decommissioning,
replacement and clean-up projects, and it is anticipated that additional such
expenditures, the amount of which is presently not
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expected to be material, will be required.
In addition, airport authorities are coming under increasing
pressure to clean-up previous contamination at their facilities, and are
seeking financial contributions from airport tenants and companies which
operate at their airports. The Company cannot predict at this time, the
amount, if any, that it may be required to pay in connection with such airport
authority initiatives.
The Company employs an aggregate of approximately 3,700
persons.
Financial Information About Foreign and Domestic Operations and Export Sales
The Company operates in only one industry segment. For
information as to foreign operations, see Note 4 to Item 14(a)(1) Financial
Statements. For information relating to the Company's investment in a joint
venture to develop and sell land in Hawaii (the Venture), see Note 6 to Item
14(a)(1) Financial Statements.
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ITEM 2. PROPERTIES
The Company's executive offices at 111 Great Neck Road, Great
Neck, New York contain approximately 13,000 square feet and are under lease
through December 31, 2002.
The Company also leases office, warehouse, hangar and
maintenance shop space as well as fuel storage facilities at various airport
locations in the United States and Canada. These leases expire at various
dates through 2005 and contain various renewal options through 2020. A
portion of this leased space has been sublet to non-affiliated sublessees. The
properties owned and leased by the Company are suitable and adequate to conduct
its business.
For information relating to the Company's interest in land in
Hawaii, see Note 6 to Item 14(a)(1) Financial Statements and page 8 of the
Registrant's 1995 Annual Report to Shareholders.
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ITEM 3. LEGAL PROCEEDINGS
In 1988, Texaco Canada Inc. (Texaco) (now known as McColl-
Frontenac Inc.) instituted a suit in the Supreme Court of Ontario, Canada
against the Company and Petro-Canada, Inc., the corporation which supplied
aviation fuel for the Company's Canadian fixed base operations. The suit's
allegations, as amended in 1992, are that the defendants interfered with
contractual and fiduciary relations and induced the breach of a fuel supply
agreement between Texaco and Innotech Aviation Limited (Innotech) in connection
with the purchase by the Company from Innotech in 1984 of certain assets of
Innotech's airport ground services business. The suit seeks compensatory and
punitive damages totaling $110,000,000 (Canadian) (approximately $80,000,000
(U.S.)) plus all profits earned by the defendants subsequent to the alleged
breach. A trial date has been set for May 1996.
Innotech (which due to a name change is now called Aerospace
Realties (1986) Limited) has agreed to defend and indemnify the Company against
claims of whatever nature asserted in connection with, arising out of or
resulting from the fuel supply agreement with Texaco, and is defending the
Company in the suit by Texaco.
Company management believes, and counsel for the Company has
advised based on available facts, that the Company will successfully defend
this action.
In March 1994 a jury in New York State Supreme Court in
Manhattan, New York rendered a verdict against the Company in a civil lawsuit
for personal injuries and awarded the plaintiff a total of $21,436,000 in
damages, of which $19,186,000 is covered by insurance. The suit arose from an
accident involving a collision between a Company vehicle and another vehicle at
JFK International Airport in New York. At March 31, 1994, the Company accrued
a provision for the entire uninsured punitive damage amount of $2,250,000 in
the Company's consolidated statements of operations. In
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June 1994, as a result of a ruling by the judge in the case vacating the
uninsured punitive damage award against the Company, the Company reversed the
$2,250,000 provision which it had previously accrued. The judge also ruled
that the jury's award of compensatory damages was excessive in several
respects, and held that this award should be reduced to $9,600,000. The
compensatory damages are fully covered by insurance. The Company's insurance
carrier has appealed the judge's ruling, seeking to further reduce the jury's
award. As a result, it is anticipated that the plaintiff will cross-appeal the
judge's ruling, seeking to reinstate the jury award including punitive damages.
Company management and appellate counsel for the Company believe that the
Appellate Division is unlikely to award punitive damages to the plaintiff.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Not Applicable
ADDITIONAL ITEM
EXECUTIVE OFFICERS OF THE COMPANY
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Name Age Position with Company
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Jay B. Langner 65 Chairman of the Board, President, Chief Executive Officer and Director
Paul R. Pollack 53 Executive Vice President and Chief Operating Officer
Michael Rubin 48 Executive Vice President and Chief Financial Officer
Raymond J. Rieder 45 Senior Vice President and Chief Marketing Officer
Fernando DiBenedetto 46 Senior Vice President - Operations
Donald S. Croot 66 Vice President-Canadian Operations
Noah E. Rockowitz 46 Vice President, Secretary and General Counsel
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No family relationships exist among the executive officers of the
Company. Each of the executive officers holds office at the pleasure of the
Board of Directors, except as noted below.
Mr. Langner has served as a Director of the Company since 1961 and as
Chairman since 1977. He has served as President since 1989 and previously
served in such capacity from 1961 until 1979. The Company has an employment
contract with Mr. Langner pursuant to which Mr. Langner has agreed to render
services to the Company as Chairman, President and Chief Executive Officer for
a period ending January 31, 1998.
Mr. Pollack has served as Executive Vice President and Chief Operating
Officer of the Company since 1990, and prior thereto as Senior Vice President
since 1984. He has been employed in various capacities with the Company,
including as a divisional officer, since 1968. Mr. Pollack is a Certified
Public Accountant.
Mr. Rubin has served as Executive Vice President and Chief Financial
Officer of the Company since 1990, and has been Treasurer of the Company since
1983. Previously, Mr. Rubin had been Vice President-Finance
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since 1985. He has been employed in various capacities with the Company since
1971. Mr. Rubin is a Certified Public Accountant.
Mr. Rieder has served as Senior Vice President and Chief Marketing
Officer of the Company since 1990, and prior thereto as Vice President -
Marketing since 1984. He has been employed in various capacities with the
Company, including as a divisional officer, since 1967.
Mr. DiBenedetto has served as Senior Vice President-Operations since
July 26, 1994. Prior thereto he was Vice President- Operations since 1984. He
has been employed in various capacities with the Company, including as a
divisional officer, since 1970.
Mr. Croot has served as Vice President-Canadian Operations of the
Company since 1989. He has been employed in various capacities with the
Company, including as a divisional officer, since 1968.
Mr. Rockowitz has served as Vice President-General Counsel since 1985
and as Secretary since 1986. Prior to joining the Company in 1985, he had been
Corporate Secretary and Assistant General Counsel of Belco Petroleum
Corporation since 1978.
The Company has employment contracts with Messrs. Pollack, Rubin,
Rieder, DiBenedetto and Rockowitz which currently extend until December 31,
1995 and are subject to extension for additional two year periods unless on or
before the September 30th preceeding any then-existing expiration date, the
Company notifies the executive that it elects not to so extend the term. The
Company also has an employment contract with Mr. Croot which may be terminated
by the Company as of any December 31st.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information required to be provided under Part II, Item 5(a) and
(c) is incorporated by reference from page 13 of the Registrant's 1995 Annual
Report to Shareholders under the caption "Selected Consolidated Financial
Data". At June 30, 1995, there were 220 holders of record of the Company's
common stock.
The Company's Revolving Credit Agreement, as amended (Credit
Agreement), contains certain limitations on the payment of dividends (see Note
5 to Item 14(a)(1) Financial Statements) including limiting the payment of
dividends (other than stock dividends) and the purchase, redemption or
retirement by the Company of its stock 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. In addition, the Company is
restricted from paying cash dividends or purchasing, redeeming or retiring its
stock unless tangible net worth (TNW), as defined, is greater than $16,500,000.
At June 30, 1995 TNW was $22,298,000. The Credit Agreement also permits the
Company, until March 31, 1996, to expend up to an additional $3,000,000 to
repurchase shares of its common stock so long as no proceeds from borrowings
under the Credit Agreement are utilized for such purpose. The Board of
Directors has approved the repurchase of up to 150,000 shares of the Company's
common stock from time to time in either open market or privately negotiated
transactions. As of August 25, 1995 the Company had repurchased 112,800 shares
in the open market for an aggregate purchase price of approximately $2,000,000
pursuant to this authorization.
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ITEM 6. SELECTED FINANCIAL DATA
The information required to be provided under Part II, Item 6 is
incorporated by reference from page 13 of the Registrant's 1995 Annual Report
to Shareholders under the caption "Selected Consolidated Financial Data".
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required to be provided under Part II, Item 7 is
incorporated by reference from pages 9-12 of the Registrant's 1995 Annual
Report to Shareholders under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and the
independent auditors' report thereon of KPMG Peat Marwick LLP, independent
certified public accountants, for the Company's fiscal years ended June 30,
1995, 1994 and 1993 are filed pursuant to Item 14(a)(1) of this Report. The
financial statements and the required financial statement schedule of the
Venture and the independent auditors' report thereon of KPMG Peat Marwick LLP,
independent certified public accountants, for the fiscal years ended June 30,
1995, 1994 and 1993 are filed pursuant to Item 14(d) of this Report. All such
financial statements and financial statement schedule are incorporated herein
by reference.
Selected quarterly financial data of the Registrant for the fiscal
years ended June 30, 1995 and 1994 appears in Note 12 to Item 14(a)(1)
Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE - Not Applicable
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required to be provided under Part III, Item 10,
relative to Directors of the Registrant is incorporated by reference from the
Registrant's 1995 definitive proxy statement to be filed with the Securities
and Exchange Commission (the "Commission") pursuant to Regulation 14A no later
than 120 days after the close of its fiscal year and, relative to executive
officers, to Part I of this report under the caption "Executive Officers of the
Company".
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required to be provided under Part III, Items 11, 12
and 13 is incorporated by reference from the Registrant's 1995 definitive proxy
statement to be filed with the Commission pursuant to Regulation 14A no later
than 120 days after the close of its fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
(a)(1)
Financial Statements of the Registrant, all of which are incorporated herein by
reference to the Registrant's 1995 Annual Report to Shareholders.
Independent Auditors' Report of KPMG Peat Marwick LLP, independent auditors,
appearing on page 24 of the 1995 Annual Report to Shareholders.
Consolidated Balance Sheets of Hudson General Corporation and Subsidiaries at
June 30, 1995 and 1994, appearing on page 15 of the 1995 Annual Report to
Shareholders.
Consolidated Statements of Operations of Hudson General Corporation and
Subsidiaries for the Years Ended June 30, 1995, 1994 and 1993, appearing on
page 14 of the 1995 Annual Report to Shareholders.
Consolidated Statements of Cash Flows of Hudson General Corporation and
Subsidiaries for the Years Ended June 30, 1995, 1994 and 1993, appearing on
page 17 of the 1995 Annual Report to Shareholders.
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Consolidated Statements of Stockholders' Equity of Hudson General Corporation
and Subsidiaries for the Years Ended June 30, 1995, 1994 and 1993 appearing on
page 16 of the 1995 Annual Report to Shareholders.
Notes to Consolidated Financial Statements appearing on pages 18-24 of the 1995
Annual Report to Shareholders.
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Location
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in 10-K
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(a)(2)
Financial Statements of Kohala Joint Venture and Subsidiary:
Independent Auditors' Report of KPMG Peat Marwick LLP. F2
Consolidated Balance Sheets of Kohala Joint Venture and Subsidiary at June 30, 1995 and 1994. F3
Consolidated Statements of Operations and Partners' Deficit of Kohala Joint Venture and Subsidiary for the F4
Years Ended June 30, 1995, 1994 and 1993.
Consolidated Statements of Cash Flows of Kohala Joint Venture and Subsidiary for the Years Ended June 30, F5
1995, 1994 and 1993.
Notes to Consolidated Financial Statements. F6-F12
Financial Statement Schedule of Kohala Joint Venture and
Subsidiary for the Years Ended June 30, 1995, 1994 and 1993:
II - Valuation and Qualifying Accounts F13
Schedules other than those listed above are omitted because of the absence of the conditions under which they
are required or because the information required therein is set forth in all material respects in the
financial statements, including the notes thereto.
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(a)(3) Exhibits
EXHIBIT
NO. EXHIBIT DESCRIPTION
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3.1 Restated Certificate of Incorporation of the Registrant,
as amended to date, filed as Exhibit 3.1 to Quarterly
Report on Form 10-Q for the quarter ended December 31,
1986, incorporated herein by reference.
3.2 By-laws of the Registrant, as amended to date, filed as
Exhibit 3.2(b) to Quarterly Report on Form 10-Q for the
quarter ended December 31, 1991, incorporated herein by
reference.
4.4(a) Revolving Credit and Term Loan Agreement dated as of
November 25, 1992 among the Registrant, various banking
institutions named therein and The First National Bank
of Boston, as agent, filed as Exhibit 4.4(h) to Current
Report on Form 8-K filed December 4, 1992, incorporated
herein by reference.
4.4(b) First Amendment to the Revolving Credit and Term Loan
Agreement dated as of November 25, 1992 among the
Registrant, various banking institutions named therein
and The First National Bank of Boston, as agent, dated
as of August 31, 1993 filed as Exhibit 4.4(i) to Annual
Report on Form 10-K for the fiscal year ended June 30,
1993, incorporated herein by reference.
4.4(c) Second Amendment to the Revolving Credit and Term Loan
Agreement dated as of November 25, 1992 among the
Registrant, various banking institutions named therein
and The First National Bank of Boston, as agent, dated
as of December 21, 1993 filed as Exhibit 4.4(j) to
Quarterly Report on Form 10-Q for the quarter ended
December 31, 1993, incorporated herein by reference.
4.4(d) Third Amendment to the Revolving Credit and Term Loan
Agreement dated as of November 25, 1992 among
Registrant, various banking institutions named therein
and The First National Bank of Boston, as agent, dated
as of March 15, 1995 filed as Exhibit 4.4(k) to
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995, incorporated herein by reference.
4.4(e) Revolving Credit Agreement dated as of November 25, 1992
among Hudson General Aviation Services Inc., various
banking institutions named therein and Bank of Boston
Canada, as agent, filed as Exhibit 4.4(i) to Quarterly
Report on Form 10-Q for the quarter ended March 31,
1993, incorporated herein by reference.
4.4(f) First Amendment to the Revolving Credit Agreement dated
as of November 25, 1992 among Hudson General Aviation
Services Inc., various banking institutions named
therein and The Chase Manhattan Bank of Canada, as
successor agent, dated as of March 15, 1995.
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4.6 Indenture dated as of July 1, 1986 between the
Registrant and Chemical Bank (Delaware), relating to the
Registrant's 7% Convertible Subordinated Debentures Due
2011, filed as Exhibit 4.1 to Amendment No. 1 to Form
S-2 Registration Statement under the Securities Act of
1933, Registration No. 33-6689, incorporated herein by
reference.
10.1(a) Development Agreement dated April 29, 1981 between Kahua
Ranch, Limited, and the Registrant, filed as Exhibit 3
to Quarterly Report on Form 10-Q for the quarter ended
March 31, 1981, incorporated herein by reference.
10.1(b) Amended and Restated Joint Venture Agreement dated April
29, 1981 between Hudson Kohala Inc. and The Hilton Head
Company of Hawaii, Inc. (now Oxford Kohala, Inc.), filed
as Exhibit 4 to Quarterly Report on Form 10-Q for the
quarter ended March 31, 1981, incorporated herein by
reference.
10.1(c) First Amendment to the Joint Venture Agreement,
Amendment and Restatement dated April 29, 1981, such
Amendment being effective as of June 30, 1984, filed as
Exhibit 10 to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1984, incorporated herein by
reference.
10.1(d) Receivable Sales Agreement dated January 3, 1990, with
amendment letters dated June 22, 1990 and August 2,
1990, between the Registrant and Oxford First
Corporation and Oxford Kohala, Inc., filed as Exhibit
10.1(d) to Annual Report on Form 10-K for the fiscal
year ended June 30, 1990, incorporated herein by
reference.
10.1(e) Commitment Agreement to Purchase Receivables dated
January 3, 1990, with amendment letter dated August 2,
1990, between Kohala Joint Venture and The Oxford
Finance Companies, Inc., filed as Exhibit 10.1(e) to
Annual Report on Form 10-K for the fiscal year ended
June 30, 1990, incorporated herein by reference.
10.1(f) Agreement constituting an amendment to the Joint Venture
Agreement, Amendment and Restatement dated April 29,
1981, dated November 2, 1990 among the Registrant,
Hudson Kohala Inc., Oxford Kohala, Inc. and Oxford First
Corporation relating to receivables of the Kohala Joint
Venture, filed as Exhibit 10.1(f) to Quarterly Report on
Form 10-Q for the quarter ended September 30, 1990,
incorporated herein by reference.
