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 three months ended
MARCH 31, 1996
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 identification No.)
incorporation or organization)
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 May 1, 1996, the Company had 30,601,657
shares of its common stock outstanding.
PAGE 1 OF 11
FLIGHTSAFETY INTERNATIONAL, INC.
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1 - Financial Statements
Consolidated Balance Sheets at March 31, 1996
and December 31, 1995 3 - 4
Consolidated Statements of Income,
Three Months Ended March 31, 1996 and 1995 5
Consolidated Statements of Cash Flows,
Three Months Ended March 31, 1996 and 1995 6
Notes to Consolidated Financial Statements
as of March 31, 1996 7 - 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote
of Security Holders 10
Item 6 - Exhibits and Reports on Form 8-K 10
SIGNATURES 11
Page 2 of 11
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(UNAUDITED)
March 31, December 31,
1996 1995
Current assets:
Cash $ 4,847,000 $ 6,128,000
Short-term investments stated at
cost which approximates market value 180,388,000 194,084,000
Accounts receivable, less allowance
for doubtful accounts of $1,549,000
($1,481,000 in 1995) 84,229,000 69,575,000
Inventory 9,221,000 7,640,000
Prepaid expenses and other current assets 9,995,000 11,482,000
Total current assets 288,680,000 288,909,000
Equipment and facilities, at cost 921,497,000 894,308,000
Less - accumulated depreciation
and amortization (397,868,000) (384,491,000)
523,629,000 509,817,000
Intangible and other assets 49,298,000 45,709,000
Total assets $861,607,000 $844,435,000
See accompanying notes to consolidated financial statements.
Page 3 of 11
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES and SHAREHOLDERS' EQUITY
(UNAUDITED)
March 31, December 31,
1996 1995
Current liabilities:
Current portion of long-term debt $ 1,634,000 $ 1,759,000
Accounts payable and accrued expenses 40,523,000 47,016,000
Dividends payable 4,287,000 4,311,000
Income taxes payable 13,141,000 3,229,000
Unearned income for contract training 38,164,000 30,265,000
Total current liabilities 97,749,000 86,580,000
Long-term debt 37,004,000 38,054,000
Deferred income taxes 111,540,000 111,537,000
Other liabilities 5,175,000 5,263,000
Total liabilities 251,468,000 241,434,000
Shareholders' equity:
Common stock - par value $.10
Authorized - 100,000,000 shares
Issued and outstanding - 30,624,245
shares (30,792,681 in 1995) 3,062,000 3,079,000
Capital in excess of par value 38,010,000 37,092,000
Retained earnings 570,723,000 564,549,000
611,795,000 604,720,000
Less - restricted stock compensation (1,656,000) (1,719,000)
Total shareholders' equity 610,139,000 603,001,000
Total liabilities and shareholders' equity $861,607,000 $844,435,000
See accompanying notes to consolidated financial statements.
Page 4 of 11
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended March 31,
1996 1995
Revenues $89,209,000 $77,831,000
Costs and expenses:
Salaries and wages 21,580,000 18,786,000
Depreciation and amortization 13,166,000 11,961,000
Operating expenses 14,093,000 6,840,000
General and administrative 7,002,000 7,823,000
Cost of product sales 3,835,000 5,326,000
59,676,000 50,736,000
Income from operations 29,533,000 27,095,000
Other income (expense):
Interest and other income 3,475,000 3,114,000
Interest expense (887,000) (724,000)
Income before income taxes 32,121,000 29,485,000
Income taxes 11,255,000 9,321,000
Net income for the period $20,866,000 $20,164,000
Net income per share $ .68 $ .64
Average shares outstanding 30,722,299 31,321,355
See accompanying notes to consolidated financial statements.
Page 5 of 11
FLIGHTSAFETY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
1996 1995
Increase (decrease) in cash
Cash flows from operating activities:
Net income $20,866,000 $20,164,000
Items in net income not using cash:
Depreciation and amortization 13,166,000 11,961,000
Provision for losses on
accounts receivable 90,000 161,000
Deferred income taxes 454,000 711,000
Increase in cash surrender value of
corporate-owned life insurance (762,000) (380,000)
Other, net 122,000 153,000
Changes in working capital other than cash:
(Increase) in accounts receivable (14,744,000) (5,505,000)
(Increase) decrease in inventory (1,581,000) 1,690,000
Decrease in prepaid expenses and other
current assets 1,487,000 1,461,000
(Decrease) in accounts payable and
accrued expenses (6,493,000) (80,000)
Increase in income taxes payable 9,912,000 4,936,000
Increase in unearned income 7,899,000 5,480,000
Net cash provided by operating activities 30,416,000 40,752,000
Cash flows from investing activities:
Capital expenditures (27,226,000) (17,018,000)
Decrease (increase) in short-term
investments 13,696,000 (20,129,000)
Corporate-owned life insurance premiums
and repayment of borrowings (3,462,000)
Other, net 696,000 430,000
Net cash (used in) provided by
investing activities (16,296,000) (36,717,000)
Cash flows from financing activities:
Repayment of short-term borrowings
and long-term debt (1,175,000) (1,175,000)
Repurchase of common stock (10,428,000)
Cash dividends (4,283,000) (3,759,000)
Other, net 485,000 (231,000)
Net cash used in financing activities (15,401,000) (5,165,000)
Net (decrease) in cash (1,281,000) (1,130,000)
Cash at beginning of period 6,128,000 2,062,000
Cash at end of period $ 4,847,000 $ 932,000
Page 6 of 11
FLIGHTSAFETY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(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 1995, 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:
March 31, December 31,
1996 1995
Industrial development obligations
and other debt due 1996-2012 $38,638,000 $39,813,000
Less - current portion (1,634,000) (1,759,000)
$37,004,000 $38,054,000
The Company's industrial development obligations have variable rates between
3.2 and 5.7 percent.
