<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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)
<TABLE>
<S> <C>
DELAWARE 13-1947395
- -------------------------------- --------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
111 GREAT NECK ROAD, GREAT NECK, NEW YORK 11021
------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (516) 487-8610
--------------
Not Applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $1.00 per share: 1,149,902 shares outstanding at
January 31, 1996
Page 1 of 14
<PAGE> 2
PART I - FINANCIAL STATEMENTS
2
<PAGE> 3
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
----------------------------- ------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . $41,052,000 $33,177,000 $75,245,000 $64,525,000
----------- ----------- ----------- -----------
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . . . . . 30,537,000 26,193,000 57,667,000 51,628,000
Depreciation and amortization . . . . . . . . . . . . 1,938,000 1,759,000 3,580,000 3,296,000
Selling, general & administrative . . . . . . . . . . 3,852,000 3,562,000 7,612,000 6,916,000
Interest . . . . . . . . . . . . . . . . . . . . . 106,000 158,000 217,000 351,000
----------- ----------- ---------- ----------
Total costs and expenses . . . . . . . . . . 36,433,000 31,672,000 69,076,000 62,191,000
----------- ----------- ---------- ----------
Earnings before equity in loss of
joint venture and provision for
income taxes . . . . . . . . . . . . . . . . . . . . . 4,619,000 1,505,000 6,169,000 2,334,000
Equity in loss of joint venture . . . . . . . . . . . . (708,000) (663,000) (1,391,000) (1,145,000)
------------ ----------- ----------- -----------
Earnings before provision for
income taxes . . . . . . . . . . . . . . . . . . . . . 3,911,000 842,000 4,778,000 1,189,000
Provision for income taxes . . . . . . . . . . . . . . 1,516,000 209,000 1,903,000 321,000
----------- ----------- ----------- ----------
Net earnings . . . . . . . . . . . . . . . . . . . . . $ 2,395,000 $ 633,000 $ 2,875,000 $ 868,000
=========== =========== =========== ==========
Earnings per share, primary . . . . . . . . . . . . . . $ 2.04 $ .50 $ 2.46 $ .69
====== ====== ======= ======
Earnings per share, fully diluted . . . . . . . . . . . $ 1.30 $ .43 $ 1.67 $ .67
====== ====== ======= ======
Cash dividends per common share . . . . . . . . . . . . $ .25 $ .25 $ .25 $ .25
====== ====== ======= ======
Weighted average common and common equivalent
shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . 1,174,000 1,263,000 1,169,000 1,262,000
=========== =========== ========= =========
Fully diluted . . . . . . . . . . . . . . . . . . . 2,064,000 2,148,000 2,065,000 2,151,000
=========== =========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
------------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $10,541,000 $12,613,000
Accounts and notes receivable - net . . . . . . . . . . . . . . . 24,430,000 14,457,000
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,224,000 936,000
Prepaid expenses and other assets . . . . . . . . . . . . . . . . 1,493,000 876,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 4,602,000 4,602,000
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . 42,290,000 33,484,000
Property, equipment and leasehold rights at cost,
less accumulated depreciation and amortization . . . . . . . . . . 36,691,000 33,864,000
Investment in Hawaii joint venture - net . . . . . . . . . . . . . . . . 16,316,000 16,065,000
Long-term receivables - net . . . . . . . . . . . . . . . . . . . . . . . 2,307,000 2,585,000
Other assets - net . . . . . . . . . . . . . . . . . . . . . . . . . . . 743,000 770,000
Excess cost over fair value of net assets acquired . . . . . . . . . . . 783,000 800,000
----------- -----------
$99,130,000 $87,568,000
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $16,937,000 $12,305,000
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . 1,745,000 1,557,000
Accrued expenses and other liabilities . . . . . . . . . . . . . . 24,665,000 21,233,000
----------- -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . 43,347,000 35,095,000
----------- -----------
Long-term debt, subordinated . . . . . . . . . . . . . . . . . . . . . . 29,000,000 29,000,000
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 2,752,000 1,857,000
