<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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: 1,744,949 shares outstanding at April
30, 1998.
Page 1 of 20
<PAGE> 2
PART I - FINANCIAL STATEMENTS
2
<PAGE> 3
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues ........................................ $ 1,570,000 $ 1,426,000 $ 4,335,000 $ 3,730,000
----------- ----------- ----------- -----------
Costs and expenses:
Depreciation and amortization ................. 163,000 184,000 510,000 561,000
Selling, general & administrative ............. 2,385,000 2,514,000 5,973,000 6,259,000
----------- ----------- ----------- -----------
Total costs and expenses .................... 2,548,000 2,698,000 6,483,000 6,820,000
----------- ----------- ----------- -----------
Operating loss .................................. (978,000) (1,272,000) (2,148,000) (3,090,000)
Equity in earnings of Hudson General LLC ........ 3,667,000 3,838,000 7,611,000 8,529,000
Equity in loss of Kohala Joint Venture .......... (708,000) (705,000) (2,105,000) (2,053,000)
Interest income ................................. 1,074,000 976,000 3,023,000 3,017,000
----------- ----------- ----------- -----------
Earnings before provision for income taxes ...... 3,055,000 2,837,000 6,381,000 6,403,000
Provision for income taxes ...................... 910,000 936,000 2,071,000 2,156,000
----------- ----------- ----------- -----------
Net earnings .................................... $ 2,145,000 $ 1,901,000 $ 4,310,000 $ 4,247,000
=========== =========== =========== ===========
Earnings per share, basic ....................... $ 1.23 $ 1.05 $ 2.48 $ 2.32
=========== =========== =========== ===========
Earnings per share, diluted ..................... $ 1.22 $ 1.04 $ 2.45 $ 2.23
=========== =========== =========== ===========
Cash dividends per common share ................. $ -- $ -- $ .50 $ .25
=========== =========== =========== ===========
Weighted average common shares outstanding:
Basic ......................................... 1,744,000 1,819,000 1,741,000 1,832,000
=========== =========== =========== ===========
Diluted ....................................... 1,759,000 1,835,000 1,756,000 1,928,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents .......................... $ 27,607,000 $ 18,425,000
Investment securities available for sale ........... 6,690,000 8,792,000
Receivables ........................................ 253,000 540,000
Advances to Hudson General LLC - net ............... 6,587,000 361,000
Prepaid expenses and other assets .................. 99,000 250,000
------------ ------------
Total current assets ............................. 41,236,000 28,368,000
Property and equipment at cost,
less accumulated depreciation and amortization ..... 2,438,000 2,902,000
Investment in Hudson General LLC ..................... 21,300,000 26,395,000
Investment in Kohala Joint Venture - net ............. 5,207,000 5,893,000
Note receivable from Hudson General LLC .............. 3,130,000 4,630,000
------------ ------------
$ 73,311,000 $ 68,188,000
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable ................................... $ 87,000 $ 161,000
Accrued expenses and other liabilities ............. 2,173,000 2,536,000
Income taxes payable ............................... 1,963,000 --
------------ ------------
Total current liabilities ........................ 4,223,000 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 2,102,260 and 2,092,160 shares .... 2,102,000 2,092,000
Paid in capital .................................... 48,880,000 48,732,000
Retained earnings .................................. 29,161,000 25,722,000
Treasury stock, at cost, 357,311 shares ............ (11,162,000) (11,162,000)
------------ ------------
Total stockholders' equity ....................... 68,981,000 65,384,000
------------ ------------
$ 73,311,000 $ 68,188,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
1998 1997
----- -----
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings ......................................... $ 4,310,000 $ 4,247,000
Adjustments to reconcile net earnings to net
cash used by operating activities:
Depreciation and amortization ...................... 510,000 561,000
Equity in earnings of Hudson General LLC ........... (7,611,000) (8,529,000)
Equity in loss of Kohala Joint Venture ............. 2,105,000 2,053,000
Accrual of interest income on Kohala Joint
Venture advances ................................. (1,419,000) (1,322,000)
Change in other current assets and liabilities:
Receivables ...................................... 287,000 (401,000)
Prepaid expenses and other assets ................ 151,000 193,000
Accounts payable ................................. (74,000) (203,000)
Accrued expenses and other liabilities ........... (363,000) (1,306,000)
Income taxes payable ............................. 1,963,000 1,075,000
Other - net ........................................ -- 19,000
------------ ------------
Net cash used by operating activities ............ (141,000) (3,613,000)
------------ ------------
Cash flows from investing activities:
Purchase of investment securities available for sale.. (5,648,000) --
Proceeds from maturity of investment securities
available for sale ............................... 7,750,000 --
Purchases of property and equipment .................. (68,000) (205,000)
Proceeds from sale of property and equipment ......... 22,000 7,000
Distributions from Hudson General LLC ................ 12,706,000 --
(Advances to) repayments from Hudson General LLC - net (5,226,000) 2,734,000
Collections of note receivable from Hudson General LLC 500,000 21,283,000
Advances to Kohala Joint Venture - net ............... -- (300,000)
------------ ------------
Net cash provided by investing activities ........ 10,036,000 23,519,000
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock ............... 158,000 162,000
Cash dividends paid .................................. (871,000) (481,000)
Purchase of treasury stock ........................... -- (6,068,000)
------------ ------------
Net cash used by financing activities ......... (713,000) (6,387,000)
------------ ------------
Net increase in cash and cash equivalents ............ 9,182,000 13,519,000
Cash and cash equivalents at beginning of period ..... 18,425,000 12,701,000
------------ ------------
Cash and cash equivalents at end of period ........... $ 27,607,000 $ 26,220,000
============ ============
</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
March 31, 1998 and June 30, 1997, and the results of operations for the
three and nine months, and cash flows for the nine months ended March
31, 1998 and 1997. 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
joint 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 (See Note 5
for a discussion of the Corporation's adoption of Statement of
Financial Accounting Standards No. 128, Earnings per Share).
