UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- - - - - - - - - - - - - - - - -
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For The Fiscal Year Ended March 31, 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 333-64513
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 65-0822351
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1815 GRIFFIN ROAD, SUITE #300, DANIA, FL 33004-2252
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (954) 926-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) AND 12(g) OF THE ACT: NONE
TITLE OF CLASS NAME OF EXCHANGE ON WHICH REGISTERED
N/A N/A
Indicate by check mark whether each 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 report(s), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date.
Common Stock, par value $0.01 per share: 100 shares outstanding at June
30, 2000.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
FORM 10-K
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TABLE OF CONTENTS
Page
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PART I
ITEM 1 Business 2
ITEM 2 Properties . 8
ITEM 3 Legal Proceedings 8
ITEM 4 Submission of Matters to a Vote of Security Holders . 9
PART II
ITEM 5 Market for the Company's Equity and Related Security Holder Matters 9
ITEM 6 Selected Financial Data 9
ITEM 7 Management's Discussion and Analysis of Financial Condition and Results of Operation 10
ITEM 7 A Quantitative and Qualitative Disclosure about Market Risk 18
ITEM 8 Financial Statements and Supplementary Data 18
ITEM 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 18
PART III
ITEM 10 Directors and Executive Officers of the Company . 19
ITEM 11 Executive Compensation 21
ITEM 12 Security Ownership of Certain Beneficial Owners and Management 26
ITEM 13 Certain Relationships and Related Transactions 28
PART IV
ITEM 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K . 33
Signatures 35
</TABLE>
<PAGE>
PART I
Aircraft Service International Group, Inc. (the "Company") was organized in
March 1998 for the purpose of acquiring beneficial ownership and control of all
the outstanding capital stock or other equity interests in Aircraft Services
International, Inc., ASIG Miami, Inc. (previously known as Dispatch Service,
Inc.), ASIG Fueling Miami, Inc. (previously known as Florida Aviation Fueling
Co.), Bahamas Airport Service, Ltd., Freeport Flight Services, Ltd., ASIG Ltd.
(previously known as Aircraft Service, Ltd.), ASIG Germany GmbH (previously
known as ASII Holding, GmbH), and ASII Aircraft Service Canada, Ltd.
(collectively the "ASIG business" or "Predecessor") from Viad Corp ("Viad") and
Viad Service Companies, Ltd. as of April 1, 1998 pursuant to a share purchase
agreement (the "Acquisition"). Prior to the Acquisition by the Company, the ASIG
business was operated under the divisional name of Aircraft Service
International Group. The Company is 100% owned by Ranger Aerospace Corporation.
The Predecessor's fiscal year ended on December 31. The Company's fiscal
year ends March 31. References herein to fiscal 2000 and 1999 refer to the
Company's fiscal year ended March 31, 2000 and 1999 and references to the
calendar years 1997 and 1996 refer to the Predecessor's fiscal years ended
December 31, 1997 and 1996.
Item 1. Business
The Company is one of the largest independent providers of aviation fueling
and aircraft ground services in the United States and believes it is the largest
independent fueler in Europe. The Company has provided service to its customers
for 53 years and has a presence in 57 airports in the United States, Europe and
the Caribbean. In fiscal 2000, the Company provided service to over 2.4 million
commercial flights for over 200 customers, including most of the major domestic
and international airlines such as American Airlines, Inc. ("American"), British
Airways ("BA"), Continental Airlines, Inc. ("Continental"), Delta Air Lines,
Inc. ("Delta"), Northwest Airlines Corporation ("Northwest"), United Airlines,
Inc. ("United") and US Airways, Inc. ("US Airways"), as well as regional air
carriers, airport authorities and oil companies such as Esso U.K. ("Esso") and
Shell U.K. ("Shell"). The Company also operates fuel storage and delivery
systems for airline consortia and airport authorities at 24 airports, including
Los Angeles International Airport's LAXFUEL, which the Company believes is the
largest airport fuel consortium in the world. For the fiscal years ended March
31, 2000, March 31, 1999 and December 31, 1997, the Company generated revenues
of $141.0 million, $123.4 million and $119.3 million, respectively, net income
(loss) of $(9.3) million, $(4.8) million (after an extraordinary charge of $0.2
million relating to the write-off of certain finance costs) and $6.0 million,
respectively and EBITDA of $11.4 million, $15.5 million and $14.6 million,
respectively.
The Company's business includes aviation fueling services (64% of 2000
revenues), aircraft ground services (32%) and other aviation services (4%).
Aviation fueling services are comprised primarily of into-plane fueling,
maintenance and operation of fuel storage and delivery systems and the retail
sale of fuel products. Generally, the Company has custody over, but not
ownership of, the fuel it manages and delivers. Aircraft ground services consist
primarily of ground handling, aircraft interior grooming, cargo handling,
passenger and traffic services and fixed base operations ("FBOs"). FBOs
generally include the provision of terminal services, pilot facilities,
maintenance, weather service, flight planning and hangar space to private,
executive and corporate aircraft. The Company provides its services to customers
pursuant to contractual agreements and currently has approximately 850
contracts. In addition, the Company has won approximately 57%, 68% and 52% of
the new contracts on which it placed competitive bids in fiscal 2000, fiscal
1999 and 1997, respectively.
The Company believes it has a significant market share of into-plane
fueling services (based on gallons pumped) at many of its locations, handling an
estimated 50% or more of the outsourced commercial fueling requirements at 27 of
the 33 locations where it provides such services. The Company handled
approximately 8.9 billion gallons of aviation fuel through all of its combined
business units during fiscal 2000.
<PAGE>
In April 1999, the Company was named "Best Aviation Fueler in the World"
by an international survey of 41 major airlines, independently conducted by the
"World Jet Fuel Report", an industry publication.
In October 1999, AVITAS, an aviation consulting firm, performed an
independent survey of the Company and its principal competitors, through a blind
assessment among 700 senior executives in the airlines industry. ASIG was
ranked Number 1 in quality in that survey.
In 2000, the Company was named "Best Airport Customer Service Cabin
Services and Underwing Supplier" and "Best Full Service Station" (Ft. Lauderdale
Airport) by Delta Airlines. The Company was also awarded the "Platinum Supplier
Award" from American Airlines.
Company History
Prior to April 1, 1998, the Company had no operations. The ASIG business
has a long history of providing service in the independent aviation services
market with its two main predecessor companies, ASIG Miami Inc. ("Miami"), which
was formerly known as Dispatch Services, Inc. and Aircraft Service
International, Inc. ("ASII") operating since 1947 and 1952, respectively. Most
of the companies comprising the ASIG business were acquired by the Greyhound
Corporation (Viad's predecessor) in the late 1960s.
On May 20, 1999, Elsinore Acquisition Corporation, a wholly-owned
subsidiary of the Company, acquired substantially all the assets of Elsinore,
L.P., including Elsinore's 23 operating units in 10 states, the U.S. Virgin
Islands and Puerto Rico, which provide a variety of aircraft fueling, ground
handling, aircraft cleaning and other aviation services to major commercial
airlines. On March 1, 2000, ASIG UK purchased 75% of the stock of Aviation
Consultancy Services, a baggage tracing provider. The Company has an option to
purchase the remaining 25% of the stock. The Company currently intends to
exercise this option.
The following chart lists the 57 airports in the United States, Europe and
the Caribbean where the Company currently provides services:
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OPERATING OPERATING
LOCATION SINCE LOCATION SINCE
------------------------ --------- ----------------------- -----
Miami, FL 1947 Colorado Springs, CO 1995
Tampa, FL 1957 London, England-Gatwick 1997
Ft. Lauderdale, FL 1958 Munich, Germany 1997
Los Angeles, CA 1961 Austin, TX 1999
Orlando, FL 1961 Washington, DC 1999
San Francisco, CA 1961 Aberdeen, Scotland 1999
West Palm Beach, FL 1962 Manchester, England 1999
Melbourne, FL 1963 Birmingham, England 1999
Memphis, TN 1963 Luton, England 1999
Freeport, Bahamas 1969 Billings, MT 1999
Cincinnati, OH 1969 Boise, ID 1999
Nashville, TN 1969 Bozeman, MT 1999
New Orleans, LA 1971 Kalispell, MT 1999
Sarasota, FL 1973 Great Falls, MT 1999
Pittsburgh, PA 1983 Helena, MT 1999
Fairbanks, AK 1985 Jackson, MS 1999
Albuquerque, NM 1987 Lincoln, NE 1999
Burbank, CA 1987 Montgomery, AL 1999
Portland, OR 1987 Missoula, MT 1999
Rochester, NY 1987 Oklahoma City, OK 1999
Seattle, WA 1987 Shreveport, LA 1999
San Diego, CA 1988 San Jose, CA 1999
<PAGE>
London, England-Heathrow 1990 Sacramento, CA 1999
Costa Mesa/Santa Ana, CA 1991 Tucson, AZ 1999
Cleveland, OH 1992 St. Thomas, VI 1999
Denver, CO 1993 San Juan, PR 1999
Philadelphia, PA 1993 Nassau, Bahamas 1999
Atlanta, GA 1994 Dallas, TX 2000
Salt Lake City, UT 2000
</TABLE>
Industry Overview
Independent aviation services include the aviation fueling and aircraft
ground services provided by the Company as well as other aviation services,
including food service, aircraft maintenance and avionics supplies. The demand
for independent aviation services depends on both the amount of airline traffic
and the extent to which airlines outsource the provision of these services.
Based on airport traffic figures, its own market experience and estimates of
revenue received for services rendered per plane, the Company believes that
approximately 90% of the total commercial aviation fueling market and
approximately 30% of the total commercial ground services market are outsourced
by airlines to independent providers such as the Company and that, as a result,
the aggregate independent markets for fueling services and ground services at
the top 100 North American airports are approximately $300 million and $1.9
billion, respectively.
The independent aviation services industry is highly fragmented in both the
United States and Europe and is characterized by many operators that provide
services at a single or small number of locations. Small operators are likely to
face significant competitive pressures as large airlines increasingly deal with
fewer and larger suppliers providing a broader range of services at multiple
locations. This trend should encourage the consolidation of the industry and
enable suppliers to capitalize on economies of scale. For these reasons, the
Company believes that industry consolidation will provide opportunities for
growth in addition to the growth resulting from increases in airline traffic and
outsourcing.
Operations
Aviation Fueling Services
The Company provides fueling services at 17 of the top 50 North American
airports (as ranked by Airports Council International in terms of total aircraft
movements), including Atlanta, Los Angeles, Miami, Denver, Philadelphia,
Pittsburgh and San Francisco. Generally, the Company has custody over, but not
ownership of, the fuel it manages and delivers, and thus has limited direct
exposure to fluctuations in fuel prices. In fiscal 2000, the Company's aviation
fueling services accounted for 64% of its revenue.
Into-Plane Fueling Services: Into-plane fueling services provided $71.7
------------------------------
million, $60.7 million, and $53.4 million of the Company's revenue in fiscal
2000, 1999 and calendar year ended 1997, respectively. The Company provides
into-plane fueling at 33 locations, including both major hub airports as well as
smaller sites, and in fiscal 2000 delivered fuel to more than 2.2 million
flights.
Major hub airports where the Company operates include Atlanta, Cincinnati,
London (Heathrow and Gatwick), Los Angeles, Memphis, Miami, Munich, Orlando,
Philadelphia, Pittsburgh, San Francisco, Salt Lake City, Dallas-Fort Worth and
Seattle. At Atlanta Hartsfield International Airport, the Company operates what
it believes is the single largest into-plane fueling contract in the world. At
Pittsburgh International Airport, the Company provides into-plane fueling for
all US Airways flights daily. In 1990, the Company won the into-plane fueling
contract for British Airways at the London-Heathrow airport through a
competitive bid process and currently supplies fuel to all British Airways
flights daily. In May 1997, Omni Aircraft (now named Skytanking) won the
contract to maintain and operate the Munich airport owned fuel systems as well
as one of two into-plane fuel service licenses. In June 1997, pursuant to an
agreement with Esso, the Company began providing into-plane fueling to BA and
other airlines at the London-Gatwick airport.
<PAGE>
Fuel System Maintenance and Operations: Fuel system maintenance and
------------------------------------------
operations generated revenue of $11.4 million, $9.8 million and $8.0 million in
-
fiscal 2000, 1999 and calendar year ended 1997, respectively.
The Company maintains and operates fuel storage and delivery systems for
airline consortia, oil company consortia, individual airlines or local airport
authorities in 22 locations, including Los Angeles, Cincinnati, Denver, Ft.
Lauderdale, Memphis, Miami and Pittsburgh. In addition, the Company owns and
operates six fuel storage and delivery systems in Albuquerque, Melbourne, New
Orleans, Orlando, Sarasota and West Palm Beach.
The Company's largest fuel system is LAXFUEL, which the Company believes is
the largest airport fuel consortium in the world. Currently comprised of 57
domestic and international airlines, LAXFUEL is operated on a 24-hour basis,
receiving fuel from more than 17 suppliers and processing approximately 1,000
fuel accounting transactions each day. In fiscal 2000, the Company managed
monthly volume at LAXFUEL of approximately 146 million gallons. The Company
first won this contract in 1986 and recently managed a $85 million upgrade of
the fuel system. Since the original contract award, the Company has won two
additional contracts from LAXFUEL.
Other Aviation Services: In addition to the other services discussed, at
-------------------------
locations where the Company operates FBOs, namely Albuquerque, Freeport, Bahamas
and Orlando, the Company sells aviation fuel to retail customers.
Aircraft Ground Services
In fiscal 2000, the Company's aircraft ground services accounted for 32% of
revenue.
Ground Handling: Ground handling services generated revenue of $34.9
----------------
million, $18.8 million and $23.3 million in fiscal 2000, 1999 and calendar year
ended 1997, respectively. The Company provides ground handling services to over
100 domestic and international airlines at 28 locations and is capable of
servicing any size aircraft, from commuter planes to wide-body Boeing 747s. The
Company's largest ground handling operation is at Miami International Airport
where the Company and its predecessors have been providing ground handling
services since 1947. The Company has over 600 employees servicing 86 airlines
and approximately 2,400 flights per month at Miami International Airport. The
Company also operates and maintains the computerized baggage system for the
entire "B" and "F" concourses and handles the Federal Inspection Service baggage
distribution for all international carriers at the airport.
Aircraft Interior Grooming: Aircraft interior grooming generated revenue
---------------------------
of $4 million, $15.4 million and $15.9 million in fiscal 2000, 1999 and calendar
year ended 1997, respectively. The Company provides aircraft interior grooming
services at 34 locations and has the capability to expand these services
throughout the Company's entire network. This decrease in fiscal 2000 is due to
the loss of the Company's contract with British Airways for grooming at
Heathrow. This contract generated $9.8 million in revenues and $2.2 million in
EBITDA in fiscal 1999.
Cargo Handling: The Company provides cargo-handling services primarily in
---------------
conjunction with its ground handling operations. The Company handles both
domestic and international cargo as well as specialized cargo and hazardous
shipments.
Other Ground Services: The Company also provides certain airline customers
---------------------
at its Ft. Lauderdale, Miami, Orlando and Tampa locations with passenger
handling services, and from time to time provides such services to charter
airline customers in Albuquerque and Pittsburgh. The Company often fulfills its
customers' particular needs by providing specialized staff who may be
multilingual or trained for specific tasks.
In addition, the Company provides certain airline customers in Miami and
Orlando with flight operations and load control, including communications,
flight dispatch, weight and balance information, flight planning, weather
<PAGE>
service and diplomatic clearances. The Company operates limited FBOs in
Albuquerque, Freeport, Bahamas and Orlando, where it provides terminal services,
pilot facilities, line maintenance, worldwide weather service, flight planning
and hanger space for private, executive and corporate aircraft. The Company also
operates United's VIP lounge at the London-Heathrow airport.
Customers
The Company's customer base is comprised of airlines, airport authorities
and oil companies. The Company currently has customer relationships with most of
the major domestic and international airlines, including American, British
Airways, Continental, Delta, Northwest, United and US Airways, as well as many
regional and smaller carriers. The Company also has relationships with many
leading airport authorities and oil companies.
In fiscal 2000, the Company's two largest customers, Delta and Continental,
accounted for approximately 20.3% and 5.3% of revenue, respectively, and the
Company's top ten customers accounted for approximately 50.8% of revenue.
Sales and Marketing
The Company's sales and marketing staff is comprised of five professionals
who average over 10 years of experience with the Company. All sales personnel
are compensated through salary plus an incentive bonus based on the Company's
overall performance.
The Company formally markets its services through a combination of customer
visits, membership in trade organizations, participation in International Air
Transportation Association and National Air Transportation Association trade
shows and seminars, and sponsorship of events at annual meetings of consortia
that own major fuel storage and delivery systems. Informational marketing also
takes place on a daily basis through interaction with the Company's customers at
all levels of their respective organizations.
The Company wins the majority of its new business through the competitive
bid process. The Company has won approximately 57%, 68% and 52% of the new
contracts on which it placed competitive bids in fiscal 2000, 1999 and calendar
year ended 1997, respectively. The Company currently has approximately 850
contracts. In fiscal 2000, the Company's largest contract accounted for 5.4% of
revenue, and no other contract accounted for more than 3.6% of revenue. The
majority of the Company's contracts have an industry standard initial length of
one year, although the Company's larger contracts generally run for initial
terms of three to five years.
