<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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-5896
HUDSON GENERAL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-1947395
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 GREAT NECK ROAD, GREAT NECK, NEW YORK 11021
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (516) 487-8610
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, par value $1.00 per share: 1,830,349 shares outstanding at
February 7, 1997
1
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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,
1996 1995 1996 1995
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues ................................. $ 1,154,000 $40,952,000 $ 2,304,000 $74,990,000
----------- ----------- ----------- -----------
Costs and expenses:
Operating .............................. -- 30,537,000 -- 57,667,000
Depreciation and amortization .......... 187,000 1,938,000 377,000 3,580,000
Selling, general & administrative ...... 1,972,000 3,852,000 3,745,000 7,612,000
----------- ----------- ----------- -----------
Total costs and expenses ............. 2,159,000 36,327,000 4,122,000 68,859,000
----------- ----------- ----------- -----------
Operating income (loss) .................. (1,005,000) 4,625,000 (1,818,000) 6,131,000
Equity in earnings of Hudson General LLC . 3,107,000 -- 4,691,000 --
Equity in loss of Kohala Joint Venture ... (663,000) (708,000) (1,348,000) (1,391,000)
Interest income .......................... 1,071,000 505,000 2,041,000 1,061,000
Interest expense ......................... -- (511,000) -- (1,023,000)
----------- ----------- ----------- -----------
Earnings before provision for income taxes 2,510,000 3,911,000 3,566,000 4,778,000
Provision for income taxes ............... 850,000 1,516,000 1,220,000 1,903,000
----------- ----------- ----------- -----------
Net earnings ............................. $ 1,660,000 $ 2,395,000 $ 2,346,000 $ 2,875,000
=========== =========== =========== ===========
Earnings per share, primary .............. $ .84 $ 2.04 $ 1.25 $ 2.46
=========== =========== =========== ===========
Earnings per share, fully diluted ........ $ .84 $ 1.30 $ 1.20 $ 1.67
=========== =========== =========== ===========
Cash dividends per common share .......... $ .25 $ .25 $ .25 $ .25
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding:
Primary ................................ 1,970,000 1,174,000 1,871,000 1,169,000
=========== =========== =========== ===========
Fully diluted .......................... 1,971,000 2,064,000 1,989,000 2,065,000
=========== =========== =========== ===========
</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,
1996 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ............................. $27,220,000 $12,701,000
Accounts and notes receivable - net ................... 492,000 238,000
Advances to and note receivable from Hudson General LLC 8,308,000 7,233,000
Prepaid expenses and other assets ..................... 47,000 302,000
----------- -----------
Total current assets ................................ 36,067,000 20,474,000
Property and equipment at cost,
less accumulated depreciation and amortization ........ 3,102,000 3,428,000
Investment in Kohala Joint Venture - net ................ 15,029,000 15,420,000
Investment in Hudson General LLC ........................ 19,234,000 8,738,000
Note receivable from Hudson General LLC ................. 4,630,000 --
Other assets - net ...................................... -- 716,000
----------- -----------
$78,062,000 $48,776,000
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ...................................... $ 122,000 $ 471,000
Accrued expenses and other liabilities ................ 2,237,000 3,648,000
Income taxes payable .................................. 1,059,000 --
----------- -----------
Total current liabilities ........................... 3,418,000 4,119,000
----------- -----------
Deferred income taxes ................................... 762,000 762,000
----------- -----------
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 2,083,060 and 1,277,401 shares ....... 2,083,000 1,277,000
Paid in capital ....................................... 48,705,000 18,033,000
Retained earnings ..................................... 28,460,000 26,595,000
Treasury stock, at cost, 205,611 and 114,300 shares ... (5,366,000) (2,010,000)
----------- -----------
Total stockholders' equity .......................... 73,882,000 43,895,000
----------- -----------
$78,062,000 $48,776,000
=========== ===========
</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,
1996 1995
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings ......................................... $ 2,346,000 $ 2,875,000
Adjustments to reconcile net earnings to net
cash (used) provided by operating activities:
Depreciation and amortization ...................... 377,000 3,580,000
Increase in deferred income tax liabilities ........ -- 908,000
Equity in earnings of Hudson General LLC ........... (4,691,000) --
Equity in loss of Kohala Joint Venture ............. 1,348,000 1,391,000
Accrual of interest income on Kohala Joint
Venture advances ................................. (883,000) (806,000)
Gain on sale or disposal of equipment .............. -- (36,000)
Change in other current assets and liabilities:
Accounts and notes receivable - net .............. (254,000) (9,954,000)
Prepaid expenses and other assets ................ 255,000 (900,000)
Accounts payable ................................. (349,000) 4,623,000
Income taxes payable ............................. 1,059,000 188,000
Accrued expenses and other liabilities ........... (1,891,000) 3,102,000
Other - net ........................................ 21,000 325,000
----------- -----------
Net cash (used) provided by operating activities . (2,662,000) 5,296,000
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment .................. (55,000) (6,425,000)
Proceeds from sale of property and equipment ......... 4,000 121,000
Advances to Hudson General LLC - net ................. (645,000) --
Collections of note receivable from Hudson General LLC 21,283,000 --
Advances to Kohala Joint Venture - net ............... (74,000) (836,000)
----------- -----------
Net cash provided (used) by investing activities . 20,513,000 (7,140,000)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock ............... 24,000 155,000
Purchase of treasury stock ........................... (3,356,000) (389,000)
----------- -----------
Net cash used by financing activities ........... (3,332,000) (234,000)
----------- -----------
Effect of exchange rate changes on cash ................ -- 6,000
----------- -----------
Net increase (decrease) in cash and cash equivalents ... 14,519,000 (2,072,000)
Cash and cash equivalents at beginning of period ....... 12,701,000 12,613,000
----------- -----------
Cash and cash equivalents at end of period ............. $27,220,000 $10,541,000
=========== ===========
</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 Corporation) as of
December 31, 1996 and June 30, 1996, and the results of operations for
the three and six months, and cash flows for the six months ended
December 31, 1996 and 1995. In the opinion of management, all necessary
adjustments that were made are of a normal recurring nature.