10.1(g) Agreement constituting an amendment to the Joint Venture
Agreement, Amendment and Restatement dated April 29,
1981, dated September 5, 1991 among the Registrant,
Hudson Kohala Inc., Oxford Kohala, Inc. and Oxford First
Corporation relating to distributions from the Kohala
Joint Venture, filed as Exhibit 10.1(g) to Annual Report
on Form 10-K for the fiscal year ended June 30, 1991,
incorporated herein by reference.
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10.1(h) Agreement constituting an amendment to the Joint Venture
Agreement, Amendment and Restatement dated April 29,
1981, dated September 26, 1991 among the Registrant,
Hudson Kohala Inc., Oxford Kohala, Inc. and Oxford First
Corporation relating to distributions from the Kohala
Joint Venture, filed as Exhibit 10.1(h) to Quarterly
Report on Form 10-Q for the quarter ended September 30,
1991, incorporated herein by reference.
10.1(i) Second Amendment to the Joint Venture Agreement,
Amendment and Restatement dated April 29, 1981, such
Amendment being effective as of October 1, 1994, filed
as Exhibit 10.1(i) to Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994, incorporated
herein by reference.
10.2* 1981 Non-Qualified Stock Option and Stock Appreciation
Rights Plan, filed as Exhibit 15.1 to Form S-8
Registration Statement under the Securities Act of 1933,
Registration No. 2-75137, incorporated herein by
reference.
10.3* 1981 Incentive Stock Option and Stock Appreciation
Rights Plan, filed as Exhibit 15.2 to Form S-8
Registration Statement under the Securities Act of 1933,
Registration No. 2-75137, incorporated herein by
reference.
10.4(a)* Form of Severance Agreement, dated as of June 3, 1986,
between the Registrant and Michael Rubin, filed as
Exhibit 10.5(a) to Annual Report on Form 10-K for the
fiscal year ended June 30, 1988, incorporated herein by
reference.
10.4(b)* Amended schedule of executive officers entitled to
benefits of Severance Agreements, filed as Exhibit
10.4(b) to Annual Report on Form 10-K for the fiscal
year ended June 30, 1990, incorporated herein by
reference.
10.5(a)* Employment Agreement dated July 28, 1988, between the
Registrant and Jay B. Langner, filed as Exhibit 10.6(a)
to Annual Report on Form 10-K for the fiscal year ended
June 30, 1988, incorporated herein by reference.
10.5(b)* Amendment dated April 16, 1990, amending the Employment
Agreement between the Registrant and Jay B. Langner
dated as of July 28, 1988, filed as Exhibit 10.5(b) to
Annual Report on Form 10-K for the fiscal year ended
June 30, 1990, incorporated herein by reference.
10.5(c)* Amendment dated August 16, 1994, amending the Employment
Agreement between the Registrant and Jay B. Langner
dated as of July 28, 1988, as amended, filed as Exhibit
10.5(c) to Annual Report on Form 10-K for the fiscal
year ended June 30, 1994, incorporated herein by
reference.
10.5(d)* Severance Agreement dated April 16, 1990 between the
Registrant and Jay B. Langner, filed as Exhibit 10.5(c)
to Annual Report on Form 10-K for the fiscal year ended
June 30, 1990, incorporated herein by reference.
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10.7(a)* Form of Employment Agreement, dated February 8, 1990,
between the Registrant and Michael Rubin, filed as
Exhibit 10.7(a) to Annual Report on Form 10-K for the
fiscal year ended June 30, 1990, incorporated herein by
reference.
10.7(b)* Schedule of executive officers entitled to benefits of
Employment Agreements, filed as Exhibit 10.7(b) to
Annual Report on Form 10-K for the fiscal year ended
June 30, 1990, incorporated herein by reference.
10.8* Employment Agreement dated September 21, 1990 between
the Registrant and Donald S. Croot, filed as Exhibit
10.9 to Annual Report on Form 10-K for the fiscal year
ended June 30, 1991, incorporated herein by reference.
10.9* Description of Executive Incentive Program adopted by
the Compensation Committee of the Board of Directors on
December 1, 1993, filed as Exhibit 10.9 to Quarterly
Report on Form 10-Q for the quarter ended December 31,
1993, incorporated herein by reference.
11 Computation of Earnings (Loss) Per Share Information -
primary and fully diluted.
13 The Registrant's 1995 Annual Report to Shareholders,
which report, except for those portions thereof which
are expressly incorporated by reference in this filing,
is furnished for the information of the Commission and
is not to be deemed to be filed as part of this filing.
21 Subsidiaries of the Registrant.
23 Consent of KPMG Peat Marwick LLP, the Company's
independent auditors, to the incorporation by reference
into the Company's Registration Statement on Form S-8,
as amended, Registration No. 2-75137.
(b) No reports on Form 8-K have been filed by Registrant
during the last quarter of the period covered by this
report.
(c) Reference is made to Item 14(a)(3) above.
(d) Reference is made to Item 14(a)(2) above.
* Denotes management contract for compensatory plan or
arrangement.
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SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned Chief Executive, Chief Financial and Chief Accounting Officers,
thereunto duly authorized on the 15th day of September 1995.
HUDSON GENERAL CORPORATION
<TABLE>
<CAPTION>
/s/ Signature Title
--------- -----
<S> <C> <C>
/s/ Jay B. Langner Chairman of the Board, President and
-------------- Chief Executive Officer
Jay B. Langner
/s/ Michael Rubin Executive Vice President and Chief
------------- Financial Officer
Michael Rubin
/s/ Barry I. Regenstein Vice President and Controller
-------------------
Barry I. Regenstein
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in their capacities as Directors on the 15th day of September
1995.
<TABLE>
<S> <C> <C> <C>
/s/ Jay B. Langner /s/ Hans H. Sammer
-------------- --------------
Jay B. Langner Hans H. Sammer
/s/ Milton H. Dresner /s/ Richard D. Segal
----------------- ----------------
Milton H. Dresner Richard D. Segal
/s/ Edward J. Rosenthal /s/ Stanley S. Shuman
------------------- -----------------
Edward J. Rosenthal Stanley S. Shuman
</TABLE>
-19-
<PAGE> 20
KOHALA JOINT VENTURE
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULE
(FORM 10-K)
JUNE 30, 1995, 1994 AND 1993
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
F1
<PAGE> 21
Independent Auditors' Report
The Board of Directors
Hudson General Corporation
The Board of Directors
Oxford First Corporation:
We have audited the accompanying consolidated balance sheets of the Kohala
Joint Venture and subsidiary as of June 30, 1995 and 1994 and the related
consolidated statements of operations and partners' deficit, and cash flows for
each of the years in the three-year period ended June 30, 1995. We have also
audited financial statement schedule II. These consolidated financial
statements and the financial statement schedule are the responsibility of the
Venture's management. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
For the years ended June 30, 1995, 1994 and 1993, the Venture incurred net
losses of $5,495,300, $3,601,800 and $5,575,500, respectively, and at June 30,
1995 the amount of the partners' deficit was $9,331,900. Additionally, in
1995, 1994 and 1993 the partners advanced $2,346,100, $1,740,000 and
$2,150,000, respectively, to the Venture. Unless land sales increase
significantly, additional contributions from the partners will be required in
fiscal 1996.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Kohala Joint
Venture and subsidiary as of June 30, 1995 and 1994 and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1995, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, present fairly, in all material respects, the information set
forth therein.
KPMG PEAT MARWICK LLP
Jericho, New York
August 16, 1995
F2
<PAGE> 22
KOHALA JOINT VENTURE AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Cash and cash equivalents $ 89,000 121,100
Accounts receivable 43,500 31,900
Accrued interest receivable 239,900 263,600
Mortgage notes receivable, net (including amounts from related parties of
$1,073,600 and $1,508,700 in 1995 and 1994, respectively) 7,448,200 9,901,800
Land and development costs 26,863,000 26,254,700
Property, plant and equipment, net 1,705,000 1,782,600
Model home, net 687,200 780,800
Foreclosed real estate, net 2,395,200 2,138,400
Other 68,800 75,900
----------- -----------
$ 39,539,800 41,350,800
=========== ===========
Liabilities and Partners' Deficit
Liabilities:
Notes payable $ 3,402,400 4,758,400
Partner advances and accrued interest payable 44,047,500 38,664,300
Accounts payable and accrued expenses 1,339,900 1,748,000
Deposits 81,900 16,700
----------- -----------
Total liabilities 48,871,700 45,187,400
Contingencies
Partners' deficit (9,331,900) (3,836,600)
----------- -----------
$ 39,539,800 41,350,800
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F3
<PAGE> 23
KOHALA JOINT VENTURE AND SUBSIDIARY
Consolidated Statements of Operations and Partners' Deficit
Years ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net sales $ 503,600 535,900 398,500
Cost of sales 191,300 163,400 182,200
---------- ---------- ----------
Gross profit 312,300 372,500 216,300
Selling, general and administrative
expenses 2,851,600 2,796,700 4,336,000
Other (income) expense:
Interest expense 3,514,500 2,111,600 2,912,400
Interest income and other (558,500) (934,000) (1,456,600)
---------- ---------- ----------
Net loss (5,495,300) (3,601,800) (5,575,500)
Partners' capital (deficit), beginning
of year (3,836,600) (234,800) 5,340,700
---------- ---------- ----------
Partners' deficit, end of year $ (9,331,900) (3,836,600) (234,800)
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F4
<PAGE> 24
KOHALA JOINT VENTURE AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Proceeds from land sales $ 23,000 75,000 213,600
Interest income received 579,000 930,100 1,262,100
Proceeds from water company sales 246,600 281,500 236,900
Land and development cost expenditures (243,700) (415,400) (860,400)
Payments on contractor obligations - (737,200) (1,542,500)
Interest paid (477,400) (693,900) (1,147,500)
Selling, general and administrative expenditures paid (2,062,800) (1,759,700) (2,243,500)
Collections on mortgage notes 1,404,500 3,832,600 3,601,600
Proceeds from utility contract refund - - 242,300
Proceeds from sale of and deposits relating to assets
held in foreclosure 89,800 - 154,100
---------- ---------- ----------
Net cash provided by (used in) operating
activities (441,000) 1,513,000 (83,300)
---------- ---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment (10,900) (88,100) (174,800)
---------- ---------- ----------
Net cash used in investing activities (10,900) (88,100) (174,800)
---------- ---------- ----------
Cash flows from financing activities:
Advances received from partners 2,346,100 1,740,000 2,150,000
Payments to partners - - (120,000)
Contributions in aid of construction received 6,000 - 54,200
Proceeds from mortgage receivable financing agreements - - 98,200
Payments on mortgage receivable financing agreements (1,932,300) (3,273,500) (1,918,900)
---------- ---------- ----------
Net cash provided by (used in) financing
activities 419,800 (1,533,500) 263,500
---------- ---------- ----------
Net increase (decrease) in cash and cash
equivalents (32,100) (108,600) 5,400
Cash and cash equivalents at beginning of year 121,100 229,700 224,300
---------- ---------- ----------
Cash and cash equivalents at end of year $ 89,000 121,100 229,700
========== ========== ==========
Non cash financing:
Issuance of note payable for land development $ 576,180 - -
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F5
<PAGE> 25
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1995, 1994 and 1993
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of the Kohala
Joint Venture (the Venture) and its 99% owned subsidiary, the
Kohala Ranch Water Company (KRWC)(note 7). All significant
intercompany accounts and transactions have been eliminated in
consolidation.
(b) Business
The Venture is a partnership which was formed to acquire, develop and sell
approximately 4,000 contiguous acres of land in Hawaii (the
Project). The Partners in the Venture are Hudson Kohala, Inc.
(Hudson, a wholly-owned subsidiary of Hudson General Corporation)
and Oxford Kohala, Inc. (Oxford, a wholly-owned subsidiary of
Oxford First Corporation) (Oxford First)) (together, the
Partners). The terms of the partnership are contained in the
Restated Joint Venture Agreement dated April 29, 1981, as amended
(the Agreement). The Project is being developed in four
successive phases. The first two phases, containing approximately
2,100 acres, have been developed and substantially sold. The third
phase, containing approximately 550 acres, has also been developed
and has 86 parcels available for sale. The fourth phase has yet
to be developed, except to the extent common improvements (main
roadway, water wells, etc.) have been completed.
(c) Partners' Capital and Allocation of Profits and Losses
Partners' capital (deficit) includes the Partners' capital accounts in the
Venture and the minority interest (the remaining 1%) of the
Partners in KRWC.
In accordance with the Agreement, profits are shared equally by the
Partners. Losses are shared by the Partners on a pro-rata basis,
based first on their respective capital accounts and then on their
respective combined advances to the Venture including accrued
interest (note 5).
(d) Revenue Recognition and Land Sales
All sales to date have been from the first, second and third phases of the
Project. Revenue is being recognized under the full accrual
method of accounting.
(e) Capitalization of Costs
Land and development costs (including interest) are initially capitalized
and subsequently carried at the lower of average cost or net
realizable value. These costs are charged to costs of sales when
the corresponding land sale is recorded based upon the relative
fair value of the parcel sold to the aggregate fair value of all
parcels in the phase. Although the Venture believes its estimates
are reasonable, there can be no assurance that the estimated
future selling prices can be realized or that the actual costs for
Phases III or IV will not exceed such estimates.
The Venture has capitalized interest costs, as appropriate, for each phase
of the Project. During fiscal 1991, 1989 and 1987, the
capitalization of interest costs relating to the third, second and
first phases,
(Continued)
F6
<PAGE> 26
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
respectively, was discontinued, as these phases were substantially
completed during the respective periods and ready for their
intended use. Effective July 1, 1994, as a result of the lack of
further development activity, capitalization of interest relating
to the fourth phase has been discontinued (note 3).
(f) Estimated Costs to Complete
At June 30, 1995, the Venture estimated that $2,478,800 of additional
costs were necessary to complete the development of Phase III.
The portion of such amount relating to unsold parcels has been
offset against land and development costs in the accompanying
consolidated balance sheets.
(g) Property, Plant and Equipment
Property, plant and equipment is recorded at the lower of cost or net
realizable value.
Depreciation is provided on the straight-line method. The number of years
over which major classes of assets are depreciated and the costs
and related accumulated depreciation as of June 30, 1995 and 1994
are set forth:
<TABLE>
<CAPTION>
Estimated
useful lives 1995 1994
------------ ---- ----
<S> <C> <C> <C>
Water distribution systems 20-50 years $ 2,763,200 2,754,400
Plant structures and equipment 3-10 years 179,900 177,800
---------- ----------
2,943,100 2,932,200
Accumulated depreciation (709,600) (626,800)
Contributions in aid of construction (528,500) (522,800)
---------- ----------
$ 1,705,000 1,782,600
========== ==========
</TABLE>
Contributions in aid of construction represent contributions by customers
for plant additions to be made for the benefit of the customer.
Accordingly, such contributions are recorded as a reduction
against property, plant and equipment.
During fiscal 1993, the Venture began depreciating the model home based
upon an estimated residual value of $500,000, and a five year
useful life. Included in both fiscal 1995 and 1994 depreciation
expense was $93,600 relating to the model home.
Depreciation expense was $176,400, $177,400 and $180,200 for fiscal 1995,
1994 and 1993, respectively.
(h) Income Taxes
As a partnership, the Venture is not a taxable entity under the provisions
of the Internal Revenue Code. The taxable results and available
tax credits of the Venture and KRWC pass directly to the Partners'
corporate income tax returns in the manner prescribed in the
Agreement.
(Continued)
F7
<PAGE> 27
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(i) Statements of Cash Flows
For the purposes of presenting the consolidated statements of cash flows,
the Venture considers all securities with an original maturity of
three months or less at the date of acquisition to be cash
equivalents.
A reconciliation of net loss to net cash provided by (used in) operating
activities for fiscal 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net loss $ (5,495,300) (3,601,800) (5,575,500)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 176,400 177,400 180,200
Provision for losses and discounts on
mortgages receivable 988,500 378,300 1,262,100
Provision for losses on foreclosed real estate - 367,700 117,800
Sale of asset held in foreclosure 89,800 - 154,100
Interest paid under interest expense 3,037,100 1,417,700 1,764,900
Mortgage loans originated on land sales (209,500) (200,000) -
Cash collections on mortgage loans 1,404,500 3,832,600 3,601,600
Excess land and development costs paid
over cost of sales 52,400 (252,000) (678,200)
Repayment of contractor obligations - (737,200) (1,542,500)
Accrued interest on mortgages receivable 23,900 800 (36,500)
Cash for water sales in excess of accrual (4,300) 1,800 (1,500)
Excise tax accrual (434,400) 224,000 600,000
Other (70,100) (96,300) 70,200
---------- ---------- ----------
Total adjustments 5,054,300 5,114,800 5,492,200
---------- ---------- ----------
Net cash provided by (used in) operating activities $ (441,000) 1,513,000 (83,300)
========== ========== ==========
</TABLE>
(2) Mortgage Notes Receivable
At June 30, 1995 and 1994, mortgage notes receivable from land sales
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Mortgage notes receivable $ 9,985,700 11,663,500
Allowance for uncollectible accounts (2,464,200) (1,661,800)
Reserve for cash discounts and other
allowances (73,300) (99,900)
---------- ----------
Mortgage notes receivable, net $ 7,448,200 9,901,800
========== ==========
</TABLE>
The Venture typically provides financing in connection with the sale of
land parcels. None of the Venture's mortgage notes receivable
comprised more than 5% of the total mortgage notes receivable
(Continued)
F8
<PAGE> 28
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
balance at June 30, 1995. The collectibility of mortgage notes
receivable is affected by general economic conditions.
