<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 September 30, 1997
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: 1,741,149 shares outstanding at October
31, 1997.
Page 1 of 17
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PART I - FINANCIAL STATEMENTS
2
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<TABLE>
<CAPTION>
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended
September 30,
1997 1996
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues ................................................................................... $ 1,384,000 $ 1,150,000
----------- -----------
Costs and expenses:
Depreciation and amortization ............................................................ 176,000 190,000
Selling, general & administrative ........................................................ 1,697,000 1,773,000
----------- -----------
Total costs and expenses ............................................................... 1,873,000 1,963,000
----------- -----------
Operating loss ............................................................................. (489,000) (813,000)
Equity in earnings of Hudson General LLC ................................................... 1,429,000 1,584,000
Equity in loss of Kohala Joint Venture ..................................................... (694,000) (685,000)
Interest income ............................................................................ 922,000 970,000
----------- -----------
Earnings before provision for income taxes ................................................. 1,168,000 1,056,000
Provision for income taxes ................................................................. 386,000 370,000
----------- -----------
Net earnings ............................................................................... $ 782,000 $ 686,000
=========== ===========
Earnings per share, primary ................................................................ $ .44 $ .39
=========== ===========
Earnings per share, fully diluted .......................................................... $ .44 $ .37
=========== ===========
Cash dividends per common share ............................................................ $ -- $ --
=========== ===========
Weighted average common and common
equivalent shares outstanding:
Primary .................................................................................. 1,763,000 1,770,000
=========== ===========
Fully diluted ............................................................................ 1,764,000 2,007,000
=========== ===========
See accompanying notes to consolidated financial statements.
3
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, June 30,
1997 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents .......................... $ 16,492,000 $ 18,425,000
Investment securities available for sale ........... 9,764,000 8,792,000
Receivables ........................................ 613,000 540,000
Advances to Hudson General LLC - net ............... 1,356,000 361,000
Prepaid expenses and other assets .................. 66,000 250,000
------------ ------------
Total current assets ............................. 28,291,000 28,368,000
Property and equipment at cost,
less accumulated depreciation and amortization ..... 2,721,000 2,902,000
Investment in Hudson General LLC ..................... 27,824,000 26,395,000
Investment in Kohala Joint Venture - net ............. 5,676,000 5,893,000
Note receivable from Hudson General LLC .............. 3,130,000 4,630,000
------------ ------------
$ 67,642,000 $ 68,188,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ................................... $ 66,000 $ 161,000
Accrued expenses and other liabilities ............. 1,048,000 2,536,000
Income taxes payable ............................... 162,000 --
------------ ------------
Total current liabilities ........................ 1,276,000 2,697,000
------------ ------------
Deferred income taxes ................................ 107,000 107,000
------------ ------------
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 2,098,160 and 2,092,160 shares .... 2,098,000 2,092,000
Paid in capital .................................... 48,819,000 48,732,000
Retained earnings .................................. 26,504,000 25,722,000
Treasury stock, at cost, 357,311 shares ............ (11,162,000) (11,162,000)
------------ ------------
Total stockholders' equity ....................... 66,259,000 65,384,000
------------ ------------
$ 67,642,000 $ 68,188,000
============ ============
See accompanying notes to consolidated financial statements.
4
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 30,
1997 1996
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings ......................................... $ 782,000 $ 686,000
Adjustments to reconcile net earnings to net
cash used by operating activities:
Depreciation and amortization ...................... 176,000 190,000
Equity in earnings of Hudson General LLC ........... (1,429,000) (1,584,000)
Equity in loss of Kohala Joint Venture ............. 694,000 685,000
Accrual of interest income on Kohala Joint
Venture advances ................................. (477,000) (443,000)
Change in other current assets and liabilities:
Receivables ...................................... (73,000) (599,000)
Prepaid expenses and other assets ................ 184,000 289,000
Accounts payable ................................. (95,000) (369,000)
Accrued expenses and other liabilities ........... (1,488,000) (2,334,000)
Income taxes payable ............................. 162,000 --
Other - net ........................................ -- 23,000
------------ ------------
Net cash used by operating activities ............ (1,564,000) (3,456,000)
------------ ------------
Cash flows from investing activities:
Purchase of investment securities available for sale . (972,000) --
Purchases of property and equipment .................. (12,000) (36,000)
Proceeds from sale of property and equipment ......... 17,000 4,000
Repayment of advances to Hudson General LLC - net .... 5,000 156,000
Collections of note receivable from Hudson General LLC 500,000 16,095,000
------------ ------------
Net cash (used) provided by investing activities . (462,000) 16,219,000
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock ............... 93,000 24,000
------------ ------------
Net cash provided by financing activities ....... 93,000 24,000
------------ ------------
Net (decrease)increase in cash and cash equivalents .... (1,933,000) 12,787,000
Cash and cash equivalents at beginning of period ....... 18,425,000 12,701,000
------------ ------------
Cash and cash equivalents at end of period ............. $ 16,492,000 $ 25,488,000
============ ============
See accompanying notes to consolidated financial statements.
