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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
MAY 20, 1999
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
COMMISSION FILE NUMBER 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
MIAMI, FLORIDA 33122
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(305) 592-4055
(REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE)
N.A.
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 5. OTHER EVENTS
Aviation Sales Company (the "Company") hereby files the following
historical financial information for its wholly-owned subsidiary, Triad
International Maintenance Corporation ("TIMCO"). The Company acquired TIMCO on
September 22, 1998, but was not required to file these financial statements
under Item 2 of Form 8-K due to the fact that TIMCO is not a significant
subsidiary of AVS under Rule 3-05 of Regulation S-X.
The Company has recently filed a Registration Statement on Form S-3 (the
"Registration Statement") to register for public sale of $85.0 million in
principal amount of the Company's Senior Subordinated Notes due 2008. In
connection with the public registration of the debt securities proposed to be
offered and sold under the Registration Statement, the Company is required
(under Rule 3-10 of Regulation S-X) to file the attached historical financial
statements of TIMCO, which will be incorporated by reference into the
Registration Statement.
2
<PAGE>
TRIAD INTERNATIONAL MAINTENANCE CORPORATION
INDEX TO FINANCIAL STATEMENTS
PAGE
-----
YEARS ENDED DECEMBER 31, 1997 AND 1996:
Independent Auditors' Report .............................................. 4
Statements of Financial Position at December 31, 1997 and 1996 ............ 5
Statements of Operations for the Years Ended December 31, 1997 and 1996 ... 6
Statements of Cash Flows for the Years ended December 31, 1997 and 1996 ... 7
Statements of Common Shareholders' Equity for the Years ended
December 31, 1997 and 1996 ............................................... 8
Notes to the Financial Statements ......................................... 9
SIX MONTHS ENDED JUNE 30, 1998 AND 1997 (UNAUDITED):
Statements of Financial Position at June 30, 1998 and December 31, 1997 ... 13
Statements of Operations for the Six Months Ended June 30, 1998 and 1997 .. 14
Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997 .. 15
Notes to Unaudited Interim Financial Statements ........................... 16
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of Triad International
Maintenance Corporation:
We have audited the accompanying statements of financial position of Triad
International Maintenance Corporation (a wholly owned subsidiary of Primark
Corporation) as of December 31, 1997 and 1996, and the related statements of
operations, cash flows, and common shareholder's equity for the years then
ended. 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 audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Triad International Maintenance Corporation
at December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
Winston-Salem, North Carolina
February 10, 1998
4
<PAGE>
TRIAD INTERNATIONAL MAINTENANCE CORPORATION
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
ASSETS
Current Assets
Cash ........................................... $ 1,890,581 $ 324,134
Receivables:
Accounts receivables .......................... 10,725,611 17,935,150
Unbilled receivables .......................... 13,837,797 7,935,469
Employee receivables .......................... 221,329 535,593
Less allowances ............................... (1,345,408) (576,504)
------------ ------------
Receivables--net ............................... 23,439,329 25,829,708
Inventory ...................................... 7,541,063 5,806,764
Federal income tax receivable .................. 902,872 453,286
Prepaid expenses, deposits and other ........... 911,478 432,893
------------ ------------
34,685,323 32,846,785
------------ ------------
Noncurrent Assets
Property:
Machinery and equipment ....................... 9,477,546 7,869,026
Leasehold improvements ........................ 12,317,963 10,909,283
Less accumulated depreciation ................. (5,458,606) (3,989,156)
------------ ------------
Property--net .................................. 16,336,903 14,789,153
Deferred costs and other--net (Note 5) ......... 574,068 240,084
------------ ------------
16,910,971 15,029,237
------------ ------------
$ 51,596,294 $ 47,876,022
============ ============
LIABILITIES AND COMMON SHAREHOLDER'S EQUITY
Current Liabilities
Notes due to affilitate (Note 3) .............. $ 30,557,286 $ 28,126,680
Accounts payable .............................. 2,915,872 2,312,598
Customer deposits ............................. 44,287 68,649
Deferred income taxes (Note 7) ................ 1,351,967 747,060
Other ......................................... 5,382,240 4,528,213
------------ ------------
40,251,652 35,783,200
------------ ------------
Long-term Liabilities (Note 6) ................. 397,428 574,652
------------ ------------
Deferred Income Taxes (Note 7) ................. 333,278 307,391
------------ ------------
Commitments (Notes 4 and 5)
Common Shareholder's Equity
Common Stock .................................. 8 8
Additional paid-in capital .................... 10,125,243 10,125,243
Retained earnings ............................. 488,685 1,085,528
------------ ------------
10,613,936 11,210,779
------------ ------------
$ 51,596,294 $ 47,876,022
============ ============
</TABLE>
The notes to the financial statements are an integral part of these statements.
