<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-K405
Annual Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended: DECEMBER 31, 1994
Commission file number: 1-7141
_______________________
PS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2760133
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4370 LA JOLLA VILLAGE DRIVE, SUITE 1050
SAN DIEGO, CALIFORNIA 92122
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (619) 546-5001
_______________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock - $1 par value New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: none.
_______________________
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant.
$55,073,114* as of March 31, 1995
* Assumes Berkshire Hathaway Inc. (and its subsidiaries) and ESL Partners,
L.P. owning approximately 19.9% and 19.7%, respectively, of the outstanding
shares of common stock of the Company on March 31, 1995 are not affiliates
of the Company.
The number of shares of common stock outstanding as of March 31, 1995 was
6,068,313.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Annual Report to Shareholders for the Year
ended December 31, 1994......................................PART I and PART II
Portions of Definitive Proxy Statement for Annual
Meeting of Shareholders on May 31, 1995................................PART III
================================================================================
<PAGE>
PART I
ITEM 1. BUSINESS
The principal businesses of PS Group, Inc. (the "Company") are aircraft
leasing (conducted directly), fuel sales and distribution, and oil and gas
production and development.
In March 1994 the Company sold its travel management business formerly
conducted by its 85% owned subsidiary, USTravel Systems Inc. (USTravel). In
August 1994 the Company adopted a plan to close-down or sell the major asset of
Recontek, Inc. (Recontek), a metallic waste recycling plant in Newman, Illinois
and, in December 1994, this plant was sold. Accordingly, travel management and
metallic waste recycling are treated as discontinued operations.
The Company was incorporated in Delaware in 1972 (under the original name
PSA, Inc.) as the successor to a California corporation originally incorporated
in 1945. The Company has its principal executive offices at 4370 La Jolla
Village Drive, Suite 1050, San Diego, California, 92122; telephone number (619)
546-5001.
As of December 31, 1994 the Company's corporate staff consisted of 9 full-
time employees who conduct the Company's aircraft leasing operations as well as
its executive and administrative activities.
AIRCRAFT LEASING
The Company's aircraft investments consist of 21 wholly-owned and seven
partially-owned jet aircraft. No additional aircraft have been acquired for
lease since 1989, nor are any purchases currently contemplated. All of the
Company's wholly-owned, leased aircraft have been pledged pursuant to various
financing arrangements. In 1994 aircraft leasing contributed $35.6 million to
the Company's consolidated operating revenues, or approximately 28% of total
revenues from continuing operations.
The information reported herein relating to the Company's aircraft lessees
was obtained from published media reports. The Company refers readers to public
information regarding USAir, Continental and America West for further details
relating to their financial condition.
Currently the Company has 16 aircraft on lease to USAir, Inc. ("USAir")
under leases that expire at various times between 1998 and 2004. Six of the
aircraft are McDonnell Douglas MD-80s and 10 are British Aerospace 146-200s.
USAir contributed approximately 79% of the Company's aircraft lease revenues in
1994.
The Company owns and leases to Continental Airlines, Inc. ("Continental")
one MD-80 aircraft and one Boeing 737-300 aircraft under leases that expire at
the beginning of 2008 and has a one-third interest in seven Boeing 737-200
aircraft which are leased to Continental under leases that expire in 1996. The
Company also owns and leases to America West Airlines, Inc. ("America West") one
Boeing 737-300 aircraft under a lease that expires in 2006. Two Boeing 747-100
freighter aircraft formerly leased to Pan American World Airways ("Pan Am") are
held for sale. Both 747s were converted from passenger to full freighter
configuration following their return from Pan Am. See "Recent Developments."
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TYPE OF AIRCRAFT LEASES. All of the Company's leases are net leases, which
provide that the lessees bear the direct operating costs and the risk of
physical loss of the aircraft, pay taxes, maintain the aircraft, indemnify the
Company against any liability suffered as the result of any act or omission of
the lessee, maintain casualty insurance in an amount equal to the specific
amount set forth in the lease (which may be less than market value) and maintain
liability insurance naming the Company as an additional insured. In general,
substantially all obligations connected with the operation and maintenance of
the leased aircraft are assumed by the lessee and minimal obligations are
imposed upon the Company. The leases also typically provide that in those
limited instances where the lessees have the voluntary right to terminate the
lease, the lessee is obligated to pay the Company a stipulated sum which would
retire any existing indebtedness relating to the aircraft and otherwise provide
the Company with the same economic value it would have received had the lease
continued.
RECENT DEVELOPMENTS. During 1994 Continental significantly expanded their
new low fare service called Continental Lite. This new service was not
successful and was being scaled back in early 1995. Year-end 1994 results
included a charge of about $400 million related to 42 aircraft Continental will
phase out of its fleet (none of which are the Company's aircraft) plus charges
for other cutbacks. Continental finished 1994 with approximately $400 million in
cash, $110 million of which is restricted as to usage. In addition, new aircraft
scheduled for delivery in 1996 and 1997 were delayed one year and Continental is
also seeking to modify future debt payments. Continental, in comparison with
many other carriers, has a lower cost structure. This lower cost structure
should help sustain Continental as it is working to increase revenues while it
reduces and redeploys part of its fleet. Until this redirection and cost
reduction is successfully completed, there is uncertainty as to Continental's
future. Due to Continental's financial condition, there is uncertainty as to
whether the Company will recover its investment in aircraft leased to
Continental.
America West completed its reorganization and emerged from bankruptcy in
August 1994. As part of the reorganization, America West is partially owned by
Continental. Both carriers are implementing various programs to cross feed
passengers and reduce common costs. While both passenger levels and profits have
recently declined, America West has been profitable for eight consecutive
quarters and finished 1994 with total cash of $211 million, of which $29 million
was restricted as to its usage. America West has a lower cost structure, which
should assist in its efforts to solidify its long-term position in the
marketplace.
Following the cessation of operations by Pan Am on December 4, 1991, two
747-100 aircraft were returned to the Company in early 1992. At the time of
return, both aircraft were in a passenger configuration, although each had been
previously modified, at the US Government's expense, to be convertible into
cargo configuration in case of a national emergency.
In February 1992 the Company committed to have the two ex-Pan Am 747s
converted to full freighter status by The Boeing Company ("Boeing"). The Company
also entered into an agreement with Boeing for the marketing of the aircraft.
Conversion of both aircraft is now complete.
Used aircraft values continued to decrease during 1994. As a result the
Company - which wrote-down the value of the two 747-100s at the end of 1991,
1992 and 1993 by approximately $5.8 million, $9.9 million, and $17 million,
respectively, took a further write-down of those aircraft at the end of 1994 of
approximately $7.2 million.
USAir leases 16 of the Company's aircraft - six MD-80 aircraft and ten BAe
146-200 aircraft. Since mid-1992 the BAe-146s have been out of service. USAir
recorded additional loss reserves in 1994 against their 18 non-operating 146s
(10 of which are leased from the Company).
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1994 was a very difficult year for USAir. Added low fare/low cost competition
from Continental (Continental Lite see above) and another new entrant into some
of USAir's markets, two aircraft accidents with fatalities, which negatively
impacted passenger levels, and a lack of progress in 1994 on reaching agreement
with USAir's labor unions to reduce annual operating costs by $500 million all
had significant impact on increasing USAir's losses in 1994. USAir recorded a
net loss of $716 million in 1994 versus a 1993 loss of $375 million. To conserve
cash during 1994, USAir suspended payment of preferred dividends and cancelled
contracts to purchase new aircraft. The consolidated cash balance for USAir and
its parent totalled $450 million at December 31, 1994. The projected cash
balance of USAir at the end of the first quarter of 1995 is $200 million. USAir
also announced the sale in February 1995 of 11 aircraft to be delivered in 1995,
which will help reduce operating expenses. In March 1995, USAir announced a
preliminary agreement with its pilots union as to a reported $190 million in
annual expense savings for a five year period in exchange for "financial returns
and governance participation." While this is an important step in USAir's goal
to achieve a total of $500 million in annual wage and benefit savings and while
all of USAir's unions have expressed their commitment to finalize agreements to
strengthen USAir, as of April 10, 1995 uncertainty remains as to USAir's future.
If USAir fails in its attempt to reduce expenses and ceases to pay rent on some
or all of the aircraft it leases from the Company, there will be a material
adverse impact on the Company. Due to USAir's financial condition there is
uncertainty as to whether the Company will recover its investment in aircraft
leased to USAir.
The ultimate impact of the sale of the two 747 freighter aircraft, and the
future prospects of USAir, Continental and America West on the Company are
unknown. It is possible that the 747 freighter aircraft will be sold without
further losses and that all of the current aircraft leases will remain with the
existing carriers. On the other hand, (i) it is difficult to predict potential
sales prices for the two 747 freighters (which may be less than current book
value) and (ii) further economic deterioration of the Company's lessees could
result in the return of some or all of the aircraft to the Company or the
renegotiation of lease terms less favorable to the Company. If the aircraft were
returned, the Company would be faced with a choice of maintaining control of the
aircraft by continuing to make the scheduled debt payments or losing control of
the aircraft to the lenders who would seek a buyer of the aircraft. Except for
debt of $20.4 million on five BAe-146s and obligations of $25.9 million on the
two 747 freighter aircraft, all other aircraft are encumbered by debt which is
nonrecourse to the Company. If the lenders took control and sold the aircraft,
the Company would likely lose most or all its equity. If, in the future, the
Company has sufficient liquidity after a lessee defaulted and elected to pay the
scheduled debt service to the lender(s), then the Company would be required to
find purchasers or new lessees for the aircraft. To the extent that sales prices
were less than the Company's carrying value or less favorable lease rates were
obtained, the Company would be negatively affected.
PS TRADING -- FUEL SALES AND DISTRIBUTION
PS Trading, Inc. (PST), which is wholly-owned by the Company, is
headquartered in Dallas and also has sales staff in California and Arizona. PST
contributed $79.6 million to the Company's 1994 consolidated operating revenues
or approximately 63% of total revenues from continuing operations.
PST operations, which are characterized by large revenues and small
operating margins, are composed of three separate divisions consisting of
aviation fuel sales, wholesale fuel marketing and facility services.
AVIATION FUEL SALES. From its formation in 1980 until 1991, PST's primary
business focus was sales of aviation fuel to scheduled airlines. Large
commercial airlines no longer dominate PST's aviation sales. Part of this
decline was a result of PST's decision not to rebid large
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contracts with de minimis margins and also the discontinuance of business with
airlines who were experiencing financial adversity. In 1994 aviation fuel sales
remained PST's largest revenue generator with a diversity of business from
higher margin/lower volume sales to corporate, charter and cargo operators along
with limited sales to scheduled passenger air carriers. PST will continue to
focus on this same business in 1995 with renewed emphasis on providing
responsive, quality service at reasonable margins.
WHOLESALE FUEL MARKETING. PST's growth segment in 1994 and area of
emphasis for future growth is wholesale fuel marketing. Sales volumes of refined
petroleum products (primarily diesel and gasoline) to commercial, military,
municipal and reseller customers increased 31% over 1993. PST's customer base
grew during 1994 in California, Arizona and Nevada, while new sales territories
in New Mexico and Oregon were being developed. As planned, PST began shipping
pipeline quantities of gasoline and diesel fuel to selected terminals in
California and Arizona during the third quarter of 1994. These pipeline
purchases have reduced PST's average cost of fuel and resulted in greater
profitability and higher sales volumes. During 1995, PST's plan is to continue
sales development in existing areas and to begin shipping via pipeline to
Washington and Oregon. Much of 1995 will be devoted to expanding sales
capabilities by employing additional sales representatives, improving customer
support services, and continuing to develop a formal employee training program.
FACILITY SERVICES. PST owns or leases limited fuel storage facilities or
pipelines in several locations including San Francisco, Oakland and Los Angeles.
During 1994 PST leased terminal storage capacity in San Diego, Sacramento,
Stockton and Chico, California and Phoenix, Arizona. During 1995 PST plans on
leasing additional storage capacity in Seattle, Portland, Albuquerque and Los
Angeles.
ECONOMIC AND COMPETITIVE FACTORS AFFECTING PST. Virtually every refiner
and reseller of refined petroleum products who sell in PST's market areas
(including other large distributors and major oil companies) is a competitor or
potential competitor of PST for the sale of its products. Many of these
companies have greater financial resources and broader marketing capabilities
than PST. In some instances competitors, especially refiners, may have lower
costs for the refined petroleum products they sell and may thus be in a
favorable position to offer product prices to PST's customers lower than those
PST can offer.
ENVIRONMENTAL ISSUES. Since PST owns or leases fuel storage facilities or
pipelines at several locations it is possible that future claims may be made
against PST regarding potential soil and groundwater pollution. Currently no
claim has been asserted. However, see "Legal Proceedings" for discussion of an
order filed by the California Regional Water Quality Control Board, San
Francisco Region. Typically PST operates at locations served by other companies
including major airlines, oil companies and airports, most of which have greater
financial resources and higher levels of operations at the locations served than
the Company.
EMPLOYEES. PST had 23 employees at December 31, 1994, none of whom are
covered by union contracts.
STATEX - OIL AND GAS PRODUCTION AND DEVELOPMENT
The Company's oil and gas operations are conducted by Dallas-based Statex
Petroleum, Inc. (Statex), which is currently wholly-owned. The Company
repurchased the interest of the two managers of Statex during 1994. Statex's
primary business activity is the application of secondary recovery processes to
increase the productivity of producing properties which yield crude oil.
Typically this involves injecting water into reservoirs which have been depleted
of their natural pressure. Since 1991 Statex has augmented the water injection
with polymers to increase
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the recovery efficiencies. Statex concentrates its efforts in areas and
reservoirs which have a proven history of economically attractive secondary
recovery operations. Currently, the main focus is in North Texas.
During 1994 Statex continued to improve the efficiency of its major
property by reducing operating expenses, particularly power and repair costs. As
a result of pricing and capital availability, major expansion projects were
deferred. Consequently, at the end of 1994 gross production from the enhanced
recovery projects averaged 1,225 barrels of oil per day versus 1,500 at the end
of 1993. Statex will delay capital expenditures necessary to produce the proved,
undeveloped reserves in Statex's primary Texas waterflood project until oil
prices stabilize at $2 to $3 per barrel above year-end levels. Plans for 1995
call for extension of the major field by drilling two wells and a seismic survey
to ascertain the potential of deeper reservoirs.
The following table sets forth, by states, well ownership and producing
acreage as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Wells Net Wells Producing Acres
---------------- ---------------- --------------------
Oil Gas Oil Gas Gross Net
------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Alabama 2 - 1.00 - 320 160
Louisiana - 2 - 0.04 22 3
New Mexico - 1 - 0.07 120 8
North Dakota 1 - 1.00 - 304 304
Oklahoma 2 14 0.05 6.16 6,476 1,866
Texas 81 4 70.60 1.60 7,111 4,784
--------------------------------------------------------
TOTAL 86 21 72.65 7.87 14,353 7,125
</TABLE>
The following table sets forth, by states, undeveloped acreage ownership as of
December 31, 1994:
<TABLE>
<CAPTION>
Acres
---------------------
Gross Net
--------- -------
<S> <C> <C>
Oklahoma 1,708 214
Texas 4,878 688
--------- -------
TOTAL 6,586 902
</TABLE>
For further information with respect to the oil and gas properties see
Page 12 of the Company's 1994 Annual Report to Stockholders.
The following table sets forth information related to oil and gas
production for the years ended December 31, 1994 and December 31, 1993:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Average Sales Price:
Oil (Per BBL) $ 16.21 $ 17.64
Gas (Per MCF) 1.99 2.02
Average Production Cost
per Equivalent BBL $ 7.88 $ 9.93
</TABLE>
During 1994 no wells were drilled. In 1993 no exploratory wells were
drilled and eight gross (7.1 net) development wells were drilled, all of which
were producing.
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<PAGE>
As of December 31, 1994 and 1993 Statex was not participating in the
drilling and/or completion of any wells.
Statex's operations are subject to all risks inherent in the exploration
for and production of oil and gas, including blowouts, cratering and fires,
which could result in damage to or destruction of oil and gas wells or
formations, producing facilities or property, or could result in personal injury
or loss of life. Such an event could result in substantial cost to Statex and
could have a material adverse effect upon its financial condition if Statex is
not fully insured against such risk. Statex carries substantial insurance
coverage but may not be fully insured against such risks.
REGULATION. Statex's operations are affected from time to time in varying
degrees by political developments and federal and state laws and regulations. In
particular, oil and gas production operations and returns are affected by tax
and other laws relating to the petroleum industry, changes in such laws and
constantly changing administrative regulations. In addition, oil and gas
operations are subject to interruption or termination by governmental
authorities for ecological and other considerations.
Additionally, in most, if not all, areas where Statex conducts activities,
there are statutory provisions regulating the production of oil and gas. These
provisions allow administrative agencies to promulgate rules in connection with
the operation and production of both oil and gas wells, including the method of
developing new fields, spacing of wells and the maximum daily production
allowable for both oil and gas wells.
ECONOMIC AND COMPETITIVE FACTORS AFFECTING STATEX. Statex is engaged
primarily in the production and sale of crude oil and natural gas directly from
the well to remarketers. Statex has literally hundreds of competitors, most of
which are larger and have greater resources than Statex. Oil and natural gas are
fungible commodities and as such the prices Statex receives for its products are
directly related to the open market price for such products at the time of sale.
These prices generally fluctuate and are for the most part controlled by the
laws of supply and demand. The price for oil is particularly driven by worldwide
production and demand. Statex has virtually no control over the establishment of
prices for its products.
To the extent there should be an oversupply of product and resulting lower
prices, Statex's revenues would be negatively impacted.
EMPLOYEES. Statex had eight employees as of December 31, 1994. None of the
employees are covered by union contracts.
FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
For financial information about business segments, see Pages 6 through 13
of the Company's 1994 Annual Report to Stockholders, which information is
incorporated herein by reference.
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ITEM 2. PROPERTIES
EXECUTIVE OFFICES AND OTHER GROUND FACILITIES
The Company's executive offices and principal administrative offices are
located at 4370 La Jolla Village Drive, Suite 1050, San Diego, California 92122.
The Company leases its executive offices consisting of approximately 6,950
square feet for a period ending in 1998 with two five year options. Annual
average base rent for the Company's executive offices is approximately $195,000.
PST owns a building located at 17742 Preston Road, Dallas, Texas 75252.
PST occupies approximately 8,000 square feet for use as its administrative
offices.
Statex leases approximately 5,000 square feet for executive offices at
1801 Royal Lane, Suite 110, Dallas, Texas 75229 at an approximate annual rental
of $34,000, for a period ending in mid-1995 with a 5-year renewal option at 95%
of current market rates. For information regarding Statex oil and gas properties
see "Business - Oil and Gas Production."
The Company believes that its present properties are adequate for its
business in light of its current operations.
FLIGHT EQUIPMENT
The aircraft owned by the Company as of March 31, 1995 are listed in the
following table.
<TABLE>
<CAPTION>
Type of Aircraft Number Owned
---------------- ------------
<S> <C> <C>
McDonnell Douglas MD-80 7 (a)
British Aerospace BAe146-200 10 (b)
Boeing 747-100 2 (c)
Boeing 737-200 7 (d)
Boeing 737-300 2 (e)
</TABLE>
Notes:
(a) Six MD-80s are leased to USAir for terms expiring from 1998 to 2004.
One is leased to Continental for a term expiring at the beginning of
2008.
(b) These aircraft are all leased to USAir for terms expiring in 2000.
(c) These aircraft are held for sale. They were formerly leased to Pan Am.
(d) The Company owns a one-third interest in each of these aircraft. United
States Airlease and Airlease, Ltd. each also own a one-third interest.
All seven aircraft are leased to Continental for terms expiring in
1996.
(e) One aircraft is leased to Continental for a term expiring at the
beginning of 2008. One aircraft is leased to America West for a term
expiring in 2006.
ITEM 3. LEGAL PROCEEDINGS
In 1992 three related lawsuits were filed against the Company, its
directors and officers by stockholders in the United States District Court for
the Southern District of California and a fourth lawsuit was filed in the United
States District Court for the Central District of Illinois (the Illinois Case).
All of the Southern District of California cases were consolidated into a single
case
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(the California Case). Both the California Case and the Illinois Case were
purported class actions alleging that the defendants made materially false and
misleading statements in public statements in filings with the Securities and
Exchange Commission and other reports, or omitted in such materials information
necessary to make them not misleading, and that the defendants are therefore
liable to the plaintiff class for declines in the price of the Company's common
stock during a defined class period.
In the fall of 1992 the Company obtained dismissals of both the California
Case and Illinois Case. In each instance, however, the court granted the
plaintiffs leave to file an amended petition. In December 1992 the California
case and the Illinois Case were consolidated in the Southern District of
Illinois (the Consolidated Case). In March 1995 the Company reached an agreement
in principle to settle for $5,000,000 all pending class action litigation. The
Company continues to deny all claims in the litigation, and a substantial factor
in the decision to settle was the substantial cost that would be incurred to
litigate the matter through trial. The settlement was recommended by a
disinterested special litigation committee of the Company's Board of Directors,
with the advice of independent counsel.
The effectiveness of the settlement is subject to reaching a definitive
agreement and certain other conditions, including the payment by USAir, Inc. of
its rental payment obligations in the amount of $13,490,000 which were due by
March 31st and April 3rd, 1995 for 15 aircraft leased by the Company to USAir.
These payments were received on time. The settlement is also subject to approval
by the federal court, which will review the fairness of the settlement. As
required by the Federal Rules of Civil Procedure, notice of the settlement will
be given to class members, describing the settlement and permitting class
members to participate in, object to, or opt out of the settlement.
The Company, along with numerous other companies including major airlines,
major oil companies and the owner of the San Francisco International Airport
(most of which have greater financial resources than the Company), is under an
order by the California Regional Water Quality Control Board, San Francisco Bay
Region, to participate in the investigation, remediation and monitoring of
actual or alleged soil and groundwater pollution at San Francisco International
Airport. The Company and other potentially responsible parties have undertaken a
joint compliance effort. No litigation is currently pending concerning this
matter. The Company will vigorously defend against future claims, if any, in
this matter.
A subsidiary of the Company is the defendant in three complaints which
fall under the Alaska Wage and Hour Act. The cases relate to three former
employees who served as travel agents. The Company is vigorously defending these
cases. While the amounts sought approximate $1 million, the Company believes the
amount of ultimate liability will not have a materially adverse effect on the
Company's financial condition.
The Company is a defendant in several other lawsuits related to the
ordinary course of business, none of which are expected to have a materially
adverse effect on the Company's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None.
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ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names, ages and certain additional
information concerning the executive officers of the Company.
<TABLE>
<CAPTION>
Age on
March 31, Positions with the Company
Name 1995 and Principal Occupation
- --------------- --------- --------------------------
<S> <C> <C>
Lawrence A. Guske 50 Vice President - Finance and Chief Financial Officer of the Company (since
1987).
Charles E. Rickershauser, Jr. 66 Chairman of the Board (since 1991), Chief Executive Officer (since 1994)
and Director (since 1984). Previously a partner in the law firm of Fried,
Frank, Harris, Shriver and Jacobsen (1986-1990); Chairman of the Board &
CEO of the Pacific Stock Exchange (1979-1986).
Johanna Unger 46 Vice President and Controller of the Company (since 1988) and Secretary of
the Company (since 1994).
</TABLE>
There are no family relationships between any of the Company's executive
officers. Each of the Company's executive officers are elected annually and
serve at the pleasure of the Board of Directors.
PART II
The information required by Items 5, 6, 7 and 8 of this Part II are hereby
incorporated by reference from pages 6 through 39 of the Company's 1994 Annual
Report to Shareholders.
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
ITEM 6. Selected Financial Data
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
ITEM 8. Financial Statements and Supplementary Data
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<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
The information called for by Part III, Items 10 through 13, is
incorporated by reference from the Company's definitive Proxy Statement which
will be filed with the Securities and Exchange Commission on or prior to April
14, 1995. Certain information concerning the Executive Officers of the Company
is included in Part I, supra. See "Additional Item. Executive Officers of the
Company."
PART IV
ITEM 14. FINANCIAL STATEMENTS, EXHIBITS
AND REPORTS ON FORM 8-K
(a) Financial Statements and Exhibits
1. Financial Statements: See Index to Financial Statements, Page F-1.
2. Exhibits: See Index to Exhibits following Page F-2.
(b) Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned thereunto duly authorized.
DATED: April 12, 1995.
PS GROUP, INC.
(Registrant)
By: /s/ Lawrence A. Guske
-------------------------------------
LAWRENCE A. GUSKE
Vice President - Finance
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, the
report has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated. Each person whose signature
appears below hereby authorizes Lawrence A. Guske and Johanna Unger, and each of
them, as attorneys-in-fact, on his or her behalf, individually and in each
capacity stated below, to sign and file any amendment to this Form 10-K Annual
Report.
