<PAGE> 1
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):
NOVEMBER 19, 1998
----------
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 0-24275 52-2081515
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
3516 CENTRE CIRCLE DRIVE
FORT MILL, SOUTH CAROLINA 29715
(Address of principal executive offices)
(803) 548-2160
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) In accordance with Item 7(a)(1) of Form 8-K, American Aircarriers
Support, Incorporated (the "Company") files herewith the required financial
statements of American Jet Engine Services, Inc. ("AmJet") as an amendment to
the Form 8-K filed on December 4, 1998.
(b) In accordance with Item 7(b)(2) of Form 8-K, the Company files
herewith the required pro forma financial information of the Company and AmJet
as an amendment to the Form 8-K filed on December 4, 1998.
(c) Additionally, the Company files Exhibit 23.1, which contains the
consent of Cherry, Bekaert & Holland, L.L.P. to inclusion of their financial
statements.
(d) The following exhibits were filed in accordance with the
provisions of Item 601 of Regulation S-B with the Form 8-K filed on December 4,
1998:
<TABLE>
<CAPTION>
Reg. S-K
Exhibit No. Description Item No.
- ----------- ----------- --------
<S> <C> <C>
2.4 Asset Purchase Agreement among the Company, American Jet Engine Services, Inc. 2
and its Shareholders and American Aircarriers Support Acquisition II Corp.
4.4 Registration Rights Agreement between the Company and American Jet Engine 4
Services, Inc.
10.1.6 Executive Employment Agreement between the Company and Anton K. Khoury 10
10.1.7 Executive Employment Agreement between the Company and Hanna K. Khoury 10
10.5.4 Lease of Real Property between the Company and Anton K. Khoury 10
10.5.5 Lease of Real Property between the Company and Hanna K. Khoury 10
10.10 Inventory Sales Agreement between the Company and Global Air Spares, Inc. 10
10.11 Aircraft Engine Sales Agreement between the Company and Atlantic Airmotive 10
Corporation
</TABLE>
<PAGE> 3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
American Jet Engine Services, Inc.
We have audited the accompanying balance sheets of American Jet Engine
Services, Inc. as of September 30, 1998 and December 31, 1997 and the related
statements of operations, stockholders' equity and cash flows for the
nine-month and twelve-month periods 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, the financial statements referred to above present fairly, in
all material respects, the financial position of American Jet Engine Services,
Inc. as of September 30, 1998 and December 31, 1997, and the results of its
operations and its cash flows for the nine-month and twelve-month periods then
ended in conformity with generally accepted accounting principles.
Charlotte, North Carolina
October 16, 1998, except for Note 8, as to
which the date is November 19, 1998
<PAGE> 4
AMERICAN JET ENGINE SERVICES, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 203,266 $ 611,745
Certificates of deposit 110,471 73,335
Trade receivables - (net of allowance for doubtful
accounts of $34,200 for 1998 and 1997) 719,131 180,533
Related party receivables 857,355 12,470
Inventory 1,011,385 474,639
Prepaid expenses 11,514 3,255
Costs and estimated earnings in excess
of billings on uncompleted contracts 161,443 1,310,033
Deposits 965 900
---------- ----------
Total current assets 3,075,530 2,666,910
---------- ----------
Property and equipment
Machinery and equipment 333,046 313,721
Furniture and fixtures 46,908 41,329
Automobiles 13,123 13,123
Leasehold improvements 3,408 0
---------- ----------
396,485 368,173
Less accumulated depreciation 300,731 275,275
---------- ----------
Total property and equipment 95,754 92,898
---------- ----------
$3,171,284 $2,759,808
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 657,986 $ 750,364
Accrued liabilities 67,716 26,959
Bank line of credit 0 500,000
Billings in excess of costs and estimated
earnings on uncompleted contracts 123,222 0
---------- ----------
Total current liabilities 848,924 1,277,323
---------- ----------
Stockholders' equity
Common stock, $1 par value; authorized,
issued, and outstanding 1,000 shares 1,000 1,000
Additional paid in capital 250,500 250,500
Retained earnings 2,244,782 1,421,737
---------- ----------
2,496,282 1,673,237
Less note receivable from stockholder 173,922 190,752
---------- ----------
Total stockholders' equity 2,322,360 1,482,485
---------- ----------
$3,171,284 $2,759,808
========== ==========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 5
AMERICAN JET ENGINE SERVICES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE TWELVE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
<S> <C> <C>
Sales $5,829,215 $4,505,206
Less cost of sales 3,987,515 2,610,272
---------- ----------
Gross profit 1,841,700 1,894,934
Selling, general and administrative expenses 500,861 528,329
---------- ----------
Operating income 1,340,839 1,366,605
---------- ----------
Other income (expense)
Interest income 12,953 17,010
Interest expense (4,568) (12,640)
---------- ----------
8,385 4,370
---------- ----------
Net income $1,349,224 $1,370,975
========== ==========
</TABLE>
See notes to financial statements.