5
</TABLE>
<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 September 30, 1997
and June 30, 1997, and the results of operations and cash flows for the
three months ended September 30, 1997 and 1996. 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), 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.
The accounting policies followed by the Corporation are stated in Note 1
to the Corporation's consolidated financial statements in the 1997 Hudson
General Corporation Annual Report filed under Item 8 to Form 10-K for the
Corporation's fiscal year ended June 30, 1997.
2. The summary consolidated balance sheets for Hudson LLC are as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents ....................... $ 8,174,000 $12,324,000
Accounts and notes receivable - net ............. 15,206,000 15,289,000
Other current assets ............................ 2,997,000 2,711,000
----------- -----------
Total current assets ......................... 26,377,000 30,324,000
Property, equipment and leasehold rights at cost,
less accumulated depreciation and amortization . 45,244,000 44,948,000
Other assets - net .............................. 2,348,000 2,248,000
----------- -----------
$73,969,000 $77,520,000
=========== ===========
Accounts payable ................................ $14,683,000 $18,528,000
Accrued expenses and other liabilities .......... 17,684,000 18,791,000
Advances from Hudson General Corporation - net .. 1,356,000 361,000
----------- -----------
Total current liabilities .................... 33,723,000 37,680,000
Note payable to Hudson General Corporation ...... 3,130,000 4,630,000
Members' equity ................................. 37,116,000 35,210,000
----------- -----------
$73,969,000 $77,520,000
=========== ===========
</TABLE>
6
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Summary results of operations for Hudson LLC are as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues $ 39,356,000 $ 36,379,000
------------ ------------
Operating costs 31,702,000 29,062,000
Depreciation and amortization 1,968,000 1,676,000
Selling, general & administrative costs 3,472,000 3,109,000
------------ ------------
Total costs and expenses 37,142,000 33,847,000
------------ ------------
Operating income 2,214,000 2,532,000
Interest income 178,000 284,000
Interest expense (84,000) (389,000)
------------ ------------
Earnings before provision for income taxes 2,308,000 2,427,000
Provision for income taxes 377,000 310,000
------------ ------------
Net earnings $ 1,931,000 $ 2,117,000
============ ============
</TABLE>
The Corporation's 74% share of Hudson LLC's results, as calculated in accordance
with the LLC Agreement, was $1,429,000 and $1,584,000 for the three months ended
September 30, 1997 and 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 the 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 (the 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 and paid in capital were increased by its
74% interest in the Deferred Payments. The Purchase Agreement, as amended,
provides LAGS an option (the LAGS Option), exercisable on October 1 of each year
from 1996 through 1999, effective as of the preceding July 1, pursuant to which
LAGS may increase its equity ownership in Hudson LLC from 26% to a maximum of
49%, for a price based on a formula related to the average earnings of the
Aviation Business over the four fiscal years preceding the exercise of the
option, subject to certain minimum and maximum amounts.
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 was 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 of the Aviation Business for fiscal 1997 and
1998 exceeds $30,553,000. In addition, 100% of Hudson LLC's net earnings in June
1996 were allocated to the Corporation.
The LLC Agreement, as amended, provides that distributions will be paid annually
in an amount at least equal to 50% of domestic net income and 10% of Canadian
pre-tax earnings, as defined, from the Aviation Business. Such distributions,
totaling approximately $8,300,000 for fiscal 1997 and the month of June 1996
were made in October 1997.