The Company also pursues periodic efforts to acquire other companies and
establish or expand joint ventures as part of its business development effort.
The acquisition of Elsinore and the ESSO joint venture are examples of these
activities.
Competition
The aircraft services industry is highly fragmented, consisting of a
limited number of well-capitalized companies, which offer a broad range of
services, a large number of smaller, specialized companies and subsidiaries
established by major airlines to provide certain services. The Company's major
competitors include Airport Group International Inc., World Wide Flight Services
(formerly AMR Services Corporation), DynAir (a subsidiary of Swissport), Hudson
General Corporation (a subsidiary of Lufthansa), Mercury Air Group, Inc., Ogden
Aviation Services Inc. and Signature Flight Support Corp. The Company believes
that the principal competitive factors in the aviation services industry are
quality, safety, turnaround time, overall customer service, technical
capabilities of personnel and price.
<PAGE>
Environmental
The Company is subject to compliance obligations and liabilities imposed
pursuant to federal, state, local and foreign environmental and workplace health
and safety requirements, including The Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"). In particular, the Company's
aircraft fuel handling operations are subject to liabilities and obligations
relating to the aboveground and underground storage of, and the release and
cleanup of, petroleum products. The Company monitors its environmental
responsibilities. Despite such efforts, the possibility exists that
noncompliance could occur or be identified in the future, the penalties or
corrective action costs associated with such could be material. In addition,
requirements are complex, change frequently, and tend to become more stringent
over time. There can be no assurance that these requirements will not change in
the future in a manner that could materially and adversely affect the Company.
The Company is currently conducting or funding, or expects to conduct or
fund, environmental investigations, monitoring and cleanups at certain of its
previously or currently operated facilities. At certain facilities at which the
Company provides into-plane fueling services or maintains and operates a fuel
storage and delivery system, environmental remedial costs have been borne by the
owners of airport fueling systems rather than the Company. In addition, the
Company has in place other legal arrangements (e.g., contractual indemnities,
insurance policies, allocation agreements and state funding mechanisms for
cleanup of pollution from storage tanks) which it believes significantly
mitigate the foregoing liabilities. However, the Company cannot guarantee that
the state programs will continue to have funds available for the cleanup of tank
sites. In the event that these or other legal arrangements fail, the Company
could bear direct liability for the foregoing or any future matters and such
liability could be material. In addition, there can be no assurance that future
environmental investigations by the Company will not identify other
environmental conditions requiring material expenditures of funds.
From time to time, the Company receives notices of potential liability,
pursuant to CERCLA or analogous state laws, for cleanup costs associated with
offsite waste recycling or disposal facilities at which wastes associated with
its operations have allegedly come to be located. Liability under CERCLA is
strict, retroactive, and joint and several, although such liability is often
allocated among multiple responsible parties. In the past several years, such
notices have been received for the Peak Oil site in Tampa, Florida; the South
Eighth Street Landfill site in West Memphis, Arkansas; the Wingate Road site in
Ft. Lauderdale, Florida; and the Petroleum Products Corporation site in Pembroke
Pines, Florida. With respect to all such sites, the Company either has settled
its liability (Peak Oil), expects its liability to be de minimis and fully
indemnified by Viad (South Eighth Street), or has denied liability altogether
(Wingate Road and Petroleum Products). The possibility exists that the Company
will receive additional notices of CERCLA-type liability in the future. In light
of the relatively small volume of waste typically contributed by the Company,
the applicability of the CERCLA "petroleum exemption" to certain of its wastes,
the large numbers of parties typically involved in such sites, and the
availability of contractual indemnifications, although there can be no assurance
in this regard, the Company currently expects that its future liabilities for
cleanup of offsite disposal facilities will not be material.
Subject to certain time and dollar limitations, Viad has agreed to
indemnify the Company with respect to certain pre-Acquisition environmental
liabilities, including all known and unknown onsite and offsite contamination
matters. Based upon its environmental due diligence investigation, the Company
believes that such indemnification, coupled with the legal arrangements set
forth above, provide sufficient protection with respect to environmental
liabilities. In the event that Viad fails to honor this indemnification, the
Company could bear direct liability for such matters and such liability could be
material.
<PAGE>
Employees
As of March 31, 2000, the Company employed 3,884 people. Approximately
56.2% of the Company's employees are represented by labor unions. There are
currently approximately 33 collective bargaining contracts (among 7 separate
union entities) in place, almost all of which have terms of three years.
Contract expirations are staggered with approximately one-third coming up for
renewal each year. The Company believes that it has had good relations with the
several unions representing its employees.
Information about geographic revenues, operating profits and identifiable
assets attributable to each of the Company's geographic areas is reported in the
footnotes to the financial statements. See footnote 14 in the Notes to
Financial Statements.
Item 2. Properties
The Company's principal corporate offices are located adjacent to the Fort
Lauderdale International Airport in Broward County, Florida. The Company's
operating facilities are in:
<PAGE>
Albuquerque, NM
Aberdeen, Scotland
Atlanta, GA
Austin, TX
Belgrade, MT
Billings, MT
Birmingham, England
Boise, ID
Burbank, CA
Cincinnati, OH
Cleveland, OH
Colorado Springs, CO
Costa Mesa/Santa Ana, CA
Dallas, TX
Denver, CO
Fairbanks, AK
Freeport, Bahamas
Ft. Lauderdale, FL
Gatwick - London, England
Great Falls, MT
Heathhrow - London, England
Helena, MT
Jackson, MS
Kalispell, MT
Lincoln, NE
Los Angeles, CA
Luton, England
Manchester, England
Melbourne, FL
Memphis, TN
Miami, FL
Missoula, MT
Montgomery, AL
Munich, Germany
Nashville, TN
Nassau, Bahamas
New Orleans, LA
Oklahoma City, OK
Orlando, FL
Philadelphia, PA
Pittsburgh, PA
Pleasant Grove, CA
Portland, OR
Rochester, NY
Salt Lake City, UT
San Diego, CA
San Francisco, CA
San Juan, PR
Sarasota, FL
Seattle, WA
Shreveport, LA
San Jose, CA
St. Thomas, VI
Tampa, FL
Tucson, AZ
Washington, DC
West Palm Beach, FL
The Company generally considers the facilities it leases adequate and suitable
for the requirements of each of its operations. Adequate space is available at
the corporate offices to accommodate expansion needs.
Item 3. Legal Proceedings
The Company and certain of its subsidiaries and affiliates are plaintiffs
or defendants in various actions, proceedings and claims, including
environmental claims. Some of the foregoing involve or may involve compensatory
or other damages. Litigation is subject to many uncertainties and although
<PAGE>
liability, if any, is not ascertainable, the Company believes that any resulting
liability will not materially affect the Company's financial position or the
results of its operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for the Company's Common Equity and Related Security Holder
Matters
The Company is 100% owned by Ranger Aerospace Corporation and accordingly,
there is no established public trading market for the Company's common stock.
See "Item 11 - Executive Compensation - Sale of Equity" for a discussion of
sale of securities in fiscal 2000 by Ranger Aerospace Corporation.
Item 6. Selected Financial Data
The selected financial data set forth below should be read in conjunction
with the financial statements of the Company and its Predecessor and related
notes thereto included elsewhere in this Form 10-K and with "Item 7-Management's
Discussion and Analysis of Financial Condition and Results of Operation"
included herein.
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
SUCCESSOR PREDECESSOR
(CONSOLIDATED) (COMBINED)
-------------- ---------
THREE MONTHS
YEAR ENDED YEAR ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, YEAR ENDED DECEMBER 31,
2000 1999 1998 1997 1996 1995
--------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues. . . . . . . . . . . . . . . . . . . . . . $141,044 $123,441 $30,156 $119,325 $121,574 $111,658
Costs and Expenses:
Operating Expenses . . . . . . . . . . . . . . . . 116,409 99.035 25,986 97,116 101,903 92,893
Selling, general and administrative. . . . . . . . 13,266 8,865 1,818 7,581 8,291 7,114
Depreciation and amortization. . . . . . . . . . . 10,235 8,721 1,119 4,604 4,420 4,340
--------- --------- -------- --------- --------- ---------
Total costs and expenses . . . . . . . . . . . . . 139,910 116,621 28,923 109,301 114,614 104,347
Operating income. . . . . . . . . . . . . . . . . . 1,134 6,820 1,233 10,024 6,960 7,311
Other income (expense), net . . . . . . . . . . . . 24 (253) (57) (71) (45) 47
Interest income . . . . . . . . . . . . . . . . . . 100 207 73 350 343 842
Interest and other financial expense. . . . . . . . (10,583) (11,281) (170) (669) (606) (620)
--------- --------- -------- --------- --------- ---------
Income (loss) before income taxes . . . . . . . . . (9,325) (4,507) 1,079 9,634 6,652 7,580
Income taxes. . . . . . . . . . . . . . . . . . . . -- 50 347 3,602 2,433 2,563
--------- --------- -------- --------- --------- ---------
Net income (loss) before extraordinary item . . . . (9,325) (4,557) 732 6,032 4,219 5,017
Extraordinary loss on early extinguishment of debt. -- (213) -- -- -- --
--------- --------- -------- --------- --------- ---------
Net income (loss) . . . . . . . . . . . . . . . . . $ (9,325) $ (4,770) $ 732 $ 6,032 $ 4,219 $ 5,017
========= ========= ======== ========= ========= =========
</TABLE>
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<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
SUCCESSOR PREDECESSOR
(CONSOLIDATED) (COMBINED)
------------- ---------
THREE
YEAR YEAR MONTHS
ENDED ENDED ENDED
MARCH 31, MARCH 31, MARCH 31, YEAR ENDED DECEMBER 31,
2000 1999 1998 1997 1996 1995
--------- ---------- -------- --------- -------- --------
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STATEMENT OF CASH FLOW DATA:
Net cash (used in) provided by operating activities. $ (778) $ 6,645 $ 4,995 $ 17,139 $ 7,161 $ 5,060
Net cash used in investing activities . . . . . . . . (13,859) (102,556) (2,666) (4,300) (9,061) (4,402)
Net cash provided by (used in) financing activities . 11,747 99,222 (2,329) (13,030) 2,091 (806)
OTHER DATA:
EBITDA(a) . . . . . . . . . . . . . . . . . . . . . . $ 11,369 $ 15,541 $ 2,352 $ 14,628 $11,380 $11,651
Capital expenditures. . . . . . . . . . . . . . . . . 8,027 13,431 2,666 3,947 9,061 4,402
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA (AT END OF PERIOD):
SUCCESSOR PREDECESSOR
---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash . . . . . . . . . . . $ 421 $ 3,311 $ 0.1 $ - $ 191 $ -
Total assets . . . . . . . 132,332 123,754 - 41,930 38,602 43,160
Total debt . . . . . . . . 90,075 82,927 - 91 173 247
Total stockholder's equity 13,686 19,350 0.1 14,557 15,433 17,692
</TABLE>
(a) EBITDA is defined herein as net income (loss) before interest, income
taxes, depreciation, amortization and other income (expense). Although EBITDA is
not a measure of performance calculated in accordance with generally accepted
accounting principles, the Company has included information concerning EBITDA in
this annual report because it is commonly used by certain investors and analysts
as a measure of a company's ability to service its debt obligations. The
Company's calculation of EBITDA may not be comparable to similarly titled
measures reported by other companies since all companies do not calculate this
non-GAAP measure in the same manner. The Company's EBITDA calculation is not
intended to represent cash used in operating activities, since it does not
include interest and taxes and changes in operating assets and liabilities, nor
is it intended to represent the net increase or decrease in cash, since it does
not include cash provided by (used in) investing and financing activities.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion of the Company's consolidated historical results
of operations and financial condition should be read in conjunction with the
financial statements and the notes thereto which appear in Part II, Item 8 of
this 10-K.
Overview
The Company's business includes aviation fueling services (64% of fiscal
2000 revenues), aircraft ground services (32%) and other aviation services (4%).
Aviation fueling services are comprised primarily of into-plane fueling,
maintenance and operation of fuel storage and delivery systems and the retail
sale of fuel products. Generally, the Company has custody over, but not
ownership of, the fuel it manages and delivers. Aircraft ground services consist
primarily of ground handling, aircraft interior grooming, cargo handling,
passenger and traffic services and FBO's.
<PAGE>
An investor group capitalized Ranger Aerospace Corporation (the 100% owner
of the Company) with an aggregate investment of $24.1 million, all of which was
contributed as equity to the Company in return for all of its outstanding common
stock on April 1, 1998. The net proceeds from the equity investment and the
Company's issuance of $75 million of Senior Increasing Rate Notes were used to
consummate the acquisition of the ASIG business from Viad for $95 million
(subject to final adjustments). Concurrent with the acquisition of the ASIG
business (the "Acquisition"), the Company entered into a $10 million senior
credit facility which was subsequently amended in May 1999 and increased to $15
million to consummate the purchase of Elsinore, L.P. Additional equity of $3.7
million was contributed to the Company in August 1999.
Revenues
Into-plane fueling service consists of providing airplanes with specified
amounts of fuel from fuel storage facilities located at or near the airport. The
Company generally records revenue from its into-plane fueling contracts based on
a fee per gallon of fuel delivered. Fuel system maintenance and operation
consists of the maintenance and operation of the fuel storage and delivery
systems at an airport. These systems are typically composed of storage tanks,
pumps, pipes and filter/separators. The Company generally records revenue from
its maintenance and operation contracts based on reimbursement of costs, plus an
additional monthly fee. In addition, the Company sells aviation fuel to private
aircraft at retail prices at locations where it has FBOs.
Ground handling services consist of the provision of ground handling crews
and all necessary ground support equipment to process airline flights through
the full range of on-the-ground services. Aircraft interior grooming consists of
the cleaning of aircraft cabins between flights and cargo handling consists of
the loading, warehousing and documentation of cargo. Passenger and traffic
services include passenger ticketing, check-in and boarding, security clearance,
special assistance and skycap services.
FBOs generally include the provision of terminal services, pilot
facilities, maintenance, weather service, flight planning and hangar space to
private, executive and corporate aircraft. For each of these aircraft ground
services, other than FBOs, the Company is generally compensated by a fixed fee
for each aircraft serviced, based on the size of the aircraft. For FBOs, the
Company is generally compensated by a fixed fee for specific services rendered.
The Company provides its services to its customers pursuant to contractual
agreements and currently has approximately 850 contracts. In fiscal 2000, the
Company's largest contract accounted for 5.4% of revenue, and no other contract
accounted for more than 3.6% of revenue. The majority of the Company's contracts
have an industry standard initial length of one year, although the Company's
larger contracts generally run for initial terms of three to five years.
Costs and Expenses
The Company's principal operating expenses are labor costs and direct
supervision at its stations along with related benefits and payroll taxes, cost
of fuel sold, workers' compensation, property and liability insurance, rent
expense, repairs and maintenance expenses and miscellaneous other direct
station-related expenses. Certain of these expenses are relatively fixed,
regardless of the extent of operations at a particular station, including the
cost of the facility, station management and related administrative expenses.
Selling, general and administrative expenses include the costs of marketing
the Company's services, general supervision provided to the stations,
acquisition-related expenses and accounting, finance and personnel related
expenses. These costs are generally comprised of labor costs and related
benefits and payroll taxes, legal and other professional fees and miscellaneous
expenses.
<PAGE>
Certain amounts in the three months ended March 31, 1998 and 1997 and the
years ended December 1997 and 1996 have been reclassified to conform with the
fiscal 2000 financial statement presentation.
Results of Operations
The following table summarizes the Company's results of operations for the
periods indicated (dollars in millions):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
Year ended Year ended Three months ended March 31, Year ended December 31,
March 31, 2000 March 31, 1999 1998 1997 1997
------------------------------------- ---------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . $ 141.0 100.0% $ 123.4 100.0% $ 30.2 100.0% $ 29.8 100.0% $119.3 100.0%
Costs and expenses:
Operating expenses . . . . . . . . . 116.4 82.6% 99.0 80.2% 26.0 86.1% 23.7 79.5% 97.1 81.4%
Selling, general and administrative. 13.2 9.4% 8.9 7.2% 1.8 6.0% 2.3 7.7% 7.6 6.4%
Depreciation and amortization. . . . 10.2 7.2% 8.7 7.1% 1.1 3.6% 1.2 4.0% 4.6 3.9%
---------------- --------------- -------------- --------------- --------------
Operating Income. . . . . . . . . . . $ 1.2 .8% $ 6.8 5.5% $ 1.2 4.0% $ 2.6 8.7% $ 10.0 8.4%
================ =============== ============== =============== ==============
Net income (loss) . . . . . . . . . . $ (9.3) (6.6)% $ (4.8) (3.9%) $.0.7 2.3% $ 1.6 5.4% $ 6.0 5.0%
================ =============== ============== =============== ==============
EBITDA. . . . . . . . . . . . . . . . $ 11.4 8.1% $ 15.5 12.6% $ 2.3 7.6% $ 3.8 12.8% $ 14.6 12.2%
================ =============== ============== =============== ==============
</TABLE>
Company's Fiscal Year Ended March 31, 2000 Compared to March 31, 1999
Revenues increased $17.6 million or 14.3%, from $123.4 million to $141.0
million in fiscal 2000. The increase was attributable to, among other things,
new business, increased activity on existing contracts and acquisitions of
Elsinore L.P. and GAH offsetting the loss of the British Airways Grooming
contract. The acquisitions of Elsinore L.P. and GAH generated revenues of $12.8
million in fiscal 2000. The British Airways grooming contract generated $9.8
million of revenue in fiscal 1999. Hurricane Floyd caused severe damage to the
Freeport operation, which resulted in a revenue loss of $0.3 million. Thus, for
the year ended March 31, 2000, core business (business excluding the British
Airways grooming contract, the acquisition of Elsinore, L.P. and GAH and the
loss due to Hurricane Floyd), revenue increased $14.9 million or 13.1%.