Purchasers of land parcels are entitled to discounts if certain conditions are
met. Discounts ranging from 10-20% are generally given if the purchase
price is paid in cash at the closing. If the cash is paid within
specified periods after the closing, a reduced sales discount is given.
Reserves have been established for estimated discounts to be taken by
purchasers under the various discount programs.
Stated interest rates on mortgage notes receivable outstanding at June 30, 1995
and 1994, range from 6% to 11% (averaging 9.6% as of June 30, 1995 and
9.8% as of June 30, 1994). Interest is not accrued on mortgage notes
receivable in arrears 90 days or more. The minimum down payment for sales
to unrelated parties is 10% (see note 8 for sales to related parties).
At June 30, 1995, mortgage notes receivable 90 days or more in arrears were
comprised of 29 mortgage notes aggregating $5,174,200, of which $314,200
represents receivables from related parties (see note 8 for sales to
related parties).
Scheduled collections of principal during the next five fiscal years and
thereafter are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1996 $ 2,189,700
1997 2,992,900
1998 2,258,700
1999 487,000
2000 311,500
Thereafter 1,745,900
----------
$ 9,985,700
==========
</TABLE>
(3) Land and Development Costs
Land and development costs include all costs directly associated with the
acquisition and development of the land parcels. The land was acquired by
the Venture from Hudson and recorded at cost. Major components of land and
development costs are the initial costs to acquire the land, roadways,
water, drainage, electrical and telephone lines, and various project
management expenditures, as well as unamortized capitalized interest of
$6,706,300 and $6,736,000 as of June 30 1995 and 1994, respectively.
Interest costs capitalized in fiscal 1994 approximated $502,900.
(4) Foreclosed Real Estate
Foreclosed real estate represents land parcels that were reacquired in
connection with previously financed mortgages. Such parcels are valued at
the lower of their remaining receivable balance outstanding, or their net
estimated realizable value, as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Foreclosed real estate $ 2,881,600 2,884,300
Allowance for losses (486,400) (745,900)
---------- ----------
Foreclosed real estate, net $ 2,395,200 2,138,400
========== ==========
</TABLE>
(Continued)
F9
<PAGE> 29
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(5) Partner Advances Payable
The Partners have agreed to make equal advances to the Venture for all
costs necessary for the orderly development of the Project. Advances
earn interest from the date of the advance compounded quarterly at the
prime rate minus 1% (8% and 6% at June 30, 1995 and 1994, respectively).
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 in an aggregate amount not to exceed $375,800 with respect to the
period October 1, 1994 through March 31, 1995, which amounts were
intended to enable Oxford to make its share of advances required by the
Venture. The amount so authorized by the Bankruptcy Court was not
sufficient to allow Oxford to make its full share of required advances.
To date, Hudson has opted to make additional advances (the Additional
Advances) to cover Oxford's funding deficiency. As of June 30, 1995,
the amount of the Additional Advances made by Hudson was $548,000.
Hudson has filed a claim with the Bankruptcy Court in an amount equal
to the Additional Advances. In addition, Oxford First has filed an
amended reorganization plan with the Bankruptcy Court contemplating
Oxford First's transfer of funds to Oxford in amounts set forth in the
plan covering periods through December 31, 1997. The Venture, at
present, is unable to determine whether the Bankruptcy Court will
confirm Oxford First's reorganization plan so as to enable Oxford First
to transfer additional funds to Oxford or whether any transfers
authorized by the Bankruptcy Court will be sufficient in order for
Oxford to make its share of future advances to the Venture. Unless land
sales increase significantly, additional contributions from the Partners
will be required in fiscal 1996. It is anticipated that Hudson will
fund, subject to its right of reimbursement, any advances required in
fiscal 1996 in the event Oxford is not able to make its share of
advances. Hudson may be required to obtain approval from its banks
before making additional advances.
During fiscal 1995, 1994 and 1993, advances accrued an average rate of
interest of 7.2%, 5.2% and 7%, respectively.
(6) Notes Payable
During fiscal 1991, the Venture entered into agreements with banks pursuant
to which $8,797,000 of the Venture's mortgage receivables were sold. An
additional sale of $3,148,000 of mortgage receivables to a bank was
completed during fiscal 1992. Since the Venture has accounted for these
transactions as financing arrangements, the unpaid balances of the
mortgage receivables in the amounts of $2,826,200 and $4,758,400 at June
30, 1995 and 1994, respectively, are shown as notes payable in the
accompanying consolidated balance sheets. These notes are
collateralized by $775,800 and $1,491,500 of other Venture owned
mortgage receivables as of June 30, 1995 and 1994, respectively. The
maximum amounts outstanding during fiscal 1995, 1994 and 1993 were
$4,758,500, $8,031,800 and $9,851,000, respectively. The average
amounts outstanding for fiscal 1995, 1994 and 1993, based upon month-end
balances, were $3,860,100, $6,091,500 and $9,063,900, respectively. The
agreements with the banks require that all payments received in
connection with the underlying mortgage receivables be remitted to the
banks until fiscal 1996 under the fiscal 1991 sales and until fiscal
1997 under the fiscal 1992 sale, when any unpaid balance due to the
banks is to be paid by the Venture. In addition, the Venture is
required to make additional payments to the banks should the yield to
the banks be less than 11-3/4% for the fiscal 1991 sales, or
(Continued)
F10
<PAGE> 30
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
less than 2% over the prime rate (as defined) for the fiscal 1992 sale.
The Venture remitted $96,600 and $129,000 during fiscal 1995 and 1994,
respectively, for such purpose. The weighted average interest rates for
fiscal 1995, 1994 and 1993 were 11.9%, 11.2%, 10.8%, respectively. The
weighted average interest rates on borrowings outstanding as of June 30,
1995 and 1994, based upon month-end balances, were 11.6% and 11.2%,
respectively.
The Company also has a note payable outstanding for $576,200 relating to
certain development costs. The note matures in December 1996 and bears
interest at the prime rate plus 1%.
(7) Kohala Ranch Water Company
KRWC provides water to the Project and is owned by the Venture (99%),
Hudson (.5%), and Oxford (.5%). The assets of KRWC are comprised
principally of property, plant and equipment. KRWC recorded revenues of
$250,975, $248,500 and $238,500 and incurred net losses of $487,000,
$512,200 and $498,800 for fiscal 1995, 1994 and 1993, respectively.
(8) Related Party Transactions
During years prior to fiscal 1993, certain directors and officers of the
Partners and certain employees of the Venture purchased parcels in the
Project at discounts from prices generally offered to the general
public. The Venture provided mortgage financing on all such sales
pursuant to which the Venture received a down payment equal to 5% of the
gross sales price before discounts and a purchase money mortgage. The
purchase money mortgages bear interest at a rate of 8% or 9% per annum
and provide for monthly principal payments based on a 30 year
amortization schedule with a balloon payment due after seven years.
Certain balloon payments on such mortgages have been extended for one
year. At June 30, 1995 and 1994, mortgages receivable of $1,073,600 and
$1,508,700, respectively, were due from such related parties. As of
June 30, 1995, two of the remaining eight outstanding balances were
delinquent.
During fiscal 1993, an officer of one of the Partners exchanged his
previously purchased parcel for a new parcel with no additional
consideration.
(9) Contingencies
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 and subdivide the fourth phase of the project into 1,490
units. 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 zoning of
the fourth phase. 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
the development of the fourth phase or the expenditures related thereto.
During fiscal 1993, the Venture made a $600,000 provision for a 4% Hawaii
excise tax relating to the collection of interest on mortgage notes
receivable. The Venture recorded an additional $224,000 during fiscal
1994. The Venture has paid $530,400 relating to this matter through
June 30, 1995.
(Continued)
F11
<PAGE> 31
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(10) Impact of New Accounting Standards
In May 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 114, "Accounting
by Creditors for Impairment of a Loan" (SFAS No. 114). SFAS No.
114 addresses the accounting by creditors for impairment of a loan
by specifying how allowances for credit losses related to certain
loans should be determined. In October 1994, the FASB issued
Statement of Financial Accounting Standards No. 118, "Accounting
by Creditors for Impairment of a Loan -- Income Recognition and
Disclosures", (SFAS No. 118) which amends SFAS No. 114 by
expanding disclosure requirements and permitting use of existing
methods for recognizing interest income on impaired loans. SFAS
Nos. 114 and 118 are effective for fiscal years beginning after
December 15, 1994.
In March 1995, the FASB issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long Lived
Assets and for Long Lived Assets to Be Disposed Of" (SFAS No.
121). SFAS No. 121 addresses accounting for the impairment of
long-lived assets (including real estate), certain identifiable
intangibles, and goodwill relating to those assets to be held
and used and for long-lived assets and certain identifiable
intangibles to be disposed of.
The Venture believes that the adoption of these new standards will not
have a material effect on the Venture's financial position and/or
results of operations.
F12
<PAGE> 32
Schedule II
KOHALA JOINT VENTURE
AND SUBSIDIARY
Valuation and Qualifying Accounts
Years ended June 30, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Additions
------------------------------
Balance at Charged to Charged to Deductions Balance at
beginning costs and other from end of
Description of year expenses accounts reserves year
----------- ------- -------- -------- -------- ----
<S> <C> <C> <C> <C> <C>
1995 - Allowance for
uncollectible accounts $ 1,661,800 980,000 - 177,600(C) 2,464,200
============= ======= ======== ========== =========
1994 - Allowance for
uncollectible accounts $ 1,768,300 406,300 - 512,800(C) 1,661,800
============= ======= ======== ========== =========
1993 - Allowance for
uncollectible accounts $ 420,500 1,341,300 6,500(B) - 1,768,300
============= ========= ======== ========== =========
1995 - Allowance for loss on
foreclosed real estate $ 745,900 - (259,500)(B) - 486,400
============= ========= ============ ========== =========
1994 - Allowance for loss on
foreclosed real estate $ 378,200 367,700 - - 745,900
============= ========= ============ ========== =========
1993 - Allowance for loss on
foreclosed real estate $ 272,000 117,800 - 11,600(B) 378,200
============= ========= ============ ========== =========
</TABLE>
___________________
(A) Transfers
(B) Recoveries and other adjustments
(C) Write-offs
F13
<PAGE> 33
HUDSON GENERAL CORPORATION & SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
No. Exhibit Pages
<S> <C> <C>
4.4(f) First Amendment to the Revolving Credit Agreement dated as of November 25, 1992 among
Hudson General Aviation Services Inc., various banking institutions named therein and
The Chase Manhattan Bank of Canada, as successor agent, dated as of March 15, 1995. 21-27
11 Computations of Earnings (Loss) Per Share Information - Primary and Fully Diluted. 28-32
13 The Registrant's 1995 Annual Report to Shareholders 33-60
21 Subsidiaries of the Registrant 61-62
23 Consent of KPMG Peat Marwick LLP, the Company's Independent Auditors 63-64
</TABLE>
-20-
<PAGE> 1
EXHIBIT 4.4(f)
First Amendment to the Revolving Credit Agreement dated as of
November 25, 1992
among Hudson General Aviation Services Inc., various
banking institutions named therein and The Chase Manhattan Bank of Canada,
as successor agent,
dated as of March 15, 1995
-21-
<PAGE> 2
HUDSON GENERAL AVIATION SERVICES INC./
SOCIETE DE SERVICES HUDSON GENERAL (AVIATION) INC.
FIRST AMENDMENT
FIRST AMENDMENT ("Amendment"), dated as of March 15, 1995, among Hudson
General Aviation Services Inc./Societe de Services Hudson General (Aviation)
Inc. ("Aviation"), the banking institutions party to the Credit Agreement
referred to below (the "Banks"), and The Chase Manhattan Bank of Canada as
successor agent for itself and the Banks (the "Agent"). The parties hereto
hereby agree as follows:
1. REFERENCE TO CREDIT AGREEMENT. Reference is made to (a) the
Revolving Credit Agreement, dated as of November 25, 1992 (the "Credit
Agreement"), among Hudson General Aviation Services Inc./Societe de Services
Hudson General (Aviation) Inc., the banking institutions named therein and Bank
of Boston Canada as agent for itself and the other banking institutions and (b)
the Resignation and Appointment Agreement, dated as of May 1, 1995, whereby
Bank of Boston Canada resigns as agent and The Chase Manhattan Bank of Canada
is appointed as agent for itself and the other banking institutions under the
Credit Agreement and the other Loan Documents. Capitalized terms which are
used herein without definition and which are defined in the Credit Agreement
shall have the same meanings herein as therein.
2. AMENDMENT OF CREDIT AGREEMENT. The Credit Agreement is hereby
amended as follows:
(a) Section 2.1(a) of the Credit Agreement is hereby amended by
deleting "1%" where it appears in the first line thereof and substituting
therefor "1/2%".
(b) Section 2.1(b) of the Credit Agreement is hereby amended by
deleting "1-3/4%" where it appears in the first line thereof and substituting
therefor "1-5/8%".
(c) Section 7.1 of the Credit Agreement is hereby amended by deleting
"Bank of Boston Canada" where it appears in the fifth and sixth lines thereof
and substituting therefor "The Chase Manhattan Bank of Canada".
(d) Section 7.7 of the Credit Agreement is hereby amended by deleting
"Bank of Boston" where such phrase appears in the first and sixth lines thereof
and substituting therefor, "the Agent".
(e) Section 7 of the Credit Agreement is hereby amended by adding the
following new section after Section 7.14 thereof.
7.15 Agent's Fee. Aviation shall pay to the Agent annually in
advance, for the Agent's own account, on May 1, 1995 and on each
anniversary of the Funding Date to occur after such date during the term of
this Agreement, an Agent's fee in the amount of $10,000.
-22-
<PAGE> 3
(f) Section 10.11 of the Credit Agreement is hereby amended by
deleting the phrase "assign to one or more banks or other financial
institutions having total capital and surplus of $100,000,000 or more" where
such phrase appears in the second and third lines thereof, and substituting
therefor the phrase "assign to one or more Banks or to one or more banks or
other financial institutions having total capital and surplus (including the
capital and surplus of such entity's parent) of $100,000,000 or more".
(g) The definition of "Commitment Percentage" set forth in Exhibit A
to the Credit Agreement is hereby amended by deleting such definition in its
entirety, and substituting therefor the following:
Commitment Percentage - With respect to each Bank, the
percentage set forth opposite its name below as such Bank's
percentage of the aggregate Commitments of all of the Banks
(subject to adjustments permitted by the terms of the Agreement):
<TABLE>
<CAPTION>
Commitment
Bank Percentage
---- ----------
<S> <C>
Chase Canada 80.2469136%
ABN Canada 19.7530864%
Total 100%
</TABLE>
(h) The definition of "Initial Revolving Period" set forth in
Exhibit A to the Credit Agreement is hereby amended by deleting "December 31,
1994" where it appears therein and substituting therefor "December 31, 1996".
(i) The definition of "Prime Rate" set forth in Exhibit A to the
Credit Agreement is hereby amended by deleting such definition in its entirety,
and substituting therefor the following:
Prime Rate - At any time shall mean the higher of (a) the rate
which is 1% in excess of the Canadian Bankers Acceptance Reference Rate (as
determined by the Agent) in effect at such time and (b) the annual rate of
interest which the Agent announces from time to time as its "prime rate"
for commercial loans made in Canada in Canadian dollars.
(j) The definition of "Reduction Commencement Date" set forth in
Exhibit A to the Credit Agreement is hereby amended by deleting "December 31,
1994" where it appears therein and substituting therefor "December 31, 1996".
(k) The definition of Revolving Credit Note(s) set forth in
Exhibit A to the Credit Agreement is hereby amended by deleting such definition
in its entirety, and substituting therefor the following:
Revolving Credit Note(s) - The revolving credit note(s)
described in Section 1.2 of the Credit Agreement, and any replacement
of any such note, including, without limitation, the Restated
Revolving Credit Note dated March 15, 1993 and restated May 1, 1995
and executed and delivered by Aviation in favor of Chase Canada.
