UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 17, 1997
Commission File No. 1-11775
AVIATION SALES COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 65-0665658
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6905 NW 25TH STREET 33122
MIAMI, FLORIDA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (305) 592-4055
N.A.
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
This Form 8-K/A amends the Form 8-K filed on November 3, 1997 to report the
acquisition by Aviation Sales Company (the "Company") of the assets of
Kratz-Wilde Machine Company ("Kratz-Wilde"). This Form 8-K/A includes both the
financial statements of Kratz-Wilde which are required to be filed pursuant to
Item 7(a) of Form 8-K, as well as the pro forma financial statements of the
Company and Kratz-Wilde required to be filed pursuant to Item 7(b) of Form 8-K,
with respect to that transaction. Additionally, Exhibit 23.1, which contains the
consent of Clark, Schoefer, Hacket & Co. to inclusion of their financial
statements in the Company's Form S-3 registration statement (File No.
333-40429), is also filed herewith.
1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Kratz-Wilde Machine Company
We have audited the accompanying balance sheets of Kratz-Wilde Machine Company
(an S Corporation) as of October 31, 1996 and 1995, and the related statements
of income, retained earnings, and cash flows for the year ended October 31,
1996. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kratz-Wilde Machine Company as
of October 31, 1996 and 1995, and the results of its operations and its cash
flows for the year ended October 31, 1996 in conformity with generally accepted
accounting principles.
As discussed in Note 8 to the financial statements, certain misstatements of
previously reported inventories as of October 31, 1996 and 1995 were discovered.
Accordingly, an adjustment has been made to net income for 1996 and retained
earnings as of October 31, 1995 to correct the misstatements.
Clark, Schaefer, Hackett & Co.
Cincinnati, Ohio
October 10, 1997
2
<PAGE>
<TABLE>
<CAPTION>
KRATZ-WILDE MACHINE COMPANY
BALANCE SHEETS
OCTOBER 31,
SEPTEMBER 30, ---------------------------
1997 1996 1995
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash, cash equivalents and
temporary investments $ 3,395,618 $ 2,534,271 $ 2,229,528
Accounts receivable:
Trade 5,448,703 5,171,529 3,464,616
Officers 7,167 7,167 7,167
Inventories 6,132,290 2,887,905 3,158,917
Prepaid expenses 22,342 14,997 11,153
----------- ----------- -----------
Total current assets 15,006,120 10,615,869 8,871,381
----------- ----------- -----------
PROPERTY AND EQUIPMENT
Land 335,479 335,479 335,479
Buildings and improvements 2,924,750 2,907,075 2,903,845
Production equipment 9,357,079 8,862,699 9,586,908
Transportation equipment 232,517 228,394 310,899
Office equipment 364,569 364,569 364,569
----------- ----------- -----------
13,214,394 12,698,216 13,501,700
Less accumulated depreciation 10,140,870 9,874,286 9,530,649
----------- ----------- -----------
Total property and equipment 3,073,524 2,823,930 3,971,051
----------- ----------- -----------
OTHER ASSETS
Accounts receivable - related party 452,222 447,765 445,726
Deposits 298,908 151,525 209,807
Cash value of life insurance, net of policy loan
of $12,276 414,496 353,641 225,196
----------- ----------- -----------
Total other assets 1,165,626 952,931 880,729
----------- ----------- -----------
Total assets $19,245,270 $14,392,730 $13,723,161
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
KRATZ-WILDE MACHINE COMPANY
BALANCE SHEETS
OCTOBER 31,
SEPTEMBER 30, ---------------------------
1997 1996 1995
----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 1,877,022 $ 1,540,947 $ 1,350,353
Accrued liabilities:
Profit sharing contribution 521,987 569,440 499,919
Salaries and wages 455,000 521,154 403,920
Vacation pay 217,439 162,325 145,872
Other 114,370 120,500 103,700
----------- ----------- -----------
Total current liabilities 3,185,818 2,914,366 2,503,764
----------- ----------- -----------
Deferred income taxes 247,556 247,556 247,556
Stockholders' equity:
Common stock, no par value, stated
value $50 per share; 5,000 shares
authorized, 2,205 shares issued
and outstanding 110,250 110,250 110,250
Retained earnings 16,127,723 11,546,635 11,287,668
----------- ----------- -----------
16,237,973 11,656,885 11,397,918
Less cost of 1,470 treasury shares 426,077 426,077 426,077
----------- ----------- -----------
Total stockholders' equity 15,811,896 11,230,808 10,971,841
----------- ----------- -----------
Total liabilities and stockholders' equity $19,245,270 $14,392,730 $13,723,161
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