F-4
<PAGE> 6
AMERICAN JET ENGINE SERVICES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common stock Notes Total
----------------------- Additional Retained Receivable Stockholders'
Shares Dollars Paid-in-Capital Earnings Stockholders Equity
------------ ------- --------------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1997 1,000 $1,000 $250,500 $ 287,308 $(212,048) $ 326,760
Net income 1,370,975 1,370,975
Stockholder distributions (236,546) (236,546)
Principal payment on notes
receivable from stockholders 21,296 21,296
----- ------ -------- ---------- --------- ----------
Balance, December 31, 1997 1,000 1,000 250,500 1,421,737 (190,752) 1,482,485
Net income 1,349,224 1,349,224
Stockholder distributions (526,179) (526,179)
Principal payment on notes
receivable from stockholders 16,830 16,830
----- ------ -------- ---------- --------- ----------
Balance, September 30, 1998 1,000 $1,000 $250,500 $2,244,782 $(173,922) $2,322,360
===== ====== ======== ========== ========= ==========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 7
AMERICAN JET ENGINE SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Twelve
Months ended Months ended
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,349,224 $ 1,370,975
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 28,494 38,075
Increase in certificates of deposit (37,136) (37,552)
(Increase) decrease in receivables (1,383,483) 82,534
Increase in inventory (536,746) (331,818)
Increase in prepaid expenses (8,259) (282)
(Increase) decrease in cost in excess of billings
on uncompleted contracts 1,148,590 (1,310,033)
Increase in deposits (65) 0
Increase (decrease) in accounts payable (92,378) 463,385
Increase in accrued liabilities 40,757 8,248
Increase in billings in excess of cost
on uncompleted contracts 123,222 0
----------- -----------
Net cash provided by operating activities 632,220 283,532
----------- -----------
Cash flows from investing activities
Additions to property and equipment (31,350) (28,421)
----------- -----------
Cash flows from financing activities
Stockholder distributions (509,349) (215,250)
Net proceeds from bank line of credit 0 500,000
Net payments on bank line of credit (500,000) 0
----------- -----------
Net cash provided by (used in) financing
activities (1,009,349) 284,750
----------- -----------
Net increase (decrease) in cash (408,479) 539,861
Cash and cash equivalents at beginning of year 611,745 71,884
----------- -----------
Cash and cash equivalents at end of year $ 203,266 $ 611,745
=========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 8
AMERICAN JET ENGINE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS
American Jet Engine Services, Inc. is an international aircraft engine
and parts overhaul facility providing service to aircraft parts and
engine redistributors, major commercial passenger and cargo airlines, and
other maintenance and repair facilities located throughout the world. The
Company's offices, overhaul shop, and inventory storage locations are in
Miami, Florida.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments purchased with a maturity of
three months or less to be cash equivalents. Included in cash equivalents
is a money market fund. These investments are recorded at cost, which
approximates market. The Company records certificates of deposit separate
from cash and cash equivalents due to their maturities being greater than
three months.
TRADE RECEIVABLES
The Company's allowance for doubtful accounts is based on management's
estimates of the creditworthiness of its customers, and, in the opinion
of management is believed to be set in an amount sufficient to respond to
normal business conditions.