2. The summary consolidated balance sheets for Hudson LLC are as follows:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Cash and cash equivalents ....................... $ 4,896,000 $12,324,000
Accounts and notes receivable - net ............. 18,091,000 15,289,000
Other current assets ............................ 4,237,000 2,711,000
----------- -----------
Total current assets ......................... 27,224,000 30,324,000
Property, equipment and leasehold rights at cost,
less accumulated depreciation and amortization . 46,583,000 44,948,000
Other assets - net .............................. 1,228,000 2,248,000
----------- -----------
$75,035,000 $77,520,000
=========== ===========
Accounts payable ................................ $15,865,000 $18,528,000
Accrued expenses and other liabilities .......... 20,139,000 18,791,000
Advances from Hudson General Corporation - net .. 6,587,000 361,000
----------- -----------
Total current liabilities .................... 42,591,000 37,680,000
Note payable to Hudson General Corporation ...... 3,130,000 4,630,000
Members' equity ................................. 29,314,000 35,210,000
----------- -----------
$75,035,000 $77,520,000
=========== ===========
</TABLE>
6
<PAGE> 7
Summary results of operations for Hudson LLC are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
------------ ------------ ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues ................................. $ 47,767,000 $ 49,486,000 $ 129,567,000 $ 127,245,000
------------ ------------ ------------- -------------
Operating costs .......................... 35,809,000 37,664,000 100,651,000 98,939,000
Depreciation and amortization ............ 2,123,000 1,970,000 6,165,000 5,534,000
Selling, general & administrative costs .. 3,772,000 3,569,000 10,704,000 9,936,000
------------ ------------ ------------- -------------
Total costs and expenses .............. 41,704,000 43,203,000 117,520,000 114,409,000
------------ ------------ ------------- -------------
Operating income ......................... 6,063,000 6,283,000 12,047,000 12,836,000
Interest income .......................... 64,000 82,000 340,000 995,000
Interest expense ......................... (218,000) (196,000) (421,000) (855,000)
------------ ------------ ------------- -------------
Earnings before provision for income taxes 5,909,000 6,169,000 11,966,000 12,976,000
Provision for income taxes ............... 953,000 982,000 1,680,000 1,666,000
------------ ------------ ------------- -------------
Net earnings ............................. $ 4,956,000 $ 5,187,000 $ 10,286,000 $ 11,310,000
============ ============ ============= =============
</TABLE>
The Corporation's 74% share of Hudson LLC's results, as calculated in accordance
with the LLC Agreement, was $3,667,000 and $3,838,000 for the three months ended
March 31, 1998 and 1997, respectively, and $7,611,000 and $8,529,000 for the
nine months ended March 31, 1998 and 1997, 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. An additional distribution of $7,500,000 for fiscal
1997 was made in December 1997. During the nine months ended March 31, 1998, the
Corporation made net
7
<PAGE> 8
advances of $5,226,000 to Hudson LLC, which were utilized to make the
distributions noted above.
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), indebted to the Corporation (the
Corporate Subordinated Debt). At March 31, 1998, 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 March
31, 1998. The current portion of this debt at March 31, 1998, 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>
March 31, June 30,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Cash and equivalents ........................ $ 908,000 $ 730,000
Land and development costs .................. 9,364,000 9,264,000
Mortgages, accounts and notes receivable .... 1,790,000 2,779,000
Foreclosed real estate - net ................ 2,470,000 2,854,000
Other assets - net .......................... 1,538,000 1,590,000
------------ ------------
$ 16,070,000 $ 17,217,000
============ ============
Partner advances and accrued interest payable $ 57,111,000 54,013,000
Accounts payable and accrued expenses ....... 1,127,000 1,162,000
Partners' deficit ........................... (42,168,000) (37,958,000)
------------ ------------
$ 16,070,000 $ 17,217,000
============ ============
</TABLE>
Summary results of operations for the Venture are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
----------- ----------- ----------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales ................................................ $ 243,000 $ 256,000 $ 394,000 $ 631,000
----------- ----------- ----------- ----------
Cost of sales ............................................ 151,000 185,000 151,000 387,000
Selling, general and
administrative costs .................................... 520,000 587,000 1,511,000 1,712,000
Interest - net ........................................... 989,000 895,000 2,942,000 2,638,000
----------- ----------- ----------- ----------
Total costs ........................................... 1,660,000 1,667,000 4,604,000 4,737,000
----------- ----------- ----------- ----------
Net loss .............................................. $(1,417,000) $(1,411,000) $(4,210,000) $4,106,000)
=========== =========== =========== ==========
</TABLE>
The Corporation's 50% share of the Venture's results were losses of $708,000 and
$705,000 for the three months ended March 31, 1998 and 1997, respectively, and
$2,105,000 and $2,053,000 for the nine months ended March 31, 1998 and 1997,
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 nine months ended March 31,
1998, the Corporation did not make any advances to the Venture. The
Corporation's net advances (including accrued interest) at March 31, 1998 were
$20,055,000.