5
<PAGE>
TRIAD INTERNATIONAL MAINTENANCE CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Operating Revenues .................................... $113,281,531 $106,361,997
------------ ------------
Operating Expenses
Cost of services ..................................... 98,062,518 88,665,187
General and administrative ........................... 11,958,052 10,306,657
Depreciation expense ................................. 1,469,450 1,204,384
------------ ------------
Total operating expenses ............................ 111,490,020 100,176,228
------------ ------------
Operating income .................................... 1,791,511 6,185,769
------------ ------------
Other Expenses
Amortization of bond issuance costs (Note 5) ......... (10,495) (10,495)
Interest expense--affiliate (Note 3) ................. (2,587,905) (1,346,143)
Other ................................................ (174,036) (157,744)
------------ ------------
Total other expenses ................................ (2,772,436) (1,514,382)
------------ ------------
Income (Loss) Before Income Taxes ..................... (980,925) 4,671,387
------------ ------------
Income Tax Expense (Benefit) (Note 7)
Current .............................................. (1,014,876) 1,369,420
Deffered ............................................. 630,794 618,231
------------ ------------
Total income tax expense (benefit) .................. (384,082) 1,987,651
------------ ------------
Net Income (Loss) ..................................... $ (596,843) $ 2,683,736
============ ============
</TABLE>
The notes to the financial statements are an integral part of these statements.
6
<PAGE>
TRIAD INTERNATIONAL MAINTENANCE CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996
--------------- -----------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) ...................................................... $ (596,843) $ 2,683,736
Adjustments to reconcile net income (loss) to net cash flows provided
by (used in) operating activities:
Deferred income taxes ................................................. 630,794 618,231
Depreciation expense .................................................. 1,469,450 1,204,384
Amortization of bond issuance costs ................................... 10,495 10,495
Changes in assets and liabilities which provided (used) cash, exclusive
of changes shown separately ......................................... 639,145 (6,304,715)
------------ -------------
Net cash provided by (used in) operating activities ................. 2,153,041 (1,787,869)
------------ -------------
Cash Flows from Finanacing Activities
Net proceeds from notes due to affiliates .............................. 2,430,606 4,872,149
------------ -------------
Cash Flows form Investing Activities
Capital expenditures ................................................... (3,017,200) (2,760,146)
------------ -------------
Net Change in Cash ...................................................... 1,566,447 324,134
Cash--Beginning of Period ............................................... 324,134 --
------------ -------------
Cash--End of Period ..................................................... $ 1,890,581 $ 324,134
------------ -------------
Changes in Assets and Liabilities Which Provided (Used) Cash, Exclusive
of Changes Shown Separately
Receivables--net ....................................................... $ 2,390,379 $ (4,319,946)
Inventory .............................................................. (1,734,299) (2,186,322)
Federal income tax receivable .......................................... (449,586) (30,580)
Accounts payable ....................................................... 603,274 (617,801)
Other assets and liabilities ........................................... (170,623) 849,934
------------ -------------
$ 639,145 $ (6,304,715)
------------ -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION--
Income taxes paid ...................................................... $ 30,000 $ 1,400,000
============ =============
Interest paid .......................................................... $ 2,587,905 $ 1,346,143
============ =============
</TABLE>
The notes to the financial statements are an integral part of these statements.