The consolidated financial statements include the accounts of the
Corporation and the Subsidiaries for which it exercises effective
control. All material intercompany accounts and transactions have been
eliminated in consolidation. Kohala Joint Venture, a land development
venture in Hawaii in which the Corporation has a 50% interest (the
Venture), is accounted for under the equity method of accounting (see
Note 3). Effective June 1, 1996, the Corporation consummated a
transaction (the Transaction) in which a third party, Lufthansa Airport
and Ground Services GmbH (LAGS), which is a German corporation and an
indirect wholly owned subsidiary of Deutsche Lufthansa AG, acquired a
26% interest in the Corporation's aviation services business (the
Aviation Business). As part of the Transaction, the Corporation
transferred substantially all of the assets and liabilities of the
Aviation Business to Hudson General LLC (Hudson LLC), a newly-formed
limited liability company (see Note 2). LAGS received a 26% interest in
Hudson LLC. At the same time, the Corporation, Hudson LLC and LAGS USA
Inc., a wholly owned subsidiary of LAGS (LAGS USA), entered into a
Limited Liability Company Agreement effective June 1, 1996 (the LLC
Agreement). Due to the provisions in the LLC Agreement, effective June
1, 1996, the Corporation has accounted for its interest in Hudson LLC
under the equity method of accounting. As a result, the consolidated
statements of earnings of the Corporation contain the operating results
of the Aviation Business under the equity method of accounting for the
three and six months ended December 31, 1996 and on a consolidated
basis for the three and six months ended December 31, 1995.
The accounting policies followed by the Corporation are stated in Note
1 to the Corporation's consolidated financial statements in the 1996
Hudson General Corporation Annual Report filed under Item 8 to Form
10-K for the Corporation's fiscal year ended June 30, 1996.
2. The summary consolidated balance sheets for Hudson LLC are as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 1,657,000 $19,269,000
Accounts and notes receivable - net 21,627,000 18,055,000
Other current assets 3,766,000 2,317,000
----------- -----------
Total current assets 27,050,000 39,641,000
Property, equipment and leasehold rights at cost,
less accumulated depreciation and amortization 43,125,000 37,442,000
Other assets - net 3,389,000 3,641,000
----------- -----------
$73,564,000 $80,724,000
=========== ===========
Accounts payable $17,083,000 $15,104,000
Accrued expenses and other liabilities 18,060,000 18,085,000
Advances from Hudson General Corporation 8,308,000 7,233,000
----------- -----------
Total current liabilities 43,451,000 40,422,000
Note payable to Hudson General Corporation 4,630,000 --
Long-term debt, subordinated -- 28,751,000
Members' equity 25,483,000 11,551,000
----------- -----------
$73,564,000 $80,724,000
=========== ===========
</TABLE>
6
<PAGE> 7
Summary results of operations for Hudson LLC are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, 1996 December 31, 1996
------------------ -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $41,380,000 $77,759,000
----------- -----------
Operating costs 32,213,000 61,275,000
Depreciation and amortization 1,888,000 3,564,000
Selling, general & administrative costs 3,258,000 6,367,000
----------- -----------
Total costs and expenses 37,359,000 71,206,000
----------- -----------
Operating income 4,021,000 6,553,000
Interest income 629,000 913,000
Interest expense (270,000) (659,000)
----------- -----------
Earnings before provision for foreign income taxes 4,380,000 6,807,000
Provision for foreign income taxes 374,000 684,000
----------- -----------
Net earnings $ 4,006,000 $ 6,123,000
=========== ===========
</TABLE>
The Corporation's 74% share of Hudson LLC's results, as calculated in accordance
with the LLC Agreement, were $3,107,000 and $4,691,000 for the three and six
months ended December 31, 1996, respectively, and are shown as "Equity in
earnings of Hudson General LLC" in the accompanying consolidated statements of
earnings.
Effective June 1, 1996, pursuant to the terms of a Unit Purchase and Option
Agreement dated February 27, 1996 (the Purchase Agreement) between the
Corporation and LAGS, the Corporation transferred substantially all of the
assets and liabilities of the Aviation Business to Hudson LLC. In exchange for
the transfer of such assets and liabilities and the assumption by Hudson LLC, as
co-obligor with the Corporation, of all of the Corporation's 7% convertible
subordinated debentures (the Debentures), the Corporation received a 74%
interest in Hudson LLC. In addition, Hudson LLC sold LAGS a 26% interest in
Hudson LLC for a purchase price of $23,686,000 in cash (after certain
adjustments), of which $15,848,000 was paid at the closing, and deferred
payments (Deferred Payments) of $2,650,000 and $5,188,000 plus interest thereon
were made, respectively, in September 1996 and December 1996. The Corporation's
investment in Hudson LLC was increased by its 74% interest in the Deferred
Payments. The Purchase Agreement granted to LAGS an option expiring on October
1, 2000 to increase its equity ownership in Hudson LLC from 26% to a maximum of
49%. Effective December 1996, the Purchase Agreement was amended so that this
option now expires on October 1, 1999.