KRATZ-WILDE MACHINE COMPANY
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED
--------------------------------------- FOR THE YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 OCTOBER 31, 1996
------------------ ------------------ ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
OPERATING REVENUES $28,711,522 $18,751,838 $24,595,131
COST OF SALES 18,499,320 15,910,231 20,545,037
----------- ----------- -----------
10,212,202 2,841,607 4,050,094
----------- ----------- -----------
OPERATING EXPENSES
Selling 73,245 71,144 122,355
General and administrative 1,805,773 1,468,362 1,999,212
----------- ----------- -----------
1,879,018 1,539,506 2,121,567
----------- ----------- -----------
INCOME FROM OPERATIONS 8,333,184 1,302,101 1,928,527
OTHER INCOME (EXPENSES)
Miscellaneous income 4,112 89,325 15,815
Interest income 80,063 67,956 95,044
Gain (loss) on sale of assets 3,500 (34,189) (241,933)
Interest expense -- -- (614)
----------- ----------- -----------
87,675 123,092 (131,688)
----------- ----------- -----------
NET INCOME $ 8,420,859 $ 1,425,193 $ 1,796,839
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
KRATZ-WILDE MACHINE COMPANY
STATEMENT OF RETAINED EARNINGS
Balance as of October 31, 1995, as originally reported $11,989,668
Adjustment to reduce previously reported inventories (702,000)
-----------
Balance as of October 31, 1995, as restated 11,287,668
Net income 1,796,839
Distributions to stockholders (1,537,872)
-----------
Balance as of October 31, 1996 11,546,635
Net income (unaudited) 9,961,720
Distributions to stockholders (unaudited) (5,380,632)
-----------
Balance as of September 30, 1997 (unaudited) $16,127,723
===========
See accompanying notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
KRATZ-WILDE MACHINE COMPANY
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
--------------------------------------- FOR THE YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996 OCTOBER 31, 1996
------------------ ------------------ ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 27,934,420 $ 17,216,228 $ 22,904,033
Cash paid to suppliers and employees (21,954,247) (15,376,622) (21,463,046)
Interest received 80,063 67,956 95,044
Interest paid -- -- (614)
Federal income taxes refunded (147,382) 58,282 58,282
------------ ------------ ------------
Net cash provided by operating activities 5,912,854 1,965,844 1,593,699
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (384,027) (191,431) (206,417)
Proceeds from sale of fixed assets 3,500 239,747 457,372
Net decrease in temporary investments 603,060
Net (increase) to related party receivables (4,457) (6,813) (2,039)
------------ ------------ ------------
Net cash provided by (used in) investing activities (384,984) 41,503 851,976
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
------------ ------------ ------------
S Corporation distributions paid (5,380,632) (1,537,872) (1,537,872)
------------ ------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 147,238 469,475 907,803
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, beginning of period 3,248,380 1,928,609 1,626,468
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 3,395,618 $ 2,398,084 $ 2,534,271
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
KRATZ-WILDE MACHINE COMPANY
STATEMENTS OF CASH FLOWS
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
FOR THE NINE MONTHS ENDED
--------------------------------------- FOR THE YEAR ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 OCTOBER 31, 1996
------------------ ------------------ ------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Net income $ 8,420,859 $ 1,425,193 $ 1,796,839
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 230,387 494,275 654,233
(Gain) loss on sale of fixed assets (3,500) 34,189 241,933
(Increase) decrease in accounts receivable - trade (781,213) (1,624,935) (1,706,913)
(Increase) decrease in inventories (2,918,653) 1,129,750 271,012
(Increase) decrease in prepaid expenses (22,342) (22,496) (3,844)
(Increase) decrease in other assets (198,095) (38,052) (70,163)
Increase (decrease) in accounts payable - trade 972,830 222,725 190,594
Increase (decrease) in accrued expenses 212,581 345,195 220,008
------------ ------------ ------------
(2,508,005) 540,651 (203,140)
------------ ------------ ------------
Net cash provided by
operating activities $ 5,912,854 $ 1,965,844 $ 1,593,699
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
KRATZ-WILDE MACHINE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following accounting practices of the Company are set forth to
facilitate the understanding of data in the financial statements.
