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 January 31, 2000
[ ] 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.)
One Lear Drive 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 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 March 10, 2000, there
were 1,115,374 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. CONDENSED FINANCIAL STATEMENTS
The Flight International Group, Inc. (the "Company") files herewith
condensed consolidated balance sheets of the Company and its subsidiaries as of
January 31, 2000 (unaudited) and April 30, 1999 (the Company's most recent
fiscal year), unaudited condensed consolidated statements of operations for the
three months and nine months ended January 31, 2000 and 1999, and unaudited
condensed consolidated statements of cash flows for the nine months ended
January 31, 2000 and 1999, 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, 1999.
2
<PAGE>
The Flight International Group, Inc.
Condensed Consolidated Balance Sheets
Assets
January 31, 2000 April 30, 1999
(Unaudited)
---------------- --------------
Current Assets
Cash $ 1,076,642 $ 79,292
Accounts Receivable, net 5,173,190 3,517,018
Inventories 3,461,544 2,886,665
Prepaid expenses and other 211,200 138,286
Deposits 562,021 681,799
----------- -----------
Total current assets 10,484,597 7,303,060
Property and equipment, net 4,756,829 4,600,619
Other assets 1,718,450 11,703
----------- -----------
$16,959,876 $11,915,382
=========== ===========
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>
January 31, 2000 April 30, 1999
(Unaudited)
---------------- --------------
<S> <C> <C>
Current Liabilities
Accounts payable $ 2,065,682 $ 555,609
Deferred revenue 0 727,586
Accrued fuel expense 1,055,735 923,715
Accrued expenses and other liabilities 1,459,860 1,644,703
Note payable 1,520,806 1,080,505
Long-term debt due currently 634,323 750,950
----------- -----------
Total current liabilities 6,736,406 5,683,068
Accrued engine reserves 627,866 448,469
Long-term debt, less current maturities 5,894,521 2,570,261
----------- -----------
Total liabilities 13,258,794 8,701,798
----------- -----------
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
Retained Earnings 2,683,326 2,195,827
----------- -----------
Total stockholders' equity 3,701,083 3,213,584
$16,959,877 $11,915,382
=========== ===========
</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 Nine Months Ended
January 31, 2000 January 31, 1999 January 31, 2000 January 31, 1999
---------------------------------- ----------------------------------
<S> <C> <C> <C> <C>
Revenues $6,252,614 $5,858,976 $20,959,045 $18,333,806
Operating costs and expenses
Costs of services 5,784,223 4,664,725 17,943,033 15,282,123
Gain on disposal of assets (916,962) (18,167) (916,962) (54,502)
Depreciation and amortization 185,996 153,260 546,578 444,358
General, corporate and administrative 1,271,844 523,516 2,539,055 1,661,158
---------- ---------- ----------- -----------
Total operating costs and expenses 6,325,101 5,323,334 20,111,704 17,333,137
Income (Loss) before other expenses (72,487) 535,642 847,341 1,000,669
expenses
Other expenses
Interest income (8,012) 0 (8,012) 0
Interest expense 170,539 92,317 367,854 250,340
---------- ---------- ----------- -----------
Total other expenses 162,527 92,317 359,842 250,340
Income (loss) before taxes (235,014) 443,325 487,499 750,329
Income tax expense 0 9,700 0 9,700
---------- ---------- ----------- -----------
Net income (loss) $ (235,014) $ 433,625 $ 487,499 $ 740,629
========== ========== =========== ===========
Net income (loss) per common $ (0.23) $ 0.43 $ 0.48 $ 0.73
share - basic ========== ========== =========== ===========
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 Nine Months Ended
January 31, 2000 January 31, 1999
-------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 487,499 $ 740,629
Adjustments to reconcile net income
to net cash provided (absorbed) by operating
activities
Depreciation and amortization 546,578 444,358
Engine reserve 179,397 (397,036)
Gain on sale of assets (916,962) (36,334)
Net cash provided (absorbed) by
Accounts receivable (1,656,172) (145,891)
Inventories (574,879) (193,232)
Prepaid expenses and other assets 46,864 (262,542)
Accounts payable 1,510,073 444,063
Accrued expenses and other liabilities 864,139 (181,310)
Deferred revenue (727,586) (126,928)
Income taxes payable 0 (11,412)
--------------------------------
Net cash (absorbed) provided by operating activities (241,050) 274,365
Investing Activities
Purchase of property and equipment (702,788) (576,134)
Net (increase) decrease in other assets (1,706,747) (15,504)
--------------------------------
Net cash absorbed by investing activities (2,409,535) (591,638)
Financing activities
Proceeds from credit line, net 440,301 659,438
Proceeds from long-term debt, net 3,207,635 25,667
--------------------------------
Net cash provided by financing activities 3,647,936 685,105
Net increase in cash and
cash equivalents 997,351 367,832
Cash and cash equivalents, beginning of period 79,292 104,008
Cash and cash equivalents, end of period $ 1,076,643 $ 471,840
================================
</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
FAA 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
The Company has 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 January 31, 2000. As
of January 31, 2000, $1,520,806 was outstanding.
