<PAGE>
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 JULY 31, 1998
[ ] 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
THE FLIGHT INTERNATIONAL GROUP, INC.
------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-1476225
-------------------- -----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Newport News/Williamsburg International Airport, Newport News, VA 23602
-----------------------------------------------------------------------
(Address of principal executive offices)
(757) 886-5500
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Issuer's telephone number
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(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 X No
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 No X
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 September 10, 1998,
there were 1,013,976 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
1
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THE FLIGHT INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
July 31, 1998 April 30, 1998
(Unaudited)
----------------------- -----------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 83,938 $ 104,008
Accounts Receivable, net 2,750,869 3,989,073
Inventories 2,306,941 2,087,700
Prepaid expenses and other 723,039 510,785
Deposits 983,774 983,774
----------------------- -----------------------
Total current assets 6,848,561 7,675,340
PROPERTY AND EQUIPMENT, NET 4,372,717 4,096,017
OTHER ASSETS 39,164 22,262
----------------------- -----------------------
$ 11,260,442 $ 11,793,619
======================= =======================
</TABLE>
2
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
THE FLIGHT INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
July 31, 1998 April 30, 1998
(Unaudited)
------------------------ -----------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 359,887 $ 450,403
Deferred revenue 1,394,505 950,802
Accrued expenses and other liabilities 2,505,763 2,362,442
Note payable 0 451,097
Long-term debt due currently 667,559 652,238
Income tax payable 8,588 20,000
------------------------ -----------------------
Total current liabilities 4,936,302 4,886,982
DEFERRED REVENUE 232,417 727,586
ACCRUED ENGINE RESERVES 762,878 744,647
LONG-TERM DEBT, LESS CURRENT MATURITIES 2,874,802 3,030,231
------------------------ -----------------------
Total liabilities 8,806,399 9,389,446
------------------------ -----------------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 10,000,000 shares
authorized, 1,013,976 issued and outstanding 10,140 10,140
Additional paid in capital 1,007,617 1,007,617
Treasury stock
Retained Earnings 1,436,286 1,386,416
------------------------ -----------------------
Total stockholders' equity 2,454,043 2,404,173
$ 11,260,442 $ 11,793,619
======================== =======================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
THE FLIGHT INTERNATIONAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended
July 31, 1998 July 31, 1997
----------------------------------------------------
<S> <C> <C>
REVENUES $ 6,182,499 $ 6,178,852
OPERATING COSTS AND EXPENSES
Costs of services 5,305,389 4,911,601
Gain on disposal of assets (18,167) (18,167)
Depreciation and amortization 141,827 139,881
General, corporate and administrative 622,349 534,408
----------------------------------------------------
Total operating costs and expenses 6,051,398 5,567,723
INCOME (LOSS) BEFORE OTHER 131,101 611,129
EXPENSES
OTHER EXPENSES
Interest expense 81,231 95,107
----------------------------------------------------
Total other expenses 81,231 95,107
INCOME BEFORE TAXES 49,870 516,022
Income tax expense 0 11,777
----------------------------------------------------
NET INCOME (LOSS) $ 49,870 $ 504,245
====================================================
NET INCOME (LOSS) PER COMMON $ 0.05 $ 0.50
====================================================
SHARE - BASIC
WEIGHTED AVERAGE NUMBER OF SHARES 1,013,976 1,013,976
====================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
THE FLIGHT INTERNATIONAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended
July 31, 1998 July 31, 1997
---------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 49,870 $ 504,245
Adjustments to reconcile net income
to net cash provided (absorbed) by operating
activities
Depreciation and amortization 141,827 139,881
Engine reserve 18,231 53,721
Gain on sale of assets (18,167)
Net cash provided (absorbed) by
Accounts receivable 1,238,204 (616,991)
Inventories (219,241) (114,101)
Prepaid expenses and other assets (212,254) (328,990)
Accounts payable (90,516) 224,220
Accrued expenses and other liabilities 161,488 119,569
Deferred revenue (51,466) (37,947)
Income taxes payable (11,412) 0
---------------------------------------------------
Net cash provided by operating activities 1,006,564 (56,393)
INVESTING ACTIVITIES
Purchase of property and equipment (418,527) (140,648)
Net (increase) decrease in other assets (16,902) 0
---------------------------------------------------
Net cash absorbed by investing activities (435,429) (140,648)
FINANCING ACTIVITIES
Proceeds from credit line, net (451,097) 240,886
Repayment of long-term debt (140,108) (162,804)
---------------------------------------------------
Net cash absorbed by financing activities (591,205) 78,082
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (20,070) (118,959)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 104,008 231,111
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 83,938 $ 112,152
===================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE>
PART 1
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Flight International Group, Inc. (the "Company") files herewith
unaudited condensed consolidated balance sheets of the Company and its
subsidiaries as of July 31, 1998 (unaudited) and April 30, 1998 (the Company's
most recent fiscal year), unaudited condensed consolidated statements of
operations for the three months ended July 31, 1998 and 1997, and unaudited
condensed consolidated statements of cash flows for the three months ended July
31, 1998 and 1997, 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.
