<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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)
DELAWARE 13-1947395
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 GREAT NECK ROAD, GREAT NECK, NEW YORK 11021
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (516) 487-8610
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $l.00 per share: 1,214,702 shares outstanding at
May 8, 1995.
Page 1 of 17
<PAGE> 2
PART I - FINANCIAL STATEMENTS
2
<PAGE> 3
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1995 1994 1995 1994
------------------------------ ------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . $37,953,000 $50,910,000 $102,478,000 $110,443,000
----------- ----------- ------------ ------------
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . . 28,429,000 34,582,000 80,057,000 81,402,000
Depreciation and amortization . . . . . . . . 2,588,000 1,861,000 5,884,000 5,328,000
Selling, general & administrative . . . . . . 3,461,000 6,554,000 10,377,000 12,816,000
Interest . . . . . . . . . . . . . . . . . . . 116,000 329,000 467,000 1,045,000
----------- ----------- ------------ ------------
Total costs and expenses . . . . . . . . . 34,594,000 43,326,000 96,785,000 100,591,000
----------- ----------- ------------ ------------
Earnings before equity in loss of joint
venture, provision (benefit) for income
taxes and cumulative effect of change in
the method of accounting for income taxes . . 3,359,000 7,584,000 5,693,000 9,852,000
Equity in loss of joint venture . . . . . . . . (660,000) (420,000) (1,805,000) (1,282,000)
----------- ----------- ------------ ------------
Earnings before provision (benefit) for
income taxes and cumulative effect of change
in the method of accounting for income taxes.. 2,699,000 7,164,000 3,888,000 8,570,000
Provision (benefit) for income taxes . . . (775,000) 2,922,000 (454,000) 3,249,000
----------- ----------- ------------ ------------
Earnings before cumulative effect of change
in the method of accounting for income
taxes . . . . . . . . . . . . . . . . . . . . 3,474,000 4,242,000 4,342,000 5,321,000
Cumulative effect of change in the method of
accounting for income taxes . . . . . . . . . - - - 450,000
----------- ----------- ------------ ------------
Net earnings . . . . . . . . . . . . . . . . . $ 3,474,000 $ 4,242,000 $ 4,342,000 $ 5,771,000
=========== =========== ============ ============
Earnings per share, primary:
Earnings before cumulative effect of change
in the method of accounting for income taxes $ 2.76 $ 3.40 $ 3.45 $ 4.28
Cumulative effect of change in the method of
accounting for income taxes . . . . . . . . . - - - .36
------- ------ ------ ------
Net earnings . . . . . . . . . . . . . . . . $ 2.76 $ 3.40 $ 3.45 $ 4.64
======= ====== ====== ======
Earnings per share, fully diluted:
Earnings before cumulative effect of change
in the method of accounting for income taxes $ 1.75 $ 2.12 $ 2.42 $ 2.89
Cumulative effect of change in the method of
accounting for income taxes . . . . . . . . . - - - .21
------- ------ ------ ------
Net earnings . . . . . . . . . . . . . . . . $ 1.75 $ 2.12 $ 2.42 $ 3.10
======= ====== ====== ======
Cash dividends per common share . . . . . . . . $ - $ - $ .25 $ -
======= ====== ====== ======
Weighted average common and common equivalent
shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . 1,258,000 1,247,000 1,260,000 1,244,000
=========== =========== ========= =========
Fully diluted . . . . . . . . . . . . . . . . 2,143,000 2,135,000 2,148,000 2,134,000
=========== =========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 June 30
1995 1994
------------ -----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $11,196,000 $ 6,727,000
Accounts and notes receivable - net . . . . . . . . . . . . . . . 14,546,000 14,628,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 823,000 904,000
Prepaid expenses and other assets . . . . . . . . . . . . . . . . 836,000 1,090,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 4,246,000 2,946,000
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . 31,647,000 26,295,000
Property, equipment and leasehold rights at cost,
less accumulated depreciation and amortization . . . . . . . . . . 32,134,000 31,047,000
Investment in Hawaii joint venture - net . . . . . . . . . . . . . 16,037,000 15,621,000
Long-term receivables - net . . . . . . . . . . . . . . . . . . . . 2,719,000 3,138,000
Other assets - net . . . . . . . . . . . . . . . . . . . . . . . . 783,000 862,000
Excess cost over fair value of net assets acquired . . . . . . . . 822,000 926,000
----------- -----------
$84,142,000 $77,889,000
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,865,000 $ 8,652,000
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . 1,327,000 1,224,000
Accrued expenses and other liabilities . . . . . . . . . . . . . . 19,221,000 18,079,000
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . 30,413,000 27,955,000
----------- -----------
Long-term debt, subordinated . . . . . . . . . . . . . . . . . . . 29,000,000 29,000,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 1,655,000 1,711,000
----------- -----------
Total noncurrent liabilities . . . . . . . . . . . . . . . . . . 30,655,000 30,711,000
----------- -----------
Stockholders' Equity:
Serial preferred stock (authorized 100,000 shares
of $1 par value) - none outstanding . . . . . . . . . . . . . . . - -
Common stock (authorized 7,000,000 shares of $1 par
value) - issued and outstanding 1,252,802 and
1,250,802 shares . . . . . . . . . . . . . . . . . . . . . . . . 1,253,000 1,251,000
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . 6,745,000 6,717,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 16,744,000 12,716,000
Equity adjustments from foreign currency
translation . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,668,000) (1,461,000)
----------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . 23,074,000 19,223,000
----------- -----------
$84,142,000 $77,889,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1995 1994
------------------------------
(Unaudited) (Unaudited)
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Earnings before cumulative effect of change in
the method of accounting for income taxes . . . . . . . . . . $ 4,342,000 $ 5,321,000
Adjustments to reconcile earnings before cumulative
effect of change in the method of accounting for
income taxes to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . 5,884,000 5,328,000
Decrease in deferred income tax liabilities excluding
cumulative effect of change in the method of
accounting for income taxes . . . . . . . . . . . . . . . . (70,000) -
Equity in loss of joint venture . . . . . . . . . . . . . . . 1,805,000 1,282,000
Capitalization of interest costs on Hawaii