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<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ C. E. Rickershauser, Jr. Chairman of the Board, April 12, 1995
- -----------------------------
(C. E. Rickershauser, Jr.) Chief Executive Officer
/s/ Lawrence A. Guske Vice President - April 12, 1995
- -----------------------------
(Lawrence A. Guske) Finance and Chief
Financial Officer
(principal financial
officer)
/s/ Johanna Unger Vice President, Controller April 12, 1995
- -----------------------------
(Johanna Unger) and Secretary (principal
accounting officer)
/s/ Robert M. Fomon Director April 12, 1995
- -----------------------------
(Robert M. Fomon)
/s/ J. P. Guerin Director April 12, 1995
- -----------------------------
(J. P. Guerin)
/s/ Donald W. Killian, Jr. Director April 12, 1995
- -----------------------------
(Donald W. Killian, Jr.)
/s/ Gordon C. Luce Director April 12, 1995
- -----------------------------
(Gordon C. Luce)
</TABLE>
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PS GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
[ITEM 14(A)]
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Page Reference
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Annual
Report to
Form 10-K Stockholders
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Report of Ernst & Young LLP, independent auditors 37
Consolidated statements of financial position at
December 31, 1994 and 1993 18
Consolidated statements of operations for each of
the three years in the period ended
December 31, 1994 19
Consolidated statements of cash flows for each of
the three years in the period ended
December 31, 1994 20
Consolidated statements of stockholders' equity for
each of the three years in the period ended
December 31, 1994 21
Notes to consolidated financial statements 22
Supplementary information:
Quarterly financial information (unaudited) 32
Oil and gas operations (unaudited) 33
Consent of Ernst & Young LLP, independent auditors F-2
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All schedules and any pro-forma financial statements are omitted since the
required information is not present or is not present in amounts sufficient to
require submission of the schedules, or because the information required is
included in the financial statements and notes thereto.
The consolidated statements of financial position of PS Group, Inc. at
December 31, 1994 and 1993 and the related statements of operations, cash flows
and stockholders' equity and the report of Ernst & Young LLP, independent
auditors, are set forth on the pages indicated above in the Annual Report to
Stockholders of PS Group, Inc. for the year ended December 31, 1994 and are
incorporated herein by reference.
F-1
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CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form 10-K
of PS Group, Inc. of our report dated February 3, 1995 except for Note 4, as to
which the date is April 3, 1995, included in the 1994 Annual Report to
Stockholders of PS Group, Inc.
We also consent to the incorporation by reference in (i) the Registration
Statement (Form S-8 No. 2-97926) pertaining to the Employee Incentive Stock
Option Program and the Incentive Stock Option Plan of PS Group, Inc. and (ii)
the Registration Statement (Form S-8, No. 33-45608) pertaining to the Recontek,
Inc. 1987 Employment Stock Option Plan of our report referred to above, with
respect to the consolidated financial statements of PS Group, Inc. incorporated
by reference in the Annual Report (Form 10-K) for the year ended December 31,
1994 filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
San Diego, California
April 12, 1995
F-2
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INDEX TO EXHIBITS
(3)(i) Articles of Incorporation.
(a) Restated Certificate of Incorporation. (Incorporated by reference
to Exhibit (3)(a) to the Company's Current Report on Form 8-K
dated November 18, 1986.)
(b) Certificate of Amendment of Certificate of Incorporation.
(Incorporated by reference to Exhibit (3)(b) to the Company's
Current Report on Form 8-K dated November 18, 1986.)
(c) Certificate of Amendment to Certificate of Incorporation dated May
24, 1990. (Incorporated by reference to Exhibit 3(c) to the
Company's 1990 Annual Report on Form 10-K.)
(d) Certificate of Amendment to Certificate of Incorporation dated
June 12, 1992. (Incorporated by reference to Exhibit 3(d) to the
Company's 1992 Annual Report on Form 10-K.)
(3)(ii) Bylaws (as amended through March 24, 1995.)
(4) Instruments defining the rights of security holders, including
indentures:
(a) Rights Agreement between the Company and Bank of America, N.T. &
S.A. dated as of June 30, 1986. (Incorporated by reference to the
Company's Current Report on Form 8-K dated July 14, 1986.)
(b) Amendment dated September 15, 1988 to Rights Agreement between the
Company and Bank of America. (Incorporated by reference to the
Company's Current Report on Form 8-K dated September 12, 1988.)
(c) Amendment dated September 16, 1990 to Rights Agreement between the
Company and Bank of America. (Incorporated by reference to the
Company's Current Report on Form 8-K dated September 16, 1990.)
(d) Amendment dated December 14, 1990 to Rights Agreement between the
Company and Bank of America. (Incorporated by reference to the
Company's Current Report on Form 8-K dated December 14, 1990.)
(10) Material contracts:
(a) 1984 Stock Incentive Plan of PS Group, Inc. (Incorporated by
reference to Exhibit (19)(a) to the Company's report on Form 10-Q
for the quarter ended June 30, 1985.)
(b) Amendment to 1984 Stock Incentive Plan for PS Group, Inc., as
approved by the Stockholders May 21, 1987. (Incorporated by
reference to Exhibit (10)(g) to the Company's 1987 Annual Report
on Form 10-K.)
(c) Form 1, Form 2, Form 3, and Form 4 of Option Agreement effective
November 17, 1984. (Incorporated by reference to Exhibit (19)(h)
to the Company's report on Form 10-Q for the quarter ended June
30, 1985.)
(d) Retirement Plan for Corporate Officers of PSA, Inc. (now PS Group,
Inc.) and Participating Subsidiaries effective March 12, 1984,
amending and restating the Retirement Plan for Corporate Officers
of Pacific Southwest Airlines.
(e) Employment Agreement dated January 15, 1988 between the Company
and Lawrence A. Guske. (Incorporated by reference to Exhibit 10(q)
to the
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Company's 1988 Annual Report on Form 10-K.) This Agreement is
substantially identical in all material respects to the Employment
Agreement between the Company and Johanna Unger.
(f) Amendment dated April 1, 1989 to Employment Agreement between the
Company and Lawrence A. Guske. (Incorporated by reference to
Exhibit 10(q) to the Company's 1989 Annual Report on Form 10-K.)
This Amendment is substantially identical in all material respects
to Amendment to Employment Agreement between the Company and
Johanna Unger.
(g) Agreement dated December 14, 1990 between Berkshire Hathaway Inc.
("Berkshire") and the Company relating to Berkshire's acquisition
of the Company's Common Stock. (Incorporated by reference to
Exhibit 10(v) to the Company's 1990 Annual Report on form 10-K.)
(h) Form of Indemnification Agreement. (Incorporated by reference to
Exhibit 10(w) to the Company's 1990 Annual Report on Form 10-K as
filed on Form 8 Amendment thereto dated May 29, 1991.)
(i) Arrangement for Pension benefit for Chairman of the Board of the
Company. (Incorporated by reference to Exhibit 10(u) to the
Company's 1992 Annual Report on Form 10-K.)
(j) Amended and Restated Credit Agreement dated June 23, 1994 between
the Company and Bank of America National Trust and Savings
Association.
(k) Letter agreement dated September 28, 1994 between George M.
Shortley and PS Group, Inc. regarding the terms of his resignation
effective October 1, 1994.
(l) Letter agreement dated September 28, 1994 between Dennis C. O'Dell
and PS Group, Inc. regarding the terms of his resignation
effective October 1, 1994.
(12) Computation of Ratios.
(13) 1994 Annual Report to Stockholders.
(21) Subsidiaries.
(23) Consent of Independent Auditors (see page F-2 of Item 14(a) of this Form
10-K).
(27) Financial Data Schedule
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Matters relating to executive compensation plans and arrangements can be found
within the index to exhibits as follows: (10)(a), (10)(b), (10)(c), (10)(d),
(10)(e), (10)(f), (10)(h), (10)(i), (10)(k) and (10)(l).
ALL EXHIBITS INCORPORATED BY REFERENCE ARE FILED IN PS GROUP, INC. DOCUMENTS
COMMISSION FILE NUMBER 1-7141.
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Exhibit (3)(ii)
PS Group, Inc.
1994 Annual Report on Form 10-K
BYLAWS OF
PS GROUP, INC.
(AS AMENDED THROUGH MARCH 24, 1995)
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BYLAWS OF
PS GROUP, INC.
(AS AMENDED THROUGH MARCH 24, 1995)
TABLE OF CONTENTS
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ARTICLE I Offices 1
ARTICLE II Meetings of Shareholders 1
ARTICLE III Directors 4
ARTICLE IV Officers 9
ARTICLE V Seal 11
ARTICLE VI Form of Stock Certificate 11
ARTICLE VII Representation of Shares of
Other Corporations 11
ARTICLE VIII Transfers of Stock 12
ARTICLE IX Lost, Stolen, or Destroyed
Certificates 12
ARTICLE X Record Date 12
ARTICLE XI Registered Shareholders 13
ARTICLE XII Fiscal Year 13
ARTICLE XIII Notices 13
ARTICLE XIV Amendments 14
ARTICLE XV Indemnification and Insurance 14
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(i)
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BYLAWS OF
PS GROUP, INC.
(A DELAWARE CORPORATION)
(AS AMENDED THROUGH SEPTEMBER 21, 1994)
ARTICLE I
OFFICES
The registered office of this Corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware, and the name of the
resident agent in charge thereof is The Corporation Trust Company.
The Corporation may also have offices at such other places, either
within or without the State of Delaware, as the Board of Directors (the "Board")
may from time to time designate or the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 1. Place of Meetings. Meetings of shareholders shall be held
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at such time and place, within or without the State of Delaware, as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
SECTION 2. Annual Meetings. Annual meetings of shareholders shall be
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held on the fourth Tuesday of May, if not a legal holiday, and if a legal
holiday, then on the next secular day following, at 10:00 a.m., or at such other
date and time set by the Board and stated in the notice of the meeting, at which
the shareholders shall elect a Board, and transact such other business as may
properly be brought before the meeting.
SECTION 3. Special Meetings. Special meetings of shareholders, for
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any purpose or purposes, unless otherwise prescribed by applicable law or by the
Certificate of Incorporation, may be called by the Chairman of the Board (or, if
the Board does not appoint a Chairman of the Board, the Chief Executive Officer)
and shall be called by the Chairman of the Board (or, if the Board does not
appoint a Chairman of the Board, the Chief Executive Officer) or Secretary at
the request in writing of a majority of the Board, or if, and only if, the
special meeting is to be called
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for the purpose of removing a director or directors for cause, at the request in
writing of shareholders owning a majority in amount of the entire capital stock
of the Corporation issued and outstanding and entitled to vote. Such request
shall state the purpose or purposes of the proposed meeting and the business
transacted at any such special meeting of shareholders shall be limited to the
purposes set forth in the notice. Shareholders may not request the call of a
special meeting for any purpose other than as provided herein.
SECTION 4. Shareholder Lists. The officer who has charge of the
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stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of shareholders, a complete list of shareholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of each
shareholder and the number of shares registered in the name of each shareholder.
Such list shall be open to the examination of any shareholder, for any
purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or at the place of the meeting, and the list shall also be available at
the meeting during the whole time thereof, and may be inspected by any
shareholder who is present.
SECTION 5. Notice of Meetings. Written notice of each meeting of
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shareholders, whether annual or special, stating the place, date and hour of the
meeting shall be given to each shareholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
SECTION 6. Quorum and Adjournment. The holders of a majority of the
----------------------
stock issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum for holding all meetings of
shareholders, except as otherwise provided by applicable law or by the
Certificate of Incorporation. If it shall appear that such quorum is not
present or represented at any meeting of shareholders, the Chairman of the
meeting shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The Chairman of the meeting may determine
that a quorum is present based upon any reasonable evidence of the presence in
person or by proxy of shareholders holding a majority of the outstanding votes,
including without limitation, evidence from any record of shareholders who have
signed a register indicating their presence at the meeting.
SECTION 7. Voting. The vote of the holders of a majority of the
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capital stock having voting power present in person or represented by proxy at
the meeting and entitled to vote on the subject matter shall decide any question
brought before such meeting, except for the election of directors, which shall
be decided by a
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plurality of the votes cast; unless the question is one upon which by express
provisions of applicable law or of the Certificate of Incorporation, a different
vote is required, in which case such express provision shall govern and control
the decision of such question.
SECTION 8. Proxies. Each shareholder entitled to vote at a meeting
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of shareholders may authorize in writing or by any other means as is provided in
Section 212 of the Delaware General Corporation Law another person or persons to
act for him by proxy, but no proxy shall be voted or acted upon after eleven
months from its date, unless the person executing the proxy specifies therein
the period of time for which it is to continue in force.
SECTION 9. Judges of Election. The Board may appoint a Judge or
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Judges of Election for any meeting of shareholders. Such Judges shall decide
upon the qualification of the voters and report the number of shares represented
at the meeting and entitled to vote, shall conduct the voting and accept the
votes, and when the voting is completed shall ascertain and report the number of
shares voted respectively for and against each position upon which a vote is
taken by ballot. The Judges need not be shareholders, and any officer of the
Corporation may be a Judge on any position other than a vote for or against a
proposal in which he shall have a material interest.
SECTION 10. Notice of Shareholder Business. At an annual meeting of
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the shareholders, only such business shall be conducted as shall have been
brought before the meeting (a) by or at the direction of the Board of Directors
or (b) by any shareholder of the Corporation who complies with the notice
procedures set forth in this Section 10. For business to be properly brought
before an annual meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the Corporation, not less than 30 days nor
more than 60 days prior to the meeting; provided, however, that in the event
that less than 40 days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be timely
must be received not later than the close of business on the 10th day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made. A shareholder's notice to the Secretary shall
set forth as to each matter the shareholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the Corporation's books, of
the shareholder proposing such business, (c) the class and number of shares of
the Corporation which are beneficially owned by the shareholder and (d) any
material interest of the shareholder in such business. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Section 10.
The Chairman of an annual meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before
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the meeting in accordance with the provisions of this Section 10, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
SECTION 11. Consent Solicitation Procedure. In order that the
------------------------------
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or any officer or agent
of the corporation having custody of the book in which proceedings of
stockholders meetings are recorded, to the attention of the Secretary of the
corporation. Delivery shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by applicable
law, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the date on which the Board of Directors adopts the resolution taking such
prior action.
ARTICLE III
DIRECTORS
SECTION 1. Powers. The Board shall have the power to manage or
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direct the management of the property, business and affairs of the Corporation,
and except as expressly limited by law, to exercise all of its corporate powers.
The Board may establish procedures and rules, or may authorize the Chairman of
any meeting of shareholders to establish procedures and rules, for the fair and
orderly conduct of any shareholders meeting, including without limitation,
registration of the shareholders attending the meeting, adoption of an agenda,
establishing the order of business at the meeting, recessing and adjourning the
meeting for the purposes of tabulating any votes and receiving the result
thereof, the timing of the opening and closing of the polls, and the physical
layout of the facilities for the meeting.
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SECTION 2. Number. The Board shall consist of one or more members in
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such number as shall be determined from time to time by resolution of the Board.
Until otherwise determined by such resolution, the Board shall consist of six
members. Directors need not be shareholders, and each director shall serve
until his successor is elected and qualified or until his death, retirement,
resignation or removal.
SECTION 3. Nominations. Nominations of candidates for election as
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directors of the Corporation may be made by the Board or by any shareholder
entitled to vote at a meeting at which one or more directors are to be elected
(an "Election Meeting").
Nominations made by the Board shall be made at a meeting of the Board
or by written consent of directors in lieu of a meeting, not less than thirty
days prior to the date of an Election Meeting. At the request of the Secretary
of the Corporation, each proposed nominee shall provide the Corporation with
such information concerning himself as is required, under the rules of the
Securities and Exchange Commission, to be included in the Corporation's proxy
statement soliciting proxies for his election as a director.
Not less than thirty days prior to the date of an Election Meeting any
shareholder who intends to make a nomination at the Election Meeting shall
deliver a notice to the Secretary of the Corporation setting forth (i) the name,
age, business address, and residence address of each nominee proposed in such
notice, (ii) the principal occupation or employment of each such nominee, (iii)
the number of shares of capital stock of the Corporation which are beneficially
owned by each such nominee and (iv) such other information concerning each such
nominee as would be required, under the rules of the Securities and Exchange
Commission, in a proxy statement soliciting proxies for the election of such
nominees. Such notice shall include a signed consent to serve as a director of
the Corporation, if elected, of each such nominee.
In the event that a person is validly designated as a nominee and
shall thereafter become unable or unwilling to stand for election to the Board,
the Board or the shareholder who proposed such nominee, as the case may be, may
designate a substitute nominee.
If the chairman of the Election Meeting determines that a nomination
was not made in accordance with the foregoing procedures, such nomination shall
be void.
SECTION 4. Class Division and Term. The Board shall be and is
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divided into three classes, Class I, Class II, and Class III, which shall be as
nearly equal in number as possible. Each director shall serve for a term ending
on the date of the third annual meeting following the annual meeting at which
such director was elected; and until his successor shall have been elected and
qualified; provided, however, that each initial director in Class I shall hold
office until the annual
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meeting of stockholders in 1979; each initial director in Class II shall hold
office until the annual meeting of stockholders in 1980; and each initial
director in Class III shall hold office until the annual meeting of stockholders
in 1981.
In the event of any increase or decrease in the authorized number of
directors, (i) each director then serving as such shall nevertheless continue as
a director of the class of which he is a member until the expiration of his
current term, or his prior death, retirement, resignation, or removal, and (ii)
the newly created or eliminated directorships resulting from such increase or
decrease shall be apportioned by the Board among the three classes of directors
so as to maintain such classes as nearly equal as possible.
SECTION 5. Vacancies and Newly Created Directorships. Any vacancy in
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the Board caused by death, resignation, removal or otherwise, or through an
increase in the number of directors of a class, shall be filled by a majority
vote of the remaining directors of the class in which such vacancy occurs, or by
the sole remaining director of that class if only one director remains, or by
the majority vote of the remaining directors of the other two classes if there
be no remaining members of the class in which the vacancy occurs. A director so
elected to fill a vacancy shall serve for the remainder of the then present term
of the office of the class to which he was elected.
SECTION 6. Initial Meeting. The Board shall meet as soon as
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practicable after the annual election of directors and notice of such first
meeting shall not be required.
SECTION 7. Regular Meetings. Regular meetings of the Board shall be
----------------
held without call or notice at such time and place as shall from time to time be
fixed by standing resolution of the Board.
SECTION 8. Special Meetings. Special meetings of the Board may be
----------------
called at any time, and for any purpose permitted by law, by the Chairman of the
Board, the Chief Executive Officer or by the Secretary on the request (whether
written or oral) of any two members of the Board, which meetings shall be held
at the time and place designated by the person or persons calling the meeting.
Notice of the time and place of any such meeting shall be given to the Directors
by the Secretary, or in case of his absence, refusal or inability to act, by any
other officer. Any such notice may be given by mail, by private express courier
service, by telegraph, by telecopier, by telephone, by personal service, or by
any thereof as to different Directors.
Notice to a Director by mail or by private express courier service
shall be deemed to have been given if addressed to such Director at the address
shown upon the records of the corporation for such Director (or as may have been
given to the corporation by such Director for purposes of notice) and deposited
in a United States Post Office or delivered to such private express courier
service, as the case
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may be, at least forty-eight hours before the time of the meeting. Any other
written notice shall be deemed to have been given at the time it is personally
delivered to the recipient or is delivered to a common carrier for transmission,
or actually transmitted to the recipient by the person giving the notice by
electronic means. Oral notice shall be deemed to have been given at the time it
is communicated, in person or by telephone or wireless, to the recipient or to a
person at the office or home of the recipient who may reasonably be expected to
communicate the notice to the recipient.
A notice need not specify the purpose of any special meeting of the
Board of Directors. Whenever any Director has been absent from any meeting of
the Board of Directors for which notice has not been dispensed with, an entry in
the minutes of such meeting to the effect that notice has been duly given shall
be conclusive and incontrovertible evidence that due notice of such meeting was
given to such Director.
SECTION 9. Quorum. At all meetings of the Board a majority of the
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whole Board shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the act of a majority of the Directors present at
any meeting at which there is a quorum shall be the act of the Board, except as
may be otherwise specifically provided by applicable law or by the Certificate
of Incorporation or by these Bylaws. Any meeting of the Board may be adjourned
to meet again at a stated day and hour. Even though no quorum is present, as
required in this Section, a majority of the Directors present at any meeting of
the Board, either regular or special, may adjourn from time to time until a
quorum be had, but no later than the time fixed for the next regular meeting of
the Board. Notice of any adjourned meeting need not be given.
SECTION 10. Fees and Compensation. Each Director and each member of
---------------------
a committee of the Board shall receive such fees and reimbursement of expenses
incurred on behalf of the Corporation or in attending meetings as the Board may
from time to time determine.
SECTION 11. Meetings by Telephonic Communication. Members of the
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Board or any committee thereof may participate in a regular or special meeting
of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, if the standing resolutions fixing the time and
place of a regular meeting or if the notice of the time and place of any regular
or special meeting provides for such participation. Participation in a meeting
pursuant to this Section shall constitute presence in person at such meeting.
SECTION 12. Qualification of Directors. No person can be elected a
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director of this Corporation (whether by vote of the shareholders or the
directors) if, were he or she to be elected a director, less than a majority of
the total number of directors would be Outside Directors. If such a person is
nominated for director, no votes cast for his or her election shall be counted
and, for this purpose, the announcement of the results of any election of
directors, shall be delayed pending the
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determination by the Board referred to below. An Outside Director is a person
who is not: (a) an officer or employee of the Corporation or any relative of an
officer or employee; (b) a Related Person (as that term is defined in Article X
of the Corporation's Certificate of Incorporation) or an officer, director,
employee, associate or affiliate of a Related Person, or a relative of any of
the foregoing; or (c) a person having a direct or indirect material business
relationship with the Corporation. The Board shall be empowered to determine in
its sole and absolute discretion whether a person is or is not an Outside Person
within the meaning of the foregoing.
SECTION 13. Committees. The Board may, by resolution passed by a
----------
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the Directors of the Corporation. The Board may
designate one or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee and if the Board has
not designated one or more alternates (or if such a designation has been made,
in the absence or disqualification of such alternate(s)), the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board to act at the meeting in the place of any such absent or disqualified
member or alternate. Any such committee, to the extent provided in the
resolution of the Board shall have and may exercise all the powers and authority
of the Board in the management of the business and affairs of the Corporation,
and may authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority in
reference to amending the Certificate of Incorporation, adopting an agreement of
merger or consolidation, recommending to the shareholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the shareholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the Bylaws of the Corporation; and,
unless the resolution expressly so provides, no such committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock.
SECTION 14. Action Without Meetings. Unless otherwise restricted by
-----------------------
applicable law or by the Certificate of Incorporation or by these Bylaws, any
action required or permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without meeting if all members of the Board or of
such committee consent thereto in writing as the case may be, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Action shall be taken by the shareholders only at annual or special meetings of
shareholders and shareholders may not act by written consent.
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ARTICLE IV
OFFICERS
SECTION 1. Appointment and Salaries. The Board shall appoint the
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executive officers who shall include a Chief Executive Officer, one or more Vice
Presidents (one or more of whom may be designated as Executive Vice Presidents
or as Senior Vice Presidents), a Secretary, a Controller, and a Treasurer. The
Board may also appoint a Chairman of the Board and a President and the Board or
the Chief Executive Officer may appoint such other officers (including Assistant
Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant
Controllers) as the Board or they may deem necessary or desirable. The Board
shall fix the salaries of all officers appointed by it. Unless prohibited by
applicable law or by the Certificate of Incorporation or by these Bylaws, one
person may be elected or appointed to serve in more than one official capacity.
SECTION 2. Removal and Resignation. Any officer may be removed,
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either with or without cause, by the Board or, in the case of an officer not
appointed by the Board by the Chief Executive Officer (or if the Board does not
appoint a Chief Executive Officer, the President). Any officer may resign at
any time by giving notice to the Board or to the Chief Executive Officer (or if
the Board does not appoint a Chief Executive Officer, the President), or to the
Secretary of the Corporation. Any such resignation shall take effect at the
date of receipt of such notice or at any later time specified therein; and,
unless otherwise specified in such notice, the acceptance of the resignation
shall not be necessary to make it effective.
SECTION 3. The Chairman of the Board. The Board may, at its
-------------------------
election, appoint a Chairman of the Board. If such an officer be elected, he
shall, if present, preside at all meetings of the shareholders and of the Board
of Directors and shall have such other powers and duties as may from time to
time be assigned to him by the Board of Directors.