7
<PAGE>
TRIAD INTERNATIONAL MAINTENANCE CORPORATION
STATEMENTS OF COMMON SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996
---------------- ---------------
<S> <C> <C>
Common Stock, par value $0.01 per share--authorized 850 shares,
outstanding 850 shares ...................................... $ 8 $ 8
------------ ------------
Additional Paid-In Capital .................................... 10,125,243 10,125,243
------------ ------------
Retained earnings
Balance--Beginning of period ................................. 1,085,528 (1,598,208)
Add--Net income .............................................. (596,843) 2,683,736
------------ ------------
Balance--End of period ....................................... 488,685 1,085,528
------------ ------------
$ 10,613,936 $ 11,210,779
============ ============
</TABLE>
The notes to the financial statements are an integral part of these statements.
8
<PAGE>
TRIAD INTERNATIONAL MAINTENANCE CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
1. COMPANY ORGANIZATION
Triad International Maintenance Corporation (the "Company"), a direct,
wholly owned subsidiary of Primark Corporation ("Primark"), was formed to lease
and operate a heavy aircraft maintenance facility that was constructed in
conjunction with the Piedmont Triad Airport Authority (the "Triad Authority")
in Greensboro, North Carolina. The Company commenced operating the maintenance
facility in October 1990. During 1996, the Company began leasing a structures
workshop which was put into service in December 1996. Through operation of
these facilities, the Company provides heavy aircraft maintenance services on
large transport aircraft used by air cargo, overnight package carriers and
passenger airlines.
2. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies of the Company are set forth below:
a. Revenue Recognition
Revenues are generated primarily from labor performed and related aircraft
parts sales. These revenues are determined based upon contractual rates and
recognized as income when such man-hours and aircraft parts are expended.
Projects in process are recorded as revenues and receivables based on work
performed. One customer accounted for 29% and 21% of operating revenues in 1997
and 1996, respectively. Another customer accounted for 12% and 11% of operating
revenues in 1997 and 1996, respectively. A third customer accounted for 31% and
22% of operating revenues in 1997 and 1996, respectively. A fourth customer
accounted for 10% and less than 10% of operating revenues in 1997 and 1996,
respectively.
b. Inventories
Inventories are valued at the lower of cost (primarily determined by the
first-in, first-out method) or market.
c. Property
Property is carried at cost and depreciated over estimated useful lives
ranging from five to twenty-six years using the straight-line method. Interest
capitalized in 1997 and 1996 was $69,823 and $76,216, respectively, for the
construction of various leasehold improvements.
d. Concentration of Credit Risk
The Company provides heavy aircraft maintenance services on large
transport aircraft as described in note 1. The Company performs ongoing credit
evaluations of its customers' financial condition and maintains allowances for
potential credit losses. Actual losses have been within management's
expectations and estimates. At December 31, 1997, four customers represented
approximately 35%, 15%, 14% and 11%, respectively of the billed and unbilled
accounts receivable balance.
e. Income Taxes
Deferred income taxes are provided for the expected future tax
consequences of all temporary differences, and deferred tax balances are
adjusted to reflect changes in tax rates expected to be in effect during the
periods in which the temporary differences reverse. As temporary differences
reverse, the related deferrals are recorded to income.
9
<PAGE>
The Company is a participant in the Intercompany Tax Allocation Plan (the
"Plan") of Primark. Under the terms of the Plan, the Company records, in the
current year, the tax payable or benefit applicable to the inclusion of its net
income or loss in Primark's consolidated tax return. Tax liabilities and
benefits are between the Company and Primark which, as the parent, is
ultimately responsible for all of the Company's Federal tax matters.
f. Use of Estimates
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
reported period. Actual results could differ from these estimates.
g. New Accounting Standard
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In performing the
review for recoverability, the Company estimates the future cash flows expected
to result from the use of the asset and its eventual disposition. If the sum of
the expected future cash flows (undiscounted and without interest charges) is
less than the carrying amount of the asset, an impairment loss is recognized.
Otherwise, an impairment loss is not recognized. Measurement of an impairment
loss for long-lived assets and identifiable intangibles that an entity expects
to hold and use should be based on the fair value of the asset.
h. Reclassifications
Certain amounts in the 1996 financial statements have been reclassified to
conform with the 1997 presentation.
