FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 1-7141
PS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2760133
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
4370 La Jolla Village Drive, Suite 1050
San Diego, California 92122
(Address of principal executive offices)
(Zip code)
(619) 546-5001
(Registrant's telephone number, including area code)
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 August 1, 1994: 6,067,727 shares of common stock, $1 par
value.
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PS GROUP, INC.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Included herein.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Included herein.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
An annual meeting of stockholders of the Company was held on May 25,
1994 for the purpose of electing two directors with terms expiring in 1997.
Information with respect to this item and other information required by
Regulation 14 is contained in the definitive proxy statement furnished to
stockholders of the Company dated April 15, 1994.
The votes cast for directors at the annual meeting are as follows:
Percent of
For Withheld Shares
Represented
Howard P. Allen 5,082,435 25,928 99.5%
George M. Shortley 5,086,298 22,065 99.6%
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Item 5. Other information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
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.
PS GROUP, INC.
(Registrant)
Date: August 15, 1994
/s/ L.A. Guske
LAWRENCE A. GUSKE
Vice President - Finance and
Chief Financial Officer
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PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
June 30, 1994 and December 31, 1993
(in thousands)
1994 1993*
ASSETS
Current assets:
Cash and cash equivalents $ 17,689 $ 5,133
Accounts and notes receivable 13,979 21,420
Net investment in discontinued travel operation 15,313
Other current assets 11,679 12,524
Total current assets 43,347 54,390
Property and equipment, net 22,254 23,045
Aircraft leased under operating leases, net 141,976 149,018
Investment in aircraft financing leases 102,855 104,881
Aircraft held for sale, cash investments used as
collateral for letters of credit and other assets 56,327 49,872
$366,759 $381,206
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 17,244 $ 16,133
Net current liability of discontinued waste recycling 3,367 1,361
operation
Current portion of long-term obligations 14,637 38,672
Total current liabilities 35,248 56,166
Net liability of discontinued waste recycling operation 13,984
Long-term obligations 129,441 124,487
Deferred income taxes and other long-term obligations 68,949 64,670
Stockholders' equity:
Common stock 6,066 6,065
Additional paid-in capital 98,408 98,407
Retained earnings 28,647 17,427
Total stockholders' equity 133,121 121,899
$366,759 $381,206
*Restated as described in Note a.
See accompanying notes.
F-1
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PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 1994 and 1993
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
1994 1993* 1994 1993*
Continuing operations:
Revenues:
Fuel sales and distribution $14,301 $26,229 $35,364 $53,550
Aircraft leasing 8,871 9,000 17,785 18,038
Oil and gas 1,921 2,419 3,598 4,977
Interest, dividends & invest. gains 413 1,547 1,704 3,926
25,506 39,195 58,451 80,491
Costs and expenses:
Costs of products & services sold 14,983 27,317 36,112 55,606
Depreciation, depletion & amortization 4,028 4,121 8,062 8,000
General & administrative expenses 1,347 950 2,635 2,065
Interest expense 4,256 6,136 8,377 11,972
24,614 38,524 55,186 77,643
Income from continuing operations
before taxes and cumulative effect of
accounting change 892 671 3,265 2,848
Provision for taxes 498 357 1,385 1,108
Income from continuing operations
before cumulative effect of
accounting change 394 314 1,880 1,740
Discontinued operations, net of tax:
Loss from operations (383) (2,871) (3,504) (5,736)
Gain (loss) on disposition (2,486) 12,844
(2,869) (2,871) 9,340 (5,736)
Cumulative effect of accounting change 2,900
Net income (loss) $(2,475) $(2,557) $11,220 $(1,096)
Income (loss) per share:
Continuing operations $ .06 $ .05 $ .31 $ .29
Loss from operations of
discontinued operations (.06) (.47) (.58) (.95)
Gain (loss) on disposition of
discontinued operations (.41) 2.12
Cumulative effect of accounting change .48
Net income (loss) per share $ (.41) $ (.42) $ 1.85 $ (.18)
Shares used in determining net income
(loss) per share 6,066 6,054 6,066 6,050
*Restated as described in Note a.
See accompanying notes.