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, 1998.
6
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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") and
licensed repair station 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. NOTES PAYABLE
During the year ended April 30, 1998, the Company entered into a
$2,000,000 asset based borrowing agreement with a bank in Newport News,
Virginia. Under the terms of the Agreement, the Company may obtain advances up
to 85% of amounts billed by the Company on government contracts. The Company
must pay interest at prime plus .50% on outstanding advances. Under the
Agreement, the Company must maintain certain net worth ratios. The Company was
in compliance with these ratios at July 31, 1998. No advances were outstanding
as of July 31, 1998.
3. 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.
7
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ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BACKGROUND AND GENERAL INFORMATION
The Flight International Group, Inc. (the "Company") was incorporated
in Georgia on May 7, 1982. The Company is an aviation services company that
performs military training services using specially modified commercial
aircraft, principally under contract with the Untied States Department of
Defense, other government agencies and foreign countries, operating through its
direct and indirect subsidiaries described in the next paragraph. In addition,
with the use of these aircraft, 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 ("NN/W Airport").
Flight International, Inc., a Georgia corporation ("FII"), Flight
International Aviation, Inc., a Georgia corporation ("FIA"), and Flight
International Sales and Leasing, Inc., a Delaware corporation, are wholly-owned
subsidiaries of the Company. Flight International of Florida, Inc., a Florida
corporation ("FIF") is a wholly-owned subsidiary of FII.
In its last three fiscal years, the Company has increased its revenue,
obtained, in August 1996, a major long-term contract (see "CAS-MOS Contract"
below) and has generated positive net income (after extraordinary item in 1996)
for the years ended April 30, 1998, 1997 and 1996.
Management believes that, in this three year period, it has
strengthened its balance sheet, developed contracts in its core areas and, as a
result, acquired more personnel and equipment, and enhanced the Company's
ability to compete more effectively in its marketplaces.
CAS-MOS CONTRACT
In August 1996, the Company was awarded a major contract. The
Commercial Air Services-Military Operations Support (CAS-MOS) Contract is a
derivative of the original government contract won by the Company in 1980 and
operated until September 1993. The new contract began on October 1, 1996 and has
completed its one base year, is currently in its first option year and three
additional years remain. Annual revenues from this contract have been $13.9
million and $7.3 million for the fiscal year ended April 30, 1998 and the seven
months ended April 30, 1997, respectively. This contract currently constitutes a
substantial portion of the Company's revenues. The Government recently exercised
the second option year on the CAS-MOS contract.
8
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RESULTS OF OPERATIONS
Revenues
Total revenues for the three months ended July 31, 1998 and 1997 were
$6,182,499 and $6,178,852, respectively. Total revenue for the quarter was
virtually unchanged from the prior year; however, the major components of
revenue did show some change. Flight Operations revenue increased 2% to
$5,149,000. This was due to an increase in contract flying partially offset by a
decrease in Purchase Order work. The FBO in Newport News produced a 15% increase
in revenue principally from increased fuel sales. Maintenance operations showed
a 24% decrease in revenue due to a slowdown in parts sales.
