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, 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
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 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
<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 October 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 October 31, 1998 and 1997, and unaudited
condensed consolidated statements of cash flows for the six months ended October
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 periods
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, 1998.
2
<PAGE>
THE FLIGHT INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
October 31, 1998 April 30, 1998
(Unaudited)
------------------------ -----------------------
CURRENT ASSETS
<S> <C> <C>
Cash $ (115,045) $ 104,008
Accounts Receivable, net 4,134,964 3,989,073
Inventories 2,280,932 2,087,700
Prepaid expenses and other 1,078,302 510,785
Deposits 678,799 983,774
--------------------- -------------------
Total current assets 8,057,952 7,675,340
PROPERTY AND EQUIPMENT, NET 4,381,053 4,096,017
OTHER ASSETS 37,766 22,262
--------------------- -------------------
$ 12,476,771 $ 11,793,619
===================== ===================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
THE FLIGHT INTERNATIONAL GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
October 31, 1998 April 30, 1998
(Unaudited)
------------------------ -----------------------
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 894,466 $ 450,403
Deferred revenue 1,518,154 950,802
Accrued expenses and other liabilities 2,144,798 2,362,442
Note payable 1,110,535 451,097
Long-term debt due currently 702,472 652,238
Income tax payable 8,588 20,000
-------------------- -------------------
Total current liabilities 6,379,013 4,886,982
DEFERRED REVENUE 33,306 727,586
ACCRUED ENGINE RESERVES 347,611 744,647
LONG-TERM DEBT, LESS CURRENT MATURITIES 3,005,664 3,030,231
-------------------- -------------------
Total liabilities 9,765,594 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 1,693,420 1,386,416
-------------------- -------------------
Total stockholders' equity 2,711,177 2,404,173
$ 12,476,771 $ 11,793,619
==================== ===================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
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, 1998 October 31, 1997 October 31, 1998 October 31, 1997
----------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
REVENUES $ 6,292,331 $ 5,501,299 $ 12,474,830 $ 11,680,151
OPERATING COSTS AND EXPENSES
Costs of services 5,312,010 4,593,121 10,617,397 9,504,722
Gain on disposal of assets (18,167) (18,167) (36,334) (36,334)
Depreciation and amortization 149,271 138,541 291,098 278,422
General, corporate and administrative 515,293 556,287 1,137,642 1,090,695
----------------------------------------- --------------------------------------
Total operating costs and expenses 5,958,407 5,269,782 12,009,803 10,837,505
INCOME (LOSS) BEFORE OTHER 333,924 231,517 465,027 842,646
EXPENSES
OTHER EXPENSES
Interest expense 76,792 81,208 158,023 176,315
----------------------------------------- --------------------------------------
Total other expenses 76,792 81,208 158,023 176,315
INCOME BEFORE TAXES 257,132 150,309 307,004 666,331
Income tax expense 0 3,148 0 14,925
----------------------------------------- --------------------------------------
NET INCOME (LOSS) $ 257,132 $ 147,161 $ 307,004 $ 651,406
========================================= ======================================
NET INCOME (LOSS) PER COMMON
SHARE - BASIC $ 0.25 $ 0.15 $ 0.30 $ 0.64
========================================= ======================================
WEIGHTED AVERAGE NUMBER OF SHARES 1,013,976 1,013,976 1,013,976 1,013,976
========================================= ======================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
<PAGE>
THE FLIGHT INTERNATIONAL GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
October 31, 1998 October 31, 1997
------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 307,004 $ 651,406
Adjustments to reconcile net income
to net cash provided (absorbed) by operating
activities
Depreciation and amortization 291,098 278,422
Engine reserve (397,036) 206,326
Gain on sale of assets (36,334) 0
Net cash provided (absorbed) by
Accounts receivable (145,891) (1,371,109)
Inventories (193,232) (98,114)
Prepaid expenses and other assets (262,542) (380,266)
Accounts payable 444,063 325,507
Accrued expenses and other liabilities (181,310) (38,076)
Deferred revenue (126,928) 27,557
Income taxes payable (11,412) 0
--------------------------------------------
Net cash provided by operating activities (312,520) (398,347)
INVESTING ACTIVITIES
Purchase of property and equipment (576,134) (163,345)
Net (increase) decrease in other assets (15,504) 1,030
--------------------------------------------
Net cash absorbed by investing activities (591,638) (162,315)
FINANCING ACTIVITIES
Proceeds from credit line, net 659,438 847,890
Repayment of long-term debt 25,667 (335,356)
--------------------------------------------
Net cash absorbed by financing activities 685,105 512,534
NET (DECREASE) INCREASE IN CASH AND (219,053) (48,128)
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 104,008 231,111
CASH AND CASH EQUIVALENTS, END OF PERIOD $ (115,045) $ 182,983
============================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
<PAGE>
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 October 31, 1998. As of October 31, 1998,
$1,110,535 was outstanding.