8
<PAGE> 9
4. Accrued expenses and other liabilities consisted of the following:
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
---------- ----------
(Unaudited)
<S> <C> <C>
Salaries and wages.................................. $1,543,000 $1,940,000
Retirement plan costs............................... 282,000 319,000
Other............................................... 348,000 277,000
---------- ----------
$2,173,000 $2,536,000
========== ==========
</TABLE>
5. Effective for the three months ended December 31, 1997, the Corporation
adopted Statement of Financial Accounting Standards No. 128, Earnings
per Share, and has restated all prior-period earnings per share (EPS)
data presented. This statement establishes standards for computing and
presenting EPS, replacing the presentation of previously required
Primary EPS with a presentation of Basic EPS. For entities with complex
capital structures, the statement requires the dual presentation of
both Basic EPS and Diluted EPS on the face of the statement of
earnings. The impact of the Corporation's adoption of this statement
was not material to previously reported EPS amounts.
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 and as a result,
the Corporation's consolidated statements of earnings 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 and nine months ended March 31,
1998 increased $.1 and $.6 million, or 10.1% and 16.2%, respectively, compared
with the corresponding periods 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 and nine months ended March 31, 1998
approximated that of the corresponding periods of the previous year. Selling,
general and administrative expenses for the three and nine months ended March
31, 1998 decreased $.1 and $.3 million or 5.1% and 4.6%, respectively, compared
with the corresponding periods of the prior year.
The Corporation's 74% share of earnings from Hudson LLC for the three
and nine months ended March 31, 1998 decreased $.2 and $.9 million,
respectively, as compared with the corresponding periods of the prior year. The
Corporation's 50% share of losses from its real estate joint venture in Hawaii
(the Venture) for the three and nine months ended March 31, 1998 approximated
that of the corresponding periods of the previous year. As is usual for
companies with land development operations, the contribution to
10
<PAGE> 11
future results from such operations will fluctuate depending upon land sales
closed in each reported period.
Interest income for the three and nine months ended March 31, 1998 was
comparable with that of the corresponding periods of the prior year.
The Corporation's provision for income taxes for the three and nine
months ended March 31, 1998 was comparable with the corresponding periods of the
previous year.
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 Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
------- ------- -------- --------
(in thousands)
<S> <C> <C> <C> <C>
Revenues ............................ $47,767 $49,486 $129,567 $127,245
------- ------- -------- --------
Costs and expenses:
Operating ......................... 35,809 37,664 100,651 98,939
Depreciation and amortization ..... 2,123 1,970 6,165 5,534
Selling, general and administrative 3,772 3,569 10,704 9,936
------- ------- -------- --------
Total costs and expenses ............ 41,704 43,203 117,520 114,409
------- ------- -------- --------
Operating income .................... $ 6,063 $ 6,283 $ 12,047 $ 12,836
======= ======= ======== ========
</TABLE>
Revenues for the three months ended March 31, 1998 decreased $1.7
million, or 3.5%, compared with the corresponding period of the prior year. The
revenue decrease reflects lower: (i) snow removal revenues of $1.9 million; (ii)
ground transportation revenues of $.6 million due mainly to lower rates
associated with renewals of existing contracts at two domestic airport
locations; (iii) Canadian ground handling revenues of $.5 million (net of
expanded services to existing customers) due mainly to: (a) lower sales of
de-icing fluid; (b) the negative impact of the mandated realignment by the local
airport authority of flights between the two international airports in Montreal;
(c) the cessation of operations by two airline customers; and (d) the decision
by several airline customers to provide ground handling services with their own
personnel and equipment or through subsidiaries or affiliated carriers; and (iv)
revenues due to the effect of fluctuation in the average rates of exchange used
in translating Canadian revenues to their U.S. dollar equivalent. The revenue
decrease was partially offset by higher: (i) domestic ground handling service
revenues of $1.2 million due primarily to expanded services to new and
11
<PAGE> 12
existing customers; and (ii) aircraft fueling revenues of $.6 million resulting
primarily from expanded intoplane fueling services.
Revenues for the nine months ended March 31, 1998 increased $2.3
million, or 1.8%, compared with the corresponding period of the prior year. The
revenue increase reflects higher domestic ground handling and aircraft fueling
service revenues of $4.4 and $1.7 million, respectively, as described above. In
addition, revenues for the nine months ended March 31, 1998 include the
recognition of $.6 million of deferred income related to the prepayment (in
October 1997) of a promissory note associated with the sale (in January 1994) of
leases and other assets at Long Island MacArthur Airport. The revenue increase
was partially offset by lower: (i) snow removal revenues of $2.1 million; (ii)
Canadian ground handling revenues of $1.1 million as discussed above; (iii)
ground transportation revenues of $.3 million for the reason noted above; and
(iv) revenues due to the effect of fluctuation in the average rates of exchange
used in translating Canadian revenues to their U.S. dollar equivalent.
Operating costs for the three months ended March 31, 1998 decreased
$1.9 million, or 4.9%, compared with the corresponding period of the previous
year. The decrease in operating costs reflects lower: (i) snow removal costs;
(ii) labor and related costs associated with Canadian ground handling
operations; (iii) fuel costs associated with the Company's fleet of equipment;
(iv) cost of sales of de-icing fluid in Canada, and (v) costs as a result of the
effect of fluctuation in the average rates of exchange used in translating
Canadian costs to their U.S. dollar equivalent. Partially offsetting the
decrease were higher: (i) labor and related costs associated with expanded
domestic ground handling and aircraft fueling operations; and (ii) fleet
maintenance costs related primarily to ground handling, ground transportation
and aircraft fueling operations.
Operating costs for the nine months ended March 31, 1998 increased $1.7
million, or 1.7%, compared with the corresponding period of the previous year.
