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: March 31, 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 May 6, 1994: 6,065,969 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.
None.
Item 5. Other information.
None.
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
Current Report on Form 8-K dated January 5, 1994 reported that the
parties involved in an agreement in principle to sell the travel management
business operated by PS Group's subsidiary, USTravel Systems Inc., to an
entity owned by affiliates of the Pritzker family of Chicago, Illinois had not
been able to agree on the definitive terms of the agreement and had
discontinued discussion of the transaction.
Current Report on Form 8-K dated March 14, 1994 reported the sale
of assets of the USTravel Systems Inc. to MTH Acquisition Corp.
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: May 6, 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
March 31, 1994 and December 31, 1993
(in thousands)
1994 1993
ASSETS
Current assets:
Cash and cash equivalents $12,884 $ 5,007
Accounts and notes receivable 20,549 21,434
Net investment in discontinued operation 15,313
Other current assets 9,098 12,504
Total current assets 42,531 54,258
Property and equipment, net 22,649 23,045
Aircraft leased under operating leases, net 145,497 149,018
Investment in aircraft financing leases 103,209 104,881
Aircraft held for sale, cash investments used as
collateral for letters of credit and other assets 68,495 50,888
$382,381 $382,090
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities $23,740 $ 17,362
Current portion of long-term obligations 15,996 38,672
Total current liabilities 39,736 56,034
Long-term obligations 135,201 139,487
Deferred income taxes and other long-term obligations 71,848 64,670
Stockholders' equity:
Common stock 6,066 6,065
Additional paid-in capital 98,408 98,407
Retained earnings 31,122 17,427
Total stockholders' equity 135,596 121,899
$ 382,381 $382,090
See accompanying notes.
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PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1994 and 1993
(in thousands)
1994 1993*
Continuing operations:
Revenues:
Fuel sales and distribution $21,063 $ 27,321
Aircraft leasing 8,914 9,038
Oil and gas 1,677 2,558
Interest, dividends and investment gains 1,377 2,482
Other 77 12
33,108 41,411
Costs and expenses:
Costs of products and services sold 21,928 31,194
Depreciation, depletion and amortization 4,034 3,884
General and administrative expenses 1,315 1,627
Interest expense 4,237 6,085
31,514 42,790
Income (loss) from continuing operations before taxes
and cumulative effect of accounting change 1,594 (1,379)
Provision (credit) for taxes 615 (457)
Income (loss) from continuing operations before
cumulative effect of accounting change 979 (922)
Discontinued operation, net of tax:
Loss from operations (2,614) (517)
Gain on disposition 15,330
12,716 (517)
Cumulative effect of accounting change 2,900
Net income $13,695 $ 1,461
Income per share:
Continuing operations $ .16 $ (.15)
Loss from operations of discontinued operation (.43) (.09)
Gain on disposition of discontinued operation 2.53
Cumulative effect of accounting change .48
Net income per share $ 2.26 $ .24
Shares used in determining net income per share 6,066 6,049
* Restated as described in Note a.
See accompanying notes.
F-2 <PAGE>
PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1994 and 1993
(in thousands)
1994 1993*
Cash flows from operating activities:
Income from continuing operations $ 979 $ 1,978
Non-cash items:
Depreciation, depletion and amortization 4,034 3,884
Cumulative effect of accounting change (2,900)
Deferred taxes and other 928 437
Changes in non-cash working capital affecting
cash from operations:
Other current assets 4,048 501
Other current liabilities (3,200) (222)
Net cash provided from operating activities 6,789 3,678
Cash flows from financing activities:
Reductions to long-term obligations (26,962) (9,724)
Stock options exercised 2 52
Net cash used in financing activities (26,960) (9,672)
Cash flows from investing activities:
Capital additions (111) (617)
Cash collateralization of letters of credit (17,692)
Proceeds from sales of marketable securities and other 6,751 4,845
Net cash provided from (used in) investing activities (11,052) 4,228
Discontinued operation 39,100 (900)
Net increase (decrease) in cash and cash equivalents 7,877 (2,666)
Cash and cash equivalents at beginning of period 5,007 12,399
Cash and cash equivalents at end of period $12,884 $ 9,733
*Restated as described in Note a.
