1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File No.
MARCH 31, 2000 0-24275
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 52-2081515
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
587 GREENWAY INDUSTRIAL DRIVE
FORT MILL, SOUTH CAROLINA 29708
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(803) 548-2160
- --------------------------------------------------------------------------------
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
The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:
Common Shares Outstanding at May 10, 2000
7,185,504
2
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 10 $ 91
Receivables:
Trade and other, net of allowances of $413 at March 31, 2000
and $366 at December 31, 1999 17,950 18,843
Affiliate 31 631
Cost and estimated earnings in excess of billings on uncompleted
contracts, net 306 981
Inventories 80,572 67,596
Prepaid expenses 1,014 825
Income tax receivable 921 --
--------- --------
Total current assets 100,804 88,967
Property and equipment, net 14,728 11,787
Assets under capital lease, net 17 19
Assets held for lease, net 633 633
Goodwill and acquisitions costs, net of amortization 11,292 10,520
Deferred financing fees 1,506 1,595
Investments in affiliated companies 2,220 --
Other assets 1,086 343
--------- --------
$ 132,286 $113,864
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving line of credit $ 69,260 $ 51,288
Current maturities of long-term debt 3,745 347
Capital lease obligations - current portion 994 965
Accounts payable and accrued expenses 17,721 20,300
Notes payable to related parties - current portion 127 168
Income taxes payable -- 1,159
--------- --------
Total current liabilities 91,847 74,227
Long-term debt, net of current maturities 5,096 3,121
Capital lease obligations - long-term portion 6,112 6,371
Notes payable to related parties - long-term portion 47 88
Deferred income taxes 316 316
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized;
no shares issued or outstanding -- --
Common stock, $.001 par value; 20,000,000 shares authorized;
7,210,504 and 7,190,104 shares issued and outstanding at
March 31, 2000 and December 31, 1999, respectively 7 7
Additional paid-in capital 20,571 20,450
Retained earnings 8,515 9,284
Treasury stock (225) --
--------- --------
Total stockholders' equity 28,868 29,741
--------- --------
$ 132,286 $113,864
========= ========
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
F-2
3
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
FOR THE THREE MONTHS
ENDED MARCH 31,
2000 1999
-------- ---------
(Unaudited)
Net revenues $ 13,967 $ 13,568
Cost of sales and service 10,547 8,960
-------- --------
GROSS PROFIT 3,420 4,608
-------- --------
Operating Expenses:
Selling and marketing 1,143 811
General and administrative 1,876 1,335
-------- --------
Total operating expenses 3,019 2,146
-------- --------
INCOME FROM OPERATIONS 401 2,462
Other (expense) income:
Interest expense, net (1,662) (373)
-------- --------
(LOSS) INCOME BEFORE INCOME TAXES (1,261) 2,089
(Benefit) provision for income taxes (492) 800
-------- --------
NET INCOME $ (769) $ 1,289
======== ========
Basic (loss) earnings per share $ (0.11) $ 0.18
======== ========
Diluted (loss) earnings per share $ (0.11) $ 0.18
======== ========
Weighted average shares outstanding:
Basic 7,186 7,190
======== ========
Diluted 7,186 7,326
======== ========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-3
4
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
FOR THE THREE MONTHS
ENDED MARCH 31,
2000 1999
--------- ---------
(Unaudited)
OPERATING ACTIVITIES
Net (loss) income $ (769) $ 1,289
Adjustments to reconcile net (loss) income to cash used in operating activities:
Depreciation and amortization 424 321
Provision for uncollectible accounts 48 --
Deferred taxes (921) --
Decrease (increase) in trade and other receivables 1,445 (1,489)
Decrease (increase) in costs and estimated earnings in excess of billings
on uncompleted contracts, net 675 (160)
Increase in inventories (12,772) (11,777)
Increase in prepaid expenses (190) (127)
Increase in other assets (742) (382)
(Decrease) increase in accounts payable and accrued expenses (2,578) 9,617
Decrease in accounts payable to related parties -- (54)
Change in income tax liability (1,159) (352)
-------- --------
Net cash used in operating activities (16,539) (3,114)
-------- --------
INVESTING ACTIVITIES
Capital expenditures (3,375) (1,790)
Change in assets held for lease -- (5,581)
Investment in affilated companies (2,220) --
Acquisition of businesses (876) (37)
-------- --------
Net cash used in investing activities (6,471) (7,408)
-------- --------
FINANCING ACTIVITIES
Net borrowings on revolving line of credit 17,972 8,628