INVENTORY
Inventory is valued at lower of cost or market. The cost of aircraft
parts purchased individually is determined on a specific identification
basis, which includes the cost associated with the overhaul and repair
necessary for resale. The cost of engine overhaul inventory is the direct
labor and overhead costs for the engine determined by the labor hours
attributed to it. The engine remains the property of the customer who
purchased it; therefore, there is no engine purchase cost recorded in the
Company's inventory.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation of furniture,
fixtures and equipment is provided under the straight-line method over
the estimated useful lives, generally five and seven years. Amortization
of leasehold improvements is provided on the straight-line method over
the estimated useful lives of leased assets or the term of the lease,
whichever is shorter.
Repair and maintenance costs are charged to operations as incurred while
major improvements are capitalized. When assets are retired or disposed
of, the cost and accumulated depreciation thereon are removed from the
accounts and any gains or losses are included in operations.
F-7
<PAGE> 9
AMERICAN JET ENGINE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
REVENUE RECOGNITION
Revenues from fixed-fee contracts for aircraft engine overhauls are
recognized on the percentage-of-completion method, measured by the
cost-to-cost method, commencing when progress reaches a point where
experience is sufficient to estimate final results with reasonable
accuracy. Revenues from overhauls of other aircraft parts, which are
short-term in nature, are recognized when the part is shipped to the
customer.
Provisions for estimated losses on uncompleted contracts, if any, are
made in the period in which such losses are determined. Changes in job
performance, job conditions and estimated profitability, including final
contract settlements, may result in revisions to costs and income and are
recognized in the period in which the revisions are determined.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts," represents revenues recognized in excess of
amounts billed. The liability, "Billings in excess of costs and estimated
earnings on uncompleted contracts," represents billings in excess of
revenues recognized.
INCOME TAXES
The Company, with the consent of its stockholders, elected to be taxed as
an S Corporation for federal and state income tax purposes as defined in
Section 1361 of the Internal Revenue Code of 1986. Therefore, the Company
is generally exempt from all federal and state income taxes as
stockholders of the Company are taxed on corporate income.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash and cash equivalents and
accounts receivable.
Cash balances in financial institutions periodically exceed amounts
insured by the FDIC. These balances and certificates of deposit are held
by a local financial institution and management believes risk of loss
related to these amounts is remote.
Accounts receivable subject the Company to a potential concentration of
credit risk. Receivables are usually due within 30 days and the Company
performs periodic credit evaluations of its customer's financial
condition. Substantially all of the Company's customers are in the
aviation industry and sales are usually affected by the current economic
condition of the industry. The Company estimates that sales to
international customers accounted for approximately 5% of net sales in
1998; there were no international sales in 1997. Sales to international
customers may be subject to greater risks, including variations in local
economies, fluctuating exchange rates and greater difficulty in accounts
receivable collection.
F-8
<PAGE> 10
AMERICAN JET ENGINE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
In a given period, a substantial portion of the Company's net sales may
be attributable to the overhaul of one or more engines. Engine overhauls
or the timing of aircraft spare parts sales during a given period may
result in a customer being considered a major customer of the Company for
that period. In 1998 and 1997, three of the Company's customers
individually accounted for in excess of 10% of net sales, including one
related-party customer. Currently, the Company believes that it has no
customer, the loss of which would have a material adverse effect on the
Company's results of operations.
A substantial portion of the Company's purchases are concentrated among a
small number of companies. Two of the Company's suppliers individually
accounted for in excess of 10% of net purchases, including one
related-party supplier, for the period ended September 30, 1998. There
was one supplier who accounted for in excess of 10% of net purchases for
the period ended December 31, 1997. Currently, the Company believes that
it has no supplier, the loss of which would have a material adverse
effect on the Company's results of operations.
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 reporting period. Actual results could differ from those
estimates.
ADVERTISING COSTS
The Company expenses advertising costs as they are incurred. For the
periods ended September 30, 1998 and December 31, 1997, advertising costs
were insignificant.