-23-
<PAGE> 4
3. REGARDING REVOLVING CREDIT NOTES AND THE REVOLVING CREDIT LOAN
MATURITY DATE. Aviation hereby authorizes each Bank to change the Revolving
Credit Loan Maturity Date set forth in such Bank's existing Revolving Credit
Note to December 31, 2000. In accordance with Paragraph 1.4(b) of the Credit
Agreement, Aviation hereby represents and warrants to the Banks that each of
the conditions precedent to the making of a Loan set forth in Paragraph 4 of
the Credit Agreement (except for any conditions specifically relating only to
the Funding Date) has been satisfied as of the date hereof. Each of the Banks
hereby agrees to deliver to Aviation a copy of such Bank's existing Revolving
Credit Note as modified as set forth herein.
4. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks
to enter into this Amendment, Aviation represents and warrants to the Banks
that (a) this Amendment and the Credit Agreement as amended hereby (the
"Amended Credit Agreement") are its legal, valid and binding obligations,
enforceable against Aviation in accordance with their terms, (b) this Amendment
and the Amended Credit Agreement do not conflict with any charter document,
agreement, instrument or undertaking binding upon Aviation or any of its
properties, and (c) no Default, or situation which with the giving of notice or
the passage of time or both would become a Default, now exists or will exist
after giving effect to this Amendment.
5. CONDITIONS PRECEDENT. This Amendment shall become effective
as of the date hereof upon satisfaction of each of the conditions precedent set
forth in this Section 5:
(a) Delivery. Aviation, the Banks, the Agent and the Guarantors
shall have executed and delivered this Amendment.
(b) Amendment to U.S. Loan Agreement. An amendment to the U.S.
Loan Agreement which is satisfactory to the Banks and the Agent in all respects
shall have been executed and delivered by each of Hudson General and the
lenders which are parties to the U.S. Loan Agreement, such amendment shall
extend the Initial Revolving Period under and as defined in the U.S. Loan
Agreement to December 31, 1996, and such amendment shall be in full force and
effect.
(c) Corporate Standing and Action. Each of the Banks shall have
received (i) a Certificate of Compliance from Industry Canada as to the good
standing of Aviation as of a recent date, and (ii) a certificate of an
Authorized Officer of Aviation, dated the date hereof, certifying (A) that
attached thereto is a true and complete copy of the Articles of Amalgamation,
all Shareholder Agreements and the bylaws of Aviation, each as amended to
the date hereof or that the Articles of Amalgamation, Shareholder Agreements
and bylaws of Aviation have not been modified, amended or supplemented since
the Funding Date, (B) that attached thereto is a true and complete copy of
resolutions of the Sole Director of Aviation authorizing the execution and
delivery of this Amendment, which resolutions are in full force and effect
without modification on the date hereof, and (C) the incumbency and
signatures of the officers of Aviation or that there have been no changes in
such incumbency and signatures since the Funding Date.
-24-
<PAGE> 5
(d) Opinions of Counsel. Each of the Banks and the Agent shall
have received a favorable legal opinion addressed to the Banks and the Agent,
dated as of the date hereof, in form and substance satisfactory to the Banks
and the Agent, from each of Noah Rockowitz, Secretary and counsel to Aviation,
and Fraser & Beatty, Ontario legal counsel to Aviation.
(e) Assignment. Bank of Boston shall have assigned all of the
Revolving Credit Loans owing to it and the Revolving Credit Note held by it to
Chase Canada in accordance with Section 10.11 of the Credit Agreement as
amended hereby.
(f) Resignation of Agent. Bank of Boston shall have resigned as
Agent under the Credit Agreement and each of the Security Documents and Chase
Canada shall have been appointed as the successor Agent under the Credit
Agreement and each of the other Loan Documents, in each case in accordance with
Section 7.6 of the Credit Agreement and pursuant to documentation which is
satisfactory to the Banks in all respects. Bank of Boston, Chase Canada,
Aviation and each of the Guarantors shall have executed and delivered all such
documents and instruments, including, without limitation, amendments to the
Security Documents, as are necessary to give effect to the above described
resignation and appointment, and all such documents and instruments shall be in
full force and effect and satisfactory to the Banks in all respects.
(g) Proceedings and Documents. All proceedings in connection with
the transactions contemplated by this Amendment and all documents incident
hereto shall be satisfactory in form and substance to the Agent, and the Agent
shall have received all information and such counterpart originals or certified
or other copies of such documents as the Agent may reasonably request.
6. MISCELLANEOUS. The Amended Credit Agreement and all of the Loan
Documents including, without limitation, the Assignment, Postponement and
Subordination and Intercreditor Agreement, are each confirmed as being in full
force and effect. This Amendment, the Amended Credit Agreement and the other
Loan Documents constitute the entire understanding of the parties with respect
to the subject matter hereof and thereof and supersede all prior understandings
and agreements, whether written or oral. This Amendment and the Credit
Agreement shall be read and construed as one agreement, and, except as
expressly amended hereby, the Credit Agreement remains unchanged. The headings
in this Amendment are for convenience of reference only and shall not alter,
limit or otherwise affect the meaning hereof. This Amendment is a Loan
Document as defined in the Amended Credit Agreement and may be executed in any
number of counterparts, which together shall constitute one instrument, and
shall bind and inure to the benefit of the parties and their respective
successors and permitted assigns. Aviation shall pay all costs and expenses,
including reasonable legal fees and disbursements of the Agent's counsel,
incurred by the Agent in preparing this Amendment (but not the legal fees and
disbursements of Agent's counsel incurred in preparation of the assignment and
purchase documents executed in connection with the assignment described in
Section 5(e) hereof or in the preparation of the resignation and appointment
documents and the amendments to the Security Documents referred to in Section
5(f) hereof). THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS (OTHER THAN THE CONFLICT OF LAWS RULES) OF THE PROVINCE OF
ONTARIO AND LAWS OF CANADA APPLICABLE THEREIN.
-25-
<PAGE> 6
IN WITNESS WHEREOF, each of the undersigned has executed this
Amendment under seal by a duly authorized officer as of the date first set
forth above.
HUDSON GENERAL AVIATION
SERVICES INC./SOCIETE DE SERVICES
HUDSON GENERAL (AVIATION) INC.
By:______________________________
Title:
THE CHASE MANHATTAN BANK
OF CANADA, FOR ITSELF AND AS AGENT
By:______________________________
Title:
ABN AMRO BANK CANADA
By:______________________________
Title:
The foregoing amendment is acknowledged and agreed to by the following
Guarantors:
HUDSON GENERAL CORPORATION
By:______________________________
Title:
HUDSON AVIATION SERVICES, INC.
CALIFORNIA
By:_______________________________
Title:
HUDSON AVIATION SERVICES, INC.
DELAWARE
By: _______________________________
Title:
-26-
<PAGE> 7
HUDSON GENERAL COACH LINES,
INC.
By: _______________________________
Title:
HUDSON AVIATION SERVICES, INC.
By: _______________________________
Title
HUDSON AVIATION SERVICES - OAKLAND, INC.
By: _______________________________
Title:
Consented to:
THE FIRST NATIONAL
BANK OF BOSTON
By:__________________________
Title:
-27-
<PAGE> 1
EXHIBIT 11
Computations
of
Earnings (Loss) Per Share Information
Primary and Fully Diluted
-28-
<PAGE> 2
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE INFORMATION
PRIMARY - EARNINGS (LOSS)
BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE
IN THE METHOD OF ACCOUNTING FOR INCOME TAXES
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994 1993
---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C>
Earnings (loss) before extraordinary item
and cumulative effect of change in the method
of accounting for income taxes for computing
earnings (loss) per share - primary . . . . . . . . . . . . . $4,593 $7,310 $(2,045)
===== ===== =====
Weighted average number of common and
common equivalent shares outstanding . . . . . . . . . . . . . 1,245 1,247 1,243
===== ===== =====
Earnings (loss) before extraordinary item
and cumulative effect of change in the method
of accounting for income taxes per common
and common equivalent
share - primary . . . . . . . . . . . . . . . . . . . . . . . $ 3.69 $ 5.86 $ (1.65)
===== ===== =====
</TABLE>
-29-
<PAGE> 3
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE INFORMATION
PRIMARY - NET EARNINGS (LOSS)
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994 1993
---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net earnings (loss) for computing earnings
(loss) per share - primary . . . . . . . . . . . . . . . . . . $4,593 $7,760 $(2,180)
===== ===== =====
Weighted average number of common and
common equivalent shares outstanding . . . . . . . . . . . . . 1,245 1,247 1,243
===== ===== =====
Net earnings (loss) per common and common
equivalent share - primary . . . . . . . . . . . . . . . . . . $3.69 $6.22 $(1.75)
===== ===== =====
</TABLE>
-30-
<PAGE> 4
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE INFORMATION
FULLY DILUTED - EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE IN THE METHOD
OF ACCOUNTING FOR INCOME TAXES
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994 1993
---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C>
Earnings (loss) before extraordinary item
and cumulative effect of change in the method of
accounting for income taxes for computing
earnings (loss) per share - primary . . . . . . . . . . . . . . $4,593 $7,310 $(2,045)
Reduction of interest expense less
applicable income taxes assuming
conversion of 7% convertible
subordinated debentures due 2011 . . . . . . . . . . . . . . . . . 1,137 1,137 -- *
------ ------ -------
Earnings (loss) before extraordinary item
and cumulative effect of change in the method of
accounting for income taxes for computing earnings
(loss) per share - fully diluted . . . . . . . . . . . . . . . . $5,730 $8,447 $(2,045)
====== ====== =======
Weighted average number of common
and common equivalent shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,260 1,249 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 . . . . . . . . . . . . . . . . . . . . . . . . . . 885 886 --*
------ ------ -------
Weighted average number of common
and common equivalent shares out-
standing on a fully diluted basis . . . . . . . . . . . . . . . . 2,145 2,135 1,243
====== ====== =======
Earnings (loss) before extraordinary item
and cumulative effect of change in the method
of accounting for income taxes per common
and common equivalent share - fully diluted . . . . . . . . . . . $2.67 $3.96 $(1.65)
====== ====== =======
</TABLE>
*Assumed conversion is antidilutive, and accordingly, the debentures are
excluded from the computation.
-31-
<PAGE> 5
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE INFORMATION
FULLY DILUTED - NET EARNINGS (LOSS)
<TABLE>
<CAPTION>
Year Ended June 30,
1995 1994 1993
---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net earnings (loss) for computing
earnings (loss) per share - primary . . . . . . . . . . . . . . . $4,593 $7,760 $(2,180)
Reduction of interest expense less
applicable income taxes assuming
conversion of 7% convertible
subordinated debentures due 2011 . . . . . . . . . . . . . . . . . 1,137 1,137 --*
Net earnings (loss) for computing
earnings (loss) per share - fully
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,730 $8,897 $(2,180)
Weighted average number of common
and common equivalent shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,260 1,249 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 . . . . . . . . . . . . . . . . . . . . . . . . . . 885 886 --*
Weighted average number of common
and common equivalent shares out-
standing on a fully diluted basis . . . . . . . . . . . . . . . . 2,145 2,135 1,243
Net earnings (loss) per common and
common equivalent share - fully
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2.67 $4.17 $(1.75)
</TABLE>
* Assumed conversion is antidilutive, and accordingly, the debentures are
excluded from the computation.
-32-
<PAGE> 1
EXHIBIT 13
The Registrant's
1995 Annual Report to Shareholders
-33-
<PAGE> 2
HUDSON GENERAL CORPORATION
1995 Annual Report
DIVERSE SERVICES
STRENGTH IN MANAGEMENT
DEDICATED EMPLOYEES
[PHOTO 1]
[HUDSON GENERAL LOGO]
<PAGE> 3
LETTER TO SHAREHOLDERS
FELLOW SHAREHOLDERS:
Although financial results for the fiscal year ended June 30, 1995 did not reach
the record levels attained in fiscal 1994, Hudson General Corporation did enjoy
a very successful and exciting year. We started off the year with our airport
ground equipment "co-starring" with Jim Carrey in the hit movie "Dumb and
Dumber", and ended it by achieving the second highest revenues and third highest
net earnings in the history of the Company.
This past winter was relatively mild in the midwest and northeast United
States as well as in many parts of Canada, especially when compared to the
extreme winter in those regions in the previous year. Despite the lack of help
that Mother Nature gave our snow removal and de-icing operations in fiscal 1994,
fiscal 1995 produced sound financial results. Revenues for the fiscal year ended
June 30, 1995 were $135.5 million compared to $142.1 million in fiscal 1994, a
decline of $6.6 million. Given that snow removal revenues were $14.2 million
lower in fiscal 1995 than in fiscal 1994, and that revenues from our Canadian
fixed base operations (FBO's) (which we ceased operating in November 1994) were
$6.2 million lower, it is clear that we have found other means of increasing
revenues. Overall, we are pleased with the progress our Company made this past
year.
FISCAL 1995 HAS SEEN MANY SUCCESSES IN OUR EFFORTS TO EXPAND OUR BUSINESS.
Bottom line results also showed strength as net earnings were $4,593,000
and earnings per share were $3.69. We believe that these results are due to our
successful effort to expand our aviation services business at a moderate pace
with conservative risk as well as to ongoing programs to improve efficiency.
Hudson General and its competitors are being presented with many new
business opportunities as the entire airline industry continues to seek ways to
return to sustained profitability. Outsourcing "under wing" services to
independent aviation service companies such as Hudson General is one of the
avenues available to airlines to achieve this goal. In addition, the Open Skies
Agreement between the United States and Canada which was signed during fiscal
1995 is increasing air traffic between these neighboring countries and the
related need for support services. While competitive pricing remains a primary
factor in the award of the new business resulting from these initiatives, the
airlines will continue to insist on high quality services. Hudson General excels
in such an environment.
Fiscal 1995 has seen many successes in our efforts to expand our business.
We have secured additional contracts as carriers continue to outsource services
to independent service companies. Our fueling operations have expanded
significantly in Boston, Miami and Chicago. In Boston we have also begun to
maintain and operate the fuel farm owned by Delta Air Lines.
Not all the changes in the airline industry have had a positive effect on
Hudson General. In some cases, mergers, alliances and code sharing agreements
between airlines can negatively affect our business. For example, when Southwest
Airlines acquired Morris Air, our ground handling contract with Morris Air in
Salt Lake City was terminated as Southwest brought this function in-house.
However, to date the pluses have far outweighed the minuses.
In Canada, the FBO's which we had operated since 1985 were terminated
during
1
<PAGE> 4
fiscal 1995 when the subleases covering their facilities expired. These FBO's
originally offered great promise, but changes over the past ten years in the
segment of the aviation industry served by these FBO's left us with no
alternative but to terminate our involvement in this business. On the other
hand, our business of providing services to airlines in Canada continued to
perform well in fiscal 1995. A highlight was the obtaining of the contract to
provide de-icing and snow removal services for all carriers at Terminal 1 of
Pearson International Airport in Toronto.
We continue to have disappointing sales activity at our real estate joint
venture in Hawaii. The recently instituted "Buy/Fly" program which is designed
to encourage California residents to visit our project and see its beauty first
hand has not produced any sales so far. However, we remain cautiously optimistic
that it will yield results as marketing efforts for this program increase. We
continue to monitor the Chapter 11 proceedings of Oxford First Corporation, the
parent of our joint venture partner, including Oxford's proposals to meet its
obligations to the joint venture.
ALSO DURING FISCAL 1995, THE BOARD APPROVED THE RESUMPTION OF A REGULAR
SEMI-ANNUAL DIVIDEND.
Effective March 15, 1995 the Company amended its Revolving Credit Agreement
with a group of banks to extend the term by two years to December 31, 2000 and
reduce the interest rate on outstanding borrowings. The amendment also permits
the Company, until March 31, 1996, to expend up to $3.0 million to repurchase
shares of its common stock (so long as no proceeds from borrowings under the
Revolving Credit Agreement are utilized for such purpose) and also continues to
allow the Company to expend a maximum of $1.2 million per fiscal year for stock
repurchases subject to certain earnings and net worth tests, less the amount of
dividends paid on the Company's stock.
In April 1995, the Board of Directors approved the repurchase of up to
150,000 shares of the Company's common stock from time to time, and as of August
25, 1995 the Company had repurchased 112,800 shares in the open market for an
aggregate purchase price of approximately $2.0 million. The Board believes that
this repurchase program will enhance shareholder value and is an excellent use
of a portion of the Company's available cash. Also during fiscal 1995, the Board
approved the resumption of the payment of a regular semi-annual dividend and
declared two such dividends of 25 cents per share of common stock. The dividend
had been discontinued after July 1989, at which time the semi-annual rate was 20
cents per share.
We once again would like to thank our employees for their hard work and
dedication. We also thank our customers, suppliers and banking group for their
loyalty and confidence in us. Finally, we thank our shareholders for their
continued trust and support.