Nature of operations
The Company's line of business is the manufacture of metal stampings
which are principally sold to customers in the aircraft, plumbing and
automotive manufacturing industries located in the United States.
Cash equivalents
For purposes of the statement of cash flows, cash equivalents consist
of money market accounts.
Temporary investments
Temporary investments consist of debt securities (principally
certificates of deposit, repurchase agreements and U.S. Treasury bills)
with maturities of less than one year. Such investments are intended to
be held to maturity and therefore are carried at amortized cost.
Inventories
Inventories are stated at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method.
Bad debts
Accounts receivable have been adjusted for all known uncollectible
accounts. No allowance for bad debts is considered necessary by
management at year end.
Property and depreciation
Property and equipment is stated at cost. The Company provides for
depreciation of property and equipment using annual rates which are
sufficient to amortize the cost of depreciable assets over their
estimated useful lives, which range from three to forty-five years. The
Company uses both the straight-line and accelerated methods of
depreciation.
Split dollar life insurance
The Company records as an asset premiums paid under the split-dollar
life insurance arrangement at the lower of the policy's cash value or
the premiums paid by the Company through the balance sheet date.
Use of estimates in preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
9
<PAGE>
KRATZ-WILDE MACHINE COMPANY
NOTES TO FINANCIAL STATEMENTS
Income taxes
The Company has elected, effective November 1, 1988, to be taxed under
provisions of Subchapter S of the Internal Revenue Code. Under those
provisions, the Company will generally not pay Federal, Ohio or
Kentucky corporate income taxes on its taxable income. Instead, each
stockholder will be liable for individual federal and state income
taxes on the Company's taxable income.
The Company can be liable for a tax on "built-in" gains until November
1, 1988. "Built-in" gains can arise if certain appreciated assets which
were held at the time of the effective date of the S election are
subsequently disposed of within 10 years.
Deferred income taxes were previously recorded for timing differences
between financial and tax reporting. Deferred income taxes resulted
principally from the use of accelerated methods of depreciation for tax
purposes and the restoration of the LIFO inventory reserve to taxable
income as a result of electing S Corporation status. No additional
deferred income taxes will be provided on future timing differences.
However, because of the possibility of a "built-in" gains tax in the
future, the Company will continue to recognize the deferred tax
liability, arising before 1989, net of any federal income tax
subsequently incurred.
Related parties
Officers of the Company own 100% of the Company's capital stock
outstanding.
Interim Condensed Financial Statements
The accompanying unaudited interim financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 8-K/A. Pursuant to such rules
and regulations, certain information and footnote disclosure normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
In the opinion of management, the accompanying unaudited interim
financial statements of Kratz-Wilde Machine Company (the "Company")
contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position of the
Company as of September 30, 1997 and the results of its operations and
cash flows for the nine month periods ended September 30, 1997 and
1996. The results of operations and cash flows for the nine month
period ended September 30, 1997 are not necessarily indicative of the
results of operations or cash flows which may be reported for the year
ending December 31, 1997.