SECTION 4. The Chief Executive Officer. Subject to such powers, if
---------------------------
any, as may be given by the Board to the Chairman of the Board, if there is such
an officer, the Chief Executive Officer shall be the chief executive officer of
the Corporation with the powers of general manager, and he shall have
supervision over and may exercise general executive powers concerning all of the
operations and business of the Corporation, with the authority from time to time
to delegate to other officers such executive and other powers and duties as he
may deem advisable. If there be no Chairman of the Board or if he is absent,
the Chief Executive Officer shall preside at all meetings of the shareholders
and of the Board, unless the Board appoints another person who need not be a
shareholder, officer, or director of the Corporation, to preside at a meeting of
shareholders.
SECTION 5. The Vice President. In the absence of the Chief Executive
------------------
Officer (or, if the Board does not appoint a Chief Executive Officer, the
President) or
9
<PAGE>
in the event of his inability or refusal to act, the Vice President (or if
there be more than one Vice President, the Vice Presidents in the order of their
rank or, if of equal rank, then in the order designated by the Board or the
Chief Executive Officer (or, if the Board does not appoint a Chief Executive
Officer, the President) or, in the absence of any designation, then in the order
of their appointment) shall perform the duties of the Chief Executive Officer
(or, if the Board does not appoint a Chief Executive Officer, the President) and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Chief Executive Officer (or, if the Board does not appoint
a Chief Executive Officer, the President). The rank of Vice Presidents in
descending order shall be Executive Vice President, Senior Vice President, Vice
President, and Assistant Vice President. The Vice President shall perform such
other duties and have such other powers as the Board may from time to time
prescribe.
SECTION 6. The Secretary. The Secretary shall attend all meetings of
-------------
the Board and all meetings of the shareholders and record all the proceedings of
the meetings of the Corporation and of the Board in a book to be kept for that
purpose and shall perform like duties for the committees when required. He
shall give, or cause to be given, notice of all meetings of shareholders and
special meetings of the Board. He shall have custody of the corporate seal of
the Corporation and he, or an Assistant Secretary, shall have authority to affix
the same to any instrument requiring it and when so affixed, it may be attested
by his signature or by the signature of such Assistant Secretary. The Board may
give general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by his signature. The Secretary shall perform such
other duties and have such other powers as the Board or the Chief Executive
Officer (or, if the Board does not appoint a Chief Executive Officer, the
President) may from time to time prescribe.
SECTION 7. The Treasurer and the Controller. The Treasurer and the
--------------------------------
Controller shall each have custody of the corporate funds and securities and
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all monies and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board. Either the Treasurer or the Controller may
disburse the funds of the Corporation as may be ordered by the Board or the
Chief Executive Officer (or, if the Board does not appoint a Chief Executive
Officer, the President), taking proper vouchers for such disbursements, and
shall render to the Board and Chief Executive Officer (or, if the Board does not
appoint a Chief Executive Officer, the President) an account of transactions and
of the financial condition of the Corporation. The Treasurer and the Controller
each shall perform such other duties and have such other powers as the Board or
the Chief Executive Officer (or, if the Board does not appoint a Chief Executive
Officer, the President) may from time to time prescribe.
SECTION 8. Assistant Officers. An Assistant Officer shall, in the
------------------
absence of the officer to whom he is an assistant or in the event of such
officer's inability or refusal to act (or, if there be more than one such
assistant officer, the assistant
10
<PAGE>
officers in the order designated by the Board or the Chief Executive Officer
(or, if the Board does not appoint a Chief Executive Officer, the President) or,
in the absence of any designation then in the order of their appointment),
perform the duties and exercise the powers of such officer. An Assistant
Officer shall perform such other duties and have such other powers as the Board
or the Chief Executive Officer (or, if the Board does not appoint a Chief
Executive Officer, the President) may from time to time prescribe.
ARTICLE V
SEAL
It shall not be necessary to the validity of any instrument executed
by any authorized officer or officers of the Corporation, that the execution of
such instrument be evidenced by the corporate seal, and all documents,
instruments, contracts, and writings of all kinds signed on behalf of the
Corporation by any authorized officer or officers thereof shall be as effectual
and binding on the Corporation without the corporate seal, as if the execution
of the same had been evidenced by affixing the corporate seal thereto.
ARTICLE VI
FORM OF STOCK CERTIFICATE
Every holder of stock in the Corporation shall be entitled to have a
certificate signed by, or in the name of, the Corporation by the Chief Executive
Officer or a Vice President, and by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation. Any or all of the signatures
on the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of the issue.
ARTICLE VII
REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The Chief Executive Officer or any other officer or officers
authorized by the Board or the Chief Executive Officer are each authorized to
vote, represent, and exercise on behalf of the corporation all rights incident
to any and all shares of any
11
<PAGE>
other corporation or corporations standing in the name of the corporation. The
authority herein granted may be exercised either by any such officer in person
or by any other person authorized so to do by proxy or power of attorney duly
executed by said officer.
ARTICLE VIII
TRANSFERS OF STOCK
Upon surrender to the Corporation or a transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment, or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its books.
ARTICLE IX
LOST, STOLEN, OR DESTROYED CERTIFICATES
The Board may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the Corporation
alleged to have been lost, stolen, or destroyed, upon the making of an affidavit
of the fact by the person claiming the certificate of stock to be lost, stolen,
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to give the Corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen, or destroyed.
ARTICLE X
RECORD DATE
The Board may fix in advance a date, which shall not be more than
sixty days nor less than ten days preceding the date of any meeting of
shareholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent, as a record date for the determination of shareholders entitled to
notice of, and to vote at, any such meeting and any adjournment thereof, or
entitled to receive payment of any such dividend,
12
<PAGE>
or to any such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to give such consent,
and in such case such shareholders, and only such shareholders as shall be
shareholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting and any adjournment thereof, or to receive payment
of such dividend, or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the case may be, not withstanding any
transfer of any stock on the books of the Corporation after any such record date
fixed as aforesaid.
ARTICLE XI
REGISTERED SHAREHOLDERS
The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and, accordingly, shall
not be bound to recognize any equitable or other claim to or interest in such
share on the part of any other person, whether or not it shall have express or
other notice thereof, save as expressly provided by applicable law.
ARTICLE XII
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
Board.
ARTICLE XIII
NOTICES
SECTION 1. Manner of Notice. Whenever under the provisions of the
----------------
statutes or of the Certificate of Incorporation or of these Bylaws notice is
required to be given to any Director, committee member, officer, or shareholder,
it shall not be construed to mean personal notice, but such notice may be given,
in the case of shareholders, in writing, by mail, by depositing the same in the
post office or letterbox, in a postpaid sealed wrapper, addressed to such
shareholder, at such address as appears on the books of the Corporation, or, in
default of other address, to such shareholder at the General Post Office in the
City of Wilmington, Delaware, and, in the case of Directors, committee members
and officers, by telephone, or by mail or by telegram to the last business
address known to the Secretary of the
13
<PAGE>
Corporation, and such notice shall be deemed to be given at the time when the
same shall be thus mailed or telegraphed or telephoned.
SECTION 2. Waiver of Notice. Whenever any notice is required to be
----------------
given under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto.
ARTICLE XIV
AMENDMENTS
The Board shall have the power to make, adopt, alter, amend and repeal
from time to time bylaws of this corporation, subject to the right of the
shareholders entitled to vote with respect thereto to adopt, alter, amend, and
repeal bylaws made by the Board; provided, however, that bylaws shall not be
adopted, altered, amended, or repealed by the shareholders of the Corporation,
except by the vote of the holders of not less than sixty-six and two-thirds
percent (66-2/3%) of the outstanding shares of Common Stock.
ARTICLE XV
INDEMNIFICATION AND INSURANCE
SECTION 1. Right to Indemnification. Each person who was or is a
------------------------
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
or inaction in an official capacity or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent permitted by the laws of Delaware, as the
same exist or may hereafter be amended, against all costs, charges, expenses,
liabilities and losses (including attorneys' fees, judgements, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent
14
<PAGE>
and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in Section 2 hereof,
the Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Article shall
be a contract right and shall include the right to be paid by the Corporation
the expenses incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding; shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers.
SECTION 2. Right of Claimant to Bring Suit. If a claim under Section
-------------------------------
1 of this Article is not paid in full by the Corporation within thirty days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has failed to meet a standard of
conduct which makes it permissible under Delaware law for the Corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is permissible in the circumstances
because he or she has met such standard of conduct, nor an actual determination
by the Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the claimant has not met such standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
failed to meet such standard of conduct.
SECTION 3. Non-Exclusivity of Rights. The right to indemnification
-------------------------
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
15
<PAGE>
SECTION 4. Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability, loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under Delaware law.
SECTION 5. Expenses as a Witness. To the extent that any director,
---------------------
officer, employee or agent of the Corporation is by reason of such position, or
a position with another entity at the request of the Corporation, a witness in
any action, suit or proceeding, he shall be indemnified against all costs and
expenses actually and reasonably incurred by him or her or on his or her behalf
in connection therewith.
SECTION 6. Indemnity Agreements. The Corporation may enter into
--------------------
agreements with any director, officer, employee or agent of the Corporation
providing for indemnification to the full extent permitted by Delaware law.
16
<PAGE>
Exhibit (10)(d)
PS Group, Inc.
1994 Annual Report on Form 10-K
RETIREMENT PLAN FOR CORPORATE OFFICERS
OF
PSA, INC. AND PARTICIPATING SUBSIDIARIES
Recitals
A. The Retirement Plan for Corporate Officers of Pacific Southwest
Airlines was originally adopted, effective July 1, 1970, and was thereafter
amended by Amendment I and Amendment II dated May 23, 1973, and March 14, 1975,
respectively;
B. The Retirement Plan for Corporate Officers of Pacific Southwest
Airlines was amended in its entirety, effective September 1, 1976, and was
thereafter amended by Amendment 1979-I dated July 1, 1979;
C. The Boards of Directors of Pacific Southwest Airlines and its parent
corporation, PSA, Inc., desire to amend and restate the Plan as set forth
herein, effective March 12, 1984.
Article I
Designation of Plan and Definitions
1.01 Title. This Plan will be known as "The Retirement Plan for Corporate
-----
Officers of PSA, Inc. and Participating Subsidiaries."
1.02 Definitions
-----------
"Actuarial Value" means the present value in dollars of any benefit
provided hereunder measured as of any specified date in accordance with the
actuarial assumptions adopted hereunder and as from time to time revised.
"Average Monthly Compensation" for the purposes of this Plan will be the
average of the monthly Compensation of the Participant during those sixty (60)
consecutive calendar months included in the one-hundred twenty (120) calendar
months of employment prior to termination of participation in this Plan in which
the Participant has had the highest monthly Compensation. If a Participant has
less than five (5) Years of Service prior to such termination, "Average Monthly
Compensation" will mean the average of the monthly Compensation of the
Participant during all full calendar months of actual employment. For the
purposes of this subparagraph, any period during which the Participant was on
authorized leave of absence without pay for more than ninety (90) days, will be
disregarded both for the purpose of determining "Average Monthly Compensation"
and for the purpose of determining what months are consecutive.
"Beneficiary" means the person or persons designated to receive the
benefit, if the Participant dies after retirement, where the Participant has
elected to receive his retirement benefits under this Plan in the form set forth
in Section 3.06(b), (c) or (d). A Participant may designate one or more
successive Beneficiaries to receive such benefit in the event of the prior death
of the primary Beneficiary or Beneficiaries. Absent the election of any option
specifically governing a situation, if no Beneficiary will have been designated
by the Participant or if no such Beneficiary survives, any benefit payment
becoming due a Beneficiary under this Plan after the death of the Participant
will be paid
1
<PAGE>
to the first surviving class of the following classes of successive preference
Beneficiaries: (i) The Participant's widow or widower; (ii) the Participant's
surviving children; (iii) the Participant's surviving parents; (iv) the
Participant's surviving brothers and sisters; and (v) the executors or
administrators of the person upon whose death the payment becomes due.
"Board of Directors" means the Board of Directors of PSA, Inc.
"Break in Employment" or "Termination of Employment" means any termination
of employment as an Employee of PSA, Inc. or any of its Participating
Subsidiaries (other than a transfer between such companies) by resignation,
discharge, retirement, or otherwise, except for those periods as set forth in
sub-paragraphs (i) and (ii) in the definition of Years of Service, and failure
to return to work at the completion of one of the authorized periods of absence
set forth in such definition, provided, however, that a termination of such
-------- -------
employment followed by a rehire within six (6) months will not constitute a
"Break in Employment" or "Termination of Employment" unless such termination
resulted from the Employee quitting his employment. Failure to return to work
at the completion of one of the authorized periods of absence set forth in the
definition of Years of Service will, except in the event of the Participant's
death or total and permanent disability during such period, be a "Break in
Employment" as of the date the absence began.
"Compensation" means all regular salary, wages, deferred compensation,
overtime pay, bonuses, commissions and other incentive compensation paid by PSA,
Inc. or a Participating Subsidiary to an Employee, together with any amounts
paid into a plan established pursuant to Section 401(k) of the Internal Revenue
Code equal to amounts of any salary or wage reduction, unless excluded by
specific resolution of the Board of Directors, before deductions on account of
any withholding such as income taxes and social security taxes. Compensation
will not include health and welfare payments, expense account allowances, and
any other such payments, and will not include stock options or stock
appreciation rights. For the purposes of this Plan, "overtime pay" means any
payments made for work in excess of forty (40) hours per week.
"Employee" means a full-time employee of PSA, Inc. or a Participating
Subsidiary, and of any Subsidiary where specifically provided herein.
"Joint and 50% Survivor Annuity" means an annuity for the life of the
Participant with a survivor annuity for the life of the spouse of the
Participant which is equal to one-half (1/2) of the amount of the annuity
payable during the joint lives of the Participant and his spouse and which is
the actuarial equivalent of a single life annuity for the life of the
Participant.
"Officer" means the persons appointed by the Board of Directors as
Officers of PSA, Inc. and the persons holding officer positions in Participating
Subsidiaries who have been designated by the Board of Directors as an "Officer"
for purposes of this Plan.
"Participant" means any person who is or becomes eligible to participate
in this Plan pursuant to Article II.
"Participating Subsidiary" means PSA and any other Subsidiary to which the
benefits of this Plan have been made applicable by action of the Board of
Directors.
"Plan" means the Retirement Plan for Corporate Officers of PSA, Inc. and
Participating Subsidiaries as set forth herein as now in effect or hereafter
amended.
"PSA" means Pacific Southwest Airlines, a California corporation and
Subsidiary, and its corporate predecessor of the same name.
2
<PAGE>
"PSA, Inc." means PSA, Inc. a Delaware corporation.
"Subsidiary" means any corporation more than 50% owned by PSA, Inc. or by
a subsidiary of PSA, Inc.
"Termination of Employment" - see "Break in Employment".
"Years of Service" means one twelfth (1/12th) of the number of full months
(excluding any fractions of months) of actual employment as an Employee of PSA,
Inc. or any Subsidiary, excluding the following periods:
(i) Service in the armed forces of the United States or any of its
Allies during a period of declared national emergency or in time of war,
or in the compulsory military service of the United States, whether during
time of war, or otherwise;
(ii) Any leaves of absence without pay unless waived in writing for
purposes of this Plan by action of the Board of Directors.
(iii) Any period of total and permanent disability without pay, except as
provided for in Section 3.04.
Article II
Eligibility
2.01 Participation Every Officer will become a Participant of this Plan upon
-------------
completion of one Year of Service as an Employee; provided, however, that after
March 12, 1984 an Officer will not become a Participant of this Plan unless,
after notice, he makes the required contributions to participate in any
qualified plan for which he is eligible covering service as an Employee of PSA,
Inc. or a Subsidiary.
2.02 Termination of Participation Participation of a Participant will commence
----------------------------
as specified in Section 2.01 and will continue until his Termination of
Employment.
2.03 Participation After Break in Employment A former Participant who is re-
---------------------------------------
employed and whose employment was terminated by a Break in Employment will be
considered a new Employee for all purposes of this Plan and all prior Years of
Service, both as an Employee and as an Officer, will be disregarded for all
purposes of this Plan.
2.04 Normal Retirement Date The Normal Retirement Date of a Participant will
----------------------
be the first day of the month coinciding with or next following the
Participant's sixtieth (60th) birthday.
2.05 Late Retirement Date With the continuing written consent of PSA, Inc. or
--------------------
his employer Participating Subsidiary, conforming to relevant federal and state
laws, the Late Retirement Date of a Participant may be the first day of the
month subsequent to his Normal Retirement Date.
2.06 Early Retirement Date The Early Retirement Date of a Participant will be
---------------------
the first day of any month selected by such Participant between the date on
which he attains the age of fifty (50) and his Normal Retirement Date, provided
he has completed ten (10) or more Years of Service as an Officer. If such
Participant is under fifty-five (55) years of age on such Early Retirement Date,
he may retire on his Early Retirement Date only with the consent of PSA, Inc. or
his employer Participating Subsidiary; provided, however, that such consent will
not be required in the event of the acquisition, directly or indirectly, by any
person, corporation (other than PSA, Inc.) or other legal entity, acting alone
or in concert with others, of all or substantially all of the assets of PSA or
PSA, Inc., or of securities constituting effective working control of PSA or
PSA, Inc., or any merger or
3
<PAGE>
consolidation of PSA or PSA, Inc., with or into any other corporation (other
than a subsidiary of PSA, Inc.) or other legal entity.
Article III
Retirement Benefits
3.01 Normal Retirement Benefit A Participant who retires on his Normal or Late
-------------------------
Retirement Date and who has completed ten (10) or more Years of Service as an
Officer or who retires on his Normal or Late Retirement Date and is an Officer
on such date, will be entitled to a Normal Retirement Benefit computed pursuant
to this section.
Except as hereinafter provided, the amount of the monthly retirement
benefit payable to such a Participant on the first day of each month for the
life of such a Participant and ending with the benefit for the month during
which his death occurs, will be equal to the following:
(i) Two and one-half percent (2.5%) of the Participant's Average Monthly
Compensation times the Participant's Years of Service (not to exceed
twenty (20) such Years of Service); plus
(ii) Two percent (2%) of the Participant's Average Monthly Compensation
times the Participant's Years of Service in excess of twenty (20) such
Years of Service (not to exceed five (5) such Years of Service).
3.02 Early Retirement Benefit A Participant who is eligible to and who retires
------------------------
on his Early Retirement Date will be entitled to an Early Retirement Benefit
computed pursuant to this section.
The amount of the monthly retirement benefit payable to such Participant
on the first day of each month for the life of such Participant commencing on
his Early Retirement Date and ending with the benefit for the month during which
his death occurs, will be equal to the following:
The amount calculated in accordance with Section 3.01 where such
amount will be based on the Participant's Years of Service as of his Early
Retirement Date
Reduced By
----------
(i) One-sixth percent (1/6%) for each month by which the Participant's
Early Retirement Date precedes his Normal Retirement Date (up to a maximum
of sixty (60) months); and
(ii) One-half percent (1/2%) for each month in excess of sixty (60)
months by which the Participant's Early Retirement Date precedes his
Normal Retirement Date.
3.03 Deferred Vested Retirement Benefit If the participation of any
----------------------------------
Participant in this Plan terminates at a time when he has completed ten (10) or
more Years of Service as an Officer and such termination is for any reason other
than retirement, total and permanent disability or death, such Participant will
be entitled to receive on his Normal Retirement Date a Normal Retirement Benefit
or on his Early Retirement Date, if such Participant satisfies the requirements
of Section 2.06, to receive an Early Retirement Benefit based, however, on his
Years of Service at the time of such termination. A Participant entitled to such
benefit may select any of the optional retirement benefit forms otherwise
authorized under this Plan. In no event will any benefit required by this
Section be paid to a Participant who is entitled to any other benefit under this
Plan.
4
<PAGE>
3.04 Disability Retirement Benefit A Participant who has completed three (3)
-----------------------------
or more Years of Service as an Officer, and becomes totally and permanently
disabled while still an Officer will be entitled on his Normal Retirement Date
to receive a Normal Retirement Benefit or on his Early Retirement Date, if such
Participant satisfies the requirements of Section 2.06, an Early Retirement
Benefit determined pursuant to Section 3.01 or 3.02. The benefit will be
determined using the Participant's
(i) Years of Service accrued on the date of his disability, plus
(ii) Years of Service calculated after such date as if he continued in
active employment to the date of his retirement, up to a maximum number
equal to the Years of Service accrued on the date of disability.
The determination of whether or not a person is totally and permanently
disabled will be made by PSA, Inc. by reference to standards of eligibility
contained in PSA's Long Term Disability Plan, the rules and regulations of the
Federal Social Security Administration, and such other relevant standards as it
may apply in good faith. A Participant eligible for such benefit may select any
optional benefit form otherwise authorized under this Plan.
3.05 Normal, Early or Late Retirement Benefit - Married Participant If a
--------------------------------------------------------------
married Participant retires on his Early, Normal or Late Retirement Date, an
actuarially reduced benefit will be paid in the form of a Joint and 50% Survivor
Annuity unless the Participant elects some other form in accordance with Section
3.06.
3.06 Optional Retirement Benefit A Participant may elect to receive, in lieu
---------------------------
of the Normal, Late or Early Retirement Benefit set forth in Section 3.01 or
Section 3.02 as a single life annuity, retirement benefits of equivalent
Actuarial Value in accordance with one of the following options;
(a) A retirement benefit payable as a single life annuity during the
Participant's life.
(b) An actuarially reduced retirement benefit payable after retirement
and during the Participant's life with the provisions that after his death
the same reduced retirement benefit will be continued to a joint annuitant
named by the Participant, if such joint annuitant is surviving, during the
lifetime of such joint annuitant through the month in which the death of
the joint annuitant occurs.
(c) An actuarially reduced retirement benefit payable for the life of
the Participant. If the Participant should die prior to having received
one hundred twenty (120) monthly payments, payments will be continued to
his designated Beneficiary for the remainder of the one hundred twenty
(120) month certain period. A Participant electing this option may
designate and from time to time change his Beneficiary by filing a written
designation of such beneficiary with PSA, Inc. or his Employer
Participating Subsidiary.
(d) An actuarially reduced retirement benefit payable for the life of
the Participant. If the Participant should die prior to having received
two hundred forty (240) monthly payments, payments will be continued to
his designated Beneficiary for the remainder of the two hundred forty
(240) month certain period. A Participant electing this option may
designate and from time to time change his Beneficiary by filing a written
designation of such Beneficiary with PSA, Inc. or his Employer
Participating Subsidiary.
(e) A Participant who becomes entitled to receive benefits under this
Plan before attaining the age at which he may receive Social Security
benefits may
5
<PAGE>
elect to have the actuarial equivalent of the benefits under this Plan
paid to him in such manner that the monthly benefit after such age will be
decreased in order that he may receive, insofar as practicable, a constant
total monthly amount from his benefits under this Plan and from his
federal Social Security benefits from the date of his retirement for the
remainder of his life.
The Participant must elect one of the foregoing options (or revoke any such
election) at least one (1) year prior to the date his benefit payments commence
or at any time prior to the date his benefit payments commence, if such election
is accompanied by evidence of the Participant's good health satisfactory to PSA,
Inc. Any dispute over whether a Participant is in good health will be resolved
by a medical doctor jointly selected by the Participant and PSA, Inc. or if they
are unable to agree on a medical doctor, by a medical doctor selection jointly
by the Participant's medical doctor and a medical doctor selected by PSA, Inc.
To be effective, any election made hereunder must be made by the Participant
himself, must be in writing on a form or forms prescribed by PSA, Inc., must
name the joint annuitant (if any), must be signed by the Participant and must
fulfill such other requirements PSA, Inc. may establish. The election of one of
the options provided for in this Section will become effective on the date the
Participant's benefit payments hereunder commence and may not be rescinded or
modified thereafter. In the event no option is selected, the retirement benefit
specified in Paragraph (a) will be payable or, if the Participant is married,
the retirement benefit specified in Section 3.05 will be payable.
3.07 Nonduplication of Benefits The amount of all retirement benefits payable
--------------------------
under this Plan will be reduced by the actuarial value of all other benefits, if
any, payable to the Participant from all other retirement plans to which PSA,
Inc. or its Subsidiaries have made contributions, the reduction to be effective
at the earliest date such benefits may become payable. In the case of a
Participant receiving a disability retirement benefit under Section 3.04, such
benefit will also be reduced by any benefits payable to the Participant under
any Long Term Disability Plan of PSA, Inc. or a Subsidiary.
Article IV
Disability and Survivor Benefits
4.01 Total and Permanent Disability Benefit A Participant who has completed
--------------------------------------
three (3) or more Years of Service as an Officer and becomes totally and
permanently disabled while still an Officer will be entitled to continuation of
a percentage of his regular monthly salary, excluding bonuses, less all benefits
payable under any Long Term Disability Plan of PSA, Inc. or a Subsidiary for
which he is eligible and less Social Security disability benefits, if any. The
percentage of salary continued will equal 60% for a period equal to the number
of Years of Service the Participant had as of his date of disability, and will
equal 40% thereafter but not less than the monthly amount to which he would be
entitled as a Normal Retirement Benefit on his Normal Retirement Date. In no
event, however, will the percentage of salary continued be less than $3,000 per
month. This benefit will continue until the earlier of:
(i) his Normal Retirement Date or, if he so elects, his Early Retirement
Date under this Plan.