The LLC Agreement, as amended, stipulates that the Corporation and LAGS USA will
share profits and losses in the same proportion as their respective equity
interests in Hudson LLC, except that the Corporation is entitled to all interest
earned on the Deferred Payments. In addition, LAGS USA will not share in any
pre-tax earnings, as defined, of the Aviation Business in excess of $14,690,000
and $15,863,000 in fiscal 1997 and 1998, respectively, unless the aggregate of
the pre-tax earnings for fiscal 1997 and 1998 exceeds $30,553,000.
During the six months ended December 31, 1996, $26,343,000 principal amount of
Debentures was converted into shares of the Corporation's common stock, and to
such extent Hudson LLC became indebted on a subordinated basis (as defined) to
the Corporation. Furthermore, during the six months ended December 31, 1996,
Hudson LLC utilized the Deferred Payments together with a portion of the
proceeds received at the closing of the Transaction to repay $21,283,000 of the
outstanding balance of its subordinated debt to the Corporation. At December 31,
1996 the balance of such debt was $5,130,000. The noncurrent portion of this
debt in the amount of $4,630,000 is shown as "Note receivable from Hudson
General LLC" in the accompanying consolidated balance sheets. In addition, the
Corporation's net advances to Hudson LLC (including the current portion of such
note receivable of $500,000) were $8,308,000 at December 31, 1996.
7
<PAGE> 8
3. The Corporation is a partner in the Venture which was formed to
acquire, develop and sell approximately 4,000 contiguous acres of land
in Hawaii.
The summary consolidated balance sheets for the Venture are as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1996 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Cash and equivalents $ 360,000 $ 267,000
Land and development costs 26,564,000 26,710,000
Mortgages, accounts and notes receivable 4,189,000 5,212,000
Foreclosed real estate - net 2,626,000 2,200,000
Other assets - net 2,187,000 2,325,000
------------ ------------
$ 35,926,000 $ 36,714,000
============ ============
Notes payable $ 573,000 $ 576,000
Partner advances and accrued interest payable 52,215,000 50,220,000
Accounts payable and accrued expenses 1,207,000 1,292,000
Partners' deficit (18,069,000) (15,374,000)
------------ ------------
$ 35,926,000 $ 36,714,000
============ ============
</TABLE>
Summary results of operations for the Venture are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 75,000 $ 175,000 $ 375,000 $ 256,000
----------- ----------- ----------- -----------
Cost of sales -- 105,000 202,000 105,000
Selling, general and
administrative costs 510,000 618,000 1,125,000 1,200,000
Interest - net 891,000 869,000 1,743,000 1,734,000
----------- ----------- ----------- -----------
Total costs 1,401,000 1,592,000 3,070,000 3,039,000
----------- ----------- ----------- -----------
Net loss $(1,326,000) $(1,417,000) $(2,695,000) $(2,783,000)
=========== =========== =========== ===========
</TABLE>
The Corporation's 50% share of the Venture's results were losses of
$663,000 and $708,000 for the three months ended December 31, 1996 and
1995, respectively, and $1,348,000 and $1,391,000 for the six months
ended December 31, 1996 and 1995, respectively, and have been included
in "Equity in loss of Kohala Joint Venture" in the accompanying
consolidated statements of earnings. The Corporation'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
Corporation's total advances (including accrued interest) at December
31, 1996 were $26,107,000.
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 Corporation
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
Corporation the entire amount of Additional Advances of $702,000
together with $37,000 of interest thereon. The Partner made its share
of required advances to the Venture during calendar year 1996. 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 calendar year 1997. The Corporation, 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 or whether Oxford First will receive permission from the
Bankruptcy Court to transfer additional funds to the Partner, if
8
<PAGE> 9
required. Should the Partner be unable to make its share of future
advances to the Venture, the Corporation 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 with a group of banks. The Partner did not file for
reorganization under Chapter 11 of the Bankruptcy Code. During the six
months ended December 31, 1996, the Corporation advanced $74,000 to the
Venture.
4. On June 3, 1996, the Corporation called for redemption on July 22,
1996, $15,825,000 aggregate principal amount of the Debentures. On July
22, 1996, $2,166,000 of the Debentures were redeemed, with the
$13,659,000 balance having been converted into shares of the
Corporation's common stock on or prior to such redemption date. In
addition, on August 5, 1996, the balance of outstanding Debentures
were called for redemption on September 4, 1996. On September 4,
1996, $242,000 of the Debentures were redeemed, with the $12,520,000
balance having been converted into shares of the Corporation's
common stock on or prior to such redemption date. At September 5,
1996 no Debentures remained outstanding. Had the conversion of
the Debentures occurred on July 1, 1996, the reported earnings
per share, primary, for the six months ended December 31, 1996,
would have decreased $.04 to $1.21.
