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: September 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 November 1, 1994: 6,068,313 shares of common stock, $1
par value.<PAGE>
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.
None.
Item 5. Other information.
None.<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
On September 21, 1994 the number of directors for PS Group, Inc.
was reduced from seven to six.
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: October 27, 1994
/s/ L.A. Guske
LAWRENCE A. GUSKE
Vice President - Finance and
Chief Financial Officer<PAGE>
PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
September 30, 1994 and December 31, 1993
(in thousands)
1994 1993*
ASSETS
Current assets:
Cash and cash equivalents $ 18,642 $ 5,133
Accounts and notes receivable 15,382 21,420
Net investment in discontinued travel operation 15,313
Other current assets 12,265 12,524
Total current assets 46,289 54,390
Property and equipment, net 21,715 23,045
Aircraft leased under operating leases, net 138,455 149,018
Investment in aircraft financing leases 101,717 104,881
Aircraft held for sale, cash investments used as
collateral for letters of credit and other assets 55,565 49,872
$363,741 $381,206
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $ 18,635 $ 16,133
Net current liability of discontinued waste recycling
operation 2,379 1,361
Current portion of long-term obligations 15,019 38,672
Total current liabilities 36,033 56,166
Net liability of discontinued waste recycling operation 13,984
Long-term obligations 125,408 124,487
Deferred income taxes and other long-term obligations 68,974 64,670
Stockholders' equity:
Common stock 6,068 6,065
Additional paid-in capital 98,420 98,407
Retained earnings 28,838 17,427
Total stockholders' equity 133,326 121,899
$363,741 $381,206
* Restated as described in Note a.
See accompanying notes.
F-1<PAGE>
PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended September 30, 1994 and 1993
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
1994 1993* 1994 1993*
Continuing operations:
Revenues:
Fuel sales and distribution $ 19,102 $ 26,537 $ 54,466 $ 80,087
Aircraft leasing 8,933 8,998 26,718 27,036
Oil and gas 2,248 2,049 5,846 7,026
Interest, dividends and
investment gains 360 631 2,064 4,557
30,643 38,215 89,094 118,706
Costs and expenses:
Costs of products and
services sold 19,691 29,171 55,803 84,777
Depreciation, depletion
and amortization 4,153 4,087 12,215 12,087
General & administrative 2,304 1,568 4,939 3,633
Interest expense 4,173 3,968 12,550 15,940
30,321 38,794 85,507 116,437
Income (loss) from continuing
operations before taxes
and cumulative effect of
accounting change 322 (579) 3,587 2,269
Provision (credit) for taxes 131 (109) 1,516 999
Income (loss) from continuing
operations before cumulative
effect of accounting change 191 (470) 2,071 1,270
Discontinued operations, net of tax:
Loss from operations (2,279) (3,504) (8,015)
Gain on disposition 12,844
(2,279) 9,340 (8,015)
Cumulative effect of acconting change 2,900
Net income (loss) $ 191 $ (2,749) $ 11,411 $ (3,845)
Income (loss) per share:
Continuing operations $ .03 $ (.08) $ .34 $ .20
Loss from operations of
discontinued operations (.37) (.58) (1.32)
Gain on disposition of
discontinued operations 2.12
Cumulative effect of
accounting change .48
Net income (loss) per share $ .03 $ (.45) $ 1.88 $ (.64)
Shares used in determining net
income (loss) per share 6,067 6,061 6,066 6,054
* Restated as described in Note a.
See accompanying notes.
F-2
<PAGE>
PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1994 and 1993
(in thousands)
1994 1993*
Cash flows from operating activities:
Income from continuing operations $ 2,071 $ 4,170
Non-cash items:
Depreciation, depletion and amortization 12,215 12,087
Cumulative effect of accounting change (2,900)
Deferred taxes and other 2,447 6,519
Changes in non-cash working capital affecting
cash from operations:
Other current assets 9,127 1,358
Other current liabilities (8,248) 854
Net cash provided from operating activities 17,612 22,088
Cash flows from financing activities:
Additions to long-term obligations 10,270 59,715
Reductions to long-term obligations (33,193) (79,752)
Stock options exercised 16 116
Net cash used in financing activities (22,907) (19,921)
Cash flows from investing activities:
Capital additions (300) (983)
Cash collateralization of letters of credit, net (7,691)
Proceeds from sales of marketable securities and other 7,049 9,488
Net cash provided from (used in) investing activities (942) 8,505
Discontinued operations 19,746 (11,380)
Net increase (decrease) in cash and cash equivalents 13,509 (708)
Cash and cash equivalents at beginning of period 5,133 12,383
Cash and cash equivalents at end of period $ 18,642 $ 11,675
* Restated as described in Note a.
See accompanying notes.
F-3<PAGE>
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. 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 is
pursuing third party interest in buying the Illinois facility during the
close-down process which is expected to be completed in early 1995. PSG
has entered into a non-binding letter of intent with a potential buyer
of the Illinois facility. A definitive agreement is being drafted while
due dilgence proceeds and the Illinois EPA reviews the application to
transfer the Part B Operating Permit for the facility.
