<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________.
Commission File Number: 0-29490
HAWKER PACIFIC AEROSPACE
(Exact name of registrant as specified in its charter)
California 95-3528840
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11240 Sherman Way, Sun Valley, California 91352
(Address of principal executive offices) (Zip Code)
(818) 765-6201
(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 of the registrant's common stock outstanding on August
18, 2000, was 5,853,653 shares.
================================================================================
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
----------- ------------
<S> <C> <C>
Current assets
Cash $ 1,425,000 $ 2,227,000
Trade accounts receivable, net 13,847,000 18,246,000
Other receivables 338,000 260,000
Inventories 27,292,000 24,680,000
Prepaid expenses 1,035,000 550,000
----------- ------------
Total current assets 43,937,000 45,963,000
Equipment and leasehold improvements, net 15,035,000 13,822,000
Exchange assets, net 35,765,000 37,613,000
----------- ------------
Total fixed assets 50,800,000 51,435,000
Other assets 4,810,000 5,765,000
----------- ------------
Total assets $99,547,000 $103,163,000
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Line of credit $54,680,000 $ 52,617,000
Accounts payable 12,409,000 13,402,000
Deferred revenue 3,386,000 3,397,000
Accrued payroll and employee benefits 1,993,000 1,495,000
Accrued expenses and other liabilities 4,242,000 4,186,000
Current portion of notes payable 621,000 623,000
Preferred stock dividends payable 134,000 --
----------- ------------
Total current liabilities 77,465,000 75,720,000
Long-term debt
Bank note 3,924,000 5,617,000
Related party 2,500,000 2,500,000
----------- ------------
Total long term debt 6,424,000 8,117,000
Commitments and contingencies
Redeemable convertible preferred stock
5,000,000 shares authorized; issued and outstanding:
300 shares; $3,750,000 redemption value 3,750,000 1,792,000
Shareholders' equity
Common stock: 20,000,000 shares authorized; issued and
outstanding: 5,828,281 and 5,822,822 at June 30, 2000,
and December 31, 1999, respectively 22,386,000 22,384,000
Retained earnings (deficit) (6,597,000) (3,474,000)
Accumulated other comprehensive income (loss) (3,881,000) (1,376,000)
----------- ------------
Total shareholders' equity 11,908,000 17,534,000
----------- ------------
Total liabilities and shareholders' equity $99,547,000 $103,163,000
=========== ============
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
-2-
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended
June 30
-------
2000 1999
------------- -------------
<S> <C> <C>
Revenue $ 20,299,000 $ 17,395,000
Cost of revenue 16,895,000 18,099,000
------------- -------------
Gross margin 3,404,000 (704,000)
Selling, general and administrative expense 2,230,000 2,524,000
------------- -------------
Income (loss) from operations 1,174,000 (3,228,000)
Interest expense, net (2,288,000) (1,515,000)
Miscellaneous expense (20,000) --
------------- -------------
Loss before income taxes (1,134,000) (4,743,000)
Provision (benefit) for income taxes (455,000) (1,761,000)
------------- -------------
Net loss ($ 679,000) ($ 2,982,000)
============= =============
Accretion of discount and redemption premium
on preferred stock (831,000) --
Preferred stock dividend (60,000) --
------------- -------------
Net loss available to common shareholders ($ 1,570,000) ($ 2,982,000)
============= =============
Loss per common share - basic and diluted ($ 0.27) ($ 0.51)
Weighted average shares outstanding -
basic and diluted 5,824,589 5,822,222
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
-3-
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30
-------
<S> <C> <C>
Revenue $ 41,787,000 $ 33,590,000
Cost of revenue 34,317,000 30,896,000
------------- -------------
Gross margin 7,470,000 2,694,000
Selling, general and administrative expense 5,113,000 4,717,000
------------- -------------
Income (loss) from operations 2,357,000 (2,023,000)
Interest expense, net (3,990,000) (2,656,000)
Miscellaneous expense (86,000) --
------------- -------------
Loss before income taxes (1,719,000) (4,679,000)
Provision (benefit) for income taxes (689,000) (1,737,000)
------------- -------------
Net loss ($ 1,030,000) ($ 2,942,000)
============= =============
Accretion of discount and redemption premium
on preferred stock (1,958,000) --
Preferred stock dividend (134,000) --
------------- -------------
Net loss available to common shareholders ($ 3,122,000) ($ 2,942,000)
============= =============
Loss per common share - basic and diluted ($ 0.54) ($ 0.51)
Weighted average shares outstanding - basic and diluted 5,823,491 5,822,222
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
-4-
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30
-------
2000 1999
------------- -------------
<S> <C> <C>
Operating Activities
Net loss ($ 1,030,000) ($ 2,942,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Deferred income taxes (706,000) (1,668,000)
Depreciation 1,004,000 816,000