3. INTERCOMPANY FUNDING
The Company operates under Primark's Intercompany Funding Policy which
provides for the daily cash flow requirements of Primark and its subsidiaries.
Generally, any cash excess or deficiency is reflected as an intercompany note
payable or receivable between Primark and the Company and accrues interest at
prevailing market rates.
4. LEASES
The Company has a noncancelable agreement to lease the constructed heavy
aircraft maintenance facility along with certain real property consisting of
land and related improvements for an initial term of 30 years, with options
extending the lease term to the year 2029. Payments under this operating lease
commenced in 1991. Rental payments on the facility approximate the principal
and interest due on the $13,800,000 tax-exempt Special Facility Revenue Bonds
(the "Bonds") issued by the Triad Authority to finance the facility's
construction. The effective interest rate for 1997 and 1996 was 3.9% and 3.7%,
respectively.
The Company, through Primark, paid lease acquisition costs of $314,864 in
1989. These costs were deferred by the Company and are being amortized over the
thirty-year life of the lease. The unamortized portion of these costs at
December 31, 1997 and 1996 was $229,589 and $240,084, respectively.
The Company is a party to a master sale and leaseback arrangement for
certain aircraft maintenance equipment. This equipment was sold and leased back
under operating leases in 1991 with lease terms ranging from five to seven
years. All rental payments have been guaranteed by Primark.
10
<PAGE>
Estimated future minimum lease payments at December 31, 1997 for operating
leases are shown below:
1998 ................................. $ 2,431,031
1999 ................................. 1,945,854
2000 ................................. 1,856,700
2001 ................................. 1,697,444
2002 ................................. 1,570,231
Thereafter ........................... 23,473,245
-----------
Total minimum lease payments ......... $32,974,505
===========
Rent expense for 1997 and 1996 was $2,894,014 and $2,635,258,
respectively.
5. LETTER OF CREDIT
In November 1989, a letter of credit of $14,169,000 was issued by a bank
for the account of the Company to secure the Bonds. Pursuant to a reimbursement
agreement between the Company and the bank, the Company will reimburse the bank
for any amounts drawn under the letter of credit. At December 31, 1997, the
amount of this letter of credit is $12,217,877. In 1994, Primark was released
from a bank covenant which required the restriction of certain cash balances to
support the letter of credit. The expiration date of the letter of credit has
been extended to December 31, 1998.
6. EMPLOYEE BENEFIT PLANS
On January 1, 1992 the Company established a defined contribution plan
covering all employees of the Company who meet service requirements and elect
to participate. Each participant may, but is not required to, contribute up to
12% of applicable compensation. The Company may also make, at its sole
discretion, additional contributions. The Company contribution for 1997 and
1996 was $213,510 and $181,161, respectively.
In 1995, the Company established a deferred compensation plan. Certain
employees accumulate deferred compensation in their individual account balances
based upon the operating results of the Company for the year. Cash payments are
made from such individual accounts at a rate of 25% of the account balance at
the end of each year. Upon normal age retirement, death, or disability, the
participant's full account balance can be paid. The Plan liability was $529,904
and $766,203 at December 31, 1997 and 1996, respectively. The Plan liability is
included in long-term liabilities and other current liabilities in the
statements of financial position.
Certain employees of the Company participate in Primark's stock purchase
plan. Statement of Financial Accounting Standard (SFAS) No. 123 "Accounting for
Stock Based Compensation" encourages, but does not require, companies to record
compensation cost for stock based compensation plans at fair value. The Company
has elected to continue to use the intrinsic value method to measure
compensation expense associated with grants of stock options to employees and
shares of stock purchased under the employee stock purchase plan. The fair
value of options on their grant date, including the valuation of the option
feature implicit in the Primark stock purchase plan, was measured using the
Black-Scholes option pricing model. The fair value of options on their grant
date and key assumptions used to apply this model were the same as those used
for Primark. Had compensation cost been determined based upon fair value at the
grant date for awards under these plans, reported compensation expense would
have been higher by approximately $83,117 and $11,290 for the years ended
December 31, 1997 and 1996, respectively. Management believes that the
assumptions used and the model applied to value the awards yield a reasonable
estimate of the fair value of the grants made under the circumstances. The
effects of applying SFAS 123 in this pro forma disclosure are not necessarily
indicative of amounts anticipated in future years. SFAS 123 does not apply to
awards prior to 1995.