Increase in capital expenditure line 1,620 --
Issuance of notes payable, net 3,754 --
Principal repayments of notes payable to related parties, net (83) --
Repurchase of treasury stock (225) --
Repayment of capital lease obligations (230) --
Issuance of additional shares of common stock 121 --
-------- --------
Net cash provided by financing activities 22,929 8,628
-------- --------
Net decrease in cash and cash equivalents (81) (1,894)
Cash and cash equivalents, beginning of period 91 2,150
-------- --------
Cash and cash equivalents, end of period $ 10 $ 256
======== ========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-4
5
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
INTERIM FINANCIAL STATEMENTS
The accompanying consolidated interim financial statements include the accounts
of American Aircarriers Support, Incorporated, a Delaware corporation, and its
wholly-owned subsidiaries Aviation Services, Inc., AAS Landing Gear Services,
Inc., AAS Amjet, Inc., AAS Complete Controls, Inc., AAS Aircraft Services, Inc.
and AAS Technologies, Inc., (collectively "AAS"). All significant intercompany
accounts and transactions have been eliminated in consolidation. These
statements have been prepared by AAS, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect all
adjustments that, in management's opinion, are necessary for fair presentation.
All such adjustments are of a normal, recurring nature. The balance sheet as of
December 31, 1999, has been derived from the audited consolidated financial
statements as of that date. Operating results for the three month period ending
March 31, 2000, are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
here have been condensed or omitted pursuant to such rules and regulations,
although we believe the disclosures are adequate to make the information
presented not misleading. It is suggested that these consolidated interim
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in our Form 10-KSB for the year ended
December 31, 1999.
RECLASSIFICATIONS
Certain amounts in the 1999 financial statements have been reclassified in order
to conform with 2000 presentation
2. LINE OF CREDIT:
In May 1999, AAS entered into a five-year revolving credit agreement and capital
expenditure loan facility ("Credit Agreement") with Bank of America (the
"agent") and other financial institutions ("the lenders"). The Credit Agreement
provides a line of credit up to $100 million of which $10 million is designated
as the Capital Expenditure Loan Facility. The Credit Agreement replaced an
existing $35 million line of credit, which was repaid in full from the proceeds
of the new facility. In conjunction with the new financing, AAS wrote off $0.1
million of deferred financing fees associated with the previous line of credit.
Principal amounts outstanding under the Credit Agreement bear interest on a
variable rate basis at various interest rates tied to either the London
Interbank Offered Rate ("LIBOR") or the prime rate, depending on certain
indebtedness ratios. The terms of the Credit Agreement also provide for a
facility non-use fee of 3/8% per annum on the unused portion of the facility.
The Credit Agreement is secured by substantially all of AAS's assets and the
capital expenditure loan facility is secured by all of the equipment funded by
the facility.
F-5
6
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
2. LINE OF CREDIT-CONTINUED:
The capital expenditure loan facility may be drawn down through May 2000, at
which time it converts into a term loan amortizing over the remaining term of
the Credit Agreement. The amount of credit available under the agreement at any
given time is determined by an availability calculation, based on the eligible
borrowing base, as defined in the credit agreement which includes the
outstanding receivables and inventories, with certain exclusions. In December
1999, the existing credit facility was amended to allow for an additional $1
million, in excess of the availability established by the borrowing base
calculation, to be available to us until additional subordinated debt could be
obtained. As of March 31, 2000, pursuant to the Credit Agreement, as amended,
the available credit was $1.0 million and $4.9 million on the revolver and
capital expenditure line, respectively. The Credit Agreement, of which $69.3
million and $5.1 million were outstanding under the revolver and capital
expenditure loan facility, respectively, at March 31, 2000, contains customary
events of default and restrictive covenants that, among other matters, require
that certain financial ratios be maintained. As of March 31, 2000, AAS was not
in compliance with certain restrictive financial covenants.