10
<PAGE>
KRATZ-WILDE MACHINE COMPANY
NOTES TO FINANCIAL STATEMENTS
2. CASH, CASH EQUIVALENTS AND TEMPORARY INVESTMENTS:
The Company maintains their cash deposit accounts at financial
institutions where the balances at times may exceed federally insured
limits. As of the reporting dates, cash, cash equivalents and temporary
investments consist of:
<TABLE>
<CAPTION>
September 30, October 31, October 31,
1997 1996 1995
------------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
Cash and cash equivalents:
Cash on hand $ 500 $ 500 $ 500
Cash in checking accounts 2,175,699 506,018 952,176
Money market accounts 1,219,419 2,027,753 673,792
-------------- ------------ -------------
3,395,618 2,534,271 1,626,468
Temporary investments - - 603,060
-------------- ------------ -------------
$ 3,395,618 $ 2,534,271 $ 2,229,528
============== ============ =============
</TABLE>
The amortized cost of temporary investments, by security type, at
October 31, 1995 is as follows:
Certificates of deposit $ 300,000
Repurchase agreements 303,060
------------
$ 603,060
============
The estimated fair value of the above debt securities approximates cost
at October 31, 1995.
3. CONCENTRATION OF CREDIT RISK:
The Company sells products to manufacturers and extends credit based on
an evaluation of the customer's financial condition, without
collateral. Exposure to losses on receivables is principally dependent
on each customer's financial condition. The Company monitors its
exposure to credit losses and maintains allowances, when necessary, for
anticipated losses.
Three major customers accounted for sales of approximately 75% for the
nine months ended September 30, 1997 and 1996 and the year ended
October 31, 1996. Accounts receivable due from these customers were
approximately $4.4 million and $3.8 million at September 30, 1997 and
October 31, 1996, respectively.
4. TAX DEPOSIT:
As a corporation that has retained a fiscal year end, the Company is
required to maintain a deposit with the Internal Revenue Service while
the S Corporation election is in effect. This deposit is recalculated
annually based on the preceding year's taxable income. The Company's
total deposit balance, related to the S Corporation election, was
$178,085 at September 30, 1997, $151,525 at October 31, 1996 and
$209,807 at October 31, 1995.
11
<PAGE>
KRATZ-WILDE MACHINE COMPANY
NOTES TO FINANCIAL STATEMENTS
5. ACCOUNTS RECEIVABLE - RELATED PARTIES:
The following is a summary of accounts receivable-related parties at
the reporting dates:
<TABLE>
<CAPTION>
September 30, October 31, October 31,
1997 1996 1995
------------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
Engineered Environments, Inc. $ 448,565 446,884 444,610
Employees and others 3,657 881 1,116
-------------- ------------ -------------
$ 452,222 $ 447,765 $ 445,726
============== ============ =============
</TABLE>
6. PROFIT SHARING PLAN:
The Company sponsors a profit sharing plan covering employees who are
at least 21 years of age with a minimum of one year of service. The
Board of Directors of the Company determines the annual contribution,
which may not exceed 15% of the qualifying employees' compensation.
Profit sharing plan expense was $568,087 and $426,801 for the nine
months ended September 30, 1997 and 1996, respectively, and $569,067
for the year ended October 31, 1996.
7. COMMITMENTS:
Distributions
It is anticipated that the Company will make cash distributions to the
stockholders since they are liable for individual federal and state
income taxes on the Company's taxable income. No additional
distributions, in excess of the amounts recorded in the accompanying
financial statements, have been declared as of September 30, 1997 or
October 31, 1996. Accordingly, no S distribution payable is recognized
in the accompanying financial statements.