See accompanying notes.
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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, accordingly this business is shown as a
discontinued operation and amounts for 1993 have been restated.
(b) Effective January 1, 1993 PS Group, Inc. (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 disposition of the
travel management business in 1994 and the change in accounting for
income taxes in 1993) necessary for a fair statement of the consolidated
financial position at March 31, 1994 and the results of operations for
the three months ended March 31, 1994 and 1993, and cash flows for the
three months ended March 31, 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 (the "1993 Annual Report").
F-4
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PS Group, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS - COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1994
AND 1993
Revenues - Revenues from PSG's fuel sales and distribution subsidiary, PS
Trading, Inc. (PST), decreased 23% for the first quarter of 1994 compared to
1993. This decrease was due to a 16% decrease in the gallons of fuel sold
and a 9% decrease in average sales price. Most of the decline in volume
relates to one airline customer whose contract PST, late in the third quarter
of 1993, declined to rebid. Some of the volume lost on this airline was made
up by a significant increase in sales to another airline. However, in the
second quarter of 1994 PST also discontinued sales to this airline. Due to
narrow margins on fuel sales to airlines, the reduced volumes do not have a
significant impact on PSG's net results.
Oil and gas revenues from Statex Petroleum, Inc. (Statex) decreased 34% from
the first quarter of 1993 to the first quarter of 1994. The primary reason
for lower revenues was a 28% reduction in oil prices.
Interest, dividends and investment gains were down 45% in the first quarter of
1994 primarily as a result of the changes in the amounts of outstanding cash,
marketable securities and notes receivable and the interest rates earned
thereon. In addition, investment gains declined from $1.5 million in the
1993 first quarter to $1.1 million in 1994.
Costs and expenses - The decrease during the first quarter of 1994 in the cost
of products and services sold reflects the reduced volumes at PST and reduced
expenses (instituted in mid-1993) of Recontek, Inc. (Recontek), PSG's metallic
waste recycling subsidiary. Depreciation, depletion and amortization was
higher due to a change in residual values of the ten BAe 146 aircraft made in
the second quarter of 1993. The decrease in general and administrative
expenses for the first quarter of 1994 is principally due to the reduced level
of operations at Recontek. Interest expense decreased in 1994's first quarter
primarily due to the elimination of foreign exchange losses, which were
approximately $2 million in the first quarter of 1993. The debt responsible
for these losses was repaid in June 1993.
Income taxes - Taxes in both 1994 and 1993 differ from the corporate federal
tax rate primarily because of the effect of state taxes.
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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 quarter of 1994 due to higher margins
although revenues were lower due to lower volumes and reduced fuel prices.
Statex operating results declined in 1994 principally due to lower oil prices.
Recontek recorded lower losses in the first quarter of 1994 due to cost
reductions. In accordance with PSG's Bank Credit Agreement, PSG reduced
Recontek's operating losses to under $300,000 per month effective July 1, 1993
compared to monthly losses in excess of $1 million in the prior months of
1993.
FINANCIAL CONDITION
At March 31, 1994 PSG's principal source of liquidity was cash and cash
equivalents of $12.9 million. At March 31, 1994 PSG had $22.7 million
outstanding under its Bank Credit Agreement, consisting entirely of letters of
credit, of which $17.7 million were cash collateralized. No further
borrowings are permitted under the Bank Credit Agreement. With the completion
of a $13.5 million financing secured by a Boeing 737-300 aircraft on April 6,
1994, and sales of marketable securities, the remaining letters of credit were
cash collateralized. Also in April PSG paid $5 million in connection with an
Internal Revenue Service audit for the years 1988 through 1991. This amount
had been previously accrued.
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 by USAir. 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.
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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 March 31, 1994 PSG had working capital of $2.8 million, compared to a
deficiency of $1.8 million at December 31, 1993. Cash and cash equivalents
totaled $12.9 million at March 31, 1994, a $7.9 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 March 31, 1994
PSG's capitalization consisted of 53% long and short-term obligations and 47%
stockholders' equity; the ratio was 59%/41% at December 31, 1993.
F-7 <PAGE>