SUPPLEMENTAL CASH FLOW AND NONCASH ACTIVITY INFORMATION
Interest paid totaled $4,568 and $12,640, respectively, during the
periods ended September 30, 1998 and December 31, 1997. Distributions to
shareholders include $16,830 and $21,296, respectively, of principal
payments on the notes receivable from shareholder during the periods
ended September 30, 1998 and December 31, 1997.
F-9
<PAGE> 11
AMERICAN JET ENGINE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
NOTE 2 - STOCKHOLDER NOTE RECEIVABLE:
The Company holds a ten-year, $251,000 face value note from a stockholder
for the purchase of stock. The note is payable in monthly installments of
$2,787 including interest at 6% through December 2004 and is
collateralized by the stock. The note receivable was $173,922 and
$190,752 at September 30, 1998 and December 31, 1997, respectively. The
Company recorded $7,371 and $12,144 in interest income related to the
note for the periods ended September 30, 1998 and December 31, 1997,
respectively. The balance of the note receivable is reflected as a
reduction of stockholders' equity in the balance sheet.
NOTE 3 - INVENTORY:
Inventory, stated at lower of cost or market, is comprised of the
following:
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
Aircraft parts $ 781,812 $326,14 8
Part overhauls 229,573 148,491
---------- --------
Total $1,011,385 $474,639
========== ========
</TABLE>
NOTE 4 - COST AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS:
Information relative to contracts in progress is as follows:
<TABLE>
<CAPTION>
1998 1997
---------- --------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 844,707 $1,045,521
Estimated earnings 362,017 432,382
---------- ----------
1,206,724 1,477,903
Billings to date 1,168,503 167,870
---------- ----------
$ 38,221 $1,310,033
========== ==========
</TABLE>
Included in the accompanying balance sheets under the following captions:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 161,443 $1,310,033
Billings in excess of costs and estimated
earnings on uncompleted contracts 123,222 --
---------- ----------
$ 38,221 $1,310,033
========== ==========
</TABLE>
F-10
<PAGE> 12
AMERICAN JET ENGINE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
NOTE 5 - LINE OF CREDIT:
In August 1997, the Company entered into a revolving line of credit ("the
facility") with a bank under which the Company could borrow up to
$500,000 at the bank's prime rate plus 2%. The facility, which matured in
August 1998, was not renewed. On December 31, 1997, $500,000 was
outstanding under this facility. The facility was collateralized by the
Company's accounts receivable, inventory and fixed assets, and guaranteed
by the existing stockholders.
NOTE 6 - COMMITMENTS AND CONTINGENCIES:
The Company overhauls and repairs aircraft engines and parts and requires
that all of the parts it sells are properly documented. Although the
Company has never been subject to product liability claims, there is no
guarantee that the Company could not be subject to liability from its
potential exposure relating to faulty aircraft parts in the future. The
Company maintains liability insurance with coverage it believes to be in
sufficient amounts and on terms that are generally consistent with
industry practice, but there can be no assurance that such coverage will
be adequate to fully protect the company from any liabilities it might
incur. An uninsured or partially insured loss could have a material
adverse effect upon the Company's financial condition.
NOTE 7 - RELATED PARTY TRANSACTIONS:
The Company leases a 15,000 square foot warehouse which includes the main
offices and overhaul shop from an existing stockholder on a
month-to-month basis for $5,325 a month. Rent expense under this
arrangement was $47,925 in 1998 and $63,900 in 1997.
The Company also leases a 12,000 square foot warehouse and repair shop
from an existing stockholder on a month-to-month basis for $5,219 a
month. Rent expense under this arrangement was $46,971 in 1998 and
$15,657 in 1997.
The Company has transactions in the normal course of business with two
aircraft and parts suppliers related through common ownership (related
companies). During the periods ended September 30, 1998 and December 31,
1997, the Company recorded $153,420 and $1,265,958 respectively, in sales
to the related companies. The Company has receivables from the related
companies amounting to $857,355 at September 30, 1998 and $12,470 at
December 31, 1997. The Company also recorded $483,708 and $-0-,
respectively, in purchases from the related companies during the periods
ended September 30, 1998 and December 31, 1997. The Company has payables
to these companies amounting to $17,810 at September 30, 1998 and $-0- at
December 31, 1997.