F-2<PAGE>
PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 1994 and 1993
(in thousands)
1994 1993*
Cash flows from operating activities:
Income from continuing operations $ 1,880 $ 4,640
Non-cash items:
Depreciation, depletion and amortization 8,062 8,000
Cumulative effect of accounting change (2,900)
Deferred taxes and other 1,713 3,541
Changes in non-cash working capital affecting
cash from operations:
Other current assets 11,358 1,592
Other current liabilities (8,407) 226
Net cash provided from operating activities 14,606 15,099
Cash flows from financing activities:
Additions to long-term obligations 13,338 59,715
Reductions to long-term obligations (32,610) (72,414)
Stock options exercised 2 82
Net cash used in financing activities (19,270) (12,617)
Cash flows from investing activities:
Capital additions (220) (703)
Cash collateralization of letters of credit, net (7,691)
Proceeds from sales of marketable securities and other 4,434 4,619
Net cash provided from (used in) investing activities (3,477) 3,916
Discontinued operations 20,697 (5,921)
Net increase (decrease) in cash and cash equivalents 12,556 477
Cash and cash equivalents at beginning of period 5,133 12,383
Cash and cash equivalents at end of period $17,689 $12,860
*Restated as described in Note a.
See accompanying notes.
F-3
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PS Group, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) On March 14, 1994 the travel management business operated by USTravel
Systems Inc. was sold. Recontek, Inc. (Recontek) has been unable to
demonstrate sufficient progress toward profitability in its recycling
operations to justify the continuing financial support necessary for
ongoing operations. Recontek has been unable to secure sufficient
customer orders to end the continuing monthly losses that PS Group, Inc.
(PSG) has previously announced were unacceptable in the long-term. As a
result, in August 1994, PSG adopted a plan to close-down or sell
Recontek's major asset, a metallic waste recycling plant in Newman,
Illinois. Accordingly travel management and metallic waste recycling are
shown as discontinued operations in the accompanying financial statements
and amounts for 1993 have been restated. PSG expects to continue
soliciting outside interest in buying or joint venturing the Illinois
facility during the close-down process which is expected to be completed
in early 1995.
Components of discontinued operations, including related taxes are as
follows:
Three Months Six Months
Ended Ended
June 30, June 30,
----------------- -----------------
1994 1993 1994 1993
Loss from operations:
Travel management $ (409) $(4,022) $ (925)
Metallic waste recycling $ (583) (3,611) (1,362) (7,162)
-------- -------- ------- --------
(583) (4,020) (5,384) (8,087)
Credit for taxes (200) (1,149) (1,880) (2,351)
-------- -------- -------- --------
$ (383) $(2,871) $(3,504) $(5,736)
Gain (loss) on disposition:
Travel management $28,571
Metallic waste recycling $(3,817) (3,817)
------- -------
(3,817) 24,754
Provision (credit) for taxes (1,331) 11,910
-------- -------
$(2,486) $12,844
F-4 <PAGE>
(b) Effective January 1, 1993 PSG changed its method of accounting for income
taxes to comply with FASB Statement No. 109.
(c) In the opinion of management, the accompanying Unaudited Condensed
Consolidated Financial Statements include all adjustments (consisting
only of normal recurring adjustments, other than the discontinuance of
the travel management and metallic waste recycling businesses in 1994 and
the change in accounting for income taxes in 1993) necessary for a fair
statement of the consolidated financial position at June 30, 1994 and the
results of operations for the three and six months ended June 30, 1994
and 1993, and cash flows for the six months ended June 30, 1994 and 1993.
These Unaudited Condensed Consolidated Financial Statements should be
read in conjunction with the Consolidated Financial Statements and Notes
thereto contained in the PSG 1993 Annual Report to Stockholders.
F-5 <PAGE>
PS Group, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS - COMPARISON OF THE THREE AND SIX MONTHS ENDED JUNE 30,
1994 AND 1993
Revenues - Revenues from PSG's fuel sales and distribution subsidiary, PS
Trading, Inc. (PST), decreased 45% and 34%, respectively, for the second
quarter and first six months of 1994 compared to the 1993 periods. These
decreases were due to a 42% and a 29% decrease in the gallons of fuel sold in
the second quarter and first six months of 1994 and an 8% decrease in average
sales price per gallon in both periods. Most of the decline in volume for the
first six months relates to one airline customer whose contract PST, late in
the third quarter of 1993, declined to rebid. In the second quarter of 1994
PST also discontinued sales to another airline. Due to narrow margins on fuel
sales to airlines, the reduced volumes do not have a significant impact on
PSG's net results.
Statex Petroleum, Inc. (Statex) recorded lower oil and gas revenues in 1994
versus 1993. Revenues decreased 21% in the second quarter and 28% in the
first half of 1994 versus 1993. The primary reason for lower revenues was a
reduction of 5% and 23%, respectively, in oil prices in the second quarter and
first half of 1994. However, at the end of June 1994 both oil and gas prices
were slightly higher than June 1993 prices. In addition, volumes of oil sold
were down 20% and 14% in the second quarter and first half of 1994.