Operating expenses increased $17.4 million or 17.1%, from $99.0 million to
$116.4 million. The increase was attributable to, among other things, (increase
in operating expenses related to the acquisitions of Elsinore LP and GAH of
$11.3 million), and a decrease in operating expenses due to the loss of the
British Airways grooming contract of $7.6 million. For the year ended March 31,
2000, operating expenses included a $0.2 million loss on retirement of fixed
assets, $0.3 million of costs associated with start-up costs and would have
increased $0.1 million due to the impact of Hurricane FloydThus, for the year
ended March 31, 2000, core business (business excluding the British Airways
grooming contract, the acquisition of Elsinore, L.P. and GAH, loss on retirement
of fixed assets and start-up costs and including the impact of Hurricane Floyd),
operating expenses increased $13.8 million or 15.8%. Core business operating
expenses as a percentage of core revenues increased 1.4% from 80.5% to 81.9%.
The increase in core operating expenses as a percentage of core revenue was
mainly due to increases in operating expenses at three stations. Two of the
stations had significant reductions in flights from South America as a result of
the weakened South America economy. Operating expenses as a percentage of
revenue at the third station increased due to inefficiencies associated with the
set up and implementation of fixed fueling carts.
Selling, general and administrative expenses increased $4.3 (or 48.3% from
$8.9 million to $13.2 million). The increase is primarily attributable, among
other things, to a write-off of $2.8 million of acquisition expenses related to
the pursuit of failed acquisitions and a write-off of $0.7 million mainly
related to costs incurred in the pursuit of the collection of the receivable due
from Viad. Of the remaining increase of $0.9 million, $0.7 million is
attributable to a restructuring in the finance department, which is not expected
<PAGE>
to reoccur.
Depreciation and amortization increased $1.5 million or 17.2%. The
acquisitions accounted for $0.3 million of the increase. The remaining increase
of $1.2 million is primarily attributable to the depreciation on new equipment
purchases.
As a result of the above factors, operating income decreased $5.6 million
or 82.4% from $6.8 million to $1.2 million. This decrease was primarily
attributable to the write-offs taken in 2000 related to the acquisition costs of
$2.8 million, Viad collection costs of $0.7 million, an increase in depreciation
and amortization of $1.5 million, and the loss of the British Airways grooming
contract which generated $2.2 million of operating income in 1999.
Interest and other financial expense decreased $0.7 million or 6.2% from
$11.3 million to $10.6 million. This decrease is mainly attributable to
financing costs incurred in 1999 related to the issuance of the $75 million
Senior Increasing Rate Notes which were written off in 1999 upon the issuance of
the $80 million Senior Notes due 2005.
Income Taxes remained constant at $0.1 million for both fiscal years.
Accordingly, net loss increased $4.5 million or 93.8% from $(4.8) million
to $(9.3) million.
For the year ended March 31, 2000, EBITDA decreased by $4.1 million or
26.5% from $15.5 million to $11.4 million. EBITDA for the year ended March 31,
2000 included several one-time expenses (write off of acquisition expenses ($2.8
million), the Viad collection costs ($0.7 million), the additional costs
associated with the restructuring of the finance department ($0.7 million), the
adverse effect of Hurricane Floyd ($0.2 million), start up costs ($0.3 million)
and the loss on retirement of fixed assets ($0.2 million). EBITDA for March 31,
2000 associated with the acquisitions of Elsinore and GAH was $1.5 million.
Thus, core EBITDA increased $1.5 million or 11.3% from $13.3 million to $14.8
million. (EBITDA for March 31, 1999 associated with the lost British Airways
Grooming contract was $2.2 million.) Furthermore, the adjusted EBITDA for the
year ended March 31, 2000 of $16.3 million (core EBITDA of $14.8 million plus
$1.5 million of Elsinore and GAH EBITDA) compares with $13.3 million of adjusted
EBITDA (excluding the lost British Airways Grooming contract) for the year ended
March 31, 1999.
Company's Fiscal Year Ended March 31, 1999 Compared to Predecessor's Year Ended
December 31, 1997
Revenues increased $4.1 million, or 3.4%, from $119.3 million in 1997 to
$123.4 million in fiscal 1999. This increase was primarily attributable to,
among other things, new business, revenue enhancements and increased activity on
existing contracts totaling approximately $10 million, including a $1.5 million
increase at the London operations due to a new fueling contract with ESSO, a
$2.6 million increase at the Philadelphia airport operations due to the major
competitor leaving the airfield and the resulting increase in business and a
$1.1 million increase at the Atlanta operations primarily resulting from a new
contract with Delta Airlines. Partially offsetting these increases was a loss
of approximately $4.9 million of revenue at eleven locations where Delta ground
handling contracts were terminated and the loss of a contract with British
Airways at London's Heathrow airport that resulted in a $1 million decrease in
revenue. This lost Delta business was primarily due to a strategic decision by
the Company either to increase margins on selected low margin ground services
contracts or terminate those contracts and Delta's decision to in-source certain
ground services which had previously been outsourced to the Company.
Operating expenses increased $1.9 million, or 2.0%, from $97.1 million
during 1997 to $99.0 million during fiscal 1999. This increase was primarily
attributable to an increase in direct payroll of $3.4 million, which was mostly
related to the increase in revenues. Offsetting this increase were decreases in
workers' compensation and property and liability insurance totaling $1.0 million
and a decrease in the cost of fuel sold of $1.0 million which resulted from
lower fuel prices and a lower volume of sales. Operating expenses as a
percentage of revenues decreased from 81.4% in 1997 to 80.2% in fiscal 1999 due
to the aforementioned and to operating efficiencies at some locations.
<PAGE>
Selling, general and administrative expenses increased $1.3 million, or
17.1%, from $7.6 million in 1997 to $8.9 million in fiscal 1999. Contributing
costs included $1 million of legal services, accounting and payroll and fringe
benefits that resulted from the new management of the Company and $0.4 million
of costs related to attempted acquisitions during the current year. Selling,
general and administrative expenses as a percentage of revenues increased from
6.4% in 1997 to 7.2% in fiscal 1999.
Depreciation and amortization expenses increased $4.1 million, or 89.1%,
from $4.6 million in 1997 to $8.7 million in fiscal 1999. This increase was
primarily attributable to the revaluation of equipment to the current fair
market value and the related goodwill as a result of the acquisition of the ASIG
business. Depreciation and amortization expenses as a percentage of revenues
increased from 3.9% in 1997 to 7.1% in fiscal 1999.
As a result of the above factors, operating income decreased $3.2 million,
or 32.0%, from $10.0 million in 1997 to $6.8 million in fiscal 1999. However,
before depreciation and amortization charges, the operating income margin
increased from 12.2% in 1997 to 12.6% in fiscal 1999. This increase was
primarily attributable to the termination of the lower margin Delta ground
handling contracts. The increased depreciation and amortization expense
mentioned above resulted in the decrease of operating income margins from 8.4%
in 1997 to 5.5% in fiscal 1999.
Interest and other financial expense increased $10.6 million from $0.7
million in 1997 to $11.3 million in fiscal 1999. This increase relates to the
interest and finance costs on the outstanding debt of the Company, which was
incurred in connection with the Acquisition. Finance cost charges totaled $2.9
million during fiscal 1999, of which, $2.6 million related to issuance of $75
million of Senior Increasing Rate Notes. Deferred finance costs relating to the
11% Senior Notes are being amortized over the seven year life of the notes.
As a result of the above factors, income taxes decreased $3.5 million from
$3.6 million for the year ended December 31, 1997, to $0.1 million for the year
ended March 31, 1999.
Accordingly, net income decreased $10.8 million from $6.0 million for the
year ended December 31, 1997, to a loss of $(4.8) million for the year ended
March 31, 1999.
The foregoing factors resulted in an increase in EBITDA of $0.9 million, or
6.2%, from $14.6 million in 1997 to $15.5 million in fiscal 1999. EBITDA margin
increased from 12.2% to 12.9% for the respective periods. EBITDA would have
been $0.4 million greater had it not been for an unusual and non-recurring item
including $361,000 of costs related to abandoned acquisition pursuits.
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Revenues increased $0.4 million, or 1.3%, from $29.8 million for the three
months ended March 31, 1997, to $30.2 million for the three months ended March
31, 1998. This increase was attributable to, among other things, new business
principally for into-plane fueling and revenue enhancements on existing
contracts partially offset by lost business primarily related to lost Delta
ground handling business in certain locations of $1.7 million as described
above.
Operating expenses increased $2.3 million, or 9.7%, from $23.7 million for
the three months ended March 31, 1997 to $26.0 million for the three months
ended March 31, 1998. This increase was primarily attributable to increased
labor and related benefits expenses of $1.6 million, workers' compensation
expenses of $0.2 million and repairs and maintenance expenses of $0.4 million.
As a result, operating expenses as a percentage of revenues increased from 79.5%
in the three months ended March 31, 1997 to 86.1% in the three months ended
March 31, 1998.
<PAGE>
Selling, general and administrative expenses decreased $0.5 million or
21.7% from $2.3 million for the three months ended March 31, 1997 to $1.8
million for the three months ended March 31, 1998. This decrease was the result
of reduced payroll related to management changes as part of a concerted effort
to reduce overhead expenses.
Depreciation and amortization expenses remained fairly constant, decreasing
from $1.2 million for the three months ended March 31, 1997 to $1.1 million for
the three months ended March 31, 1998. Although the level of expenses was
consistent between periods, depreciation and amortization expenses as a
percentage of revenues decreased from 4.0% in the three months ended March 31,
1997 to 3.6% in the three months ended March 31, 1998 as a result of the
increased revenues.
As a result of the above factors, operating income decreased $1.4 million,
or 53.9%, from $2.6 million for the three months ended March 31, 1997 to $1.2
million for the three months ended March 31, 1998. Operating income margins
decreased from 8.7% in the three months ended March 31, 1997 to 4.0% in the
three months ended March 31, 1998.
As a result of the above factors, income taxes decreased $0.6 million from
$0.9 million for the three months ended March 31, 1997, to $0.3 million for the
three months ended March 31, 1998. The effective tax rates were fairly
consistent between the two periods.
Accordingly, net income decreased $0.9 million from $1.6 million for the
three months ended March 31, 1997, to $0.7 million for the three months ended
March 31, 1998. Net income margins decreased from 5.4% to 2.3% for the
respective periods.
The foregoing factors resulted in a decrease in EBITDA of $1.5 million, or
39.5%, from $3.8 million for the three months ended March 31, 1997 to $2.3
million for the three months ended March 31, 1998. EBITDA margins decreased from
12.8% to 7.6% for the respective periods.
Liquidity and Capital Resources
Net cash provided by (used in) operating activities was $(0.8) million for
fiscal 2000, as compared to $6.6 million for fiscal 1999. Net cash used in
operating activities increased primarily due to an increase in the net loss of
$4.5 million from a loss of ($4.8) million in 1999 to a loss of ($9.3) million
in 2000. Cash used for working capital requirements increased $1.9 million from
$(2.3) in 2000 to $(0.4) million in 1999. Net cash provided by operating
activities was $17.1 million in 1997. The decrease from 1997 to 1999 was
primarily due to a $7.8 million increase in interest expense and a $2.9 million
decrease in accrued expenses.
Net cash used in investing activities was $13.9 million for fiscal 2000 as
compared to $102.6 million for fiscal 1999. The decrease was primarily
attributable to the decrease in acquisition expenses of $83.1 million and a
decrease in capital spending of $5.4 million. Net cash used in investing
activities was $4.3 million for 1997. The fluctuation between 1997 and 1999 was
primarily due to the Viad Acquisition of $88.5 million and the investment in
equipment of $9.5 million.
Net cash provided by financing activities was $11.7 million for fiscal 2000
and $99.2 million for fiscal 1999. This decrease is primarily due to a decrease
in the issuance of common stock of $20.4 million and a decrease in borrowings of
$67.1 million after finance costs and an infusion of $3.7 million in 2000. Net
cash used in financing activities was $13.0 million in 1997. The increase was
primarily due to the issuance of common stock of $24.1 million and $75.1 million
received (after finance costs) from debt financing relating to the Acquisition.
As of March 31, 2000, the Company had long-term indebtedness of $80.0
million in the form of its Series B 11% Senior Notes due 2005, $4.6 million of
senior debt and $0.5 million note to the former owner of Elsinore L.P.
<PAGE>
The Company's primary sources of liquidity are from cash flow provided by
operations, borrowings under its senior credit facility and cash infusion from
the Parent. Based upon the successful implementation of management's business
and operating strategy, the Company believes that these funds will provide it
with sufficient liquidity and capital resources to meet current and future
financial obligations, including the payment of principal and interest on its
notes, as well as to provide funds for the Company's working capital, capital
investments and other needs for the next twelve months. The Company's future
operating performance and ability to service or refinance its notes and to
repay, extend or refinance the senior credit facility will be subject to future
economic conditions and to financial, business and other factors, many of which
are beyond the Company's control. There can be no assurance that such sources of
funds will be adequate and that the Company will not require additional capital
from borrowings or securities offerings to satisfy such requirements. In
addition, there can be no assurance that the Company will have sufficient
available capital resources to realize its acquisition strategy. Such future
acquisitions, depending on their size and the form of consideration, may require
the Company to seek additional debt or equity financing.
Recent Developments
Effective August 3, 1999, Mr. Jeffrey P. Hartman joined the Company as its
Senior Vice President and Chief Financial Officer. Mr. Hartman came to the
Company from Signature Flight Support Corporation where he served as the Vice
President of Finance since 1993. Prior to 1993, Mr. Hartman was an audit
manager with KPMG, LLP. Mr. Hartman is a Certified Public Accountant who
received both a Masters Degree in Accounting and a Masters of Business
Administration from Northeastern University in Boston, Massachusetts.
Effective May 21, 1999, Ms. Shirley O'Connor was appointed Vice President
of the Company and effective October 8, 1999 she assumed the position of Vice
President of Finance/Controller.
Environmental Matters
The Company is subject to compliance obligations and liabilities imposed
pursuant to federal, state, local and foreign environmental and workplace health
and safety requirements, including CERCLA. In particular, the Company's aviation
fueling services are subject to liabilities and obligations relating to the
above ground and underground storage of, and the release and cleanup of,
petroleum products. Although the Company believes it is in material compliance
with environmental, health and safety requirements, the possibility exists that
noncompliance could occur or be identified in the future, and the penalties or
costs of corrective action associated therewith could have a material adverse
effect on the Company's business, operating results and financial condition. In
addition, requirements are complex, change frequently and have tended to become
more stringent over time, and there can be no assurance that these requirements
will not change in the future in a manner that could materially and adversely
affect the Company.
The Company is currently conducting or funding, or expects to conduct or
fund, environmental investigations, monitoring and cleanups at certain of its
previously or currently operated facilities. Also, from time to time, the
Company receives notices of potential liability for cleanup costs associated
with offsite waste recycling or disposal facilities at which wastes associated
with its operations allegedly have come to be located. In addition, airport
authorities are coming under increasing pressure to clean up previous
contamination at their facilities and are seeking financial contribution from
airport tenants and companies which operate at their airports. Although the
Company has taken steps to mitigate or remove the foregoing liabilities, the
Company could bear direct liability for the foregoing matters and such liability
could have a material adverse effect on the Company's business, operating
results and financial condition.
<PAGE>
Year 2000 Issue
Costs
The Company did not experience any significant disruptions in its internal
information technology systems as a result of the Year 2000 date change. To
date, the Company is not aware of any material Year 2000 problems at any of its
material customers or suppliers. The Company's costs of achieving Year 2000
compliance have not been material to date and no further material costs are
expected. The Company will continue to monitor its internal information
technology systems and its material suppliers and customers for latent Year 2000
problems. Although the Company has not been materially adversely affected by
the Year 2000 issue to date, there can be no assurance that the Company and/or
its customers and suppliers will not experience system failures or malfunctions
as a result of the Year 2000 issue, which could have a material adverse effect
on the Company.
Euro Conversion Issue
On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency ("Euro") and adopted the Euro as their common
legal currency. The transition period for the introduction of the Euro will be
between January 1, 1999 and January 1, 2002. The Company is currently
evaluating the effects of the Euro conversion as it relates to the conversion of
information technology systems, recalculating currency risk, strategies
concerning continuity of contracts and the impact on its operations and
financial condition, particularly as the Euro conversion relates to the
Company's European operations.
Based on its work to date, the Company believes the Euro conversion will
not have a material adverse impact on the Company's consolidated financial
statements.
Recent Accounting Pronouncements
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130),
which establishes standards for reporting and display of comprehensive income
and its components in a full set of general purpose financial statements.
Comprehensive income (loss) includes net income (loss) and other comprehensive
income, which includes, but is not, limited to, unrealized gains for marketable
securities and future contracts, foreign currency translation adjustments and
minimum pension liability adjustments. The accompanying financial statements for
the Company reflect other comprehensive income (loss) consisting of net income
(loss) and foreign currency translation adjustments.