In connection with the conversion of the Debentures, during the six
months ended December 31, 1996, the Corporation issued 804,259 shares
of its common stock. As a result, "Stockholders' equity" as shown in
the accompanying consolidated balance sheets increased by $25,646,000.
5. In November 1996, the Board of Directors authorized the repurchase of
up to 200,000 shares of the Corporation's common stock, and in January
1997, the Board of Directors authorized the repurchase of up to an
additional 100,000 shares of the Corporation's common stock. Such
purchases may be made from time to time in either open market or
privately negotiated transactions. Prior to the November 1996
authorization, the Corporation still had authority to repurchase up
to 35,700 shares from a previous authorization. In December 1996
the Corporation repurchased 91,300 shares in the open market for an
aggregate purchase price of $3,356,000, and in January 1997, the
Corporation repurchased 50,700 shares in the open market for an
aggregate purchase price of $1,917,000.
6. Certain reclassifications of fiscal 1996 balances have been made to
conform with the fiscal 1997 presentation.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
Effective June 1, 1996, the Corporation consummated a transaction (the
Transaction) in which a third party, Lufthansa Airport and Ground Services GmbH
(LAGS), acquired a 26% interest in the Corporation's aviation services business
(the Aviation Business). As part of the Transaction, the Corporation transferred
substantially all of the assets and liabilities of the Aviation Business to
Hudson General LLC (Hudson LLC), a newly-formed limited liability company (see
Notes 1 and 2). Effective June 1, 1996, the Corporation has accounted for its
interest in Hudson LLC under the equity method of accounting. As a result, the
Corporation's consolidated statements of earnings for the three and six months
ended December 31, 1996 contain the operating results of the Aviation Business
under the equity method of accounting. For the three and six months ended
December 31, 1995, the Corporation's consolidated statements of earnings contain
the operating results of the Aviation Business on a consolidated basis.
The Corporation's revenues of $1.2 and $2.3 million for the three and
six months ended December 31, 1996, respectively, reflect overhead fees and
equipment rentals billed by the Corporation to Hudson LLC. Depreciation and
amortization of $.2 and $.4 million for the three and six months ended December
31, 1996, respectively, primarily represent depreciation related to operating
equipment leased to Hudson LLC by the Corporation. Selling, general and
administrative expenses for the three and six months ended December 31, 1996 of
$2.0 and $3.7 million, respectively, principally reflect administrative and
related costs of the Corporation.
The Corporation's 74% share of earnings from Hudson LLC for the three
and six months ended December 31, 1996 was $3.1 and $4.7 million, respectively.
(For an analysis of the results of the Aviation Business, see the table and
related management's discussion which appear below.)
The Corporation's 50% share of losses from its real estate joint venture
in Hawaii (the Venture) for the three and six months ended December 31, 1996
approximated that of the corresponding periods of the previous year as sales of
land parcels continued to be slow. As is usual for companies with land
development operations, the contribution to future results from such operations
will fluctuate depending upon land sales closed in each reported period.
10
<PAGE> 11
Interest income for the three and six months ended December 31, 1996
increased $.6 and $1.0 million, or 112.1% and 92.4%, respectively, compared
with the corresponding period of the prior year. The increase primarily reflects
interest income associated with: (i) the subordinated note receivable from
Hudson LLC related to conversion of the 7% convertible subordinated debentures
(the Debentures) into shares of the Corporation's common stock (see Note 2);
(ii) advances made by the Corporation to Hudson LLC; and (iii) higher excess
cash balances.
Interest expense for the three and six months ended December 31, 1995
was attributable to the Debentures (see Notes 2 and 4).
The Corporation's provision for income taxes for the three and six
months ended December 31, 1996 decreased $.7 million compared with the
corresponding periods of the previous year. Included in the Corporation's
provision for income taxes for the three and six months ended December 31, 1996
is a lower provision associated with decreased pre-tax earnings in the U.S., and
the absence in the current year periods of a provision for foreign income taxes.
As a result of the Transaction, the Corporation is no longer required to provide
for or reflect foreign income taxes in its consolidated financial statements.
Therefore, the effective tax rate for the three and six months ended December
31, 1996 decreased compared with the corresponding periods of the prior year as
foreign income taxes, which are provided for at a higher effective tax rate
than in the U.S., are reflected on the financial statements of Hudson LLC.
The following table and related management's discussion are intended to
provide a presentation and analysis of results of the Aviation Business for the
three and six months ended December 31, 1996 and 1995 on a comparable basis.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
------- ------- ------- -------
(in thousands)
<S> <C> <C> <C> <C>
Revenues $41,380 $40,949 $77,759 $74,984
------- ------- ------- -------
Costs and expenses:
Operating 32,213 30,537 61,275 57,667
Depreciation and amortization 1,888 1,918 3,564 3,540
Selling, general and administrative 3,258 2,808 6,367 5,657
------- ------- ------- -------
Total costs and expenses 37,359 35,263 71,206 66,864
------- ------- ------- -------
Operating income $ 4,021 $ 5,686 $ 6,553 $ 8,120
======= ======= ======= =======
</TABLE>
11
<PAGE> 12
Revenues for the three and six months ended December 31, 1996 increased
$.4 and $2.8 million, or 1.0% and 3.7%, respectively, compared with the
corresponding periods of the prior year. The increase reflects higher ground
handling service revenues (net of lower sales of de-icing fluid in the U.S.) of
$1.5 and $4.4 million, respectively, due primarily to expanded services to new
and existing customers. Partially offsetting the revenue increase for the three
and six months ended December 31, 1996 were lower: (i) ground transportation
revenues of $.5 and $1.2 million, respectively, due primarily to the loss of
contracts to operate information kiosks and airfield passenger transport
vehicles; and (ii) snow removal revenues of $.7 million for both periods.