Components of discontinued operations, including related taxes are as
follows:
Three Months Nine Months
Ended Ended
September 30, September 30,
1994 1993 1994 1993
Loss from operations:
Travel management $ (3,075) $(4,022) $ (4,000)
Metallic waste recycling (317) (1,362) (7,479)
(3,392) (5,384) (11,479)
Credit for taxes (1,113) (1,880) (3,464)
$ (2,279) $(3,504) $ (8,015)
Gain (loss) on disposition:
Travel management $28,571
Metallic waste recycling (3,817)
24,754
Provision for taxes 11,910
$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 September 30, 1994
and the results of operations for the three and nine months ended
September 30, 1994 and 1993, and cash flows for the nine months ended
September 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 NINE MONTHS ENDED
SEPTEMBER 30, 1994 AND 1993
Revenues - Revenues from PSG's fuel sales and distribution subsidiary, PS
Trading, Inc. (PST), decreased 28% and 32%, respectively, for the third
quarter and first nine months of 1994 compared to the 1993 periods. These
decreases were due to a 28% decrease in the gallons of fuel sold in both the
third quarter and first nine months of 1994 and a 5% decrease in average sales
price per gallon for the nine month period. Most of the decline in volume for
the first nine 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 a 10% increase in oil and gas
revenues for the third quarter of 1994 versus 1993 primarily because of a
$325,000 settlement of a disputed ownership interest and a 4% increase in oil
prices. These increases were somewhat offset by a 5% reduction in oil sales
volumes for the third quarter of 1994 versus the comparable 1993 period.
Revenues decreased 17% in the first nine months of 1994 versus 1993 primarily
due to a 12% reduction in oil prices and a 9% reduction in volumes of oil
sold. These decreases were partially offset by the $325,000 settlement
previously discussed, which had an approximate $150,000 positive impact on
pretax income.
Interest, dividends and investment gains were down 55% in the first nine
months of 1994 primarily as a result of a decline in investment gains.
Investment gains declined from $2.3 million in the first nine months of 1993
to $.7 million in 1994's first nine months. Interest, dividends and
investment gains were down in the third quarter of 1994 versus 1993 primarily
due to a reduced level of investments.
Costs and expenses - The decrease during the third quarter and first nine
months of 1994 in the cost of products and services sold primarily reflects
the reduced volumes at PST. The increase in general and administrative
expenses for the third quarter and first nine months of 1994 is largely due to
the accrual (with payment in January 1995) related to the cancellation of
employment contracts with former PSG officers who have resigned. Interest
expense decreased in 1994's first nine months primarily due to the elimination
of foreign exchange losses, which were $3.9 million in the first nine months
of 1993. The debt responsible for these
F-6<PAGE>
losses was repaid in June 1993. Interest expense is higher in the third
quarter and the first nine months of 1994 (aside from foreign exchange losses)
due to higher interest rates on aircraft refinanced in June 1993 and April
1994.
Income taxes - The credit for income taxes for the third quarter of 1993
includes the benefit of a reevaluation of the estimated future deferred income
tax liability initiated after the filing of the 1992 tax returns. This
reevaluation indicated the recorded liability was in excess of the updated
estimate. This excess liability was offset by approximately $.8 million of
additional estimated future tax resulting from the 1992 increase in the
federal income tax rate from 34% to 35%. 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 nine months of
1994 due to higher margins although revenues were lower due to lower volumes
and reduced fuel prices. Profits were down slightly during the third quarter
of 1994. Statex operating results improved in 1994 principally because 1993's
third quarter included a $1.8 million write-off of an oil field that did not
respond to water flood enhancement.
FINANCIAL CONDITION
PSG's principal source of liquidity was cash and cash equivalents of $18.6
million at September 30, 1994. At the end of 1994's third quarter, $7.7
million of letters of credit were outstanding under a Bank Credit Agreement,
all of which were cash collateralized. The Bank Credit Agreement expires on
November 4, 1995 and has no provision for any borrowings.
Marketing of the two Boeing 747-100SF freighter aircraft continues in what
remains a soft market.
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
F-7<PAGE>
could have a material adverse impact on PSG, particularly because ten of the
aircraft leased to USAir are not being flown. USAir's third quarter 1994
operating loss was $160 million versus $121 million in 1993. USAir's
management indicated that third quarter revenues fell below the company's
expectations and that fourth quarter revenues are anticipated to be below
expectations as well. USAir's management previously indicated that 1994's
losses will be greater than the $350 million net loss incurred in 1993.
Management also stated that the third quarter 1994 results "underscore the
urgent need to reduce our operating costs to a level competitive with the
industry." 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 and the company announced a future phase-out of
aircraft to reduce operating costs. With this action by management the
pilots broke off negotiations. In late September 1994, USAir's parent, USAir
Group, Inc., announced it would defer payment of preferred dividends. USAir
aircraft lease payments to PSG are predominately semi-annual with payments due
on March 31st/ September 30th or April 1st/ October 1st. All amounts due from
USAir in September and October 1994 were received by PSG as scheduled. 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 September 30, 1994 PSG had working capital of $10.3 million, compared to a
deficiency of $1.8 million at December 31, 1993. Cash and cash equivalents
totaled $18.6 million at September 30, 1994, a $13.5 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
September 30, 1994 PSG's capitalization consisted of 51% long and short-term
obligations and 49% stockholders' equity; the ratio was 57%/43% at December
31, 1993.
F-8<PAGE>
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