joint venture advances . . . . . . . . . . . . . . . . . . . (1,057,000) (678,000)
Gain on sale or disposal of equipment . . . . . . . . . . . . (463,000) (174,000)
Change in other current assets and liabilities:
Accounts and notes receivables - net . . . . . . . . . . . . 29,000 (10,345,000)
Prepaid expenses and other assets . . . . . . . . . . . . . 251,000 144,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . (1,300,000) (1,000,000)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . 1,224,000 1,945,000
Income taxes payable . . . . . . . . . . . . . . . . . . . . 103,000 3,550,000
Accrued expenses and other liabilities . . . . . . . . . . . 1,226,000 7,841,000
Decrease in inventory . . . . . . . . . . . . . . . . . . . . 76,000 33,000
Decrease in other assets . . . . . . . . . . . . . . . . . . . 79,000 122,000
Decrease in long-term receivables . . . . . . . . . . . . . . 419,000 17,000
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . 95,000 100,000
----------- ----------
Net cash provided by operating activities . . . . . . . . 12,643,000 13,486,000
----------- ----------
Cash flows from investing activities:
Purchases of property, equipment and leasehold rights . . . . . (7,508,000) (7,780,000)
Proceeds from sale of property and equipment . . . . . . . . . . 900,000 572,000
Advances to Hawaii joint venture . . . . . . . . . . . . . . . . (1,164,000) (740,000)
----------- ----------
Net cash used by investing activities . . . . . . . . . . (7,772,000) (7,948,000)
----------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock . . . . . . . . . . . . . 30,000 118,000
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . (314,000) -
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . - 500,000
Principal repayments of borrowings . . . . . . . . . . . . . . . - (5,833,000)
----------- ----------
Net cash used by financing activities . . . . . . . . . . (284,000) (5,215,000)
----------- ----------
Effect of exchange rate changes on cash . . . . . . . . . . . . . (118,000) (281,000)
----------- ----------
Net increase in cash and cash equivalents . . . . . . . . . . . . 4,469,000 42,000
Cash and cash equivalents at beginning of period . . . . . . . . 6,727,000 6,376,000
----------- ----------
Cash and cash equivalents at end of period . . . . . . . . . . . $11,196,000 $6,418,000
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements were prepared
in accordance with generally accepted accounting principles and include
all adjustments which, in the opinion of management, are necessary to
present fairly the consolidated financial position of Hudson General
Corporation and Subsidiaries (the Company) as of March 31, 1995 and June
30, 1994, and the results of operations for the three and nine months, and
cash flows for the nine months, ended March 31, 1995 and 1994. In the
opinion of management, all necessary adjustments that were made are of a
normal recurring nature.
The accounting policies followed by the Company are stated in Note 1 to
the Company's consolidated financial statements in the 1994 Hudson General
Corporation Annual Report filed under Item 8 to Form 10-K for the
Company's fiscal year ended June 30, 1994.
2. The Company is a partner in a joint venture (the Venture) which was formed
to acquire, develop and sell approximately 4,000 contiguous acres of land
in Hawaii. The Company accounts for its investment in the Venture under
the equity method of accounting.
The summary balance sheets for the Venture are as follows:
<TABLE>
<CAPTION>
March 31 June 30
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Cash and equivalents $ 97,000 $ 121,000
Land and development costs 26,380,000 26,255,000
Mortgages, accounts and notes receivable 8,908,000 10,197,000
Other assets - net 4,906,000 4,778,000
----------- -----------
$40,291,000 $41,351,000
=========== ===========
Notes payable $ 3,467,000 $ 4,759,000
Partner advances and accrued interest payable 42,605,000 38,664,000
Accounts payable and accrued expenses 1,666,000 1,765,000
Partners' deficit (7,447,000) (3,837,000)
----------- -----------
$40,291,000 $41,351,000
=========== ===========
</TABLE>
Summary results of operations for the Venture are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1995 1994 1995 1994
----------------------------- ---------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------------------------- ---------------------------
<S> <C> <C> <C> <C>
Sales (net of discounts) $ 180,000 $ 335,000 $ 339,000 $ 466,000
----------- ---------- ----------- -----------
Cost of sales 93,000 193,000 93,000 193,000
Selling, general and administrative 627,000 710,000 1,755,000 2,010,000
Interest - net 780,000 271,000 2,101,000 826,000
----------- ---------- ----------- ----------
Total costs 1,500,000 1,174,000 3,949,000 3,029,000
----------- ---------- ----------- ----------
Loss $(1,320,000) $ (839,000) $(3,610,000) $(2,563,000)
=========== ========== =========== ===========
</TABLE>
The Company's 50% share of the Venture's results were losses of $660,000 and
$420,000 for the three months ended March 31, 1995 and 1994, respectively, and
$1,805,000 and $1,282,000 for the nine months ended March 31, 1995 and 1994,
respectively, and have been included in "Equity in loss of joint venture" in
the accompanying consolidated statements of earnings. The Company's partner in
the Venture is Oxford Kohala, Inc. (Oxford Kohala), a subsidiary of Oxford
First Corporation (Oxford First). Under the Restated Joint Venture Agreement
dated April 29, 1981, as amended (the Agreement), the partners have agreed to
make equal advances to the Venture for all costs necessary for the orderly
development of the land and to share profits and losses equally. On October
13, 1994, Oxford First filed for reorganization under Chapter 11 of the
Bankruptcy Code. Pursuant to an order of the Bankruptcy Court dated November
28, 1994, Oxford First (through its subsidiary, The Oxford Finance Companies,
Inc.) was permitted to transfer funds to Oxford Kohala in an amount not to
exceed $180,000 with respect to the period October 1, 1994 through December 31,
1994 and $195,000 with respect to the period January 1, 1995 through March 31,
1995, which amounts were intended to enable Oxford First to honor its
obligation to make funds available to Oxford Kohala so that Oxford
6
<PAGE> 7
Kohala could make its share of advances required by the Venture. The amount
authorized by the Bankruptcy Court with respect to the period January 1, 1995
through March 31, 1995 was not sufficient to allow Oxford Kohala to make its
full share of required advances. To date, the Company has opted to make
additional advances (the Additional Advances) to cover the Oxford Kohala
funding deficiency. As of March 31, 1995 and the date of this filing, the
amount of the Additional Advances was $270,000 and $420,000, respectively.