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits-an amendment of FASB Statements No. 87, 88, and 106"
(SFAS No. 132). SFAS No. 132 revises employers' disclosures about pension and
other postretirement benefit plans. It does not change the measurement or
recognition of those plans; therefore, the adoption of SFAS No. 132 affected the
Company's disclosure information only.
In fiscal year 1999, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133), which is effective for
fiscal quarters of fiscal years beginning after June 15, 1999. This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. It requires that an entity recognized all derivatives as
either assets or liabilities in the statement of financial position and measures
those instruments at fair value. The Company plans to adopt SFAS No. 133 in the
year 2000 and is currently assessing the impact this statement will have on its
consolidated financial statements.
In fiscal year 2000, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133" (SFAS No. 137), which delayed the effective date of SFAS No.
133. The effective date for SFAS 133, after issuance of SFAS No. 137, is for
all fiscal quarters of all fiscal years beginning after June 15, 2000.
The Company plans to adopt SFAS No. 133 in fiscal year 2001. The adoption
of SFAS No. 133 is not expected to impact the Company significantly.
<PAGE>
Impact of Inflation
Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe that inflation has had a
material effect on its revenue or results of operations for the periods
presented herein. However, substantial increases in the Company's costs,
particularly labor or employee benefits costs would be likely to adversely
affect the Company's revenues and operating results. In addition, because
inflation would likely materially and adversely affect the airline industry as a
whole, and the Company's business depends to a large extent on the economic
health of the airline industry, an increase in inflation would likely have a
material adverse effect on the Company's revenue and operating results.
Forward-Looking Statements
Certain statements contained with this report may be deemed
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. All statements in this report other than statements of historical
fact are forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors, which could cause actual results and
performance of the Company to differ materially from such statements. The words
"believe," "expect," "anticipate," "intend," "will," "plans", and similar
expressions identify forward-looking statements. In addition, forward-looking
statements contained herein relate to, among other things, (i) anticipated
financial performance, (ii) ability to comply with the Company's general working
capital requirements, and (iii) ability to generate sufficient cash flow from
operations to fund all costs of operations. While the Company believes the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance such expectations will prove to have been correct. There are a
variety of factors which would cause future outcomes to differ materially from
those described in this report, including, but not limited to, (i) general
economic conditions, (ii) material reduction in revenues, (iii) inability to
collect in a timely manner a material amount of receivables, increased
competitive pressures, inability to obtain required permits and approvals to
conduct operations, changes in federal, state and local laws and regulations,
especially aircraft regulations, or interpretation of such, potential increases
in equipment, maintenance, operating or labor costs, management retention and
development, the requirement to use internally generated funds for purposes not
presently anticipated, the computer systems of the Company's key suppliers,
customers, creditors and financial service organizations, any sudden or
substantial change in senior management, which could adversely affect major
customer relationships, the adverse affect on the Company's customers resulting
from the increase in the price or the decrease in the availability of aviation
fuel, risks associated with doing business in foreign countries and with foreign
customers and the loss of one or more of the Company's significant customers.
The Company undertakes no obligations to update publicly any forward-looking
statement, whether as a result of new information, future events or otherwise.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in interest rates and currency
exchange rates, which may adversely affect our results of operations and
financial condition. We seek to minimize the risks from these interest rate and
currency exchange rate fluctuations through our regular operating and financing
activities. Management believes that such risks are not material to the results
of operations and the financial condition of the Company.
Item 8. Financial Statements and Supplementary Data
The financial statements required pursuant to this item are included in
Part IV, Item 14 of this Form 10-K and are presented beginning on Page F-1.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company
The following table sets forth certain information (ages as of June 10,
2000) with respect to the persons who are members of the Board of Directors (the
"Board"), executive officers or key employees of the Company. John Hancock
Mutual Life Insurance Company ("Hancock") and affiliates of Canadian Imperial
Bank of Commerce ("CIBC") together have the ability to appoint a majority of the
members of the Board of both Ranger and the Company pursuant to the
Securityholders Agreement. See "Item 13- Certain Relationships and Related
Transactions--Securityholders Agreement."
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES
--------------------- --- -------------------------------------------------------
<S> <C> <C>
Stephen D. Townes 47 President, Chief Executive Officer and Director
George B. Schwartz 46 Chairman of the Board, Director and Assistant Secretary
George W. Watts 47 Executive Vice President and Secretary
John W. Gassett 53 Senior Vice President-ASIG North America
Jeffrey P. Hartman 37 Senior Vice President and Chief Financial Officer
Paul Jefferson 44 Senior Vice President and Managing Director-ASIG Europe
William McLendon 41 Vice President-Eastern Operations
Ronald F. Pattie 52 Vice President-Technical Services
James P. Ferrara 47 Vice President-Quality and Engineering & CIO
Wesley Vedo 61 Vice President-National Programs
Kurt A. Granger 42 Vice President-Customer Service
Robert D. Sellas, Jr. 36 Vice President-Marketing
Silvio Tano 45 Vice President-Ground Services
D. Dana Donovan 43 Director
Jay R. Levine 43 Director
Edward Levy 35 Director
S. Mark Ray 47 Director
</TABLE>
Stephen D. Townes founded Ranger and the Company and became President,
Chief Executive Officer and Director upon the consummation of the Acquisition.
Prior to joining Ranger and the Company, Mr. Townes had been the Vice Chairman
and a Director of Sabreliner Corporation's commercial aircraft services division
since November 1995. From July 1994 to November 1995, Mr. Townes was President
and Partner of Intertrade Ltd., and prior to joining Intertrade, Mr. Townes was
the Executive Vice President & Technical Operations Officer of Stevens Aviation.
Prior to joining Stevens Aviation in March 1990, Mr. Townes held management
positions with the Dee Howard Company and LTV Aerospace & Defense (now Vought
Aircraft). Mr. Townes received an engineering degree from West Point, an MBA
from Long Island University and completed the PMD Program at Harvard Business
School.
George B. Schwartz co-founded Ranger and the Company and became Chairman of
the Board upon the consummation of the Acquisition. Mr. Schwartz is currently
the President of Tioga Capital Corporation, a position he has held since 1991.
From 1987 to 1990, Mr. Schwartz was a Partner of The Airline Group, L.P., an
investment fund, the general partner of which was an affiliate of Bass Brothers
Enterprises. Prior to joining Airline, Mr. Schwartz was employed as a Senior
Vice President of Drexel Burnham Lambert, Inc. Mr. Schwartz also serves as a
director of Thompson Hospitality Corporation and as Chairman of the Board of
Engineered Fibres, Inc. Mr. Schwartz received his MBA from the Amos Tuck School
at Dartmouth College and a bachelors degree from Vanderbilt University.
<PAGE>
Dr. George W. Watts joined Ranger and the Company as Executive Vice
President and Secretary upon the consummation of the Acquisition. Prior to
joining Ranger and the Company, Dr. Watts had been the President of Executive
Vision, a management consulting firm specializing in executive and
organizational development from 1985 to 1994 and 1997 to 1998. From 1994 to
1996, Dr. Watts was the Executive Vice President of PM Realty Group. Dr. Watts
has authored several books regarding corporate change management and executive
development and has consulted with numerous venture capital companies and major
corporations in the areas of executive assessment, management training, business
process re-engineering, corporate restructuring, marketing program development,
post-merger integration and accelerated growth management. Dr. Watts received
bachelors, master's and Ph.D. degrees in psychology and education from The
College of William and Mary.
John W. Gassett joined the Company in 1967 and until 1980, served as
Station Manager of the West Palm Beach, Miami and Fort Lauderdale facilities. In
1980, Mr. Gassett was appointed a Director of Sales, in 1988 was named Vice
President--Marketing and Sales and, effective July 1998, was promoted to his
current position. Mr. Gassett attended the University of North Florida and
Pensacola Junior College.
Paul Jefferson joined the Company in 1996 as Vice President--Europe and,
effective July 1998, was promoted to his current position. Mr. Jefferson is
responsible for all aspects of the Company's business in the United Kingdom and
continental Europe. Mr. Jefferson is also a director of Skytanking GmbH, the
Company's joint venture in Germany. From 1992 to 1996, Mr. Jefferson held the
position of Retail Services Manager in France with Eurotunnel and prior to that
Mr. Jefferson was employed with Esso U.K. for 14 years. Mr. Jefferson received a
BS degree (with Honours) in Business Studies from Queens University--Belfast.
Jeffrey P. Hartman joined the Company as its Senior Vice President and
Chief Financial Officer on August 3, 1999. Mr. Hartman came to the Company from
Signature Flight Support Corporation where he served as the Vice President of
Finance since 1993. Prior to 1993, Mr. Hartman was an Audit Manager with KPMG,
LLP. Mr. Hartman is a Certified Public Accountant who received both a Masters
Degree in Accounting and a Masters of Business Administration from Northeastern
University in Boston, Massachusetts.
William McLendon joined the Company in July 1998 as Vice President--Eastern
Operations. Mr. McLendon is responsible for all aspects of the Company's
business in the eastern U.S. Prior to joining the Company, Mr. McLendon was a
General Manager with Stevens Aviation from 1994 to 1996, and from 1991 to 1994,
was employed by ATS Aerospace, Inc., most recently as Vice President,
Operations. From 1981 to 1991 Mr. McLendon served in the United States Air
Force. Mr. McLendon received an engineering degree from the United States Air
Force Academy and bachelors and master's degrees from Oxford University where he
was a Rhodes Scholar.
Ronald F. Pattie joined the Company in 1969 as a field operations officer,
has since served as Director of Maintenance, was appointed as Director of
Technical Services and Quality Assurance in 1983 and, effective July 1998, was
promoted to his current position. Mr. Pattie received a bachelor's degree in
Business Administration and Accounting from the University of South Florida.
Peter J. Ferrara joined the Company in 1999 as the Company's Vice President
Quality and Engineering and Chief Information Officer. Mr. Ferrara's primary
responsibilities are quality control programs, ISO-9000 certification efforts,
internal operations auditing, the Company's MIS departments and systems, and
technical interface with engineering and quality management at airlines and
airport authorities. Prior to joining the Company, Mr. Ferrara was a senior
manager and engineering veteran of Lockheed Martin and GE-Aerospace, with
extensive experience in quality systems and aerospace technologies. Mr. Ferrara
is also a licensed professional engineer and commercial airplane pilot. Mr.
Ferrara graduated from the U.S. Military Academy at West Point, New York in 1975
with honors.
<PAGE>
Wesley R. Vedo joined the Company, in 1959 as a Ramp Agent and was promoted
to his current position in June of 1998. Mr. Vedo assists the Senior Vice
President-North America with operations and the design and implementation of new
system and initiatives. Prior to serving as Vice President-National Programs,
Mr. Vedo served as Regional Vice President of Sales and Service from November of
1991 to June of 1998.
Kurtis A. Granger joined the Company in 1976 and was promoted to his
current position in July of 1998. Mr. Granger is primarily responsible for
managing customer relationship with major airlines. Prior to Mr. Granger's
promotion to his current position, he served as the Company's Director of Sales
and Customer Service from October 1994 to July of 1998 and as Manager of Sales
and Service from August 1991 to October 1994.
Robert D. Sellas, Jr. joined the Company in 1986 and was promoted to his
current position in 1998. Mr. Sellas is responsible for business development,
branding, promotions, and marketing initiatives. Prior to Mr. Sellas' promotion
to Vice President-Marketing, he served as the Company's Director of Marketing
and Sales from 1994 to 1998 and as a Station Manager from 1990 to 1994.
Silvio Tano joined the Company in 1974 and was promoted to Vice President,
Ground Services for ASIG in June 1999. Mr. Tano is primarily responsible for
integration of ASIG's recent acquisition, Elsinore LP, plus other pending growth
pursuits in ground services.
D. Dana Donovan became a Director of Ranger and the Company upon the
consummation of the Acquisition. Mr. Donovan is a Managing Director at John
Hancock Mutual Life Insurance Company. From 1988 to 1990, Mr. Donovan was a
principal with Berwick Capital. From 1985 to 1988, Mr. Donovan was with Signal
Capital's Merchant Banking Group. Mr. Donovan is a director of Learning Curve
International L.L.C. and Optiva Corporation. Mr. Donovan received his MBA from
the Amos Tuck School at Dartmouth College and a bachelor's degree from Duke
University.
Jay R. Levine became a Director of Ranger and the Company upon the
consummation of the Acquisition. Since 1997, Mr. Levine has served as a Managing
Director of CIBC. From 1996 to 1997, Mr. Levine was President of PPMJ, Inc., a
private consulting firm that advised its clients on private equity investments.
From 1990 to 1996, Mr. Levine was a senior executive in the Morningside and
Springfield Group, a private investment company. Mr. Levine is a director of
Consolidated Advisors Limited, L.L.C., Heating Oil Partners, L.P. and Evercom,
Inc. Mr. Levine received a bachelors degree from Syracuse University, a JD
degree from Tulane University and an LLM in taxation from New York University.
Edward Levy became a Director of Ranger and the Company upon the
consummation of the Acquisition. Mr. Levy has been a Managing Director of an
affiliate of CIBC since 1995. Between 1991 and 1995, Mr. Levy held various
positions at The Argosy Group, L.P., culminating in the position of Managing
Director. Mr. Levy has also held positions in the Mergers and Acquisitions Group
of Drexel Burnham Lambert Incorporated and the Corporate Finance Department of
Kidder, Peabody & Co., Incorporated. Mr. Levy is also a director of Heating Oil
Partners, L.P., Norcross Safety Products, L.L.C., DSMax International, Inc. and
High Voltage Engineering Corporation. Mr. Levy is a graduate of Connecticut
College.
S. Mark Ray became a Director of Ranger and the Company upon the
consummation of the Acquisition. Mr. Ray is Managing Director at John Hancock
Mutual Life Insurance Company, where he manages a $2.0 billion transportation
portfolio for the Bond and Corporate Finance Group. Before joining John Hancock
Mutual Life Insurance Company in 1978, Mr. Ray was a United States Air Force
pilot candidate, as well as a civilian aviator. Leaving active duty in 1977, but
continuing service with the Air Force Reserves, he worked on the marketing and
operations staff of the Kansas City Southern Railway Company for a year in
Dallas. As an inactive ready-reservist, Mr. Ray achieved the rank of Captain and
in 1987, after completing his service commitment, he received his Honorable
Discharge. Mr. Ray received a bachelor's degree from Texas Tech University in
1975.
Item 11. Executive Compensation
The following table sets forth information regarding the compensation paid
or accrued by the Company to the Chief Executive Officer and each of the four
other most highly compensated executive officers of the Company in fiscal 2000
and 1999 (collectively, the "Named Executive Officers") for services rendered to
the Company in all capacities during fiscal years 2000 and 1999.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
AWARDS PAYOUTS
------------------------ --------
OTHER RESTRICTED UNDERLYING
NAME AND ANNUAL STOCK OPTIONS LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) ($) ($) ($) ($)
------------------------------- ------ ----------- --------- ---------- ---------- -------- --------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen D. Townes (1)) . . . . 2000 283,373 10,000 5,515 30,749 (2)
Chief Executive Officer . . . . 1999 275,000 -- -- 12,375 (3)
Dr. George W. Watts (4)
Executive Vice President. . . . 2000 232,461 8,000 2,546 26,257 (5)
and Secretary . . . . . . . . . 1999 212,000 -- -- 11,670 (6)
Jeffrey P. Hartman (7)
Senior Vice President and 2000 105,208 5,500 636 18,412 (8)
Chief Financial Officer
John W. Gassett
Senior Vice President ASIG. . . 2000 169,167 8,000 -- 4,065 (9)
North America . . . . . . . . . 1999 140,000 9,500 415 6,462 (10)
Paul Jefferson
Senior Vice President and
Managing Director ASIG. . . . . 2000 143,929 7,000 -- 28,604 (11)
Europe. . . . . . . . . . . . . 1999 137,648 7,300 385 20,373 (12)
Andy Mitchell (13). . . . . . . 2000 -- -- -- 198,765 (14)
Former Chief Financial Officer. 1999 204,027 28,867 (14)
<FN>
(1) Mr. Townes became Chief Executive Officer of the Company effective March 31,1998.
(2) Reflects $10,000 Company 401(k) matching contributions, $1,140 for group term life insurance, and
$19,609 of Board-approved unused vacation pay.
(3) Reflects $10,000 Company 401(k) matching contributions and $2,3375 for group term life insurance.
(4) Dr. Watts became an Executive Vice President of the Company effective April 2, 1998.
(5) Reflects $10,000 Company 401(k) matching contributions, $1,140 for group term life insurance, and
$15,117 of Board-approved unused vacation pay.
(6) Reflects $10,000 Company 401 (k) matching contributions and $1,670 for group term life insurance.
(7) Mr. Hartman became Chief Financial Officer of the Company effective August 3, 1999.
(8) Reflects $6,000 signing bonus, $629 for group term life insurance, and $11,783 in relocation
reimbursement.
(9) Reflects $1,969 Company 401 (k) matching contributions, $1,257 for group term life insurance and $840 for auto
allowance.
(10) Reflects $4,500 Company 401(k) matching contributions and $1,962 for group term life insurance.
(11) The amount shown includes $14,366 of Company Pension (U.K.) contributions and $6,608 for the use of a Company
automobile.
(12) The amount shown includes $13,765 of Company Pension (U.K.) contributions and $6.608 for the use of a Company
automobile.