The increase in operating costs reflects higher: (i) labor and related costs
associated with expanded domestic ground handling and aircraft fueling
operations; and (ii) fleet maintenance costs as described above. Partially
offsetting the increase were lower: (i) snow removal costs; (ii) labor and
related costs associated with Canadian ground handling operations; (iii) fuel
costs associated with the Company's fleet of equipment; (iv) cost of sales of
de-icing fluid in Canada; and (v) costs
12
<PAGE> 13
as a result of the effect of fluctuation in the average rates of exchange used
in translating Canadian costs to their U.S. dollar equivalent.
Depreciation and amortization expenses for the three and nine months
ended March 31, 1998 increased $.2 and $.6 million, or 7.8% and 11.4%,
respectively, compared with the corresponding periods of the previous year due
mainly to additions of ground handling equipment.
Selling, general and administrative expenses for the three and nine
months ended March 31, 1998 increased $.2 and $.8 million, or 5.7% and 7.7%,
respectively, compared with the corresponding periods of the previous year. The
increase primarily reflects higher overhead fees paid to the Corporation as
noted above.
Operating income for the three and nine months ended March 31, 1998
decreased $.2 and $.8 million, respectively, compared with the corresponding
periods of the previous year due primarily to: (i) decreased results associated
with ground transportation and snow removal operations; (ii) lower sales of
de-icing fluid in Canada for the nine months ended March 31, 1998; (iii) higher
selling, general and administrative expenses as described above; and (iv) higher
depreciation and amortization. Partially offsetting the decreases were improved
results from: (i) expanded ground handling and aircraft fueling operations; and
(ii) the recognition of deferred income as noted above.
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.
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
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. In December 1997, Hudson LLC made an additional
distribution with respect to fiscal 1997. The Corporation's 74% share of such
additional distribution was $5.9 million. 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 nine months ended March 31, 1998, 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 March 31, 1998.
During the nine months ended March 31, 1998 and 1997, net cash used by
operating activities was $.1 and $3.6 million, respectively, due mainly to
equity in earnings of Hudson LLC which were not distributed to
14
<PAGE> 15
the Corporation. Net cash provided by investing activities for the nine months
ended March 31, 1998 was $10.0 million, due mainly to the distributions from
Hudson LLC to the Corporation in October and December 1997 as noted above. Net
cash provided by investing activities was $23.5 million for the nine months
ended March 31, 1997 due mainly to Hudson LLC's partial repayment of the
outstanding balance of its subordinated debt to the Corporation. Cash and cash
equivalents were $27.6 and $18.4 million at March 31, 1998 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 nine months ended March 31, 1998.
Hudson LLC's recurring sources of liquidity are funds provided from
operations, advances from the Corporation and bank lines of credit. Pursuant to
a Revolving Credit Agreement (the LLC Credit Agreement) with a group of banks
dated June 1, 1996, Hudson LLC may borrow funds (including outstanding letters
of credit) up to a limit of $18.0 million (the LLC Limit) until September 30,
1998. At such time, and at the end of each subsequent quarter, the LLC Limit
will be reduced by one-sixteenth of the LLC Limit that was in effect on June 30,
1998 until June 30, 2002, at which time the LLC Credit Agreement terminates.
There were no direct borrowings and $3.0 million of outstanding letters of
credit at March 31, 1998. In addition, net advances to Hudson LLC from the
Corporation were $6.6 million as of March 31, 1998. At March 31, 1998 Hudson LLC
had commitments to fund $1.5 million for operating equipment, the majority of
which is expected to be expended during fiscal 1999. In addition to such
commitments, Hudson LLC is obligated to expend funds of $3.6 and $1.4 million in
fiscal 1999 and 2000, respectively, for equipment to be used in providing
de-icing and snow removal services at Lester B. Pearson International Airport in
Toronto pursuant to a contract entered into in December 1997 with the Greater
15
<PAGE> 16
Toronto Airport Authority. Capital expenditures are primarily for equipment and
facilities used in Hudson LLC's operations. Hudson LLC is unable to determine
the extent of additional future capital expenditures since, as a service
company, its capital expenditure requirements fluctuate depending upon facility
requirements and equipment purchases associated with Hudson LLC's ability to
successfully obtain additional contracts.
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 to
the Hawaii Supreme Court, and in May 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. In March and April 1998, the Circuit
Court ruled in favor of the County and the Venture on the remanded issues and
certain other issues. Motions for summary judgment on the remaining counts in
the suit are expected to be considered by the Circuit Court in July 1998. As a
result, the Venture cannot determine the impact of this litigation on the timing
of Phase IV or expenditures related thereto until the remaining issues are
adjudicated.
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 and that any
advances which the Corporation may be required to make to the Venture will be
provided from the Corporation's cash flow
16
<PAGE> 17
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 March 31, 1998, 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.
17
<PAGE> 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In 1988, Texaco Canada Inc. (Texaco) (now known as McColl-Frontenac Inc.)
instituted a lawsuit (the Texaco Lawsuit) in the Supreme Court of Ontario,
Canada against the Corporation, the Corporation's Canadian subsidiary (now owned
by Hudson LLC) and Petro-Canada Inc. (the corporation which supplied aviation
fuel for the Corporation's Canadian fixed base operations). The Texaco Lawsuit's
allegations, as amended, are that the defendants interfered with contractual and
fiduciary relations, conspired to injure, and induced the breach of a fuel
supply agreement between Texaco and Innotech Aviation Limited (Innotech) in
connection with the purchase by the Corporation from Innotech in 1984 of certain
assets of Innotech's airport ground services business. The Texaco Lawsuit seeks
compensatory and punitive damages totaling $110,000,000 (Canadian)
(approximately $80,000,000 (U.S.)) plus all profits earned by the defendants
subsequent to the alleged breach. The trial, which began in May 1996, concluded
after several adjournments on May 7, 1997. The trial judge has informed the
parties that he will issue his decision on May 25, 1998.