Sincerely,
/s/ Jay B. Langner
Jay B. Langner
Chairman of the Board, President and
Chief Executive Officer
/s/ Paul R. Pollack
Paul R. Pollack
Executive Vice President and Chief Operating Officer
/s/ Michael Rubin
Michael Rubin
Executive Vice President and Chief Financial Officer
2
<PAGE> 5
AVIATION SERVICES
Hudson General Corporation is one of the major aviation services companies
engaged in providing a broad array of services at airports throughout the United
States and Canada.
Aircraft ground handling services are provided to domestic and
international airlines, and include: aircraft marshaling; loading and
off-loading of baggage, freight and commissary items; passenger ticketing;
porter and wheelchair services; aircraft cleaning; de-icing; ramp sweeping and
glycol recovery; water and lavatory service; maintenance and service checks;
weight and balance; cargo and mail transferring; aircraft pushbacks; ground
power and air-conditioning.
[PHOTO 2]
3
<PAGE> 6
Ground transportation services are provided for airline passengers and
airport employees through Hudson General operated airport shuttle bus systems
and ground transportation information kiosks. These operations also include
operation and maintenance of passenger boarding bridges and specialized airfield
passenger transport vehicles. Besides its airport-related transportation
services, Hudson General provides transportation management services for various
governmental agencies and authorities.
Aircraft fueling services are offered through contract fueling, fuel
management and retail sales of fuel. Contract fueling services are provided to
airlines and fuel suppliers by delivery of fuel from airport storage facilities
into commercial aircraft. Fuel management services consist of acting as an
agent, managing the purchase, supply and distribution of fuel both domestically
and internationally for regional scheduled and international cargo carriers, as
well as charter passenger airlines.
Hudson General also operates one of the newest and most technologically
advanced perishables center at any airport in the United States for cargo
requiring a climate-controlled environment.
[PHOTO 3]
4
<PAGE> 7
[PHOTO 4]
<PAGE> 8
[PHOTO 5]
<PAGE> 9
[PHOTO 6]
Snow removal services are performed at airports in the northeastern and
midwestern United States under contracts with airport operators and airlines
serving these airports. Snow removal services are also performed at various
seaport facilities.
Maintenance services are provided for ground support, cargo handling,
ground transportation and other airport related equipment. In addition, building
maintenance services are provided at both terminal and hangar facilities. In
Salt Lake City, hangar facilities and tie-down services are offered to the
general aviation community including corporate and private aircraft owners.
This year Hudson General will be celebrating its thirty-fifth anniversary
as it continues to bring to its customers the broad experience and knowledge of
aviation services they need, with the quality they demand, to help them succeed
in the highly competitive aviation industry.
7
<PAGE> 10
[PHOTO 7]
LAND DEVELOPMENT
Hudson General is a 50% partner in a joint venture to develop approximately
4,000 contiguous acres of land situated in the North Kohala District on the
Island of Hawaii. The Project is being developed in four successive phases.
Substantially all of the parcels in Phases I and II, which comprise
approximately 2,100 acres of the Project, have been sold. Phase III consists of
100 five acre parcels, with 86 parcels remaining available for sale.
During fiscal 1992, the County of Hawaii passed an ordinance pursuant to
which, after the obtaining of subdivision approvals, Phase IV could be developed
into 1,490 units. The validity of this ordinance has been challenged in a
lawsuit brought by two local residents of Hawaii, and development of Phase IV
must await the ultimate outcome of this litigation.
8
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Hudson General Corporation and Subsidiaries
RESULTS OF OPERATIONS
FISCAL 1995 COMPARED WITH FISCAL 1994
Revenues decreased from $142.1 to $135.5 million, a decrease of $6.6
million, or 4.7%. The decrease reflects lower: (i) snow removal revenues of
$14.2 million due mainly to the mild winter weather during fiscal 1995; (ii)
aircraft fueling and hangar rental revenues in Canada of $6.2 million due to
lower volumes of retail fuel sales and the expiration on October 31, 1994 of the
Company's subleases (see Note 4) at its Canadian fixed base operations (FBO's);
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.
Partially offsetting the revenue decreases were higher: (i) ground handling
service revenues (net of decreased sales volumes of de-icing fluid) of $7.1
million due primarily to expanded services to new and existing customers and to
a new contract to provide various winter related aircraft ground handling
services at Terminal 1 in Toronto's Lester B. Pearson International Airport;
(ii) domestic aircraft fueling revenues of $5.2 million resulting primarily from
expanded intoplane fueling services at new and existing locations; (iii) ground
transportation revenues of $1.6 million due mainly to expanded services to
existing customers; and (iv) building maintenance revenues of $.8 million due
primarily to expanded services to new and existing customers in the U.S.
Costs and expenses were substantially unchanged at $128.5 million in fiscal
1995 as compared with $128.6 million in fiscal 1994. Operating costs decreased
by $.4 million, or .3%. The decrease was attributable to lower: (i) snow removal
costs due to the mild winter weather in the U.S.; (ii) fuel and facility rental
costs related to the Company's Canadian FBO's (see Note 4); and (iii) the effect
of fluctuation in the average rates of exchange used in translating Canadian
costs to their U.S. dollar equivalent. Partially offsetting the decreases were
higher: (i) domestic labor and related costs due primarily to expanded services
to new and existing customers; (ii) equipment rental costs due mainly to
expanded intoplane fueling services; (iii) labor and related costs associated
with ground handling operations in Canada due primarily to expanded services to
new and existing customers; and (iv) domestic maintenance associated with
expansion of the Company's fleet of equipment.
Depreciation and amortization expenses increased from $7.0 to $7.5 million,
an increase of $.5 million, or 6.9%. The increase was due primarily to the
accelerated amortization of the remaining carrying value of leasehold
improvements made to a hangar facility at a domestic airport location (see Note
3).
Selling, general and administrative expenses increased from $13.8 to $14.3
million, an increase of $.5 million, or 3.6%, due mainly to higher facility,
personnel and related costs associated with the Company's expanded operations as
noted above.
Interest expense decreased from $1.3 to $.6 million, a decrease of $.7
million, or 56.4%, due mainly to lower average outstanding borrowings and the
increase in the Company's capitalization of interest on its advances to its real
estate joint venture in Hawaii (the Venture).
Earnings before equity in loss of joint venture, provision (benefit) for
income taxes, extraordinary item and cumulative effect of change in the method
of accounting for income taxes decreased from $13.5 to $7.0 million, a decrease
of $6.5 million, or 48.3%, due primarily to reduced results from snow removal
operations and lower sales volumes of de-icing fluid due mainly to the mild
winter weather; the accelerated amortization of the remaining carrying value of
leasehold improvements; and higher selling, general and administrative expenses
as described above. Partially offsetting the decreases were improved results
from domestic aircraft fueling and ground transportation operations and lower
interest expense.
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 de-icing 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 increased from $1.8 to
$2.7 million, an increase of $.9 million, or 52.5%. The increase in the
Venture's losses is due mainly to 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.
The Company's provision (benefit) for income taxes decreased from a
provision of $4.4 million to a benefit of $.4 million, a decrease of $4.8
million. The decrease reflects lower federal and state tax provisions totaling
$3.5 million due to decreased pre-tax earnings in the U.S., and the recognition
in fiscal 1995 of $1.3 million of deferred tax assets resulting from a
reevaluation of the operating results of the Company's Canadian subsidiary (see
Note 7).
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. This trend as well as the Open Skies Agreement between the
United States and Canada, whereby there will be more access for airlines to fly
between these bordering countries, has provided additional opportunities for the
Company. The Company is unable, at this time, to evaluate the full impact of
these factors.
The compliance with federal, state and local provisions which have been
enacted or adopted regulating the discharge of materials into the environment
did not have a material effect upon the Company's capital expenditures or
results of operations for fiscal 1995, 1994 and 1993, or competitive position.
However, the federal government and many state and local governments have
enacted or proposed legislation and regulations with respect to storage
facilities for fuel, petroleum-based products and chemicals, the disposal of
hazardous waste materials, storm water discharges, and financial responsibility
for possible liability exposures relating to fuel storage facilities. Compliance
with such legislation and regulations has resulted in expenditures by the
Company, including
9
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Hudson General Corporation and Subsidiaries
(Continued)
expenditures for the testing, decommissioning and/or replacement of certain of
its fuel and de-icing fluid storage facilities, and the clean-up of fuel spills.
The Company is presently engaged in several such decommissioning, replacement
and clean-up projects, and it is anticipated that additional such expenditures,
the amount of which is presently not expected to be material, will be required.
In addition, airport authorities are coming under increasing pressure to
clean-up previous contamination at their facilities, and are seeking financial
contributions from airport tenants and companies which operate at their
airports. The Company cannot predict at this time, the amount, if any, that it
may be required to pay in connection with such airport authority initiatives.
FISCAL 1994 COMPARED WITH FISCAL 1993
Revenues increased from $132.2 to $142.1 million, an increase of $9.9
million, or 7.5%. The increase reflects higher: (i) snow removal revenues of
$8.9 million due mainly to the severe winter weather in the United States in
fiscal 1994; (ii) ground handling service revenues of $2.8 million due primarily
to expanded services to new and existing customers in the U.S.; (iii) ground
transportation revenues aggregating $1.6 million due mainly to expanded services
to existing customers; and (iv) building maintenance revenues of $1.0 million
due primarily to expanded services to new and existing customers in the U.S.
Partially offsetting the revenue increases were lower: (i) aircraft fueling
revenues of $1.4 million resulting primarily from lower volumes of retail fuel
sales at the Company's Canadian FBO's and the cessation of operations at Long
Island MacArthur Airport, net of increases in domestic intoplane fueling
revenues; and (ii) 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 decreased from $129.7 to $128.6 million, a decrease of
$1.2 million, or .9%. The principal reason for this decrease was that fiscal
1993 costs and expenses included accelerated amortization of the remaining
carrying value of leasehold rights related to the Company's Canadian FBO's in
the amount of $4.3 million (the FBO Accelerated Amortization). Operating costs
increased from $103.2 to $106.4 million, an increase of $3.3 million, or 3.2%.
The increase was attributable to higher: (i) snow removal costs; (ii) domestic
labor and related costs due primarily to expanded services to new and existing
customers; (iii) equipment rental costs due mainly to expanded intoplane fueling
and ground transportation services; and (iv) maintenance costs associated with
expansion of the Company's fleet of equipment and increased use in snow removal
operations. 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 improved manpower utilization resulting
from favorable changes to the flight activity and schedules of the Company's
airline customers; (ii) fuel costs due primarily to lower volumes of retail fuel
sales 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 decreased from $7.2 to $7.0 million,
a decrease of $.2 million, or 2.2%. The decrease reflects the absence of
amortization of leasehold rights related to the Company's Canadian FBO's as such
rights were fully amortized as of June 30, 1993 due to the FBO Accelerated
Amortization.
Selling, general and administrative expenses increased from $13.3 to $13.8
million, an increase of $.5 million, or 4.0%, due to higher administrative and
related costs mainly attributable to higher bonus provisions under the Company's
Executive Incentive Program, which were partially offset by a decrease of $.7
million in the provision for bad debts.
Interest expense decreased from $1.8 to $1.3 million, a decrease of $.5
million, or 27.8%, due to: (i) the prepayment in fiscal 1993 of the remaining
balance of the Company's privately held 14% subordinated notes; (ii) lower
average outstanding borrowings; and (iii) the payment of the remaining balance
of the Company's 11% debentures in fiscal 1993.
Earnings before equity in loss of joint venture, provision (benefit) for
income taxes, extraordinary item and cumulative effect of change in the method
of accounting for income taxes increased from $2.5 to $13.5 million, an increase
of $11.0 million, due mainly to: (i) the absence in fiscal 1994 of the FBO
Accelerated Amortization; (ii) improved results from snow removal operations;
(iii) improved margins from ground handling operations; (iv) improved results
from ground transportation operations; and (v) lower interest expense. Partially
offsetting the increase were: (i) reduced results from the Company's Canadian
FBO's; and (ii) higher selling, general and administrative expenses as described
above.
The Company's 50% share of losses from the Venture decreased from $2.8 to
$1.8 million, a decrease of $1.0 million, due mainly to reduced provisions
during fiscal 1994 for a Hawaii excise tax and doubtful mortgage receivables.
The Venture's losses resulted mainly from a lack of sales of the Venture's land
parcels, which sales were negatively impacted by general economic conditions.
Effective July 1, 1993, the Company and its Venture partner (the Partners)
reduced the interest rate that the Venture must pay for advances made to it by
the Partners from 1% over prime to 1% below prime to reflect lower incremental
borrowing costs of the Partners. This change resulted in a reduction of interest
expense to the Venture of $.3 million for fiscal 1994 compared with fiscal 1993
net of lower interest income on mortgage receivables.
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (FAS 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 the Canadian net operating loss carryforwards referred to in the
next paragraph, net of the related valuation allowance, in the consolidated
statements of operations.
The Company's provision for income taxes increased from $1.7 to $4.4
million, an increase of $2.7 million, due to higher provisions for federal and
state income taxes associated with increased pre-tax earnings in the U.S.
Pursuant to FAS 109, the Company utilized in full its
10
<PAGE> 13
Canadian net operating loss carryforwards and a portion of its depreciation
differences to offset its provision for foreign income taxes in the amount of
$.8 million.
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, as amended during fiscal
1995, which provides for a revolving credit facility pursuant to which the
Company may borrow funds (including outstanding letters of credit) to a limit of
$18.3 million (the Limit) until March 31, 1997. 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, 1996 until December 31, 2000, at which time
the Credit Agreement terminates. As of June 30, 1995, there were no direct
borrowings and $3.7 million of letters of credit were outstanding under the
Credit Agreement.
In fiscal 1995, 1994 and 1993, net cash provided by operating activities was
$19.7, $16.4, and $10.8 million, respectively. Capital expenditures net of
proceeds from the sale of property and equipment were $9.9, $9.2, and $5.5
million in fiscal 1995, 1994 and 1993, respectively. Net cash advanced to the
Venture was $1.7, $.9 and $.2 million in fiscal 1995, 1994 and 1993,
respectively. Net cash used by financing activities was $2.2, $5.7 and $2.6
million for fiscal 1995, 1994 and 1993, respectively. Cash and cash equivalents
were $12.6, $6.7, and $6.4 million at June 30, 1995, 1994 and 1993,
respectively. At June 30, 1995 the Company had commitments to fund approximately
$5.1 million for operating equipment, the majority of which is expected to be
expended during the first six months of fiscal 1996. 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.
During fiscal 1995, the Board of Directors approved the repurchase of up to
150,000 shares of the Company's common stock from time to time in either open
market or privately negotiated transactions. As of August 25, 1995 the Company
had repurchased in the open market 112,800 shares for an aggregate purchase
price of approximately $2.0 million pursuant to this authorization.
At June 30, 1995, the Venture had commitments aggregating $2.9 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
expected that funds for most of the Venture's other commitments will be expended
subsequent to fiscal 1996. In addition, the Venture is obligated to repurchase
during fiscal 1996 and 1997 the unpaid balance of certain mortgage receivables
that were previously sold to two banks (see Note 6). The Venture has begun
discussions with financial institutions to extend or refinance such obligations.
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 commitments noted above)
approximately $2.3 million for improvements and in lieu payments. 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 its partner in the
Venture, Oxford Kohala, Inc. (the Partner) are obligated to make equal advances
of any 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 $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 $2.8 million. 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. 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 or that
the Credit Agreement will be amended to allow for any excess.
The Partner 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 the Partner in an aggregate amount not to
exceed $376,000 with respect to the period October 1, 1994 through March 31,
1995, which amounts were intended to enable the Partner to make its share of
advances required by the Venture. The amount so authorized by the Bankruptcy
Court was not sufficient to allow the Partner to make its full share of required
11
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Hudson General Corporation and Subsidiaries
(Continued)
advances. To date, the Company has opted to make additional advances (the
Additional Advances) to cover the Partner's funding deficiency. The Company has
filed a claim with the Bankruptcy Court in an amount equal to the Additional
Advances. In addition, Oxford First has filed an amended reorganization plan
with the Bankruptcy Court contemplating Oxford First's transfer of funds to the
Partner in amounts set forth in the plan covering periods through December 31,
1997. The Company, at present, is unable to determine whether the Bankruptcy
Court will confirm Oxford First's reorganization plan so as to enable Oxford
First to transfer additional funds to the Partner or whether any transfers
authorized by the Bankruptcy Court will be sufficient in order for the Partner
to make its share of future advances to the Venture. Should the Partner be
unable to make its share of future advances to the Venture, the Company has the
option to make Additional Advances (subject to its right of reimbursement)
necessary up to the limits set forth in the Credit Agreement. The Partner did
not file for reorganization under Chapter 11 of the Bankruptcy Code. During
fiscal 1995, the Company advanced $1.7 million to the Venture including $.5
million of Additional Advances.
The extent to which advances 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.
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.
