<PAGE> 1
U.S. Securities and Exchange Commission, Washington, D.C. 20549
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1995
----------------
/ / 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 2-87778A
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THE FLIGHT INTERNATIONAL GROUP, INC.
------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-1476225
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
of incorporation or organization) Identification No.)
Newport News/Williamsburg International Airport, Newport News, VA 23602
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(804) 886-5500
-------------------------
Issuer's telephone number
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 No X .
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes X No .
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's class of
common equity, as of the latest practicable date: As of December 12, 1995, there
were 998,974 shares of the issuer's New Common Stock, par value $.01 per share,
issued and outstanding.
Transitional Small Business Disclosure Format [check one]: Yes No X
----- -----
<PAGE> 2
PART 1
FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
The Flight International Group, Inc. (the "Company") files herewith
condensed consolidated balance sheets of the Company and its subsidiaries as of
October 31, 1995 (unaudited) and April 30, 1995 (the Company's most recent
fiscal year), unaudited condensed consolidated statements of operations for the
three months ended October 31, 1995 and 1994, and unaudited condensed
consolidated statements of cash flows for the three months ended October 31,
1995 and 1994, together with unaudited condensed notes thereto. In the opinion
of management of the Company, the financial statements reflect all adjustments,
all of which are normal recurring adjustments, necessary to fairly present the
financial condition of the Company for the interim period presented. Operating
results for any quarter are not necessarily indicative of results for any future
period. The financial statements included in this report on Form 10-QSB should
be read in conjunction with the audited financial statements of the Company and
the notes thereto included in the annual report of the Company on Form 10-KSB
for the year ended April 30, 1995.
2
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THE FLIGHT INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
October 31, 1995 April 30 ,1995
(Unaudited)
---------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 568,101 $ 601,744
Accounts Receivable, net 2,386,465 1,809,891
Inventories 1,332,504 1,376,818
Prepaid expenses, deposits and other 847,184 564,186
---------------- --------------
Total current assets 5,134,254 4,352,639
PROPERTY AND EQUIPMENT, NET 7,471,075 7,821,152
OTHER ASSETS 66,453 29,208
---------------- --------------
$ 12,671,782 $ 12,202,999
================ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE> 4
THE FLIGHT INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
October 31, 1995 April 30 ,1995
(Unaudited)
---------------- --------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 170,243 $ 69,414
Deferred revenue 550,113 277,478
Accrued expenses and other liabilities 1,950,002 1,902,435
Long-term debt due currently 976,347 871,357
---------------- --------------
Total current liabilities 3,646,705 3,120,684
OTHER NON-CURRENT LIABILITIES 1,604,496 1,361,680
LONG-TERM DEBT, LESS CURRENT MATURITIES 6,236,016 6,843,080
---------------- --------------
Total liabilities 11,487,217 11,325,444
---------------- --------------
STOCKHOLDERS' EQUITY
Common stock 9,990 9,990
Additional paid in capital 988,986 988,986
Treasury stock (1,769) (1,769)
Retained Earnings (accumulated deficit) 187,358 (119,652)
---------------- --------------
Total stockholders' equity 1,184,565 877,555
---------------- --------------
$ 12,671,782 $ 12,202,999
================ ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE> 5
THE FLIGHT INTERNATIONAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994
-------------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
REVENUES $ 3,758,098 $ 2,955,386 $ 7,044,735 $ 6,027,847
OPERATING COSTS AND EXPENSES
Costs of services 2,673,369 2,063,376 5,024,235 4,236,238
Depreciation and amortization 220,412 199,784 425,872 403,274
General, corporate and administrative 476,948 433,970 972,269 1,206,435
-------------------------------------- -------------------------------------
Total operating costs and expenses 3,370,729 2,697,130 6,422,376 5,845,947
INCOME (LOSS) BEFORE OTHER (INCOME) 387,369 258,256 622,359 181,900
EXPENSES
OTHER (INCOME) EXPENSES
Interest expense 151,841 48,823 313,459 95,098
Income tax 800 0 1,890 0