Oxford First has filed a motion with the Bankruptcy Court requesting that
Oxford First be permitted to transfer funds to Oxford Kohala in an amount
sufficient to allow Oxford Kohala to reimburse the Company for advances made to
cover the Oxford Kohala funding deficiency and to make its share of the
Venture's required fundings through September 30, 1995. The Company, at
present, is unable to determine whether the Bankruptcy Court will authorize
Oxford First to transfer such funds to Oxford Kohala or whether any transfers
authorized by the Bankruptcy Court will be sufficient in order for Oxford
Kohala to so reimburse the Company and make its share of future advances to the
Venture. Should Oxford Kohala continue to be unable to make its share of such
advances to the Venture, the Company has the option to make Additional Advances
necessary up to the limits set forth in its revolving credit agreement (the
Credit Agreement) with a group of banks (see Note 4). Oxford Kohala did not
file for reorganization under Chapter 11 of the Bankruptcy Code. During the
nine months ended March 31, 1995, the Company advanced $894,000 as its 50%
share of the Venture's required fundings. The Company's total advances,
including the Additional Advances, to the Venture (including accrued interest)
at March 31, 1995 were $21,573,000.
3. Accrued expenses and other liabilities consisted of the following:
<TABLE>
<CAPTION>
March 31 June 30
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Salaries and wages $ 4,421,000 $ 5,137,000
Interest 450,000 956,000
Insurance 5,620,000 3,607,000
Operating expenses payable 3,271,000 2,748,000
Other 5,459,000 5,631,000
----------- -----------
$19,221,000 $18,079,000
=========== ===========
</TABLE>
4. Effective March 15, 1995 the Credit Agreement was amended whereby its term
was extended by two years to December 31, 2000, the limit on capital
expenditures that the Company may incur in any fiscal year was increased
from $10,000,000 to $13,000,000 and the interest rate that the Company
must pay on outstanding borrowings was reduced and will be 12.5 to 50
basis points less than the prior rate depending on the interest rate
option selected by the Company. Furthermore, the amendment permits the
Company, until March 31, 1996, to expend up to $3,000,000 to repurchase
shares of its common stock in addition to purchases already permitted
under the Credit Agreement as discussed below so long as no proceeds from
borrowings under the Credit Agreement are utilized for such purpose. On
May 2, 1995, the Company announced that its Board of Directors had
approved the repurchase of approximately 112,000 shares of its common
stock from time to time in either open market or privately negotiated
transactions. This authorization was in addition to the purchase of
38,100 shares by the Company on April 21, 1995.
The Credit Agreement contains various restrictions, among which are
provisions restricting the Company from paying cash dividends or
purchasing, redeeming or retiring its stock unless consolidated tangible
net worth (TNW), as defined, is greater than $16,500,000 both immediately
before and after giving effect to such dividend, purchase, redemption or
retirement. Furthermore, any such payments are limited to an annual
amount not to exceed the lesser of (i) $1,200,000 or (ii) 50% of
consolidated net income, as defined, for the most recently ended fiscal
year. On November 18, 1994, the Board of Directors of the Company
declared a regular semi-annual dividend of 25 cents per share of common
stock, aggregating $314,000, which was paid on January 4, 1995. At March
31, 1995, the Company's TNW was $23,920,000. Pursuant to the Credit
Agreement the Company may advance up to $2,000,000 to the Venture in any
fiscal year or up to $4,000,000 during the term of the Credit Agreement,
net of any distributions received from the Venture by the Company during
such periods. Since the inception of the Credit Agreement the Company has
increased its net advances to the Venture by $2,249,000.
7
<PAGE> 8
5. The Company had an option which was exercisable until January 31, 1994 to
renew the subleases (Subleases) covering its fixed base operation (FBO)
locations at several Canadian airports beyond their October 31, 1994
expiration dates. The renewal option provided that it could only be
exercised for all of the FBO locations. These FBO's had experienced
operating losses, and the Company had previously determined that it would
not renew the Subleases on their then present terms and conditions.
Negotiations with the Company's landlord to revise the sublease terms were
not successful, and the Company did not exercise its renewal option.
Accordingly, the term of the Subleases expired on October 31, 1994. At
June 30, 1993, the Company accelerated the amortization of the remaining
carrying value of its sublease rights in the amount of $4,287,000. The
Company's decision not to exercise its renewal option is not expected to
have a further material effect on its consolidated financial position or
results of operations.
6. The Company has an option which is exercisable until May 31, 1995 to renew
the lease on a hangar facility at a domestic airport location. The
Company has determined that it will not exercise its renewal option and,
accordingly, the term of the lease will expire on May 31, 1995. At March
31, 1995, the Company accelerated the amortization of the remaining
carrying value of its leasehold improvements made to this hangar facility
in the amount of $744,000, which amount is included in depreciation and
amortization in the accompanying consolidated statements of earnings. The
Company's decision not to exercise its renewal option is not expected to
have a further material effect on its consolidated financial position or
results of operations.
7. Effective with the Company's July 1, 1993 adoption of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, 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
deferred tax assets for the nine months ended March 31, 1995 was a
decrease of $2,232,000. The decrease reflects the utilization of a
portion of the Company's Canadian depreciation differences to offset its
provision for foreign income taxes in the amount of $800,000, and the
recognition of $1,300,000 of deferred tax assets resulting from a
reevaluation of the operating results of the Company's Canadian
subsidiary.