F-11
<PAGE> 13
AMERICAN JET ENGINE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1998
AND THE YEAR ENDED DECEMBER 31, 1997
NOTE 8 - SUBSEQUENT EVENT:
On November 19, 1998, the Company sold substantially all operating assets
and liabilities to American Aircarriers Support Acquisitions II Corp., a
Florida corporation and subsidiary of American Aircarriers Support,
Incorporated (AASI). At the time of the closing, the Company received
$8,522,685 in cash and 625,000 shares of AASI common stock.
F-12
<PAGE> 14
(B) PRO FORMA FINANCIAL INFORMATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated statement of operations for the
year ended December 31, 1997 reflects the historical accounts of American
Aircarriers Support, Incorporated ("AAS" or "the Company") for that period,
adjusted giving effect to the acquisition, by AAS of American Jet Engine
Services, Inc. as if the event had occurred on the first day of the period
presented. The following unaudited pro forma consolidated statement of
operations for the nine months ended September 30, 1998 reflects the historical
accounts of the Company for that period, adjusted giving effect to the
acquisition, as if the event had occurred on the first day of the period
presented. The following unaudited pro forma consolidated balance sheet as of
September 30, 1998 reflects the historical accounts of the Company as of that
date as adjusted to give pro forma effect to the acquisition, as if the event
had occurred on September 30, 1998.
The unaudited pro forma consolidated financial data and related notes should be
read in conjunction with the financial statements and financial information
pertaining to the Company and American Jet Engine Services, Inc. included
elsewhere herein and documents previously filed with the Securities and
Exchange Commission by the Company. The Company believes that the assumptions
used in the following statements provide a reasonable basis on which to present
the unaudited pro forma financial data. The unaudited pro forma consolidated
financial data are provided for informational purposes only and should not be
construed to be indicative of the Company's financial condition, results of
operations or covenant compliance had the acquisition transaction described
above been consummated on the dates assumed, and are not intended to project
the Company's financial condition on any future date or its results of
operations for any future period.
F-13
<PAGE> 15
Unaudited Pro Forma Consolidated Balance Sheet
As of September 30, 1998
<TABLE>
<CAPTION>
Historical
------------------------------
American
Aircarriers American
Support, Jet Engine Pro Forma Pro Forma
Incorporated Services, Inc. Adjustments Combined
------------ -------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,103,749 $ 203,266 $ 177,315 (a) $ 1,281,064
(203,266)(b)
Certificates of deposit 0 110,471 (110,471)(b) 0
Receivables - trade and other 3,018,510 719,131 (95,108)(c) 3,642,533
Receivables - affiliate 23,074 857,355 0 880,429
Inventory 13,652,272 1,011,385 100,000 (a) 14,763,657
Costs and estimated earnings in excess
of billings on uncompleted contracts 0 161,443 0 161,443
Prepaid expenses and deposits 92,669 12,479 (9,794)(b) 95,354
----------- ---------- ----------- -----------
Total current assets 17,890,274 3,075,530 (141,324) 20,824,480
Property and equipment, net 661,405 95,754 304,246 (a) 1,061,405
Goodwill 0 0 10,396,925 (a) 10,396,925
Assets held for lease 480,000 0 0 480,000
Investments 410,000 0 0 410,000
Other assets 148,698 0 0 148,698
Deferred tax asset 40,000 0 0 40,000
----------- ---------- ----------- -----------
Total assets $19,630,377 $3,171,284 $10,559,847 $33,361,508
=========== ========== =========== ===========
Liabilities and Stockholders' equity
Current liabilities
Bank line of credit 500,000 0 1,740,000 (a) 2,240,000
Customer deposits 31,000 0 0 31,000
Accounts payable and accrued
liabilities 1,383,828 725,702 527,315 (a) 2,541,737
(95,108)(c)
Income taxes payable 501,054 0 0 501,054
Billings in excess of costs and estimated
earnings on uncompleted contracts 0 123,222 0 123,222
Distributions payable for
S-Corporation income taxes 70,580 0 0 70,580
----------- ---------- ----------- -----------
Total current liabilities 2,486,462 848,924 2,172,207 5,507,593
----------- ---------- ----------- -----------
Long-term debt, less current maturities 0 0 6,960,000 (a) 6,960,000
----------- ---------- ----------- -----------
Stockholders' equity
Preferred stock 0 0 0 0
Common stock 6,350 1,000 (375)(a) 6,975
Additional paid-in capital 15,363,735 250,500 3,498,875 (a) 19,113,110
Retained earnings 1,773,830 2,244,782 (1,747,329)(a) 1,773,830
(497,453)(b)
Less notes receivable from stockholders 0 (173,922) 173,922 (b) 0
----------- ---------- ----------- -----------
Total stockholders' equity 17,143,915 2,322,360 1,427,640 20,893,915
----------- ---------- ----------- -----------
Total liabilities and
stockholders' equity $19,630,377 $3,171,284 $10,559,847 $33,361,508
=========== ========== =========== ===========
</TABLE>
See notes to Unaudited Pro Forma Consolidated Balance Sheet.