<PAGE>
(13) Mr. Mitchell became Chief Financial Officer of the Company effective April 2, 1998 and left the Company
effective December 31, 1998.
(14) Reflects $197,725 and $17,975 for fiscal 2000 and 1999, respectively, from a consulting agreement entered
into by the Company and Mr. Mitchell when he left the Company; 2000 also includes $1,040 for group term
life insurance; 1999 also includes $10,000 in Company 401(k) matching contributions and $892 for group
term life insurance.
</TABLE>
Option Grants and Exercises
The following tables set forth, for the Named Executive Officers,
information regarding stock options granted or exercised during, or held at the
end of fiscal 2000. These options are options to purchase Class B Common Stock
of Ranger, the Company's parent.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM
------------------------------------------------- -------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#)(1) YEAR ($/SH) DATE 5% ($) (2) 10% ($)(2)
---------------------------------------- ------- -------- ------ ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stephen D. Townes 5,515 (3) 40% $ 100 3/31/08 346,834 878,919
Chief Executive Officer
George W. Watts 2,546 (3) 18% $ 100 3/31/08 160,116 405,753
Executive Vice President and Secretary
Jeffrey P. Hartman 636 (3) 10% $ 100 3/31/08 39,998 101,358
Senior Vice President and Chief Financial
Officer
John W. Gassett 415 3% $ 100 3/31/08 26,099 66.139
Senior Vice President-ASIG North America
Paul Jefferson
Senior Vice President and
Managing Director-ASIG Europe. . . . . . 385 3% $ 100 3/31/08 24,213 61,357
_____________. . . . . . . . . . . . . .
<FN>
(1) In order to prevent dilution or enlargement of rights under the options, in the event
of a reorganization, recapitalization, stock split, stock dividend, or combination or other
change in the Class B Common Stock of Ranger, the type and number of shares available upon
exercise and the exercise price may be adjusted accordingly.
(2) Amounts reflect assumed rates of appreciation from the fair market value on the date
of grants as set forth in the SEC's executive compensation disclosure rules. Actual gains,
if any, on stock option exercises depend on future appreciation of the Class B Common Stock
of Ranger Aerospace Corporation. No assurance can be made that the amounts reflected in these
columns will be achieved.
(3) Twenty-nine percent (29%)of the options granted to Stephen Townes and fifty percent (50%) of the
options granted to George Watts and Jeffrey Hartman will vest if the Company satisfies certain
market value and liquidity requirements in connection with a sale of the business of Ranger or
the Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR Values
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS/SARS AT OPTIONS/SARS AT FISCAL
ACQUIRED ON REALIZED FISCAL; YEAR END (#) YEAR END ($)
NAME EXERCISE(1) ($)(1) ERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---------------------------- ------------ --------- -------------------------- ---------------------------
<PAGE>
<S> <C> <C> <C> <C>
Stephen D. Townes -- -- 2,336/3,179 $ 0/$0
Chief Executive Officer
George W. Watts
Executive Vice President and
Secretary -- -- 764/1,782 $ 0/$0
Jeffrey P. Hartman
Senior Vice President and Chief
Financial Officer -- -- 191/445 $ 0/$0
John W. Gassett
Senior Vice President-ASIG
North America -- -- 166/249 $ 0/$0
Paul Jefferson
Senior Vice President and
Managing Director-ASIG
Europe
________________________ -- -- 144/241 $ 0/$0
<FN>
(1) As of the end of the fiscal year, none of the options held by the Named Executive Officers had been
exercised.
</TABLE>
Compensation of Directors
Generally, the Directors of the Company will not be paid for their services
on the Board. Directors are reimbursed for out-of-pocket expenses incurred in
connection with attending Board meetings. The Company has entered into an
agreement with Tioga Capital Corporation ("Tioga") pursuant to which Tioga will
receive a fee during the period which Mr. Schwartz serves as Chairman of the
Board. Mr. Schwartz is the President of Tioga. See "Item 13. Certain
Relationships and Related Transactions Chairman Agreement."
Compensation Committee Interlocks and Insider Participation
The Company currently does not have a compensation committee. The
compensation of the executive officers of the Company is determined by the
Board.
Employment Agreements
Messrs. Townes, Watts and Hartman have each entered into an employment
agreement, which was amended effective as of March 7, 2000, (each, an
"Employment Agreement") with Ranger and the Company. The Employment Agreements
provide for the employment, unless terminated earlier as provided in the
respective Employment Agreement, of (i) Mr. Townes as the President and Chief
Executive Officer until March 31, 2003, and (ii) Mr. Watts as Executive Vice
President until March 31, 2003, and (iii) Mr. Hartman as Senior Vice President
and Chief Financial Officer until August 1, 2002, The Employment Agreement of
Mr. Townes provides for an annual base salary of $275,000, the Employment
Agreement of Mr. Watts provides for an annual base salary of $212,000, and the
employment agreement of Mr. Hartman provides for an annual base salary of
$150,000. In addition, each Employment Agreement provides: (i) for the base
salary to increase based on the Consumer Price Index; (ii) an annual bonus to be
determined by the Board of Directors of the Company; and (iii) health benefits,
life and disability insurance, participation in the Company's retirement plan(s)
and customary fringe benefits and vacation periods.
<PAGE>
Each Employment Agreement may be terminated by the Company at any time with
or without Cause. Each Employment Agreement defines "Cause" to mean any of the
following acts: (i) theft or embezzlement, or attempted theft or embezzlement,
of money or property of the Company or any of its subsidiaries, perpetration or
attempted perpetration of fraud, or participation in a fraud or attempted fraud,
on the Company or any of its subsidiaries or unauthorized appropriation of, or
attempt to misappropriate, any substantial tangible or intangible assets or
property of the Company or any of its subsidiaries, (ii) conviction of any
criminal felony involving the Company or any of its subsidiaries, or (iii)
willful failure to substantially follow any reasonable instructions of the Board
and/or other policies of the Company, which failure is not corrected within 15
business days after receipt of notice from the Board describing such failure.
Messrs. Townes, Watts and Hartman may also choose to terminate employment with
the Company by reason of a Constructive Termination. "Constructive Termination"
means (i) a reduction of base salary, (ii) the assigning of any duties
inconsistent with duties first described in the respective Employment Agreement,
or (iii) a substantial breach by the Company of any term of (w) their employment
agreement (x) their Executive Stock Agreement by which they acquired stock of
the Company, (y) their Non-Qualified Stock Option Agreement, (z) the security
holders agreement or any amendment or successor to any of the foregoing
agreements, which breach has a material adverse effect on the executive and
which is not cured within 15 days of receipt of notice to the Company of such
breach. If the employment of Mr. Townes is terminated for any reason other than
(i) a termination by the Company for Cause or (ii) a termination by Mr. Townes
that is not a Constructive Termination, Mr. Townes will receive severance
compensation equal to 24 months base salary and current health benefit coverage.
If the employment of Mr. Watts is terminated for any reason other than (i) a
termination by the Company for Cause or (ii) a termination by Mr. Watts that is
not a Constructive Termination, Mr. Watts will receive 24 months salary and
current health benefit coverage. If the employment of Mr. Hartman is terminated
for any reason other than (i) a termination by the Company for Cause or (ii) a
termination by Mr. Hartman that is not a Constructive Termination, Mr. Hartman
will receive 12 months salary and current health benefit coverage. The
Employment Agreements of Mr. Townes and Mr. Watts provide that if the Company
requires either of them to relocate their permanent residence, the Company will
pay any relocation expenses, will grant an increase in annual salary, and will
grant additional options to them.
1999 Stock Option Plan
The Board of Directors of Ranger has approved the Ranger Aerospace
Corporation 1999 Stock Option Plan ("1999 Option Plan"), which authorizes the
granting of stock options to acquire shares of Ranger's Class B Common Stock to
current or future executive officers and key employees of Ranger or its
subsidiaries. The 1999 Option Plan authorizes the granting of stock options up
to an aggregate of 1,000,000 shares of Ranger's Class B Common Stock, subject to
adjustment upon the occurrence of certain events to prevent any dilution or
expansion of the rights of participants that might otherwise result from the
occurrence of such events.
Options to purchase an aggregate of 636 and 13,795 shares of Ranger's Class
B Common Stock were granted (574 and 85, respectively have been cancelled)
during fiscal 2000 and 1999. An aggregated 3,213 of these granted options are
vestable to Messrs. Townes, Watts and Hartman if the Company satisfies certain
market value and liquidity requirements in connection with a sale of Ranger or
the Company. Other than these 3,213 options, one-third of the shares subject
to such options is subject to time vesting beginning on March 31, 1999 and
ending on March 31, 2003. Two-thirds of the shares subject to such options are
subject to performance vesting beginning on March 31, 1999 and ending on March
31, 2003. With respect to Mr. Townes options, if he is terminated by the Company
without cause or if he quits for good reason, then fifty percent (50%) of his
unvested time and performance vesting options will vest if the Company has met
certain performance qualifications. Otherwise, unvested options will terminate
in the event that the optionee ceases to be employed with the Company and vested
but unexercised options will terminate immediately if the optionee is terminated
for Cause. With respect to all optionees except for Mesrrs. Townes, Watts and
Hartman, the vested but unexercised options expire after 60 days if the optionee
ceases to be employed by the Company by reason of death, disability or
retirement or after 30 days if the employee is terminated other than for Cause.
Ranger and certain other significant stockholders have the right to repurchase
any shares issued or issuable under the employees option agreement. Unvested
options will immediately vest upon a sale of Ranger meeting certain value
<PAGE>
thresholds. All of the options granted have an exercise price of $100 per
share, which the Company believes approximates the fair market value of the
Class B Common Stock on the date of grant.
All unvested options granted under the plan will automatically vest on
January 28, 2007.
Sale of Equity
In fiscal 2000, Ranger sold 4,944 shares of its Class A Common Stock at a
price of $100 per share. Ranger also sold 11,376 shares of its Class B Common
Stock at a price of $100 and 2,448 shares of Preferred Stock at a price of
$1,000 to Ranger's original investors and Messrs. Townes, and Watts.
In fiscal 1999, Ranger sold 844 shares of its Class B Common Stock at a
price of $100 per share and 123 shares of its Preferred Stock at a price of
$1,000 per share to a number of its key employees. Each purchaser of these
shares entered into an executive stock agreement with Ranger which, among other
things, restricts the transfer of such securities, grants Ranger and certain
significant stockholder the right to repurchase such share upon the employee's
termination and requires the employee to consent to a sale of Ranger approved by
its Board and the holders of a majority of its common stock.
401(k) Profit Sharing Plan
The Company has a 401(k) plan for the benefit of substantially all of its
non-union employees, which is qualified for tax exempt status by the Internal
Revenue Service. Employees can make contributions to the plan up to the maximum
amount allowed by federal tax code regulations.
Item 12. Security Ownership of Certain Beneficial Owners and Management
All of the equity of the Company is owned by Ranger. The following table
sets forth certain information regarding the beneficial ownership of the equity
securities of Ranger by: (i) each of the Directors of Ranger and the Named
Executive Officers; (ii) all Directors and executive officers as a group; and
(iii) each owner of more than 5% of any class of equity securities of Ranger
("5% Owners"). Ranger currently has 42,433 shares of Class A Common, 86,587
shares of Class B Common (including 4,660 shares subject to currently
exercisable options) and 17,028 shares of Preferred Stock issued and
outstanding. Unless otherwise noted, the address for each Director and executive
officer is c/o Ranger Aerospace Corporation, 7600 Pelham Centre, Greenville,
South Carolina 29615-3170.
<PAGE>
<TABLE>
<CAPTION>
CLASS A COMMON CLASS B COMMON PREFERRED
-------------- -------------- ---------
STOCK
Name and Address of Beneficial Owner Number Percent Number Percent Number Percent
<S> <C> <C> <C> <C> <C> <C>
Directors and Named Executive Officers:
George B. Schwartz (a) 5,964.8 14.06% -- 0.00% -- 0.00%
Stephen D. Townes (b) 2,663.0 6.28% 3,136 (c) 3.62% 120 0.70%
George W. Watts -- 0.00% 1,484 (d) 1.71% 108 0.63%
Jeffrey P. Hartman -- 0.00% 191 (e) 0.22% -- 0.00%
John W. Gassett -- 0.00% 266 (f) 0.31% 15 0.09%
Paul Jefferson -- 0.00% 254 (g) 0.29% 15 0.09%
Edward Levy (h) 22,048.4 51.96% 13,430 15.51% 5,321.8 31.25%
D. Dana Donovan (i) -- 0.00% 65,456 75.60% 9,818.4 57.66%
S. Mark Ray (I) -- 0.00% 65,456 75.60% 9,818.4 57.66%
Jay R. Levine (h) 22,048.4 51.96% 13,430 15.51% 5,321.8 31.25%
All Directors and Executive Officers as a
Group (16 persons) 30,676.2 72.29% 85,307 98.52% 15,468.7 90.84%
5% OWNERS:
John Hancock Mutual Life Insurance
Company (j) -- 0.00% 65,456 75.60% 9,818.4 57.66%
Canadian Imperial Bank of Commerce (k) 22,048.4 51.96% 13,430 15.51% 5,321.8 31.25%
Randolph Street Partners II (l) 5,678.0 13.59% -- 0.00% 865.2 5.08%
Gregg L. Engles (m) 4,497.6 10.60% -- 0.00% 674.6 3.96%
Danielle Schwartz Trust , UAD 10/1/93 (n) 5,694.8 13.42% -- 0.00% -- 0.00%
<FN>
(a) Includes 5,964.8 shares of Class A Common owned by the Danielle Schwartz Trust, UAD 10/1/93.
Mr. Schwartz does not have beneficial ownership in, or control over, the Danielle Schwartz Trust.
(b) Includes 2,663 shares of Class A Common currently being transferred from Mr. Townes to the
Townes Family Trust. Mr. Townes does not have beneficial ownership in, or control over, the
Townes Family Trust.
(c) Includes 2,336 shares that may be acquired through stock options exercisable within 60 days of
March 31, 2000.
(d) Includes 764 shares that may be acquired through stock options exercisable within 60 days of
March 31, 2000.
(e) Includes 191 shares that may be acquired through stock options exercisable within 60 days of
March 31, 2000.
(f) Includes 166 shares that may be acquired through stock options exercisable within 60 days of
March 31, 2000.
(g) Includes 154 shares that may be acquired through stock options exercisable within 60 days of
March 31, 2000.
(h) Includes 22,048 shares of Class A Common, 13,430 shares of Class B Common and 5,322 shares of
Preferred Stock beneficially owned by CIBC. Such person disclaims beneficial ownership of all such
shares. Such person's address is c/o CIBC, 425 Lexington Avenue, New York, New York 10017.
(i) Includes 65,456 shares of Class B Common and 1,358 share of Preferred Stock beneficially owned
by John Hancock Mutual Life Insurance Company. Such person disclaims beneficial ownership of all
such shares. Such person's address is c/o John Hancock Mutual Life Insurance Company,
John Hancock Place, Box 111, Boston, Massachusetts 02117.
(j) Such person's address is John Hancock Place, Box 111, Boston, Massachusetts 02117.
(k) Such person's address is 161 Bay Street, 8th Floor, BCE Place; PP Box 500 MSJ 258, Toronto,
Canada. Each of Messrs. Jay Bloom, Andrew Heyer and Dean Kehler (each of who are employees of an
<PAGE>
affiliate of CIBC) may be viewed as sharing beneficial ownership of such shares.
(l) Such person's address is 200 East Randolph Drive, Suite 5400, Chicago, Illinois 60601.
(m) Such person's address is 3811 Turtle Creek Road, Dallas, Texas 75219
(n) Such person's address is c/o Ranger Aerospace Corporation, 7600 Pelham Centre, Greenville,
South Carolina 29615-3170.
</TABLE>
Item 13. Certain Relationships and Related Transactions
Securityholders Agreement
Ranger, John Hancock Mutual Life Insurance Company ("Hancock") and its
affiliates, affiliates of CIBC, the Danielle Schwartz Trust, Mr. Townes, Dr.
Watts, Randolph Street Partners II and Gregg L. Engles have entered into a
Securityholders Agreement dated April 1, 1998 and amended effective March 7,
2000 (the "Securityholders Agreement"). The Securityholders Agreement requires
that each of the parties thereto vote all of his or its Ranger voting securities
and take all other necessary or desirable actions to cause the size of the Board
of Ranger to be established at six members and to cause the election to the
Board of Ranger of two representatives designated by Hancock and its affiliates
(the "Hancock Designees"), two representatives designated by such affiliates of
CIBC (the "CIBC Designees") and two executive officers jointly designated by
such affiliates of CIBC and Hancock and its affiliates (the "Executive
Directors"). Mr. Schwartz and Mr. Townes will each serve as an Executive
Director, so long as such person is an officer of the Company and Ranger until
their earlier resignation or removal. Any representative on the Board of Ranger
may be removed from the Board of Ranger only at the request of the party that
designated such representative. The Board of the Company is established by the
Board of Ranger, provided that Mr. Schwartz will serve as a Director of the
Company. The right of Hancock and its affiliates and such affiliates of CIBC to
designate representatives to the Board of Ranger will terminate at such time as
such party owns less than 50% of the common stock, Preferred Stock and/or PIK
Notes held by such party as of the Acquisition closing date. The right of Mr.