Cost of Services
Cost of services for the three months ended July 31, 1998 and 1997 were
$5,305,389 and $4,911,601, respectively. The 8% increase is due to a rise in
aircraft operating costs in the current quarter. The startup of operations in
Alaska also contributed substantially to the cost increase.
As a result of the flat revenue and increased costs of operations, the
overall gross margin declined from 20% to 14%.
Depreciation and Amortization
Depreciation and amortization for the three months ended July 31, 1998
and 1997 were $141,827 and $139,881, respectively.
General Corporate and Administrative
General corporate and administrative expenses for the three months
ended July 31, 1998 and 1997 were $622,349 and $534,408, respectively. The 16%
increase is a result of certain facility expenses incurred due to a higher level
of operations and certain executive and marketing expenses incurred to secure
expanded business opportunities.
Interest
Interest expense for the three months ended July 31, 1998 and 1997 was
$81,231 and $95,107, respectively. The 15% reduction in interest expenses is due
to lower borrowing costs on the Company's new line of credit (see "Liquidity and
Capital Resources" below).
9
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Net Income
As a result of the foregoing, the Company's net income for the three
months ended July 31, 1998 was $49,870, or $.05 per share of the Company's
common stock, compared to $504,245, or $.50 per share for the three months
ended July 31, 1997. The weighted average number of shares used in computing per
share earnings for the three months ended July 31, 1998 and 1997 was 1,013,976.
Liquidity and Capital Resources
The Company has funded its operations primarily through cash flow from
operations, bank indebtedness and a sale-leaseback of certain aircraft effected
in April 1996. The Company's operating activities provided cash of $1,006,564
for the three months ended July 31, 1998, while using $56,393 in the comparable
prior year period. A decrease in accounts receivable of $1,200,000 provided cash
during the current quarter; however, this was offset by a paydown on the line of
credit, the purchase of two jet engines and the repayment of long term debt.
On February 25, 1998, the Company entered into a line of credit with
Crestar Bank ("Crestar") for all short term financing needs. The new Agreement,
which replaces the Agreement with Metro Factors, Inc., which has now been
terminated, provides for up to $2,000,000 in credit. The loan is represented by
a demand note which may be payable at any time upon the demand of Crestar. The
Company will be obligated to pay Crestar interest at prime rate plus one-half
percent of the average balance outstanding. The line is secured by the Company's
accounts receivable and an assignment of the CAS-MOS Contract.
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.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. To the best knowledge of the officers and directors,
neither the Company nor any of its officers and directors are party to any
legal proceeding or litigation. The officers and directors know of no such
litigation being threatened or contemplated.
Item 2. Changes in Securities. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. (a) Exhibits
Exhibit Number and Description
27.1 Financial Data Schedule
(b) Reports on Form 8-K. None
11
<PAGE>
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: September 11, 1998 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
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 83,938
<SECURITIES> 0
<RECEIVABLES> 2,964,285
<ALLOWANCES> 213,416
<INVENTORY> 2,306,941
<CURRENT-ASSETS> 6,848,561
<PP&E> 6,301,392
<DEPRECIATION> 1,928,675
<TOTAL-ASSETS> 11,260,442
<CURRENT-LIABILITIES> 4,936,302
<BONDS> 0
0
0
<COMMON> 10,140
<OTHER-SE> 2,443,903
<TOTAL-LIABILITY-AND-EQUITY> 11,260,442
<SALES> 6,182,499
<TOTAL-REVENUES> 6,182,499
<CGS> 5,305,389
<TOTAL-COSTS> 6,051,398
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81,231
<INCOME-PRETAX> 49,870
<INCOME-TAX> 0
<INCOME-CONTINUING> 49,870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,870
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