-------------------------------------- -------------------------------------
Total other expenses 152,641 48,823 315,349 95,098
NET INCOME (LOSS) $ 234,728 $ 209,433 $ 307,010 $ 86,802
====================================== =====================================
NET INCOME (LOSS) PER COMMON SHARE $ 0.24 $ 0.02 $ 0.31 $ 0.01
====================================== =====================================
WEIGHTED AVERAGE NUMBER OF SHARES 998,976 9,899,713 998,976 9,899,713
====================================== =====================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE> 6
THE FLIGHT INTERNATIONAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
October 31, 1995 October 31, 1994
-------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 307,010 $ 86,802
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities
Depreciation and amortization 425,872 403,274
Engine reserve 123,247 165,345
Changes in operating assets and liabilities
Accounts receivable (576,574) (250,077)
Inventories 44,314 (130,231)
Prepaid expenses (282,998) 47,158
Accounts payable 100,829 113,235
Accrued expenses and other liabilities (75,680) (813,921)
Deferred revenue 515,451 6,206
-------------------------------------
Net cash provided by (used in) operating activities 581,471 (372,209)
INVESTING ACTIVITIES
Sale (Purchase) of property and equipment (75,795) 375,618
Net (increase) decrease in other assets (37,245) 728,994
-------------------------------------
Net cash provided by (used in) investing activities (113,040) 1,104,612
FINANCING ACTIVITIES
Repayment of long-term debt (502,074) (439,735)
-------------------------------------
Net cash provided by (used in) financing activities (502,074) (439,735)
NET (DECREASE) INCREASE IN CASH AND (33,643) 292,668
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 601,744 147,071
CASH AND CASH EQUIVALENTS, END OF QUARTER $ 568,101 $ 439,739
=====================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 314,138 $ 90,000
Income taxes paid $ 1,890 $ 0
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE> 7
THE FLIGHT INTERNATIONAL GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Flight International Group, Inc. (the "Company") is an aviation
services company that performs military training services using
specially modified commercial aircraft, principally under contracts
with the United States Department of Defense, other government
agencies and foreign countries. In addition, the Company has
established a market for training and testing in the aerospace
industry. The Company also operates a fixed base operation ("FBO") at
the Newport News/Williamsburg International Airport.
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant
intercompany transactions and balances have been eliminated.
Net income/loss per common share is computed by dividing the
income/loss by the weighted average number of shares of common stock
outstanding during the year.
2. REORGANIZATION AND EMERGENCE FROM CHAPTER 11
On February 4, 1994, the Company and three of its affiliates, Flight
International, Inc. ("FII"), Flight International of Florida, Inc.
("FIF"), and Flight International Aviation, Inc. ("FIA") filed
voluntary petitions in the United States Bankruptcy Court in the
Eastern District of Virginia (the "Bankruptcy Court") for
reorganization under Chapter 11 of the United States Bankruptcy Code.
On December 8, 1994, the Bankruptcy Court entered an order confirming
the Company's joint plan of reorganization (the "Plan"), and the Plan
became effective on December 28, 1994 (the "Effective Date"). For
accounting purposes, the effective date is deemed to be December 31,
1994.
Pursuant to the plan, a total of 1,000,000 shares of new common stock
were authorized and 998,976 shares were issued. The 9,899,713 shares
of common stock previously outstanding were cancelled. The shares of
new common stock were distributed as follows:
(i) 510,000 shares were issued to holders of allowed general unsecured
claims;
(ii) 290,000 shares were issued to Flight's management group, as
identified in the Disclosure Statement, in exchange for an equity
investment of $290,000 in the
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reorganized company;
(iii) 100,000 shares were issued to the Flight management, as
identified in the Disclosure Statement; and
(iv) 98,976 were issued to shareholders of record on December 20,
1994. Of the 510,000 shares to be issued to holders of allowed general
unsecured claims, approximately 63,000 shares are being held by the
Company to satisfy the remaining disputed claims of unsecured
creditors. Once these claims are settled the 63,000 shares will be
redistributed based on the final valuation of all general unsecured
claims.