8. Certain reclassifications of fiscal 1994 balances have been made to
conform with the fiscal 1995 presentation.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- -------------------------------------------------------------------------------
Results of Operations
Revenues for the three and nine months ended March 31, 1995 decreased
$13.0 and $8.0 million, or 25.5% and 7.2%, respectively, compared with the
corresponding periods of the previous year. The decrease reflects lower: (i)
snow removal revenues of $13.2 and $13.1 million, respectively, due mainly to
the mild winter weather in the United States during fiscal 1995; (ii) aircraft
fueling and hangar rental revenues in Canada of $1.7 and $4.1 million,
respectively, due to lower volumes of retail fuel sales and the expiration on
October 31, 1994 of the Company's subleases (see Note 5) 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
deicing fluid) of $.2 and $4.8 million, respectively, 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 $1.6 and $3.8 million, respectively, resulting primarily from
expanded intoplane fueling services at new and existing locations; and (iii)
ground transportation revenues of $.5 and $1.6 million, respectively, due
mainly to expanded services to existing customers.
Costs and expenses for the three and nine months ended March 31, 1995
decreased $8.7 and $3.8 million, or 20.2% and 3.8%, respectively, compared with
the corresponding periods of the previous year. Operating costs for the three
and nine months ended March 31, 1995 decreased $6.2 and $1.3 million, or 17.8%
and 1.7%, respectively, compared with the corresponding periods of the previous
year. 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 in
Canada due to lower volumes of retail fuel sales and the expiration on October
31, 1994 of the Company's subleases (see Note 5) 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. Partially
offsetting the decreases were higher: (i) domestic labor and related costs due
primarily to expanded services to new and existing customers; (ii) rental costs
due mainly to equipment funded under operating leases related to expanded
intoplane fueling and ground transportation 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.
9
<PAGE> 10
Depreciation and amortization expenses for the three and nine months ended
March 31, 1995 increased $.7 and $.6 million, or 39.1% and 10.4%, respectively,
compared with the corresponding periods of the previous year. The increase was
due to the accelerated amortization of the remaining carrying value of
leasehold improvements made to a hangar facility at a domestic airport location
(see Note 6).
Selling, general and administrative expenses for the three and nine months
ended March 31, 1995 decreased $3.1 and $2.4 million, or 47.2% and 19.0%,
respectively, compared with the corresponding periods of the previous year.
The decrease reflects: (i) the absence of an accrual of $2.3 million made in
the quarter ended March 31, 1994 for the uninsured portion of a jury award
rendered against the Company in a civil lawsuit (which accrual was reversed in
the following quarter), and (ii) a lower provision in the current year periods
with respect to the Company's Executive Incentive Program.
Interest expense for the three and nine months ended March 31, 1995
decreased $.2 and $.6 million, or 64.7% and 55.3%, respectively, compared with
the corresponding periods of the previous year due mainly to lower average
outstanding borrowings and the increase in the Company's capitalization of
interest on its advances to the joint venture in Hawaii (the Venture).
Earnings before equity in loss of joint venture, provision (benefit) for
income taxes and cumulative effect of change in the method of accounting for
income taxes for each of the three and nine months ended March 31, 1995,
decreased $4.2 million compared with the corresponding periods of the previous
year due primarily to: (i) reduced results from snow removal operations and
lower sales volumes of deicing fluid due mainly to the mild winter weather in
the U.S.; and (ii) the accelerated amortization of the remaining carrying value
of leasehold improvements as noted above. Partially offsetting the decreases
were: (i) lower selling, general and administrative expenses as described
above; (ii) improved results from ground handling operations (net of deicing
fluid sales); (iii) lower interest expense - net; and (iv) improved results
from domestic aircraft fueling and ground transportation operations.
Results of the Company's aircraft ground handling operations fluctuate
depending upon the flight activity and schedules of customers and the ability
of the Company to deploy equipment and manpower in the most efficient manner to
service such customers.
The Company's snow removal and aircraft deicing services are seasonal in
nature. The results of these operations are normally reflected in the second
and third quarters of the fiscal year, and fluctuate depending upon the
severity of the winter season.
10
<PAGE> 11
The Company's 50% share of losses from the Venture for the three and nine
months ended March 31, 1995 increased $.2 and $.5 million, respectively,
compared with the corresponding periods of the previous year. The Venture's
losses result primarily from a lack of sales of the Venture's land parcels,
which sales have been negatively impacted by general economic conditions and
the cessation of interest capitalization by the Venture on Phase IV of the
Project as of July 1, 1994. As is usual for companies with land development
operations, the contribution to future results from such operations will
fluctuate depending upon land sales closed in each reported period.
The state of the North American aviation industry has resulted in
increased competitive pressures on the pricing of aviation services and in the
exploration of alliances between major commercial airline carriers. While
these factors may have an adverse effect on the Company, the state of the
airline industry has resulted in several airlines outsourcing services to
independent aviation service companies, and this trend has provided additional
opportunities for the Company. The Company is unable, at this time, to
evaluate the future effects of these factors nor the impact of the Open Skies
Agreement between the United States and Canada, whereby there will be more
access for airlines to fly between these bordering countries. Furthermore, the
economic climate is having and may continue to have a negative impact upon the
sale of land parcels in Hawaii.
The Company's provision for income taxes for each of the three and nine
months ended March 31, 1995, decreased $3.7 million compared with the
corresponding periods of the previous year. The decrease reflects: (i) lower
federal and state tax provisions of $2.4 million in both periods due to
decreased pre-tax earnings in the U.S. associated primarily with the reduction
in snow removal services and an increase in the Company's share of losses from
the Venture; and (ii) the recognition in the current year period 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). In addition, during
the nine months ended March 31, 1995 and 1994, the Company utilized $1.8 and
$1.7 million, respectively, of its Canadian depreciation differences and
Canadian net operating loss carryforwards, to offset its provision for foreign
income taxes in the amount of $.8 and $.7 million, respectively.