----------- -----------
Total noncurrent liabilities . . . . . . . . . . . . . . . . . 31,752,000 30,857,000
----------- -----------
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 1,263,202 and
1,253,802 shares . . . . . . . . . . . . . . . . . . . . . . . . 1,263,000 1,254,000
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . 6,905,000 6,759,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 19,295,000 16,707,000
Equity adjustments from foreign currency
translation . . . . . . . . . . . . . . . . . . . . . . . . . . (1,422,000) (1,483,000)
Treasury stock, at cost, 114,300
and 96,600 shares . . . . . . . . . . . . . . . . . . . . . . . (2,010,000) (1,621,000)
----------- -----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . 24,031,000 21,616,000
----------- -----------
$99,130,000 $87,568,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1995 1994
-------------------------------------
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,875,000 $ 868,000
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 3,580,000 3,296,000
Increase (decrease) in deferred income tax liabilities . . . . . . . 908,000 (70,000)
Equity in loss of joint venture . . . . . . . . . . . . . . . . . . . 1,391,000 1,145,000
Capitalization of interest costs on Hawaii
joint venture advances . . . . . . . . . . . . . . . . . . . . . . (806,000) (672,000)
Gain on sale or disposal of equipment . . . . . . . . . . . . . . . . (36,000) (192,000)
Change in other current assets and liabilities:
Accounts and notes receivables - net . . . . . . . . . . . . . . . (9,954,000) (3,060,000)
Inventory - net . . . . . . . . . . . . . . . . . . . . . . . . . (285,000) (78,000)
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . (615,000) 249,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . 4,623,000 988,000
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . 188,000 (260,000)
Accrued expenses and other liabilities . . . . . . . . . . . . . . 3,102,000 441,000
Decrease in other assets . . . . . . . . . . . . . . . . . . . . . . 27,000 65,000
Decrease in long-term receivables - net. . . . . . . . . . . . . . . . 278,000 277,000
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 65,000
----------- ----------
Net cash provided by operating activities . . . . . . . . . . . 5,296,000 3,062,000
----------- ----------
Cash flows from investing activities:
Purchases of property, equipment and leasehold rights . . . . . . . . . (6,425,000) (5,535,000)
Proceeds from sale of property and equipment . . . . . . . . . . . . . . 121,000 420,000
Advances to Hawaii joint venture . . . . . . . . . . . . . . . . . . . . (836,000) (429,000)
----------- ----------
Net cash used by investing activities . . . . . . . . . . . . . (7,140,000) (5,544,000)
----------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . 155,000 30,000
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . (389,000) -
----------- ----------
Net cash provided (used) by financing activities . . . . . . . . (234,000) 30,000
----------- ----------
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . 6,000 (73,000)
----------- -----------
Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . (2,072,000) (2,525,000)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . 12,613,000 6,727,000
----------- ----------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . $ 10,541,000 $4,202,000
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements were
prepared in accordance with generally accepted accounting
principles and include all adjustments which, in the opinion of
management, are necessary to present fairly the consolidated
financial position of Hudson General Corporation and Subsidiaries
(the Company) as of December 31, 1995 and June 30, 1995, and the
results of operations for the three and six months, and cash flows
for the six months ended December 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 1995
Hudson General Corporation Annual Report filed under Item 8 to Form
10-K for the Company's fiscal year ended June 30, 1995.
2. The Company is a partner in a joint venture (the Venture) which was
formed to acquire, develop and sell approximately 4,000 contiguous
acres of land in Hawaii. The Company accounts for its investment
in the Venture under the equity method of accounting.