Innotech (which due to a name change is now called Aerospace Realties (1986)
Limited (Aerospace)) had agreed to defend and indemnify the Corporation against
claims of whatever nature asserted in connection with, arising out of or
resulting from the fuel supply agreement with Texaco. As reported in the
Corporation's Quarterly Report on Form 10-Q for the quarter ended December 31,
1997, in December 1997, Aerospace filed for bankruptcy in Montreal, Canada.
The Corporation's management believes, and counsel for the Corporation has
advised based on the facts as disclosed at trial, that the Corporation will
successfully defend the Texaco Lawsuit.
18
<PAGE> 19
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.4(d) Amendment effective February 6, 1998, amending the
Form of Severance Agreement between the Registrant
and Michael Rubin, dated as of June 3, 1986, as
amended.
10.4(e) Amended schedule of executive officers entitled to
benefits of Severance Agreements.
10.5(g) Amendment effective February 6, 1998, amending the
Employment Agreement between the Registrant and Jay B.
Langner dated as of July 28, 1988, as amended.
10.5(h) Amendment effective February 6, 1998, amending the
Severance Agreement between the Registrant and Jay B.
Langner dated April 16, 1990, as amended.
10.6(d) Amendment effective February 6, 1998, amending the Form
of Employment Agreement between the Registrant and
Michael Rubin, dated February 8, 1990, as amended.
10.6(e) Amended schedule of executive officers entitled to
benefits of Employment Agreements.
11 Computations of Earnings Per Share Information,
Basic and Diluted.
27 Financial Data Schedule.
b) Reports on Form 8-K - None
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUDSON GENERAL CORPORATION
(Registrant)
Date: May 12, 1998
/s/ MICHAEL RUBIN
-------------------------------------
Michael Rubin
President
/s/ BARRY REGENSTEIN
-------------------------------------
Barry Regenstein
Chief Financial Officer
20
<PAGE> 21
HUDSON GENERAL CORPORATION & SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Page No.
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
10.4(d) Amendment effective February 6, 1998, amending the 22-25
Form of Severance Agreement between the Registrant
and Michael Rubin, dated as of June 3, 1986, as amended.
10.4(e) Amended schedule of executive officers entitled to benefits of 26-27
Severance Agreements.
10.5(g) Amendment effective February 6, 1998, amending the 28-32
Employment Agreement between the Registrant and
Jay B. Langner dated as of July 28, 1988, as amended.
10.5(h) Amendment effective February 6, 1998, amending the 33-36
Severance Agreement between the Registrant and
Jay B. Langner dated April 16, 1990, as amended.
10.6(d) Amendment effective February 6, 1998, amending the 37-40
Form of Employment Agreement between the Registrant
and Michael Rubin, dated February 8, 1990, as amended.
10.6(e) Amended schedule of executive officers entitled to benefits of 41-42
Employment Agreements.
11 Computations of Earnings Per Share, 43-45
Basic and Diluted
27 Financial Data Schedule 46
</TABLE>
21
<PAGE> 1
EXHIBIT 10.4(d)
Amendment effective February 6, 1998,
amending the Form of Severance Agreement
between the Registrant and Michael Rubin,
dated as of June 3, 1986, as amended.
22
<PAGE> 2
AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, Michael Rubin (the "Executive") and Hudson General
Corporation, a Delaware corporation (the "Company"), entered into a Severance
Agreement as of June 3, 1986, as amended as of January 23, 1996 (the
"Agreement"); and
WHEREAS, the Executive and the Company wish to amend the
Agreement in certain respects;
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the Executive and the Company agree
that the Agreement shall be amended, effective as of February 6, 1998, as set
forth herein.
Unless otherwise defined herein, capitalized terms used herein
shall have the meaning ascribed to such terms in the Agreement.
1. Section 2(i) of the Agreement is hereby amended and
restated to read as follows:
(i) No benefits shall be payable hereunder unless there shall
have been a change in control of the Company, as set forth below. For
purposes of this Agreement, a "change in control of the Company" shall
mean a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is in fact required to
comply therewith, provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's
then outstanding securities (such event, a "50% Event"); or (B) during
any period of two consecutive years (not including any period prior to
the original execution of this Agreement), individuals who at the
beginning of such period constitute the Board and any new director
(other than (i) any director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
clauses (A)
23
<PAGE> 3
or (C) of this Subsection and (ii) any director whose initial
assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose election by
the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or (C)
the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 60% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company
of all or substantially all the Company's assets. Notwithstanding the
foregoing, the occurrence of a 50% Event shall not, of itself,
constitute a change in control of the Company for purposes of the
preceding sentence if, within 30 days after the occurrence of such 50%
Event, such "person's" beneficial ownership of securities of the
Company decreases to less than 50% of the combined voting power of the
Company's then outstanding securities; provided, however, if your
employment is terminated by the Company without Cause while the 50%
Event continues in effect during such 30-day period, the foregoing
provisions of this sentence shall be null and void and of no effect,
and the determination of whether a change in control has occurred shall
be made without reference to the foregoing provisions of this sentence.