Effective July 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes, and reported a
benefit of $450,000 as the cumulative effect of the change in the method of
accounting for income taxes. Such benefit was reported inclusive of the effect
of Canadian depreciation differences and net operating loss carryforwards, net
of the related valuation allowance, in the consolidated statement of earnings
for the nine months ended March 31, 1994.
11
<PAGE> 12
Liquidity and Capital Expenditures and Commitments
The Company's recurring sources of liquidity are funds provided from
operations and bank lines of credit. The Company has a Revolving Credit
Agreement (the Credit Agreement) with a group of banks which provides for a
revolving credit facility. Effective March 15, 1995 the Credit Agreement was
amended whereby its term was extended by two years to December 31, 2000, the
limit on capital expenditures that the Company may incur in any fiscal year was
increased from $10.0 to $13.0 million, and the interest rate that the Company
must pay on outstanding borrowings was reduced and will be 12.5 to 50 basis
points less than the prior rate depending on the interest rate option selected
by the Company. Furthermore, the amendment permits the Company, until March
31, 1996, to expend up to $3,000,000 to repurchase shares of its common stock
in addition to purchases already permitted under the Credit Agreement so long
as no proceeds from borrowings under the Credit Agreement are utilized for such
purpose (see Note 4). Pursuant to the Amended Credit Agreement, the Company
may borrow funds up 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 March 31, 1995, there were no direct borrowings and $3.7 million of
letters of credit were outstanding under the Credit Agreement.
During the nine months ended March 31, 1995 and 1994 net cash provided by
operating activities was $12.6 and $13.5 million, respectively. Net cash used
by advances to the Hawaii joint venture was $1.2 and $.7 million for the nine
months ended March 31, 1995 and 1994, respectively. Capital expenditures net of
proceeds from the sale of property and equipment were $6.6 and $7.2 million for
the nine months ended March 31, 1995 and 1994, respectively. At March 31, 1995
cash and cash equivalents were $11.2 million compared with $6.7 million at June
30, 1994. At March 31, 1995 the Company had commitments to fund approximately
$2.7 million for operating equipment, the majority of which is expected to be
expended during the fourth quarter of fiscal 1995. Capital expenditures are
primarily for equipment and facilities used in the Company's operations. The
Company is unable to determine the extent of additional future capital
expenditures since, as a service company, its capital expenditure requirements
fluctuate depending upon facility requirements and equipment purchases
associated with the Company's ability to successfully obtain additional
contracts.
On May 2, 1995, the Company announced that its Board of Directors had
approved the repurchase of approximately 112,000 shares of its common stock
from time to time in either open market or privately negotiated transactions.
This authorization was in addition to the purchase of 38,100 shares made by the
Company on April 21, 1995.
12
<PAGE> 13
At March 31, 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
currently expected that approximately $60,000 of the Venture's commitments will
be expended during the remainder of fiscal 1995.
Should the Venture be unsuccessful in its efforts to dispute the
imposition on it of a 4% Hawaii excise tax, the Venture would have to expend an
additional amount of up to approximately $.6 million, which has been previously
accrued by the Venture. At March 31, 1995, the Venture had $100,000 of cash
available for its requirements.
During fiscal 1992, the County of Hawaii passed an ordinance pursuant to
which the Venture, after subdivision approvals are obtained, would be able to
develop Phase IV of the project into 1,490 units. Pursuant to such ordinance,
the Venture is required to expend (in addition to the $2.9 million of
commitments noted above) approximately $2.3 million for improvements and
payments related to the project, which are expected to be expended subsequent
to fiscal 1995. However, shortly after passage of the ordinance, a lawsuit
against the County of Hawaii was filed by two local residents of Hawaii
(Plaintiffs) seeking to invalidate such ordinance on various grounds including
that the ordinance was adopted without following State of Hawaii procedure
relating to the preparation of an Environmental Impact Statement. During
fiscal 1993, the Judge in this action granted Plaintiffs' motion for partial
summary judgment without indicating any effect on Phase IV zoning. The County
and the Venture have appealed this ruling. The appeal was heard before the
Hawaii Supreme Court in March 1994, and the Court has taken the matter under
advisement. The Venture cannot, at this time, determine the impact of the
Court's ruling on the timing of development of Phase IV or the expenditures
related thereto.
The Joint Venture Agreement provides that the Company and 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 $2.2 million. At present, it is anticipated
that the advances required to meet the
13
<PAGE> 14
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 amount not to exceed
$180,000 with respect to the period October 1, 1994 through December 31, 1994
and $195,000 with respect to the period January 1, 1995 through March 31, 1995,
which amounts were intended to enable Oxford First to honor its obligation to
make funds available to the Partner so that the Partner could make its share of
advances required by the Venture. The amount authorized by the Bankruptcy
Court with respect to the period January 1, 1995 through March 31, 1995 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. As of March 31, 1995 and
the date of this filing, the amount of the Additional Advances was $.3 and $.4
million, respectively. Oxford First has filed a motion with the Bankruptcy
Court requesting that Oxford First be permitted to transfer funds to the
Partner in an amount sufficient to allow the Partner to reimburse the Company
for advances made to cover the Partner's funding deficiency and to make its
share of the Venture's required fundings through September 30, 1995. During
the nine months ended March 31, 1995, the Company advanced $.9 million as its
50% share of the Venture's required fundings. The Company, at present, is
unable to determine whether the Bankruptcy Court will authorize Oxford First to
transfer funds to the Partner subsequent to March 31, 1995 or whether any
transfers authorized by the Bankruptcy Court will be sufficient in order for
the Partner to so reimburse the Company and make its share of future advances
to the Venture. Should the Partner be unable to make its share of such
advances to the Venture, the Company has the option to make Additional Advances
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.