F-14
<PAGE> 16
Unaudited Pro Forma Consolidated Statement of Operations
For the nine months ended September 30, 1998
<TABLE>
<CAPTION>
Historical
------------------------------
American
Aircarriers American
Support, Jet Engine Pro Forma Pro Forma
Incorporated Services, Inc. Adjustments Combined
------------ -------------- ----------- ---------
<S> <C> <C> <C> <C>
Sales $15,440,548 $5,829,215 $ (536,164)(a) $20,733,599
Less cost of sales 8,718,001 3,987,515 (288,782)(a) 12,435,984
19,250 (d)
----------- ---------- ----------- -----------
Gross profit 6,722,547 1,841,700 (266,632) 8,297,615
Selling, general and administrative
expenses 1,723,505 500,861 259,923 (b) 2,419,639
13,350 (d)
(78,000)(g)
----------- ---------- ----------- -----------
Operating income 4,999,042 1,340,839 (461,905) 5,877,976
----------- ---------- ----------- -----------
Other income (expense)
Interest income 74,640 12,953 0 87,593
Interest expense (185,159) (4,568) (494,643)(c) (684,370)
----------- ---------- ----------- -----------
(110,519) 8,385 (494,643) (596,777)
----------- ---------- ----------- -----------
Net income before tax provision 4,888,523 1,349,224 (956,548) 5,281,199
Income tax expense - pro forma 1,955,409 (f) 0 149,200 (e) 2,104,609
----------- ---------- ----------- -----------
Net income - pro forma $ 2,933,114 $1,349,224 $(1,105,748) $ 3,176,590
=========== ========== =========== ===========
Pro forma basic net income per share $ 0.58 $ 0.56
=========== ===========
Pro forma basic weighted average
shares outstanding 5,087,179 625,000 5,712,179
=========== =========== ===========
Pro forma diluted net income per share $ 0.58 $ 0.56
=========== ===========
Pro forma diluted weighted average
shares outstanding 5,087,179 625,000 5,712,179
=========== =========== ===========
</TABLE>
See notes to Unaudited Pro Forma Consolidated Statements of Operations.