Amortization 1,235,000 1,272,000
Other non-cash items -- (85,000)
Changes in operating assets and liabilities:
Accounts receivable and other receivables 3,916,000 2,514,000
Inventory (3,798,000) (1,167,000)
Other assets 441,000 407,000
Prepaid expenses 485,000 67,000
Accounts payable (534,000) 295,000
Deferred revenue 23,000 2,900,000
Accrued liabilities 1,335,000 (973,000)
------------- -------------
Cash provided by operating activities 2,371,000 1,436,000
Investing Activities
Purchase of equipment, leasehold improvements and landing
gear (2,946,000) (5,200,000)
Payments for construction in progress (678,000) (4,447,000)
------------- -------------
Cash used in investing activities (3,624,000) (9,647,000)
Financing Activities
Principal payments on bank notes (1,686,000) (5,156,000)
Borrowings on line of credit 2,062,000 15,694,000
Payments on line of credit -- (1,062,000)
Deferred offering costs 39,000 (130,000)
Deferred acquisition and loan fee expense 36,000 89,000
------------- -------------
Cash provided by financing activities 451,000 9,435,000
------------- -------------
Increase (decrease) in cash (802,000) 1,224,000
Cash, beginning of period 2,227,000 560,000
------------- -------------
Cash, end of period $ 1,425,000 $ 1,784,000
============= =============
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 3,770,000 $ 991,000
Income taxes 11,000 3,000
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
-5-
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
Other
Common Stock Accumulated Comprehensive
--------------------------
# of Shares Amount Deficit Income (Loss) Total
------------ ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
Balances at
December 31, 1999 5,822,222 $22,384,000 ($3,474,000) ($ 1,376,000) $17,534,000
Net loss (1,030,000) (1,030,000)
Foreign currency
translation adjustment (2,505,000) (2,505,000)
----------
Comprehensive loss (3,535,000)
Issuance of common stock 6,059 2,000 2,000
Preferred stock dividend (134,000) (134,000)
Accretion of discount and
redemption premium on
preferred stock (1,959,000) (1,959,000)
--------------------------------------------------------------------------------------------------------------
Balances at
June 30, 2000 5,828,281 $22,386,000 ($6,597,000) ($ 3,881,000) $11,908.000
========= =========== ========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
-6-
<PAGE>
Hawker Pacific Aerospace
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
Interim Condensed Financial Statements
During interim periods, Hawker Pacific Aerospace (the "Company") follows the
accounting policies set forth in its Annual Report to Shareholders and applies
appropriate interim financial reporting standards, as indicated below. Users of
financial information produced for interim periods are encouraged to refer to
the notes contained in the Annual Report to Shareholders when reviewing interim
financial results.
Interim financial reporting standards require management to make estimates that
are based on assumptions regarding the outcome of future events and
circumstances not known at the present time, including the use of estimated
effective tax rates. Inevitably, some assumptions may not materialize and
unanticipated events and circumstances may occur which vary from those estimates
and such variations may significantly affect the Company's future results.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with the
Securities and Exchange Commission's requirements of Form 10-Q and contain all
adjustments of a normal and recurring nature which are necessary to present
fairly the financial position of the Company as of June 30, 2000, and December
31, 1999, and the results of its operations and cash flows for the three month
and/or six month periods ended June 30, 2000 and 1999.
Contingencies
The Company is occasionally party to various legal proceedings incidental to its
business. There are currently no claims, suits or complaints arising in the
ordinary course of business which have been filed or are pending against the
Company. Based on facts now known to the Company, management is not aware of
any matters that are not adequately provided for, covered by insurance or, which
involve such amounts that would materially and adversely affect the consolidated
results of operations and cash flows or financial position of the Company.
Earnings (Loss) per Share
Basic earnings (loss) per share are based upon the weighted average number of
common shares outstanding. The weighted average common shares used in
calculating basic earnings per share were 5,824,589 and 5,822,222 for the three
months ended June 30, 2000 and 1999, respectively, and 5,823,491 and 5,822,222
for the six months ended June 30, 2000 and 1999, respectively. Diluted earnings
per share are based on the number of shares used in the basic earnings per share
calculation plus the dilutive effects of stock options under the treasury stock
method.
Options to purchase 680,354 shares of common stock at exercise prices between
$2.85 and $9.88 were outstanding and vested during the second quarter of 2000.