As a result of the conversion of Debentures into shares of the Corporation's
common stock in fiscal 1996 and 1997, Hudson LLC is, on a subordinated basis (as
defined),
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<PAGE> 8
indebted to the Corporation (the Corporate Subordinated Debt). At
September 30, 1997, the balance of the Corporate Subordinated Debt was
$4,630,000. Hudson LLC is obligated to repay $1,500,000 of such debt to
the Corporation on July 15, 1998 and on each July 15th thereafter until
the entire principal balance is satisfied. The noncurrent portion of the
Corporate Subordinated Debt in the amount of $3,130,000 is shown as "Note
receivable from Hudson General LLC" in the accompanying consolidated
balance sheet at September 30, 1997. The current portion of this debt at
September 30, 1997, in the amount of $1,500,000, is included in "Advances
to Hudson General LLC - net" in the accompanying consolidated balance
sheets. Interest on the Corporate Subordinated Debt is payable
semi-annually in January and July at the rate of 7% per annum.
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 Project).
The summary consolidated balance sheets for the Venture are as follows:
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Cash and equivalents ........................ $ 1,012,000 $ 730,000
Land and development costs .................. 9,319,000 9,264,000
Mortgages, accounts and notes receivable .... 1,755,000 2,779,000
Foreclosed real estate - net ................ 3,137,000 2,854,000
Other assets - net .......................... 1,589,000 1,590,000
------------ ------------
$ 16,812,000 $ 17,217,000
============ ============
Partner advances and accrued interest payable $ 55,034,000 54,013,000
Accounts payable and accrued expenses ....... 1,124,000 1,162,000
Partners' deficit ........................... (39,346,000) (37,958,000)
------------ ------------
$ 16,812,000 $ 17,217,000
============ ============
</TABLE>
Summary results of operations for the Venture are as follows:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales ................................... $ 76,000 $ 300,000
----------- -----------
Cost of sales ............................... -- 202,000
Selling, general and administrative costs.... 499,000 615,000
Interest - net .............................. 965,000 852,000
----------- -----------
Total costs ................................. 1,464,000 1,669,000
----------- -----------
Net loss .................................... $(1,388,000) $(1,369,000)
=========== ===========
</TABLE>
The Corporation's 50% share of the Venture's results were losses of
$694,000 and $685,000 for the three months ended September 30, 1997 and
1996, 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. During the three months ended September 30, 1997,
the Corporation did not make any advances to the Venture. The
Corporation's net advances (including accrued interest) at September 30,
1997 were $19,017,000.
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4. Accrued expenses and other liabilities consisted of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
---------- ----------
(Unaudited)
<S> <C> <C>
Salaries and wages .. $ 374,000 $1,940,000
Retirement plan costs 369,000 319,000
Other ............... 305,000 277,000
---------- ----------
$1,048,000 $2,536,000
========== ==========
</TABLE>
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 months ended
September 30, 1997 and 1996 contain the operating results of the Aviation
Business under the equity method of accounting. (For an analysis of the results
of the Aviation Business, see the table and related management's discussion
which appear below.)
The Corporation's revenues for the three months ended September 30, 1997
increased $.2 million or 20.3% compared with the corresponding period of the
prior year. The increase is due primarily to higher overhead fees billed by the
Corporation to Hudson LLC. (The Corporation and LAGS USA Inc., a wholly-owned
subsidiary of LAGS and a party to the Limited Liability Company Agreement of
Hudson LLC, agreed to raise these overhead fees for fiscal 1998 to 3-1/2% of
Hudson LLC's consolidated domestic revenues and 1-1/4% of Hudson LLC's
consolidated Canadian revenues.) Depreciation and amortization for the three
months ended September 30, 1997 approximated that of the corresponding period of
the previous year. Selling, general and administrative expenses for the three
months ended September 30, 1997 decreased $.1 million or 4.3%, compared with the
corresponding period of the prior year.
The Corporation's 74% share of earnings from Hudson LLC for the three
months ended September 30, 1997 as compared with the corresponding period of the
prior year decreased $.2 million, from $1.6 million to $1.4 million. The
Corporation's 50% share of losses from its real estate joint venture in Hawaii
(the Venture) for the three months ended September 30, 1997 approximated that of
the corresponding period of the previous year. As is usual for companies with
land development operations, the contribution to
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future results from such operations will fluctuate depending upon land sales
closed in each reported period.