14
<PAGE> 15
The extent to which advances by the Company to the Venture will be
required in the future, as well as the timing of the return to the Company of
the advances made by it, will depend upon the amount of sales generated by the
Venture, the terms upon which parcels are sold, expenses incurred in the
planning and development of future phases of the project and the ability of the
Partner to fund its obligations under the Joint Venture Agreement.
The general economic climate has negatively impacted the sale of the
Venture's land parcels. Since July 1, 1992 seven lots have been sold, four of
which were resales of lots that had been previously foreclosed upon.
Distributions, if any, received by the Company with respect to the
Venture, net of advances made by the Company during the applicable period, in
excess of $4.0 million in any four consecutive quarters, or in excess of $2.0
million in any fiscal year, reduce the Limit.
It is expected that the sources of the Company's liquidity, as noted
above, will provide sufficient funding to allow the Company to meet its
liquidity requirements.
15
<PAGE> 16
PART II - OTHER INFORMATION
Item 5. Other Information
On May 2, 1995, the Company announced that its Board of Directors had
approved the repurchase of approximately 112,000 shares of its common
stock from time to time in either open market or privately negotiated
transactions. The Company also said that it had amended its Revolving
Credit Agreement (the Credit Agreement) with a group of banks to allow
such repurchases so long as no proceeds from borrowings under the
Credit Agreement are utilized for such purpose. This authorization was
in addition to the previously announced purchase of 38,100 shares by
the Company on April 21, 1995.
The Credit Agreement permits the Company to expend a maximum of
$1,200,000 per fiscal year for stock repurchases, subject to certain
earnings and net worth tests, less the amount of any dividends paid on
the Company's stock. The amendment permits the Company, until March
31, 1996, to expend up to an additional $3,000,000 to repurchase shares
of its common stock. The amendment also includes provisions whereby
the term of the Credit Agreement is extended by two years to December
31, 2000, the limit on capital expenditures that the Company may incur
in any fiscal year is increased from $10,000,000 to $13,000,000, and
the interest rate that the Company must pay on outstanding borrowings
is reduced and will be 12.5 to 50 basis points less than the prior rate
depending on the interest rate option selected by the Company.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
4.4(k) Third 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 March 15, 1995.
11 Computations of Earnings Per Share Information, Primary and
Fully Diluted, from Earnings Before Cumulative Effect of Change
in the Method of Accounting for Income Taxes and Net Earnings.
27 Financial Data Schedule
b) Reports on Form 8-K - None
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUDSON GENERAL CORPORATION
---------------------------
(Registrant)
Date: May 10, 1995
/s/ JAY B. LANGNER
---------------------------
Jay B. Langner
President
/s/ MICHAEL RUBIN
---------------------------
Michael Rubin
Chief Financial Officer
17
<PAGE> 18
HUDSON GENERAL CORPORATION & SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Page No.
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
4.4(k) Third 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 March 15, 1995. 19-25
11 Computations of Earnings Per Share Information,
Primary and Fully Diluted, from Earnings Before
Cumulative Effect of Change in the Method of Accounting
for Income Taxes and Net Earnings 26-30
27 Financial Data Schedule 31-32
</TABLE>
18
<PAGE> 1
EXHIBIT 4.4(k)
Third 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 March 15,
1995.
19
<PAGE> 2
HUDSON GENERAL CORPORATION
THIRD AMENDMENT
THIRD AMENDMENT ("Amendment"), dated as of March 15, 1995, among Hudson
General Corporation, a Delaware corporation (the "Company"), the banking
institutions party to the Credit Agreement referred to below (the "Banks"), and
The First National Bank of Boston as agent for itself and the Banks (the
"Agent"). The parties hereto hereby agree as follows:
1. REFERENCE TO CREDIT AGREEMENT. Reference is made to the Revolving
Credit and Term Loan Agreement, dated as of November 25, 1992, as amended (as
so amended, the "Credit Agreement"), among Hudson General Corporation, the
banking institutions named therein and The First National Bank of Boston as
agent for itself and the other banking institutions. 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) Paragraph 1.8 of the Credit Agreement (Drawings) is hereby amended
by deleting the phrase "1/2% above" where it appears in the eighth line of such
paragraph and where it appears in the nineteenth line of such paragraph.
(b) Paragraph 1.11 of the Credit Agreement (Letter of Credit Fee) is
hereby amended by deleting "1-1/2%" where it appears in the twelfth line
thereof and substituting therefor "1-3/8%".
(c) Paragraph 3.1 of the Credit Agreement (Agent's Fee) is hereby
amended by deleting "$20,000" where it appears in the last line thereof and
substituting therefor "$15,000".
(d) Paragraph 3.3 of the Credit Agreement (Interest) is hereby amended
by (i) deleting the phrase "1/2 of 1% above" where it appears in the second
line of clause (a) thereof, and (ii) deleting "1-3/4%" where it appears in the
third line of clause (b) thereof and substituting therefor "1-3/8%".
(e) Paragraph 6.16(g) of the Credit Agreement (Investments and
Contingent Liabilities) is hereby amended by deleting the phrase "no more than
$5,000,000 of which shall be issued other than in connection with the Kohala
Joint Venture" where it appears therein and substituting therefor the phrase
"no more than $3,500,000 of which shall be issued in connection with the Kohala
Joint Venture".
20
<PAGE> 3
(f) Paragraph 6.18 of the Credit Agreement (Limitation on Dividends)
is hereby amended by adding "(A)" after the heading thereof and by adding the
following paragraph after the first paragraph thereof:
(B) Notwithstanding the foregoing provisions of
subparagraph (A) of this Paragraph 6.18, the Company may purchase,
redeem or otherwise retire shares of the Company's common stock on
or before March 15, 1996, provided that (1) the aggregate amount
paid by the Company to purchase, redeem or otherwise retire such
shares does not exceed $3,000,000, (2) no proceeds of the Loans
will be used in connection with such purchase, redemption or
retirement, and (3) no Default has occurred and is continuing and
no condition which would, with either or both the giving of notice
or the lapse of time, result in a Default has occurred and is
continuing at the time such shares are purchased, redeemed or
otherwise retired and no Default or condition which would, with
either or both the giving of notice or the lapse of time, result
in a Default shall result from the purchase, redemption or
retirement of such shares. The amount paid by the Company to
purchase, redeem or otherwise retire shares of the Company's
common stock pursuant to this subparagraph (B) shall not be
considered in computing the aggregate amount of dividends which
the Company may declare or pay or the aggregate amount the Company
may pay to purchase, redeem or otherwise retire shares in any
fiscal year of the Company under subparagraph (A) of this
Paragraph 6.18.