11
<PAGE>
7. INCOME TAXES
A reconciliation of actual income taxes for the years ended December 31,
1997 and 1996 to the amount of income tax expense computed at the statutory
federal income tax rate of 35% is as follows:
<TABLE>
<CAPTION>
1997 1996
-------------- -------------
<S> <C> <C>
Income tax expense at statutory rate ................ $ (340,434) $1,634,985
State income taxes, net of federal benefit .......... (69,629) 330,020
Other ............................................... 25,981 22,646
---------- ----------
Total ............................................... $ (384,082) $1,987,651
========== ==========
</TABLE>
The deferred tax assets and tax liabilities recorded on the balance sheet
as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
DEFERRED DEFERRED
TAX ASSETS TAX LIABILITIES
-------------------------- -----------------------------
1997 1996 1997 1996
------------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
Property ................................... $ -- $ -- $ 333,278 $ 307,391
Allowance for receivables .................. 470,893 201,776 -- --
Unearned revenue ........................... -- -- 2,014,275 1,172,298
State operating loss carryforwards ......... 129,239 59,610 -- --
Deferred compensation ...................... 139,493 201,128 -- --
Other ...................................... 357,857 258,056 435,174 295,332
---------- -------- ---------- ----------
Total ...................................... $1,097,482 $720,570 $2,782,727 $1,775,021
========== ======== ========== ==========
</TABLE>
The Company has state operating loss carryforwards that may be carried
forward for five years which expire in 2002. At December 31, 1997 and 1996, no
valuation allowance relative to deferred income tax assets was required.
8. RELATED PARTY TRANSACTIONS
The Company incurred expenses of $336,708 in 1997 and $175,000 in 1996,
relating to certain administrative services provided by Primark.
9. CONTINGENCIES
The Company is involved in certain administrative proceedings and matters
concerning issues arising in the ordinary course of business. Management cannot
predict the final disposition of such issues, but believes that adequate
provision has been made for the probable losses and the ultimate resolution of
these proceedings will not have a material adverse effect on the Company's
financial condition, results of operations or financial liquidity.
10. SUBSEQUENT EVENT (UNAUDITED)
On September 22, 1998, the Company was acquired by Aviation Sales
Maintenance, Repair & Overhaul Company (a wholly owned subsidiary of Aviation
Sales Company) pursuant to a Stock Purchase Agreement effective August 10,
1998.
* * *
12
<PAGE>
TRIAD INTERNATIONAL MAINTENANCE CORPORATION
STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------------- ---------------
<S> <C> <C>
ASSETS
Current Assets
Cash ......................................... $ 4,508,109 $ 1,890,581
Receivables:
Accounts Receivables ........................ 11,777,129 10,725,611
Unbilled receivables ........................ 18,608,111 13,837,797
Employee receivables ........................ 323,061 221,329
Less allowances ............................. (1,642,944) (1,345,408)
------------ ------------
Receivables --net ............................ 29,065,357 23,439,329
Inventory .................................... 7,598,181 7,541,063
Federal income tax receivable ................ 2,183,990 902,872
Prepaid expenses, deposits and other ......... 991,899 911,478
------------ ------------
44,347,536 34,685,323
------------ ------------
Noncurrent Assets
Property:
Machinery and equipment ..................... 10,603,186 9,477,546
Leasehold improvements ...................... 12,513,964 12,317,963
Less accumulated depreciation ............... (6,254,642) (5,458,606)
------------ ------------
Property--net ................................ 16,862,508 16,336,903
Deferred costs and other--net ................ 568,820 574,068
------------ ------------
17,431,328 16,910,971
------------ ------------
$ 61,778,864 $ 51,596,294
============ ============
LIABILITIES AND COMMON SHAREHOLDER'S EQUITY
Current Liabilities
Notes due to affilitate ..................... $ 31,683,301 $ 30,557,286
Accounts payable ............................ 3,321,224 2,915,872
Customer deposits ........................... 5,102,835 44,287
Deferred income taxes ....................... 1,427,491 1,351,967
Other ....................................... 7,255,020 5,382,240
------------ ------------
48,789,871 40,251,652
------------ ------------
Long-term Liabilities ........................ -- 397,428
------------ ------------
Deferred Income Taxes ........................ 333,278 333,278
------------ ------------
Commitments (Note 4)
Common Shareholder's Equity
Common Stock ................................ 8 8
Additional paid-in capital .................. 10,125,243 10,125,243
Retained earnings ........................... 2,530,464 488,685
------------ ------------
12,655,715 10,613,936
------------ ------------
$ 61,778,864 $ 51,596,294
============ ============
</TABLE>
The notes to the financial statements are an integral part of these statements.