Life insurance program
In 1995, the Company implemented a split dollar life insurance
arrangement. The Company will pay most of the premium cost which will
be approximately $50,000 per year. These premiums are expected to be
repaid to the Company. The Company does not own the policies but does
hold a collateral assignment that effectively pledges the policies'
cash values and death proceeds as security for the return of the
premiums paid by the Company. The cash values are expected to
eventually exceed the cumulative premiums paid. The Company's recovery
of the premiums paid is contingent upon continuation of the life
insurance program in the future.
The Company is the owner and beneficiary of other life insurance
policies under a buy-sell agreement between the stockholders. The
Company's annual premium cost under this arrangement is approximately
$40,000 per year.
12
<PAGE>
KRATZ-WILDE MACHINE COMPANY
NOTES TO FINANCIAL STATEMENTS
8. INVENTORIES:
Subsequent to issuance of the reviewed financial statements for the
year ended October 31, 1996 it was determined that inventory was
overstated. Correction of these estimated misstatements resulted in a
decrease of previously reported net income for 1996 amounting to
$783,000 and a decrease to retained earnings as of October 31, 1995
amounting to $702,000. The cumulative effect of these changes was to
decrease retained earnings as of October 31, 1996 by $1,485,000.
<TABLE>
<CAPTION>
September 30, October 31, October 31,
1997 1996 1995
------------- ----------- -----------
(Unaudited)
<S> <C> <C> <C>
Raw Material $ 849,527 $ 911,820 $ 638,138
Work in process 1,885,031 827,759 963,564
Finished goods 3,397,732 1,148,326 1,557,215
-------------- ------------ -------------
$ 6,132,290 $ 2,887,905 $ 3,158,917
============== ============ =============
</TABLE>
9. CONTINGENCY:
The Company is a defendant in lawsuits arising from normal business
activities. Outside counsel for the Company has advised that at this
stage they cannot offer an opinion as to their probable outcome.
Management has reviewed pending litigation and believes that the
ultimate liability, if any, resulting from them will not materially
affect the Company's financial position. Nevertheless, it is at least
reasonably possible that such an effect will occur, although the amount
cannot be estimated.
10. SUBSEQUENT EVENT:
The Company agreed in September 1997 to sell principally all of its
operating assets for $42.5 million. All of the Company's operations
will be transferred to the new owner.
13
<PAGE>
(B) PRO FORMA FINANCIAL INFORMATION
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
AVIATION SALES COMPANY AND SUBSIDIARIES
AND KRATZ-WILDE MACHINE COMPANY
The following unaudited condensed consolidated pro forma financial statements
include the consolidated financial statements of Aviation Sales Company and
Subsidiaries ("the Company") which includes the accounts of its wholly-owned
subsidiaries, Aviation Sales Operating Company, Inc., Aviation Sales Finance
Company and Aerocell Structures, Inc. ("Aerocell") which the Company acquired in
September, 1997, and the financial statements of Kratz-Wilde Machine Company
("Kratz-Wilde") which the Company acquired in October, 1997. Although the
Aerocell acquisition has been accounted for under the pooling of interests
method of accounting, the Company's consolidated financial statements for the
year ended December 31, 1996 have not been restated to give retroactive effect
for the acquisition due to the immateriality of the restated amounts. As a
result of the Aerocell acquisition, the Company's operating revenues for the
nine months ended September 30, 1997 increased by approximately $14.3 million.
The Kratz-Wilde acquisition was accounted for using the purchase method of
accounting.
The following unaudited condensed consolidated pro forma financial statements
present the pro forma financial position of the Company at September 30, 1997
and the pro forma results of operations of the Company for the nine months ended
September 30, 1997 and the year ended December 31, 1996 and October 31, 1996 as
if the acquisition of Kratz-Wilde, which occurred October 17, 1997, had been
consummated as of January 1, 1996.
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
No. 128), is effective for fiscal years ending after December 15, 1997. This
statement specifies the computation, presentation and disclosure requirements
for earnings per share for entities with publicly held common stock or potential
common stock. Unaudited basic and diluted earnings per share computed in
accordance with SFAS No. 128 for the nine months ended September 30, 1997 and
the year ended December 31, 1996 and October 31, 1996 do not differ materially
from primary and fully diluted earnings per share as presented.