(ii) the date benefits cease under any Long Term Disability Plan of PSA,
Inc. or a Subsidiary, or
(iii) the date of his death.
6
<PAGE>
The determination of whether or not a person is totally and permanently disabled
will be made by PSA, Inc. by reference to standards of eligibility contained in
PSA's Long Term Disability Plan, the rules and regulations of the Federal Social
Security Administration, and such other relevant standards as it may apply in
good faith.
4.02 Surviving Dependent's Benefit In the event that a Participant dies while
-----------------------------
still an Officer and is survived by a spouse to whom he has been legally married
during one full year immediately preceding the date of his death (a "Surviving
Spouse"), or by one or more children under the age of twenty-two (22) years
("Dependent Children"), a surviving dependents' benefit will be payable in
accordance with this Section.
A. Surviving Spouse In the event that such a Participant is survived by a
----------------
Surviving Spouse or by a Surviving Spouse and one (1) or more Dependent
Children, a monthly benefit will be payable to the Surviving Spouse, commencing
on the first day of the month next following the date of the Participant's death
and ending on the first day of the month in which the death of the Surviving
Spouse occurs. Such benefit will be equal to the retirement benefit which would
have been payable to the Participant's spouse after the Participant's death as a
survivor annuity under the terms of an annuity described in Section 3.06(b) had
such Participant been entitled to receive a Normal Retirement Benefit based,
however on his Years of Service to the date of his death and determined pursuant
to Section 3.01. Such benefit will equal one hundred percent (100%) of the
Participant's actuarially reduced retirement benefit payable under such annuity.
B. Surviving Dependent Children In the event that such a Participant is not
----------------------------
survived by a Surviving Spouse, but is survived by one or more Dependent
Children, or upon the death of a Surviving Spouse who is survived by one or more
Dependent Children, a benefit will be payable to the Dependent Children in a
lump sum. Such benefit will be equal, in the aggregate, to the actuarial
equivalent of the Normal Retirement Benefit to which the Participant would have
been entitled had he retired on his Normal Retirement Date based, however, on
his Years of Service to the date of his death and determined pursuant to Section
3.01 adjusted for amounts which may have been paid to a Surviving Spouse, if
any. The proportion of such aggregate benefits payable to each of the Dependent
Children, if there be more than one, will equal the number of whole months
remaining until such Dependent Child attains the age of twenty-two (22) divided
by the sum of the number of whole months remaining until each Dependent Child
attains the age of twenty-two (22). Any benefit payable under this Section to a
child who has not attained the age of eighteen (18) will be paid to the court-
appointed guardian of such child.
Article V
Rights and Obligations Under the Plan
5.01 In General This Plan is a voluntary undertaking on the part of PSA, Inc.
----------
and Participating Subsidiaries, and nothing contained herein will be deemed to
give any Employee the right to be retained as an Employee or to interfere with
the right of PSA, Inc. or his employer Subsidiary to discharge or rehire any
Employee at any time. Participation in this Plan will not give any Participant
or any other person any right or claim to any benefit hereunder, except to the
extent that such right is specifically set forth herein.
The benefits to be provided under this Plan are to be provided by PSA,
Inc. or the Participating Subsidiary directly, and will be a liability of the
last employer maintaining this Plan. It is not contemplated that a funding
medium will be used to provide benefits
7
<PAGE>
hereunder. This Plan is a contract between the Participants and PSA, Inc. or
its Participating Subsidiary, and it may not be amended or terminated except in
accordance with Section 6.02 hereof.
5.02 Application for Benefits No person will be entitled to any benefits under
------------------------
this Plan unless he makes timely written application to PSA, Inc. for such
benefits. Such application will be timely if filed within three (3) years after
the first day upon which any part of such benefits become payable. Benefits
will commence only after application has been made. The interest of any person
in any benefits for which such timely application is made will be forfeited.
5.03 Forfeiture of Benefits Notwithstanding any other provision or provisions
----------------------
hereof to the contrary, benefits under this Plan are paid with the understanding
that the Participant does not engage or become involved in any occupation or any
activity or relationship which involves the use or disclosure to others of
information or practices acquired or learned while employed by PSA, Inc. or any
of its Subsidiaries and which any of them reasonably regards as confidential or
their property or trade secret or in any other activity detrimental to any of
them. If PSA, Inc. after a thorough investigation finds that a Participant has
violated the provisions of this Section, benefits payable hereunder in respect
of such Participant will be forfeited.
Notwithstanding any other provision or provisions hereof to the contrary,
no benefits will be payable under this Plan with respect to any Participant, if
such Participant confesses to, or is convicted of, an act of fraud, theft or
dishonesty amounting to a felony and arising in the course of or in connection
with, his employment with PSA, Inc. or any of its Subsidiaries and, in such
case, all such benefits will be forfeited.
5.04 Acquisition, Merger or Consolidation In the event of the acquisition,
------------------------------------
directly or indirectly, by any person, corporation (other than PSA, Inc.) or
other legal entity acting alone or in concert with others of all or
substantially all of the assets of PSA, Inc. or a Participating Subsidiary, or
securities constituting effective working control of PSA, Inc. or a
Participating Subsidiary, or any merger or consolidation of PSA, Inc. or a
Participating Subsidiary with or into any other corporation (other than a
subsidiary of PSA, Inc.) or other legal entity, each Participant who is an
Officer at the date of such acquisition, merger or consolidation will be
entitled to receive on his Normal or Late Retirement Date a Normal Retirement
Benefit or on his Early Retirement Date to receive an Early Retirement Benefit
based, however, on such Participant's Years of Service and Average Monthly
Compensation as of the date of such acquisition, merger or consolidation and
determined pursuant to Section 3.01 or 3.02, provided, however this Section will
not be applicable to any Participant whose benefits under this Plan would
otherwise be greater notwithstanding such acquisition, merger or consolidation.
A Participant eligible for such benefit may select any optional benefit form
otherwise authorized under this Plan.
Article VI
Administration; Amendment and Termination
6.01 Plan Administration This Plan will be administered by the Board of
-------------------
Directors.
6.02 Amendment and Termination The Board of Directors reserves the right to
-------------------------
amend or terminate this Plan. Such amendment or termination will be stated in
an instrument in writing, executed by PSA, Inc. in the same manner as this Plan.
Notwithstanding any
8
<PAGE>
other provision or provisions of this Plan to the contrary, this Plan will not
be amended to reduce or cause to be lost any earned or accrued benefit of any
Participant hereunder nor will the termination of this Plan reduce or cause to
be lost any benefit earned or accrued by any Participant as of the date of such
termination.
Article VII
Miscellaneous
7.01 Nonassignability None of the benefits, payments, proceeds or claims of
----------------
any Participant or any other person entitled to receive benefits under this Plan
will be subject to any claim of any creditor and, in particular, the same will
not be subject to attachment or garnishment or other legal process by any
creditor, nor will any such Participant or any other person have any right to
alienate, anticipate, commute, pledge, encumber, or assign any of the benefits
or payment or proceeds which he may expect to receive, contingently or otherwise
under this Plan.
7.02 Participants Bound Any action taken by PSA, Inc. with respect to this
------------------
Plan, or any action authorized by or taken at the direction of PSA, Inc. will be
conclusive upon all Participants and any other person entitled to benefits under
the Plan.
7.03 Receipts of Releases Any payment with respect to participation by any
--------------------
Participant in this Plan, will to the extent thereof, be in full satisfaction of
all claims against PSA, Inc. and its Subsidiaries, and PSA, Inc. may require the
recipient thereof, as a condition precedent to such payment, to execute a
receipt and release to such effect. If any such recipient is determined by PSA,
Inc. to be incompetent by reason of physical or mental disability to give a
valid receipt and release, PSA, Inc. may cause the payment or payments becoming
due to such person to be made to another person for his benefit without
responsibility on the part of PSA, Inc. to follow the application of such funds.
7.04 California Law Governs This Plan will be construed, administered and
----------------------
governed in all respects under and by the laws of the State of California. If
any provision will be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof will continue to be fully
effective.
7.05 Headings and Subheadings Headings and subheadings in this instrument are
------------------------
inserted for convenience only and are not to be considered in the construction
of the provisions hereof.
7.06 Instrument in Counterparts This Plan may be executed in several
--------------------------
counterparts, each of which will be deemed an original, and all such
counterparts will constitute one and the same instrument, which may be
sufficiently evidenced by any one of such counterpart.
7.07 Gender The masculine gender as used herein includes the feminine and
------
neuter genders.
7.08 Successors and Assigns This agreement will inure to the benefit of, and
----------------------
be binding on the parties hereto and their successors and assigns.
Adopted by the Board of Directors as of March 12, 1984.
PSA, Inc.
By /s/ Paul C. Barkley
-------------------
9
<PAGE>
By /s/ Mort Rible
--------------
By action of its Board of Directors the undersigned joins in the adoption of
this instrument as of March 12, 1984.
Pacific Southwest Airlines
By Paul C. Barkley
---------------
By Mort Rible
----------
10
<PAGE>
Exhibit (10)(j)
PS Group, Inc.
1994 Annual Report on Form 10-K
June 23, 1994
PS GROUP, INC.
4370 La Jolla Village Drive, Suite 1050
San Diego, California 92122
Attention: Lawrence A. Guske
Vice President Finance and
Chief Financial Officer
Gentlemen:
Bank of America National Trust and Savings Association ("Bank") is pleased to
amend and restate that certain Credit Agreement dated as of November 5, 1990, as
amended, among PS Group, Inc., a Delaware corporation, ("Company"), the banks
parties thereto, including Bank of America National Trust and Savings
Association (in its capacity as a bank, "Bank"), and Bank of America National
Trust and Savings Association, as agent for such banks (the "Existing
Agreement") on the following terms and conditions:
I. The Letters of Credit.
---------------------
A. Subject to the terms and conditions set forth herein, Bank agrees to
continue outstanding the standby letters of credit set forth on Exhibit
A hereto issued under the Existing Agreement until their current
expiration date or, in the case of any "evergreen" Letter of Credit,
until Bank has notified Company in accordance with the terms thereof
that it does not agree to renew such Letter of Credit.
B. In addition to continuing the above letters of credit, Bank agrees to
issue one additional standby letter of credit on or before July 31,
1994 in a face amount not exceeding $1,000,000 with an expiration not
exceeding one year beyond the date of issuance (such letter of credit,
together with the letters of credit set forth on Exhibit A, the
"Letters of Credit").
<PAGE>
PS GROUP, INC.
June 23, 1994
Page 2
C. This is not a revolving credit, and once any Letter of Credit expires
it may not be renewed or continued. Bank shall be under no obligation
to renew or continue a Letter of Credit beyond its stated expiration.
D. Company shall reimburse any drawings on the Letters of Credit
immediately upon demand.
E. Company agrees to pay to Bank a commission on each outstanding Letter
of Credit in an amount equal to 1% per annum on the daily average
aggregate undrawn face amount thereof, payable quarterly in arrears on
the last day of each calendar quarter.
F. Bank's standard fee schedule shall apply to all Letters of Credit
including, without limitation, issuance, negotiation, amendment and
transfer fees.
G. Any amount not paid when due hereunder shall bear interest at a per
annum rate which is equal to the Reference Rate plus 2 percent.
The Reference Rate is the rate of interest publicly announced from time
to time by Bank in San Francisco, California, as its "reference rate."
It is a rate set by Bank based upon various factors including Bank's
costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which
may be priced at, above, or below such announced rate. Any change in
the reference rate announced by Bank shall take effect at the opening
of business on the day specified in the public announcement of such
change.
H. All interest and commissions shall be calculated on the basis of a 360-
day year and actual days elapsed (which results in more interest and
commissions than if a 365-day year were used).
II. Payments.
--------
A. All payments to Bank shall be made at its Global Payment Operations,
1850 Gateway Boulevard, Concord, California 94520 in same day funds.
<PAGE>
PS GROUP, INC.
June 23, 1994
Page 3
B. Company agrees to make all payments or reimbursements hereunder free
and clear of any deduction for any present or future taxes and agrees
to pay any present or future taxes or charges with respect to such
payments or reimbursements which may be imposed by any government
authority, except net income taxes of Bank imposed by any jurisdiction.
C. Company shall reimburse or compensate Bank, upon demand by Bank, for
all costs incurred, losses suffered or payments made by Bank or any
corporation controlling Bank which are applied or allocated by Bank to
the transaction contemplated herein (all as determined by Bank in its
sole and absolute discretion) by reason of:
1. Any and all present or future reserve, deposit or similar
requirements against (or against any class of or change in or in
the amount of) assets or liabilities of, or commitments or
extensions of credit made hereunder by, Bank;
2. Any and all present or future capital or similar requirements
affecting Bank or any corporation controlling Bank against (or
against any class of or change in or in the amount of) assets or
liabilities or, or commitments or extensions of credit by, Bank;
and
3. Compliance by Bank with any direction, requirements or request from
any regulatory authority, whether or not having the force of law.
III. Security and Support.
--------------------
Company's obligations hereunder shall be secured by a cash collateral
account in an amount equal to the total undrawn and drawn and unreimbursed
amount of Letters of Credit pursuant to the First Amended and Restated
Security Agreement (the "Security Agreement") in the form of Exhibit B
hereto.
IV. Conditions for Line.
-------------------
A. As a condition precedent to this Agreement becoming effective, Bank
must have received all of the following in form and substance
satisfactory to Bank :
<PAGE>
PS GROUP, INC.
June 23, 1994
Page 4
1. Corporate resolutions with certificate of incumbency evidencing the
authority of the officer(s) executing this agreement and the
Security Agreement on behalf of Company.
2. An amendment fee of $28,000.
3. This agreement and the Security Agreement duly executed and
delivered by Company, together with any account opening documents
and deposits in such account required in connection herewith and
therewith.
4. Concurrently with the effectiveness of this agreement, banks other
than Bank that are party to the Existing Agreement will be
assigning their interests thereunder to Bank pursuant to
documentation in form and substance satisfactory to Bank and, in
connection therewith, Borrower will have paid to Bank, for
distribution to such exiting banks, all amounts accrued and owing
under the Existing Agreement to such banks.
B. As a condition precedent to the issuance of the additional Letter of
Credit hereunder:
1. Each representation and warranty set forth in Section V below must
be true and correct (and the request for the Letter of Credit shall
be deemed a further representation that they are true and correct).
2. No Event of Default or event which would, with due notice or lapse
of time or both, constitute an Event of Default shall have
occurred.
3. The wording and beneficiary of the Letter of Credit shall be
satisfactory to Bank.
4. Bank shall have received a duly executed and completed standby
letter of credit application on Bank's standard form.
<PAGE>
PS GROUP, INC.
June 23, 1994
Page 5
V. Representations and Warranties. Company represents and warrants to Bank
------------------------------
that:
A. Company and its Subsidiaries are corporations duly organized and
existing under the laws of their respective jurisdiction of
incorporation and are duly organized to do business and are in good
standing under the laws of all jurisdictions in which they are doing
business except where the failure to so qualify would not result in a
material adverse effect upon (i) the business, operations, properties,
assets, business prospects or condition (financial or otherwise) of
Company and its Subsidiaries, taken as a whole, or (ii) the ability of
Company to perform, or of Bank to enforce, the obligations of Company
hereunder (a "Material Adverse Effect").
B. All corporate action on the part of Company necessary for the
authorization, execution, delivery and performance hereof has been duly
taken.
C. This agreement creates legally valid and binding obligations of
Company, enforceable against Company in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally.
D. All required waivers, consents, permissions or licenses from any
governmental regulatory body to which Company is subject which are
necessary in connection with this agreement and the borrowings
hereunder have been obtained prior to the date hereof.
E. Company's audited consolidated financial statements dated December 31,
1993 and unaudited consolidated financial statements dated March 31,
1994 fairly present the financial position and results of operations of
Company and its consolidated subsidiaries as of the respective dates
thereof. Since March 31, 1994 there has not been any Material Adverse
Effect.
F. The execution, delivery and performance by Company of this agreement do
not and will not (a) violate any provision of law, the certificate of
incorporation or bylaws of Company or any order, judgment or decree of
<PAGE>
PS GROUP, INC.
June 23, 1994
Page 6
any court or other agency of government binding on Company, or (b)
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any agreement or instrument to
which Company is a party or by which any of its properties or assets is
bound.
VI. Affirmative Covenants.
---------------------
So long as credit is available hereunder and until full and final payment
of all of Company's obligations hereunder and any other instruments or
agreements required hereunder, Company shall:
A. Promptly give written notice to Bank of any Event of Default or event
which constitutes (with due notice or lapse of time or both) an Event
of Default.
B. Deliver to Bank, in form and substance satisfactory to Bank:
1. Within 120 days after the end of each fiscal year, Company's
audited consolidated financial statements and unaudited
consolidating financial statements for such year together with an
opinion related to the audited financial statements of an
independent certified accountant containing only such limitations
and qualifications as shall be satisfactory to Bank;
2. Within 60 days after the end of its first three (3) fiscal
quarters, Company's consolidating financial statements for such
quarter; and
3. Within 10 days after the end of each month, a certificate signed by
the chief financial officer, controller, treasurer or an assistant
treasurer of Company stating that Company has been, and continues
to be, in compliance with Paragraph VI.C. during such month.
C. Maintain at all times an aggregate minimum of not less than Three
Million Dollars in cash and cash equivalents on hand, unpledged and
free and clear of all liens and
<PAGE>
PS GROUP, INC.
June 23, 1994
Page 7
encumbrances (including the lien of Bank under the Security Agreement)
whether voluntary or involuntary.
VII. Default. If any of the following events ("Events of Default") shall occur:
-------
A. Any reimbursement of any drawing under any Letter of Credit is not made
when due; or any other payment required to be made hereunder is not
made within three (3) days thereof when due; or
B. Any representation or warranty to Bank in any document related to this
financing proves to be in any respect false or misleading in any
material respect at the time made and shall not have been cured within
fifteen (15) days of the Company having become aware thereof; or
C. Company fails to comply with any other term or provision of this
agreement and such failure shall continue for more than thirty (30)
days after written notice from Bank to Company of the existence and
character of such Event of Default; or
D. Any provision of this agreement or the Security Agreement shall for any
reason cease to be valid and binding on or enforceable against Company
or Company shall so state in writing or bring an action to limit its
obligations or liabilities thereunder; or the Security Agreement shall
for any reason cease to create a valid security interest in the
collateral purported to be covered thereby or such security interest
shall for any reason cease to be a perfected and first priority
security interest; or
E. Any bankruptcy, receivership, reorganization, liquidation, arrangement,
insolvency or dissolution proceeding is commenced in any court by or
against Company or any of its Subsidiaries under the laws of any
jurisdiction;
THEN, at option of Bank, all sums outstanding hereunder or under any
instrument executed in connection herewith shall immediately be due and
payable, together with all commissions and interest thereon, and the Bank
may exercise the remedies available to it under law, in equity and under
<PAGE>
PS GROUP, INC.
June 23, 1994
Page 8
the Security Agreement, all without notice of default, presentment or
demand for payment, protest or notice of nonpayment or dishonor, or other
notices or demands of any kind or character, all of which are hereby
expressly waived.
VIII. Miscellaneous.
-------------
A. The obligation of Company to reimburse Bank for payments made by Bank
under the Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the
terms of this agreement under all circumstances.
B. This agreement shall bind and inure to the benefit of the parties and
their respective successors and assigns; provided, however, Company
-------- -------
shall not assign this agreement or any other instrument or agreement
required hereunder or any rights, duties or obligations of Company
herein and thereunder.
E. Bank may at any time upon written consent by Company, which consent
shall not be unreasonably withheld by Company, sell, assign, grant
participation in, or otherwise transfer (a "Transfer") all or part of
the obligations of Company or any part of them under this agreement,
provided such Transfer shall result in no cost to Company not otherwise
contemplated by this Agreement, and Company agrees each such
disposition shall give rise to their direct obligation to any buyer,
participant or assignee of Bank. Bank may disclose to any such
prospective buyer information in Bank's possession concerning Company,
this agreement.
F. No delay or omission by Bank to exercise any right under this agreement
or under any document related hereto shall impair such right, nor shall
it be construed as a waiver thereof. No waiver of any breach or default
shall be deemed a waiver of any subsequent breach or default. Any
waiver, consent or approval under this agreement must be in writing to
be effective.
G. Company agrees to pay all costs, expenses and attorneys' fees
(including the allocated costs of in-house counsel) incurred in the
preparation, negotiation
<PAGE>
PS GROUP, INC.
June 23, 1994
Page 9
and administration of this agreement and the documents delivered in
connection herewith and incurred in the enforcement and collection
(including without limitation during any bankruptcy or receivership
proceeding) of any indebtedness incurred or outstanding hereunder.
H. This agreement, and all other instruments or agreements attached
hereto, required hereunder, or referred to herein, integrate all the
terms and conditions mentioned herein or incidental hereto, supersede
all oral negotiations and prior existing with respect to the
transactions authorized herein, and are intended by the parties as the
final expression of their agreement with respect to the terms and
conditions set forth herein and in any such other instruments or
agreements. Notwithstanding any provision of any application relating
to any Letter of Credit to the contrary, it is understood that in the
event of any conflict between the terms of any such application and the
terms of this agreement, the terms of this agreement shall control with
respect to events of default, representations and warranties, and
covenants, except that such application may provide for further
warranties relating specifically to the transaction or affairs
underlying such Letter of Credit.
I. All notices, consents and other communications provided for or
permitted hereunder, shall be given in writing and delivered or sent by
hand, by telex, cable or facsimile transmission to each party at its
address set forth below, or to such other addresses as either party may
hereafter designate in writing:
To Borrower
-----------
PS GROUP, INC.
4370 La Jolla Village Drive, Suite 1050
San Diego, California 92122
Attention: Lawrence A. Guske
Vice President Finance and
Chief Financial Officer
Telephone: (619) 546-5004
Facsimile: (619) 546-5017
<PAGE>
PS GROUP, INC.
June 23, 1994
Page 10
To Bank
-------
Bank of America National Trust
and Savings Association
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Attention: Carolyn Simmons
Vice President
Credit Products #5618
Telephone: (213) 228-2832
Facsimile: (213) 228-2756
I. This agreement shall be governed by and construed under the laws of the
State of California.
J. This agreement amends and restates in its entirety the Existing
Agreement. To the extent not amended, restated and set forth herein,
all terms of the Existing Agreement shall be of no further force and
effect from and after the date of this Agreement.
This commitment shall expire unless accepted in writing by Company on or
before June 30, 1994. If and when this agreement is accepted it shall constitute
the final agreement between the parties hereto. Please indicate your acceptance
of the foregoing by signing and returning a copy of this letter to my attention
on or before such date.
Sincerely yours,
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/ Carolyn Simmons
--------------------------
Carolyn Simmons
Vice President
AGREED TO AND ACCEPTED:
PS GROUP, INC.
Date: June 24, 1994
--------------------------
/s/ L.A. Guske
- --------------------------------
By: Lawrence A. Guske
-----------------------------
Title: Vice President - Finance
--------------------------
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
---------
LETTERS OF CREDIT
-----------------
Standby Letter Expiry or Reduction
of Credit No. Face Amount Date
- -------------- ----------- -------------------
<S> <C> <C>
LASB 213492 (a) $ 210,000.00 Evergreen; Bank to give
written notice to cancel
120 days prior to each
February 25
LASB 205060 3,149,499.12 November 11, 1994
2,857,045.63 May 11, 1995
2,542,095.72 November 5, 1995
LASB 205062 3,328,063.34 November 11, 1994
3,019,028.89 May 11, 1995
2,686,222.56 November 5, 1995
</TABLE>
(a) Borrower intends to cancel/surrender by September 30, 1994. This standby
letter of credit backs up the following standby letters of credit issued by
Seattle First National Bank:
<TABLE>
<CAPTION>
Standby Letter Expiry or Reduction
of Credit No. Face Amount Date
- -------------- ----------- -------------------
<S> <C> <C>
66738 $70,000 Evergreen; SFNB to give
written notice to cancel
prior to each January 19
71189 70,000 Evergreen; SFNB to give
written notice to cancel
prior to each January 18
71190 70,000 Evergreen; SFNB to give
written notice to cancel
prior to each January 18
</TABLE>
<PAGE>
EXHIBIT B
---------
FIRST AMENDED AND RESTATED
SECURITY AGREEMENT
1. As security for the payment (in such manner and order as of the
holder may elect) of any drawings under the Letters of Credit (as defined in the
Agreement referred to below) and any extensions or renewals of the same and all
other obligations of the undersigned pursuant to the amended and restated letter
loan Agreement dated as of even date herewith between PS Group, Inc. ("Company")
and Bank of America National Trust and Savings Association ("Bank") (as amended,
restated, extended or otherwise modified from time to time, the "Agreement"),
Company hereby assigns and grants a security interest in all money and property
from time to time delivered to and deposited with Bank in the bank account
identified on Schedule 1 attached hereto, together with all proceeds thereof,
interest, earnings, money, rights to subscribe, new securities or other property
to which Debtor is or may hereafter become entitled to receive on account of
such property (the "collateral").