3. TREASURY STOCK
In February 2000, AAS entered into an agreement to exchange $621,000, classified
on the balance sheet as of December 31, 1999 as accounts receivable from
affiliates, for 69,000 shares of common stock which were issued to a related
party in connection with one of the previous acquisitions. Subsequent to the
agreement, AAS sold the stock for $621,000. As of March 31, 2000, cash in the
amount of $600,000 had been received, leaving an open accounts receivable
balance of $21,000. The agreement also calls for the registration of the
remaining 56,000 shares held by the related party or the assistance by AAS with
a private placement of those shares. During March, AAS repurchased 25,000 of
these shares from the related party for $9 per share, or $225,000. These shares,
which are held in treasury; carried at cost and reflected as a separate
deduction from shareholders' equity. In April, AAS finalized the purchase of a
facility from the related party for $363,000 and the assumption of the $450,000
mortgage on that facility and entered into a new lease for another facility
previously subleased from the related party.
THREE MONTHS ENDED
MARCH 31, 2000
------------------
(000's)
Basic weighted average shares outstanding
beginning of period 7,211
Repurchased Treasury Stock (25)
------
Basic weighted average shares outstanding 7,186
======
F-6
7
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
4. EARNINGS PER SHARE:
The computation of basic earnings per share in accordance with SFAS No. 128 is
as follows - (in thousands, except per share amounts):
THREE MONTHS THREE MONTHS
ENDED MARCH ENDED MARCH
31, 2000 31, 1999
------------ ------------
Net (loss) income as reported $ (769) $1,289
------- ------
Weighted average shares outstanding 7,186 7,190
------- ------
Basic (loss) earnings per share $ (0.11) $ 0.18
======= ======
The computation of diluted earnings per share in accordance with SFAS No. 128 is
as follows - (in thousands except per share amounts):
THREE MONTHS THREE MONTHS
ENDED MARCH ENDED MARCH
31, 2000 31, 1999
------------ ------------
Net (loss) income as reported $ (769) $121,289
======== ========
Weighted average shares outstanding 7,186 7,190
Effect of dilutive securities -- 136
-------- --------
Diluted weighted average shares outstanding 7,186 7,326
-------- --------
Diluted (loss) earnings per share $ (0.11) $ 0.18
======== ========
Options to purchase 644,750 shares of common stock at a range of $6.00 to $10.75
per share and 200,000 warrants priced at $7.98 were outstanding during the first
quarter 2000 but were not included in the computation of diluted EPS because to
do so would have been antidilutive for the period presented.
F-7
8
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - CONTINUED
5. BUSINESS COMBINATION:
Effective February 15, 2000, AAS completed the acquisition of certain assets of
Santa Barbara Aerospace, Inc., for a purchase price of $2.3 million in cash and
notes. The name of subsequently changed to AAS Aircraft Services, Inc. The
acquisition involved the purchase of assets used in the operation of a facility
that was FAA certified to provide heavy maintenance and modification services.
AAS entered into a lease of the facilities previously used for these services
from the San Bernardino International Airport Authority.
The AAS Aircraft Services acquisition has been accounted for by the purchase
method of accounting, and accordingly, the results of operations of AAS Aircraft
Services for the period from February 15, 2000 are included in the accompanying
consolidated financial statements. Assets acquired and liabilities assumed have
been recorded at their estimated fair values, and are subject to adjustment
within the next twelve months when additional information concerning asset and
liability valuations are finalized.