The accompanying unaudited condensed consolidated pro forma financial statements
should be read in conjunction with the Company's December 31, 1996 financial
statements and the notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996 (File No. 1-11775) and the October 31,
1996 financial statements of Kratz-Wilde, which are included in this filing.
14
<PAGE>
<TABLE>
<CAPTION>
AVIATION SALES COMPANY AND SUBSIDIARIES AND KRATZ-WILDE MACHINE COMPANY
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
-------------------------------------------------------------------------
PRO FORMA
AVIATION SALES KRATZ-WILDE COMBINED ADJUSTMENTS AS ADJUSTED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,802,253 $ 3,395,618 $ 5,197,871 $ -- $ 5,197,871
Accounts receivable, net of allowances for doubtful
accounts of $3,779,580 and $4,622,300 and allowances
for sales returns of $1,227,598 and $1,274,098 in 1996
and 1997, respectively 57,258,782 5,455,870 62,714,652 -- 62,714,652
Inventories 114,822,960 6,132,290 120,955,250 491,993 (1) 121,447,243
Prepaid expenses 2,620,601 22,342 2,642,943 -- 2,642,943
Deferred income taxes 2,639,029 -- 2,639,029 -- 2,639,029
------------ ------------ ------------ ------------ ------------
Total current assets 179,143,625 15,006,120 194,149,745 491,993 194,641,738
------------ ------------ ------------ ------------ ------------
SPARE PARTS ON LEASE, net of accumulated amortization
of $2,601,069 in 1996 and $3,488,330 in 1997 21,851,953 -- 21,851,953 -- 21,851,953
------------ ------------ ------------ ------------ ------------
FIXED ASSETS
Property and equipment 8,709,344 13,214,394 21,923,738 (1,732,749)(2) 20,190,989
Less - Accumulated depreciation (3,230,174) (10,140,870) (13,371,044) 10,140,870 (2) (3,230,174)
------------ ------------ ------------ ------------ ------------
Total fixed assets 5,479,170 3,073,524 8,552,694 8,408,121 16,960,815
------------ ------------ ------------ ------------ ------------
AMOUNTS DUE FROM RELATED PARTIES 2,928,056 -- 2,928,056 -- 2,928,056
------------ ------------ ------------ ------------ ------------
OTHER ASSETS
Deposits and other 1,148,890 1,165,626 2,314,516 (751,129)(4) 1,563,387
Deferred income taxes 3,314,774 (247,556) 3,067,218 247,556 (5) 3,314,774
Deferred financing costs and intangible assets, net 2,035,614 -- 2,035,614 18,539,119 (6) 20,574,733
------------ ------------ ------------ ------------ ------------
Total other assets 6,499,278 918,070 7,417,348 18,035,546 25,452,894
------------ ------------ ------------ ------------ ------------
Total assets $215,902,082 $ 18,997,714 $234,899,796 $ 26,935,660 $261,835,456
============ ============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 20,407,734 $ 1,877,022 $ 22,284,756 $ -- $ 22,284,756
Accrued expenses 12,459,937 1,308,796 13,768,733 -- 13,768,733
Income taxes payable 2,652,243 -- 2,652,243 -- 2,652,243
Notes payable, current maturities
Senior 4,243,788 -- 4,243,788 6,850,523 (7) 11,094,311
Revolver 60,383,112 -- 60,383,112 -- 60,383,112
------------ ------------ ------------ ------------ ------------
Total current liabilities 100,146,814 3,185,818 103,332,632 6,850,523 110,183,155
------------ ------------ ------------ ------------ ------------
LONG-TERM LIABILITIES
Deferred income 1,074,465 -- 1,074,465 -- 1,074,465
Notes payable - Senior 21,485,150 -- 21,485,150 35,649,477 (7) 57,134,627
------------ ------------ ------------ ------------ ------------
Total long-term liabilities 22,559,615 -- 22,559,615 35,649,477 58,209,092
------------ ------------ ------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock 9,202 110,250 119,452 (110,250)(8) 9,202