The summary balance sheets for the Venture are as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
----------- ---------
(Unaudited)
<S> <C> <C>
Cash and equivalents $ 594,000 $ 89,000
Land and development costs 26,870,000 26,863,000
Mortgages, accounts and notes receivable 6,221,000 7,732,000
Foreclosed real estate - net 2,285,000 2,395,000
Other assets - net 2,363,000 2,461,000
----------- -----------
$38,333,000 $39,540,000
=========== ===========
Notes payable $ 2,298,000 $ 3,402,000
Partner advances and accrued interest payable 47,187,000 44,048,000
Accounts payable and accrued expenses 963,000 1,422,000
Partners' deficit (12,115,000) (9,332,000)
----------- -----------
$38,333,000 $39,540,000
=========== ===========
</TABLE>
Summary results of operations for the Venture are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
--------------------------------- -------------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Sales (net of discounts) $ 175,000 $ 63,000 $ 256,000 $ 159,000
----------- ----------- ----------- -----------
Cost of sales 105,000 - 105,000 -
Selling, general and
administrative 618,000 570,000 1,200,000 1,128,000
Interest - net 869,000 819,000 1,734,000 1,321,000
----------- ---------- ----------- -----------
Total costs 1,592,000 1,389,000 3,039,000 2,449,000
----------- ---------- ----------- -----------
Loss $(1,417,000) $(1,326,000) $(2,783,000) $(2,290,000)
=========== =========== =========== ===========
</TABLE>
The Company's 50% share of the Venture's results were losses of
$708,000 and $663,000 for the three months ended December 31,
1995 and 1994, respectively, and $1,391,000 and $1,145,000 for
the six months ended December 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. (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 December 31, 1995
(including Additional Advances referred to in the next paragraph)
were $24,301,000.
6
<PAGE> 7
On October 13, 1994, Oxford First filed for reorganization under
Chapter 11 of the Bankruptcy Code. Pursuant to an order of the
Bankruptcy Court, Oxford First (through its subsidiary, The
Oxford Finance Companies, Inc.) was permitted to transfer certain
amounts to the Partner. The amounts so authorized were not
sufficient to allow the Partner to make its full share of
required advances. The Company opted to make additional advances
(the Additional Advances) to cover the Partner's funding
deficiency. During November 1995, the Partner resumed making
advances, and in In January 1996, the Partner repaid to the
Company $702,000, which was the entire amount of Additional
Advances. In addition, pursuant to an amended reorganization plan
which was approved by the Bankruptcy Court on September 7, 1995,
Oxford First is permitted to transfer funds to the Partner in an
aggregate amount not to exceed $750,000 in each of the calendar
years 1996 and 1997. The Company, at present, is unable to
determine whether such permitted transfers 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 further advances on behalf of the Partner (subject to its
rights of reimbursement) necessary up to the limits set forth in
its Revolving Credit Agreement (the Credit Agreement) with a
group of banks (see Note 4). The Partner did not file for
reorganization under Chapter 11 of the Bankruptcy Code. During
the three months ended December 31, 1995, the Company advanced
$528,000, to the Venture constituting its 50% share of the
Venture's required fundings. During the six months ended
December 31, 1995, the Company advanced $836,000 to the
Venture, including Additional Advances that were repaid in
January 1996.
3. Accrued expenses and other liabilities consisted of the
following:
<TABLE>
<CAPTION>
December 31 June 30
1995 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Salaries and wages $ 4,649,000 $ 5,353,000
Interest 965,000 956,000
Insurance 6,508,000 6,022,000
Operating expenses payable 4,085,000 3,176,000
Customer advances and deposits 3,419,000 1,739,000
Other 5,039,000 3,987,000
------------ -----------
$ 24,665,000 $21,233,000
============ ===========
</TABLE>
4. The Credit Agreement contains various restrictions, among which
are provisions restricting the Company from paying cash dividends
or purchasing, redeeming or retiring its stock unless
consolidated tangible net worth (TNW), as defined, is greater
than $16,500,000 both immediately before and after giving effect
to such dividend, purchase, redemption or retirement. At
December 31, 1995, the Company's TNW was $24,670,000.
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. 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
December 31, 1995, the Company had repurchased 114,300 shares of
its common stock in the open market for an aggregate purchase
price of $2,010,000 pursuant to this authorization.
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.
From the inception of the Credit Agreement through December 31,
1995 the Company had increased its net advances to the Venture by
$3,642,000. As a result of the $702,000 repayment made by the
Partner referred to in Note 2 above, the net advances by the
Company as of January 31, 1996 were $2,940,000.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Revenues for the three and six months ended December 31, 1995
increased $7.9 and $10.7 million, or 23.7% and 16.6%, respectively, compared
with the corresponding periods of the prior year. The increase reflects
higher: (i) ground handling service revenues of $5.3 and $7.9 million,
respectively, due primarily to expanded services to new and existing customers
and higher sales of de-icing fluid; (ii) domestic aircraft fueling
revenues of $1.4 and $3.0 million, respectively, resulting primarily from
expanded intoplane fueling services and retail sales of fuel at existing
locations, and (iii) snow removal revenues of $1.4 million for both the three
and six month periods. Partially offsetting the revenue increases were lower
aircraft fueling and hangar rental revenues in Canada of $.5 and $2.3 million
as a result of the cessation of operations of the Company's Canadian fixed base
operations (FBO's) on October 31, 1994.