The assets of Santa Barbara Aerospace, Inc. were purchased out of bankruptcy.
Therefore, there is no pro forma information on the results of operations as if
the acquisition had taken place on January 1, 2000.
F-8
9
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion may contain "forward-looking" statements, as that term
is defined by (i) the Private Securities Litigation Reform Act of 1995 (the
"Reform Act") and (ii) in releases made by the Securities and Exchange
Commission from time to time. Forward-looking statements are subject to risks
and uncertainties that may cause future results to differ materially from those
set forth in such forward-looking statements. AAS undertakes no obligation to
update forward-looking statements to reflect events or circumstances after the
date hereof. Our future operating results may be affected by various trends and
factors beyond our control. Accordingly, past results and trends should not be
used by investors to anticipate future results or trends.
OVERVIEW
American Aircarriers Support, Incorporated, founded in 1985, provides integrated
aviation maintenance, repair and overhaul services including spare parts for
commercial airlines, cargo operators and maintenance and repair facilities
worldwide. AAS offers engine and aircraft management services, maintenance,
repair and overhaul of flight controls, landing gear systems and jet engines at
its FAA licensed facilities, and, as of February 2000, heavy maintenance for
complete aircraft. AAS is one of the few companies that specialize in both
engine and airframe components and spare parts and also provides aviation
services that include:
1) sale, lease or exchange of all major airframe and engine components
and spare parts;
2) complete FAA and JAA (a consortium of European civil aviation
regulatory authorities) certified maintenance, repair and overhaul
("MRO") services for engines, landing gear and flight control surfaces;
3) engine and aircraft management, insurance claims assistance and
other services; and
4) as of February 2000, FAA certified heavy maintenance and
modification for both narrow and wide body aircraft.
F-9
10
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
RESULTS OF OPERATIONS
Comparison of Three Months Ended March 31, 2000 and 1999
Net revenues increased approximately $0.4 million, or 2.9%, to $14.0 million in
the three months ended March 31, 2000 from $13.6 million in the corresponding
period in 1999. Businesses acquired during the second quarter of 1999 and the
first quarter of 2000 accounted for approximately $1.4 million of the total net
revenues as of March 31, 2000. This revenue was partially offset by a decrease
in net revenues of the other companies of approximately $1.0 million.
A number of factors contributed to the decrease in revenues such as delays of
customer approvals for MRO services and purchasing decisions not to buy parts
due to an industry slowdown that was caused by the uncertainty of fuel prices
during the first part of the quarter.
Cost of sales and service totaled approximately $10.5 million, or 75.5% of net
revenues, in the first quarter of 2000, compared with $9.0 million, or 66.0% net
of revenues, in the first quarter of 1999. Gross profit decreased 25.8% to $3.4
million for the three months ended March 31, 2000, compared with $4.6 million
for the same period last year. As a percentage of revenues, gross profit was
approximately 24.5% of revenues in the three months ended March 31, 2000,
compared with approximately 34.0% in the three months ended March 31, 1999. The
decrease in gross profit is largely attributable to the pricing pressures
resulting from the increased competition related to the industry slowdown and
delayed customer purchases.
Selling and marketing expenses increased $0.3 million, or 40.5%, to $1.1 million
in the three months ended March 31, 2000 from $0.8 million in the three months
ended March 31, 1999. This increase primarily reflects compensation expenses
related to additional staffing, fees paid to outside agents and sales related
travel. As a percentage of net revenues, selling and marketing expenses
increased to 8.2% in the three months ended March 31, 2000, compared to 6.0% of
net revenues in the three months ended March 31, 1999.
General and administrative expenses increased $0.5 million, or 40.1%, to $1.9
million in the three months ended March 31, 2000 from $1.3 million in the
comparable 1999 period. The majority of the increase in expenses is attributable
to the approximately $0.4 million of general and administrative expenses
associated with the recently acquired operations. Other expense increases which
negatively impacted results were insurance, rent and depreciation. As a
percentage of net revenues for the three months ended March 31, 2000, general
and administrative expenses were 13.4%, compared with 9.8% of net revenues in
the three months ended March 31, 1999.