2. Provided no Default or Event of Default has occurred and is
continuing, Company may instruct Bank to invest the collateral in debt
securities of the following types (the funds at any time and from time to time
so invested and all proceeds thereof being herein called "Invested Assets"):
(a) direct obligations of, or obligations the principal and interest
of which are guaranteed by, the United States of America;
(b) deposit accounts (which may be represented by certificates of
deposits) in Bank and bankers acceptances drawn on and accepted by Bank;
(c) Pacific Horizon Government Agency Funds; and
(d) other debt securities approved by Bank in writing;
provided, however, that (i) in all cases the maturity of any such Invested
- -------- -------
Assets described in clauses (a) and (b) above shall not exceed six months; (ii)
so long as no Default or Event of Default has occurred and is continuing, Bank
shall remit any interest received on the Invested Assets to Company; (iii) so
long as no Default or Event of Default has occurred and is continuing, Bank
shall remit to Company the excess of total Invested Assets over
- 1 -
<PAGE>
the total undrawn and drawn and unreimbursed amount of ALL Letters of Credit;
and (iv) Bank shall be satisfied, in its sole discretion, that the perfection
and continuity of security interest granted hereunder in such Invested Assets
shall not be adversely affected by such investment.
3. Company, upon any Event of Default, authorizes Bank to cause to
collect upon the collateral by transferring to the name of Bank or that of its
nominee any investment securities, cash or any other assets now or hereafter
deposited with it as collateral and further authorizes Bank at its option,
without demand, advertisement or notice to liquidate all or any portion of the
above collateral or any substitute or addition thereto, including evidences of
debt, at public or private sale, at the best price offered and pursue any other
remedy of a secured creditor under the California Uniform Commercial Code.
4. Company waives, to the full extent permissible by law, the
pleading of the statute of limitations as a defense to any demand hereunder, and
hereby consents, without notice, to renewals and extensions of time, to the
release, surrender of substitutions of collateral, and to the acceptance of any
type of further security; and diligence, presentment, protest, demand and notice
of every kind are hereby waived. Company also specifically agrees that it shall
not be necessary for said holder to proceed against anyone liable for the
payment of said obligations, or against any other security therefor, prior to or
as a condition of realizing upon any security held hereunder.
5. Terms not defined herein have the meanings assigned to them in
the Agreement.
6. Company agrees to pay all costs, expenses and attorneys' fees
(including the allocated costs of in-house counsel) incurred in the preparation,
negotiation and administration of this agreement and the documents delivered in
connection herewith. Company hereunder agrees to pay any costs and attorneys'
fees (including the allocated cost of in-house counsel) incurred in the
enforcement and collection (including without limitation during any bankruptcy
or receivership proceeding) of any indebtedness incurred or outstanding
hereunder.
7. No delay or omission by Bank to exercise any right under this
agreement or under any document related hereto shall impair such right, nor
shall it be construed as a waiver thereof. No waiver of any breach or default
shall be deemed a waiver of any subsequent breach or default. Any waiver,
consent or approval under this agreement must be in writing to be effective.
- 2 -
<PAGE>
8. This agreement shall be governed by and construed under the laws
of the State of California.
9. This Agreement amends and restates the Third Amendment Security
Agreement dated as of February 11, 1992 between Company and Bank of America
National Trust and Savings Association, as agent.
IN WITNESS WHEREOF, the parties hereto have entered into this First
Amended and Restated Security Agreement as of June 23, 1994.
PS GROUP, INC.
By: /s/ L. A. Guske
-----------------------------
Title: Vice President - Finance
--------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Carolyn Simmons
-----------------------------
Carolyn Simmons
Vice President
- 3 -
<PAGE>
SCHEDULE 1
BANK DEPOSIT ACCOUNT
- 4 -
<PAGE>
Exhibit (10)(k)
PS Group, Inc.
September 28, 1994 Annual Report on Form 10-K
Mr. George M. Shortley
P.O. Box 2251
Rancho Santa Fe, CA 92067
Dear Mr. Shortley:
Following are the terms of the agreement PS Group, Inc. ("PSG") has reached with
you regarding your resignation as a director, officer and employee of PSG and
various of its subsidiaries:
1. You agree to resign from your positions as President and Chief
Executive Officer and as a director of PSG effective October 1, 1994.
You also agree to resign from any and all positions as a director or
officer you currently hold with any PSG subsidiary.
2. You agree that your Employment Agreement with PSG dated September 16,
1985, as amended March 14, 1988 (the "Employment Agreement") is
cancelled as of October 1, 1994 and thereafter will be of no further
force and effect.
3. On September 30, 1994 you will be paid your unpaid salary through that
date plus accrued vacation.
4. In consideration of (i) the cancellation of your Employment Agreement
and (ii) the Release (as defined in Section 9 below), you will be paid
a total of $837,500 (the "Settlement Amount"). The Settlement Amount
will be paid in a lump sum amount on January 2, 1995.
5. PSG agrees to maintain existing Pacific Mutual whole life insurance
policies (the "Policies") on your life in an amount not less than
$1,130,000 until July 1, 2000. Effective July 1, 2000 and thereafter
PSG will maintain Policies on your life in an amount not less than
$270,000. You will be permitted to designate from time to time the
beneficiaries of this insurance. You agree, however, that if the death
benefit under the Policies exceeds the amount of life insurance to
which you are entitled under this section PSG will be entitled to such
excess.
6. You and your eligible dependents will be entitled to the same medical
and dental insurance you have been provided as an officer of PSG until
October 1, 1997. Thereafter you will be entitled to purchase insurance
under COBRA as is dictated by law (currently a maximum of 18 months).
<PAGE>
Mr. Shortley September 28, 1994
Page 2
7. PSG agrees to review with you periodically the possibility of making a
lump sum payment to you of the then present value of your accrued
benefits under the Retirement Plan for Corporate Officers of PSG (the
"SERP"). You agree that the methodology used by PSG's actuaries on
September 13, 1994 to derive a January 1, 1995 present value of your
retirement benefit (in the amount of $1,006,897 using a currently
appropriate discount rate of 7%) will be used for future calculations.
The first such review will occur in early 1995.
8. After October 1, 1994 you agree to cooperate with PSG from time to
time as is reasonably necessary for the ongoing conduct of PSG's
business in those areas where your assistance due to your prior
employment could be of value.
9. In consideration of the commitments herein made by PSG (including the
Settlement Amount being paid to you pursuant to Section 4 above) you
agree that, except for Retained Rights (as defined below), the
obligations of PSG hereunder are in lieu of any claims you may have
under the Employment Agreement or otherwise in connection with your
positions as an officer, director or employee of PSG and/or any of its
affiliates. Except for your Retained Rights, you also release,
discharge and forever hold harmless PSG and its affiliates from and
against any claims, liability, actions or causes of action (whether in
law or in equity), promises, damages, loss, cost or expense of any
nature whatsoever, known or unknown, fixed or contingent, arising out
of or connected in any way to (i) your employment with PSG or its
affiliates, (ii) your positions as an officer and director of PSG or
any of its affiliates, (iii) the Employment Agreement and (iv) your
resignation provided for herein (collectively the "Release"). You
acknowledge that the Release is a material part of the consideration
PSG is receiving hereunder.
By giving this Release you shall not be deemed to have given up or
waived any rights or claims you may have with respect to (i) PSG's
obligations under this letter agreement, (ii) any rights you have
under the SERP or (iii) any rights to indemnification you have under
Article VII of PSG's Certificate of Incorporation (as in effect as of
the date hereof), Article XV of PSG's Bylaws (as in effect as of the
date hereof) or the Indemnity Agreement between you and PSG dated May
21, 1987. Items (i), (ii) and (iii) of this paragraph are defined
collectively as the "Retained Rights."
<PAGE>
Mr. Shortley September 28, 1994
Page 3
10. You acknowledge that you are familiar with the provisions of
California Civil Code Secton 1542, which provides as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release, which
if known by him must have materially affected his
settlement with the debtor.
You, being aware of such Code Section, hereby expressly waive any
rights you may have thereunder.
Please indicate your acceptance of the terms set forth herein by signing in the
space provided below. Please return one fully executed counterpart to me.
PS GROUP, INC.
/s/ Charles E. Rickershauser, Jr.
- ---------------------------------
Charles E. Rickershauser, Jr.
Chairman of the Board
AGREED TO AND ACCEPTED:
/s/ G. M. Shortley
- ---------------------------------
George M. Shortley
Date: 9-28-94
--------------------------
<PAGE>
Exhibit (10)(l)
PS Group, Inc.
September 28, 1994 Annual Report on Form 10-K
Mr. Dennis C. O'Dell
13373 Gelbourne Place
San Diego, CA 92130
Dear Mr. O'Dell:
Following are the terms of the agreement PS Group, Inc. ("PSG") has reached with
you regarding your resignation as an officer and employee of PSG and various of
its subsidiaries:
1. You agree to resign from your positions as Vice President, General
Counsel and Secretary of PSG effective October 1, 1994. You also agree
to resign from any and all positions as a director or officer you
currently hold with any PSG subsidiary.
2. You agree that your Employment Agreement with PSG dated April 1, 1988,
as amended April 1, 1989 (the "Employment Agreement") is cancelled as
of October 1, 1994 and thereafter will be of no further force and
effect.
3. On September 30, 1994 you will be paid your unpaid salary through that
date plus accrued vacation.
4. In consideration of (i) the cancellation of your Employment Agreement
and (ii) the Release (as defined in Section 9 below), you will be paid
a total of $233,000 (the "Settlement Amount"). The Settlement Amount
will be paid in a lump sum amount on January 2, 1995.
5. PSG agrees to maintain existing Pacific Mutual whole life insurance
policies (the "Policies") on your life in an amount not less than
$650,000 until February 1, 2004. Effective February 1, 2004 and
thereafter PSG will maintain Policies on your life in an amount not
less than $150,000. You will be permitted to designate from time to
time the beneficiaries of this insurance. You agree, however, that if
the death benefit under the Policies exceeds the amount of life
insurance to which you are entitled under this section PSG will be
entitled to such excess.
6. You and your eligible dependents will be entitled to the same medical
and dental insurance you have been provided as an officer of PSG until
October 1, 1995. Thereafter you will be entitled to purchase insurance
under COBRA as is dictated by law (currently a maximum of 18 months).
<PAGE>
Mr. O'Dell September 28, 1994
Page 2
7. PSG agrees to review with you periodically the possibility of making a
lump sum payment to you of the then present value of your accrued
benefits under the Retirement Plan for Corporate Officers of PSG (the
"SERP"). You and PSG agree that the methodology used by PSG's
actuaries on September 13, 1994 to derive a January 1, 1995 present
value of your retirement benefit, but based on an early retirement
date of April 1, 1996 along with the currently appropriate discount
rate, will be used for future calculations. The first such review will
occur in early 1995.
8. After October 1, 1994 you agree to cooperate with PSG from time to
time as is reasonably necessary for the ongoing conduct of PSG's
business in those areas where your assistance due to your prior
employment could be of value.
9. In consideration of the commitments herein made by PSG (including the
Settlement Amount being paid to you pursuant to Section 4 above) you
agree that, except for Retained Rights (as defined below), the
obligations of PSG hereunder are in lieu of any claims you may have
under the Employment Agreement or otherwise in connection with your
positions as an officer or employee of PSG and/or any of its
affiliates. Except for your Retained Rights, you also release,
discharge and forever hold harmless PSG and its affiliates from and
against any claims, liability, actions or causes of action (whether in
law or in equity), promises, damages, loss, cost or expense of any
nature whatsoever, known or unknown, fixed or contingent, arising out
of or connected in any way to (i) your employment with PSG or its
affiliates, (ii) your positions as an officer of PSG or any of its
affiliates, (iii) the Employment Agreement and (iv) your resignation
provided for herein (collectively the "Release"). You acknowledge that
the Release is a material part of the consideration PSG is receiving
hereunder.
By giving this Release you shall not be deemed to have given up or
waived any rights or claims you may have with respect to (i) PSG's
obligations under this letter agreement, (ii) any rights you have
under the SERP or (iii) any rights to indemnification you have under
Article VII of PSG's Certificate of Incorporation (as in effect as of
the date hereof), Article XV of PSG's Bylaws (as in effect as of the
date hereof) or the Indemnity Agreement between you and PSG dated May
24, 1988. Items (i), (ii) and (iii) of this paragraph are defined
collectively as the "Retained Rights."
<PAGE>
Mr. O'Dell September 28, 1994
Page 3
10. You acknowledge that you are familiar with the provisions of
California Civil Code Secton 1542, which provides as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release, which
if known by him must have materially affected his
settlement with the debtor.
You, being aware of such Code Section, hereby expressly waive any
rights you may have thereunder.
Please indicate your acceptance of the terms set forth herein by signing in the
space provided below. Please return one fully executed counterpart to me.
PS GROUP, INC.
/s/ Charles E. Rickershauser, Jr.
- ---------------------------------
Charles E. Rickershauser, Jr.
Chairman of the Board
AGREED TO AND ACCEPTED:
/s/ Dennis C. O'Dell
- ---------------------------------
Dennis C. O'Dell
Date: 9-28-94
----------------------------
<PAGE>
EXHIBIT (12)
PS GROUP, INC.
COMPUTATION OF RATIOS
The debt to equity ratios set forth on page 1 of the Company's 1994 Annual
Report to Stockholders are derived by dividing stockholders' equity into total
debt for each year.
<PAGE>
PS GROUP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
================================================================================
PS GROUP, INC. (NYSE Symbol: PSG), PSG operates three principal business
segments - fuel sales and distribution, aircraft leasing, and oil and gas
production and development. In March 1994 the assets of USTravel Systems Inc.
(USTravel), PSG's travel management segment, were sold. In August 1994 PSG
adopted a plan to close-down or sell a metallic waste recycling plant, the major
asset of Recontek, Inc. (Recontek), a subsidiary of PSG, and in December 1994
the plant was sold. Accordingly travel management and metallic waste recycling
are shown as discontinued operations.
<TABLE>
<CAPTION>
FOR THE YEAR 1994 1993* 1992* 1991* 1990*
- ----------------------------------------------------------------------------------------------------------------
(In thousands, except per share data and ratios)
<S> <C> <C> <C> <C> <C>
Revenues from continuing operations $ 125,448 $ 156,968 $ 145,118 $ 176,751 $ 161,513
Income (loss) from continuing operations
before extraordinary item and
change in accounting (4,582) (8,842) 2,082 3,362 7,389
Income (loss) from discontinued operations 11,818 (12,528) (69,664) (27,303) (17,419)
Extraordinary item (433)
Cumulative effect of change in accounting 2,900
----------------------------------------------------------------
Net income (loss) 7,236 (18,470) (67,582) (23,941) (10,463)
Income (loss) per common share:
Continuing operations (.76) (1.46) .35 .62 1.33
Discontinued operations 1.95 (2.07) (11.68) (5.00) (3.14)
Extraordinary item (.08)
Cumulative effect of change in accounting .48
----------------------------------------------------------------
Net income (loss) per share 1.19 (3.05) (11.33) (4.38) (1.89)
Cash dividends per common share .15 .60 .60
Capital additions 485 1,430 2,451 7,350 7,031
AT YEAR END
- ----------------------------------------------------------------------------------------------------------------
Total assets 361,258 381,206 429,955 497,717 578,775
Total debt 137,225 163,159 190,719 215,140 260,050
Stockholders' equity 129,151 121,899 140,243 190,685 217,903
Stockholders' equity per share 21.28 20.10 23.22 34.90 39.89
Debt to equity ratio 1.06 to 1 1.34 to 1 1.36 to 1 1.13 to 1 1.19 to 1
COMPARABILITY
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Results from continuing operations are not comparable between years due to
unusual items, the most significant of which are: (i) in 1990, a write-down of
$15 million in the carrying value of PSG's marketable securities was charged to
operations, (ii) in 1994, 1993, 1992 and 1991, gains (net of losses) of $ .6
million, $2.5 million, $3 million and $13.7 million, respectively, were recorded
on marketable equity securities' transactions, (iii) in 1994, 1993, 1992 and
1991, PSG recorded write-downs of $7.2 million, $17 million, $9.9 million and
$31.2 million, respectively, related to 747 aircraft previously leased to
airlines which have declared bankruptcy and (iv) in 1994 an accrual of $5
million was made for the conditional settlement of securities litigation. (All
amounts discussed are pretax.)
* Information for the years 1990 through 1993 has been restated to show the
metallic waste recycling segment as a discontinued operation; travel
management was previously shown as a discontinued operation in the 1993
Annual Report to Shareholders.
================================================================================
1.
<PAGE>
LETTER TO STOCKHOLDERS
================================================================================
In 1994 the basic restructuring of PSG resulting from the effort to satisfy the
obligations under our bank credit agreement and thereby avoid foreclosure on our
assets pledged to the banks was completed. As mentioned last year, the assets
of the travel management business were sold in early 1994 and the sales proceeds
were used to repay outstanding borrowed funds and to partially collateralize the
outstanding letters of credit. In April 1994 the borrowing on the 737-300
aircraft leased to America West Airlines, Inc. was completed and the proceeds
were used to complete the cash collateralization of the letters of credit. In
June 1994 the industrial revenue bonds on Recontek's metallic waste recycling
plant, which were backed by a bank letter of credit, were paid in full.
In August 1994 we decided to close-down or sell the metallic waste recycling
plant, which was Recontek's major asset, and thereby record a loss provision for
close-down. In late December 1994 this facility was sold and the sale proceeds
reduced the earlier recorded loss provision. At year end 1994 the loss
provision on the two 747-100 freighter aircraft held for sale was increased by
$7.2 million. Also at year end 1994 a $5 million charge was recorded to reflect
a conditional settlement in March 1995 of the securities litigation filed in
1992.
AIRCRAFT LEASING
While the uncertainties related to the loss-ridden travel management and
metallic recycling businesses were eliminated in 1994 with their sale, the
uncertainty related to PSG's largest area of investment, aircraft leasing,
remains. PSG's largest aircraft lessee, USAir, Inc. (USAir), (16 out of 21.3
aircraft) incurred substantial losses and suffered deteriorating liquidity in
1994. During 1994 USAir proposed a massive cost reduction program to save $1
billion per year ($500 million from wage and benefit costs reductions). In March
1995 USAir announced a preliminary agreement with its pilots union as to a
reported $190 million in annual expense savings for a five year period in
exchange for "financial returns and governance participation." While this is an
important step in USAir's goal to achieve a total of $500 million in annual wage
and benefit savings and while all of USAir's unions have expressed their
commitment to finalize agreements to strengthen USAir, as of April 10, 1995
uncertainty remains as to USAir's future. Continental Airlines, Inc.
(Continental), PSG's second largest aircraft lessee, also recorded losses in
1994 as a result of an unsuccessful low fare, simplified service concept
introduced in new and expanded markets. Continental is now redirecting its
operations and implementing new cost savings programs. If either USAir or
Continental fail in their attempts to reduce expenses and cease to pay rent on
some or all of the aircraft they lease from PSG, there will be a material
adverse impact on PSG. Due to USAir's and Continental's financial condition,
there is uncertainty as to whether PSG will recover its investment in aircraft
leased to them. Consequently, the opinion from PSG's independent auditors on
PSG's 1994 financial statements includes an emphasis paragraph with respect to
such uncertainties. PSG's future will continue to be substantially dependent on
the future of these two airlines, particularly USAir. (See page 16 for
information on the negative impacts on PSG.)
The information reported herein relating to PSG's aircraft lessees was obtained
from published media reports. PSG refers readers to public information
regarding USAir, Continental and America West for further details relating to
their financial condition.
================================================================================
2.
<PAGE>
================================================================================
PSG'S 1994 RESULTS
Comparative results for 1994 versus 1993 for continuing operations, discontinued
operations and net income (loss) are as follows:
<TABLE>
<CAPTION>
(millions) (per share)
-------------------- ----------------------
1994 1993 1994 1993
----------- --------- ---------- --------
<S> <C> <C> <C> <C>
Loss from continuing operations $ (4.6) $ (8.9) $ (.76) $(1.46)
Gain (loss) from discontinued operations:
Travel management 12.7 (7.2) 2.10 (1.19)
Metallic waste recycling (.9) (5.3) (.15) (.88)
----------- --------- ---------- ---------
11.8 (12.5) 1.95 (2.07)
Cumulative effect of change in
accounting for income taxes 2.9 .48
----------- --------- ---------- ---------
Net income (loss) $ 7.2 $(18.5) $ 1.19 $(3.05)
=========== ========= ========== =========
</TABLE>
The following table reflects (in thousands) components of PSG's losses for 1994,
1993 and 1992 (before discontinued operations and taxes) by major business
segment, including marketable securities transactions:
<TABLE>
<CAPTION>
1994/(a)/ 1993/(a)/ 1992/(a)/
---------------------------------------
<S> <C> <C> <C>
Fuel sales and distribution (PS Trading) $ 1,402 $ 1,326 $ 1,252
Aircraft leasing/(b)/ (1,538) (8,644) 1,044
Oil and gas production and development
(Statex Petroleum)/(c)/ 1,381 (1,336) 2,939
Marketable securities/(d)/ 2,486 5,237 8,149
Interest on debt/(e)/ (801) (6,121) (5,642)
Corporate and other/(f)/ (10,111) (3,723) (3,779)
---------- ---------- ----------
$ (7,181) $(13,261) $ 3,963
========== ========== ==========
</TABLE>
(a) Refer to the consolidated financial statements for more information.
(b) Includes aircraft write-downs of $7.2 million in 1994, $17 million in
1993 and $9.9 million in 1992.
(c) Includes a write-down of $1.8 million and a $.7 million loss on oil and
gas property sale in 1993.
(d) Includes interest and dividend income as well as gains and losses on
security transactions.
(e) Excludes interest on aircraft lease financings which is included in the
aircraft leasing segment. Includes foreign exchange losses of $3.9
million and $2 million in 1993 and 1992, respectively.
(f) Includes provisions for settlement of litigation and officers' employment
contracts totaling $6.1 million in 1994, and a $1 million gain on the
sale of a flight training operation in early 1992.
Interest expense (excluding aircraft financings) is shown separately so the
reader can better determine the results of each line of business without the
effect of how it is financed.
================================================================================
3.
<PAGE>
================================================================================
METALLIC WASTE RECYCLING
A year ago we reported that Recontek had been successfully recycling limited
amounts of certain types of metal laden hazardous waste and that the future
challenge was to obtain sufficient customers to increase volume to cover cash
operating expenses. At that time the potential for a small profit was seen.
However, in August 1994 it was decided that sufficient progress was not being
made to justify continuing financial support. A plan to close-down or sell
Recontek's metallic waste recycling plant was adopted and the metallic waste
recycling segment became a discontinued operation. A pretax loss provision of
approximately $3.8 million was recorded in the second quarter of 1994.
Subsequently, an agreement was reached to sell this facility and the sale closed
in late December 1994. With the sale, approximately $2.5 million of the loss
provision was reversed and Recontek's name was changed to PSG Services, Inc.
(PSGS). PSGS is attempting to sell the remaining unused Part B
permits/applications and property. If sold, the estimated sale proceeds will
not be significant. We appreciate the loyal, dedicated former Recontek
employees who assisted in and stayed through the sale process.
PS TRADING AND STATEX PETROLEUM
PS Trading, Inc. (PST), the fuel sales and distribution subsidiary of PSG,
recorded a pre-interest, pretax profit of $1.4 million in 1994, about the same
as in 1993. PST plans to expand its wholesale sales organization in 1995 and
thereby boost revenues and income.
Statex Petroleum, Inc. (Statex), the oil and gas production and development
subsidiary of PSG, improved results over 1993 by recording a pre-interest,
pretax profit of $1.4 million. Statex will delay capital expenditures necessary
to produce the proved, undeveloped reserves in Statex's primary Texas waterflood
project until oil prices stabilize at $2 to $3 per barrel above year-end levels.
LITIGATION SETTLEMENT
In March 1995 PSG reached an agreement in principle to settle for $5 million all
pending class action litigation against PSG and certain of its officers and
directors. In the litigation, which was originally filed as four parallel class
actions in 1992 and later consolidated before a federal court in Illinois, it
was alleged that PSG's filings with the Securities and Exchange Commission and
its informal public statements were misleading with respect to the progress and
prospects of Recontek. The suits were brought on behalf of all persons who
purchased securities of PSG during the period February 25, 1991 through February
20, 1992. PSG continues to deny all claims in the litigation, and a substantial
factor in the decision to settle was the substantial cost that would be incurred
to litigate the matter through trial. The settlement was recommended by a
disinterested special litigation committee of PSG's Board of Directors, with the
advice of independent counsel.