3. FRESH START ACCOUNTING
The Company has accounted for the reorganization by using the
principles of fresh start accounting, as required by SOP 90- 7. The
Company was required to adopt fresh start reporting because holders of
the existing voting shares immediately prior to filing and
confirmation of the Plan received less than 50% of the voting shares
of the emerging entity, and its reorganization value was less than the
total of its post-petition liabilities and allowed claims. Under the
principles of fresh start accounting, the Company's total assets were
recorded at their assumed reorganization value, with the
reorganization value allocated to identifiable tangible assets on the
basis of their estimated fair value.
The Company's net reorganization value was determined to be
approximately $1,000,000. The net reorganization value was based
principally on cash infusions received for the issuance of new common
stock and was approved by the Bankruptcy Court.
As a result of the implementation of fresh start accounting, the
financial statements of the Company after consummation of the plan are
not comparable to the Company's financial statements of prior periods.
4. INCOME TAXES
No provision for federal income taxes has been made by the Company, as
it has substantial Net Operating Loss carry forwards available to
offset against current income.
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BACKGROUND AND GENERAL INFORMATION
On February 4, 1994 (the "Petition Date"), the Company and certain of
its subsidiaries (the "Chapter 11 Entities") filed a petition for relief under
Chapter 11 of the Federal Bankruptcy Code (the "Code") in the United States
Bankruptcy Court for the Eastern District of Virginia, Newport News Division
(the "Bankruptcy Court").
On December 28, 1994, a Joint Plan of Reorganization dated August 31,
1994, as amended, confirmed and decreed by order of the Bankruptcy Court (the
"Plan"), became effective pursuant to an order of the Bankruptcy Court. The
Plan restructured and satisfied the claims of the creditors of the Chapter 11
Entities and the interests of shareholders of the Company.
The Company accounted for the reorganization effected by the Plan
through the principles of "fresh start" accounting, as required by Statement of
Position ("SOP") 90-7, "Financial Reporting by Entities in Reorganization Under
the Bankruptcy Code", issued by the American Institute of Certified Public
Accountants. As a result, the financial statements of the Company for the post
bankruptcy period are not comparable in all respects to the Company's financial
statements of prior periods.
RESULTS OF OPERATIONS
Revenues
Total revenues for the three months ended October 31, 1995 and 1994
were $3,758,098 and $2,955,386, respectively. For the six months ended October
31, 1995 and 1994, total revenues were $7,044,735 and $6,027,847, respectively.
The 17% increase in revenue for the six months ended October 31, 1995
over the comparable prior year period is a result of (i) a 27% increase in
contract revenues due to the contract with the U.S. Navy/Naval Weapons Center in
China Lake, California (the "China Lake contract") to provide Metro III aircraft
necessary to accomplish naval transportation, which was awarded in October,
1994, and increased revenue from the Continental United States Commercial
Services Contract (the "CAS Conus contract") and the United States Naval Weapons
Center, Patuxent River, Maryland Contract (the "Patuxent River contract"), (ii)
a 15% increase in fixed base operations and (iii) a 9% increase in repair
facility revenues, partially offset by (iv) a 100% decrease in flight school
revenues caused by the lease and subsequent sale of the Company's flight school
operations to an unaffiliated party.
6
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Cost of Services
Cost of services for the three months ended October 31, 1995 and 1994
were $2,673,369 and $2,063,376, respectively. For the six months ended October
31, 1995 and 1994, the cost of services was $5,024,236 and $4,236,238,
respectively. The 19% increase in cost of services for the six months ended
October 31, 1995 over the comparable prior year period is a result of increased
operating costs due to new business (primarily the CAS Conus, China Lake and
Patuxent River contracts), partially offset by a reduction in cost of services
caused by the lease and subsequent sale of the flight school operations.
Depreciation and Amortization
Depreciation and amortization for the three months ended October 31,
1995 and 1994 were $220,412 and $199,784, respectively. For the six months ended
October 31, 1995 and 1994, depreciation and amortization were $425,872 and
$403,274, respectively. The 6% increase in cost of services for the six months
ended October 31, 1995 over the comparable prior year period is a result of a
relatively stable level of aircraft and facilities and an increased utilization
rate.