Interest income for the three months ended September 30, 1997 was
comparable with that of the corresponding period of the prior year. The
Corporation's provision for income taxes for the three months ended September
30, 1997 increased slightly from the corresponding period of the previous year
due mainly to higher pre-tax earnings.
The following table and related management's discussion are intended to
provide a presentation and analysis of results of the Aviation Business
conducted by Hudson LLC.
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Revenues ............................ $39,356 $36,379
------- -------
Costs and expenses:
Operating ......................... 31,702 29,062
Depreciation and amortization ..... 1,968 1,676
Selling, general and administrative 3,472 3,109
------- -------
Total costs and expenses ............ 37,142 33,847
------- -------
Operating income .................... $ 2,214 $ 2,532
======= =======
</TABLE>
Revenues for the three months ended September 30, 1997 increased $3.0
million, or 8.2%, compared with the corresponding period of the prior year. The
increase reflects higher: (i) ground handling service revenues of $2.2 million,
due primarily to expanded services to new and existing customers; and (ii)
domestic aircraft fueling revenues of $.5 million resulting primarily from
expanded into plane fueling services.
Costs and expenses for the three months ended September 30, 1997 increased
$3.3 million, or 9.7%, compared with the corresponding period of the previous
year. Operating costs for the three months ended September 30, 1997 increased
$2.6 million, or 9.1%, compared with the corresponding period of the previous
year as a result of higher: (i) labor and related costs associated with expanded
ground handling operations; and (ii) fleet maintenance costs related primarily
to ground handling and ground transportation operations.
Depreciation and amortization expenses for the three months ended
September 30, 1997 increased $.3 million, or 17.4%, compared with the
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<PAGE> 12
corresponding period of the previous year due mainly to additions of ground
handling equipment.
Selling, general and administrative expenses for the three months ended
September 30, 1997 increased $.4 million, or 11.7%, compared with the
corresponding period of the previous year. The increase primarily reflects
higher: (i) overhead fees paid to the Corporation as noted above; and (ii)
administrative and related costs.
Operating income for the three months ended September 30, 1997 decreased
$.3 million compared with the corresponding period of the previous year due
primarily to: (i) decreased results associated with ground transportation
operations; (ii) higher selling, general and administrative expenses as
described above; and (iii) higher depreciation and amortization. Partially
offsetting the decreases were improved results from ground handling and domestic
aircraft fueling operations.
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
has provided additional opportunities for Hudson LLC. The Corporation is unable,
at this time, to evaluate the future impact of these factors.
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<PAGE> 13
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
pays to the Corporation an overhead fee, which for fiscal 1998 was raised to the
sum of 3-1/2% of Hudson LLC's consolidated domestic revenues and 1-1/4% 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 LLC Agreement provides that
distributions from Hudson LLC will be paid annually to the Corporation and LAGS
(the Members) in amounts at least equal to 50% of domestic net income and 10% of
Canadian pre-tax earnings for the fiscal year from the Aviation Business, as
defined, multiplied by the Members' respective equity interests in Hudson LLC.
The Corporation's 74% share of such minimum distribution for fiscal 1997 and its
100% share of June 1996 earnings, in the total amount of $6.8 million, were
received in October 1997. Furthermore, as a result of the conversion of the
Corporation's 7% convertible subordinated debentures (the Debentures) in fiscal
1996 and 1997 into shares of the Corporation's common stock, Hudson LLC is, on a
subordinated basis (as defined), indebted to the Corporation. During the three
months ended September 30, 1997, Hudson LLC repaid $.5 million of such debt to
the Corporation. Hudson LLC is obligated to repay to the Corporation $1.5
million on July 15, 1998 and on each July 15th thereafter until the remaining
principal balance of $4.6 million is satisfied.
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 September 30, 1997.
During the three months ended September 30, 1997 and 1996, net cash used
by operating activities was $1.6 and $3.5 million, respectively, due mainly to:
(i) payments of accrued expenses and other liabilities; and (ii) equity in
earnings of Hudson LLC which were not distributed to the Corporation. Net cash
used by investing activities for the three months ended September 30, 1997 was
$.5 million, while net cash provided
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<PAGE> 14
by investing activities was $16.2 million for the three months ended September
30, 1996 due mainly to Hudson LLC's partial repayment of the outstanding balance
of its subordinated debt to the Corporation. Cash and cash equivalents were
$16.5 and $18.4 million at September 30, 1997 and June 30, 1997, respectively.