3. Income Taxes
No provision has been made for federal income taxes because of the
substantial net operating loss carry forwards that are available to offset
against current income.
7
<PAGE>
4. Long Term Debt
As of January 31, 2000, long term debt was $5,894,521. This consists
primarily of aircraft and engine debt on assets used on the CAS-MOS contract.
Lenders are Wachovia Bank and Synovis Financial Group. Additionally, the
remaining debt associated with leasehold improvements at the Newport News
airport was $1,300,000 which is included in the above total. The Company is
confident that terms associated with the debt are reasonable and consistent.
8
<PAGE>
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, Flight Alaska,
Inc., a Delaware corporation, and Flight International Services, Inc., a
Delaware corporation ("FISI") are wholly-owned subsidiaries of the Company.
Flight International of Florida, Inc., a Florida corporation ("FIF") is a
wholly-owned subsidiary of FII. GeoFlight, LLC is a joint venture established in
October 1999 with Geophysical & Environmental Resources Corporation, of
Millbrook, New York. The purpose of the joint venture is to provide commercial
remote sensing services. The Limited Liability Company Agreement with respect to
the joint venture is expected to be executed and delivered shortly. The venture
is 50% owned by the Company.
In its last three fiscal years, the Company has increased its revenue,
obtained two major long-term contracts (see "CAS-MOS and CAS-MED Contracts"
below) and has generated positive net income for the years ended April 30, 1999,
1998 and 1997.
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.
9
<PAGE>
China Lake Contract
The Company was granted a twelve (12) month extension of the Navy China
Lake Contract, which had been due to be completed on October 1, 1999. The
estimated value of the contract is approximately $4,000,000.
CAS-MED Contract
In October 1999, the Company was awarded the Commercial Air
Services-Mediterranean Contract. This Contract is similar in scope to CAS-MOS,
which the Company has operated since 1996. CAS-MED is a one (1) year contract
with four (4) options providing a potential value of $15 million over the five
years. There can be no assurance that the Company will achieve this level of
revenues, or that the DOD will exercise its renewal options.
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 second option year, with two additional option years remaining.
Annual revenues from this contract have been $15.2 million and $13.9 million for
the fiscal years ended April 30, 1999 and 1998, respectively. The contract has
provided $13,680,142 million in revenues in the nine months ended January 31,
2000, a 20.0% increase from the same period last year. This contract currently
constitutes a substantial portion of the Company"s revenues.
Yute Air
In December 1999, the Company entered into an Agreement with the
Bankruptcy Court in the State of Alaska to manage the operations of Yute Air
Alaska, Inc. ("Yute"). The Company will maintain operations of Yute until an
Asset Purchase Agreement can be negotiated, which is expected in the near
future.
10
<PAGE>
Flight Systems, Inc.
Effective February 29, 2000, the Company completed, through FISI, the
acquisition of the assets and certain liabilities of Flight Systems, Inc., in
Myrtle Beach, South Carolina. The acquisition represents the Company's desire to
expand its services into the commercial aircraft maintenance and modification
business. Total consideration for the transaction consisted of $150,000 cash and
101,398 shares of New Common Stock of the Company, representing approximately 9%
of the currently outstanding shares of New Common Stock. The Company is hopeful
that taking over these operations will add materially to its revenue base.
11
<PAGE>
Results of Operations
Revenue
Total revenues for the three months ended January 31, 2000 and 1999
were $6,258,614 and $5,858,976, respectively. Total revenue for the three months
increased 6.7% from the prior year.
Total revenues for the nine months ended January 31, 2000 and 1999 were
$20,959,045 and $18,333,806, respectively. Total revenue for the nine months was
increased 14.3% from the prior year, with flight operations increasing to
$18,242,089. This increase was principally due to an increase in CAS-MOS flying,
the addition of the CAS-MED Contract, and an increase in Alaska operations.
Costs of Services
Costs of services for the three months ended January 31, 2000 and 1999
were $5,784,223 and $4,664,725, respectively. Cost of services for the three
months increased by 24.0%. Cost of services for the nine months ended January
31, 2000 and 1999 were $17,943,033 and $15,282,123, respectively. The 17.4%
increase is due to the start-up of the CAS-MED and China Lake Contracts.
The overall gross margin was 14% representing a 3% decrease from the
previous year. This decrease is due to the rising cost of fuel and the start up
of the CAS-MED contract.
Depreciation and Amortization
Depreciation and amortization for the three months ended January 31,
2000 and 1999 were $185,996 and $153,260, respectively. Depreciation and
amortization for the three months increased by 21.4%.
Depreciation and amortization for the nine months ended January 31,
2000 and 1999 were $546,578 and $444,358, respectively. The 23.0% increase is
due to equipment purchases and aircraft modifications completed in the first and
second quarters of FY 2000.
