UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the nine months ended
JUNE 30, 1994
Commission File Number: 1-6222
FLIGHTSAFETY INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)
New York 11-1671001
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
Marine Air Terminal, LaGuardia Airport
Flushing, New York 11371
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code: 718-565-4100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock (par value $.10 per share) New York Stock
Exchange,
Inc.
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Company (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 Company was required to file such reports), and (2) has
been
subject to such filing requirements for the past 90 days.
Yes X No
As of July 31, 1994, the Company had 31,695,620
shares of its common stock outstanding.
FLIGHTSAFETY INTERNATIONAL, INC.
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1 - Financial Statements
Consolidated Balance Sheets at
June 30, 1994 and December 31, 1993 3 - 4
Consolidated Statements of Income,
Six Months Ended June 30, 1994 and 1993 5
Consolidated Statements of Income,
Three Months Ended June 30, 1994 and 1993 6
Consolidated Statements of Cash Flows,
Six Months Ended June 30, 1994 and 1993 7
Notes to Consolidated Financial
Statements as of June 30, 1994 8 - 9
Item 2 - Management's Discussion
and Analysis of Financial
Condition and Results of
Operations 10
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote
of Security Holders 11
Item 6 - Exhibits and Reports on Form 8-K 11
SIGNATURES 12
Page 2 of 12
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
June 30, December 31,
1994 1993
Current assets:
Cash $ 4,948,000 $ 2,100,000
Short-term investments
stated at cost which
approximates market value 192,509,000 178,949,000
Accounts receivable, less
allowance for doubtful
accounts of $1,474,000
($1,442,000)in 1993 52,737,000 48,963,000
Inventory 13,801,000 14,605,000
Prepaid expenses and other
current assets 5,195,000 8,586,000
Total current assets 269,190,000 253,203,000
Equipment and facilities, at cost 769,370,000 744,408,000
Less - accumulated depreciation
and amortization (313,029,000) (291,030,000)
456,341,000 453,378,000
Intangible and other assets 45,177,000 47,353,000
Total assets $770,708,000 $753,934,000
See accompanying notes to consolidated financial statements.
Page 3 of 12
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES and SHAREHOLDERS' EQUITY
(UNAUDITED)
June 30, December 31,
1994 1993
Current liabilities:
Current portion of long-term
debt $ 1,788,000 $ 1,819,000
Accounts payable and
accrued expenses 32,168,000 36,964,000
Income taxes payable 3,570,000 5,299,000
Unearned income for
contract training 38,429,000 30,996,000
Total current liabilities 75,955,000 75,078,000
Long-term debt 40,173,000 41,572,000
Deferred income taxes 105,054,000 103,515,000
Other liabilities 6,291,000 7,336,000
Total liabilities 227,473,000 227,501,000
Shareholders' equity:
Common stock - par value $.10
Authorized - 100,000,000 shares
Issued and outstanding -
31,715,076 shares(32,007,558
in 1993) 3,172,000 3,201,000
Capital in excess of par value 32,908,000 30,778,000
Retained earnings 508,936,000 494,161,000
545,016,000 528,140,000
Less - restricted
stock compensation (1,781,000) (1,707,000)
Total shareholders' equity 543,235,000 526,433,000
Total liabilities and
shareholders' equity $770,708,000 $753,934,000
See accompanying notes to consolidated financial statements.
Page 4 of 12
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended June 30,
1994 1993
Revenues:
Training revenues $132,076,000 $120,651,000
Product sales 15,179,000 31,768,000
147,255,000 152,419,000
Costs and expenses:
Salaries and wages 36,576,000 31,659,000
Depreciation and amortization 22,974,000 21,853,000
General and administrative 12,763,000 12,296,000
Operating expenses 11,482,000 11,026,000
Cost of product sales 13,192,000 24,345,000
96,987,000 101,179,000
Income from operations 50,268,000 51,240,000
Other income (expense):
Interest and other income 5,234,000 5,434,000
Interest expense (1,201,000) (1,517,000)
Income before income taxes 54,301,000 55,157,000
Income taxes 19,563,000 19,414,000
Net income for the period $ 34,738,000 $ 35,743,000
Net income per share $ 1.09 $ 1.06
Average shares outstanding 31,877,554 33,747,509
See accompanying notes to consolidated financial statements.