The effectiveness of the settlement is subject to reaching a definitive
agreement and certain other conditions, including the payment by USAir, Inc. of
its rental payment obligations in the amount of $13.5 million, which were due by
March 31st and April 3rd, 1995 for 15 aircraft leased by PSG to USAir. These
payments were received on time. The settlement is also subject to approval by
the federal court, which will review the fairness of the settlement. As
required by the Federal Rules of Civil Procedure, notice of the
================================================================================
4.
<PAGE>
================================================================================
settlement will be given to class members, describing the settlement and
permitting class members to participate in, object to, or opt out of the
settlement.
POTENTIAL RESTRICTION IN USE OF FUTURE TAX BENEFITS
As discussed in Note 8 of the Notes to Consolidated Financial Statements, as of
December 31, 1994, PSG has a federal tax loss operating carryforward of $90.1
million, a California net operating loss carryforward of $19.6 million and
unused investment tax credits of $12.5 million. In addition to the customary
financial and legal difficulties ordinarily involved in using these
carryforwards and credits, there is a special limitation which shareholders
should be aware of that arises when stock ownership changes exceed a
"calculated" 50% over a three year period. The change in ownership calculation,
which is heavily influenced by changes in shares held by owners of 5% or more of
PSG stock, is both complex and confusing. In addition, the issuance of new
equity securities or the buyback of outstanding common stock by PSG would
negatively effect the change in ownership calculation. Therefore, PSG will
likely be constrained in its ability to effect such equity transactions while
there is concern as to the change of ownership calculation. While this test has
not yet been exceeded, the most recent calculation did disclose a change in
ownership of approximately 38% over the three year period ending December 31,
1994. Generally, PSG has no control over either the purchase or sale of shares
by 5% shareholders, however, the resulting effect of such changes could be the
payment by PSG of taxes that would otherwise not be due. As of December 31,
1994 this limitation would theoretically limit PSG's future tax carryforwards
and unused tax credits usage to approximately $4 million per year.
CHANGE IN OFFICERS AND DIRECTORS
Reflecting the reduced operations of PSG, on October 1, 1994 George M. Shortley
resigned as President and CEO and Dennis C. O'Dell resigned as Vice President
and General Counsel. George served PSG and Pacific Southwest Airlines for over
25 years and Dennis served for over 14 years. We thank them both for their
dedicated service and wish them well in their future endeavors. The undersigned
assumed the CEO responsibilities effective October 1, 1994.
Howard P. Allen resigned as a Director of PSG in December 1994. Howard was a
Director for over 15 years. We very much appreciate Howard's dedicated services
and active participation and diligence in fulfilling the Board's
responsibilities. With Howard Allen's resignation, the Board of Directors was
reduced in size to five members.
Sincerely,
/s/ Charles E. Rickershauser, Jr.
CHARLES E. RICKERSHAUSER, JR.
Chairman of the Board and
Chief Executive Officer
April 10, 1995
================================================================================
5.
<PAGE>
FUEL SALES AND DISTRIBUTION
================================================================================
PS Trading, Inc. (PST) operations, which are characterized by large revenues and
small operating margins, are composed of three separate divisions consisting of
aviation fuel sales, wholesale fuel marketing and facility services.
AVIATION FUEL SALES - From its formation in 1980 until 1991, PST's primary
business focus was sales of aviation fuel to scheduled airlines. Large
commercial airlines no longer dominate PST's aviation sales. Part of this
decline was a result of PST's decision not to rebid large contracts with de
minimis margins and also the discontinuance of business with airlines who were
experiencing financial adversity. In 1994 aviation fuel sales remained PST's
largest revenue generator with a diversity of business from higher margin/lower
volume sales to corporate, charter and cargo operators along with limited sales
to scheduled passenger air carriers. PST will continue to focus on this same
business in 1995 with renewed emphasis on providing responsive, quality service
at reasonable margins.
WHOLESALE FUEL MARKETING - PST's growth segment in 1994 and area of emphasis for
future growth is wholesale fuel marketing. Sales volumes of refined petroleum
products (primarily diesel and gasoline) to commercial, military, municipal and
reseller customers increased 31% over 1993. PST's customer base grew during
1994 in California, Arizona and Nevada, while new sales territories in New
Mexico and Oregon were being developed. As planned, PST began shipping pipeline
quantities of gasoline and diesel fuel to selected terminals in California and
Arizona during the third quarter of 1994. These pipeline purchases have reduced
PST's average cost of fuel and resulted in greater profitability and higher
sales volumes. During 1995, PST's plan is to continue sales development in
existing areas and to begin shipping via pipeline to Washington and Oregon. Much
of 1995 will be devoted to expanding sales capabilities by employing additional
sales representatives, improving customer support services, and continuing to
develop a formal employee training program.
FACILITY SERVICES - PST owns or leases limited fuel storage facilities or
pipelines in several locations including San Francisco, Oakland and Los Angeles.
During 1994 PST leased terminal storage capacity in San Diego, Sacramento,
Stockton and Chico, California and Phoenix, Arizona. During 1995 PST plans on
leasing additional storage capacity in Seattle, Portland, Albuquerque and Los
Angeles.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
OPERATING STATISTICS 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gallons of fuel sold (in thousands) /(a)/ 111,855 145,281 112,663 100,040 91,445
Average price per gallon (in cents) /(a)/ 70 73 75 73 86
Employees at year-end 23 24 21 18 18
Spot sales (in thousands of dollars) 819 4,999
</TABLE>
(a) Statistics exclude spot sales. Spot sales are one-time sales of large
blocks of fuel typically with de minimis margins.
================================================================================
6.
<PAGE>
FUEL SALES AND DISTRIBUTION - CONTINUED
================================================================================
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA (in thousands) 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 79,642 $ 106,904 $ 85,450 $ 75,302 $ 84,756
Operating expenses 78,240 105,578 84,198 74,177 82,689
-------------------------------------------------
Income before interest and taxes 1,402 1,326 1,252 1,125 2,067
Identifiable assets at year-end 17,943 15,975 14,161 12,756 13,271
Net assets before debt at year-end/(b)/ 8,033 9,430 7,612 8,978 9,857
Capital additions 64 67 203 153 74
Depreciation and amortization 321 336 366 400 440
Income before interest and taxes as
a percent of revenues 1.8% 1.2% 1.5% 1.5% 2.4%
</TABLE>
(b) Identifiable assets less current liabilities.
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL DATA FOR 1992 THROUGH 1994 AND KNOWN TRENDS
- --------------------------------------------------------------------------------
Revenues decreased 26% during 1994 compared to 1993 due to a 23% decrease in the
gallons of fuel sold and a 4% decrease in the average sales price per gallon.
Most of the volume reduction relates to declines in sales to one airline and the
discontinuance of sales to another airline. This did not have a material affect
on net operating results.
Between 1992 and 1993 operating revenues increased 25% due to a 29% rise in
gallons sold; the increase in gallons sold was partially offset by a 3% decrease
in the average price per gallon. The increase in gallons sold from 1990 through
1993 was the result primarily of enhanced marketing efforts.
Income as a percent of revenues varies because of changing margins on fuel
distribution contracts (largely due to competitive pricing) and the percentage
of lower volume/higher margin customers. With PST now holding more fuel in
inventory, it will be subject to greater variation in profitability due to fuel
price fluctuation. Because of the narrow margins generated by the fuel sales
and distribution activity, substantial increases in revenues are required to
significantly improve this segment's operating results.
================================================================================
7.
<PAGE>
AIRCRAFT LEASING
================================================================================
PSG's aircraft leasing business represents the major portion of its assets and
its largest source of cash flow. Even though PSG has no current intention to
expand its leasing activity, this segment will likely remain the main factor in
PSG's operations. PSG's lease portfolio is comprised of large commercial
aircraft in passenger configuration that are leased to large US airlines whose
primary operations are scheduled passenger service in the continental United
States. All required lease payments were made timely by the lessees in 1994 and
during the first quarter of 1995.
TYPE OF AIRCRAFT LEASES. All of PSG's leases are net leases, which provide that
the lessees bear the direct operating costs and the risk of physical loss of the
aircraft, pay taxes, maintain the aircraft, indemnify PSG against any liability
suffered as the result of any act or omission of the lessee, maintain casualty
insurance in an amount equal to the specific amount set forth in the lease
(which may be less than market value) and maintain liability insurance naming
PSG as an additional insured. In general, substantially all obligations
connected with the operation and maintenance of the leased aircraft are assumed
by the lessee and minimal obligations are imposed upon PSG. The leases also
typically provide that in those limited instances where the lessees have the
voluntary right to terminate the lease, the lessee is obligated to pay PSG a
stipulated sum which would retire any existing indebtedness relating to the
aircraft and otherwise provide PSG with the same economic value it would have
received had the lease continued.
PSG'S AIRCRAFT LESSEES. PSG's aircraft lessees are USAir, Inc. (USAir),
Continental Airlines, Inc. (Continental) and America West Airlines, Inc.
(America West). The information reported herein relating to PSG's aircraft
lessees was obtained from published media reports. PSG refers readers to public
information regarding USAir, Continental and America West for further details
relating to their financial condition. Since PSG's leases are relatively long-
term (the longest lease expires in 2008), PSG is concerned as to both the
current and long-term futures of its three lessees. A summary of the recent
results and current status of each of PSG's lessees follows:
. USAIR leases 16 of PSG's aircraft - six MD-80 aircraft and ten BAe 146-200
aircraft. Since mid-1992 the BAe-146s have been out of service. USAir
recorded additional loss reserves in 1994 against their 18 non-operating
146s (10 of which are leased from PSG). 1994 was a very difficult year for
USAir. Added low fare/low cost competition from Continental (Continental
Lite see below) and another new entrant into some of USAir's markets, two
aircraft accidents with fatalities, which negatively impacted passenger
levels, and a lack of progress in 1994 on reaching agreement with USAir's
labor unions to reduce annual operating costs by $500 million all had
significant impact on increasing USAir's losses in 1994. USAir recorded a
net loss of $716 million in 1994 versus a 1993 loss of $375 million. To
conserve cash during 1994, USAir suspended payment of preferred dividends
and cancelled contracts to purchase new aircraft. The consolidated cash
balance for USAir and its parent totalled $450 million at December 31,
1994. The projected cash balance of USAir at the end of the first quarter
of 1995 is $200 million. USAir also announced the sale in February 1995 of
11 aircraft to be delivered in 1995, which will help reduce operating
expenses. In March 1995, USAir announced a preliminary agreement with its
pilots union as to a reported $190 million in annual expense savings for a
five year period in exchange for "financial returns and
================================================================================
8.
<PAGE>
AIRCRAFT LEASING - CONTINUED
================================================================================
governance participation." While this is an important step in USAir's goal
to achieve a total of $500 million in annual wage and benefit savings and
while all of USAir's unions have expressed their commitment to finalize
agreements to strengthen USAir, as of April 10, 1995 uncertainty remains as
to USAir's future. If USAir fails in its attempt to reduce expenses and
ceases to pay rent on some or all of the aircraft it leases from PSG, there
will be a material adverse impact on PSG. Due to USAir's financial
condition there is uncertainty as to whether PSG will recover its
investment in aircraft leased to USAir.
. CONTINENTAL leases one MD-80 and one 737-300 from PSG as well as seven
older 737-200 aircraft in which PSG has a one-third interest. During 1994
Continental significantly expanded their new low fare service called
Continental Lite. This new service was not successful and was being scaled
back in early 1995. Year-end 1994 results included a charge of about $400
million related to 42 aircraft Continental will phase out of its fleet
(none of which are PSG aircraft) plus charges for other cutbacks.
Continental finished 1994 with approximately $400 million in cash, $110
million of which is restricted as to usage. In addition, new aircraft
scheduled for delivery in 1996 and 1997 were delayed one year and
Continental is also seeking to modify future debt payments. Continental, in
comparison with many other carriers, has a lower cost structure. This
lower cost structure should help sustain Continental as it is working to
increase revenues while it reduces and redeploys part of its fleet. Until
this redirection and cost reduction is successfully completed, there is
uncertainty as to Continental's future. Due to Continental's financial
condition there is uncertainty as to whether PSG will recover its
investment in aircraft leased to Continental.
. AMERICA WEST leases one 737-300 aircraft from PSG. America West completed
its reorganization and emerged from bankruptcy in August 1994. As part of
the reorganization, America West is partially owned by Continental. Both
carriers are implementing various programs to cross feed passengers and
reduce common costs. While both passenger levels and profits have recently
declined, America West has been profitable for eight consecutive quarters
and finished 1994 with total cash of $211 million, of which $29 million was
restricted as to its usage. America West has a lower cost structure, which
should assist in its efforts to solidify its long-term position in the
marketplace.
USED AIRCRAFT MARKET. The number of aircraft offered for sale or lease from all
sources declined during 1994 as new start-up carriers absorbed some of the
excess. Airlines continued to accept new aircraft deliveries for orders placed
several years ago. This triggered additional used aircraft for sale. In
addition, some airlines have been grounding aircraft to reduce costs and/or
pressure their labor unions to consider "give backs" to enable the airlines to
be more cost competitive. Demand for used aircraft generally remains weak.
This is not a favorable environment if PSG should have any of its leased
aircraft prematurely returned before the end of the lease terms. In addition,
because all of PSG's leased aircraft have debt obligations (all non-recourse
debt except for debt on five BAe-146s), PSG would have to continue to make the
principal and interest payments to the aircraft lenders to be able to pursue a
sale or lease of the aircraft in order to maintain or salvage some of PSG's
equity interest. Whether PSG undertook such a course
================================================================================
9.
<PAGE>
AIRCTAFT LEASING - CONTINUED
================================================================================
of action would be dependent on PSG having sufficient liquidity (cash) to
maintain the debt payments and a viable market for the specific type of used
aircraft PSG would be marketing. Currently both of these factors are uncertain.
AIRCRAFT HELD FOR SALE. Since early 1992 PSG has been trying to sell two 747-
100 freighter aircraft formerly leased to Pan American World Airways. These
aircraft have been modified from passenger to freighter configuration. Due to
declining market values, write-downs on these two aircraft since 1991 have
totaled $39.9 million. The level of customer inquiry into the two freighters
has increased significantly in recent months so prospects appear better for sale
in 1995, but there is no assurance that a sale will occur.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
OPERATING STATISTICS (at year-end) 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET AIRCRAFT LEASED/(a)/:
BAe 146-200 aircraft/(b)/ 10.0 10.0 10.0 10.0 10.0
MD-80 aircraft 7.0 7.0 7.0 7.0 7.0
737-200 aircraft 2.3 2.3 2.3 2.3 2.3
737-300 aircraft 2.0 2.0 2.0 2.0 2.0
747-100 aircraft 2.0
747-200 aircraft 2.0
------------------------------
Total aircraft leased 21.3 21.3 21.3 21.3 25.3
Aircraft leased under operating leases/(c)/ 16.3 16.3 16.3 15.3 15.3
Aircraft leased under financing leases/(c)/ 5.0 5.0 5.0 6.0 8.0
Aircraft leased under leveraged leases 2.0
AIRCRAFT HELD FOR SALE - 747-100 2.0 2.0 2.0 2.0
</TABLE>
(a) At December 31, 1994, PSG had a 100% interest in all aircraft except
for a 33% interest in seven 737-200 aircraft.
(b) Non-operating since the spring of 1992.
(c) During 1992, a 737-300 aircraft was reclassified from a financing lease
to an operating lease.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA (in thousands) 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 35,637 $ 35,920 $ 36,412 $ 46,200 $ 49,916
Operating expenses/(d)/ 21,346 31,165 22,544 45,123 12,599
----------------------------------------------------
Income before interest and taxes 14,291 4,755 13,868 1,077 37,317
Identifiable assets at year-end 279,508 302,341 324,719 338,034 382,921
Depreciation and amortization 14,085 13,837 12,394 13,478 12,386
Income before interest and taxes
as a percent of revenues 40.1% 13.2% 38.1% 2.3% 74.8%
</TABLE>
(d) Includes write-downs in 1994, 1993, 1992 and 1991, of $7.2 million, $17
million, $9.9 million and $31.2 million, respectively, related to 747
aircraft.
================================================================================
10.
<PAGE>
AIRCRAFT LEASING - CONTINUED
================================================================================
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL DATA FOR 1992 THROUGH 1994 AND KNOWN TRENDS
- --------------------------------------------------------------------------------
The reduction in revenues in each year from 1992 to 1994 reflects the reduced
revenue recognition associated with aircraft leased under financing leases. The
income declines since 1990 are a result of the reduced revenues and the $7.2
million, $17 million, $9.9 million and $31.2 million write-downs in 1994, 1993,
1992 and 1991, respectively, of 747 aircraft.
The ultimate impact of the sale of the two 747 freighter aircraft, and the
future prospects of USAir, Continental and America West on PSG are unknown. It
is possible that the 747 freighter aircraft will be sold without further losses
and that all of the current aircraft leases will remain with the existing
carriers. On the other hand, (i) it is difficult to predict potential sales
prices for the two 747 freighters (which may be less than current book value)
and (ii) further economic deterioration of PSG's lessees could result in the
return of some or all of the aircraft to PSG or the renegotiation of lease terms
less favorable to PSG. If the aircraft were returned, PSG would be faced with a
choice of maintaining control of the aircraft by continuing to make the
scheduled debt payments or losing control of the aircraft to the lenders who
would seek a buyer of the aircraft. Except for debt of $20.4 million on five
BAe-146s and obligations of $25.9 million on the two 747 freighter aircraft, all
other aircraft are encumbered by debt which is nonrecourse to PSG. If the
lenders took control and sold the aircraft, PSG would likely lose most or all
its equity. If, in the future, PSG has sufficient liquidity after a lessee
defaulted and elected to pay the scheduled debt service to the lender(s), then
PSG would be required to find purchasers or new lessees for the aircraft. To
the extent that sales prices were less than PSG's carrying value or less
favorable lease rates were obtained, PSG would be negatively affected.
================================================================================
11.
<PAGE>
OIL AND GAS PRODUCTION AND DEVELOPMENT
================================================================================
PSG's oil and gas operations are conducted by Dallas-based Statex Petroleum,
Inc. (Statex), which is currently wholly-owned. PSG repurchased the interest of
the two managers of Statex during 1994. Statex's primary business activity is
the application of secondary recovery processes to increase the productivity of
producing properties which yield crude oil. Typically this involves injecting
water into reservoirs which have been depleted of their natural pressure. Since
1991 Statex has augmented the water injection with polymers to increase the
recovery efficiencies. Statex concentrates its efforts in areas and reservoirs
which have a proven history of economically attractive secondary recovery
operations. Currently, the main focus is in North Texas.
During 1994 Statex continued to improve the efficiency of its major property by
reducing operating expenses, particularly power and repair costs. As a result
of pricing and capital availability, major expansion projects were deferred.
Consequently, at the end of 1994 gross production from the enhanced recovery
projects averaged 1,225 barrels of oil per day versus 1,500 at the end of 1993.
Statex will delay capital expenditures necessary to produce the proved,
undeveloped reserves in Statex's primary Texas waterflood project until oil
prices stabilize at $2 to $3 per barrel above year-end levels. Plans for 1995
call for extension of the major field by drilling two wells and a seismic survey
to ascertain the potential of deeper reservoirs.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
OPERATING STATISTICS 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Proved reserves:
Crude oil (Mbbls) 5,082 6,856 8,438 8,776 7,235
Natural gas (MMcf) 3,026 3,737 4,849 6,164 5,714
Undeveloped oil and gas acreage:
Gross/(a)/ 6,586 5,877 6,303 9,187 16,383
Net/(b)/ 902 1,687 2,070 3,654 9,860
Producing wells:
Gross/(a)/ 107 114 126 140 129
Net/(b)/ 81 87 96 104 88
Production:
Crude oil (Mbbls) 405 446 435 447 392
Natural gas (MMcf) 520 467 559 646 623
Wells drilled:
Gross/(a)/ - 8 9 13 13
Net/(b)/ - 7 9 13 11
Average price during year:
Crude oil - per barrel $16.21 $17.64 $20.03 $20.71 $23.66
Natural gas - per thousand cubic feet $1.99 $2.02 $1.68 $1.46 $2.12
Year-end price:
Crude oil - per barrel $16.00 $12.50 $18.00 $18.20 $27.05
Natural gas - per thousand cubic feet $1.50 $2.15 $2.00 $1.60 $1.57
Employees at year-end 8 9 9 9 9
</TABLE>
Mbbls = thousands of barrels MMcf = millions of cubic feet
(a) Gross refers to the total amount owned by all participants.
(b) Net refers to Statex's ownership interest in the gross amount.
================================================================================
12.
<PAGE>
OIL AND GAS PRODUCTION AND DEVELOPMENT - CONTINUED
================================================================================
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
SELECTED FINANCIAL DATA (in thousands) 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 7,686 $ 8,907 $10,483 $10,367 $10,816
Operating expenses 6,305 10,283/(d)/ 7,526 7,041 5,824
---------------------------------------------------
Income (loss) before interest and taxes 1,381 (1,376) 2,957 3,326 4,992
Identifiable assets at year-end 20,536 22,175 26,232 25,072 22,438
Net assets before debt at year-end/(c)/ 19,757 20,950 24,814 23,789 19,928
Capital additions 419 1,360 2,237 6,208 2,782
Depreciation, depletion and amortization 1,990 1,957 2,013 1,905 2,019
</TABLE>
(c) Identifiable assets less current liabilities.
(d) Includes a $1.8 million write-off of oil properties and $.7 million of
loss on sale of oil and gas properties.
- --------------------------------------------------------------------------------
ANALYSIS OF FINANCIAL DATA FOR 1992 THROUGH 1994 AND KNOWN TRENDS
- --------------------------------------------------------------------------------
Revenues were 14% lower in 1994 versus 1993 because the average price of oil was
down 8% and oil production was down 9%. Revenues for 1993 were 15% lower than
1992 due primarily to lower oil prices in 1993 and one-time revenue settlements
that occurred in 1992. As shown by both the average and the year-end crude oil
and natural gas prices above, there has been significant volatility in these
prices.
Operating expenses for 1993 were significantly higher than in 1994 and 1992 due
to a $1.8 million write-off of an oil field which did not respond to water flood
enhancement and $.7 million of losses on the sales of oil and gas properties.
================================================================================
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
================================================================================
RESULTS OF OPERATIONS
Refer to pages 6 through 13 of this Annual Report for a description of each of
PSG's principal business segments, an analysis of financial data from 1992 to
1994 and a discussion of known trends.
REVENUES (EXCEPT FROM SEGMENTS). Interest and dividend income varied in each
year primarily as a result of the annual changes in the amounts of outstanding
cash, marketable securities and notes receivable and the interest rates earned.
Net investment gains in each year resulted from the sale of a portion of the
marketable securities held in PSG's portfolio. These net gains were $.6 million
in 1994, $2.5 million in 1993 and $3 million in 1992. With the sales of
marketable securities in 1994, future results are not expected to yield
significant gains from marketable security transactions.
Included in other revenues in 1992 are the operations of PSG's flight training
business and a $1 million gain on the sale of this business, which occurred in
February 1992.
COSTS AND EXPENSES. The changes in cost of sales from 1992 to 1994 are
primarily a reflection of the change in sales volume of PST. The increase in
depreciation between 1992 and 1993 is due to the mid-year 1992 reclassification
of a 737-300 aircraft lease from financing to operating and a reduction in the
residual value of the BAe-146 aircraft made in 1993. The increase in general
and administrative expense for 1994 is largely due to the accrual (with payment
in January 1995) related to the cancellation of employment contracts with two
former PSG officers who have resigned and increased legal expenses related to
the securities litigation described below. General and administrative expenses
decreased from 1992 to 1993 due to a one-time reduction in PSG's corporate
employee benefits expense. The aircraft write-downs relate to two 747-100
aircraft held for sale which were written-down to the estimated market value at
each year-end. In early 1995 PSG conditionally settled an outstanding
securities litigation for $5 million. Refer to Note 4 of Notes to the
Consolidated Financial Statements for details of the settlement. Interest
expense varied each year due to changes in the level of outstanding debt and
changes in the average interest rate. Included in interest expense are yen
foreign exchange losses of $3.9 million and $2 million in 1993 and 1992,
respectively. All yen denominated debt was repaid in June 1993.
PROVISION (CREDIT) FOR TAXES. Refer to Notes 1 and 8 of Notes to the
Consolidated Financial Statements for an explanation of the elements included in
the provision (credit) for taxes and for a discussion of the effects of adopting
the Financial Accounting Standards Board's Statement No. 109, "Accounting for
Income Taxes" in 1993.