2. Section 3(iii)(A) of the Agreement is hereby amended and
restated to read as follows:
(A) the assignment to you of any duties inconsistent
with your status as President or a substantial adverse alteration in the nature
or status of your responsibilities from those in effect immediately prior to the
change in control of the Company;
3. Section 3(iii)(B) of the Agreement is hereby amended and
restated to read as follows:
24
<PAGE> 4
(B) a reduction by the Company in your annual cash
compensation to an amount less than the sum of (x) your annual salary
rate in effect immediately prior to the change in control of the
Company, plus either (y) from and after the date on which the
individuals who, immediately prior to the change in control of the
Company, constituted the Board do not constitute a majority of the
Board, an amount equal to the average of your bonuses (including awards
under the Executive Incentive Program and any other annual incentive
program that may be in effect) earned for the three years prior to the
change in control of the Company, or (z) during the period in which the
individuals who, immediately prior to the change in control of the
Company, constituted the Board continue to constitute a majority of the
Board, an amount equal to 50% of the average of your bonuses (including
awards under the Executive Incentive Program and any other annual
incentive program that may be in effect) earned for the three years
prior to the change in control of the Company.
Except as amended hereby, the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed by a duly authorized officer of the Company, and Executive has
executed this Amendment, on this ____ day of _________, 1998, effective as of
February 6, 1998.
HUDSON GENERAL CORPORATION
By:
--------------------------
Name: Jay B. Langner
Title: Chief Executive
Officer
--------------------------
Michael Rubin
25
<PAGE> 1
EXHIBIT 10.4(e)
Amended Schedule of Executive Officers
Entitled to Benefits of Severance Agreements
26
<PAGE> 2
LUMP SUM PAYMENTS
UNDER THE
SEVERANCE AGREEMENTS (1)
<TABLE>
<CAPTION>
Term Upon Change
Name Position in Control (2) Multiplier
---- -------- -------------- ----------
<S> <C> <C> <C>
Fernando DiBenedetto Senior Vice President-Operations 36 2
Paul Pollack Executive Vice President and Chief Operating Officer 48 3
Barry Regenstein Vice President and Chief Financial Officer 36 2
Raymond Rieder Senior Vice President and Chief Marketing Officer 48 3
Noah Rockowitz Vice President, General Counsel & Secretary 36 2
Michael Rubin President 48 3
</TABLE>
(1) The provisions of the individual severance agreements differ only in
the term upon a change in control of the Registrant and the Multiplier
of average compensation used to determine the lump sum payments.
(2) In months.
27
<PAGE> 1
EXHIBIT 10.5(g)
Amendment effective February 6, 1998,
amending the Employment Agreement between
the Registrant and Jay B. Langner dated
as of July 28, 1988, as amended.
28
<PAGE> 2
AMENDMENT TO
EMPLOYMENT AGREEMENT
WHEREAS, Jay B. Langner (the "Executive") and Hudson General
Corporation, a Delaware corporation (the "Company"), entered into an Employment
Agreement as of July 28, 1988, as amended from time to time (the "Agreement");
and
WHEREAS, the Executive and the Company wish to amend the
Agreement in certain respects;
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the Executive and the Company agree
that the Agreement shall be amended, effective as of February 6, 1998, as set
forth herein.
Unless otherwise defined herein, capitalized terms used herein
shall have the meaning ascribed to such terms in the Agreement.
1. The second paragraph of the preamble of the Agreement is
hereby amended in its entirety to read as follows:
The Executive is presently employed as Chairman of
the Board and Chief Executive Officer of the Company.
2. The first sentence of Section 20 of the Agreement is hereby
amended and restated as follows:
During the Extended Term, the Executive shall serve as Chairman of the
Board of Directors and Chief Executive Officer of the Company and shall
have such responsibilities, duties and authority as he may have had as
of the expiration of the Original Term (or by virtue of any position to
which he may be promoted after the commencement of the Extended Term)
and as may from time to time be assigned to the Executive by the Board
that are consistent with such responsibilities, duties and authority.
29
<PAGE> 3
3. Section 27(b) of the Agreement is hereby amended and
restated to read as follows:
(b) For purposes of this Section 27, a "Change in Control" of
the Company shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), whether or not the Company is in fact
required to comply therewith, provided that, without limitation, such a
change in control shall be deemed to have occurred if (A) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's
then outstanding securities (such event, a "50% Event"); or (B) during
any period of two consecutive years (not including any period prior to
the original execution of this Agreement), individuals who at the
beginning of such period constitute the Board and any new director
(other than (i) any director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
clauses (A) or (C) of this Subsection and (ii) any director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company)
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or
30
<PAGE> 4
whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or (C) the
stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 60% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company
of all or substantially all the Company's assets. Notwithstanding the
foregoing, the occurrence of a 50% Event shall not, of itself,
constitute a change in control of the Company for purposes of the
preceding sentence if, within 30 days after the occurrence of such 50%
Event, such "person's" beneficial ownership of securities of the
Company decreases to less than 50% of the combined voting power of the
Company's then outstanding securities; provided, however, if the
Executive's employment is terminated by the Company without Cause while
the 50% Event continues in effect during such 30-day period, the
foregoing provisions of this sentence shall be null and void and of no
effect, and the determination of whether a change in control has
occurred shall be made without reference to the foregoing provisions of
this sentence.
4. Section 29 of the Agreement is hereby amended and restated
to read as follows:
31
<PAGE> 5
29. Severance Agreement. The Company and the
Executive are parties to an agreement dated April 16, 1990, as amended
from time to time, relating to the Executive's employment in the event
of a "change in control" of the Company (the "Severance Agreement").
Upon the occurrence of a "change in control" (as defined in the
Severance Agreement) that occurs during the Employment Term, this
Agreement shall immediately terminate and be of no further force or
effect, and all rights and obligations of the Company and the Executive
with respect to the Executive's employment by the Company shall be
governed by the terms of the Severance Agreement. During the Employment
Term, the Company shall not terminate or permit to expire the Severance
Agreement. Notwithstanding any other provision hereof, nothing in this
Section 29 shall adversely affect the rights of the Executive hereunder
if the Employment Term has ended prior to such "change in control".