F-15
<PAGE> 17
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Historical
--------------------------------
American
Aircarriers American
Support, Jet Engine Pro Forma Pro Forma
Incorporated Services, Inc. Adjustments Combined
------------ -------------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $13,250,328 $4,505,206 $ (74,341)(a) $17,681,193
Less cost of sales 7,946,467 2,610,272 (41,992)(a) 10,547,347
32,600 (d)
----------- ---------- ----------- -----------
Gross profit 5,303,861 1,894,934 (64,949) 7,133,846
Selling, general and
administrative expenses 1,266,790 528,329 346,564 (b) 2,132,547
10,864 (d)
(20,000)(g)
----------- ---------- ----------- -----------
Operating income 4,037,071 1,366,605 (402,377) 5,001,299
----------- ---------- ----------- -----------
Other income (expense)
Interest income 115,719 17,010 0 132,729
Interest expense (79,435) (12,640) (673,570)(c) (765,645)
----------- ---------- ----------- -----------
36,284 4,370 (673,570) (632,916)
----------- ---------- ----------- -----------
Net income before tax provision 4,073,355 1,370,975 (1,075,947) 4,368,383
Income tax expense - pro forma 1,629,300(f) 0 112,100 (e) 1,741,400
=========== ========== =========== ===========
Net income - pro forma $ 2,444,055 $1,370,975 $(1,188,047) $ 2,626,983
=========== ========== =========== ===========
Pro forma basic net income
per share $ 0.60 $ 0.56
=========== ===========
Pro forma basic weighted
average shares outstanding 4,100,000 625,000 4,725,000
=========== =========== ===========
Pro forma diluted net income
per share $ 0.60 $ 0.56
=========== ===========
Pro forma diluted weighted
average shares outstanding 4,100,000 625,000 4,725,000
=========== =========== ===========
</TABLE>
See notes to Unaudited Pro Forma Consolidated Statements of Operations.
F-16
<PAGE> 18
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(a) Represents the elimination of sales from American Jet Engine Services,
Inc. (AMJET) to American Aircarriers Support, Incorporated, (AAS) and the
related intercompany profit on engines remaining in inventory of AAS as
of the end of each period presented.
(b) Represents the amortization over an assumed useful life of 30 years, of
goodwill resulting from the acquisition of AMJET.
(c) Represents the increase in interest expense associated with the debt
incurred to finance the acquisition of AMJET.
(d) Represents an increase in depreciation expense for the increase in
depreciable basis of certain fixed assets.
(e) Represents (i) the estimated provision for income taxes on AMJET net
income as if AMJET had been taxed under Subchapter C of the Internal
Revenue Code of 1986 since the beginning of the period presented at an
assumed effective income tax rate of 38%; and (ii) the income tax effects
of the pro forma adjustments at an assumed income tax rate of 38%.
(f) Represents (i) the estimated provision for income taxes on AAS net income
as if AAS had been taxed under Subchapter C of the Internal Revenue Code
of 1986 since the beginning of the period through December 31, 1997 and
May 28, 1998, respectively; and (ii) for the nine months ended September
30, 1998, the provision for income taxes for AAS between May 28, 1998 and
September 30, 1998.
(g) Represents the elimination of compensation costs for individuals of AMJET
that will not be employed by AAS and certain related expenses.
F-17
<PAGE> 19
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Represents the preliminary allocation of the purchase price of the AMJET
acquisition based on the estimated fair value of the net assets acquired.
The estimated purchase price allocation consists of the following:
<TABLE>
<S> <C>
Total consideration:
Cash $ 8,522,685
Common stock 3,750,000
--------------
Total 12,272,685
Plus: Estimated acquisition expenses 450,000
Less: Estimated fair value of tangible
net assets acquired 2,325,760
Excess of purchase price over fair
value of net tangible assets acquired $ 10,396,925
==============
</TABLE>
The value assigned to the 625,000 shares of American Aircarriers Support,
Incorporated common stock issued in connection with the AMJET acquisition
of $6.00 per share approximates the quoted market price of the stock
during the period of the purchase negotiations.
(b) Represents the elimination of certain net assets of AMJET not being
acquired.
(c) Represents the elimination of an AMJET trade receivable from American
Aircarriers Support, Incorporated of $95,108 at September 30, 1998.
F-18
<PAGE> 20
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 hereunto duly authorized.
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
Date: January 20, 1998 By: /s/ Elaine T. Rudisill
---------------------------------------
Elaine T. Rudisill,
Chief Financial Officer
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
American Jet Engine Services, Inc.
We consent to the inclusion of our report dated October 16, 1998, with respect
to the balance sheets of American Jet Engine Services, Inc. as of September 30,
1998 and December 31, 1997, and the related statements of income, changes in
shareholders equity, and cash flows for the nine months and twelve months then
ended, which report appears in this amendment to the current report on Form 8-K
of American Aircarriers Support, Incorporated dated November 19, 1998.
/s/ Cherry, Bekaert & Holland, L.L.P.
Charlotte, North Carolina
January 15, 1999