Townes to be elected as a member of the Board of Ranger will terminate at such
time as he owns less than 50% of the shares of common stock purchased under the
Executive Stock Agreement (as defined herein), or earlier in the event he ceases
to be an officer of the Company and Ranger. The right of Mr. Schwartz to be
elected as a member of the Board of Ranger will terminate at such time as the
Danielle Schwartz Trust owns less than 50% of the shares of common stock it
purchased under the Investor Stock Agreement (as defined herein), or earlier in
the event Mr. Schwartz ceases to be Chairman of the Company and Ranger pursuant
to the Chairman Agreement (as defined herein). The provisions of the
Securityholders Agreement relating to the composition of the Board of Ranger
will terminate on the earlier to occur of (i) the tenth anniversary of the
Acquisition unless extended by holders of 75% of the voting securities subject
to the Securityholders Agreement or (ii) upon a Qualified Public Offering (as
defined herein).
In addition to the foregoing, the Securityholders Agreement (i) requires
the holders of securities of Ranger to obtain the prior written consent of
Ranger in some circumstances prior to transferring any securities of Ranger;
(ii) grants in connection with the sale of securities of Ranger certain
preemptive rights with respect to such sale, first to other holders of
securities of Ranger, then to Ranger; (iii) grants the holders of securities of
Ranger certain participation rights in connection with certain transfers made by
other holders of securities of Ranger; and (iv) requires all holders of Ranger
securities who are parties to the Securityholders Agreement to consent to and
participate in a sale of the business of Ranger to an independent third party
(whether by way of a sale of stock, sale of assets, merger, recapitalization or
otherwise) if such sale is approved by such affiliates of CIBC and Hancock and
its affiliates (provided that such affiliates of CIBC and Hancock and its
affiliates each hold not less than 50% of the Ranger securities held by such
party as of the Acquisition closing date) and the Board of Ranger. The
agreements set forth in (i) to (iii) above terminate with respect to each
security of Ranger upon the earlier of the date on which such security has been
transferred in a public sale or the consummation of a public offering of $35
million or more of Ranger's equity securities in which the per share price of
the common stock of Ranger is no less than four times its price as of the date
of the Acquisition (a "Qualified Public Offering"). The agreement set forth in
(iv) above terminates with respect to each interest in Ranger upon the
consummation of a Qualified Public Offering.
<PAGE>
The Securityholders Agreement also provides that the Preferred Stock and
PIK Notes (as defined herein) issued under the Securities Purchase Agreement
will rank pari passu in the event of any liquidation, dissolution or winding-up
of Ranger, and that holders of PIK Notes will use their reasonable efforts to
provide the holders of Preferred Stock representation on any creditors'
committee established for the benefit of the holders of PIK Notes. A similar
provision is contained in the Share Purchase Agreement (as defined herein).
In addition, without the consent of both the CIBC Designees and the Hancock
Designees, Ranger may not: (i) issue or authorize the issuance of any equity
securities or any securities convertible into equity securities in excess of
2,500 shares of Ranger common stock; (ii) consolidate or merge with, or sell all
of substantially all of its assets to, any other person; (iii) permit any of its
subsidiaries to issue any equity securities to any person other than Ranger or
one of Ranger's direct or indirect wholly-owned subsidiaries; (iv) acquire any
interest in any business for an aggregate consideration in excess of $1.0
million; or (v) amend any provision of Ranger's certificate of incorporation.
Rights Agreement
Ranger, Hancock and its affiliates, affiliates of CIBC, Randolph Street
Partners II, Gregg L. Engles and the Danielle Schwartz Trust have entered into a
Rights Agreement (the "Rights Agreement"). Under the Rights Agreement, the
holders of shares of Ranger common stock originally issued to Hancock and to
affiliates of CIBC have the right at any time, subject to certain conditions, to
require Ranger to register any or all of their common stock in Ranger under the
Securities Act on Form S-1 or Form S-2 (a "Long-Form Registration") on two
occasions and on Form S-3 (a "Short-Form Registration") on unlimited occasions,
and all holders of registrable securities of Ranger have the right to request
that such securities be included in any such Long-Form or Short-Form
Registration, subject to pro rata reductions if required by the managing
underwriter. In addition, all holders of registrable securities of Ranger are
entitled to request the inclusion of such securities in any registration
statement at Ranger's expense whenever Ranger proposes to register any of its
securities under the Securities Act (a "Piggyback Registration"). Ranger shall
pay all registration expenses in connection with each Long-Form, Short-Form and
Piggyback Registration. Holders of registrable securities of Ranger are
prohibited from effecting a public sale of such securities seven days prior to
and 90 days after the effective date of any Long-Form, Short-Form or
underwritten Piggyback Registration. Ranger is prohibited from effecting a
public sale of its equity securities on its own behalf during the seven days
prior to and 120 days after the effective date of any Long-Form, Short-Form or
underwritten Piggyback Registration. In connection with such registrations,
Ranger has agreed to indemnify all holders of registrable securities against
certain liabilities, including liabilities under the Securities Act.
Executive Stock Agreement
Messrs. Townes and Watts have each entered into Executive Stock Agreements
with Ranger (each an "Executive Stock Agreement"). Pursuant to the first
Executive Stock Agreement for Mr. Townes (which was amended effective as of
March 7, 2000), Mr. Townes purchased 2,663 shares of Class A Common at a price
of $100 per share and such stock was paid for with a promissory note. This
promissory note is secured by a pledge of all of shares of Class A Common
purchased by Mr. Townes under the Executive Stock Agreement and is recourse to
Mr. Townes for 25% of the original principal amount of and accrued interest
under the promissory note. All of the stock purchased by Mr. Townes was
originally subject to vesting but is now fully vested as of March 7, 2000. Mr.
Townes entered into a second Executive Stock Agreement pursuant to which he
purchased 800 shares of the Company's Class B Common Stock for $100 per share
and 120 shares of Preferred Stock for $1,000 per share for an aggregate of
$200,000. Dr. Watts purchased 720 shares of the Company's Class B Common Stock
and 108 shares of Preferred Stock for $1,000 per share for an aggregate of
$180,000, $130,000 of this amount was paid for by Dr. Watts with a promissory
note. This promissory note is secured by a pledge of all of the shares of Class
B Common and Preferred purchased by Dr. Watts under the Executive Stock
Agreement and is recourse to Dr. Watts for twenty-five percent (25%) of the
original principal amount of an accrued interest under the promissory note
pursuant to his Executive Stock Agreement. In the event of a termination of Mr.
Townes' employment for any reason, a portion of the stock in Ranger held by Mr.
Townes or his successors and assigns shall be subject to repurchase by Ranger.
In the event of the termination of Mr. Townes' employment for a reason other
<PAGE>
than: (i) death or disability; (ii) a termination by the Company for "Cause"; or
(iii) a termination by Mr. Townes that is not a "constructive termination," Mr.
Townes may require Ranger to repurchase a portion of the interests Mr. Townes
holds therein. In addition, neither Mr. Watts nor Mr. Townes may transfer the
interests either of them holds in Ranger without the consent of the Board of
Ranger or pursuant to the Securityholders Agreement. See "--Securityholders
Agreement."
Investors Stock Agreement
The Danielle Schwartz Trust has entered into an Investor Stock Agreement
(the "Investor Stock Agreement") with Ranger pursuant to whom it purchased Class
A Common at a price of $100 per share and such stock was paid for with a
promissory note. This promissory note is secured by a pledge of all of the
shares of Class A Common purchased under the Investor Stock Agreement and is
recourse to the Danielle Schwartz Trust for 25% of the original principal amount
of and accrued interest under the promissory note. Under the Investor Stock
Agreement, in the event that Mr. Schwartz is terminated for "Cause" as Chairman
(as such terms are defined in the Chairman Agreement), Ranger shall have the
option to repurchase all of the interests in Ranger held by the Danielle
Schwartz Trust. In addition, the Danielle Schwartz Trust may not transfer the
interests it holds in Ranger without the consent of the Board of Ranger or
pursuant to the Securityholders Agreement. See "--Securityholders Agreement."
Chairman Agreement
Tioga, Ranger, the Company and Mr. Schwartz have entered into a Chairman
Agreement (the "Chairman Agreement") pursuant to which Mr. Schwartz will serve
as the Chairman of Ranger and the Company until April 2, 2001 (such period will
be automatically extended for additional terms of one year unless the Board of
Ranger takes action to terminate such extension), unless terminated earlier as
provided in the Chairman Agreement. The Chairman Agreement provides that Tioga
will receive a $150,000 annual base fee (subject to annual increases based on
the consumer price index) and that Mr. Schwartz will receive health benefits and
life and disability insurance. In addition, Tioga will receive a bonus of
$1,350,000 if the Company satisfies certain market value and liquidity
requirements in connection with a sale of the business of Ranger or the Company
or a public offering of equity securities of Ranger. The Company believes that
the terms of the Chairman Agreement are at least as favorable to the Company as
those which could be obtained from an unrelated party.
Noncompetition provisions of the Chairman Agreement prevent Mr. Schwartz
from engaging in any business in competition with the Company for a period of 18
months after any termination or for 12 months after termination as director
without Cause in countries where the Company conducts business as of the date of
such termination.
Mr. Schwartz may be terminated as the Chairman at any time with or without
Cause. The Chairman Agreement defines "Cause" to mean any of the following acts:
(i) the commission of a felony or a crime involving moral turpitude (as
determined by the Board of the Company in its good faith judgment) or any
indictment for a felony or crime involving moral turpitude; (ii) the commission
of any other act or omission involving dishonesty, disloyalty or fraud with
respect to Ranger or any of its subsidiaries or any of their customers or
suppliers; (iii) conduct tending to bring Ranger or any of its subsidiaries into
substantial public disgrace or disrepute; (iv) failure to perform duties as
reasonably directed by the Board of Ranger which failure is not cured within 15
days after written notice thereof; (v) gross negligence or willful misconduct
with respect to Ranger or any of its subsidiaries; or (vi) any other material
breach of the Chairman Agreement which is not cured within 15 days after written
notice thereof. If Mr. Schwartz is terminated as the Chairman for any reason
other than for Cause, Tioga will receive the base fee for one year thereafter.
<PAGE>
Fee Letter
In connection with the Acquisition, the Company paid Tioga the sum of
$850,000 pursuant to a certain fee letter in consideration for services rendered
by Tioga to the Company and Ranger. Mr. Schwartz is the president of Tioga. In
consideration for such payment, the Company and Ranger on one hand, and Tioga
and Mr. Schwartz on the other, along with certain other parties, agreed to
release each other from any claims, liabilities or obligations not arising from
gross negligence or willful misconduct with respect to the consummation of the
Acquisition.
Share Purchase Agreement
Pursuant to a Share Purchase Agreement (the "Share Purchase Agreement"), Viad
and Viad Service Companies, Limited, a United Kingdom limited liability company
(together with Viad, the "Sellers") agreed to sell all of the issued and
outstanding shares of capital stock or other equity interests of the entities
which comprised the ASIG business to Ranger. On April 1, 1998, the Company
completed the Acquisition for a purchase price of approximately $95 million in
cash; plus fees and expenses of approximately $4.1 million. The original
purchase price was subject to a purchase price adjustment in favor of the
Company for any shortfall in the net asset value, net working capital or
required cash (as such terms are defined in the purchase agreement) of the ASIG
business from the levels represented at the closing of the Acquisition. The
purchase price was also subject to adjustment in favor of Viad in an amount
equal to the amount of cash in the ASIG business at the closing of the
Acquisition in excess of the required cash. As a result of the purchase price
adjustments, the Company is due a purchase price settlement of $2.125 million
from Viad, which is shown in the Company's March 31, 2000 consolidated balance
sheet as a receivable.
Prior to the closing of the Acquisition, the Share Purchase Agreement was
amended by the Sellers and Ranger (the "Amendment"). In addition to certain
other matters addressed in the Amendment, Ranger assigned all of its rights and
obligations under the Share Purchase Agreement to the Company, with the
exception of its rights to acquire Aircraft Service, Ltd., a United Kingdom
limited liability company, which it assigned to ASIG Europe Ltd., a United
Kingdom limited liability company.
Noncompetition Agreement
The Sellers, Greyhound Dobbs Incorporated, a Delaware corporation
("Dobbs"), Ranger and the Company entered a noncompetition agreement (the
"Noncompetition Agreement"). Under the Noncompetition Agreement, each of the
Sellers and Dobbs covenanted and agreed that it would not, in any geographical
location anywhere in the world, engage directly or indirectly, in any activity
which is competitive with the Company's business as of the date of the
Acquisition. In addition, each of Ranger and the Company covenanted and agreed
that it would not, in any geographical location anywhere in the world, engage
directly or indirectly, in the business of preparing and providing food and
beverage services for airline passengers, airline crews, support personnel and
airport personnel. The noncompetition restrictions above terminate upon the
earlier of: (i) the date three years following the date of the Acquisition and
(ii) for restrictions that apply to Dobbs, Ranger and the Company, upon (a) the
Sellers' sale of any of the capital shares of Dobbs resulting in a divestiture
of control, (b) the sale of Ranger, (c) the sale by Ranger of any of the capital
shares of the entities comprising the ASIG business resulting in a divestiture
of control, or (d) the sale by Ranger or Dobbs of capital shares or
substantially all of the assets of any subsidiary, in which event such
restrictions shall terminate only with respect to the subsidiary being sold.
Securities Purchase Agreement
Pursuant to the Securities Purchase Agreement, Ranger authorized the
issuance and sale of the following securities: (i) $8,460,000 in aggregate
principal amount of 10.5% payment-in-kind notes (the "PIK Notes"); (ii) 6,000
shares of Preferred Stock; (iii) 29,862 shares of Class A Common; and (iv)
66,718 shares of Class B Common. Subject to the terms of the Securities Purchase
Agreement, Ranger agreed to sell, and Hancock, affiliates of CIBC, Randolph
Street Partners II and Gregg L. Engles (collectively, the "Purchasers") agreed
to purchase, the Securities.
<PAGE>
The Securities Purchase Agreement contained customary provisions for such
agreements, including representations and warranties and affirmative covenants.
The Securities Purchase Agreement also granted the Purchasers the right to
purchase their pro rata share of any future issuances of Ranger common equity or
convertible securities other than in connection with certain public offerings.
The Securities Purchase Agreement also provided that the PIK Notes would have a
scheduled repayment date of March 31, 2010, and that Ranger may optionally repay
the PIK Notes before this date provided that Ranger also redeems the Preferred
Stock.
Relationship With Viad
In fiscal 1997, the Company transferred approximately $12.8 million of
accounts receivable to Viad and was charged a financing charge by Viad of
approximately $0.6 million in 1997 for the transferred receivables. In addition,
prior to the Acquisition, Viad allocated certain income and expenses to the
Company. For a description of such allocations see Note 3 in Notes to Financial
Statements to the Company's audited financial statements which appear elsewhere
in this annual report.
On April 1, 1998, the Company completed the Acquisition for a purchase
price of approximately $95 million in cash plus fees and direct acquisition
costs of approximately $4.1 million. The original purchase price was subject to
a purchase price adjustment in favor of the Company for any shortfall in the net
asset value, net working capital or required cash (as such terms are defined in
the purchase agreement) of the ASIG business from the levels represented at the
closing of the Acquisition. The purchase price was also subject to adjustment
in favor of Viad in an amount equal to the amount of cash in the ASIG business
at the closing of the Acquisition in excess of the required cash. As a result
of the purchase price adjustments, the Company is due a purchase price
settlement of $2.125 million from Viad, which is shown in the accompanying
consolidated balance sheet as a receivable. Currently, the Company and Viad
have disputed the amount of the purchase price settlement. Both Viad and the
Company have submitted claims to an independent arbitrator. Management believes
that it will fully recover the amount receivable from Viad on the accompanying
balance sheet. However, there are no assurances that Management will be
successful in these efforts.
Relationship with Kirkland and Ellis
One of the Company's investors is Randolph Street Partners, which is
affiliated with the Law Firm of Kirkland and Ellis, which provide legal services
for the Company. Legal expenses incurred in connection with services performed
by Kirkland and Ellis included in selling, general and administrative in the
accompanying statements of operations, were approximately $482 for the year
ended March 31, 1999 and $779 for the year ended March 31, 2000. Legal expenses
of approximately $720 for the year ended March 31, 1999 were incurred in
connection with the VIAD acquisition.
Relationship with CIBC Oppenheimer Corporation
One of Ranger's investors, CIBC, performed certain services for the Company
in the fiscal year ended March 31, 1999. CIBC provided the Company with
short-term financing between April 1, 1998 and August 18, 1998. Interest
payments made to CIBC for the short-term loan was approximately $2.4 million.
Furthermore, transaction fees incurred in connection with the short-term
financing and subsequent exchange of the Old Notes for the Senior Notes were
approximately $2,401. In addition, transaction fees incurred in connection with
the VIAD acquisition paid to CIBC were approximately $2,250 for the year ended
March 31, 1999.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Index to Financial Statements
See Page F-1
(a) (2) Index to Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts
See Page S-1
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable or the information
called for thereby is otherwise included in the financial statements and
therefore have been omitted.