The interest capitalized on major equipment acquisitions for the three
months ended March 31, 1996 was $390,000 ($614,000 in 1995).
3) The changes in the Company's shareholders' equity account balances in
the current period were as follows:
Common Capital in
Excess of Retained
Par Value Earnings
Balance at December 31, 1995
$3,079,000 $37,092,000 $564,549,000
Net income for the period 20,866,000
Exercise of options pursuant to
employee stock option plans 2,000 918,000
Repurchase of common stock (19,000) (10,409,000)
Dividends declared (4,283,000)
Balance at March 31, 1996 $3,062,000 $38,010,000 $570,723,000
Page 7 of 11
On September 12, 1995 the Company's Board of Directors authorized the
repurchase of an additional 4,000,000 shares of the Company's outstanding
common stock. The Company is now authorized to repurchase 8,000,000 shares.
As of March 31, 1996, 4,123,300 shares had been repurchased and subsequently
retired. At its March meeting, the Company's Board of Directors declared a
regular quarterly cash dividend of fourteen cents per share on its common
stock payable May 7, 1996 to shareholders of record on April 12, 1996.
Page 8 of 11
FLIGHTSAFETY INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
In the first three months of 1996, $30.4 million of cash was provided by
operations and $13.7 milion was provided by a reduction in short-term
investments. Cash was principally used for the purchase of additional
equipment and facilities ($27.2 million), repurchase of shares of the Company's
common stock ($10.4 million) and payment of dividends ($4.3 million).
Capital expenditures, which are primarily revenue generating assets such as
simulators, are expected to exceed $85 million in 1996. The Board of Directors
increased the shares authorized for the stock repurchase program to 8,000,000
shares from 4,000,000 shares on September 12, 1995. There were 194,600 shares
repurchased under the program in the first quarter of 1996. The Company has
repurchased and retired 4,123,300 shares as of March 31, 1996. 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 $14.7 million, or 21 percent, primarily due to
an increase in amounts billed in the first quarter of 1996 as compared to the
1995 first quarter and higher amounts due from the U. S. Government related
to an increase in a U. S. Air Force contract.
Results of Operations
Revenues for the three month period ending March 31, 1996 increased by
$11.4 million, or 15 percent, as compared to 1995. Revenue increases were
experienced in all areas of the Company's training operations. Training
revenues increased by $13.1 million including approximately $7.0 million from
an increase in a U. S. Air Force contract, offset by a reduction in product
sales of $1.7 million.
Total expenses for the three months ended March 31, 1996 increased by
$8.9 million, or 18 percent. Salaries and wages increased by $2.8 million,
or 15 percent, due to personnel additions and annual salary increases.
Depreciation and amortization increased by $1.2 million due to additional
equipment added since the first quarter of 1995. Operating expenses increased
by $7.3 million primarily from costs associated with the increase in the U. S.
Air Force contract previously referred to, increases in training supplies and
facility costs. These increases were offset by a decrease in general and
administrative expenses of $0.8 million primarily due to decreases in
professional fees and insurance costs, and a decrease in cost of product
sales of $1.5 million related to reduced product sales.
Income tax expenses for the three months ended March 31, 1996 versus 1995
increased by $1.9 million. Income taxes, as a percentage of pre-tax income,
increased to 35.0 percent in 1996 as compared to 31.6 percent in 1995. The
higher income tax expense and effective income tax rate is due principally to
income tax refunds received in the first quarter of 1995 related to prior years
and a decrease in tax advantaged income as a percentage of pre-tax income.
Page 9 of 11
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 10 of 11
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: May 15, 1996 s/ A. L. UELTSCHI
President
Date: May 15, 1996 s/ K. W. MOTSCHWILLER
Vice President/Treasurer
Page 11 of 11