Costs and expenses for the three and six months ended December 31, 1996
increased $2.1 and $4.3 million, or 5.9% and 6.5%, respectively, compared with
the corresponding periods of the previous year. Operating costs for the three
and six months ended December 31, 1996 increased $1.7 and $3.6 million, or 5.5%
and 6.3%, respectively, compared with the corresponding periods of the previous
year. The increase was attributable to higher labor and related costs associated
with expanded ground handling operations. Partially offsetting the increase for
the three and six months ended December 31, 1996 were lower costs related to:
(i) the loss of contracts to operate ground transportation information kiosks
and airfield passenger transport vehicles; (ii) workers' compensation
insurance as a result of the positive trend of related claims; and (iii) snow
removal operations.
Depreciation and amortization expenses for the three and six months
ended December 31, 1996 were comparable with those of the corresponding periods
of the previous year.
Selling, general and administrative expenses for the three and six
months ended December 31, 1996 increased $.5 and $.7 million, or 16.0% and
12.6%, respectively, compared with the corresponding periods of the previous
year. The increases primarily reflect higher administrative and related costs.
Operating income for the three and six months ended December 31, 1996
decreased $1.7 and $1.6 million compared with the corresponding periods of the
previous year due primarily to decreased results associated with:
12
<PAGE> 13
(i) lower sales of de-icing fluid in the U.S.; (ii) snow removal operations;
and (iii) higher selling, general and administrative expenses as described
above. In addition, reduced ground handling margins in Canada caused mainly by
increased labor costs associated with scheduling changes by our airline
customers contributed to the decrease in operating results. Partially
offsetting the decreases were improved results from domestic ground handling
operations and lower workers' compensation insurance costs.
Results of aircraft ground handling operations fluctuate depending upon
the flight activity and schedules of customers and the ability to deploy
equipment and manpower in the most efficient manner to service such customers.
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 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 Corporation, several airlines have
been outsourcing 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 Hudson LLC. The Corporation is unable,
at this time, to evaluate the full impact of these factors.
13
<PAGE> 14
Liquidity and Capital Expenditures and Commitments
The Corporation's recurring sources of liquidity are funds provided from
Hudson LLC and bank lines of credit. As a result of the Transaction, Hudson LLC
will pay to the Corporation an overhead fee equal to the sum of 3% of Hudson
LLC's consolidated domestic revenues and 1% of Hudson LLC's consolidated
Canadian revenues. It is anticipated that approximately $3.0 million of the
Corporation's overhead will not be allocated to Hudson LLC on an annual basis.
In addition, the Corporation is expected to receive distributions from Hudson
LLC annually in an amount substantially equal to 50% of domestic and 10% of
Canadian pre-tax earnings from the Aviation Business, as defined, multiplied by
the Corporation's respective equity interest in Hudson LLC (presently 74%).
Furthermore, as a result of the conversion of Debentures into shares of the
Corporation's common stock, Hudson LLC is, on a subordinated basis (as defined),
indebted to the Corporation. During the six months ended December 31, 1996,
Hudson LLC repaid $21.3 million of such debt to the Corporation. Hudson LLC is
obligated to repay the remaining balance of $5.1 million to the Corporation as
follows: (i) $.5 million on July 15, 1997; and (ii) $1.5 million on July 15,
1998 and on each July 15th thereafter until the entire principal balance is
satisfied. In addition, as a result of the Transaction, the Corporation received
certain trade receivables and has made advances to Hudson LLC. The balance of
such advances (which Hudson LLC is obligated to repay to the Corporation on
demand) totaled $7.8 million as of December 31, 1996.
Pursuant to a Revolving Credit Agreement (the Credit Agreement) with a
group of banks dated June 1, 1996, the Corporation may borrow funds (including
outstanding letters of credit) up to a limit of $6.0 million until June 30, 1999
at which time the Credit Agreement terminates. There were no direct borrowings
or letters of credit outstanding at December 31, 1996.
During the six months ended December 31, 1996, net cash used by
operating activities was $2.7 million due mainly to: (i) payments of accrued
expenses; and (ii) equity in earnings of Hudson LLC which were not distributed
to the Corporation. During the six months ended December 31, 1995, net cash
provided by operating activities was $5.3 million. Net cash provided by
investing activities was $20.5 million
14
<PAGE> 15
for the six months ended December 31, 1996 due mainly to Hudson LLC's partial
repayment of the outstanding balance of its subordinated debt to the
Corporation. Capital expenditures net of proceeds from the sale of property and
equipment were $51,000 and $6.3 million during the six months ended December 31,
1996 and 1995, respectively. In the 1995 period, the majority of capital
expenditures were made in respect of the Aviation Business and as such are now
made by Hudson LLC. Cash and cash equivalents were $27.2 and $12.7 million at
December 31, 1996 and June 30, 1996, respectively. The increase in cash and cash
equivalents primarily reflects the repayment to the Corporation of $21.3 million
from Hudson LLC as noted above.