12
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
-------------------------------------------------------------
1995 1994 1993 1992 1991
-------------------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues .......................................... $135,453 $142,075 $ 132,186 $126,744 $128,978
Earnings (loss) before extraordinary items and
cumulative effect of change in the method of
accounting for income taxes ..................... 4,593 7,310 (2,045)(a) 1,128 2,723
Earnings (loss) per share before extraordinary
items and cumulative effect of change in the
method of accounting for income taxes:
Primary ........................................ 3.69 5.86 (1.65) .90 2.19
Fully diluted .................................. 2.67 3.96 (1.65) 1.06 1.79
Net earnings (loss) ............................... 4,593 7,760 (2,180)(a) 2,005(b) 4,014(b)
Net earnings (loss) per share:
Primary ........................................ 3.69 6.22 (1.75) 1.60 3.23
Fully diluted .................................. 2.67 4.17 (1.75) 1.47 2.39
Total assets ...................................... 87,568 77,889 72,414 79,038 82,870
Long-term obligations less current maturities ..... 29,000 29,000 32,700 34,800 39,416
Capital expenditures .............................. 10,806 9,815 5,786 7,359 6,175
Cash dividends per common share ................... .50 -- -- -- --
=============================================================
</TABLE>
For information related to restrictions on the payment of cash dividends see
Note 5.
(a) Includes $4,287 of accelerated amortization of leasehold rights related to
the Company's Canadian Fixed Base Operations.
(b) Includes extraordinary tax benefit from net operating loss carryforwards of
$800 and $1,123 in fiscal 1992 and 1991, respectively.
<TABLE>
<CAPTION>
Fiscal 1995 Fiscal 1994
------------------------------------------------
Market Price Range* High Low High Low
------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . . . . . . 20 15 1/8 12 3/8 10 3/4
Second Quarter . . . . . . . . . . . . . . . . . . . . . . 18 3/8 15 7/8 15 1/8 11 1/8
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . 16 3/4 15 3/4 16 7/8 13 1/2
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . 20 1/2 16 16 3/4 15 1/8
------------------------------------------------
</TABLE>
* The range of per share closing prices of the Company's common stock on the
American Stock Exchange in each fiscal quarter from July 1, 1993 through June
30, 1995.
At June 30, 1995, there were 220 record holders of the Company's common stock.
13
<PAGE> 16
CONSOLIDATED STATEMENTS OF OPERATIONS
Hudson General Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------
1995 1994 1993
----------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $135,453 $142,075 $132,186
----------------------------------------
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,070 106,424 103,160
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 7,528 7,042 7,202
Selling, general & administrative . . . . . . . . . . . . . . . . . . . . . . . 14,306 13,806 13,280
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 559 1,283 1,776
Accelerated amortization of leasehold rights . . . . . . . . . . . . . . . . . - - 4,287
----------------------------------------
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 128,463 128,555 129,705
----------------------------------------
Earnings before equity in loss of joint venture, provision (benefit) for
income taxes, extraordinary item and cumulative effect of change
in the method of accounting for income taxes . . . . . . . . . . . . . . . . . 6,990 13,520 2,481
Equity in loss of joint venture . . . . . . . . . . . . . . . . . . . . . . . . . (2,747) (1,801) (2,788)
----------------------------------------
Earnings (loss) before provision (benefit) for income taxes, extraordinary item
and cumulative effect of change
in the method of accounting for income taxes . . . . . . . . . . . . . . . . . 4,243 11,719 (307)
Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . . . . . (350) 4,409 1,738
----------------------------------------
Earnings (loss) before extraordinary item and cumulative effect of
change in the method of accounting for income taxes . . . . . . . . . . . . . . 4,593 7,310 (2,045)
Extraordinary loss on repurchase of debt (net of applicable income taxes) . . . . - - (135)
Cumulative effect of change in the method of accounting for income taxes . . . . - 450 -
----------------------------------------
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,593 $ 7,760 $ (2,180)
========================================
Earnings (loss) per share, primary:
Earnings (loss) before extraordinary item and cumulative effect of
change in the method of accounting for income taxes . . . . . . . . . . . . . $ 3.69 $ 5.86 $ (1.65)
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - (.11)
Cumulative effect of change in the method of accounting
for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - .36 -
----------------------------------------
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.69 $ 6.22 $ (1.75)
========================================
Earnings (loss) per share, fully diluted:
Earnings (loss) before extraordinary item and cumulative effect of
change in the method of accounting for income taxes . . . . . . . . . . . . . $ 2.67 $ 3.96 $ (1.65)
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - (.11)
Cumulative effect of change in the method of accounting for income taxes . . . - .21 -
----------------------------------------
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.67 $ 4.17 $ (1.75)
========================================
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE> 17
CONSOLIDATED BALANCE SHEETS
Hudson General Corporation and Subsidiaries
<TABLE>
<CAPTION>
June 30,
--------------------
1995 1994
--------------------
(in thousands)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $12,613 $ 6,727
Accounts and notes receivable - net . . . . . . . . . . . . . . . . . . 14,457 14,628
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 936 904
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . 876 1,090
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 4,602 2,946
--------------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 33,484 26,295
Property, equipment and leasehold rights at cost, less accumulated
depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 33,864 31,047
Investment in Hawaii joint venture - net . . . . . . . . . . . . . . . . . 16,065 15,621
Long-term receivables - net . . . . . . . . . . . . . . . . . . . . . . . . 2,585 3,138
Other assets - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 770 862
Excess cost over fair value of net assets acquired. . . . . . . . . . . . . 800 926
--------------------
$87,568 $77,889
====================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,305 $ 8,652
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 1,557 1,224
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . 21,233 18,079
--------------------
Total current liabilities . . . . . . . . . . . . . . . . . . . 35,095 27,955
--------------------
Long-term debt, subordinated . . . . . . . . . . . . . . . . . . . . . . . 29,000 29,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,857 1,711
--------------------
Total noncurrent liabilities . . . . . . . . . . . . . . . . . . 30,857 30,711
--------------------
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 1,253,802 and 1,250,802 shares . . . . . . . . . . . . . . 1,254 1,251
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,759 6,717
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,707 12,716
Equity adjustments from foreign currency translation . . . . . . . . . . (1,483) (1,461)
Treasury stock, at cost, 96,600 shares . . . . . . . . . . . . . . . . . (1,621) --
--------------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . 21,616 19,223
--------------------
$87,568 $77,889
====================
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE> 18
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Hudson General Corporation and Subsidiaries
<TABLE>
<CAPTION>
For the Years Ended June 30, 1995, 1994 and 1993
------------------------------------------------------------------------------------
Equity
Common Stock Adjustments
Issued From Foreign
------------------- Paid in Retained Currency Treasury Stockholders'
Shares Amounts Capital Earnings Translation Stock Equity
------------------------------------------------------------------------------------
(in thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1992 ...... 1,242,802 $1,243 $6,607 $ 7,136 $ 80 $ -- $15,066
Equity adjustment from
foreign currency
translation ............. -- -- -- -- (745) -- (745)
Net loss .................. -- -- -- (2,180) -- -- (2,180)
----------------------------------------------------------------------------------
Balance, June 30, 1993 ...... 1,242,802 1,243 6,607 4,956 (665) -- 12,141
Common stock issued in
connection with exercise
of stock options ........ 8,000 8 110 -- -- -- 118
Equity adjustment from
foreign currency
translation ............. -- -- -- -- (796) -- (796)
Net earnings .............. -- -- -- 7,760 -- -- 7,760
----------------------------------------------------------------------------------
Balance, June 30, 1994 ...... 1,250,802 1,251 6,717 12,716 (1,461) -- 19,223
Common stock issued in
connection with exercise
of stock options ........ 3,000 3 42 -- -- -- 45
Dividends ($.50 per share) -- -- -- (602) -- -- (602)
Equity adjustment from
foreign currency
translation ............. -- -- -- -- (22) -- (22)
Purchase of treasury stock -- -- -- -- -- (1,621) (1,621)
Net earnings .............. -- -- -- 4,593 -- -- 4,593
----------------------------------------------------------------------------------
Balance, June 30, 1995 ...... 1,253,802 $1,254 $6,759 $ 16,707 $(1,483) $(1,621) $21,616
==================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE> 19
CONSOLIDATED STATEMENTS OF CASH FLOWS
Hudson General Corporation and Subsidiaries
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------
1995 1994 1993
---------------------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Earnings (loss) before extraordinary item and cumulative effect of
change in the method of accounting for income taxes ......................... $ 4,593 $ 7,310 $ (2,045)
Adjustments to reconcile earnings (loss) before extraordinary item
and cumulative effect of change in the method of accounting for income taxes
to net cash provided by operating activities:
Depreciation and amortization ............................................. 7,528 7,042 7,202
Provision for losses on accounts receivable - net ......................... 178 160 878
Accelerated amortization of leasehold rights .............................. -- -- 4,287
Loss on repurchase of debt ................................................ -- -- (135)
Increase (decrease) in deferred income taxes excluding cumulative
effect of change in the method of accounting for income taxes ........... 149 178 (408)
Equity in loss of joint venture ........................................... 2,747 1,801 2,788
Capitalization of interest cost on Hawaii joint venture advances .......... (1,471) (947) (1,035)
Gain on sale of equipment ................................................. (454) (133) (238)
Change in other current assets and liabilities:
Accounts and notes receivable .......................................... 5 (2,797) (479)
Inventory - net ........................................................ (31) (121) 216
Prepaid expenses and other assets ...................................... 215 129 (316)
Deferred income taxes .................................................. (1,656) (1,489) 82
Accounts payable ....................................................... 3,650 1,261 2,150
Income taxes payable ................................................... 333 575 186
Accrued expenses and other liabilities ................................. 3,136 3,123 (2,594)
Decrease (increase) in other assets ....................................... 92 155 (12)
Decrease in long-term receivables - net ................................... 553 23 115
Other - net ............................................................... 127 130 145
---------------------------------
Net cash provided by operating activities .............................. 19,694 16,400 10,787
---------------------------------
Cash flows from investing activities:
Purchases of property, equipment and leasehold rights ......................... (10,806) (9,815) (5,786)
Proceeds from sale of property and equipment .................................. 935 648 270
Advances to Hawaii joint venture - net ........................................ (1,720) (870) (206)
---------------------------------
Net cash used by investing activities .................................. (11,591) (10,037) (5,722)
---------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock ........................................ 45 118 --
Cash dividends paid ........................................................... (602) -- --
Purchase of treasury stock .................................................... (1,621) -- --
Proceeds from borrowings ...................................................... -- 500 15,580
Principal repayments of borrowings ............................................ -- (6,333) (18,147)
---------------------------------
Net cash used by financing activities .................................. (2,178) (5,715) (2,567)
---------------------------------
Effect of exchange rate changes on cash ......................................... (39) (297) (66)
---------------------------------
Net increase in cash and cash equivalents ....................................... 5,886 351 2,432
---------------------------------
Cash and cash equivalents at beginning of year .................................. 6,727 6,376 3,944
---------------------------------
Cash and cash equivalents at end of year ........................................ $ 12,613 $ 6,727 $ 6,376
=================================
</TABLE>
See accompanying notes to consolidated inancial statements.
17
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Hudson General Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND CONSOLIDATION: The consolidated financial statements
include the accounts of Hudson General Corporation and its subsidiaries (the
Company). A land development venture in which the Company has a 50% interest
(the Venture) is accounted for under the equity method of accounting (see Note
6). All material intercompany accounts and transactions have been eliminated in
consolidation.
INVENTORIES: Inventories are carried at the lower of average cost or market.
DEPRECIATION AND AMORTIZATION: Depreciation of property and equipment is
provided on the straight-line method over their estimated useful lives.
Leasehold rights are being amortized over the original and anticipated renewal
terms of the underlying leases.
EXCESS COST OVER FAIR VALUE OF NET ASSETS ACQUIRED: The excess cost over fair
value of net assets acquired, net of accumulated amortization of $1,188,000 and
$1,060,000 at June 30, 1995 and 1994, respectively, is amortized on a
straight-line basis over periods not to exceed forty years.
INCOME TAXES: Effective July 1, 1993, the Company adopted Statement
of Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes",
which requires the use of the liability method of accounting for deferred income
taxes (see Note 7).
FOREIGN CURRENCY TRANSLATION: The financial position and
results of operations of the Company's Canadian operations are measured using
local currency as the functional currency. Assets and liabilities are translated
into U.S. dollars at year-end rates of exchange, and revenues and expenses are
translated at the average rates of exchange for the year. Gains or losses
resulting from translating foreign currency financial statements are accumulated
as a separate component of stockholders' equity.
STATEMENTS OF CASH FLOWS: For purposes of the consolidated statements of cash
flows, the Company considers all securities with an original maturity of three
months or less at the date of acquisition to be cash equivalents. In fiscal
1995, 1994 and 1993 income taxes (net of refunds) of $362,000, $4,677,000 and
$2,515,000, respectively, were paid. Interest of $2,030,000, $2,241,000 and
$2,786,000 was paid in fiscal 1995, 1994 and 1993, respectively.
EARNINGS (LOSS) PER SHARE: Primary earnings (loss) per common and common
equivalent share have been computed based upon the weighted average number of
shares of common stock outstanding and dilutive common stock equivalents assumed
outstanding during the respective years. The weighted average number of shares
used in computing primary earnings (loss) per common and common equivalent share
was 1,245,122, 1,246,889 and 1,242,802 in fiscal 1995, 1994 and 1993,
respectively. Fully diluted earnings (loss) per common and common equivalent
share have been computed based upon the assumption that the Company's
convertible debentures are converted into common shares at the beginning of each
period in which their effect is dilutive (such debentures were dilutive only as
to fiscal 1995 and 1994 results) and that the related interest expense that
would not have been incurred had conversion taken place, net of applicable
taxes, is added back to net earnings (loss). The weighted average number of
common and common equivalent shares used in computing fully diluted earnings
(loss) per share in fiscal 1995 and 1994 was 2,145,175 and 2,134,789,
respectively.
RECLASSIFICATIONS: Certain reclassifications of fiscal 1994 and 1993 balances
have been made to conform with the fiscal 1995 presentation.
2. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
Accounts, notes and long-term receivables - net at June 30, 1995 and 1994
consisted of the following:
<TABLE>
<CAPTION>
1995 1994
------------------
(in thousands)
<S> <C> <C>
Rental and service fees receivable ....................... $13,905 $13,997
Note receivable (a) ...................................... 2,941 3,553
Equipment rental contracts and other
notes receivable (less unearned
finance income of $59,000 and $84,000) ................. 196 216
------------------
17,042 17,766
Less: current portion (net of allowance
for doubtful accounts of $1,579,000
and $1,631,000) ........................................ 14,457 14,628
------------------
Long-term portion ........................................ $ 2,585 $ 3,138
==================
</TABLE>
(a) On January 6, 1994, the Company assigned its leases and ceased operations at
Long Island MacArthur Airport in Islip, New York (LIMA) where the Company had
provided ground handling and fueling services to commercial airlines and related
fixed base operation services to general aviation aircraft. At the closing, the
Company was paid $150,000 in cash and received a promissory note from the
purchaser of its leases in the amount of $3,750,000, payable over seven years
with interest at the rate of 7%. The outstanding balance of the note receivable
at June 30, 1995 and 1994 was $2,941,000 and $3,553,000, respectively. The
promissory note is secured by the assigned leases and other assets located at
LIMA. This transaction did not have a material effect on the Company's
consolidated financial position or results of operations.
The Company provides various services at airports throughout the United
States and Canada. The Company grants credit to customers based upon an analysis
of its customers' financial position and then-existing conditions in the
aviation industry. Six of the Company's customers had individual balances
outstanding greater than 5%, and aggregating 48%, of accounts receivable - net
at June 30, 1995. During the three fiscal years ended June 30, 1995 certain
airline customers of the Company filed for protection under the bankruptcy laws
or ceased operations. Bad debt expenses were $178,000, $160,000 and $878,000 for
fiscal 1995, 1994 and 1993, respectively.
Accrued expenses and other liabilities at June 30, 1995 and 1994 consisted
of the following:
<TABLE>
<CAPTION>
1995 1994
---------------------
(in thousands)
<S> <C> <C>
Salaries and wages ................................. $ 5,353 $ 5,137
Interest ........................................... 956 956
Insurance .......................................... 6,022 3,607
Operating expenses payable ......................... 3,176 2,748
Customer advances and deposits ..................... 1,739 614
Other .............................................. 3,987 5,017
---------------------
$21,233 $18,079
=====================
</TABLE>
Maintenance and repair expenses were $7,400,000, $6,540,000 and $5,930,000
for fiscal 1995, 1994 and 1993, respectively.
18
<PAGE> 21
Interest income included in revenues was $615,000, $374,000 and $337,000 for
fiscal 1995, 1994 and 1993, respectively.