3. INCOME TAXES
No provision for federal income taxes has been made by the Company, as
it has substantial Net Operating Loss carry forwards
7
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available to offset against current income.
8
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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 United 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)
9
<PAGE>
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 base year and first option year, with three
additional years remaining. 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.
RESULTS OF OPERATIONS
Revenues
Total revenues for the three months ended October 31, 1998 and 1997
were $6,292,331 and $5,501,299, respectively. The 14% increase in revenue is
primarily due to an increase in flight operations from the CAS-MOS contract.
Maintenance and FBO revenues also increased by 27% and 8%, respectively.
Revenue increased 7% for the six months ended October 31, 1998, due
principally to the CAS-MOS contract and increased Yuma activity. Maintenance
operations, which accounted for 8% of total Company revenues, are down 4% from
the prior year. FBO revenue, which accounted for 9% of total revenue, increased
by 12% for the six month period.
Cost of Services
Cost of services for the three months ended October 31, 1998 and 1997
were $5,312,010 and $4,593,121, respectively. For the six months ended October
31, 1998 and 1997, the cost of services was $10,617,397 and $9,504,722,
respectively. The 16% increase for the three months and the 12% increase for the
six months are principally due to the increased revenue as mentioned above.
General Corporate and Administrative
General corporate and administrative expenses for the three months
ended October 31, 1998 and 1997 were $515,293 and $556,287, respectively. For
the six months ended October 31, 1998 and 1997, general corporate and
administrative expenses were $1,137,642 and
10
<PAGE>
$1,090,695, respectively. The 7% decrease in the three month period is due to a
reduction in facilities costs and marketing expenses. The 4% increase in the six
month period is due to increased personnel costs needed to handle the increased
revenues.
Interest
Interest expense for the three months ended October 31, 1998 and 1997
was $76,792 and $81,208, respectively. For the six months ended October 31, 1998
and 1997, interest expense was $158,023 and $176,315, respectively. The 5% and
10% decreases in interest expense for the three month and six month periods
ended October 31, 1998 over the comparable prior year periods is principally due
to the scheduled pay off of long term debt.
Net Income
As a result of the foregoing, the Company's income for the three months
ended October 31, 1998 was $257,132, or $.25 per share of the Company's common
stock, compared with net income of $147,161, or $.15 per share for the three
months ended October 31, 1997. For the six months ended October 1998, the
Company's net income was $307,004 or $.30 per share, compared to $651,406 or
$.64 per share for the six months ended October 31, 1997. The weighted average
number of shares used in computing per share earnings for all periods 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 used cash of $312,520 for the
six months ended October 31, 1998, while using $398,347 in the comparable prior
year period.
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
11
<PAGE>
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.
12
<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.
(a) The Annual Shareholders Meeting of the Company was
held on October 7, 1998.
(b) The following directors were elected or their term
of office as a director continued:
John R.Bone, Vice Admiral Richard M. Dunleavy,
C. Lofton Fouts, Wayne M. Richmon and
David E. Sandlin
(c) The following is a brief description of matters
voted upon by shareholders at the Annual Meeting and the
results of the vote:
(i) Ratification of BDO Seidman as the Company's
Independent Auditors for the Fiscal Year Ended April 30, 1999:
Approved by majority vote of those shareholders present at the
meeting in person or by proxy.
(ii) Election of Directors: Approved by a
majority vote of those shareholders present at the meeting in
person or by proxy.
(iii)Approval of 1998 Stock Option Plan: Approved by
a majority vote of those shareholders present at the meeting in
person or by proxy.
13
<PAGE>
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
14
<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: December 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
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000732775
<NAME> Flight International Group, Inc.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> OCT-31-1998
<CASH> (115,045)
<SECURITIES> 0
<RECEIVABLES> 4,358,380
<ALLOWANCES> 223,416
<INVENTORY> 2,280,932
<CURRENT-ASSETS> 8,057,952
<PP&E> 6,453,485
<DEPRECIATION> 2,072,432
<TOTAL-ASSETS> 12,476,771
<CURRENT-LIABILITIES> 7,826,423
<BONDS> 0
0
0
<COMMON> 10,140
<OTHER-SE> 2,701,037
<TOTAL-LIABILITY-AND-EQUITY> 12,476,771
<SALES> 12,474,830
<TOTAL-REVENUES> 12,474,830
<CGS> 10,617,397
<TOTAL-COSTS> 12,009,803
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 158,023
<INCOME-PRETAX> 307,004
<INCOME-TAX> 0
<INCOME-CONTINUING> 307,004
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 307,004
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