In November 1996, the Board of Directors authorized the repurchase of
up to 200,000 shares of the Corporation's common stock, and in January 1997,
the Board of Directors authorized the repurchase of up to an additional
100,000 shares of the Corporation's common stock. Such purchases may be made
from time to time in either open market or privately negotiated transactions.
Prior to the November 1996 authorization, the Corporation still had authority
to repurchase up to 35,700 shares from a previous authorization. In December
1996 the Corporation repurchased 91,300 shares in the open market for an
aggregate purchase price of $3.4 million, and in January 1997, the Corporation
repurchased 50,700 shares in the open market for an aggregate purchase price
of $1.9 million.
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 approximately $2.3 million for public
infrastructural 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
15
<PAGE> 16
this ruling. The appeal was heard before the Hawaii Supreme Court in March 1994,
and because of an existing backlog in its caseload, the Court has not rendered a
decision. 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 Corporation 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 Corporation and the Partner. It is expected
that any advances which the Corporation may be required to make to the Venture
will be provided from the Corporation's cash flow and lines of credit. Pursuant
to the Credit Agreement the Corporation may advance up to $2.0 million to the
Venture in any fiscal year or up to $5.0 million during the term of the Credit
Agreement, net of any distributions received from the Venture by the Corporation
during such periods. At present, it is anticipated that the advances required to
meet the obligations of the Venture will not exceed the limits set forth in the
Credit Agreement.
At December 31, 1996, the Venture had commitments (in addition to the
commitments noted above) aggregating $3.2 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, 1999. It is currently expected that
approximately $.6 million of funds for the Venture's other commitments will be
expended during fiscal 1997.
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
Corporation 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 Corporation the
entire amount of the Additional Advances of $.7 million together with interest
thereon. The Partner made its share of required
16
<PAGE> 17
advances to the Venture during calendar year 1996. 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 calendar year 1997. The
Corporation, 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 or whether Oxford First will receive permission from the
Bankruptcy Court to transfer additional funds to the Partner, if required.
Should the Partner be unable to make its share of future advances to the
Venture, the Corporation 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 six months ended December
31, 1996, the Corporation advanced $74,000 to the Venture.
The extent to which advances to the Venture will be required in the
future, as well as the timing of the return to the Corporation 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.
It is expected that the sources of the Corporation's liquidity, as noted
above, will provide sufficient funding to allow the Corporation to meet its
liquidity requirements.
17
<PAGE> 18
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders of the Corporation, held on November
15, 1996, the only matter voted upon was the election of directors. Effective at
the Annual Meeting, the number of directors was increased from six to eight. All
six incumbent directors of the Corporation were re-elected. Elected as new
directors were Paul R. Pollack and Michael Rubin, who were included as
management nominees in the Proxy Statement for the Annual Meeting. The voting
was as follows:
Shares for Which
Name of Nominee Shares Voted For Authority Withheld
- --------------- ---------------- ------------------
Milton H. Dresner 1,106,930 108,751
Jay B. Langner 1,106,930 108,751
Paul R. Pollack 1,106,930 108,751
Edward J. Rosenthal 1,106,930 108,751
Michael Rubin 1,106,830 108,851
Hans H. Sammer 1,106,808 108,873
Richard D. Segal 1,106,930 108,751
Stanley S. Shuman 1,106,585 109,096
There were no abstentions or broker nonvotes.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.10(c) First Amendment to the Unit Purchase and Option
Agreement dated February 27, 1996 between the
Registrant and Lufthansa Airport and Ground Services
GmbH, a German corporation, dated as of December 12,
1996.
10.10(d) Third Amendment to the Limited Liability Company
Agreement dated May 31, 1996, effective as of June 1,
1996, among the Registrant, LAGS (USA) Inc. and Hudson
General LLC dated as of December 12, 1996.
11 Computations of Earnings Per Share Information, Primary
and Fully Diluted - Net Earnings.
27 Financial Data Schedule.
b) Reports on Form 8-K - None
18
<PAGE> 19
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 10, 1997
/s/ JAY B. LANGNER
-----------------------------
Jay B. Langner
Chairman of the Board and
Chief Executive Officer
/s/ MICHAEL RUBIN
-----------------------------
Michael Rubin
President and Principal
Financial Officer
19
<PAGE> 20
HUDSON GENERAL CORPORATION & SUBSIDIARIES
EXHIBIT INDEX
Exhibit
No. Exhibit Page No.
