<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
-----------------------------------------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 1996
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 1-7141
PS GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2760133
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
4370 LA JOLLA VILLAGE DRIVE, SUITE 1050
SAN DIEGO, CALIFORNIA 92122
(Address of principal executive offices)
(Zip code)
(619) 642-2999
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of May 1, 1996: 6,068,313 shares of common stock, $1 par value.
================================================================================
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PS GROUP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Included herein on pages F-1 to F-4.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Included herein on pages F-5 to F-7.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
Form 8-K, dated January 30, 1996, reported an Agreement and Plan of
Reorganization pursuant to which the Company will, if shareholder approval is
obtained at the 1996 Annual Meeting of Stockholders, undergo a holding company
reorganization. The sole purpose of the Reorganization is to help preserve the
Company's substantial tax benefits. In connection with the Reorganization, the
Board of Directors approved the fifth amendment to the Company's Rights
Agreement dated as of June 30, 1986. The amendment exempted the Reorganization
from the operation of the Rights Agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PS GROUP, INC.
--------------
(Registrant)
Date: May 3, 1996
/s/ L.A. Guske
- -----------------
LAWRENCE A. GUSKE
Vice President - Finance and
Chief Financial Officer
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PS GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(in thousands)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,373 $ 3,999
Marketable securities 9,855 14,270
Accounts and notes receivable 29,106 22,381
Other current assets 18,188 13,128
-------- --------
Total current assets 63,522 53,778
Property and equipment, net 20,379 20,285
Aircraft leased under operating leases, net 117,024 120,500
Investment in aircraft financing leases 91,682 97,004
Other assets 13,970 14,404
-------- --------
$306,577 $305,971
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,137 $ 6,289
Other current liabilities 7,263 6,040
Current portion of long-term obligations 22,748 19,244
-------- --------
Total current liabilities 38,148 31,573
Long-term obligations 95,687 103,365
Deferred income taxes 41,097 40,535
Other liabilities 7,692 7,416
Stockholders' equity:
Common stock 6,068 6,068
Additional paid-in capital 98,420 98,420
Retained earnings 19,465 18,594
-------- --------
Total stockholders' equity 123,953 123,082
-------- --------
$306,577 $305,971
======== ========
See accompanying notes.
F-1
</TABLE>
<PAGE>
PS GROUP, INC.
UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS
Three months Ended March 31, 1996 and 1995
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Revenues:
Fuel sales and distribution $39,177 $25,849
Oil and gas production and development 1,793 1,778
Aircraft leasing 8,830 8,898
Interest and other 317 562
------- -------
50,117 37,087
------- -------
Costs and expenses:
Cost of sales 39,732 26,469
Depreciation, depletion and amortization 3,980 4,059
General and administrative expenses 1,283 985
Interest expense 3,632 4,010
------- -------
48,627 35,523
------- -------
Income before taxes 1,490 1,564
Provision for taxes 619 655
------- -------
Net income $ 871 $ 909
======= =======
Net income per share $ .14 $ .15
======= =======
Shares used in determining net income per share 6,068 6,068
======= =======
</TABLE>
See accompanying notes.
F-2
<PAGE>
PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1996 and 1995
(in thousands)
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Cash provided from operating activities $ 2,372 $ 2,655
Cash flows from financing activities:
Additions to long-term obligations 692
Reductions in long-term obligations (4,867) (4,568)
------- -------
Net cash used in financing activities (4,175) (4,568)
------- -------
Cash flows from investing activities:
Proceeds from marketable securities and other 4,715 1,341
Cash collateralization of letters of credit,
net 815
Capital additions (538) (130)
------- -------
Net cash provided from investing activities 4,177 2,026
------- -------
Net increase in cash and cash equivalents 2,374 113
Cash and cash equivalents at beginning of
period 3,999 22,780
------- -------
Cash and cash equivalents at end of period $ 6,373 $22,893
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE>
PS Group, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) In the opinion of management, the accompanying Unaudited Condensed
Consolidated Financial Statements include all adjustments (consisting only
of normal recurring adjustments) necessary for a fair statement of the
consolidated financial position at March 31, 1996 and the results of
operations for the three months ended March 31, 1996 and 1995, and cash
flows for the three months ended March 31, 1996 and 1995. These Unaudited
Condensed Consolidated Financial Statements should be read in conjunction
with the Consolidated Financial Statements and Notes thereto contained in
the PSG 1995 Annual Report to Stockholders (the 1995 Annual Report).