12
<PAGE>
General Corporate and Administrative
General corporate and administrative expenses for the three months
ended January 31, 2000 and 1999 were $1,271,844 and $523,516, respectively.
General corporate and administrative expenses for the three months increased
142.9%.
General corporate and administrative expenses for the nine months ended
January 31, 2000 and 1999 were $2,539,055 and $1,661,158, respectively. The
52.8% increase is a result of certain executive and marketing expenses incurred
to secure expanded business opportunities. Additionally, expenditures associated
with merger and acquisition activities rose sharply due to costs attributable to
the acquisition of Yute Air Alaska, Flight Systems, Inc. and the proposed
acquisition of 100,000 square feet of aircraft maintenance and modification
facilities in Peachtree City, Georgia. These costs include accounting, legal,
and investment banking expenses associated with performing due diligence
functions.
Interest
Interest expense for the three months ended January 31, 2000 and 1999
was $170,539 and $92,317, respectively. Interest expense increased 84.7% for the
three months.
Interest expense for the nine months ended January 31, 2000 and 1999
was $367,854 and $250,340, respectively. The 46.9% increase in interest expense
is due to increased long term debt associated with the purchase of aircraft to
maintain current operations and for resale.
Other Assets
Other assets increased to $1,718,451 due to the acquisition of a Lear
35A airframe for modification/repair and resale. Additionally, the Company
purchased two Jetstream 31 aircraft to support current operations.
Cash
Cash increased as a result of proceeds from the sale/leaseback of a
Lear 36A to Maritime Sales and Leasing Co, Inc. These proceeds are dedicated to
costs associated with expansion of the Company"s business in aircraft
maintenance and modifications.
13
<PAGE>
Net Income
As a result of the foregoing, the Company's net loss for the three
months ended January 31, 2000 was $235,014, or $.23 per share of the Company's
common stock, compared to net income of $433,625, or $.43 per share for the
three months ended January 31, 2000.
The Company"s net income for the nine months ended January 31, 2000 was
$487,499, or $.48 per share of the Company"s common stock, compared to $740,629,
or $.73 per share for the nine months ended January 31, 2000. Net income
declined due to the seasonality of the CAS-MOS Contract and non-recurring
expenses associated with merger/acquisitions and the start-up of CAS-MED. The
weighted average number of shares used in computing per share earnings for the
nine months ended January 31, 2000 was 1,013,976.
14
<PAGE>
Liquidity and Capital Resources
The Company has funded its operations primarily through cash flow, bank
indebtedness, and sale/leaseback activities. The Company's operating activities
used cash of $241,049 for the nine months ended January 31, 2000, while
contributing $274,365 in the comparable prior year period. An increase in
accounts receivable of $1,656,172 absorbed cash during the quarter, which was
due to the timing of the billing cycle on the CAS-MOS Contract. This was offset
by an increase in accounts payable and borrowings under the Company"s line of
credit.
The Company has a line of credit with Crestar Bank ("Crestar") for all
short term financing needs. The Agreement provides for up to $2,000,000 in
credit. The loan is a demand note which may be payable at any time upon the
demand of Crestar. The Company is 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.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. A former employee has filed suit against the Company
in the United States District Court for Eastern Virginia alleging violations of
the Fair Labor Standards Act, the Virginia Payment of Wage Law, and the Civil
Rights Act of 1964, as amended, as well as embezzlement and fraud. The former
employee is seeking judgment in the amount of $3,000,000. The ultimate cost of
this litigation to the Company cannot presently be determined. No provision has
been made for any liability that may result.
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. See Item 2.
Item 6. (a) Exhibits.
27.1 Financial Data Schedule
(b) Reports on Form 8-K. None
16
<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: March 14,2000 THE FLIGHT INTERNATIONAL GROUP, INC.
By: /s/ David E. Sandlin
-------------------------------
David E. Sandlin
Principal Executive Officer
By: /s/ B. Scott Terry
-------------------------------
B. Scott Terry
Principal Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 1076642
<SECURITIES> 0
<RECEIVABLES> 5266942
<ALLOWANCES> 93752
<INVENTORY> 3461544
<CURRENT-ASSETS> 10484597
<PP&E> 7502340
<DEPRECIATION> 2745511
<TOTAL-ASSETS> 16959876
<CURRENT-LIABILITIES> 6736406
<BONDS> 0
0
0
<COMMON> 10140
<OTHER-SE> 3690943
<TOTAL-LIABILITY-AND-EQUITY> 16959877
<SALES> 20959045
<TOTAL-REVENUES> 20959045
<CGS> 17943033
<TOTAL-COSTS> 20111704
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 367854
<INCOME-PRETAX> 487499
<INCOME-TAX> 0
<INCOME-CONTINUING> 487499
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 487499
<EPS-BASIC> 0.48
<EPS-DILUTED> 0.48
</TABLE>