Page 5 of 12
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended June 30,
1994 1993
Revenues:
Training revenues $67,231,000 $63,025,000
Product sales 6,778,000 15,635,000
74,009,000 78,660,000
Costs and expenses:
Salaries and wages 17,793,000 16,108,000
Depreciation and amortization 11,581,000 11,041,000
General and administrative 5,868,000 6,241,000
Operating expenses 6,471,000 5,920,000
Cost of product sales 5,800,000 12,472,000
47,513,000 51,782,000
Income from operations 26,496,000 26,878,000
Other income (expense):
Interest and other income 2,792,000 2,360,000
Interest expense (511,000) (672,000)
Income before income taxes 28,777,000 28,566,000
Income taxes 10,238,000 10,061,000
Net income for the period $18,539,000 $18,505,000
Net income per share $ .58 $ .56
Average shares outstanding 31,759,226 33,238,913
See accompanying notes to consolidated financial statements.
Page 6 of 12
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
1994 1993*
Increase (decrease) in cash
Cash flows from operating
activities:
Net income $34,738,000 $35,743,000
Items in net income not
using cash:
Depreciation and amortization 22,974,000 21,853,000
Provision for losses on
accounts receivable 150,000 360,000
Deferred income taxes 2,238,000 792,000
Increase in cash surrender
value of corporate-owned life
insurance (758,000) (696,000)
Other, net 383,000 405,000
Changes in working capital
other than cash:
Decrease (increase) in
inventory 804,000 (8,093,000)
(Increase)in accounts
receivable (3,924,000) (20,021,000)
Decrease in prepaid expenses
and other current assets 3,391,000 3,936,000
(Decrease) in accounts payable
and accrued expenses (4,796,000) (3,197,000)
(Decrease) in income taxes
payable (1,729,000) (1,474,000)
Increase in unearned income 7,433,000 5,364,000
Net cash provided by
operating activities 60,904,000 34,972,000
Cash flows from
investing activities:
Capital expenditures (26,265,000) (28,913,000)
(Increase) decrease in
short-term investments (13,560,000) 88,612,000
Other, net 220,000 2,224,000
Net cash (used in) provided
by investing activities (39,605,000) 61,923,000
Cash flows from
financing activities:
Intangible assets arising
from acquisition (5,082,000)
Repayment of short-term
borrowings and long-term debt (1,430,000) (28,320,000)
Repurchase of common stock (13,655,000) (61,616,000)
Cash dividends (6,344,000) (5,994,000)
Exercise of stock options 2,137,000 1,808,000
Other 841,000 2,638,000
Net cash used in
financing activities (18,451,000) (96,566,000)
Net increase in cash 2,848,000 329,000
Cash at beginning of period 2,100,000 2,311,000
Cash at end of period $ 4,948,000 $ 2,640,000
*Reclassified to conform to 1994 presentation.
Page 7 of 12
FLIGHTSAFETY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
(UNAUDITED)
1) These financial statements, which should be read in
conjunction with the financial statements included in
FlightSafety International, Inc.'s Annual Report to Shareholders
for 1993, are unaudited but include all adjustments of a normal
recurring nature that the Company considers necessary for a fair
presentation of the results for such interim period. Results for
interim periods are not necessarily indicative of results for a
full year.
2) Debt consists of:
June 30, December 31,
1994 1993
Industrial development
obligations and other
debt due 1994-2012 $41,961,000 $43,391,000
Less - current portion, (1,788,000) (1,819,000)
$40,173,000 $41,572,000
The Company's industrial development obligations have variable
rates between 1.8 and 3.6 percent.
The interest capitalized on major equipment acquisitions for
the six months ended June 30, 1994 was $694,000 ($895,000 in
1993).