- ------------------------------------------------------------------------------
10.10(c) First Amendment to the Unit Purchase
and Option Agreement dated February 27,
1996 between the Registrant and
Lufthansa Airport and Ground Services
GmbH, a German corporation, dated as of
December 12, 1996 21 - 23
10.10(d) Third Amendment to the Limited Liability
Company Agreement dated May 31, 1996,
effective as of June 1, 1996, among the
Registrant, LAGS (USA) Inc. and Hudson
General LLC dated as of December 12, 1996 24 - 26
11 Computations of Earnings Per Share
Information, Primary and Fully Diluted -
Net Earnings 27 - 29
27 Financial Data Schedule 30 - 31
20
<PAGE> 1
EXHIBIT 10.10(c)
First Amendment to the Unit Purchase and
Option Agreement dated February 27, 1996
between the Registrant and Lufthansa Airport
and Ground Services GmbH, a German corporation,
dated as of December 12, 1996
21
<PAGE> 2
AMENDMENT NO. 1
TO UNIT PURCHASE AND OPTION AGREEMENT
AMENDMENT NO. 1 dated as of December 12, 1996 to the Unit Purchase and
Option Agreement dated February 27, 1996 (the "Purchase Agreement") between
Lufthansa Airport and Ground Services GmbH ("LAGS"), a German corporation, as
assigned by LAGS to its wholly owned subsidiary, LAGS (USA) Inc. (the "Buyer"),
a Delaware corporation, and Hudson General Corporation ("Hudson"), a Delaware
corporation. Certain capitalized but undefined terms used in this Amendment No.
1 will have the meanings set forth in the Purchase Agreement.
WHEREAS, on December 12, 1996, the Buyer elected to prepay to Hudson
General LLC the sum of $5,188,000 plus accrued interest (the "Prepayment")
representing the entire remaining balance of the purchase price of the Purchased
Units as contemplated by Paragraph 1.3 (d) of the Purchase Agreement;
NOW, THEREFORE, in connection with and in consideration of the
Prepayment, and the amendment to the Limited Liability Company Agreement of
Hudson General LLC being entered into concurrently with this Amendment No. 1,
the parties hereto agree as follows:
1. The Option Period. The Option referred to in Paragraph 3.1 of the
Purchase Agreement shall expire on October 1, 1999, instead of on October 1,
2000. In order to effectuate the foregoing, the parties agree that the Purchase
Agreement shall be amended as set forth in Paragraphs 2 and 3 below. If and to
the extent that any other provisions of the Purchase Agreement conflict with or
are otherwise inconsistent with the provisions or intent of this Amendment No.
1, this Amendment No. 1 shall govern.
2. Amendment to Paragraph 3.1. The first sentence of Paragraph 3.1 of
the Purchase Agreement shall be deleted in its entirety, and the following shall
be inserted in place thereof:
"The Buyer will have the option (the "Option"), exercisable on October
1, 1997, 1998 and 1999 (each of those being an "Option Date"), to purchase from
Hudson (or, as provided in Paragraph 3.5, to purchase from the Company) Class B
Units ("Option Units") which will increase the total outstanding Class B Units
to up to 49% of the Class A Units and Class B Units (together, the "Units") of
the Company which are outstanding on the Option Date on which the Option is
exercised (each Option Date on which the Option is exercised being an "Exercise
Date")."
3. Amendment to Paragraph 3.3 (a). Clauses (y) and (z) of the first
sentence of Paragraph 3.3 (a) of the Purchase Agreement shall be deleted in
their entirety, and the following shall be inserted in place thereof:
" (y) $77,932,250 if the Option Date is October 1, 1997, $82,516,500 if
the Option Date is October 1, 1998 and $87,100,750 if the Option Date is October
1, 1999, but in no event more than; (z) $115,010,000 if the Option Date is
October 1, 1997, $128,811,000, if the Option Date is October 1, 1998 and
$144,268,000 if the Option Date is October 1, 1999."
22
<PAGE> 3
4. Governing Law. This Amendment No. 1 will be governed by, and
construed under, the laws of the State of New York in the United States of
America relating to contracts made and to be performed in that state.
5. Counterparts. This Amendment No. 1 may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
6. Full Force and Effect. This Amendment No. 1 constitutes a document
signed in writing by both the Buyer and Hudson as contemplated by Paragraph
14.11 of the Purchase Agreement. The Purchase Agreement, as modified by this
Amendment No.1, shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1
as of December 12, 1996.
HUDSON GENERAL CORPORATION
By:______________________________
Title: President
LAGS (USA) Inc.
By:______________________________
Title:
23
<PAGE> 1
EXHIBIT 10.10(d)
Third Amendment to the Limited Liability Company
Agreement dated May 31, 1996, effective as of
June 1, 1996, among the Registrant, LAGS (USA) Inc.
and Hudson General LLC dated as of December 12, 1996
24
<PAGE> 2
AMENDMENT NO. 3
TO LIMITED LIABILITY COMPANY AGREEMENT
OF
HUDSON GENERAL LLC
AMENDMENT NO. 3 to the Limited Liability Company Agreement dated May
31, 1996, effective as of June 1, 1996 (the "LLC Agreement"), among Hudson
General Corporation ("Hudson"), a Delaware corporation, LAGS (USA) Inc.
("LAGS"), a Delaware corporation, and Hudson General LLC (the "Company"), a
Delaware limited liability company. Certain capitalized but undefined terms used
in this Amendment No. 3 will have the meanings set forth in the LLC Agreement.