FINANCIAL CONDITION
Refer to the Consolidated Statements of Cash Flows which reflects the various
components of PSG's operating, financing and investing activities.
================================================================================
14.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - CONTINUED
================================================================================
At December 31, 1994 PSG's principal source of liquidity was cash and cash
equivalents of $22.8 million, which represented a $17.6 million increase from
December 31, 1993. The major components of this change in cash are as follows:
Cash flows from operating activities: PSG's primary source of cash was
------------------------------------
provided by operating activities. While PSG recorded a net loss from
continuing operations of $4.6 million in 1994, the elimination of non-cash
items (the most significant of which was depreciation) resulted in positive
cash flow from operations of $16.2 million.
Cash flows from financing activities: The net reduction in debt in 1994
------------------------------------
was $23.4 million after subtracting the effect of a new financing for $13.5
million discussed below.
Cash flows from investing activities: During 1994 PSG generated $4.9
------------------------------------
million from the sale of marketable securities. Capital additions during 1994
were only $.5 million. Net cash of $7.7 million was used to collateralize
outstanding letters of credit.
Discontinued operations: Discontinued operations generated a net of $23.7
-----------------------
million during 1994 largely due to the cash proceeds of $40 million received
on the sale of USTravel, which was partially offset by $15 million used to
repay Recontek's Resource Recovery Bonds.
In mid-1993 PSG refinanced five MD-80 aircraft. Out of the proceeds of the new
$59.7 million debt, PSG repaid existing aircraft debt in the amount of $25.1
million and repaid $29.9 million of borrowed funds under the bank credit
agreement. The debt repaid included a note denominated in yen, which when
repaid, eliminated all of PSG's foreign exchange exposure.
All the net proceeds received from the sale of USTravel on March 14, 1994 (see
Note 2 of Notes to the Consolidated Financial Statements) were applied against
the bank credit agreement. With the application of these net proceeds, all
borrowed funds (approximately $21.1 million) were repaid and approximately $16.4
million was applied to provide a cash collateral account to secure the $22.7
million of the then outstanding letters of credit.
In April 1994 PSG borrowed $13.5 million secured by a Boeing 737-300 which is on
long-term lease to America West. With the consummation of this borrowing, the
net proceeds of $12.7 million were used to complete the collateralization of the
remaining letters of credit and to pay $5 million of federal income taxes
related to an IRS audit for the years 1988 through 1991. The remaining cash
proceeds were used to increase PSG's working capital.
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 operation. The amended and restated bank
credit agreement, which only covers letters of credit, expires on November 4,
1995. At December 31, 1994 $6.9 million of letters of credit were outstanding
under the bank credit agreement, all of which were cash collateralized.
================================================================================
15.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - CONTINUED
================================================================================
PSG's aircraft lease portfolio represents the major portion of PSG's assets and
its largest source of cash flow. The lease portfolio of 21.3 equivalent
aircraft is dominated by 16 aircraft leased to USAir including ten BAe-146
aircraft that are grounded. Refer to pages 8 through 10 for a discussion of
USAir.
If USAir's financial condition should deteriorate to a point where it sought
protection from its creditors, it is almost certain USAir would reject the
leases for the ten BAe-146 aircraft it leases from PSG. All lease payments due
from USAir are current through April 3, 1995. If subsequent to April 3, 1995,
USAir were to cease paying rent on the ten BAe-146 leased to it and PSG did not
continue to make the related debt payments, PSG's remaining 1995 net cash flow
would be reduced by approximately $3.6 million (rent receipts of $7.7 million
less debt payments of $4.1 million). In addition, if the ten BAe-146 aircraft
were returned, PSG would likely sustain a major loss on disposition of these
aircraft which had a net book value of approximately $73.9 million at the end of
1994. The recourse debt applicable to these ten aircraft totals approximately
$20.4 million and the non-recourse debt totals approximately $20.2 million at
December 31, 1994. The six MD-80 aircraft leased to USAir had a net book value
of approximately $93.6 million at the end of 1994. The total non-recourse debt
applicable to these six MD-80's totaled $54.9 million at December 31, 1994. If
subsequent to April 3, 1995 USAir were to cease paying all rent to PSG and PSG
did not continue to make the related debt payments, PSG's remaining 1995 annual
net cash flow would be reduced by approximately $4.1 million (rent receipts of
$16.8 million less debt payments of $12.7 million).
If USAir were to default under its leases with PSG, a decision would be required
as to whether PSG desired to maintain control of the aircraft. If PSG agreed to
continue to make the principal and interest payments (P & I payments), PSG would
likely have the opportunity to sell or re-lease the aircraft if the lenders so
agreed. Without such action by PSG the lenders would take control of and market
the returned aircraft and PSG would relinquish its equity interest in the
aircraft. Subsequent to April 3, 1995 the remaining 1995 P & I payments are
$8.6 million for the six MD-80s and $4.1 million for the ten BAe-146s leased to
USAir. The dilemma for PSG if an aircraft default were to occur is does PSG
have sufficient cash to continue to make P & I payments while no rent is being
received from the lessee and is it financially prudent to continue to make P & I
payments.
As discussed in Note 8 of the Notes to Consolidated Financial Statements, as of
December 31, 1994, PSG has a federal tax loss operating carryforward of $90.1
million, a California net operating loss carryforward of $19.6 million and
unused investment tax credits of $12.5 million. In addition to the customary
financial and legal difficulties ordinarily involved in using these
carryforwards and credits, there is a special limitation which shareholders
should be aware of that arises when stock ownership changes exceed a
"calculated" 50% over a three year period. The change in ownership calculation,
which is heavily influenced by changes in shares held by owners of 5% or more of
PSG stock, is both complex and confusing. In addition, the issuance of new
equity securities or the buyback of outstanding common stock by PSG would
negatively effect the change in ownership calculation. Therefore, PSG will
likely be constrained in its ability to affect such equity transactions while
there is concern as to the change of
================================================================================
16.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - CONTINUED
================================================================================
ownership calculation. While this test has not yet been exceeded, the most
recent calculation did disclose a change in ownership of approximately 38% over
the three year period ending December 31, 1994. Generally, PSG has no control
over either the purchase or sale of shares by 5% shareholders, however, the
resulting effect of such changes could be the payment by PSG of taxes that
would otherwise not be due. As of December 31, 1994 this limitation would
theoretically limit PSG's future tax carryforwards and unused tax credits usage
to approximately $4 million per year.
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 capital needs of PSG in both the short and long-term. PSG's
planned capital additions for 1995, primarily for oil and gas development
activities, are approximately $1 million. If oil prices stabilize at $2 to $3
per barrel above current levels, then additional drilling expenditures would be
undertaken.
================================================================================
17.
<PAGE>
PS GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 1994 AND 1993
(IN THOUSANDS EXCEPT PER SHARE AMOUNT)
================================================================================
<TABLE>
<CAPTION>
1994 1993*
----------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,780 $ 5,133
Marketable securities, pledged 1,113 4,001
Accounts receivable 16,934 17,075
Notes receivable 1,370 4,345
Current portion of aircraft leases, pledged 5,487 4,905
Fuel inventory 3,363 1,327
Prepaid expenses and other current assets 4,939 2,291
Net investment in discontinued travel operation 15,313
----------------------
Total current assets 55,986 54,390
Oil and gas property and other equipment, at cost 42,733 42,564
Less accumulated depreciation, depletion and amortization (21,652) (19,519)
----------------------
21,081 23,045
Aircraft under operating leases, at cost, pledged 247,544 247,544
Less accumulated depreciation (112,611) (98,526)
----------------------
134,933 149,018
Investment in aircraft financing leases, pledged 101,248 104,881
Aircraft held for sale and other assets, substantially pledged 48,010 49,872
----------------------
$ 361,258 $ 381,206
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,396 $ 6,260
Accrued interest 3,933 4,150
Accrued legal settlement 5,000
Other accrued liabilities 9,404 3,499
Income taxes payable 4,944 2,224
Current portion of long-term obligations 15,151 38,672
Net current liabilities of discontinued waste recycling operation 869 1,361
----------------------
Total current liabilities 45,697 56,166
Net long-term liability of discontinued waste recycling operation 13,984
Long-term obligations 122,074 124,487
Deferred income taxes 32,840 34,491
Other liabilities 31,496 30,179
Commitments and contingencies
Stockholders' equity:
Preferred stock, 1,000 shares authorized, none issued
Common stock, par value $1 per share, 10,500 shares
authorized, 6,068 shares issued and outstanding
(6,065 in 1993) 6,068 6,065
Additional paid-in capital 98,420 98,407
Retained earnings 24,663 17,427
----------------------
Total stockholders' equity 129,151 121,899
----------------------
$ 361,258 $ 381,206
======================
</TABLE>
*Restated as described in Note 1.
================================================================================
See accompanying notes to consolidated financial statements.
18.
<PAGE>
PS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
===============================================================================
<TABLE>
<CAPTION>
1994 1993* 1992*
----------------------------------------
<S> <C> <C> <C>
Continuing operations:
Revenues:
Fuel sales and distribution $ 79,642 $ 106,904 $ 85,450
Aircraft leasing 35,637 35,920 36,412
Oil and gas production and development 7,683 8,907 10,483
Interest, dividends and net investment gains 2,486 5,237 8,149
Other 4,624
----------------------------------------
125,448 156,968 145,118
----------------------------------------
Cost and expenses:
Cost of sales 81,234 112,624 90,941
Depreciation, depletion and amortization 16,500 16,247 15,272
General and administrative expenses 6,075 4,879 6,520
Aircraft write-downs 7,190 17,000 9,933
Settlement of securities litigation 5,000
Interest expense 16,630 19,479 18,489
----------------------------------------
132,629 170,229 141,155
----------------------------------------
Income (loss) from continuing operations before
taxes and cumulative effect of change in accounting (7,181) (13,261) 3,963
Provision (credit) for taxes (2,599) (4,419) 1,881
----------------------------------------
Income (loss) from continuing operations before
cumulative effect of change in accounting (4,582) (8,842) 2,082
Discontinued operations, net of tax:
Loss from operations (3,503) (12,528) (69,664)
Net gain on dispositions 15,321
----------------------------------------
11,818 (12,528) (69,664)
Cumulative effect of change in accounting 2,900
----------------------------------------
Net income (loss) $ 7,236 $ (18,470) $ (67,582)
========================================
Income (loss) per share:
Continuing operations $ (.76) $ (1.46) $ .35
Loss from operations of discontinued operations (.58) (2.07) (11.68)
Net gain on dispositions of discontinued operations 2.53
Cumulative effect of change in accounting .48
----------------------------------------
Net income (loss) per share $ 1.19 $ (3.05) $ (11.33)
========================================
Shares used in determination of income (loss)
per share 6,067 6,057 5,967
========================================
</TABLE>
*Restated as described in Note 1.
================================================================================
See accompanying notes to consolidated financial statements.
19.
<PAGE>
PS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS)
================================================================================
<TABLE>
<CAPTION>
1994 1993* 1992*
----------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Income (loss) from continuing operations $ (4,582) $ (5,942) $ 2,082
Non-cash items:
Depreciation, depletion and amortization 16,500 16,247 15,272
Aircraft write-downs 7,190 17,000 9,933
Settlement of securities litigation 5,000
Marketable securities transactions (828) (2,706) (3,430)
Cumulative effect of change in accounting (2,900)
Deferred taxes and other (8,159) 2,320 4,015
Changes in non-cash working capital affecting
cash from operating activities:
Current assets 1,069 (1,647) 5,000
Current liabilities 58 497 (3,346)
----------------------------------------
Net cash provided from operating activities 16,248 22,869 29,526
----------------------------------------
Cash flows used in financing activities:
Debt related:
Additions to long-term obligations 13,500 59,715
Reductions in long-term obligations (36,921) (91,114) (26,018)
Settlement of forward contract (1,657)
Equity related:
Stock options exercised 16 126 651
Cash dividends (788)
----------------------------------------
Net cash used in financing activities (23,405) (31,273) (27,812)
----------------------------------------
Cash flows provided from investing activities:
Proceeds from disposition of marketable
securities 4,916 10,346 10,080
Capital additions (485) (1,430) (2,451)
Proceeds from disposition of property and
equipment 410 11,837
Net cash used for collateralization of letters of credit (7,691)
Changes in notes receivable and other 4,339 8,811 7,733
----------------------------------------
Net cash provided from investing activities 1,079 18,137 27,199
----------------------------------------
Discontinued operations:
Loss from operations (3,503) (12,528) (69,664)
Net gain on dispositions 15,321
Deferred taxes 10,213 (6,542) (20,393)
Decrease in net assets 1,694 2,087 56,796
----------------------------------------
Net cash provided from (used in) discontinued
operations 23,725 (16,983) (33,261)
----------------------------------------
Net increase (decrease) in cash and cash
equivalents 17,647 (7,250) (4,348)
Cash and cash equivalents at beginning of year 5,133 12,383 16,731
----------------------------------------
Cash and cash equivalents at end of year $ 22,780 $ 5,133 $ 12,383
========================================
</TABLE>
*Restated as described in Note 1.
================================================================================
See accompanying notes to consolidated financial statements.
20.
<PAGE>
PS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
================================================================================
<TABLE>
<CAPTION>
Common Stock
-------------------- Additional
Paid-In Retained
Shares Amount Capital Earnings
-----------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1991 5,463 $ 5,463 $ 80,955 $ 104,267
Net loss (67,582)
Common stock issued 576 576 17,352
Cash dividends ($.15 per share) (788)
-----------------------------------------------
Balance at December 31, 1992 6,039 6,039 98,307 35,897
Net loss (18,470)
Common stock issued 26 26 100
-----------------------------------------------
Balance at December 31, 1993 6,065 6,065 98,407 17,427
Net income 7,236
Common stock issued 3 3 13
-----------------------------------------------
Balance at December 31, 1994 6,068 $ 6,068 $ 98,420 $ 24,663
===============================================
</TABLE>
================================================================================
See accompanying notes to consolidated financial statements.
21.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements include the accounts of
PSG and its subsidiaries. As more fully described in Note 2, USTravel Systems
Inc. (USTravel) and Recontek, Inc. (Recontek) are shown as discontinued
operations. Amounts for 1993 and 1992 have been restated to show Recontek as a
discontinued operation. USTravel was previously shown as a discontinued
operation.
CASH EQUIVALENTS - For purposes of these statements, PSG considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents.
DEPRECIATION AND AMORTIZATION - Depreciation to estimated residual values is
computed on the straight-line basis over the estimated useful lives of the
related assets, which are generally 15 to 18 years for leased aircraft and from
3 to 30 years for other property and equipment.
ACCOUNTING FOR OIL AND GAS PRODUCING ACTIVITIES - PSG follows the successful
efforts method of accounting for oil and gas exploration and development costs,
as described below:
LEASE ACQUISITIONS - PSG defers the costs of acquiring unproven oil and gas
leases until they are either assigned or sold to other parties or retained by
PSG for possible future development. An allowance for the abandonment of
unproven leases is provided using the straight-line method over the life of
the leases.
EXPLORATION AND DEVELOPMENT COSTS - The costs of drilling and equipping all
development wells are capitalized. The costs of drilling exploratory wells
are initially deferred. If proved reserves are discovered, the costs of the
wells are capitalized. If proved reserves are not discovered, the costs of
drilling the wells, net of any salvage value, are charged to expense.
DEPRECIATION, DEPLETION AND AMORTIZATION - Depletion of producing leases is
computed for individual fields using the unit-of-production method based on
estimated proved reserves. Depreciation and amortization of wells and related
equipment is computed using the unit-of-production method, based on proved
developed reserves.
MARKETABLE SECURITIES - PSG adopted Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
(FAS 115) on January 1, 1994. In accordance with FAS 115, prior years'
financial statements were not restated to reflect the change in accounting
method. There was no material cumulative effect of adopting FAS 115.
At December 31, 1994, PSG held approximately $4.8 million of U.S. Treasury bills
maturing on January 12, 1995 ($3.7 million of which were classified as non-
current pursuant to a collateral agreement) and approximately $22.6 million in a
repurchase agreement transaction (REPO) with a major investment bank (Seller)
classified as cash equivalents. In accordance with the terms of the REPO, PSG
purchased specifically identified U.S. Government securities which were held by
the Seller who subsequently repurchased the securities with interest on January
3, 1995. Management has classified these investments
================================================================================
22.
<PAGE>
================================================================================
as held-to-maturity securities at December 31, 1994. The fair market value of
these investments approximates cost.
During 1994 PSG sold approximately $3.1 million of equity securities and
realized gains totaling approximately $.6 million.
AIRCRAFT HELD FOR SALE - Two 747-100 freighter aircraft are classified as
aircraft held for sale. These aircraft are carried at their estimated market
value.
NET INCOME (LOSS) PER SHARE - Net income (loss) per share is based on the
weighted average number of common shares outstanding during the period.
PROVISION (CREDIT) FOR TAXES - Effective January 1, 1993, PSG adopted FASB
Statement No. 109, "Accounting for Income Taxes." Under Statement 109, the
liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on the differences
between the financial reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Prior to the adoption of Statement 109,
income taxes were determined using the deferred method whereby income and
expense items that were reported in different years in the financial statements
and tax returns were measured at the tax rate in effect in the year the
difference originated. As permitted by Statement 109, PSG has elected not to
restate the financial statements of prior years. The cumulative effect of the
change in accounting shown for 1993 was a gain of $2.9 million - $.48 per share,
although the effect of the change on the results of operations for the year
ended December 31, 1993 was not material.
Investment tax credits are accounted for using the flow-through method.
ASSET REALIZATION - PSG's assets include approximately $174 million and $55
million for which realization is substantially dependent upon the future
performance of USAir and Continental, respectively, under aircraft leases with
PSG. USAir has suffered major losses in the last few years and is attempting to
reduce its expenses to remain competitive. Continental also recorded a
significant loss in 1994 and is attempting to implement cost savings programs.
Should either USAir or Continental default on their leases with PSG or file
bankruptcy and reject certain of such leases, PSG would suffer significant
losses on the ultimate disposal of the related aircraft or upon the ultimate
repossession of the aircraft by the lenders. The eventual outcome of these
matters cannot be determined at this time.
2. DISCONTINUED OPERATIONS
On March 14, 1994 the travel management business operated by USTravel was sold.
Proceeds from the sale were approximately $40 million.
Recontek, PSG's metallic waste recycling subsidiary, was 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
================================================================================
23.
<PAGE>
================================================================================
plan to close-down or sell a metallic waste recycling plant, Recontek's major
asset, and in December 1994 the plant was sold. Proceeds from the sale were
approximately $1.5 million.
Operating revenues of the discontinued operations are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------
<S> <C> <C> <C>
Travel management $ 17,912 $ 110,875 $ 117,799
Metallic waste recycling 153 134 64
--------------------------------------
$ 18,065 $ 111,009 $ 117,863
======================================
</TABLE>
Components of discontinued operations, including related taxes are as follows
(in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
----------------------------------------
<S> <C> <C> <C>
Loss from operations:
Travel management $ (4,022) $ (10,216) $ (17,630)
Metallic waste recycling (1,361) (8,369) (72,359)/(a)/
---------- ---------- ----------
(5,383) (18,585) (89,989)
Credit for taxes (1,880) (6,057) (20,325)
---------- ---------- ----------
$ (3,503) $ (12,528) $ (69,664)
========== ========== ==========
Gain (loss) on dispositions:
Travel management $ 28,571
Metallic waste recycling (1,329)
----------
27,242
Provision for taxes 11,921
----------
$ 15,321
==========
</TABLE>
(a) includes write-down of assets of $56.4 million.
The loss on disposition of the metallic waste recycling operation is less than
disclosed in previously issued interim financial statements because of the
proceeds received from the sale of the plant, which were not in the original
disposition estimate, and because the costs to close-down the plant were less
than projected due to its sale.
Net interest expense charged to the discontinued operations by PSG was $651,000,
$4,471,000 and $5,028,000 in 1994, 1993 and 1992, respectively.
3. LONG-TERM OBLIGATIONS
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 PS Trading, Inc.'s operation. The amended and
restated bank credit agreement, which only covers letters of credit, expires on
November 4, 1995. At December 31, 1994 $6.9 million of letters of credit were
outstanding under the bank credit
================================================================================
24.
<PAGE>
================================================================================
agreement, all of which were cash collateralized. Under the terms of the bank
credit agreement PSG is required to maintain at least $3 million in cash and
cash equivalents.
Long-term obligations at December 31, excluding current maturities, consist of
the following (in thousands):
<TABLE>
<CAPTION>
1994 1993
-----------------------
<S> <C> <C>
Loans secured by ten BAe-146 aircraft; bearing interest at
12% to 12.5%; due 2000 $ 37,246 $ 40,614
Loans secured by five MD-80 aircraft; bearing interest at
8.1% to 10.7%; due 1998 and 1999 36,262 45,624
Loans secured by two MD-80 aircraft; bearing interest at
9.6% and 11.9%; due 2004 and 2006 22,837 23,719
Note payable secured by one Boeing 737 aircraft; bearing
interest at 11.2%; due 2006 14,169 14,530
Note payable secured by one Boeing 737 aircraft; bearing
interest at 11.6%; due 2002 11,560
-----------------------
$ 122,074 $ 124,487
=======================
</TABLE>
PSG paid interest of $16,815,000, $15,453,000 and $16,596,000 in 1994, 1993 and
1992, respectively.
Principal payments on existing long-term obligations in each of the four years
after 1995 are as follows: $19,291,000 in 1996; $23,893,000 in 1997; $21,291,000
in 1998; and $17,285,000 in 1999.
4. SECURITIES LITIGATION
In March 1995 PSG reached an agreement in principle to settle for $5 million all
pending class action litigation against PSG and certain of its officers and
directors. In the litigation, which was originally filed as four parallel class
actions in 1992 and later consolidated before a federal court in Illinois, it
was alleged that PSG's filings with the Securities and Exchange Commission and
its informal public statements were misleading with respect to the progress and
prospects of Recontek. The suits were brought on behalf of all persons who
purchased securities of PSG during the period February 25, 1991 through February
20, 1992. PSG continues to deny all claims in the litigation, and a substantial
factor in the decision to settle was the substantial cost that would be incurred
to litigate the matter through trial. The settlement was recommended by a
disinterested special litigation committee of PSG's Board of Directors, with the
advice of independent counsel.
The effectiveness of the settlement is subject to reaching a definitive
agreement and certain other conditions, including the payment by USAir, Inc. of
its rental payment obligations in the amount of $13.5 million, which were due by
March 31st and April 3rd, 1995 for 15 aircraft leased by PSG to USAir. These
payments were received on time. The settlement is also subject to approval by
the federal court, which will review the fairness of the settlement. As required
by the Federal Rules of Civil Procedure, notice of the
================================================================================
25.
<PAGE>
================================================================================
settlement will be given to class members, describing the settlement and
permitting class members to participate in, object to, or opt out of the
settlement.
5. PREFERRED SHARE PURCHASE RIGHTS PLAN
PSG has a Preferred Share Purchase Rights Plan (sometimes called a "poison
pill"). Pursuant to the Plan one preferred share purchase right (Right) has been
issued for and trades with each outstanding share of common stock. Each Right
entitles the holder to buy 1/100th of a share of junior participating preferred
stock, Series D, at an exercise price of $100 per Right. The Rights can be
redeemed at any time by PSG for $.05 per Right prior to a party becoming an
"Acquiring Person" (as defined in the Plan and described below). The Rights
become exercisable and separately transferable only if a party becomes an
Acquiring Person or announces a tender offer for 30% or more of PSG's common
stock. Upon becoming exercisable the Rights also permit a holder (other than an
Acquiring Person), (i) in the event PSG is merged with another company, to
receive a number of shares of common stock of the surviving company having a
market value of twice the exercise price of each Right or (ii) in the event a
party becomes an Acquiring Person or in the event of self-dealing by a control
shareholder, to receive a number of shares of PSG stock having a market value of
twice the exercise price of each Right. PSG has reserved 90,000 shares of junior
participating preferred stock, Series D, for issuance if necessary. The Plan
defines an Acquiring Person as any party that acquires 20% or more of PSG's
common stock, except that Warren E. Buffet, Berkshire Hathaway Inc. or their
affiliates only become Acquiring Persons if they acquire 45% or more of PSG's
common stock.
6.COMMON STOCK OPTIONS
Changes in stock options outstanding during 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
Options Option
Outstanding Prices
----------- --------------
<S> <C> <C>
Balance at December 31, 1992 68,000 $ 3.41 - 29.75
Exercised (26,400) 3.41 - 8.53
Canceled (18,500) 3.41 - 8.53
-----------
Balance at December 31, 1993 23,100 3.41 - 29.75
Exercised (2,900) 3.41 - 6.83
Canceled (5,600) 13.90 - 24.86
-----------
Balance at December 31, 1994 14,600 6.83 - 29.75
===========
</TABLE>
At December 31, 1994 and 1993, 14,600 options were exercisable. There were
209,200 shares available for grant at the end of 1993. The stock option plan
expired in September 1994 and no more options may be granted although existing
options can be exercised.