(a) (3) Index to Exhibits
The following exhibits are filed as part of, or incorporated by reference
into, this report:
Exhibit No. Exhibit Description
2.1 Asset Purchase Agreement dated May 20, 1999, by and among Elsinore
Acquisition Corporation and Elsinore, L.P., and with respect to Article
VIII and Section 9.8 only, Ranger Aerospace Corporation, Aircraft
Service International Group, Inc., Air/Lyon, Inc., Air/Lyon Associates,
LP, Elsinore Aerospace Services, LP and Elsinore Services Corporation,
and with respect to Section 9.8 only, General William Lyon (incorporated
by reference to Exhibit 2.1 to the Company's Current Report on 8-K
dated May 20, 1999)*
3.1 Certificate of Incorporation of the Company(1)
3.2 Bylaws of the Company(1)
4.1 Securities Purchase Agreement dated as of August 13, 1998, by and among
the Company, the Guarantors and CIBC Oppenheimer Corp.(1)
4.2 Indenture dated as of August 18, 1998, among the Company and State
Street Bank and Trust Company, as Trustee with respect to the 11% Senior
Notes due 2005 (including the form of Series B 11% Senior Notes and
Guarantees)(1)
4.3 Registration Rights Agreement dated as of August 18, 1998, among the
Company, the Guarantors and CIBC Oppenheimer Corp. and State Street Bank
and Trust with respect to the 11% Senior Notes due 2005(1)
10.1 Share Purchase Agreement dated as of March 14, 1998, between Viad Corp.
and Viad Service Companies Limited and Ranger, as amended on March 31,
1998(1)*
10.2 Securities Purchase Agreement dated as of April 1, 1998, by and among
Ranger, John Hancock Mutual Life Insurance Company, CIBC Wood Gundy
Ventures, Randolph Street Partners and Gregg L. Engles(1)
10.3 Securityholders Agreement, dated April 1, 1998 by and among Ranger,
John Hancock Mutual Life Insurance Company, CIBC Wood Gundy Ventures,
Randolph Street Partners II and Gregg L. Engles (1)
10.4 Registration Rights Agreement, dated April 1, 1998 by and among Ranger,
CIBC Wood Gundy Ventures, Randolph Street Partners II and Gregg L.
Engles (1)
10.5 Amended and Restated Executive Stock Agreement, dated April 2, 1998
between Ranger and Stephen D. Townes (1)
10.6 Investor Stock Agreement, dated April 2, 1998 between Ranger and The
<PAGE>
Danielle Schwartz Trust (1)
10.7 Amended and Restated Employment Agreement, dated April 2, 1998, between
the Company and Stephen D. Townes (1)
10.8 Employment Agreement, dated April 2, 1998, between the Company and
F. Andrew Mitchell (1)
10.9 Amended and Restated Employment Agreement, dated March 7, 2000, between
the Company and George W. Watts (1)
10.10 Chairman Agreement, dated April 2, 1998, between Ranger, the Company,
Tioga Capital Corporation and George B. Schwartz 1)
10.11 Senior Credit Facility dated April 2, 1998, between the Company and
Key Corporate Capital, Inc., including the amendment thereto dated May
20, 1999
10.12 Amendment to the Ranger Aerospace Corporation Security Holders Agreement
dated April 1, 1998, between John Hancock Mutual Life Insurance Company,
CIBC Wood Gundy Ventures, Inc., Gene Z. Salkind, M.D., trustee of the
Danielle Schwartz Trust UAD 10/1/93 and Investors on the Schedule of
Security holders and George W. Watts dated March 7, 2000
10.13 Second Executive Stock Agreement between Ranger Aerospace Corporation
and Stephen D. Townes dated March 7, 2000
10.14 Amendment to the Executive Stock Agreement between Ranger Aerospace
Corporation and Stephen D. Townes dated March 7, 2000
10.15 Non-qualified Stock Option Agreement between Ranger Aerospace Corporation
and Stephen D. Townes dated March 7, 2000
10.16 Non-qualified Stock Option Agreement between Ranger Aerospace Corporation
and George W. Watts dated March 7, 2000
10.17 Executive Stock Agreement, Executive Stock Pledge Agreement and Promissory
Note between Ranger Aerospace Corporation and George W. Watts, all dated
March 7, 2000
10.18 Liquidity Agreement/Right to Put Certain Shares of Second Executive Stock
Agreement between Ranger Aerospace Corporation and Stephen D. Townes dated
March 7, 2000
10.19 Liquidity Agreement/Right to Put Certain Shares of Second Executive Stock
Agreement between Ranger Aerospace Corporation and George W. Watts dated
March 7, 2000
21. Subsidiaries of the Company
27.1 Financial Data Schedule for the year ended March 31, 2000
* The Company agrees to furnish supplementally to the Commission a copy of
any omitted schedule or exhibit to such agreement upon request by the
Commission.
(1) Incorporated by reference to the same numbered exhibit to the Company's
Registration Statement on Form S-4 (Registration No. 333-64513).
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
By: /s/ Stephen D. Townes
Stephen D. Townes
President and Chief Executive Officer
* * *
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on June 29, 2000 by the following persons on behalf of the
Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
-------------------------------------------------------- --------------------------------------------------
<S> <C>
/s/ Stephen D. Townes. . . . . . . . . . . . . . . . . . President and Chief Executive Officer and
---------------------------- Director (Principal Executive Officer)
Stephen D. Townes
/s/ Jeffrey P. Hartman . . . . . . . . . . . . . . . . . Senior Vice President and Chief Financial
---------------------------- Officer (Principal Accounting and Financial Officer)
Jeffrey P. Hartman
/s/ George B. Schwartz . . . . . . . . . . . . . . . . . Chairman of the Board, Director and Assistant
---------------------------- Secretary
George B. Schwartz
/s/ D. Dana Donovan. . . . . . . . . . . . . . . . . . . Director
----------------------------
D. Dana Donovan
/s/ Jay R. Levine . . . . . . . . . . . . . . . . . . . . Director
----------------------------
Jay R. Levine
/s/ Edward Levy. . . . . . . . . . . . . . . . . . . . . Director
----------------------------
Edward Levy
/s/ S. Mark Ray. . . . . . . . . . . . . . . . . . . . . Director
----------------------------
S. Mark Ray
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Reports of Independent Certified Public Accountants F-2
<S> <C>
Consolidated Balance Sheets F-5
Statements of Operations F-6
Combined Statements of Changes in Combined Equity and Consolidated
Statements of Changes in Stockholder's Equity F-7
Statements of Cash Flows F-8
Notes to Financial Statements F-9
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholder
Aircraft Service International Group, Inc.
We have audited the accompanying consolidated balance sheets of Aircraft
Service International Group, Inc. and subsidiaries as of March 31, 2000 and
1999, and the related consolidated statements of operations, changes in
stockholder's equity and cash flows for each of the two years in the period
ended March 31, 2000. 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 auditing standards generally
accepted in the United States. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Aircraft Service International Group, Inc. and subsidiaries at March 31, 2000
and 1999, and the consolidated results of their operations and their cash flows
for each of the two years in the period ended March 31, 2000, in conformity with
accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Miami, Florida
June 9, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders
Aircraft Service International Group, Inc.
We have audited the accompanying combined statements of income, changes in
combined equity and cash flows of Aircraft Service International Group, Inc., a
combined group of companies affiliated by common ownership, for the three months
ended March 31, 1998 and for the year ended December 31, 1997. 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 did not audit the financial statements of Aircraft Service, Ltd.
("ASL"), a company affiliated by common ownership and included in the
accompanying combined financial statements, for the year ended December 31,
1997. ASL's financial statements reflect total revenues of $15,897,000 for the
year ended December 31, 1997. Those statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
data included for ASL for the year ended December 31, 1997, is based solely on
the report of the other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. 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 and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits, and for 1997 the report of other
auditors, the combined financial statements referred to above present fairly, in
all material respects, the combined results of operations and cash flows of
Aircraft Service International Group, Inc. for the three months ended March 31,
1998 and for the year ended December 31, 1997, in conformity with accounting
principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Miami, Florida
June 9, 2000
<PAGE>
REPORT OF INDEPENDENT AUDITORS TO THE DIRECTORS
AND SHAREHOLDERS OF AIRCRAFT SERVICE LIMITED
We have audited the profit and loss accounts, reconciliation of movements in
shareholders' funds and cash flow statements of Aircraft Service Limited for
each of the two years in the period ended 31 December 1997 (not presented
separately herein), all expressed in pounds sterling. 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 auditing standards generally accepted
in the United Kingdom, which are similar to those generally accepted in the
United States of America. Those standard require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free from 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 presentation of
the financial statements. 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 results of the operations and cash flows of Aircraft Service
Limited for each of the two years in the period ended 31 December 1997, in
conformity with accounting principles generally accepted in the United Kingdom,
which differ in certain significant respects from generally accepted accounting
principles in the United States of America.
DELOITTE & TOUCHE
Chartered Accountants and
Registered Auditors
7 July 1998
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
2000 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 421 $ 3,311
Accounts receivable, net of allowance of $645 and $567 at March 31, 2000
and 1999, respectively 24,028 16,421
Prepaid expenses 1,694 650
Spare parts and supplies 2,428 2,095
----------- -----------
Total current assets 28,571 22,477
Property, plant and equipment, net of accumulated depreciation of $13,526 and
$6,176 at March 31, 2000 and 1999, respectively 48,162 46,889
Goodwill, net of accumulated amortization of $5,262 and $2,545 at
March 31, 2000 and 1999, respectively 49,571 48,668
Deferred financing costs, net of accumulated amortization of $889 and $337
at March 31, 2000 and 1999, respectively 2,736 3,205
Receivable from Viad 2,125 2,125
Investments in and advances to joint venture 359 224
Other assets 808 166
----------- -----------
Total assets $ 132,332 $ 123,754
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 6,387 $ 5,082
Accrued expenses 17,500 12,850
Customer deposits 3,645 3,488
Current portion of term loan and other 1,039 57
----------- -----------
Total current liabilities 28,571 21,477
Senior credit facility 5,930 2,927
Term loan 4,145 --
Senior Notes 80,000 80,000
----------- -----------
Total liabilities 118,646 104,404
Commitments and contingencies
Stockholder's equity:
Common stock, $0.01 par value; 1,000 shares authorized; 100 shares issued
and outstanding -- --
Paid-in capital 27,800 24,100
Accumulated deficit (14,095) (4,770)
Accumulated other comprehensive (loss) income ( 19) 20
----------- -----------
Total stockholder's equity 13,686 19,350
----------- -----------
Total liabilities and stockholders' equity $ 132,332 $ 123,754
=========== ===========
</TABLE>
See accompanying notes
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
(CONSOLIDATED) (COMBINED)
-------------- ----------
Three Months
Year Ended Year Ended ended Year Ended
March 31, March 31, March 31, December 31,
2000 1999 1998 1997
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Revenues $141,044 $123,441 $30,156 $119,325
Costs and expenses:
Operating expenses 116,409 99,035 25,986 97,116
Selling, general and administrative 13,266 8,865 1,818 7,581
Amortization of intangibles 2,727 2,545 22 103
Depreciation 7,508 6,176 1,097 4,501
--------- --------- -------- ---------
Total costs and expenses 139,910 116,621 28,923 109,301
--------- --------- -------- ---------
Operating income 1,134 6,820 1,233 10,024
Other income (expense), net 24 (253) (57) (71)
Interest income 100 207 73 350
Interest and other financial expense (10,583) (11,281) (170) (669)
--------- --------- -------- ---------
(Loss) income before income taxes and
extraordinary item (9,325) (4,507) 1,079 9,634
Income taxes -- 50 347 3,602
--------- --------- -------- ---------
(Loss) income before extraordinary item (9,325) (4,557) 732 6,032
Extraordinary loss on early extinguishment of debt -- (213) -- --
--------- --------- -------- ---------
Net (loss) income $ (9,325) $ (4,770) $ 732 $ 6,032
========= ========= ======== =========
See accompanying notes.
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
(U.S. DOLLARS IN THOUSANDS)
COMBINED STATEMENTS OF CHANGES IN COMBINED EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE COMBINED
PREDECESSOR STOCK CAPITAL EARNINGS INCOME (LOSS) EQUITY
---------------------------------------- ------------ -------- ---------- --------------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 $ 907 $ 1,585 $ 12,919 $ 22 $ 15,433
Dividends -- -- (6,881) -- (6,881)
Comprehensive income:
Net income -- -- 6,032 -- 6,032
Foreign currency translation adjustment -- -- -- (27) ( 27)
----------
TOTAL COMPREHENSIVE INCOME 6,005
---------------------------------------- ------------
BALANCE AT DECEMBER 31, 1997 907 1,585 12,070 ( 5) 14,557
Dividends -- -- (13) -- (13)
Comprehensive income:
Net income -- -- 732 -- 732
Foreign currency translation adjustment -- -- -- (13) (13)
----------
TOTAL COMPREHENSIVE INCOME 719
----------------------------------------
BALANCE AT MARCH 31, 1998 $ 907 $ 1,585 $ 12,789 $ (18) $ 15,263
======================================== ============ ======== ========== =============== ==========
</TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON OTHER TOTAL
STOCK COMMON PAID-IN ACCUMULATED COMPREHENSIVE STOCKHOLDER'S
SUCCESSOR: OUTSTANDING STOCK CAPITAL DEFICIT INCOME EQUITY
----------------------------- ------------ ------- -------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1998 100 $ -- $ -- $ -- $ -- $ --
Capital contribution -- -- 24,100 -- -- 24,100
Comprehensive loss:
Net loss -- -- -- (4,770) -- (4,770)
Foreign currency translation
adjustment -- -- -- -- 20 20
---------------
TOTAL COMPREHENSIVE LOSS (4,750)
----------------------------- ------------
BALANCE AT MARCH 31, 1999 100 -- 24,100 (4,770) 20 19,350
Capital contribution -- -- 3,700 -- -- 3,700
Comprehensive loss:
Net loss -- -- -- (9,325) -- (9,325)
Foreign currency translation
adjustment -- -- -- -- (39) (39)
---------------
TOTAL COMPREHENSIVE LOSS (9,364)
Balance at March 31, 2000 100 $ -- $ 27,800 $ (14,095) $ (19) $ 13,686
============================= ============ ======= ======== ============= =============== ===============
</TABLE>
See accompanying notes
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
STATEMENTS OF CASH FLOWS
(U.S. DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
(CONSOLIDATED) (COMBINED)
-------------- ----------
Year Year Three months
ended ended ended Year ended
March 31, March 31, March 31, December 31,
2000 1999 1998 1997
--------- ---------- -------- ---------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $ (9,325) $ (4,770) $ 732 $ 6,032
Adjustments to reconcile net (loss) income to
Net cash provided by operating activities:
Amortization of intangible assets 2,727 2,545 22 103
Depreciation 7,508 6,176 1,097 4,501
Amortization of deferred financing costs 552 2,888 -- --
Deferred income taxes -- 41 (245) (136)
Provision for bad debts -- 36 -- 245
Equity in (income) loss of joint venture (135) 157 54 133
Loss on sale of fixed assets 196 -- -- --
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable (5,811) (1,069) 2,650 1,822
Prepaid expenses (1,024) (523) 295 161
Spare parts and supplies (333) (337) (18) (71)
Other assets (512) 278 (200) 63
Accounts payable 1,152 462 411 1,387
Accrued expenses 4,070 (294) 1,136 2,438
Customer deposits 157 1,055 (939) 461
--------- ---------- -------- ---------
Net cash (used in) provided by operating activities (778) 6,645 4,995 17,139
INVESTING ACTIVITIES
Purchases of property, plant and equipment (8,027) (13,431) (2,666) (3,947)
Purchase of ASIG business, less cash acquired
of $6,513 -- (88,487) -- --
Purchase of ACS (160) -- -- --
Purchase of Elsinore business, less cash acquired of $8 (5,672) -- -- --
Purchase of GAH business -- (438) -- --
Advances to joint venture -- (200) -- (353)
--------- ---------- -------- ---------
Net cash used in investing activities (13,859) (102,556) (2,666) (4,300)
FINANCING ACTIVITIES
Issuance of common stock 3,700 24,100 -- --
Borrowings, net 8,130 80,630 -- --
Payments of deferred financing costs (83) (5,508) -- --
Principal payments on notes payable -- -- -- (82)
Advances from (to) Parent, net -- -- (2,316) (6,067)
Dividends -- -- (13) (6,881)
--------- ---------- -------- ---------
Net cash provided by (used in) financing activities 11,747 99,222 (2,329) (13,030)
--------- ---------- -------- ---------
Net (decrease) increase in cash and cash equivalents (2,890) 3,311 -- (191)
Cash and cash equivalents at beginning of period 3,311 -- -- 191
--------- ---------- -------- ---------
Cash and cash equivalents at end of period $ 421 $ 3,311 $ -- $ --
========= ========== ======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 9,888 $ 4,392 $ -- $ --
========= ========== ======== =========
Taxes paid $ 515 $ 401 $ -- $ 766
========= ========== ======== =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Receipt of fixed assets in satisfaction of a receivable $ -- $ 1,414 $ -- $ --
========= ========== ======== =========
</TABLE>
SEE ACCOMPANYING NOTES.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS
BASIS OF PRESENTATION
Aircraft Service International Group, Inc. (the "Company" or "Successor") was
organized in March 1998 for the purpose of acquiring beneficial ownership and
control of all the outstanding capital stock or other equity interests in
Aircraft Service International, Inc., ASIG Miami, Inc. (previously known as
Dispatch Services, Inc.), ASIG Fueling Miami, Inc. (previously known as Florida
Aviation Fueling Co.), Bahamas Airport Service, Ltd., Freeport Flight Services,
Ltd., ASIG, Ltd. (previously known as Aircraft Service, Ltd.), ASIG Germany GmbH
(previously known as ASII Holding GmbH), and ASII Aircraft Service Canada Ltd.