Except as amended hereby, the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed by a duly authorized officer of the Company, and Executive has
executed this Amendment, on this ____ day of ________, 1998, effective as of
February 6, 1998.
HUDSON GENERAL CORPORATION
By:
---------------------------------
Name: Michael Rubin
Title: President
---------------------------------
Jay B. Langner
32
<PAGE> 1
EXHIBIT 10.5(h)
Amendment effective February 6, 1998,
amending the Severance Agreement between
the Registrant and Jay B. Langner dated
April 16, 1990, as amended.
33
<PAGE> 2
AMENDMENT TO
SEVERANCE AGREEMENT
WHEREAS, Jay B. Langner (the "Executive") and Hudson General
Corporation, a Delaware corporation (the "Company"), entered into a Severance
Agreement as of April 16, 1990, as amended as of January 23, 1996 (the
"Agreement"); and
WHEREAS, the Executive and the Company wish to amend the
Agreement in certain respects;
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the Executive and the Company agree
that the Agreement shall be amended, effective as of February 6, 1998, as set
forth herein.
Unless otherwise defined herein, capitalized terms used herein
shall have the meaning ascribed to such terms in the Agreement.
1. Section 2(i) of the Agreement is hereby amended and
restated to read as follows:
(i) No benefits shall be payable hereunder unless there shall
have been a change in control of the Company, as set forth below. For
purposes of this Agreement, a "change in control of the Company" shall
mean a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is in fact required to
comply therewith, provided that, without limitation, such a change in
control shall be deemed to have occurred if (A) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's
then outstanding securities (such event, a "50% Event"); or (B) during
any period of two consecutive years (not including any period prior to
the original execution of this Agreement), individuals who at the
beginning of such period constitute the Board and any new director
(other than (i) any director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
clauses (A) or (C) of this Subsection and (ii) any director whose
initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company)
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election
was previously so approved, cease for any reason to constitute a
majority thereof; or (C) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to
34
<PAGE> 3
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 60% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
Notwithstanding the foregoing, the occurrence of a 50% Event shall not,
of itself, constitute a change in control of the Company for purposes
of the preceding sentence if, within 30 days after the occurrence of
such 50% Event, such "person's" beneficial ownership of securities of
the Company decreases to less than 50% of the combined voting power of
the Company's then outstanding securities; provided, however, if your
employment is terminated by the Company without Cause while the 50%
Event continues in effect during such 30-day period, the foregoing
provisions of this sentence shall be null and void and of no effect,
and the determination of whether a change in control has occurred shall
be made without reference to the foregoing provisions of this sentence.
2. Section 3(iii)(A) of the Agreement is hereby amended and
restated to read as follows:
(A) the assignment to you of any duties inconsistent
with your status as Chairman of the Board of Directors and Chief
Executive Officer of the Company or a substantial adverse alteration in
the nature or status of your responsibilities from those in effect
immediately prior to the change in control of the Company;
3. Section 3(iii)(B) of the Agreement is hereby amended and
restated to read as follows:
(B) a reduction by the Company in your annual cash
compensation to an amount less than the sum of (x) your annual salary
rate in effect immediately prior to the change in control of the
Company, plus either (y) from and after the date on which the
individuals who, immediately prior to the change in control of the
Company, constituted the Board do not constitute a majority of the
Board, an amount equal to the average of your bonuses (including awards
under the Executive Incentive Program and any other annual incentive
program that may be in effect) earned for the three years prior to the
change in control of the Company, or (z) during the period in which the
individuals who, immediately prior to the change in control of the
Company, constituted the Board continue to constitute a majority of the
Board, an amount equal to 50% of the average of your bonuses (including
awards under the Executive Incentive Program and any other annual
incentive program that may be in effect) earned for the three years
prior to the change in control of the Company.
Except as amended hereby, the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed by a duly authorized officer of the Company, and Executive has
executed this Amendment, on this ____ day of __________, 1998, effective as of
as of February 6, 1998.
35
<PAGE> 4
HUDSON GENERAL CORPORATION
By:
--------------------------------
Name: Michael Rubin
Title: President
--------------------------------
Jay B. Langner
36
<PAGE> 1
EXHIBIT 10.6(d)
Amendment effective February 6, 1998,
amending the Form of Employment Agreement
between the Registrant and Michael Rubin,
dated February 8, 1990, as amended.
37
<PAGE> 2
AMENDMENT TO
EMPLOYMENT AGREEMENT
WHEREAS, Michael Rubin (the "Executive") and Hudson General
Corporation, a Delaware corporation (the "Company"), entered into an Employment
Agreement as of February 8, 1990, as amended as of January 23, 1996 (the
"Agreement"); and
WHEREAS, the Executive and the Company wish to amend the
Agreement in certain respects;
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the Executive and the Company agree
that the Agreement shall be amended, effective as of February 6, 1998, as set
forth herein.
Unless otherwise defined herein, capitalized terms used herein
shall have the meaning ascribed to such terms in the Agreement.
1. The second paragraph of the preamble of the Agreement is
hereby amended in its entirety to read as follows:
The Executive is presently employed as President of
the Company.