3. PROPERTY, EQUIPMENT AND LEASEHOLD RIGHTS
The number of years over which major classes of assets are being depreciated and
amortized, and the costs and the related accumulated depreciation and
amortization thereof at June 30, 1995 and 1994 are set forth below.
<TABLE>
<CAPTION>
Estimated
Useful Lives 1995 1994
----------------------------------------
(in thousands)
<S> <C> <C> <C>
Operating equipment ................. 3 - 12 $ 70,232 $ 63,760
Leasehold rights .................... 25 2,400 9,030
Buildings ........................... 14 - 20 1,458 1,454
Office furnishings and
equipment ......................... 3 - 10 3,193 3,184
Leasehold improvements .............. 2 - 28 5,829 7,356
----------------------------------------
83,112 84,784
Accumulated depreciation
and amortization ................. (49,248) (53,737)
----------------------
$ 33,864 $ 31,047
======================
</TABLE>
Due to an early lease termination, at March 31, 1995, the Company
accelerated the amortization of the remaining carrying value of its leasehold
improvements made to a hangar facility at a domestic airport location in the
amount of $744,000. Such amount is included in depreciation and amortization in
the accompanying consolidated statements of operations.
Leasehold rights at June 30, 1994 include $6,630,000 related to the Company's
Canadian FBO's (see Note 4).
4. CANADIAN OPERATIONS
The consolidated financial statements include: assets of $12,301,000,
$14,895,000 and $15,672,000; net assets of $7,655,000, $8,866,000 and
$8,145,000; and revenues of $34,376,000, $40,144,000 and $48,576,000 in fiscal
1995, 1994 and 1993, respectively; and earnings of $3,352,000 and $1,717,000 in
fiscal 1995 and 1994, respectively, and a loss of $3,901,000 in fiscal 1993,
related to the Company's Canadian operations. In fiscal 1995 and 1993, the
Company's Canadian subsidiary redeemed for cash preferred shares held by the
Company for $4,500,000 and $4,100,000, respectively.
The Company did not renew the subleases (Subleases) covering its fixed base
operation (FBO) locations at several Canadian airports beyond their October 31,
1994 expiration dates and as a result ceased operating the FBO's on such date.
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.
5. LONG-TERM DEBT
(a) Pursuant to a Revolving Credit Agreement with a group of banks dated
November 25, 1992, as amended (the Credit Agreement), the Company may borrow
funds (including outstanding letters of credit) up to a limit of $18,300,000
(the Limit) until March 31, 1997. 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, 1996 until December 31, 2000, at which time the
Credit Agreement terminates. The Limit may also be reduced by asset sales in
excess of certain amounts and by any distributions to the Company from the
Venture, net of advances made by the Company during the applicable period, in
excess of $4,000,000 in any four consecutive quarters, or in excess of
$2,000,000 in any fiscal year. There were no direct borrowings outstanding at
June 30, 1995 and 1994. At June 30, 1995 and 1994 there were $3,655,000 and
$4,451,000, respectively, of outstanding letters of credit. The Credit Agreement
provides the Company with the option of selecting a rate of interest at either
the base rate or 13/8% above the LIBO rate, as defined.
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. At June 30, 1995,
the Company's TNW was $22,298,000. 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. In
addition, the Company may, until March 31, 1996, expend up to an additional
$3,000,000 to repurchase shares of its common stock so long as no proceeds from
borrowings under the Credit Agreement are utilized for such purpose.
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 $2,805,000.
Additionally, the Credit Agreement requires that the Company maintain certain
minimum effective net worth requirements, as defined, which are subject to
incremental annual increases and further stipulates that the Company not incur a
consolidated net loss for any fiscal year. The Credit Agreement also requires
that the Company meet certain other customary financial covenants and permits
the Company, with certain limitations, to prepay or otherwise purchase
subordinated debt.
The Company has granted the banks a security interest in substantially all
of its domestic equipment and accounts receivable and certain of its other
assets. The Company's obligations under the Credit Agreement are guaranteed by
the Company's domestic subsidiaries, and the guarantees of those subsidiaries
with material operations are similarly secured.
The Company also has an agreement with Canadian affiliates of the same group
of banks to provide a credit facility for its Canadian subsidiary (the Canadian
Agreement) in the amount of $5,000,000 (Cdn). Any borrowings made pursuant to
the Canadian Agreement reduce the availability under the Credit Agreement. The
$5,000,000 (Cdn) borrowing limit will be reduced commencing March 31, 1997 on
the same basis as the Limit. The Canadian Agreement provides the Company with
the option of selecting a rate of interest at either 1/2% above the prime rate
or 15/8% above the cost of funds rate, as defined.
In connection with the Canadian Agreement, the Company has guaranteed the
obligations of its Canadian subsidiary and granted the banks a security interest
in substantially all
19
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Hudson General Corporation and Subsidiaries
(Continued)
of its Canadian accounts receivable and certain of its other assets, including
inter-company debt from its Canadian subsidiary. The guarantees of the Company's
domestic subsidiaries referred to above extend to the Company's obligations as a
guarantor under the Canadian Agreement.
(b) In July 1986 the Company issued $30,000,000 of 7% convertible
subordinated debentures due 2011 (the Debentures), which are convertible at any
time prior to maturity, unless previously redeemed, into shares of the Company's
common stock at a conversion price of $32.75 per share (see Note 8), subject to
adjustment in certain events. Interest on the Debentures is payable
semi-annually in January and July. The Debentures are redeemable at any time at
the option of the Company, in whole or in part, at declining premiums (101.4% of
the principal amount at June 30, 1995), subject to certain conditions. The
Debentures are subject to a mandatory sinking fund, beginning in July 1997, in
annual installments of $1,500,000, which will retire 70% of the Debentures prior
to maturity. The Company previously repurchased $1,000,000 of the Debentures.
Such repurchased amount may, at the Company's discretion, be used to meet
sinking fund obligations. The Debentures are subordinate to all superior debt as
defined in the indenture. At June 30, 1995 and 1994 there was $29,000,000 of the
Debentures outstanding.
Maturities of long-term debt for the next five fiscal years are: none in
1996 and 1997; $500,000 in 1998 (assuming application of the $1,000,000 of
repurchased Debentures to the sinking fund); $1,500,000 in 1999; $1,500,000 in
2000; and $25,500,000 thereafter.
6. INVESTMENT IN HAWAII JOINT VENTURE
The Venture was formed to acquire, develop and sell approximately 4,000
contiguous acres of land in Hawaii (the Project). The Project is being developed
in four successive phases. The first two phases, containing approximately 2,100
acres, have been developed and substantially sold. The third phase, containing
approximately 550 acres, has also been developed and has 86 parcels available
for sale. The fourth phase has yet to be developed, except to the extent common
improvements (main roadway, water wells, etc.) have been completed. 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 into 1,490 units. 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 Company's partner in the Venture is Oxford Kohala, Inc. (the Partner), a
wholly owned 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. The Company's total
advances (including accrued interest) at June 30, 1995 (including Additional
Advances referred to in the next paragraph) and 1994 were $22,565,000 and
$19,333,000, respectively.
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 the Partner in an aggregate
amount not to exceed $376,000 with respect to the period October 1, 1994 through
March 31, 1995, which amounts were intended to enable the Partner to make its
share of advances required by the Venture. The amount so authorized by the
Bankruptcy Court was not sufficient to allow the Partner to make its full share
of required advances. To date, the Company has opted to make additional advances
(the Additional Advances) to cover the Partner's funding deficiency. The Company
has filed a claim with the Bankruptcy Court in an amount equal to the Additional
Advances. In addition, Oxford First has filed an amended reorganization plan
with the Bankruptcy Court contemplating Oxford First's transfer of funds to the
Partner in amounts set forth in the plan covering periods through December 31,
1997. The Company, at present, is unable to determine whether the Bankruptcy
Court will confirm Oxford First's reorganization plan so as to enable Oxford
First to transfer additional funds to the Partner or whether any transfers
authorized by the Bankruptcy Court will be sufficient in order for the Partner
to make its share of future advances to the Venture. Should the Partner be
unable to make its share of future advances to the Venture, the Company has the
option to make Additional Advances (subject to its rights of reimbursement)
necessary up to the limits set forth in the Credit Agreement (see Note 5). The
Partner did not file for reorganization under Chapter 11 of the Bankruptcy Code.
During fiscal 1995, the Company advanced $1,720,000 including $548,000 of
Additional Advances to the Venture.
During fiscal 1991, the Venture entered into agreements with banks pursuant
to which $8,797,000 of the Venture's mortgage receivables were sold. An
additional sale of $3,148,000 of mortgage receivables to a bank was completed
during fiscal 1992. Since the Venture has accounted for these transactions as
financing arrangements, the unpaid balances of the mortgage receivables in the
amount of $2,826,000 and $4,759,000 are shown as "Notes payable" in the
consolidated balance sheets of the Venture at June 30, 1995 and 1994,
respectively. The agreements with the banks require that all payments received
in connection with the underlying mortgage receivables be remitted to the banks
until fiscal 1996 under the fiscal 1991 sales and until fiscal 1997 under the
fiscal 1992 sale, when any unpaid balance due to the banks is to be repaid by
the Venture. In addition, the Venture is required to make additional payments to
the banks should the yield to the banks be less than 113/4% for the fiscal 1991
sales, or less than 2% over the prime rate (as defined) for the fiscal 1992
sale. The Venture remitted $97,000 and $129,000 during fiscal 1995 and 1994,
respectively, for such purpose.
20
<PAGE> 23
The Company defers recognition of interest income on its advances to the
Venture and capitalizes interest costs at its weighted average cost of funds on
such advances. At June 30, 1995 and 1994, the amount of deferred interest income
was $1,859,000 and $1,819,000, respectively. The Company will recognize deferred
interest income as the balance of the notes payable to the banks is reduced and
when additional distributions or payments related to the Venture, if any, are
made to the Company. Interest costs capitalized by the Company for fiscal 1995
and 1994 were $1,471,000 and $947,000, respectively.
The summary consolidated balance sheets for the Venture as of June 30, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
------------------------
(in thousands)
<S> <C> <C>
Cash and equivalents ............................. $ 89 $ 121
Land and development costs (including
capitalized interest of $6,706,000 and
$6,736,000) .................................... 26,863 26,255
Mortgages, accounts and notes receivable ......... 7,732 10,197
Foreclosed real estate - net ..................... 2,395 2,138
Other assets - net ............................... 2,461 2,640
------------------------
$ 39,540 $ 41,351
========================
Notes payable .................................... $ 3,402 4,759
Partner advances and accrued interest
payable ........................................ 44,048 38,664
Accounts payable and accrued expenses ............ 1,422 1,765
Partners' deficit ................................ (9,332) (3,837)
------------------------
$ 39,540 $ 41,351
========================
</TABLE>
Summary results of operations for the Venture are as follows for the fiscal
years ended June 30, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------
1995 1994 1993
------------------------------------
(in thousands)
<S> <C> <C> <C>
Net sales ............................ $ 504 $ 536 $ 398
Cost of sales ........................ 191 163 182
Selling, general and
administrative costs ............... 2,852 2,797 4,336
Interest - net ....................... 2,956 1,178 1,456
------------------------------------
Net loss ............................. $(5,495) $(3,602) $(5,576)
====================================
</TABLE>
As a partnership, the Venture is not subject to federal or state income
taxes. The Company's portion of the Venture's results is shown as "Equity in
loss of joint venture" in the accompanying consolidated statements of
operations.
7. INCOME TAXES
Provision (benefit) for income taxes consisted of the following for the years
ended June 30, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------
(in thousands)
<S> <C> <C> <C>
Federal:
Current ............................ $ 847 $ 3,855 $ 1,807
Deferred ........................... (137) (946) (719)
Foreign:
Current ............................ -- -- --
Deferred ........................... (1,300) -- --
State:
Current ............................ 313 1,791 645
Deferred ........................... (73) (291) 5
------------------------------------
$ (350) $ 4,409 $ 1,738
====================================
</TABLE>
A reconciliation of the provision (benefit) for income taxes to the amount
computed by applying the statutory federal income tax rate to earnings (loss)
before provision (benefit) for income taxes, extraordinary item and cumulative
effect of change in the method of accounting for income taxes for the years
ended June 30, 1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------------------
(in thousands)
<S> <C> <C> <C>
Computed "expected" tax
provision (benefit) ................ $ 1,442 $ 3,984 $ (104)
Increase (decrease) in income
taxes resulting from:
Reevaluation of valuation
allowance ...................... (1,300) -- --
Utilization of foreign net
operating loss carry-forwards
and depreciation differences ... (804) (752) --
Foreign tax differential ......... 204 168 --
State income taxes, net of
Federal income tax effect ...... 158 990 429
Losses for which no tax
benefit was recorded ........... -- -- 1,326
Other - net ...................... (50) 19 87
------------------------------------
Provision (benefit) for
income taxes ....................... $ (350) $ 4,409 $ 1,738
====================================
</TABLE>
Major components of deferred tax expense (income) are as follows for the
years ended June 30, 1995, 1994 and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------
(in thousands)
<S> <C> <C> <C>
Differences in tax and book
depreciation .......................... $ 850 $ 284 $ 1,646
Interest capitalized in financial
statements ............................ 28 73 32
Reserves for doubtful accounts,
disputed claims, losses on
assets and contracts, etc ............. 32 (712) (1,787)
Retirement plans ........................ 59 (82) (132)
Accrued insurance ....................... (472) (841) (328)
State taxes ............................. 269 (125) 3
Difference in Hawaii joint
venture's book and tax
year-end .............................. (226) 175 (223)
Reevaluation of valuation
allowance ............................. (1,300) -- --
Utilization of foreign net
operating loss carryforwards
and depreciation differences .......... (804) -- --
Other ................................... 54 (9) 75
----------------------------------
Total ................................... $(1,510) $(1,237) $ (714)
==================================
</TABLE>
21
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Hudson General Corporation and Subsidiaries
(Continued)
Deferred tax assets (liabilities) are comprised of the following as of June
30, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---------------------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Reserves for doubtful accounts, claims, etc ........ $ 860 $ 892
Retirement plans ................................... 368 427
Property, equipment and leasehold rights,
principally depreciation - foreign ............... 2,235 2,929
Accrued insurance .................................. 2,099 1,627
---------------------
Current deferred tax assets ........................ 5,562 5,875
---------------------
State income taxes ................................. 618 887
Difference in Hawaii joint venture's book
and tax year-end ................................. 545 319
Other .............................................. -- 53
---------------------
Noncurrent deferred tax assets ..................... 1,163 1,259
---------------------
6,725 7,134
Valuation allowance .................................. (960) (3,064)
---------------------
Net deferred tax assets ............................ 5,765 4,070
---------------------
Deferred tax liabilities:
Property, equipment and leasehold rights,
principally depreciation - domestic .............. (2,463) (2,306)
Interest capitalized on financial statements ....... (557) (529)
---------------------
Noncurrent deferred tax liabilities ................ (3,020) (2,835)
---------------------
Deferred tax assets - net ............................ $ 2,745 $ 1,235
=====================
</TABLE>
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, and has reported the
cumulative effect of the change in the method of accounting for income taxes in
the consolidated statement of operations for fiscal 1994, without restating
prior period financial statements.
Statement 109 requires a change from the deferred method under APB Opinion
11 to the asset and liability method of accounting for income taxes. Under the
asset and liability method of Statement 109, deferred income taxes are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
Pursuant to the deferred method under APB Opinion 11, which was applied by
the Company in fiscal 1993 and prior years, deferred income taxes were
recognized for income and expense items that were reported in different years
for financial reporting purposes and income tax purposes using the tax rate
applicable for the year the timing difference arose. Under the deferred method,
deferred taxes are not adjusted for subsequent changes in tax rates.
Under Statement 109, a valuation allowance is provided when it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. At July 1, 1993, the Company provided a 100% valuation allowance for
the net operating loss carryforwards and depreciation differences relating to
its Canadian operations since realization of the related deferred tax assets was
uncertain at that time. The net change in the valuation allowance for fiscal
1995 and 1994 was a decrease of $2,104,000 and $1,211,000, respectively. The
decrease reflects: (i) the tax effect resulting from utilization of a portion of
the Company's Canadian depreciation differences to offset its provision for
foreign income taxes in the amount of $804,000 and $1,211,000 for fiscal 1995
and 1994, respectively; and (ii) the recognition of $1,300,000 of deferred tax
assets in fiscal 1995 resulting from a review of prior Canadian operating
results and anticipation of future Canadian earnings, which together with
cessation of operations of the Company's Canadian FBO's (see Note 4), made the
realization of additional Canadian depreciation differences more likely than
not.