None of these were included in the computation of diluted earnings (loss) per
share because the exercise price was greater than the average market price of
the common shares and/or the Company incurred a loss for the period, therefore,
the effect would be antidilutive.
Inventories
Inventories are comprised of the following:
June 30, December 31,
2000 1999
----------- -----------
Purchased parts and assemblies $20,733,000 $20,246,000
Work in process 6,559,000 4,434,000
----------- -----------
$27,292,000 $24,680,000
=========== ===========
Forward Looking Statements
Statements included in this filing which are not historical in nature are
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward looking statements regarding the
Company's future performance and financial results are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those set forth for a variety of reasons. Factors that may impact such forward
looking statements include, among others, changes in the condition of the
industry, changes in general economic conditions and the success of the
Company's strategic operating plans.
-7-
<PAGE>
Hawker Pacific Aerospace
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
2. LINE OF CREDIT AND NOTES PAYABLE
On December 22, 1998, the Company secured a $66.3 million senior credit facility
from Heller Financial, Inc., and NMB-Heller Limited (collectively, "Heller").
The Loan and Security Agreement (the "Heller Agreement") provides a $55.0
million revolving line of credit, a Term Loan A in the amount of $4.3 million,
and a Term Loan B in the amount of $7.0 million. The revolver and both term
loans expire in five years. At June 30, 2000, the interest rate for all three
loans was 12%.
Availability for the $55.0 million revolving line of credit may be limited by
borrowing base criteria related to levels of accounts receivable, inventory and
exchange assets. At June 30, 2000, the Company's borrowing base was $55.0
million, of which $54.7 million had been advanced, leaving remaining
availability of $0.3 million.
On April 5, 2000, the Company and Heller executed an amendment to the Heller
Agreement. This amendment extends certain covenant provisions of the Heller
Agreement until August 31, 2000, and provides for an escalation of certain fees
to Heller. The Company expects to execute a further amendment to the Heller
Agreement prior to August 31, 2000, to extend the agreement to October 31, 2000,
and to reduce certain fees allowed under the current amendment. The Company is
also working to secure a new senior credit facility prior to October 31, 2000.
3. REDEEMABLE CONVERTIBLE PREFERRED STOCK
In December 1999, the Company issued 300 shares of 8% Series C Convertible
Preferred Stock ("Series C") for $3,000,000. In connection with the issuance of
preferred stock, the Company issued a warrant to the broker to purchase 50,000
shares of common stock at $2.85 per share. The warrant was valued at $240,000
and is included in the costs associated with the issuance. The Company incurred
an additional $205,000 in costs associated with the issuance of preferred stock.
In connection with the issuance of preferred stock, the Company issued a warrant
to the preferred stock holder to purchase 125,000 shares of common stock at
$7.37 per share. The warrant was valued at $286,000. Series C also contains a
redemption feature that calls for the preferred stock to be redeemed, under
certain circumstances, for 125% of the stated value ($3,750,000) and as such the
preferred stock was being accreted to $3,750,000 over the 180 day period from
December 1999 until June 2000. This accretion was charged to retained earnings,
similar to a preferred dividend, as a reduction of earnings (loss) to common
shares.
Series C provides for a multiple-step beneficial conversion feature, which has
been valued for financial statement purposes at $750,000. The resulting
discount on the Series C was amortized over the 180 day period from December
1999 to June 2000, and charged to retained earnings, similar to a preferred
dividend, as a reduction of earnings (loss) to common shares. The amount of
accretion related to the redemption premium, conversion discount, associated
warrants, and costs of issuance which are included in the calculation of the
loss per share for the three months ended June 30, 2000, was $831,000. The
Company also accrued $60,000 of dividends payable on Series C during the second
quarter.
4. SEGMENT INFORMATION
The Company operates in one segment. The following table sets forth certain
geographic information related to the Company's operations.
<TABLE>
<CAPTION>
United States United Kingdom Consolidated
As of June 30 2000 1999 2000 1999 2000 1999
------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total assets $52,096,000 $50,241,000 $47,451,000 $43,743,000 $99,547,000 $93,984,000
Total long-lived assets (net of
depreciation and amortization) 18,861,000 21,594,000 31,939,000 26,842,000 50,800,000 48,436,000
For the quarter ended June 30
-----------------------------
Revenue by location of operations 15,332,000 12,309,000 4,966,000 5,086,000 20,298,000 17,395,000
Income (loss) before income tax (58,000) (346,000) (1,075,000) (4,202,000) (1,134,000) (4,548,000)
</TABLE>
The Company generated revenue from customers located outside of the United
States of $7,337,000 and $7,633,000 for the quarter ended June 30, 2000 and
1999, respectively.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The following analysis compares material changes in the Company's financial
position from December 31, 1999, to June 30, 2000.