F-4
<PAGE>
PS Group, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION
At March 31, 1996, PSG's principal source of liquidity was cash, cash
equivalents and marketable securities of $16.2 million, a $2 million decrease
from December 31, 1995. The major changes in cash and cash equivalents are
detailed in the Unaudited Condensed Consolidated Statements of Cash Flows.
Working capital increased by $3.2 million since December 31, 1995. PSG's
capitalization consisted of 49% long and short-term obligations and 51% equity
at March 31, 1996 compared to 50%/50% at December 31, 1995.
At the end of 1996's first quarter, PSG had $5.6 million outstanding under its
bank credit agreement, consisting entirely of letters of credit, all of which
were fully cash collateralized. No borrowings are permitted under the bank
credit agreement.
Statex Petroleum, Inc. (Statex), PSG's oil and gas production and development
subsidiary, has a separate bank credit agreement collateralized by its major oil
properties. The total availability is $5.5 million but on approval could be
increased up to $8.2 million. During the first quarter of 1996, $.7 million was
borrowed under this agreement. This source of funding is intended for the
acquisition and development of properties which Statex may acquire in the
future.
PSG's assets include approximately $157.8 million for which realization is
substantially dependent upon the future performance of USAir, Inc. (USAir) under
aircraft leases with PSG. All payments due from USAir are current through May 1,
1996, however USAir's long-term financial future is uncertain. Should USAir
default on their leases with PSG, or file bankruptcy and reject certain of such
leases, there could be a material decrease in the market value of the types of
aircraft leased to USAir due to an increased availability of these aircraft for
lease or sale. In such case, PSG could suffer significant losses on the ultimate
disposal of the related aircraft or upon the ultimate repossession of the
aircraft by the lenders. For a more complete discussion of USAir's relationships
to PSG's financial condition, refer to PSG's 1995 Annual Report. PSG refers
readers to information released by USAir for details relating to their financial
condition.
PSG believes that, absent a failure by USAir to meet its lease obligations to
PSG, its cash, cash equivalents, marketable securities and the availability
under Statex's bank credit agreement, plus projected cash flow, are adequate to
meet the operating and planned capital needs of PSG in both the short and
long-term.
F-5
<PAGE>
POTENTIAL RESTRICTION ON USE OF FUTURE TAX BENEFITS
PSG has substantial net operating loss carryforwards, investment tax credit
carryforwards and other tax benefits for use in offsetting future taxable
income. As of December 31, 1995, PSG believes it had approximately $95.6 million
of federal net operating loss carryforwards and $12.5 million of federal
investment tax credit carryforwards, in addition to other state and federal tax
benefits. Besides the customary financial and legal difficulties ordinarily
involved in using these tax benefits, there is a special limitation on the use
of these tax benefits that arises when an "ownership change" occurs for federal
income tax purposes. As of March 1996, if an "ownership change" was triggered,
PSG's usage of future tax carryforwards and unused tax credits would, under most
circumstances, be limited to approximately $3.4 million per year for 15 years
and PSG could end up paying taxes that would otherwise not be due.