8. COMMON STOCK
(a) The Company's 1981 Non-Qualified Stock Option and Stock Appreciation Rights
Plan (the Plan) provided for the issuance of non-qualified stock options
(Options) to key employees. In connection with these Options, the Board of
Directors' Stock Option and Appreciation Rights Committee (the Committee) could
also grant stock appreciation rights (Rights) exercisable in lieu of the
Options, and/or limited rights (Limited Rights) exercisable under certain
circumstances in lieu of the Options. No further Options or Rights may be
granted under the Plan. The exercise price of outstanding Options under the Plan
is the fair market value (as defined in the Plan) of the shares of the Company's
common stock on the date of grant.
Activity in Options during fiscal 1995 and 1994 was as follows:
<TABLE>
<S> <C>
Outstanding June 30, 1993 ...................................... 79,600
Exercised ($14.79 per share) ................................... (8,000)
------
Outstanding June 30, 1994 ...................................... 71,600
Exercised ($14.79 per share) ................................... (3,000)
Canceled ($14.79 per share) .................................... (6,500)
Canceled ($19.07 per share) .................................... (600)
------
Outstanding June 30, 1995 ...................................... 61,500
======
</TABLE>
Limited Rights were also granted in conjunction with Options granted in May
1990 and June 1991 of which 55,000 ($14.79 per share) and 6,500 ($19.07 per
share) were outstanding at June 30, 1995. At June 30, 1995 the aggregate Option
price and quoted market value of Company stock subject to outstanding Options
were $937,000 and $1,253,000, respectively. All outstanding Options and Rights
were granted with a term of ten years and are currently exercisable.
The Committee was also authorized to grant additional separate stock
appreciation rights (Independent Rights), which are not connected with any
Option. There were 18,000 Independent Rights outstanding ($17.32 per share) at
June 30, 1995 and 1994.
At June 30, 1995 the aggregate Independent Right price and quoted market
value of outstanding Independent Rights were $312,000 and $367,000,
respectively.
(b) The Company's 1981 Incentive Stock Option (ISO) and Stock Appreciation
Rights Plan (the Plan) provided for the issuance of ISO's to key employees. The
fair market value, as defined, at the date of grant, for which an individual may
have been awarded ISO's, was limited to $100,000 per calendar year. No further
ISO's may be granted under the Plan. The exercise price of all ISO's outstanding
under the Plan is one hundred percent (100%) of the fair market value (as
defined in the Plan) of the shares of the Company's common stock on the date of
grant.
22
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Hudson General Corporation and Subsidiaries
(Continued)
The Committee was also authorized to grant Rights and/or Limited Rights in
conjunction with ISO's granted under the Plan. In all material respects, Rights
and Limited Rights granted under the ISO Plan operate in a manner identical to
Rights and Limited Rights granted under the 1981 Non-Qualified Stock Option and
Stock Appreciation Rights Plan.
Activity in ISO's (and Rights) during fiscal 1995 and 1994 was as follows:
<TABLE>
<S> <C>
Outstanding June 30, 1994 and 1993 ............................. 51,900
Canceled ($17.00 per share) .................................... (2,000)
Canceled ($19.88 per share) .................................... (1,100)
------
Outstanding June 30, 1995 ...................................... 48,800
======
</TABLE>
Rights and Limited Rights were also granted in conjunction with ISO's
granted in May 1990 of which 36,000 ($17.00 per share) were outstanding at June
30, 1995. Limited Rights were also granted in conjunction with ISO's granted in
June 1991 of which 12,800 ($19.88 per share) were outstanding at June 30, 1995.
At June 30, 1995 the aggregate ISO (and Right) price and quoted market value of
Company stock subject to outstanding ISO's (and the Rights) were $866,000 and
$994,000, respectively. All outstanding ISO's and Rights were granted with a
term of ten years and are currently exercisable.
(c) In 1985, the Company sold $15,000,000 of subordinated notes due 1995
(the Notes). In connection with the sale of the Notes, the Company issued
warrants entitling the holders to purchase an aggregate of 65,000 shares of
common stock. During fiscal 1992, 1,300 warrants were surrendered in connection
with the Company's repurchase of a portion of the Notes. The balance of the
Notes was prepaid in fiscal 1993 and the remaining warrants expired on June 27,
1995.
(d) Common Stock Reserved: Common shares were reserved for issuance at June
30, 1995 as follows:
<TABLE>
<S> <C>
Conversion of convertible debentures ........................... 885,496
Exercise of incentive stock options - 1981 Plan ................ 48,800
Exercise of non-qualified stock options - 1981 Plan ............ 79,500
Exercise of stock appreciation rights .......................... 161,004
---------
Total .......................................................... 1,174,800
=========
</TABLE>
(e) In April 1995, the Board of Directors approved the repurchase of up to
150,000 shares of the Company's common stock from time to time in either open
market or privately negotiated transactions. As of June 30, 1995 the Company had
repurchased 96,600 shares in the open market for an aggregate purchase price of
$1,621,000 pursuant to this authorization.
9. RETIREMENT PLANS
The Company maintains a 401(k) Profit Sharing Plan (the Plan) covering
substantially all of its domestic employees not subject to collective bargaining
agreements. Under the Plan the Company contributes a discretionary contribution
and makes a matching contribution equal to 25% of the Compensation (as defined
in the Plan) that each participant elects to defer (up to 5% of the
participant's Compensation) and contribute to the Plan. During fiscal 1995 and
1994, the Company contributed $845,000 and $635,000, respectively, to the Plan,
representing employer matching and discretionary contributions.
During fiscal 1995, the Company established a Group Registered Retirement
Savings Plan (RRSP) covering substantially all of its Canadian employees not
subject to collective bargaining agreements. Under the RRSP the Company
contributes a discretionary contribution. During fiscal 1995, the Company
contributed $61,000 to the RRSP.
Net expense related to the Company's retirement plans was $701,000, $844,000
and $745,000 for fiscal 1995, 1994 and 1993, respectively.
10. COMMITMENTS AND CONTINGENCIES
(a) LEASES
Minimum rental payments for future fiscal years under non-cancelable
operating leases (after deducting $493,000 to be received subsequent to June 30,
1995 under non-cancelable subleases) are: $3,992,000 in 1996; $3,608,000 in
1997; $3,310,000 in 1998; $2,991,000 in 1999; $2,514,000 in 2000; and $8,154,000
thereafter.
Total rental expense incurred amounted to $6,592,000, $7,237,000 and
$7,179,000 for fiscal 1995, 1994 and 1993 (excluding sublease income amounting
to $1,337,000, $3,411,000 and $4,156,000 in fiscal 1995, 1994 and 1993),
respectively.
(b) CAPITAL COMMITMENTS
At June 30, 1995 the Company had commitments to fund $5,084,000 for
operating equipment and facility improvements.
(c) LITIGATION
In 1988, Texaco Canada Inc. (Texaco) (now known as McColl-Frontenac Inc.)
instituted a suit in the Supreme Court of Ontario, Canada against the Company
and Petro-Canada Inc., the corporation which supplied aviation fuel for the
Company's Canadian fixed base operations. The suit's allegations, as amended in
1992, are that the defendants interfered with contractual and fiduciary
relations and induced the breach of a fuel supply agreement between Texaco and
Innotech Aviation Limited (Innotech) in connection with the purchase by the
Company from Innotech in 1984 of certain assets of Innotech's airport ground
services business. The suit seeks compensatory and punitive damages totaling
$110,000,000 (Canadian) (approximately $80,000,000 (U.S.)) plus all profits
earned by the defendants subsequent to the alleged breach. A trial date has been
set for May 1996.
Innotech (which due to a name change is now called Aerospace Realties (1986)
Limited) has agreed to defend and indemnify the Company against claims of
whatever nature asserted in connection with, arising out of or resulting from
the fuel supply agreement with Texaco, and is defending the Company in the suit
by Texaco.
Company management believes, and counsel for the Company has advised based
on available facts, that the Company will successfully defend this action.
11. RELATED PARTY TRANSACTION
In February 1988, the Company engaged an investment banking firm of which a
director of the Company is affiliated to render certain investment banking
services and paid a retainer fee relating to such services in the amount of
$125,000. During fiscal 1993, the Company paid such firm an additional $50,000
for additional investment banking services.
23
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Hudson General Corporation and Subsidiaries
(Continued)
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table sets forth unaudited quarterly financial information for
fiscal 1995 and 1994:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
1995
Revenues ......................... $31,348 $33,177 $37,953 $32,975
Gross profit ..................... 4,446 5,296 7,008 5,397
Net earnings ..................... 235 633 3,474(a) 251
Earnings per share, primary:
Net earnings .................... $ .19 $ .50 $ 2.76 $ .21
===========================================
Earnings per share, fully diluted:
Net earnings .................... $ .19 $ .43 $ 1.75 $ .21
===========================================
1994
Revenues ......................... $28,818 $30,715 $50,910 $31,632
Gross profit ..................... 4,601 4,800 14,537(b) 4,974(b)
Net earnings ..................... 1,136(c) 393 4,242(b) 1,989(b)
Earnings per share, primary:
Net earnings .................... $ .91(c) $ .32 $ 3.40 $ 1.59
===========================================
Earnings per share, fully diluted:
Net earnings .................... $ .67(c) $ .32 $ 2.12 $ 1.06
===========================================
</TABLE>
(a) Includes the recognition of $1,300 of deferred tax assets (See note 7).
(b) In March 1994 a jury in Manhattan, New York rendered a verdict against the
Company in a civil lawsuit for personal injuries and awarded the plaintiff a
total of $21,436 in damages, of which $19,186 is covered by insurance. At
March 31, 1994, the Company accrued a provision for the entire uninsured
punitive damage amount of $2,250 in the Company's consolidated statements of
operations. In June 1994, as a result of a ruling by the judge in the case
vacating the uninsured punitive damage award against the Company, the
Company reversed the $2,250 provision which it had previously accrued.
(c) Earnings before cumulative effect of change in the method of accounting for
income taxes were $686 in the first quarter of fiscal 1994. Earnings per
share, primary and fully diluted, before cumulative effect of change in the
method of accounting for income taxes were $.55 and $.46, respectively, in
the first quarter of fiscal 1994.
INDEPENDENT AUDITORS' REPORT
[KPMG PEAT MARWICK LLP LOGO]
The Stockholders and Board of Directors
Hudson General Corporation
We have audited the accompanying consolidated balance sheets of Hudson
General Corporation and subsidiaries as of June 30, 1995 and 1994 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three year period ended June 30, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hudson
General Corporation and subsidiaries at June 30, 1995 and 1994 and the results
of their operations and their cash flows for each of the years in the three year
period ended June 30, 1995, in conformity with generally accepted accounting
principles.
As discussed in the notes to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," on a prospective basis in fiscal 1994.
/s/ KPMG PEAT MARWICK, LLP
Jericho, New York
August 16, 1995
24
<PAGE> 27
[HUDSON GENERAL LOGO]
HUDSON GENERAL CORPORATION
111 Great Neck Road
P.O.Box 355
Great Neck, New York 11022
CORPORATE INFORMATION
Hudson General Corporation and Subsidiaries
DIRECTORS
Jay B. Langner
Chairman
Milton H. Dresner
Developer, Builder
and Private Investor
Edward J. Rosenthal
Executive Vice President
Cramer Rosenthal McGlynn, Inc.
Hans H. Sammer
Consultant, Retired Director,
Investment Banking Group
Prudential Securities Incorporated
Richard D. Segal
Chairman and Chief Executive Officer
Seavest Inc.
Stanley S. Shuman
Executive Vice President
and Managing Director
Allen & Company Incorporated
TRANSFER AGENT AND REGISTRAR
First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
One Jericho Plaza
Jericho, New York 11753
SHARES LISTED
Common --
American Stock Exchange
(Symbol: HGC)
10-K AVAILABLE
The Annual Report, on Form
10-K, as filed with the
Securities and Exchange
Commission, is available to
stockholders without charge
upon written request to:
Secretary
Hudson General Corporation
111 Great Neck Road
Great Neck, New York 11021
CORPORATE OFFICERS
Jay B. Langner
Chairman of the Board, President
and Chief Executive Officer
Paul R. Pollack
Executive Vice President
and Chief Operating Officer
Michael Rubin
Executive Vice President
and Chief Financial Officer
Fernando DiBenedetto
Senior Vice President -- Operations
Raymond J. Rieder
Senior Vice President
and Chief Marketing Officer
Donald S. Croot
Vice President --
Canadian Operations
Rocco Daloia
Vice President -- Maintenance and Facilities
Barry I. Regenstein
Vice President and Controller
Noah E. Rockowitz
Vice President, General Counsel and Secretary
Henry A. Satinskas
Vice President -- Transportation Services
DIVISIONAL OFFICERS
UNITED STATES
Salvatore J. Altizio, Jr.
Regional Vice President
David L. Finch
Vice President --
Contract Services
Frederick C. Knapp, Jr.
Vice President -- Fuel Services and Planning
Bert J. Smith
Regional Vice President
David M. Ziolkowski
Regional Vice President
CANADA
Thomas D. Culp
Vice President -- Marketing
Audrey J. Laurin
Vice President and Controller
Denis A. A. Lawn
Vice President -- Operations
CORPORATE HEADQUARTERS
111 Great Neck Road
Great Neck, New York 11021
(516) 487-8610
UNITED STATES LOCATIONS
Baltimore-Washington
International Airport
Fort Lauderdale/Hollywood
International Airport
Houston
Ellington Field
William P. Hobby Airport
JFK International Airport
LaGuardia Airport
Logan International Airport
Los Angeles International Airport
Miami International Airport
Newark International Airport
O'Hare International Airport
Orlando International Airport
Salt Lake City International Airport
Washington National Airport
CANADIAN LOCATIONS
Administrative Offices
100 Alexis Nihon, Suite 400
Ville St. Laurent, Quebec
H4M 2N9
(514) 748-2277
Calgary International Airport
Edmonton Municipal Airport
Halifax International Airport
Montreal International Airport
(Dorval)
Montreal International Airport
(Mirabel)
Ottawa International Airport
St. John's Airport
Toronto International Airport
Vancouver International Airport
Winnipeg International Airport
<PAGE> 28
[HUDSON GENERAL LOGO]
HUDSON GENERAL CORPORATION
110 Great Neck Road
P.O. Box 355
Great Neck, New York 11022
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
-61-
<PAGE> 2
EXHIBIT 21
HUDSON GENERAL CORPORATION
SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction
of
Incorporation
-------------
<S> <C>
Hudson General Aviation Services Inc. Canada
Hudson Aviation Services, Inc. California California
Hudson General Coach Lines, Inc. California
Hudson Aviation Services, Inc. Delaware Delaware
Hudson Aviation Services, Inc. Massachusetts
Hudson Aviation Services-Oakland, Inc. California
Hudson Kohala Inc. Delaware
</TABLE>
-62-
<PAGE> 1
EXHIBIT 23
Consent of
KPMG Peat Marwick LLP,
the Company's
Independent Auditors
-63-
<PAGE> 2
Independent Auditors' Consent
Board of Directors
Hudson General Corporation:
We consent to the incorporation by reference in the Registration Statement (No.
2-75137) on Form S-8 of Hudson General Corporation of our report dated August
16, 1995, relating to the consolidated balance sheets of Hudson General
Corporation and subsidiaries as of June 30, 1995 and 1994 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1995 which report is
incorporated by reference in the June 30, 1995 annual report on Form 10-K of
Hudson General Corporation and our report dated August 16, 1995, relating to
the consolidated balance sheets of Kohala Joint Venture and subsidiary as of
June 30, 1995 and 1994 and the related consolidated statements of operations
and partners' deficit, and cash flows and related financial statement schedule
for each of the years in the three-year period ended June 30, 1995 which report
appears in the June 30, 1995 annual report on Form 10-K of Hudson General
Corporation.
Our report relating to the consolidated financial statements of Hudson General
Corporation refers to a change in the method of accounting for income taxes.
KPMG PEAT MARWICK LLP
Jericho, New York
September 14, 1995
-64-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 12,613,000
<SECURITIES> 0
<RECEIVABLES> 14,457,000
<ALLOWANCES> 0
<INVENTORY> 936,000
<CURRENT-ASSETS> 33,484,000
<PP&E> 33,864,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 87,568,000
<CURRENT-LIABILITIES> 35,095,000
<BONDS> 29,000,000
<COMMON> 1,254,000
0
0
<OTHER-SE> 20,362,000
<TOTAL-LIABILITY-AND-EQUITY> 21,616,000
<SALES> 135,453,000
<TOTAL-REVENUES> 135,453,000
<CGS> 106,070,000
<TOTAL-COSTS> 113,598,000
<OTHER-EXPENSES> 14,306,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 559,000
<INCOME-PRETAX> 4,243,000
<INCOME-TAX> (350,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,593,000
<EPS-PRIMARY> 3.69
<EPS-DILUTED> 2.67
</TABLE>