During 2000 the Company has generated positive cash flow from operations, and it
is expected that the Company will continue to generate positive cash flow
throughout 2000 and beyond. Cash provided by operations during the first six
months of 2000 amounted to $2,371,000. The Company's cash position remains
tight, however, as a result of the substantial amount of deferred payments in
2000 for capital expenditures related to the establishment and relocation of the
new United Kingdom facility, and the construction of a new plating shop. The
final payments for the UK facility have just been completed within the last
month, and, coupled with the improving performance of the UK operation, the
Company expects its cash position to improve noticeably with each successive
month.
The Company's most recent amendment to its senior loan facility extended certain
covenant provisions to August 31, 2000. The Company expects to execute an
agreement with its senior lender prior to August 31, 2000, which would extend
these covenant provisions to October 31, 2000, and further provide for a
material reduction in certain fees charged by the lender.
This agreement will be subject to the completion of separate transactions which
would provide additional funding for the Company. The Company and the
shareholders of Unique Investment Corporation ("Unique") are currently in the
final stage of negotiations with a strategic partner (the "Acquirer"). The
Acquirer has proposed to purchase 40% of the Company's common stock from the
Unique shareholders in a private transaction. Based upon the current status of
these negotiations, upon the conclusion of this purchase the Acquirer would
provide approximately $10 million of subordinated debt to the Company, in
exchange for which it would receive warrants to purchase up to 2,500,000 shares
of the Company's common stock at $4.25. The issuance of 1,330,000 of these
warrants would be subject to approval by the shareholders of the Company.
The senior management of the Company, who hold approximately 3% of the Company's
outstanding common stock, would transfer to the Acquirer the voting rights for
these shares. If all 2,500,000 warrants are approved and exercised, the Acquirer
would control approximately 60% of the Company's common stock. Upon the closing
of the transaction, the three directors who are also shareholders of Unique
would be replaced by three directors designated by the Acquirer.
In addition, the Acquirer would provide further financial support for the
Company by purchasing $10 million of the Company's senior credit facility. This
loan participation with the Company's senior lender would minimize the potential
for additional issues with the Company's lender, and would further provide for a
material reduction in fees charged by the lender.
The Company can provide no assurances that the contemplated transaction with the
Acquirer will be successfully concluded. If this transaction does not close by
August 25, 2000, the Company will seek to renegotiate its facility with its
senior lender.
If the contemplated transaction does not close, the Company still believes that
cash provided from operations will continue to provide sufficient liquidity to
meet the Company's cash requirements for the next twelve months provided that
its senior credit facility can be successfully extended. In this case, an
extension of the senior credit facility would not be necessary to meet the
Company's operating cash requirements, but rather would only be necessary to
meet the Company's cash requirements for additional fees charged by its lender.
If the contemplated transaction does close, as the Company expects, the
Company's liquidity will be enhanced considerably, and the Company will renew
efforts to replace its senior lender prior to October 31, 2000.
Results of Operations
The following analysis compares the Company's results of operations for the
quarter and six months ended June 30, 2000, with the quarter and six months
ended June 30, 1999.
Revenue for the quarter increased by $2,904,000, or 17%, to $20,299,000 from
$17,395,000 for the comparable period in 1999. Revenue for the six months
increased by $8,197,000, or 24%, to $41,787,000 from $33,590,000 in 1999. Most
of the revenue growth occurred in the Sun Valley division, which recorded a
year-to-date increase in revenue of 34%. Revenue in the UK operation also
increased by 7% year-to-date. Revenue growth was developed mostly from new
landing gear customer contracts, and from increased component services and line
replacement unit repair work in the UK.
-9-
<PAGE>
Cost of revenue for the second quarter decreased by $1,204,000, or 7%, from the
comparable period of 1999. Cost of revenue was unfavorably affected during the
second quarter of 1999 by the UK facility relocation, and a non-recurring
inventory adjustment of $826,000 in Sun Valley. Cost of revenue for the second
quarter of 2000 was adversely affected by the Company's tight cash position,
which has caused significantly increased purchasing costs, and delays and
difficulties in securing parts on a timely basis to achieve rapid turnaround
times on landing gear and hydromechanical jobs.
Cost of revenue for the first six months of 2000 increased by $3,421,000, or
11%, over the comparable period of 1999, primarily as a result of the increase
in revenue. The increase in cost of revenue was partially offset by continuing
improvements in the operating performance of the UK subsidiary. These
improvements helped generate an increase in consolidated gross margin from 8%
for the first six months of 1999 to 18% during 2000. The increase in gross
margin was accomplished despite extra costs incurred in Sun Valley to lease or
acquire additional landing gear shipsets to meet tight customer schedules during
2000. Sun Valley gross margin was also lower than normal because of unusually
high material costs on a few isolated jobs, and some unscheduled overhauls which
had to be subcontracted, with resulting loss of margin.