(g) Paragraph 6.19 of the Credit Agreement (Limitations on Capital
Expenditures) is hereby amended by deleting "$10,000,000" where it appears
therein and substituting therefor "$13,000,000".
(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 "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".
(j) Schedule 4.18(b) to the Credit Agreement is hereby amended by
adding thereto the Supplement to Schedule 4.18(b) attached to this Amendment.
3. REGARDING REVOLVING CREDIT NOTES AND THE REVOLVING CREDIT LOAN
MATURITY DATE. The Company 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, the Company hereby represents and warrants to the Banks that each of
the conditions precedent to the making of a Loan set forth in Paragraph 5 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 the Company a copy of such Bank's existing
Revolving Credit Note as modified as set forth herein.
21
<PAGE> 4
4. REPRESENTATIONS AND WARRANTIES. In order to induce the Banks to
enter into this Amendment, the Company 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 the Company 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 the Company 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. The Company, the Banks, the Agent and the Guarantors
shall have executed and delivered this Amendment.
(b) Corporate Standing and Action. Each of the Banks shall have
received (i) a certificate of the Secretary of State of the State of Delaware
as to the good standing of the Company as of a recent date, (ii) certificates
of the Secretary of State of the State of New York and the Commonwealth of
Massachusetts as to the good standing of the Company as a foreign corporation
as of a recent date, and (iii) a certificate of the Secretary or Assistant
Secretary of the Company, dated the date hereof, certifying (A) that attached
thereto is a true and complete copy of the Certificate of Incorporation and
bylaws of the Company, each as amended to the date hereof or that the
Certificate of Incorporation and bylaws of the Company 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 Board of Directors of the Company
authorizing the execution and delivery of this Amendment, which resolutions are
in full force and effect without modification on the date hereof, and (C) that
there have been no changes in the incumbency and signatures of the officers of
the Company since the Funding Date.
(c) Opinion 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 Noah Rockowitz, Vice President - General Counsel, counsel to the
Company.
(d) Transaction Fee. The Agent shall have received, for the accounts
of the Banks pro rata in accordance with their Commitment Percentages (prior to
the effectiveness of the assignment from BankBoston Canada to The Chase
Manhattan Bank of Canada), a transaction fee equal to $20,000.
(e) 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.
22
<PAGE> 5
6. MISCELLANEOUS. The Amended Credit Agreement and all of the Loan
Documents 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.
The Company 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. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS (OTHER THAN THE CONFLICT OF LAWS RULES) OF THE
COMMONWEALTH OF MASSACHUSETTS.
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 CORPORATION
By:
--------------------------------------
Title:
THE FIRST NATIONAL BANK
OF BOSTON, FOR ITSELF
AND AS AGENT
By:
--------------------------------------
Title:
EUROPEAN AMERICAN BANK
By:
--------------------------------------
Title:
THE CHASE MANHATTAN BANK, N.A.
By:
--------------------------------------
Title:
23
<PAGE> 6
The foregoing amendment is acknowledged and agreed to by the following
Guarantors:
HUDSON AVIATION SERVICES, INC.
CALIFORNIA
By:
------------------------------
Title:
HUDSON AVIATION SERVICES, INC.
DELAWARE
By:
------------------------------
Title:
HUDSON GENERAL COACH LINES, INC.
By:
------------------------------
Title:
HUDSON AVIATION SERVICES, INC.
By:
------------------------------
Title
HUDSON AVIATION SERVICES -
OAKLAND, INC.
By:
------------------------------
Title:
24
<PAGE> 7
Supplement to Schedule 4.18(b)
ENVIRONMENTAL NOTICES
MASSPORT ENVIRONMENTAL CLAIM
On April 19, 1994, a law firm representing the Massachusetts Port
Authority ("Massport") sent a letter (the "Original Demand") to thirty-seven
companies, including the Company, notifying the addressees that Massport
believed that they were liable for contamination of soil and groundwater at
Logan International Airport in East Boston, Massachusetts (the "Airport").
Massport claimed that it was performing response actions at the Airport, and
stated that it was seeking "contribution, reimbursement and payment of an
equitable share of the costs of past, current and future response actions
undertaken by Massport...".
The Original Demand identified twenty-four (24) spills of fuel, oil and
hydraulic fluid at various places at the Airport which allegedly had been
caused by the Company between January 1982 and September 1992. In addition,
the Original Demand proposed a settlement by which the Company would pay a per
capita share of past response costs (such share to be a minimum of $311,761)
and agree to pay a per capita share of all future response costs or undertake
to perform all necessary future response actions at locations where it had
releases.
On July 1, 1994, the Company responded to the Original Demand, raising
numerous objections to Massport's allegations and requesting considerable
additional information in Massport's possession.
Following an informational meeting held by Massport on September 21, 1994
for all parties which had received the Original Demand, Massport sent a letter
dated October 5, 1994 to the Company (the "Massport Proposal") clarifying its
position and proposing a greatly reduced settlement payment. The Massport
Proposal first proposed a cash-out payment by the Company for past response
costs of $29,968 in respect of a reduced total of twenty-two (22) spills. (By
contrast, Massport alleged a grand total of 2,462 spills at the Airport since
1953). The Massport Proposal further limited Massport's claim against the
Company for future response costs to three sites where the Company allegedly
had a total of only ten (10) spills. The proposed settlement in respect of
these future response costs was $526,154, bringing Massport's aggregate
settlement proposal to $556,122.