F-10
11
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
Comparison of Three Months Ended March 31, 2000 and 1999 - continued
Net interest expense for the three months ended March 31, 2000 increased by $1.3
million to approximately $1.7 million, compared to $0.4 million in the three
months ended March 31, 1999. This increase is due to the higher levels of
indebtedness outstanding used to finance the recent acquisitions, inventory
purchases and working capital requirements. For the three months ended March 31,
2000, the weighted average borrowings under the Credit Facility were $65.8
million and the weighted average interest rate was 8.46%.
As a result of the above, net income before taxes decreased $3.3 million, or
160%, to a pre-tax loss of $1.3 million in the first quarter of 2000 from
pre-tax income of $2.1 million in the same period in 1999. Net loss after the
income tax benefit of $0.5 million was $0.7 million ($0.11 loss per diluted
share) for the three months ended March 31, 2000.
In January 2000, AAS purchased a DC10 aircraft for disassembly for $8.5 million.
The aircraft was financed under our revolving credit facility. We are presently
in the process of disassembly, inspection and tagging the parts in preparation
for sale. We anticipate the sales from this aircraft to significantly impact
third and fourth quarter results of operations.
In February 2000, AAS entered into a technology partnering agreement with
SupplyAccessTM for the joint development of an Internet-based distribution model
for parts sales. We borrowed $3 million from an unaffiliated private investor to
fund our participation in the development and marketing of this
business-to-business e-Procurement solution for the aerospace industry. Both
principal and interest on the loan are due at the earlier of one hundred twenty
days from the closing or the funding of a subordinated debenture offering in the
minimum amount of $10 million. The loan is evidenced by an unsecured,
subordinated promissory note that bears interest at 9.5% per annum and is
secured by the personal guaranty of the founder and CEO of AAS. The bridge
lender also received an option to purchase 25,000 shares of common stock at
$8.00 per share for a four-year period. The option has customary anti-dilution
provisions and the holder has certain resignation rights.
In March 2000, AAS signed a commitment letter to issue up to $25 million in
subordinated debt to an unaffiliated institutional investor, subject to a due
diligence review. As of May 10, 2000, the subordinated debt financing had not
been closed.
F-11
12
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity for AAS prior to completion of the May 1998
initial public offering were cash flows from operating activities, borrowings
under the prior credit facility and advances from its two founders. AAS requires
capital to purchase inventory, to fund product servicing and overhaul
facilities, for normal operating expenses and for general working capital
purposes.
In May 1999, AAS entered into a five-year revolving credit agreement and capital
expenditure loan facility. The Credit Agreement provides for a line of credit up
to $100 million, of which $10 million is designated as the Capital Expenditure
Loan Facility. The Credit Agreement replaced an existing $35 million line of
credit, which was repaid in full from the proceeds of the new facility. In
conjunction with the new financing, we wrote off $0.1 million of deferred
financing fees associated with the previous line of credit. Principal amounts
outstanding under the Credit Agreement bear interest on a variable rate basis at
various interest rates tied to either the LIBOR or the prime rate, depending on
certain indebtedness ratios. The terms of the Credit Agreement also provide for
a facility non-use fee of 3/8% per annum on the unused portion of the facility.
The Credit Agreement is secured by substantially all of AAS's assets and the
capital expenditure loan facility is secured by all of the equipment funded by
the facility. The capital expenditure loan facility may be drawn down through
May 2000, at which time it converts into a term loan amortizing over the
remaining term of the Credit Agreement.
The amount of credit available under the credit agreement at any given time is
determined by an availability calculation, based on the eligible borrowing base,
as defined in the credit agreement which includes the outstanding receivables
and inventories, with certain exclusions. In December 1999, the existing credit
facility was amended to allow for an additional $1 million, in excess of the
availability established by the borrowing base calculation, to be available to
us until additional subordinated debt could be obtained. As of March 31, 2000,
pursuant to the Credit Agreement, as amended, available credit was $1.0 million
and $4.9 million on the revolver and capital expenditure line, respectively.