Additional paid-in capital 71,772,487 -- 71,772,487 -- 71,772,487
Retained earnings 21,413,964 16,127,723 37,541,687 (16,127,723)(8) 21,413,964
------------ ------------ ------------ ------------ ------------
93,195,653 16,237,973 109,433,626 (16,237,973) 93,195,653
Less treasury shares -- 426,077 426,077 (426,077)(8) --
------------ ------------ ------------ ------------ ------------
Total stockholders' equity 93,195,653 15,811,896 109,007,549 (15,811,896) 93,195,653
------------ ------------ ------------ ------------ ------------
Total liabilities and stockholders' equity $215,902,082 $ 18,997,714 $234,899,796 $ 26,688,104 $261,587,900
============ ============ ============ ============ ============
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
AVIATION SALES COMPANY AND SUBSIDIARIES AND KRATZ WILDE MACHINE COMPANY
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------------------------------------------------
PRO FORMA
AVIATION SALES KRATZ-WILDE COMBINED ADJUSTMENTS AS ADJUSTED
-------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Sales of aircraft parts, net $165,883,534 $ 28,711,522 $194,595,056 $ -- $194,595,056
Rentals from leases and other 7,841,090 -- 7,841,090 -- 7,841,090
Gain on sale of spare parts on lease 752,922 -- 752,922 -- 752,922
------------ ------------ ------------ ------------ ------------
174,477,546 28,711,522 203,189,068 -- 203,189,068
COST OF SALES 122,712,277 18,499,320 141,211,597 754,470 (3) 141,966,067
------------ ------------ ------------ ------------ ------------
51,765,269 10,212,202 61,977,471 (754,470) 61,223,001
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
Operating 11,026,918 -- 11,026,918 -- 11,026,918
Selling 6,858,966 73,245 6,932,211 -- 6,932,211
General and administrative 8,895,737 1,792,273 10,688,010 412,500 (9) 11,100,510
Depreciation and amortization 2,157,876 13,500 2,171,376 716,314 (3) 2,887,690
------------ ------------ ------------ ------------ ------------
28,939,497 1,879,018 30,818,515 1,128,814 31,947,329
------------ ------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 22,825,772 8,333,184 31,158,956 (1,883,284) 29,275,672
OTHER EXPENSES
Interest expense 4,331,261 (87,675) 4,243,586 2,225,769 (10) 6,469,355
------------ ------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 18,494,511 8,420,859 26,915,370 (4,109,053) 22,806,317
INCOME TAX (BENEFIT) EXPENSE 7,212,859 -- 7,212,859 1,681,605 (11) 8,894,464
------------ ------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM $ 11,281,652 $ 8,420,859 $ 19,702,511 $ (5,790,658) $ 13,911,853
============ ============ ============ ============ ============
PRO FORMA EARNINGS PER
SHARE (12) $ 1.22 $ 0.91 $ 2.13 $ (0.62) $ 1.51
============ ============ ============ ============ ============
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
AVIATION SALES COMPANY AND SUBSIDIARIES AND KRATZ-WILDE MACHINE COMPANY
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME
FOR THE YEAR ENDED
---------------------------------------------------------------------------------
DECEMBER 31, 1996 OCTOBER 31, 1996 PRO FORMA
AVIATION SALES KRATZ-WILDE COMBINED ADJUSTMENTS AS ADJUSTED
----------------- ---------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Sales of aircraft parts, net $151,407,093 $ 24,595,131 $176,002,224 $ -- $176,002,224
Rentals from leases and other 10,536,776 -- 10,536,776 -- 10,536,776
Gain on sale of spare parts on lease -- -- -- -- --
------------ ------------ ------------ ------------ ------------
161,943,869 24,595,131 186,539,000 -- 186,539,000
COST OF SALES 110,358,502 20,545,037 130,903,539 1,078,255 (3) 131,981,794
------------ ------------ ------------ ------------ ------------