Costs and expenses for the three and six months ended December 31,
1995 increased $4.8 and $6.9 million, or 15.0% and 11.1%, respectively,
compared with the corresponding periods of the previous year. Operating costs
for the three and six months ended December 31, 1995 increased $4.3 and $6.0
million, or 16.6% and 11.7%, compared with the corresponding periods of the
previous year. The increase was attributable to higher: (i) labor and related
costs associated with expanded ground handling operations and domestic aircraft
fueling services; (ii) cost of sales of de-icing fluid; (iii) fuel costs
associated with higher volumes of retail fuel sales in the U.S. and (iv) snow
removal costs. Partially offsetting the increases were lower costs as a result
of the cessation of operations of the Company's Canadian FBO's.
Depreciation and amortization expenses for the three and six months
ended December 31, 1995 increased $.2 and $.3 million, or 10.2% and 8.6%,
respectively, compared with the corresponding periods of the previous year.
The increase is due primarily to additions of ground handling equipment.
Selling, general and administrative expenses for the three and six
months ended December 31, 1995 increased $.3 and $.7 million, or 8.1% and
10.1%, compared with the corresponding periods of the previous year. The
increase primarily reflects the recording of provisions relating to stock
appreciation rights as a result of increases in the market price of the
Company's common stock.
Earnings before equity in loss of joint venture and provision for
income taxes for the three and six months ended December 31, 1995, increased
$3.1 and $3.8 million compared with the corresponding periods of the previous
year due primarily to improved results from ground handling (including higher
sales of de-icing fluid), domestic aircraft fueling and snow removal
operations. Adding to the increase was the elimination of operating losses
associated with the Company's
8
<PAGE> 9
Canadian FBO's. Partially offsetting the increases were higher selling,
general and administrative expenses as described above and for the six months
the loss of a ground handling contract at a domestic airport location as a
result of a merger of two airlines.
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 its real estate joint
venture in Hawaii (the Venture) for the six months ended December 31, 1995
increased $.2 million from, and for the three months ended December 31, 1995
approximated that of, the corresponding period of the previous year. The
increased loss for the six months is due primarily to higher interest - net as
interest expense increased due mainly to higher balances of partner advances
payable. In addition, the Venture's interest income decreased as a result of
the reduction in mortgage receivables. 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 for income taxes for the three and six
months ended December 31, 1995, increased $1.3 and $1.6 million compared with
the corresponding periods of the previous year. The increase primarily
reflects: (i) increased pre-tax earnings in the U.S. and Canada; and (ii) the
Company's utilization during the six months ended December 31, 1994 of $.5
million of its Canadian depreciation differences to offset its provision for
foreign income taxes.
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, several airlines have
begun to outsource services to independent aviation service companies. This
trend, as well as the Open Skies Agreement between the United States and
Canada, which provides increased 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.
As set forth in Item 5 of Part II of this Form 10-Q, the Company is
engaged in negotiations with Lufthansa Airport and Ground Services GmbH (LAGS)
concerning the acquisition by LAGS of a minority interest in the Company's
North American Aviation Services business. LAGS is a wholly-owned subsidiary
of Deutsche Lufthansa AG.
9
<PAGE> 10
Liquidity and Capital Expenditures and Commitments
The Company's recurring sources of liquidity are funds provided
from operations and bank lines of credit. The Company has a Revolving Credit
Agreement (the Credit Agreement) with a group of banks which provides for a
revolving credit facility. Pursuant to the Credit Agreement, the Company may
borrow funds (including outstanding letters of credit) 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 December 31, 1995, there were no
direct borrowings and $3.0 million of letters of credit were outstanding under
the Credit Agreement.