After obtaining additional information from Massport, the Company
responded to the Massport Proposal by letter dated January 20, 1995 (the
"Hudson Counterproposal"). The Hudson Counterproposal reiterated objections
made previously and stated additional objections. However, the Company offered
to pay Massport $75,000 in return for a complete release and a mutually
acceptable settlement agreement that would include indemnification by Massport
against any claims brought against the Company by any other party, including
government agencies. The Company believes this to be fair and equitable offer
in light of the legal and factual problems it identified with Massport's
position. The Company has not yet received a response from Massport.
25
<PAGE> 1
EXHIBIT 11
Computations of Earnings Per Share Information,
Primary and Fully Diluted, from Earnings Before Cumulative
Effect of Change in the Method of
Accounting for Income Taxes and Net Earnings.
26
<PAGE> 2
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
PRIMARY-EARNINGS BEFORE CUMULATIVE EFFECT OF
CHANGE IN THE METHOD OF ACCOUNTING FOR INCOME TAXES
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
(in thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Earnings before cumulative effect of change
in the method of accounting for income taxes
per share - primary . . . . . . . . . . . . . . . . . . $3,474 $4,242 $4,342 $5,321
====== ====== ====== ======
Weighted average number of
common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . . . 1,258 1,247 1,260 1,244
===== ===== ===== ======
Earnings before cumulative effect of change
in the method of accounting for income taxes
per common and common equivalent share - primary . . . $2.76 $3.40 $3.45 $4.28
===== ===== ===== =====
</TABLE>
27
<PAGE> 3
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
PRIMARY - NET EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------ -----------------
1995 1994 1995 1994
------------------ -----------------
(in thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Net earnings for computing earnings
per share - primary . . . . . . . . . . . . . . . . . . $3,474 $4,242 $4,342 $5,771
====== ====== ====== ======
Weighted average number of
common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . . . 1,258 1,247 1,260 1,244
===== ===== ===== ======
Net earnings per common and
common equivalent share-primary . . . . . . . . . . . . $2.76 $3.40 $3.45 $4.64
===== ===== ===== =====
</TABLE>
28
<PAGE> 4
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
FULLY DILUTED - EARNINGS BEFORE CUMULATIVE
EFFECT OF CHANGE IN THE METHOD OF ACCOUNTING FOR INCOME TAXES
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------- ----------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
(in thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Earnings before cumulative effect of change
in the method of accounting for income taxes
for computing earnings per share - primary . . . . . . . $3,474 $4,242 $4,342 $5,321
Reduction of interest expense less applicable
income taxes assuming conversion of 7% convertible
subordinated debentures due 2011 . . . . . . . . . . . . 280 280 853 853
---- ---- ---- ----
Earnings before cumulative effect of change in
the method of accounting for income taxes for
computing earnings per share-fully diluted . . . . . . . $3,754 $4,522 $5,195 $6,174
====== ====== ====== ======
Weighted average number of common and
common equivalent shares outstanding . . . . . . . . . . 1,258 1,250 1,263 1,249
Addition from assumed conversion as of the beginning
of each period of the 7% convertible subordinated
debentures outstanding at the end of each period . . . . 885 885 885 885
---- ---- ---- ----
Weighted average number of common and common
equivalent shares outstanding on a fully
diluted basis . . . . . . . . . . . . . . . . . . . . . 2,143 2,135 2,148 2,134
===== ===== ===== =====
Earnings before cumulative effect of change in the
method of accounting for income taxes per common
and common equivalent share - fully diluted . . . . . . $1.75 $2.12 $2.42 $2.89
===== ===== ===== =====
</TABLE>
29
<PAGE> 5
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
FULLY DILUTED - NET EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------------- ----------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
(in thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Net earnings for computing
earnings per share - primary . . . . . . . . . . . . . . $3,474 $4,242 $4,342 $5,771
Reduction of interest expense less applicable income
taxes assuming conversion of 7% convertible
subordinated debentures due 2011 . . . . . . . . . . . . 280 280 853 853
---- ---- ------ ------
Net earnings for computing earnings
per share-fully diluted . . . . . . . . . . . . . . . . $3,754 $4,522 $5,195 $6,624
====== ====== ====== ======
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . 1,258 1,250 1,263 1,249
Addition from assumed conversion as of the beginning
of each period of the 7% convertible subordinated
debentures outstanding at the end of each period . . . . 885 885 885 885
----- ----- ----- -----
Weighted average number of common and common
equivalent shares outstanding on a fully diluted
basis . . . . . . . . . . . . . . . . . . . . . . . . . 2,143 2,135 2,148 2,134
===== ===== ===== =====
Net earnings per common and
common equivalent share - fully diluted . . . . . . . . $1.75 $2.12 $2.42 $3.10
===== ===== ===== =====
</TABLE>
30
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 11,196,000
<SECURITIES> 0
<RECEIVABLES> 14,546,000<F1>
<ALLOWANCES> 0
<INVENTORY> 823,000
<CURRENT-ASSETS> 31,647,000
<PP&E> 32,134,000<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 84,142,000
<CURRENT-LIABILITIES> 30,413,000
<BONDS> 29,000,000
<COMMON> 1,253,000
0
0
<OTHER-SE> 21,821,000
<TOTAL-LIABILITY-AND-EQUITY> 84,142,000
<SALES> 102,478,000
<TOTAL-REVENUES> 102,478,000
<CGS> 80,057,000
<TOTAL-COSTS> 85,941,000
<OTHER-EXPENSES> 10,377,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 467,000
<INCOME-PRETAX> 3,888,000
<INCOME-TAX> (454,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,342,000
<EPS-PRIMARY> 3.45
<EPS-DILUTED> 2.42
<FN>
<F1>AMOUNTS SHOWN NET.
</FN>
</TABLE>