Generally speaking, an "ownership change" occurs whenever, within a three-year
period, the aggregate ownership of a company's stock by its "5-percent
shareholders" (as defined by the applicable federal income tax regulations)
increases by more than 50 percentage points. Making the calculation is complex
and uncertain. PSG believes that as of May 1, 1996, no "ownership change" had
occurred with respect to PSG, but that the aggregate percentage point increase
in the ownership of PSG's stock by "5-percent shareholders" was in excess of
35%. PSG generally has no control over either the purchase or sale of its shares
by 5% shareholders. In addition, the issuance of new equity securities or the
buy back of outstanding common stock by PSG would negatively effect the
"ownership change" calculation. Therefore, PSG will likely be constrained in its
ability to effect such equity transactions while there is concern as to the
"ownership change" calculation.
At the 1996 Annual Meeting, to be held on May 28, 1996, stockholders of PSG will
have the opportunity to vote on a holding company reorganization transaction
which is designed to impose transfer restrictions on shares in order to help
decrease the risk that an "ownership change" will occur.
RESULTS OF OPERATIONS - COMPARISON OF THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995
REVENUES - Revenues from PSG's fuel sales and distribution subsidiary, PS
Trading, Inc. (PST), increased 52% for the first quarter of 1996 compared to the
first quarter of 1995, primarily as a result of a 57% increase in the gallons of
fuel sold which resulted from increased marketing efforts by the wholesale fuel
marketing division.
Total aircraft leasing revenues are approximately the same in the first quarters
of 1996 and 1995, however, there are offsetting items that account for this.
Normal lease revenues were down in 1996 due to declining revenues from financing
leases
F-6
<PAGE>
and lease rate resets on certain aircraft leases (which were matched by lower
interest rates on the related debt). Offsetting these items was the settlement
of PSG's administrative claim in the Pan Am bankruptcy at a higher amount than
originally estimated and the sale of 747 engine parts from inoperable engines
returned by Pan Am related to the two 747 aircraft sold by PSG in 1995.
Interest and other revenues were down from the first quarter of 1995 due to
lower levels of interest bearing assets, plus, in 1996, investment losses of
$130,000 were recorded related to market value adjustments on PSG's investments
in U.S. Government securities as a result of recent higher interest rates.
COSTS AND EXPENSES - The 50% increase during the first quarter of 1996 in the
cost of sales reflects the increased volumes at PST discussed above. The
increase in general and administrative expenses for the first quarter of 1996 is
largely due to expenses associated with the holding company reorganization
discussed above plus additional expenses to support PST's expanded operations.
Interest expense decreased in 1996's first quarter primarily due to lower levels
of outstanding debt.
INCOME TAXES - Taxes in both 1996 and 1995 differ from the corporate federal tax
rate primarily because of the effect of state taxes.
SEGMENT RESULTS - 1996 first quarter unconsolidated results for the parent
company, PSG, which includes the aircraft leasing activity, were approximately
the same as in 1995.
PST 1996 results include expenses related to the permanent removal of fuel
distribution pipelines as a result of construction at the San Francisco
International Airport. Excluding these removal expenses, PST's first quarter
1996 results were improved over 1995. Fuel prices increased during March 1996
and have continued to increase in the second quarter of 1996. PST, as a holder
of fuel inventory, is expected to benefit as a result.
Statex recorded higher net income in 1996, principally due to higher oil prices.
F-7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,373
<SECURITIES> 9,855
<RECEIVABLES> 29,106
<ALLOWANCES> (68)
<INVENTORY> 7,492
<CURRENT-ASSETS> 10,696
<PP&E> 288,690
<DEPRECIATION> (151,287)
<TOTAL-ASSETS> 306,577
<CURRENT-LIABILITIES> 38,148
<BONDS> 0
0
0
<COMMON> 6,068
<OTHER-SE> 117,885
<TOTAL-LIABILITY-AND-EQUITY> 306,577
<SALES> 40,970
<TOTAL-REVENUES> 9,147
<CGS> 39,732
<TOTAL-COSTS> 39,732
<OTHER-EXPENSES> 5,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,632
<INCOME-PRETAX> 1,490
<INCOME-TAX> 619
<INCOME-CONTINUING> 871
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 871
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