13
<PAGE>
TRIAD INTERNATIONAL MAINTENANCE CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
-------------------------------
1998 1997
-------------- --------------
Operating Revenues ........................... $ 71,958,567 $ 58,623,596
------------ ------------
Operating Expenses
Cost of services ............................ 59,965,312 51,346,416
General and administrative .................. 6,231,606 6,065,525
Depreciation expense ........................ 796,036 708,947
------------ ------------
Total operating expenses ................... 66,992,954 58,120,888
------------ ------------
Operating income ........................... 4,965,613 502,708
------------ ------------
Other Expenses
Amortization of bond issuance costs ......... (5,248) (5,248)
Interest expense--affiliate ................. (1,260,933) (1,207,038)
Other ....................................... (110,247) (110,790)
------------ ------------
Total other expenses ....................... (1,376,428) (1,323,076)
------------ ------------
Income (Loss) Before Income Taxes ............ 3,589,185 (820,368)
------------ ------------
Income Tax Expense (Benefit)
Current ..................................... 1,471,882 (271,787)
Deferred .................................... 75,524 (60,182)
------------ ------------
Total income tax expense (benefit) ......... 1,547,406 (331,969)
------------ ------------
Net Income (Loss) ............................ $ 2,041,779 $ (488,399)
============ ============
The notes to the financial statements are an integral part of these statements.
14
<PAGE>
TRIAD INTERNATIONAL MAINTENANCE CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------------
1998 1997
---------------- ---------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) ...................................................... $ 2,041,779 $ (488,399)
Adjustments to reconcile net income (loss) to net cash flows provided
by operating activities
Deferred income taxes ................................................. 75,524 (60,182)
Depreciation expense .................................................. 796,036 708,947
Amortization of bond issuance costs ................................... 5,248 5,248
Changes in assets and liabilities which provided (used) cash, exclusive
of changes shown separately ......................................... (105,433) 694,303
------------ ------------
Net cash provided by operating activities ........................... 2,813,154 859,917
------------ ------------
Cash Flows from Finanacing Activities
Net proceeds from notes due to affiliates .............................. 1,126,015 564,295
------------ ------------
Cash Flows form Investing Activities
Capital expenditures ................................................... (1,321,641) (1,677,849)
------------ ------------
Net Change in Cash ...................................................... 2,617,528 (253,637)
Cash--Beginning of Period ............................................... 1,890,581 324,134
------------ ------------
Cash--End of Period ..................................................... $ 4,508,109 $ 70,497
------------ ------------
Change in Assets and Liabilities Which Provided (Used) Cash, Exclusive
of Changes Shown Separately
Receivables--net ....................................................... $ (5,626,028) $ 909,411
Inventory .............................................................. (57,118) (1,132,447)
Federal income tax receivable .......................................... (1,281,118) 381,005
Accounts payable ....................................................... 405,352 (65,984)
Customer deposits ...................................................... 5,058,548 15,300
Other assets and liabilities ........................................... 1,394,931 587,018
------------ ------------
$ (105,433) $ 694,303
------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION--
Income taxes paid ...................................................... $ 2,753,000 $ 30,000
Interest paid .......................................................... $ 1,260,933 $ 1,207,038
------------ ------------
</TABLE>
The notes to the financial statements are an integral part of these statements.