2. Section 10(b) of the Agreement is hereby amended and
restated to read as follows:
(b) For purposes of this Section 10, a "Change in Control" of
the Company shall mean a change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), whether or not the Company is in fact
required to comply therewith, provided that, without limitation, such a
change in control shall be deemed to have occurred if (A) any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's
then outstanding securities (such event, a "50% Event"); or (B) during
any period of two consecutive years (not including any period prior to
the original execution of this Agreement), individuals who at the
beginning of such period constitute the Board and any new director
(other than (i) any director designated by a person who has entered
into an agreement
38
<PAGE> 3
with the Company to effect a transaction described in clauses (A) or
(C) of this Subsection and (ii) any director whose initial assumption
of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating
to the election of directors of the Company) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or (C)
the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 60% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company
of all or substantially all the Company's assets. Notwithstanding the
foregoing, the occurrence of a 50% Event shall not, of itself,
constitute a change in control of the Company for purposes of the
preceding sentence if, within 30 days after the occurrence of such 50%
Event, such "person's" beneficial ownership of securities of the
Company decreases to less than 50% of the combined voting power of the
Company's then outstanding securities; provided, however, if the
Executive's employment is terminated by the Company without Cause while
the 50% Event continues in effect during such 30-day period, the
foregoing provisions of this sentence shall be null and void and of no
effect, and the determination of whether a change in control has
occurred shall be made without reference to the foregoing provisions of
this sentence.
3. Section 12 of the Agreement is hereby amended and restated
to read as follows:
12. Severance Agreement. The Company and the
Executive are parties to an agreement dated June 3, 1986, as amended
from time to time, relating to the Executive's employment in the event
of a "change in control" of the Company (the "Severance Agreement").
Upon the occurrence of a "change in control" (as defined in the
Severance Agreement) that occurs during the Employment Term, this
Agreement shall immediately terminate and be of no further force or
effect, and all rights and obligations of the Company and the Executive
with respect to the Executive's employment by the Company shall be
governed by the terms of the Severance Agreement. During the Employment
Term, the Company shall not terminate or permit to expire the Severance
Agreement. Notwithstanding any other provision hereof, nothing in this
Section 12 shall adversely affect the rights of the Executive hereunder
if the Employment Term has ended prior to such "change in control".
Except as amended hereby, the Agreement shall remain in full
force and effect.
39
<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed by a duly authorized officer of the Company, and Executive has
executed this Amendment, on this ____ day of ________, 1998, effective as of
February 6, 1998.
HUDSON GENERAL CORPORATION
By:
---------------------------------
Name: Jay B. Langner
Title: Chief Executive
Officer
---------------------------------
Michael Rubin
40
<PAGE> 1
EXHIBIT 10.6(e)
Amended Schedule of Executive Officers
Entitled to Benefits of Employment Agreements
41
<PAGE> 2
SEVERANCE PAYMENTS
UNDER THE
EMPLOYMENT AGREEMENTS (1)
<TABLE>
<CAPTION>
Severance Payments
Minimum Total Not Subject to
Name Position Term(2) Severance Payments Mitigation
---- -------- ------- ------------------ ------------------
<S> <C> <C> <C> <C>
Fernando DiBenedetto Senior Vice President-Operations 24 18 9
Paul Pollack Executive Vice President and Chief Operating Officer 36 24 12
Barry Regenstein Vice President and Chief Financial Officer 24 15 7.5
Raymond Rieder Senior Vice President and Chief Marketing Officer 36 24 12
Noah Rockowitz Vice President, General Counsel & Secretary 24 18 9
Michael Rubin President 36 24 12
</TABLE>
(1) The provisions of the individual employment agreements differ only in
the term and the amount of potential severance payments.
(2) In Months.
42
<PAGE> 1
EXHIBIT 11
Computations of Earnings Per Share,
Basic and Diluted
43
<PAGE> 2
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE, BASIC
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
--------- --------- -------- ---------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net earnings ....................................... $ 2,145 $ 1,901 $ 4,310 $ 4,247
========= ========= ========= =========
Weighted average number of common shares
outstanding ....................................... 1,744 1,819 1,741 1,832
========= ========= ========= =========
Earnings per share, basic .......................... $ 1.23 $ 1.05 $ 2.48 $ 2.32
========= ========= ========= =========
</TABLE>
44
<PAGE> 3
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE, DILUTED
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1998 1997 1998 1997
---- ---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net earnings ............................................... $2,145 $1,901 $4,310 $4,247
Plus: Interest on 7% convertible subordinated debentures due
2011 less applicable income taxes .......................... -- -- -- 50
------ ------ ------ ------
Net earnings for computing earnings
per share, diluted ......................................... $2,145 $1,901 $4,310 $4,297
====== ====== ====== ======
Weighted average number of common shares
outstanding ................................................ 1,744 1,819 1,741 1,832
Plus: Incremental shares from assumed:
Exercise of stock options ........................... 15 16 15 18
Conversion of 7% convertible
subordinated debentures ............................. -- -- -- 78
------ ------ ------ ------
Weighted average number of common and potential common
shares outstanding ......................................... 1,759 1,835 1,756 1,928
====== ====== ====== ======
Earnings per share, diluted ................................ $ 1.22 $ 1.04 $ 2.45 $ 2.23
====== ====== ====== ======
</TABLE>
45
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 27,607
<SECURITIES> 6,690
<RECEIVABLES> 253
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41,236
<PP&E> 2,438
<DEPRECIATION> 0
<TOTAL-ASSETS> 73,311
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 2,102
<OTHER-SE> 66,879
<TOTAL-LIABILITY-AND-EQUITY> 68,981
<SALES> 4,335
<TOTAL-REVENUES> 4,335
<CGS> 0
<TOTAL-COSTS> 6,483
<OTHER-EXPENSES> 5,973
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,381
<INCOME-TAX> 2,071
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,310
<EPS-PRIMARY> 2.48<F1>
<EPS-DILUTED> 2.45
<FN>
<F1>AMOUNT REPORTED IS EPS BASIC.
</FN>
</TABLE>