Interest, dividends and investment gains were down in the second quarter and
first half of 1994 primarily as a result of a decline in investment gains.
Investment gains declined from $2.3 million in the 1993 first half to $ .7
million in 1994's first half. In the second quarter of 1993 investment gains
were $ .8 million compared to zero gains in 1994's second quarter.
Costs and expenses - The decrease during the second quarter and first half of
1994 in the cost of products and services sold reflects the reduced volumes at
PST. The increase in general and administrative expenses for the second
quarter and first half of 1994 is largely due to increased legal expenses
associated with the securities litigation described in the 1993 Annual Report.
Interest expense decreased in 1994's second quarter and first half primarily
due to the elimination of foreign exchange losses, which were approximately
$1.9 million in the second quarter of 1993 and $3.9 million in the first half
of 1993. The debt responsible for these losses was repaid in June 1993.
F-6 <PAGE>
Income taxes - Taxes in both 1994 and 1993 differ from the corporate federal
tax rate primarily because of the effect of state taxes.
Segment results - Results for aircraft leasing were improved over 1993
primarily due to the elimination of the foreign exchange loss previously
described, however 1994 results include increased interest expense on higher
aircraft debt levels.
PST's profits increased during the first half of 1994 due to higher margins
although revenues were lower due to lower volumes and reduced fuel prices.
Profits were down slightly during the second quarter of 1994.
Statex operating results declined in 1994 principally due to lower oil prices.
FINANCIAL CONDITION
At June 30, 1994 PSG's principal source of liquidity was cash and cash
equivalents of $17.7 million.
In June 1994 the $15 million Resource Recovery Bonds on the Recontek Newman,
Illinois plant were prepaid. Also in June 1994 PSG's Bank Credit Agreement
was amended and restated to eliminate all but one bank and to authorize the
issuance of an additional $1 million letter of credit in support of PST's
operations. The amended and restated Bank Credit Agreement covering letters
of credit expires on November 4, 1995. At June 30, 1994 $6.7 million of
letters of credit were outstanding under the Bank Credit Agreement, all of
which were cash collateralized.
As mentioned in the prior quarter report, PSG completed a $13.5 million
financing secured by a Boeing 737-300 aircraft in April 1994 and also paid $5
million related to an Internal Revenue Service audit of the years 1988 through
1991.
In July 1994 PSG reached agreement with America West to reset the rent of its
leased Boeing 737-300 at a higher level effective August 1994 and to waive its
reset rights in 1996 and 1998. Marketing of the two Boeing 747-100SF
freighter aircraft continues in what remains a soft market.
F-7
A substantial portion of PSG's aircraft lease revenues (as well as cash flow)
are derived from 16 aircraft leased to USAir, Inc. (USAir). USAir's recent
losses and weakening financial condition continue to be of concern to PSG. A
continuing deterioration of USAir's financial condition could have a material
adverse impact on PSG, particularly because ten of the aircraft leased to
USAir are not being flown. While USAir's second quarter 1994 results were
better than expected, USAir's management reiterated that 1994's losses will be
greater than the $350 million loss incurred in 1993 and USAir must reduce its
operating costs through significant labor concessions if USAir is to maintain
its future existence as a viable competitive airline. USAir pilots have
presented to USAir a proposed concession package which would reduce pilot
costs at USAir in exchange for minority equity ownership and other financial
commitments. This proposal has been rejected by USAir. The other USAir labor
unions have not yet offered any concessions. The information relating to
USAir and reported herein by PSG was obtained primarily from published media
reports. PSG refers readers to public information regarding USAir for further
details relating to USAir's financial condition. For a more complete
discussion of USAir's relationship to PSG's financial condition refer to PSG's
1993 Annual Report and 1993 Annual Report on Form 10-K.
PSG believes that, absent a failure by USAir to meet its lease obligations to
PSG, its cash and cash equivalents plus projected cash flow are adequate to
meet the operating and planned capital needs of PSG in both the short and
long-term.
At June 30, 1994 PSG had working capital of $8.4 million, compared to a
deficiency of $1.8 million at December 31, 1993. Cash and cash equivalents
totaled $17.7 million at June 30, 1994, a $12.6 million increase from December
31, 1993. The major changes in cash and cash equivalents are detailed in the
Unaudited Condensed Consolidated Statements of Cash Flows. At June 30, 1994
PSG's capitalization consisted of 52% long and short-term obligations and 48%
stockholders' equity; the ratio was 57%/43% at December 31, 1993.
F-8 <PAGE>