3) The changes in the Company's shareholders' equity account
balances in the current period were as follows:
Common Capital in Retained
Stock Excess of Earnings
Par Value
Balance at
December 31, 1993 $3,201,000 $30,778,000 $494,161,000
Net income for the
period 34,738,000
Exercise of options
pursuant to employee
stock option plans 7,000 2,130,000
Repurchase of common
stock (36,000) (13,619,000)
Dividends declared
($.20 per share) (6,344,000)
Balance at June 30, 1994 $3,172,000 $32,908,000 $508,936,000
Page 8 of 12
On February 19, 1993, the Company's Board of Directors authorized
the repurchase of up to 3,000,000 shares of the Company's
outstanding common stock. On December 3, 1993, the Board of
Directors increased its authorization to 4,000,000 shares. As of
June 30, 1994, 2,881,200 shares had been repurchased and
subsequently retired. At its June meeting, the Company's Board
of Directors declared a regular quarterly cash dividend of ten
cents per share on its common stock. The dividend is payable
August 4, 1994 to shareholders of record on July 14, 1994.
Page 9 of 12
FLIGHTSAFETY INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
In the first six months of 1994, cash provided by operations was
$60.9 million. Cash was principally used to purchase additional
equipment and facilities ($26.3 million), repurchase shares of
the Company's common stock ($13.7 million), purchase of
short-term investments ($13.6 million) and payment of dividends
($6.3 million). Capital expenditures, which are primarily
revenue generating assets such as simulators, are expected to
exceed $50 million in 1994. The Company also expects to continue
to purchase shares of its common stock. The Board of Directors
increased the shares authorized for the stock repurchase program
from 3,000,000 shares to 4,000,000 shares on December 3, 1993.
The Company had repurchased and retired 2,881,200 shares as of
June 30, 1994. The Company expects to fund its capital
expenditures and stock repurchase program from cash provided by
operations, existing cash and short-term investments. Accounts
receivable increased by $3.8 million, or eight percent, since
December 31, 1993 primarily due to an increase in amounts billed
in the first six months of 1994. Results of Operations Training
revenues for the six months ended June 30, 1994 increased by
$11.4 million or nine percent, and the 1994 second quarter
training revenues increased by $4.2 million, or seven percent,
compared to the same periods in 1993. Increased training
revenues for the 1994 periods were primarily attributed to
increases in business training (more aircraft delivered by the
aircraft manufacturers), ab initio (primary) flight training and
government training programs. Training revenues for the first
half of 1994 include approximately $1.9 million related to an
equivalent amount of retroactive salary and benefit increases
from October 1, 1992 paid to employees in accordance with the
United States Government Services Contract Act on one of the
Company's contracts. Product sales, which consist of simulators
and visual systems, decreased $16.6 million, or 52 percent and
$8.9 million, or 57 percent, respectively, for the six and three
month periods ended June 30, 1994 due to decreases in equipment
being produced for unaffiliated customers by the Company's
Simulation Systems Division. Total expenses for the six months
ended June 30, 1994 decreased by $4.2 million, or four percent.
The decrease in expenses is due to a decrease in cost of product
sales of $11.2 million due to a reduction in sales of new
simulators. This decrease was offset by salaries and wages
increasing $4.9 million principally due to retroactive salary
increases from October 1, 1992 paid in accordance with the United
States Government Services Contract Act on one of the Company's
contracts, personnel added for the new KC-135 U. S. Air Force
contract and for new and expanded facilities. Depreciation and
amortization increased $1.1 million due to the installation of
simulators since the first six months of 1993. Income taxes
for the six and three months ended June 30, 1994 increased
slightly for both periods as compared to the 1993 periods.
Income taxes, as a percentage of pre-tax income for the six
months ended June 30, 1994, increased to 36.0 percent in 1994
from 35.2 percent for the same period in 1993 and increased to
35.6 percent from 35.2 percent for the three month periods ended
June 30, 1994 and 1993, respectively. The increases in the
effective tax rate are primarily due to a one percent increase in
the federal income tax rate in August 1993. For the second
quarter of 1994, the increase in the effective tax rate was
partially offset by additional tax advantaged income.
Page 10 of 12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 6. Exhibits and Reports on Form 8-K.
None.
Page 11 of 12
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.
FLIGHTSAFETY INTERNATIONAL, INC.
Date: August 12, 1994 s/ A.L. UELTSCHI
President
Date: August 12, 1994 s/ KENNETH W. MOTSCHWILLER
Vice President/Treasurer
Page 12 of 12