51,585,367 4,050,094 55,635,461 (1,078,255) 54,557,206
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
Operating 9,319,981 -- 9,319,981 -- 9,319,981
Selling 6,977,518 122,355 7,099,873 -- 7,099,873
General and administrative 10,681,242 1,978,720 12,659,962 550,000 (9) 13,209,962
Depreciation and amortization 2,322,791 20,492 2,343,283 959,585 (3) 3,302,868
------------ ------------ ------------ ------------ ------------
29,301,532 2,121,567 31,423,099 1,509,585 32,932,684
------------ ------------ ------------ ------------ ------------
INCOME FROM OPERATIONS 22,283,835 1,928,527 24,212,362 (2,587,840) 21,624,522
OTHER EXPENSES
Interest expense 5,350,020 131,688 5,481,708 2,967,692 (10) 8,449,400
------------ ------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 16,933,815 1,796,839 18,730,654 (5,555,532) 13,175,122
INCOME TAX (BENEFIT) EXPENSE 6,604,188 -- 6,604,188 (1,465,890)(11) 5,138,298
------------ ------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM $ 10,329,627 $ 1,796,839 $ 12,126,466 $ (4,089,642) $ 8,036,824
============ ============ ============ ============ ============
PRO FORMA EARNINGS PER
SHARE (12) $ 1.48 $ 0.26 $ 1.74 $ (0.59) $ 1.15
============ ============ ============ ============ ============
</TABLE>
17
<PAGE>
AVIATION SALES COMPANY AND SUBSIDIARIES
AND KRATZ-WILDE MACHINE COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL STATEMENTS
(1) Represents an entry to conform the inventory accounting policies of
Kratz-Wilde from LIFO to the specific identification method.
(2) Represents entries made to adjust the carrying value of property and
equipment to fair market value on the acquisition date.
(3) Depreciation expense has been adjusted to reflect results assuming the
acquisition occurred on January 1, 1996.
(4) Represents the elimination of other assets not purchased with the
Kratz-Wilde acquisition.
(5) Represents an entry to eliminate deferred taxes existing at the acquisition
date.
(6) Represents an entry to record the preliminary estimate of goodwill and
goodwill amortization generated from the Kratz-Wilde acquisition. Goodwill
is being amortized over a 20 year period.
(7) Represents additional debt incurred to finance the Kratz-Wilde acquisition.
(8) Represents entries made to eliminate the equity interests existing in
Kratz-Wilde prior to the acquisition.
(9) Represents entries made to adjust certain Kratz-Wilde administrative
expenses to levels set forth in the Purchase Agreement, assuming that the
acquisition occurred on January 1, 1996.
(10) Represents the assumed incremental increase in interest expense from
borrowings made to finance the Kratz-Wilde acquisition as well as
amortization of goodwill as set forth in note (6) as if the acquisition
had occurred on January 1, 1996.
(11) Represents adjustments made to reflect results as if Kratz-Wilde had been
taxed as a C-corporation since January 1, 1996.
(12) Weighted average shares outstanding are 6,960,295 and 9,231,661 for the
periods ending December 31, 1996 and September 30, 1997, respectively.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AVIATION SALES COMPANY
By: /s/ Joseph E. Civiletto
--------------------------------------
Joseph E. Civiletto, Vice President
And Chief Financial Officer
Dated: December 31, 1997
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
23.1 Consent of Clark, Schaefer, Hackett & Co.
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation of our report included in this Form 8-K/A into Aviation Sales
Company's previously filed Registration Statement (File No. 333-40429).
Clark, Schaefer, Hackett & Co.
Cincinnati, Ohio
December 1, 1997