During the six months ended December 31, 1995 and 1994, net cash
provided by operating activities was $5.3 and $3.1 million, respectively. Net
cash used by advances to the Hawaii joint venture was $.8 and $.4 million for
the six months ended December 31, 1995 and 1994, respectively. Capital
expenditures, net of proceeds from the sale of property and equipment, were
$6.3 and $5.1 million for the six months ended December 31, 1995 and 1994,
respectively. At December 31, 1995 cash and cash equivalents were $10.5
compared with $12.6 million at June 30, 1995. The increases in accounts
receivable, accounts payable and accrued expenses and other current liabilities
are primarily attributable to the Company's snow removal and aircraft de-icing
services, which are seasonal in nature. At December 31, 1995 the Company had
commitments to fund $2.2 million for operating equipment, the majority of which
is expected to be expended during the third quarter 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 December 31,
1995, the Company had repurchased 114,300 shares of its common stock in the
open market for an aggregate purchase price of $2.0 million pursuant to this
authorization.
At December 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. The
Venture has begun the process to extend the date by which this expenditure need
be made. It is expected that funds for most of the Venture's other commitments
will be expended subsequent to fiscal 1996. As of December 31, 1995, the
Venture
10
<PAGE> 11
was obligated to repurchase $.3 million of mortgage receivables that were
previously sold to a bank. In addition, the Venture is obligated to repurchase
on February 11 and September 27, 1996 the unpaid balance of certain mortgage
receivables that were previously sold to another bank. As of December 31,
1995, the unpaid balance in respect of such mortgage receivables was $.9 and
$.5 million, respectively. The Venture is engaged in discussions to extend or
refinance such obligations. At December 31, 1995, the Venture had $.6 million
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 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 commitments, including any repurchase of
mortgage receivables previously sold to two banks, 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, and
after giving effect to the repayment by the Partner in January 1996 of
Additional Advances as discussed below, the Company has increased its net
advances to the Venture by $2.9 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
11
<PAGE> 12
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, Oxford First (through its subsidiary, The Oxford Finance Companies,
Inc.) was permitted to transfer certain amounts to the Partner. The amounts so
authorized were not sufficient to allow the Partner to make its full share of
required advances. The Company opted to make additional advances (the
Additional Advances) to cover the Partner's funding deficiency. During
November 1995, the Partner resumed making advances, and in January 1996, the
Partner repaid to the Company $.7 million, which was the entire amount of
Additional Advances. In addition, pursuant to an amended reorganization plan
which was approved by the Bankruptcy Court on September 7, 1995, Oxford First
is permitted to transfer funds to the Partner in an aggregate amount not to
exceed $750,000 in each of the calendar years 1996 and 1997. The Company, at
present, is unable to determine whether such permitted transfers 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 further advances on behalf of
the Partner (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 the three months ended December
31, 1995, the Company advanced $.5 million to the Venture constituting its
50% share of the Venture's required fundings. During the six months ended
December 31, 1995, the Company advanced $.8 million to the Venture, including
Additional Advances that were repaid in January 1996.
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.
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> 13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Company, held on
November 17, 1995, the only matter voted upon was the election of directors.
All six incumbent directors of the Company were re-elected. The voting was as
follows:
<TABLE>
<CAPTION>
Shares for Which
Name of Nominee Shares Voted For Authority Withheld
--------------- ---------------- ------------------
<S> <C> <C>
Milton H. Dresner 1,107,997 0
Jay B. Langner 1,107,997 0
Edward J. Rosenthal 1,107,997 0
Hans H. Sammer 1,107,997 0
Richard D. Segal 1,107,997 0
Stanley S. Shuman 1,103,297 4,700
</TABLE>
There were no abstensions or broker nonvotes.
Item 5. Other Information
On December 7, 1995 the Company announced that it is engaged in negotiations
with Lufthansa Airport and Ground Services GmbH (LAGS) concerning the
acquisition by LAGS of a minority interest in the Company's North American
Aviation Services business (the Aviation Business). LAGS is a wholly-owned
subsidiary of Deutsche Lufthansa AG (Lufthansa). Such negotiations are
continuing at the present time.
The negotiations contemplate a transaction pursuant to which LAGS would acquire
a 26% interest in the Aviation Business for a price of approximately $23.8
million, subject to adjustment based on future earnings of the Aviation
Business. It is intended that approximately $16 million of the purchase price
be paid in cash by LAGS at the closing, with the balance payable over three
years. The negotiations also contemplate that LAGS would have an option to
increase its interest in the Aviation Business up to 49%. The option price
would be based in part on a formula related to future earnings.