General Corporate and Administrative
General corporate and administrative expenses for the three months
ended October 31, 1995 and 1994 were $476,948 and $433,970, respectively. For
the six months ended October 31, 1995 and 1994, general corporate and
administrative expenses were $979,269 and $1,206,435, respectively. The 19%
decline in general corporate and administrative expenses for the six months
ended October 31, 1995 over the comparable prior year period is primarily the
result of reduced legal and other bankruptcy related costs, which were
substantial in the prior year, partially offset by increased marketing costs due
to the Company's allocation of increased personnel and greater resources towards
the pursuit of new business initiatives.
Interest
Interest expense for the three months ended October 31, 1995 and 1994
was $151,841 and $48,823, respectively. For the six months ended October 31,
1995 and 1994, interest expense was $313,459 and $95,098, respectively. The 231%
increase in interest expense for the six month period ended October 31, 1995
over the comparable prior year period is due to the fact that most of the
Company's debt in the prior year did not accrue interest because of the
bankruptcy proceedings.
Net Income (Loss)
As a result of the foregoing, the Company's net income for the three
months ended October 31, 1995 was $234,728, or $.24 per share of the Company's
common stock, compared net income of $209,433, or $.02 per share for the three
months ended October 31, 1994. For the
7
<PAGE> 11
six months ended October 1995, the Company's net income was $307,010, or $.31
per share, compared to $86,802, or $.01 per share for the six months ended
October 31, 1994. The weighted average number of shares used in computing per
share earnings decreased from 9.9 million shares for the three and six months
periods ended October 31, 1994 to 1.0 million shares for the three and six
months periods ended October 31, 1995 as a result of the confirmation of the
Plan.
Liquidity and Capital Resources
The Company has funded its operations primarily through cash flows from
operations and bank indebtedness. The Company's operating activities provided
cash of approximately $581,471 for the six months ended October 31, 1995 while
using $372,209 in the comparable prior year period. For the six months ended
October 31, 1995, cash from operations was primarily provided by net income and
increases in deferred revenue, offset by increases in accounts receivable and
prepaid expenses.
The Company operates in a capital intensive industry. Typically major
expenses are incurred in connection with the initiation of a new contract. These
costs can be reduced through leasing arrangements and advance payments from
customers, if these are obtainable. The Company believes that it will be able to
arrange through available means the financing of these initial contract costs
when necessary, although no assurance can be given.
The Plan included a favorable restructuring of all of the Company's
indebtedness, and the Company's aircraft and parts inventory currently is
financed over periods averaging six years with interest rates fixed at 7-8%. The
mortgage on the leasehold improvements at the fixed base operations, including
the headquarters building and adjoining hangars, will need to be refinanced or
paid in February 1997, and there can be no assurance that the Company will be
able to complete such refinancing or payment. The facilities are in excess of
current Company needs and management has attempted, without success, to sell or
sublease a portion of its office or hangar space. Management intends to
continues to seek the sale or sublease of this space unless business conditions
shall justify otherwise.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Dated: December 13, 1995 THE FLIGHT INTERNATIONAL GROUP, INC.
By: /s/ David E. Sandlin
---------------------------------
David E. Sandlin
Principal Executive Officer
By: /s/ Wayne M. Richmon
---------------------------------
Wayne M. Richmon
Principal Financial Officer
9
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- ------- ----------- ----
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Flight
International Group, Inc.'s unaudited condensed consolidated financial
statements for the quarterly period ended October 31, 1995 and is qualified in
its entirety by reference to such unaudited condensed consolidated financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 568,101
<SECURITIES> 0
<RECEIVABLES> 2,386,465
<ALLOWANCES> 0
<INVENTORY> 1,332,504
<CURRENT-ASSETS> 5,134,254
<PP&E> 7,471,075
<DEPRECIATION> 220,412
<TOTAL-ASSETS> 12,671,782
<CURRENT-LIABILITIES> 3,646,705
<BONDS> 6,236,016
<COMMON> 9,990
0
0
<OTHER-SE> 1,174,575
<TOTAL-LIABILITY-AND-EQUITY> 12,671,782
<SALES> 0
<TOTAL-REVENUES> 7,044,735
<CGS> 0
<TOTAL-COSTS> 5,024,235
<OTHER-EXPENSES> 1,398,141
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 313,459
<INCOME-PRETAX> 308,900
<INCOME-TAX> 1,890
<INCOME-CONTINUING> 307,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 307,010
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