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TRIAD INTERNATIONAL MAINTENANCE CORPORATION
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
JUNE 30, 1998 AND 1997
(UNAUDITED)
1. BASIS OF PRESENTATION:
A. COMPANY ORGANIZATION
Triad International Maintenance Corporation (the "Company"), a direct,
wholly owned subsidiary of Primark Corporation ("Primark"), was formed to lease
and operate a heavy aircraft maintenance facility that was constructed in
conjunction with the Piedmont Triad Airport Authority (the "Triad Authority")
in Greensboro, North Carolina. The Company commenced operating the maintenance
facility in October 1990. During 1996, the Company began leasing a structures
workshop which was put into service in December 1996. Through operation of
these facilities, the Company provides heavy aircraft maintenance services on
large transport aircraft used by air cargo, overnight package carriers and
passenger airlines.
B. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. The accompanying unaudited interim financial statements should be
read in conjunction with the Company's December 31, 1997 financial statements
and the notes thereto.
In the opinion of management, the accompanying unaudited interim financial
statements of the Company contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position of
the Company as of June 30, 1998 and the results of its operations and cash
flows for the six month periods ended June 30, 1998 and 1997. The results of
operations and cash flows for the six month period ended June 30, 1998 are not
necessarily indicative of the results of operations or cash flows which may be
reported for the year ending December 31, 1998.
C. REVENUE RECOGNITION
Revenues are generated primarily from labor performed and related aircraft
parts sales. These revenues are determined based upon contractual rates and
recognized as income when such man-hours and aircraft parts are expended.
Projects in process are recorded as revenues and receivables based on work
performed. Four customers accounted for 83.42% and 80.12% of operating revenues
in the six months ended June 30, 1998 and 1997 respectively.
D. CONCENTRATION OF CREDIT RISK
The Company provides heavy aircraft maintenance services on large
transport aircraft. The Company performs ongoing credit evaluations of its
customers' financial condition and maintains allowances for potential credit
losses. Actual losses have been within management's expectations and estimates.
At June 30, 1998, three customers represented approximately 19.12%, 16.62% and
11.34%, respectively of the billed and unbilled accounts receivable balance.
E. USE OF ESTIMATES
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
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statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from these estimates.
F. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 establishes new rules for the reporting and display of comprehensive
income and its components; however, the adoption of SFAS 130 had no impact on
the Company's net income or shareholder's equity.
2. INTERCOMPANY FUNDING
The Company operates under Primark's Intercompany Funding Policy which
provides for the daily cash flow requirements of Primark and its subsidiaries.
Generally, any cash excess or deficiency is reflected as an intercompany note
payable or receivable between Primark and the Company and accrues interest at
prevailing market rates.
3. LEASES
The Company has a noncancelable agreement to lease the constructed heavy
aircraft maintenance facility along with certain real property consisting of
land and related improvements for an initial term of 30 years, with options
extending the lease term to the year 2029. Payments under this operating lease
commenced in 1991. Rental payments on the facility approximate the principal
and interest due on the $13,800,000 tax-exempt Special Facility Revenue Bonds
issued by the Triad Authority to finance the facility's construction.
4. CONTINGENCIES
The Company is involved in certain administrative proceedings and matters
concerning issues arising in the ordinary course of business. Management cannot
predict the final disposition of such issues, but believes that adequate
provision has been made for the probable losses and the ultimate resolution of
these proceedings will not have a material adverse effect on the Company's
financial condition, results of operations or financial liquidity.
5. SUBSEQUENT EVENT
On September 22, 1998, the Company was acquired by Aviation Sales
Maintenance, Repair & Overhaul Company (a wholly owned subsidiary of Aviation
Sales Company) pursuant to a Stock Purchase Agreement effective August 10,
1998.
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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/ GARLAN BRAITHWAITE
-------------------------------------------
Garlan Braithwaite, Vice President, Finance
Date: May 20, 1999
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