WHEREAS, on December 12, 1996, LAGS elected to prepay to the Company
the sum of $5,188,000 plus accrued interest (the "Prepayment") in accordance
with the provisions of Paragraph 1.3 (d) of the Unit Purchase and Option
Agreement dated February 27, 1996 (the "Purchase Agreement") between Lufthansa
Airport and Ground Services GmbH (as assigned by it to LAGS) and Hudson; and
WHEREAS, in accordance with Paragraph 15.2 of the LLC Agreement, the
Member Board has voted to approve this Amendment No. 3; and
WHEREAS, in accordance with Paragraph 15.2 of the LLC Agreement,
Hudson, as holder of a majority of the outstanding Units, has voted to approve
this Amendment No. 3;
NOW, THEREFORE, in connection with and in consideration of the
Prepayment, and the amendment to the Purchase Agreement being entered into
concurrently with this Amendment No. 3, the parties hereto agree as follows:
1. Amendment to Paragraph 4.2 (a): The last sentence of Paragraph 4.2
(a) of the LLC Agreement shall be deleted in its entirety and the following
shall be inserted in place thereof:
"Notwithstanding the limitation on distributions of Net Income to
holders of Class B Units in the Fiscal Years ending June 30, 1997 and June 30,
1998 as provided for in the first sentence of this Paragraph 4.2 (a), if the
aggregate Pre-Tax Earnings in such two Fiscal Years, minus any earnings of
Hudson Canada in such two Fiscal Years, except to the extent that those earnings
are at any time distributed to the Company by Hudson Canada, are in excess of
$30,552,300, then the limitations on distributions to holders of Class B Units
provided for in this Paragraph 4.2 (a) shall not be applicable. If in accordance
with the preceding sentence the limitations on distributions to holders of Class
B Units are not applicable (which determination cannot be made until Pre-Tax
Earnings for the Fiscal Year ending June 30, 1998 are available), and if Pre-Tax
Earnings for the Fiscal Year ended June 30, 1997, minus any earnings of Hudson
Canada in such Fiscal Year, except to the extent that those earnings are at any
time distributed to the Company by Hudson Canada, were in excess of $14,
689,500, then holders of Class B Units will be entitled to receive additional
distributions for the Fiscal Year ending June 30, 1998 in an amount equal to the
distributions such holders did not receive for the Fiscal Year ended June 30,
1997 by reason of such limitations. Any reduction or increase in distributions
otherwise payable to holders of Class B Units by virtue of this
25
<PAGE> 3
Paragraph 4.2 (a) shall cause a corresponding increase or reduction to the
distributions payable to Hudson for each such Fiscal Year."
If and to the extent that any other provisions of the LLC Agreement
conflict with or are otherwise inconsistent with the provisions or intent of
this Amendment No. 3, this Amendment No. 3 shall govern.
2. Governing Law. This Amendment No.3 will be governed by, and
construed under, the laws of the State of Delaware.
3. Counterparts. This Amendment No. 3 may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
4. Full Force and Effect.The LLC Agreement, as previously modified by
Amendment No. 1 and Amendment No. 2, and as modified by this Amendment No. 3,
shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No.3
as of December 12, 1996.
HUDSON GENERAL CORPORATION
By:________________________________
LAGS (USA) INC.
By:________________________________
HUDSON GENERAL LLC
By:________________________________
26
<PAGE> 1
EXHIBIT 11
Computations of Earnings Per Share Information,
Primary and Fully Diluted - Net Earnings.
27
<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,
1996 1995 1996 1995
------ ------ ------ ------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net earnings for computing earnings
per share - primary .................... $1,660 $2,395 $2,346 $2,875
====== ====== ====== ======
Weighted average number of common and
common equivalent shares outstanding ... 1,970 1,174 1,871 1,169
====== ====== ====== ======
Net earnings per common and common
equivalent share-primary ............... $ .84 $ 2.04 $ 1.25 $ 2.46
====== ====== ====== ======
</TABLE>
28
<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,
1996 1995 1996 1995
------ ------ ------ ------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net earnings for computing earnings
per share - primary .................... $1,660 $2,395 $2,346 $2,875
Reduction of interest expense less
applicable income taxes assuming
conversion of 7% convertible
subordinated debentures due 2011 ....... -- 287 50 573
------ ------ ------ ------
Net earnings for computing earnings
per share-fully diluted ................ $1,660 $2,682 $2,396 $3,448
====== ====== ====== ======
Weighted average number of common and
common equivalent shares outstanding ... 1,971 1,179 1,872 1,180
Addition from assumed conversion as of
the beginning of each period of the 7%
convertible subordinated debentures
outstanding on a fully diluted basis
-- 885 117 885
------ ------ ------ ------
Weighted average number of common and
common equivalent shares outstanding
on a fully diluted basis ............... 1,971 2,064 1,989 2,065
====== ====== ====== ======
Net earnings per common and common
equivalent share - fully diluted
$ .84 $ 1.30 $ 1.20 $ 1.67
====== ====== ====== ======
</TABLE>
29
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 27,220
<SECURITIES> 0
<RECEIVABLES> 492
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,067
<PP&E> 3,102
<DEPRECIATION> 0
<TOTAL-ASSETS> 78,062
<CURRENT-LIABILITIES> 3,418
<BONDS> 0
0
0
<COMMON> 2,083
<OTHER-SE> 71,799
<TOTAL-LIABILITY-AND-EQUITY> 78,062
<SALES> 2,304
<TOTAL-REVENUES> 2,304
<CGS> 0
<TOTAL-COSTS> 4,122
<OTHER-EXPENSES> 3,745
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,566
<INCOME-TAX> 1,220
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,346
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.20
</TABLE>