Most of the unusual costs which reduced Sun Valley gross margin during 2000 are
not expected to recur routinely. Further the Company expects to receive new
funding shortly, and to obtain new senior financing during the fourth quarter.
Although the impact on gross margin from the Company's tight cash position will
be reflected to a lesser extent in the third quarter, the Company does not
believe that the margins recorded for the quarter or six months will be
necessarily indicative of future results.
Selling, general and administrative expense for the second quarter decreased by
$294,000, or 12%, from the same period in 1999. This decrease was primarily the
result of a reduction in UK pension expense, and a reclassification of certain
financing fees from corporate overhead to interest expense. Year-to-date
operating expense was $396,000, or 8%, higher than the comparable period of 1999
because of higher legal and professional fees, and sales commissions incurred
during the first quarter of 2000. The increased amount of legal and professional
fees resulted from additional work necessary with regard to the Company's senior
lender, and the December 1999 private placement. These costs are not expected to
be present in future periods once the Company has replaced its senior lender.
Interest expense for the quarter increased by $773,000 as a result of increased
borrowings on the line of credit, an increased rate of interest, and additional
financing costs charged by the Company's senior lender. These additional costs
plus the amount of interest charged in excess of a fair market rate amount to
$734,000 during the first six months of 2000. In addition, during the period
July 1 to August 18, 2000, the lender has charged the Company further fees of
$1,020,000.
As a result of the increased costs from the Company's senior lender, and the
higher than normal cost of revenue and operating expenses, the Company recorded
a net loss for the quarter of $679,000, as compared with a net loss of
$2,982,000 in the second quarter of 1999. The Company also recorded a year-to-
date net loss of $1,030,000, as compared to a net loss of $2,942,000 for the
prior comparable period. For the reasons stated above, the Company does not
believe that gross margin, operating expense and interest expense for the
reported periods will be representative of future results of operations.
For the quarter and six months, the Company recorded $0.15 and $0.36 per share
charges, respectively, to record accretion of a discount and redemption premium
on preferred stock, along with the issue's cumulative dividends. The accretion
charge represents a pro rata share of the maximum possible benefit that the
preferred shareholders might receive through both conversion and redemption, as
well as other costs and discounts associated with the issue of the preferred
stock. These non-cash and non-operating charges are recorded on the Company's
Statement of Operations below the net loss amount. The total of net loss, less
these additional amounts, represents net loss available to common shareholders.
Forward Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of
the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of
1995, such as statements of the Company's plans, objectives, expectations and
intentions, that involve risks and uncertainties that could cause actual results
to differ materially from those discussed in such forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this Quarterly Report and in the Company's
various filings with the Securities and Exchange Commission, including without
limitation the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1999.
This discussion and analysis should be read in conjunction with the Company's
financial statements and related notes thereto included herein, and with the
information set forth under Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's Annual Report on Form 10-
K/A for the year ended December 31, 1999.
-10-
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk refers to the potential effects of unfavorable changes in certain
prices and rates on the Company's financial results and condition, primarily
foreign currency exchange rates and interest rates on borrowings. The Company
does not utilize derivative instruments in managing its exposure to such
changes.
Foreign Currency Risk. The Company has operations in the United Kingdom and the
Netherlands. The currencies of these two countries have been relatively stable
as compared with the U.S. dollar. The Company manages foreign currency risk, in
part, by generally requiring that customers pay for the services of the
Company's foreign operating units in the currency of the country where the
operating unit is located. The Company also does not routinely exchange material
sums of money between the operating units. The Company has not to date seen the
need for currency hedging transactions in the ordinary course of business.
Interest Rate Risk. The Company's senior credit facility is comprised of two
notes payable and a revolving line of credit, each of which currently carries an
interest rate which varies in accordance with a Base Rate equal to the higher of
the Federal Reserve prime rate, or the Federal Funds Effective Rate. The Company
is presently subject to potentially material fluctuations in its debt service as
the Base Rate changes.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
(b) Form 8-K
No reports were filed on Form 8-K during the quarter ended June 30, 2000.
-11-
<PAGE>
Hawker Pacific Aerospace
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.
HAWKER PACIFIC AEROSPACE
Date: August 18, 2000 By /s/ Philip M. Panzera
---------------------
Philip M. Panzera
Executive Vice President
(Principal Financial and Accounting Officer)
-12-