In fiscal 1997, the Board of Directors authorized the repurchase of up
to 400,000 shares of the Corporation's common stock, which purchases could be
made from time to time in either open market or privately negotiated
transactions. Prior to the fiscal 1997 authorization, the Corporation still had
authority to repurchase up to 35,700 shares from a previous authorization.
During fiscal 1997, the Corporation repurchased 243,000 shares in the open
market for an aggregate purchase price of $9.2 million. No shares were
repurchased during the three months ended September 30, 1997.
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 in the Circuit Court
of Hawaii 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 appealed this ruling. The
appeal was heard before the Hawaii Supreme Court in March 1994, and on May 6,
1997, the Supreme Court vacated the summary judgment which was previously
granted and remanded certain related issues to the Circuit Court for that Court
to decide. The Venture cannot, at this time, determine the impact of the Supreme
Court's ruling and the Circuit Court's proceedings 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
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<PAGE> 15
anticipated that the Venture's capital commitments will be funded by cash flow
from its operations and advances from the Corporation and the Partner and 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. Since the inception of the Credit Agreement, the
Corporation has not increased its net advances to the Venture. 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 September 30, 1997, the Venture had commitments (in addition to the
commitments noted above) aggregating $2.6 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 funds
for most of the Venture's other commitments will be expended subsequent to
fiscal 1998.
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 and expenses incurred in the planning and
development of future phases of the Project.
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.
15
<PAGE> 16
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
11 Computations of Earnings Per Share Information, Primary
and Fully Diluted - Net Earnings.
27 Financial Data Schedule.
b) Reports on Form 8-K - None
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUDSON GENERAL CORPORATION
---------------------------------
(Registrant)
Date: November 4, 1997
----------------
/s/ MICHAEL RUBIN
---------------------------------
Michael Rubin
President
/s/ BARRY REGENSTEIN
---------------------------------
Barry Regenstein
Chief Financial Officer
17
<PAGE> 18
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 19 - 21
27 Financial Data Schedule 22 - 23
</TABLE>
18
<PAGE> 1
EXHIBIT 11
Computations of Earnings Per Share Information,
Primary and Fully Diluted - Net Earnings.
19
<PAGE> 2
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
PRIMARY - NET EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
----- ----
(in thousands, except per share amounts)
<S> <C> <C>
Net earnings for computing earnings
per share - primary ...................... $ 782 $ 686
======= ======
Weighted average number of common and
common equivalent shares outstanding ..... 1,763 1,770
======= ======
Net earnings per common and common
equivalent share-primary ................. $ .44 $ .39
======= ======
</TABLE>
20
<PAGE> 3
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
FULLY DILUTED - NET EARNINGS
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
---- ----
(in thousands, except per share amounts)
<S> <C> <C>
Net earnings for computing earnings
per share - primary .................................................. $ 782 $ 686
Reduction of interest expense less
applicable income taxes assuming
conversion of 7% convertible
subordinated debentures due 2011 ..................................... -- 50
------ ------
Net earnings for computing earnings
per share-fully diluted .............................................. $ 782 $ 736
====== ======
Weighted average number of common and
common equivalent shares outstanding ................................. 1,764 1,770
Addition from assumed conversion as of the beginning of each period of
the 7% convertible subordinated debentures outstanding on a fully
diluted basis ........................................................ -- 237
------ ------
Weighted average number of common and
common equivalent shares outstanding
on a fully diluted basis ............................................. 1,764 2,007
====== ======
Net earnings per common and common equivalent share - fully
diluted .............................................................. $ .44 $ .37
====== ======
</TABLE>
21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 16,492
<SECURITIES> 9,764
<RECEIVABLES> 613
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,291
<PP&E> 2,721
<DEPRECIATION> 0
<TOTAL-ASSETS> 67,642
<CURRENT-LIABILITIES> 1,276
<BONDS> 0
0
0
<COMMON> 2,098
<OTHER-SE> 64,161
<TOTAL-LIABILITY-AND-EQUITY> 67,642
<SALES> 1,384
<TOTAL-REVENUES> 1,384
<CGS> 0
<TOTAL-COSTS> 1,873
<OTHER-EXPENSES> 1,697
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,168
<INCOME-TAX> 386
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 782
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