The Company will continue to manage the Aviation Business and neither LAGS nor
Lufthansa will acquire securities of the Company.
The Company's Aviation Business constitutes approximately 70% of its assets and
virtually all of its revenues.
Any transaction would be subject to negotiation and execution of definitive
agreements, approval of the Company's Board of Directors and stockholders, and
certain other conditions. There can be no assurance that definitive agreements
relating to the proposed transaction will be reached, or if agreements are
reached, that any transaction will be consummated.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
11 Computations of Earnings Per Share Information, Primary and
Fully Diluted - Net Earnings.
b) Reports on Form 8-K - None
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUDSON GENERAL CORPORATION
--------------------------
(Registrant)
Date: February 5, 1996
----------------
/s/ JAY B. LANGNER
--------------------------
Jay B. Langner
President
/s/ MICHAEL RUBIN
---------------------------
Michael Rubin
Chief Financial Officer
<PAGE> 15
HUDSON GENERAL CORPORATION & SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Page No.
- --------------------------------------------------------------------------
<S> <C> <C>
11 Computations of Earnings Per Share Information,
Primary and Fully Diluted - Net Earnings 16-18
27 Financial Data Schedule 19-20
</TABLE>
<PAGE> 1
EXHIBIT 11
Computations of Earnings Per Share Information,
Primary and Fully Diluted - Net Earnings.
<PAGE> 2
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
PRIMARY - NET EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
---------------------- ----------------------
1995 1994 1995 1994
---------------------- ----------------------
(in thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Net earnings for computing earnings
per share - primary . . . . . . . . . . . . . . . . . . . . . $ 2,395 $ 633 $ 2,875 $ 868
======= ======= ======= =======
Weighted average number of
common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . . . . . . . 1,174 1,263 1,169 1,262
======= ======= ======= =======
Net earnings per common and
common equivalent share-primary . . . . . . . . . . . . . . . $ 2.04 $ .50 $ 2.46 $ .69
======= ======= ======= =======
</TABLE>
<PAGE> 3
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
FULLY DILUTED - NET EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
---------------------- ----------------------
1995 1994 1995 1994
---------------------- ----------------------
(in thousands, except
per share amounts)
<S> <C> <C> <C> <C>
Net earnings for computing
earnings per share - primary . . . . . . . . . . . . . . . . . $ 2,395 $ 633 $ 2,875 $ 868
Reduction of interest expense less applicable income
taxes assuming conversion of 7% convertible
subordinated debentures due 2011 . . . . . . . . . . . . . . . 287 286 573 573
------- ------ ------- -------
Net earnings for computing earnings
per share-fully diluted . . . . . . . . . . . . . . . . . . . $ 2,682 $ 919 $ 3,448 $ 1,441
======= ====== ======= =======
Weighted average number of common and common
equivalent shares outstanding . . . . . . . . . . . . . . . . 1,179 1,263 1,180 1,266
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,064 2,148 2,065 2,151
======= ======= ======= =======
Net earnings per common and
common equivalent share - fully diluted . . . . . . . . . . . $ 1.30 $ .43 $ 1.67 $ .67
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,541,000
<SECURITIES> 0
<RECEIVABLES> 24,430,000
<ALLOWANCES> 0
<INVENTORY> 1,224,000
<CURRENT-ASSETS> 42,290,000
<PP&E> 36,691,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 99,130,000
<CURRENT-LIABILITIES> 43,347,000
<BONDS> 29,000,000
0
0
<COMMON> 1,263,000
<OTHER-SE> 22,768,000
<TOTAL-LIABILITY-AND-EQUITY> 99,130,000
<SALES> 75,245,000
<TOTAL-REVENUES> 75,245,000
<CGS> 57,667,000
<TOTAL-COSTS> 69,076,000
<OTHER-EXPENSES> 7,612,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 217,000
<INCOME-PRETAX> 4,778,000
<INCOME-TAX> 1,903,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,875,000
<EPS-PRIMARY> 2.46
<EPS-DILUTED> 1.67
</TABLE>