As of March 31, 2000, AAS's principal sources of liquidity included cash and
cash equivalents of $10,000, net accounts receivable of $18.0 million and
potentially up to $20.7 million of available borrowings under the revolver if
inventory and accounts receivable are at level that yield such availability as
determined by the borrowing base calculation. Additionally, there is $4.9
million of borrowings available under the capital expenditure line of the Credit
Agreement. There was working capital of $9.0 million and long-term debt of $11.3
million at March 31, 2000.
For the three months ended March 31, 2000, operating activities used cash of
$16.5 million, primarily for increases in inventory and decreases in accounts
payable and accrued expenses and income taxes payable, which were partially
offset by decreases in accounts receivable.
F-12
13
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
Net cash used in investing activities during the three months ended March 31,
2000 was $6.5 million, reflecting the purchase of fixed assets, increased
acquisition costs that were incurred in connection with the purchase of certain
assets of Santa Barbara Aerospace, Inc., which closed on February 14, 2000, as
well as an investment in a technology partnering agreement for the development
of an internet-based distribution model for aircraft parts sales. Net cash
provided by financing activities during the three months ended March 31, 2000,
was $22.9 million, which consisted primarily of net borrowings under the Credit
Agreement.
Capital expenditures were approximately $3.4 million for the three months ended
March 31, 2000. Of this amount, approximately $2.1 million is related to the
acquisition of AAS Aircraft Services and approximately $1 million is related to
the leasehold improvements necessary for the completion of the expansion of our
flight control maintenance, repair and overhaul facility in Tucson, Arizona. The
expansion was completed and the new facility opened in February 2000. Our
planned expansions of our plating facility for our landing gear operation, along
with our new engine maintenance, repair and overhaul facility, have been delayed
due to the delays in closing our subordinated debt financing.
On April 30, 2000, the amendment to our credit facility which allowed for the
additional $1 million of availability expired. As of that date and continuing
afterward, our borrowings have exceeded the availability allowed by the
borrowing base calculation resulting in a default under our Credit Agreement.
The lenders have agreed to provide financial accommodations at this time, but
have reserved their right to exercise all rights and remedies under the Credit
Agreement at any time without further notice to AAS.
We have recently begun a plan to significantly reduce our debt through the sale
of certain assets held for rotable exchanges at our MRO facilities and the
reduction of inventory levels. Existing cash balances, accounts receivable and
amounts available under the Credit Facility may not be sufficient to meet future
short-term capital requirements. If we are unsuccessful in closing the
subordinated debt facility in the near future, we will be forced to seek other
financing alternatives. There can be no assurance that we will be capable of
securing additional capital or that the terms upon which such capital will be
available to us will be acceptable.
F-13
14
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - CONTINUED
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). This statement addresses the accounting
for derivative instruments, including certain derivative instruments imbedded in
other contracts, and hedging activities. The Statement is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999. In June 1999,
the FASB issued SFAS No. 137 which delayed the effective date of SFAS No. 133
until fiscal quarters of all fiscal years beginning after June 15, 2000. We do
not believe that the adoption of the provisions of SFAS No. 133 will
significantly impact the financial reporting of American Aircarriers Support,
Incorporated and Subsidiaries
F-14
15
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
AAS is involved in various claims and lawsuits incidental to its business
operations. In the opinion of management, the ultimate resolution of these
claims and lawsuits will not have a material adverse effect on the financial
condition, results of operations or cash flows of the Company.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable
(b) Not applicable
(c) Not applicable
(d) Not applicable
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 -EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
F-15
16
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.
American Aircarriers Support, Incorporated
(Registrant)
Date: May 11, 2000
By /s/ Elaine T. Rudisill
----------------------
Elaine T. Rudisill
(Principal Financial and Accounting Officer)
F-16