================================================================================
26.
<PAGE>
================================================================================
7. AIRCRAFT LEASES AND AIRCRAFT HELD FOR SALE
At December 31, 1994 PSG leased jet aircraft to three commercial airlines under
agreements accounted for as operating or financing leases.
The future minimum lease payments scheduled to be received on aircraft currently
under lease are (in thousands):
<TABLE>
<CAPTION>
Operating Financing
Leases Leases
-----------------------
<S> <C> <C>
1995 $ 27,026 $ 11,976
1996 27,026 12,318
1997 25,556 14,983
1998 23,578 12,835
1999 17,774 12,837
Later years 31,914 63,769
-----------------------
Total $ 152,874 $ 128,718
=======================
1994 1993
-----------------------
Information on financing leases (in thousands):
Total investment $ 106,735 $ 109,786
Unguaranteed residual values (included in total
investment) 28,240 28,240
Unearned income 50,223 59,098
</TABLE>
Aircraft under operating leases are depreciated to estimated residual values
which aggregate approximately $41.3 million, or approximately 18% of original
cost.
USAir, PSG's largest aircraft lessee, has suffered major losses in the last few
years and is attempting to reduce its expenses to remain competitive. Refer to
Management's Discussion and Analysis, page 16, for information on aircraft
leased to USAir as to book value, debt, cash flow and the impact of a payment
default by USAir. Fundamental to USAir's survival is a plan to reduce both union
and non-union employee wages and benefits by a total of $500 million per year.
In March 1995, USAir announced a preliminary agreement with its pilots union as
to a reported $190 million in annual expense savings for a five year period in
exchange for "financial returns and governance participation." While this is an
important step in USAir's goal to achieve a total of $500 million in annual wage
and benefit savings and while all of USAir's unions have expressed their
commitment to finalize agreements to strengthen USAir, as of April 10, 1995
uncertainty remains as to USAir's future. Continental Airlines, Inc.
(Continental), PSG's second largest aircraft lessee, also recorded losses in
1994 as a result of an unsuccessful low fare, simplified service concept
introduced in new and expanded markets. Continental is now redirecting its
operations and implementing new cost savings programs. If either USAir or
Continental fail in their attempts to reduce expenses and cease to pay rent on
some or all of the aircraft they lease from PSG, there will be a material
adverse impact on PSG. Due to USAir's and Continental's financial condition
there is uncertainty as to whether PSG will recover its investment in aircraft
leased to them.
================================================================================
27.
<PAGE>
================================================================================
The information reported herein relating to PSG's aircraft lessees was obtained
from published media reports. PSG refers readers to public information regarding
USAir, Continental and America West for further details relating to their
financial condition.
During the fourth quarters of 1994, 1993 and 1992, PSG wrote-down its investment
in two 747-100 aircraft (which have been converted to freighters) by $7.2
million, $17 million and $9.9 million, respectively. These two aircraft are
currently held for sale. Included in other long-term liabilities at December 31,
1994 is $25.9 million ($24.2 million at December 31, 1993) relating to the
freighter conversion program and this amount is payable from future sales
proceeds. PSG is unable to predict when these aircraft will be sold, thus the
aircraft and related liability are carried as long-term.
8. CREDIT FOR TAXES
As discussed in Note 1, PSG adopted FASB Statement No. 109 effective January 1,
1993.
The provision (credit) for taxes from continuing operations was comprised of (in
thousands):
<TABLE>
<CAPTION>
Liability Liability Deferred
Method Method Method
1994 1993 1992
----------------------------------------
<S> <C> <C> <C>
Current taxes:
Federal $ 38 $ 62
State $ 69 70 3
Deferred taxes (2,668) (4,527) 1,816
----------------------------------------
$ (2,599) $ (4,419) $ 1,881
========================================
</TABLE>
PSG paid income taxes of $4,288,000, $152,000 and $71,000 in 1994, 1993 and
1992, respectively. In addition, refunds of prior years' income taxes of
$559,000, $67,000 and $1,258,000 were received in 1994, 1993 and 1992,
respectively.
There is a federal tax net operating loss carryforward (NOL) of $90.1 million at
December 31, 1994, which expires beginning in 2005. A Separate Return Limitation
Year (SRLY) net operating loss carryforward in the amount of $5.1 million
(related to Recontek) expires in 2005. A California net operating loss
carryforward of $19.6 million is available for years beginning after 1993 and
starts expiring in 1995. The unused investment tax credit (ITC) for tax return
purposes at December 31, 1994 is $12.5 million, which expires in 2000 to 2003.
PSG is subject to certain tax regulations which could severely limit the
carryforward NOLs and ITCs. Pursuant to Internal Revenue Code Sections 382 and
383, if, within a three year period, certain defined changes in ownership exceed
50% of PSG's outstanding shares, the future annual use of the NOLs and tax
credits may be significantly limited.
================================================================================
28.
<PAGE>
================================================================================
A reconciliation between the amount computed by multiplying loss from continuing
operations before taxes by the statutory Federal rate, and the amount of
reported taxes is as follows:
<TABLE>
<CAPTION>
Percent of Pretax Loss
--------------------------------
Liability Liability Deferred
Method Method Method
1994 1993 1992
--------------------------------
<S> <C> <C> <C>
Statutory Federal rate (35)% (35)% 34 %
Increase (reductions) in taxes resulting from:
State and foreign taxes net of Federal income
tax benefit 6
Non-benefit for write-downs 7
Other (1) 2
--------------------------------
(36)% (33)% 47 %
================================
</TABLE>
Significant components of PSG deferred tax liabilities and assets for Federal
and state income taxes as of December 31, 1994 and 1993 are as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1993
----------------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation $ 95,944 $ 99,691
Other 10,157 8,431
----------------------
Total deferred tax liabilities 106,101 108,122
Deferred tax (assets):
Aircraft write-downs (16,810) (13,628)
Financing leases (7,365) (6,102)
Net effect of tax benefit transfer agreement (3,748) (3,529)
Recontek write-down (9,943) (18,263)
Net operating loss carryforward (24,180) (16,856)
Capital loss carryforward (3,425) (3,346)
Investment tax credit carryforward (12,542) (12,981)
AMT credit carryforward (3,460) (6,571)
Other (3,257) (5,768)
----------------------
Total deferred tax (assets) (84,730) (87,044)
Valuation allowance 13,914 13,928
----------------------
Net deferred tax (assets) (70,816) (73,116)
----------------------
Net deferred tax liability $ 35,285 $ 35,006
======================
</TABLE>
The valuation allowance against deferred tax assets relates primarily to capital
losses for which future realization is uncertain. Included with other accrued
liabilities on the accompanying Consolidated Statement of Financial Position is
$2.5 million of the net deferred tax liability.
================================================================================
29.
<PAGE>
================================================================================
Deferred taxes from continuing operations result from timing differences in the
recognition of revenue and expense for tax and financial statement purposes. The
sources of these differences for 1992 under the deferred method were as follows
(in thousands):
<TABLE>
<CAPTION>
Deferred
Method
1992
----------
<S> <C>
Depreciation and depletion $ (20,456)
Net operating loss carryforward 10,795
Aircraft write-downs 6,205
Marketable securities transactions 4,049
Other 1,223
----------
$ 1,816
==========
</TABLE>
The California Franchise Tax Board is in the process of examining PSG's tax
returns for the years 1987 through 1990 and preliminary review by the examining
agent indicates that the potential adjustments may be significant. PSG will
protest these adjustments and believes that adequate provision has been made in
the Consolidated Financial Statements for possible assessments, if any, of
additional taxes and interest.
9. BUSINESS SEGMENTS
PSG operates three principal business segments - fuel sales and distribution,
aircraft leasing, and oil and gas production and development.
Revenues from USAir equaled 23%,18% and 20% of total revenues in the years 1994,
1993 and 1992, respectively.
Fuel sales and distribution revenues from one airline customer amounted to 11%
and 13% of total revenues in 1993 and 1992. Similar revenues from another
airline amounted to 14% of total revenues in 1993. Sales to one of these
airlines has been discontinued. Because of the low margins in this segment, the
loss of individual customers will not have a material effect on consolidated
operating results.
Revenues; income before interest, taxes and cumulative effect of change in
accounting; depreciation, depletion and amortization; identifiable assets; and
capital additions for each of PSG's principal business segments for the three
years ended December 31, 1994 are included under "Selected Financial Data" on
pages 6 through 13 of this Annual Report and are an integral part of these
Consolidated Financial Statements.
================================================================================
30.
<PAGE>
================================================================================
A reconciliation of this Selected Financial Data for the principal business
segments follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------
<S> <C> <C> <C>
REVENUES FROM CONTINUING OPERATIONS:
Principal business segments $122,962 $151,731 $132,345
Corporate and other 2,486 5,237 12,773
------------------------------
Total $125,448 $156,968 $145,118
==============================
INCOME FROM CONTINUING OPERATIONS
BEFORE INTEREST, TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING:
Principal business segments $ 17,074 $ 4,704 $ 18,077
Corporate and other (7,625) 1,514 4,375
------------------------------
Total $ 9,449 $ 6,218 $ 22,452
==============================
DEPRECIATION, DEPLETION AND AMORTIZATION:
Principal business segments $ 16,398 $ 16,130 $ 14,773
Corporate and other 102 117 499
------------------------------
Total $ 16,500 $ 16,247 $ 15,272
==============================
IDENTIFIABLE ASSETS:
Principal business segments $317,987 $340,491 $365,112
Corporate and other 43,271 25,402 47,061
Discontinued operations 15,313 17,782
------------------------------
Total $361,258 $381,206 $429,955
==============================
CAPITAL ADDITIONS:
Principal business segments $ 483 $ 1,427 $ 2,440
Corporate and other 2 3 11
------------------------------
Total $ 485 $ 1,430 $ 2,451
==============================
</TABLE>
10. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of fair value information
about financial instruments, whether or not recognized in the Consolidated
Statement of Financial Position, when it is practicable to estimate such value.
In cases where quoted market prices are not available, fair value is based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flow. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the financial
instrument. Statement 107 excludes certain financial instruments and all non-
financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying value of
PSG.
The methods and assumptions discussed below were used by PSG in estimating fair
value disclosures for its financial instruments.
================================================================================
31.
<PAGE>
================================================================================
CASH AND CASH EQUIVALENTS: The carrying amounts approximate fair value
because of the short maturity of these items.
MARKETABLE SECURITIES: The fair value for marketable securities is based on
quoted market prices.
NOTES RECEIVABLE: The fair value for notes receivable is estimated using
discounted cash flow analyses, using interest rates which might be offered if
the notes were renegotiated currently.
CASH COLLATERAL ACCOUNT: The cash collateral account is invested in a fund
which holds U.S. Government instruments. The market value of the fund is
equal to the cost.
DEBT INSTRUMENTS: The fair value of PSG's debt is estimated using discounted
cash flow analyses, based on management's best estimate of current market
rates for similar types of borrowing arrangements.
The estimated fair value of PSG's financial instruments at December 31, 1994 and
1993 (in thousands) is as follows:
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
--------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 22,780 $ 22,780 $ 5,133 $ 5,133
Marketable securities 4,813 4,813 8,901 9,818
Notes receivable 4,982 4,841 9,310 9,683
Cash collateral account 7,692 7,692
--------------------------------------------
$ 40,267 $ 40,126 $ 23,344 $ 24,634
============================================
Financial liabilities:
Debt instruments $ 137,225 $ 130,184 $ 163,159 $ 167,017
============================================
</TABLE>
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(In thousands except per share data)
<TABLE>
<CAPTION>
1994 QUARTERS First Second Third Fourth
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Continuing operations:
Revenues $ 32,945 $ 25,506 $ 30,643 $ 36,354
Gross profit (loss) 7,782 6,495 6,799 (5,552)
Income (loss) from continuing operations 1,486 394 191 (6,653)
Income (loss) from discontinued operations 12,209 (2,869) 2,478
----------------------------------------
Net income (loss) 13,695 (2,475) 191 (4,175)
Income (loss) per share:
Continuing operations .24 .06 .03 (1.10)
Discontinued operations 2.02 (.47) .41
----------------------------------------
Net income (loss) 2.26 (.41) .03 (.69)
</TABLE>
================================================================================
32.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
1993 QUARTERS First Second Third Fourth
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Continuing operations:
Revenues $ 41,296 $ 39,195 $ 38,215 $ 38,262
Gross profit (loss) 9,128 7,757 4,957 (10,745)
Income (loss) from continuing operations 1,426 314 (470) (10,112)
Income (loss) from discontinued operations (2,865) (2,871) (2,279) (4,513)
Change in accounting 2,900
---------------------------------------
Net income (loss) 1,461 (2,557) (2,749) (14,625)
Income (loss) per share:
Continuing operations .24 .05 (.08) (1.67)
Discontinued operations (.48) (.47) (.37) (.74)
Change in accounting .48
---------------------------------------
Net income (loss) .24 (.42) (.45) (2.41)
</TABLE>
Gross profit (loss) is income (loss) from continuing operations before interest
expense, general and administrative expenses, taxes and cumulative effect of
change in accounting. In the fourth quarters of 1994 and 1993, write-downs of
$7.2 million, and $17 million, respectively, were recorded related to two 747
freighter aircraft previously leased to Pan Am and currently held for sale. In
1994's fourth quarter $5 million was accrued for settlement of a securities
litigation described in Note 4.
12. OIL AND GAS OPERATIONS (UNAUDITED)
Changes in estimated net proved developed and undeveloped reserves based on
internal reserve reports (in thousands):
<TABLE>
<CAPTION>
Oil Gas
(Bbls)* (Mcf)*
-------------------
<S> <C> <C>
December 31, 1991 8,776 6,164
Revisions of previous estimates 122 (678)
Sales of reserves in place (26) (78)
Production (434) (559)
-------------------
December 31, 1992 8,438 4,849
Revisions of previous estimates (977) (525)
Extensions, discoveries and other additions 2 90
Sales of reserves in place (161) (210)
Production (446) (467)
-------------------
December 31, 1993 6,856 3,737
Revisions of previous estimates (1,369) (191)
Production (405) (520)
-------------------
December 31, 1994 5,082 3,026
===================
</TABLE>
* Bbls = barrels; Mcf = one thousand cubic feet.
================================================================================
33.
<PAGE>
================================================================================
<TABLE>
<CAPTION>
Oil Gas
(Bbls) (Mcf)
-------------------
<S> <C> <C>
NET PROVED DEVELOPED RESERVES AT DECEMBER 31, 1992 5,289 4,849
===================
NET PROVED DEVELOPED RESERVES AT DECEMBER 31, 1993 4,665 3,737
===================
NET PROVED DEVELOPED RESERVES AT DECEMBER 31, 1994 3,638 3,026
===================
</TABLE>
CAPITALIZED COSTS AND COSTS INCURRED (IN THOUSANDS) - The aggregate costs at
December 31, 1994, 1993 and 1992 relating to oil and gas producing activities
(all of which are in the continental United States) are presented below for
capitalized costs and costs incurred.
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------------
<S> <C> <C> <C>
Capitalized costs:
Proved properties $ 34,806 $ 34,457 $ 41,057
Unproved properties net of allowance for
abandonments 3 5 8
---------------------------------
Total 34,809 34,462 41,065
Accumulated depreciation, depletion and
amortization (16,457) (14,533) (17,394)
---------------------------------
Net capitalized costs $ 18,352 $ 19,929 $ 23,671
=================================
Costs incurred:
Property acquisition costs $ 10 $ 25
Exploration costs, including unsuccessful wells 8 12
Development costs $ 336 1,324 2,155
---------------------------------
Total expenditures $ 336 $ 1,342 $ 2,192
=================================
</TABLE>
RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES (IN THOUSANDS) - The
results of operations for oil and gas producing activities (excluding general
and administrative expenses and interest costs) for the years ended December 31,
1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------
<S> <C> <C> <C>
Oil and gas revenues $ 7,686 $ 8,907 $10,483
Production costs (4,099) (5,501) (5,409)
Exploration costs (8) (12)
Depreciation, depletion and amortization (1,990) (1,954) (2,007)
------------------------------
Income before income tax expense 1,597 1,444 3,055
Income tax expense (666) (491) (1,226)
------------------------------
Income from operations for producing activities $ 931 $ 953 $ 1,829
==============================
</TABLE>
================================================================================
34.
<PAGE>
================================================================================
STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS (IN THOUSANDS)
Pursuant to Statement of Financial Accounting Standards No. 69, all publicly
traded enterprises having significant oil and gas producing activities are
required to present a standardized measure of the discounted future net cash
flows relating to proved oil and gas reserve quantities, as well as the changes
in significant components of the standardized measure from prior periods. There
are numerous uncertainties inherent in estimating quantities of proved reserves
and in projecting the future rates of production and timing of development
expenditures. The future cash inflows determined from such reserve data
represent estimates only. Moreover, the present values should not be construed
as the current market values of PSG's oil and gas reserves or the costs that
would be incurred to obtain equivalent reserves. A market value determination
would include many additional factors including (i) anticipated future increases
or decreases in oil and gas prices and production and development costs; (ii) an
allowance for return on investment; (iii) regulatory actions; (iv) the value of
additional reserves, not considered proved at the present time, which may be
recovered as a result of further exploration and development activities; and (v)
other business risks. The tables below present the required information
relating to PSG's proved oil and gas reserves as of December 31, 1994, 1993 and
1992. The future cash inflows are calculated using the market price of oil and
gas at the end of the year presented.
<TABLE>
<CAPTION>
1994 1993 1992
---------------------------------
<S> <C> <C> <C>
Future cash inflows $ 90,908 $ 98,741 $167,669
Future production costs (45,710) (56,036) (82,945)
Future development and abandonment costs (6,264) (7,346) (8,866)
---------------------------------
Future net cash inflows before income tax/(a)/ 38,934 35,359 75,858
Future income tax expenses (7,882) (7,347) (18,307)
---------------------------------
Future net cash flows 31,052 28,012 57,551
Discount factor at 10% (14,806) (15,531) (27,548)
---------------------------------
Standardized measure of discounted future
net cash flows $ 16,246 $ 12,481 $ 30,003
=================================
</TABLE>
(a) The discounted present value at 10% of future net cash inflows before
income taxes was $18,970, $15,254 and $36,831 as of December 31, 1994,
1993 and 1992, respectively.
<TABLE>
<CAPTION>
1994 1993 1992
-----------------------------
<S> <C> <C> <C>
Year-end market price used for
future cash inflows:
Crude oil - per barrel $16.00 $12.50 $18.00
Natural gas - per thousand cubic feet 1.50 2.15 2.00
</TABLE>
================================================================================
35.
<PAGE>
================================================================================
The following are the principal sources of change in the standardized measure of
discounted future net cash flows for the years ended December 31, 1994, 1993
and 1992:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------
<S> <C> <C> <C>
Standardized measure at beginning of the year $ 12,481 $ 30,003 $ 34,582
Revenues less production costs for the year (3,554) (3,385) (4,194)
Net change in sales prices net of production costs 7,454 (15,264) (5,296)
Extensions and discoveries 130
Changes in estimated future development costs 732 669 (1,560)
Costs incurred that reduced future development
costs 520 1,304
Revisions of previous quantity estimates (4,888) (2,946) 45
Accretion of discount 1,526 3,683 4,816
Net change in income taxes 49 4,055 5,104
Sale of reserves in place (800) (167)
Changes in production rates (timing) and other 2,446 (4,184) (4,631)
--------------------------------
Standardized measure at end of year $ 16,246 $ 12,481 $ 30,003
================================
</TABLE>
==============================================================================
36.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
================================================================================
THE BOARD OF DIRECTORS AND STOCKHOLDERS
PS GROUP, INC.
We have audited the accompanying consolidated statements of financial position
of PS Group, Inc. as of December 31, 1994 and 1993, and the related consolidated
statements of operations, cash flows, and stockholders' equity for each of the
three years in the period ended December 31, 1994. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of PS Group, Inc. at
December 31, 1994 and 1993, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1994, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, realization of certain of
the Company's assets totaling approximately $229 million (63% of total assets)
is dependent upon the future performance by USAir, Inc. ("USAir") and
Continental Airlines, Inc. ("Continental") under aircraft leases with the
Company. Should either USAir or Continental default on their leases with the
Company or reject certain of such leases, the Company would suffer significant
losses on the ultimate disposal of the related aircraft or upon the ultimate
repossession of the aircraft by the lenders. The eventual outcome of these
matters cannot be determined at this time.
Also as discussed in Note 1 to the consolidated financial statements, in 1993
the Company changed its method of accounting for income taxes.
/s/ Ernst & Young LLP
San Diego, California
February 3, 1995,
except for Note 4, as to which the date is
April 3, 1995
================================================================================
37.
<PAGE>
PS GROUP, INC.
DIRECTORS AND OFFICERS
================================================================================
DIRECTORS
PS GROUP, INC.
Charles E. Rickershauser, Jr.
Chairman of the Board and
Chief Executive Officer
Robert M. Fomon
President, Robert M. Fomon
and Company (a private
investment company)
J.P. Guerin*
Private Investor
Donald W. Killian, Jr.*
Attorney-at-Law
Gordon C. Luce*
Independent Financial
Advisor
OFFICERS
PS GROUP, INC.
Charles E. Rickershauser, Jr.
Chairman of the Board and
Chief Executive Officer
Lawrence A. Guske
Vice President - Finance &
Chief Financial Officer
Johanna Unger
Vice President, Controller &
Secretary
OFFICERS
PS TRADING, INC.
Douglas A. Jones
President
Michael E. Kooken
Vice President
OFFICERS
STATEX PETROLEUM, INC.
B. Andrew Wilkinson
President & Chief Operating
Officer
Dhar Carman
Executive Vice President &
Chief Financial Officer
*Member of the Audit Committee
================================================================================
38.
<PAGE>
PS GROUP, INC.
INVESTOR INFORMATION
================================================================================
COMMON STOCK TRANSFER AND
DIVIDEND DISBURSING AGENT & REGISTRAR
- -------------------------------------
Questions regarding stockholder's accounts should be directed to:
Chemical Trust Company of California
450 West 33rd Street, 8th Floor
New York, New York 10001
Attention: Shareholders' Relations
800-356-2017
Common Stock listed on the New York
and Pacific Stock Exchanges. Symbol: PSG
CORPORATE OFFICES
- -----------------
4370 La Jolla Village Drive, Suite 1050
San Diego, California 92122
619-546-5001
AUDITORS
- --------
Ernst & Young LLP
501 West Broadway, Suite 1100
San Diego, California 92101
ANNUAL MEETING
- --------------
May 31, 1995 at 10:00 a.m.
Sheraton Grande Hotel
333 South Figueroa Street
Los Angeles, California 90071
<TABLE>
<CAPTION>
MARKET PRICES OF COMMON STOCK
- -------------------------------
High Low
---- ---
<S> <C> <C>
1993:
First quarter 16 9
Second quarter 12-1/2 9-7/8
Third quarter 12-5/8 10-1/4
Fourth quarter 15-1/2 10-1/8
1994:
First quarter 14-3/4 10-5/8
Second quarter 12 9-3/8
Third quarter 11-3/8 9-5/8
Fourth quarter 11 8-7/8
</TABLE>
DIVIDENDS ON COMMON STOCK
- -------------------------
No cash dividends were declared in 1994 or 1993.
INVESTOR RELATIONS
- ------------------
As of March 31, 1995 there were 1,636 holders
of record of PSG's common stock.
PSG will supply to stockholders, upon written
request to the corporate office and without
charge, a copy of PSG's annual report on
Form 10-K for the year 1994.
================================================================================
39.
<PAGE>
EXHIBIT (21) SUBSIDIARIES
PS GROUP, INC.
1994 ANNUAL REPORT ON FORM 10-K
(as of March 31, 1995)
<TABLE>
<CAPTION>
Jurisdiction
Name of Corporation of Incorporation
- ------------------- ----------------
<S> <C>
PS Trading, Inc. California
Statex Petroleum, Inc. California
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 22780
<SECURITIES> 1113
<RECEIVABLES> 23791
<ALLOWANCES> 0
<INVENTORY> 3363
<CURRENT-ASSETS> 55986
<PP&E> 290277
<DEPRECIATION> 134263
<TOTAL-ASSETS> 361258
<CURRENT-LIABILITIES> 45697
<BONDS> 0
<COMMON> 129151
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 361258
<SALES> 122962
<TOTAL-REVENUES> 125448
<CGS> 81234
<TOTAL-COSTS> 81234
<OTHER-EXPENSES> 27575
<LOSS-PROVISION> 7190
<INTEREST-EXPENSE> 16630
<INCOME-PRETAX> (7181)
<INCOME-TAX> (2599)
<INCOME-CONTINUING> (4582)
<DISCONTINUED> 11818
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7236
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.19
</TABLE>