(collectively the "ASIG business" or "Predecessor") from Viad Corp ("Viad") and
Viad Service Companies, Limited as of April 1, 1998 pursuant to a share purchase
agreement (the "Acquisition"). Prior to the Acquisition by the Company, the
ASIG business was operated by Viad under the divisional name of Aircraft
Services International Group. The ASIG business had a December 31 year-end under
Viad's ownership. The Company's fiscal year end is March 31.
The Company's accompanying balance sheets as of March 31, 2000 and 1999 and the
related statements of operations, changes in stockholder's equity and cash flows
for the years ended March 31, 2000 and 1999 are presented on a consolidated
basis. The Company is 100% owned by Ranger Aerospace Corporation ("Ranger").
Prior to April 1, 1998, the Company had no operations.
For the year ended December 31, 1997, and for the three months ended March 31,
1998, the accounts of the ASIG business were not previously presented on a
combined basis as those of a single reporting entity. Accordingly, the accounts
included in the accompanying Predecessor financial statements were carved out of
Viad's historical accounting records. For all periods presented, the financial
statements of the Predecessor include the accounts of the ASIG business. The
accompanying financial statements include costs allocated by Viad to the
Predecessor for certain legal, audit, risk assessment, treasury and financial
services.
On April 1, 1998, the Company completed the Acquisition for a purchase price of
approximately $95 million in cash plus fees and direct acquisition costs of
approximately $4.1 million. The original purchase price was subject to a
purchase price adjustment in favor of the Company for any shortfall in the net
asset value, net working capital or required cash (as such terms are defined in
the purchase agreement) of the ASIG business from the levels represented at the
closing of the Acquisition. The purchase price was also subject to adjustment in
favor of Viad in an amount equal to the amount of cash in the ASIG business at
the closing of the Acquisition in excess of the required cash. As a result of
the purchase price adjustments, the Company is due a purchase price settlement
of $2.125 million from Viad, which is shown in the accompanying consolidated
balance sheet as a receivable. Currently, the Company and Viad have disputed
the amount of the purchase price settlement. Both Viad and the Company have
submitted claims to an independent arbitrator. Management believe that it will
fully recover the amount receivable from Viad on the accompanying balance sheet.
However, there are no assurances that Management will be successful in these
efforts.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS (CONTINUED)
The Acquisition was accounted for as a purchase and, accordingly, the purchase
price was allocated to the assets acquired and liabilities assumed based on
appraisals and other estimates of their underlying fair values. The excess of
the purchase price over the fair value of net assets acquired of approximately
$50.8 million is classified as goodwill and is being amortized over 20 years.
<TABLE>
<CAPTION>
The following is a summary of the purchase price allocation:
<S> <C>
Net working capital, including cash of $6,513 . . . . . . . . . . . $ 4,783
Property, plant and equipment . . . . . . . . . . . . . . . . . . . 38,149
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,268
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,775
--------
$96,975
========
The purchase price was funded as follows:
Sale of 100 shares of common stock, $0.01 par value, to
Ranger Aerospace Corporation . . . . . . . . . . . . . . . . . . . $24,100
Borrowings under Senior Increasing Rate Notes (see Note 8). . . . . 75,000
Purchase price adjustment - receivable from Viad at March 31, 1999. (2,125)
--------
$96,975
========
</TABLE>
The following unaudited pro forma data presents a summary of consolidated
results of operation of the Company for the year ended March 31, 1998 as if the
Acquisition had occurred on April 1, 1997:
<TABLE>
<CAPTION>
<S> <C>
Revenues . . . . . . . . . . . . . . $119,700
Net loss . . . . . . . . . . . . . . (4,010)
Net loss per share . . . . . . . . . (40,100)
</TABLE>
The unaudited pro forma results have been prepared for comparison purposes only
and include certain adjustments, such as additional depreciation and
amortization expense due to the revaluation of assets acquired and the goodwill
related to the Acquisition, additional interest expense associated with the debt
related to the acquisition, and certain reductions in expense associated with
the restructuring of certain Company functions after the Acquisition. The
unaudited pro forma results do not purport to be indicative of the results of
operation which actually would have resulted had the Acquisition occurred on
April 1, 1997, or of future results of operation of the Company.
On May 20, 1999, Elsinore Acquisition Corporation ("EAC"), a newly-created,
wholly-owned subsidiary of the Company, acquired substantially all of the assets
of Elsinore, L.P., ("Elsinore"), which includes 23 operating units in 10 states,
the U.S. Virgin Islands and Puerto Rico. Elsinore provides a variety of ground
handling, fueling, aircraft cleaning and other aviation services to major
commercial airlines. EAC will primarily continue the same business as
previously conducted by Elsinore. The Company and its sole shareholder, Ranger
Aerospace, are guarantors of EAC's obligations under the agreement governing the
asset purchase.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS (CONTINUED)
The total consideration paid by EAC was approximately $5.9 million (subject to
post-closing adjustments), which consists of $5 million in cash and a promissory
note of approximately $0.9 million. The promissory note has a maturity of one
year from the date of purchase, and is subject to post-closing adjustments. The
Company borrowed the cash portion of the purchase price from Key Corporate
Capital, Inc. ("Key") pursuant to the terms of an amendment to the Company's
existing senior credit facility, which the Company recorded on the books of EAC.
The Elsinore acquisition was accounted for as a purchase and accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed
based on appraisals and other estimates of their underlying fair values. The
excess of the purchase price over the fair value of net assets acquired of
approximately $3.7 million is classified as goodwill and is being amortized over
20 years.
The following is a summary of the purchase price allocation:
<TABLE>
<CAPTION>
<S> <C>
Net working capital, including cash of $9 $1,110
Property, plant and equipment 799
Other assets 130
Goodwill 3,453
------
$5,492
======
The purchase price was funded as follows:
Senior credit facility (see Note 7) $5,000
Promissory note (see Note 7) 492
------
$5,492
======
</TABLE>
The following unaudited pro forma data presents a summary of consolidated
results of operation of the Company for the twelve months ended March 31, 2000
and 1999 as if the Elsinore acquisition had occurred on April 1, 1998:
<TABLE>
<CAPTION>
Year Ended
March 31,
2000 1999
--------- ---------
<S> <C> <C>
Revenue $142,796 $137,319
Net loss (9,408) (6,025)
</TABLE>
The unaudited pro forma results have been prepared for comparison purposes only
and include certain adjustments, such as additional amortization expense due to
the goodwill related to the Elsinore acquisition and additional interest expense
associated with the debt related to the Elsinore acquisition. The unaudited pro
forma results do not purport to be indicative of the results of operation which
actually would have resulted had the Elsinore acquisition occurred on April 1,
1998, or of future results of operation of the Company.
In March 2000, a working capital adjustment of approximately $407,000 to reduce
the note payable was made pursuant to an agreement with General William Lyon,
which reduced goodwill. No further adjustments are anticipated.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS (CONTINUED)
NATURE OF BUSINESS
The Company and its subsidiaries provide aviation fueling services, aircraft
ground services and other aviation services at various airports in the United
States, Europe and the Caribbean.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND COMBINATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned or controlled. The Predecessor
is a combined group of companies affiliated through common ownership by Viad.
The accompanying Predecessor combined financial statements include the following
entities: Aircraft Services International, Inc., ASIG Miami, Inc., ASIG Fueling
Miami, Inc., Bahamas Airport Services, Ltd., Freeport Flight Services, Ltd.,
ASIG, Ltd., ASIG Germany GmbH and ASII Aircraft Service Canada Ltd. All
significant intercompany balances and transactions were eliminated.
SPARE PARTS AND SUPPLIES
Spare parts and supplies are valued at the lower of cost or market. Cost is
computed using the first-in first-out cost method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is recorded using
the straight-line method over the estimated useful lives of the assets, which
range from 4 to 20 years for operating equipment, 20 to 30 years for buildings,
and 3 to 10 years for office furniture and equipment. Leasehold improvements are
amortized over the life of the lease or the related asset, whichever is shorter.
Maintenance and repairs are charged to expense when incurred. Significant
expenditures, which extend the useful lives of assets, are capitalized.
FOREIGN CURRENCY TRANSLATION
For the Company's operations where the functional currency is other than the
U.S. Dollar, balance sheet amounts are translated using the exchange rate in
effect at the balance sheet date. Income statement amounts are translated at the
average exchange rates during the year or period. Translation adjustments
resulting from the changes in exchange rates from year to year are recorded as
accumulated other comprehensive income.
INVESTMENTS IN AND ADVANCES TO JOINT VENTURE
The Company accounts for its investment in a 50% owned joint venture under the
equity method of accounting. The joint venture, Skytanking GmbH, located in
Munich, Germany, provides aviation fueling and aircraft ground services at
Munich International Airport.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for the impairment of long-lived assets under 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 No. 121).
SFAS No. 121 requires impairment losses to be recorded on long-lived assets when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. The
Company believes no impairment indicators existed at March 31, 2000.
IMPAIRMENT OF GOODWILL
The carrying value of cost in excess of net assets acquired is reviewed for
impairment whenever events or changes in circumstances indicate that it may not
be recoverable. If such an event occurred, the Company would prepare
projections of future results of operations for the remaining amortization
period. If such projections indicated that the cost in excess of net assets
acquired would not be recoverable, the Company's carrying value of such asset
would be reduced by the estimated excess of such value over projected income.
REVENUE RECOGNITION
The Company recognizes revenue when services are performed.
INCOME TAXES
The Company and the Predecessor account for income taxes under FASB Statement
No. 109, "Accounting for Income Taxes" (SFAS No. 109). Deferred income tax
assets and liabilities are determined based upon differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that are expected to be in effect when the
differences are expected to reverse.
RECLASSIFICATION
Certain amounts in the statement of operations for the three month period ended
March 31, 1998 and year ended December 31, 1997 have been reclassified to
conform with the fiscal 2000 and 1999 financial statement presentation.
NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130), which
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. Comprehensive
income (loss) includes net income (loss) and other comprehensive income, which
includes, but is not, limited to, unrealized gains for marketable securities and
future contracts, foreign currency translation adjustments and minimum pension
liability adjustments. The accompanying financial statements for the Company
reflect other comprehensive income (loss) consisting of net income (loss) and
foreign currency translation adjustments.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In fiscal year 1999, the Company adopted Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits-an amendment of FASB Statements No. 87, 88, and 106"
(SFAS No. 132). SFAS No. 132 revises employers' disclosures about pension and
other postretirement benefit plans. It does not change the measurement or
recognition of those plans; therefore, the adoption of SFAS No. 132 affected the
Company's disclosure information only.
In fiscal year 1999, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133), This statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
It requires that an entity recognized all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value.
In fiscal year 2000, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133" (SFAS No. 137), which delayed the effective date of SFAS No.
133. The effective date for SFAS 133, after issuance of SFAS No. 137, is for
all fiscal quarters of all fiscal years beginning after June 15, 2000.
The Company plans to adopt SFAS No. 133 in fiscal year 2001. The adoption of
SFAS No. 133 is not expected to have a material impact on the Company's
financial statements.
CONCENTRATION OF CREDIT RISK
The Company provides services to domestic and foreign airlines and continually
monitors its exposure for credit losses. The Company limits its exposure by
requiring prepayments or deposits from certain customers.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
BUSINESS SEGMENTS
Pursuant to SFAS No. 131, "Disclosure About Segments of a Business Enterprise
and Related Information," the Company is required to report segment information.
As the Company only operates in one business segment, no additional reporting is
required, except for the geographic financial information provided in Note 14.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, accounts receivable, accounts payable and accrued
expenses in the accompanying financial statements approximate their fair value
because of their short-term maturities. At March 31, 2000 and 1999, the fair
value of the long-term debt, based on quoted market prices, was approximately
$69.4 million and $81.2 million, respectively.
3. RELATED-PARTY TRANSACTIONS
The Company's parent, Ranger, has no independent operations. Expenses incurred
by Ranger related to the Aircraft Service International Group business have been
pushed down to the Company. These expenses totaled $1,089 and $1,715 in fiscal
2000 and 1999, respectively.
The Company's Chairman is the President of a company which received a $150
annual fee in fiscal 2000 and 1999 and an $850 payment from the Company for
acquisition related services in connection with the Acquisition. In addition,
the same company will receive a bonus of $1,350 if the Company satisfies certain
market value and liquidity requirements in connection with a sale of the
business of Ranger or the Company or a public offering of equity securities of
Ranger.
Viad provided certain corporate general and administrative services to the
Predecessor, including legal, audit, risk assessment, treasury and finance
services. Related allocated expenses, included in selling, general and
administrative in the accompanying statements of operations, were approximately
$173 for the three months ended March 31, 1998 and approximately $854 for the
year ended December 31,1997.
Prior to the Acquisition, the Predecessor transferred ownership of certain
accounts receivable to Viad. The Predecessor was charged a discount from Viad
for these transferred receivables based on the amount of receivables actually
sold by Viad. Allocated charges totaled $148 for the three months ended March
31, 1998 and $555 for the year ended December 31, 1997, and are included in
interest and other financial expense in the accompanying statements of
operations.
Prior to the Acquisition, Viad managed the cash and financing requirements of
the Predecessor. The Predecessor's available cash was swept into Viad's accounts
and the Predecessor's cash requirements were paid from Viad's accounts. Interest
was credited to the Predecessor on net balances due from Viad based on the
prime-lending rate less 1.5%. Interest income credited to the Predecessor
totaled approximately $55 for the three months ended March 31, 1998 and $247 for
the year ended December 31, 1997.
All allocations and estimates were based on assumptions that Viad believed were
reasonable in these circumstances. The allocated amounts are not necessarily
indicative of the costs that the Predecessor would have incurred as a
stand-alone entity.
One of the Company's investors is Randolph Street Partners, which is affiliated
with the law firm of Kirkland and Ellis, which provide legal services for the
Company. Legal expenses incurred in connection with services performed by
Kirkland and Ellis, included in selling, general and administrative in the
accompanying statements of operations, were approximately $779 for the year
ended March 31, 2000 and $482 for the year ended March 31, 1999. Legal expenses
of approximately $720 for the year ended March 31, 1999 were incurred in
connection with the VIAD acquisition.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. RELATED-PARTY TRANSACTIONS (CONTINUED)
One of Ranger's investors, CIBC, performed certain services for the Company
in the fiscal year ended March 31, 1999. CIBC provided the Company with
short-term financing between April 1, 1998 and August 18, 1998. Interest
payments made to CIBC for the short-term loan was approximately $2.4 million.
Furthermore, transaction fees incurred in connection with the short-term
financing and subsequent exchange of the Old Notes for the Senior Notes were
approximately $2,401. In addition, transaction fees incurred in connection with
the VIAD acquisition paid to CIBC were approximately $2,250 for the year ended
March 31, 1999.
<TABLE>
<CAPTION>
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
March 31, 2000 March 31, 1999
--------------- --------------
<S> <C> <C>
Operating equipment . . . . . . . . . . . . . . . . . . $ 50,953 $41,379
Buildings and leasehold improvements. . . . . . . . . . 7,282 3,545
Office furniture and equipment. . . . . . . . . . . . . 3,123 1,472
Construction in progress. . . . . . . . . . . . . . . . 330 6,669
---------------- --------
61,688 53,065
(13,526) (6,176)
---------------- --------
Accumulated depreciation and amortization . . . . . . . $ 48,162 $46,889
================ ========
5. ACCRUED EXPENSES
Accrued expenses consisted of the following:
March 31, 2000. . March 31, 1999
-------------- --------------
Salaries and wages. . . . . . . . . . . . . . . . . . . $ 4,044 $ 4,161
Damage claims . . . . . . . . . . . . . . . . . . . . . 1,170 1,502
Pension liability . . . . . . . . . . . . . . . . . . . 206 151
Accrued interest. . . . . . . . . . . . . . . . . . . . 1,249 1,122
Consortium Funds 4,621 3,380
Other . . . . . . . . . . . . . . . . . . . . . . . . . 6,210 2,534
---------------- --------
$ 17,500 $12,850
================ ========
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. INCOME TAXES
The income (loss) before income taxes consisted of the following:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
Year ended Year ended Three months ended Year ended
March 31, March 31, March 31, December 31,
2000 1999 1998 1997
-------- -------- ------ ------
<S> <C> <C> <C> <C>
United States $(8,292) $(4,823) $ 504 $7,910
Non-U.S. (940) 316 575 1,724
-------- -------- ------ ------
$(9,232) $(4,507) $1,079 $9,634
======== ======== ====== ======
</TABLE>
The provision (benefit) for income taxes is summarized as follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
Year ended Year ended Three months ended Year ended
March 31, March 31, March 31, December 31,
2000 1999 1998 1997
----- ------ ------ -------
<S> <C> <C> <C> <C>
Current:
U.S. Federal $ -- $ -- $ 298 $2,737
State -- -- 57 478
Non-U.S. -- 9 152 523
------ ------ ------- ------
-- 9 507 3,738
Deferred:
U.S. Federal -- -- (126) (120)
State -- -- (15) (14)
Non-U.S. -- 41 (19) (2)
----- ------ ------ -------
-- 41 (160) (136)
----- ------ ------ -------
$ -- $ 50 $ 347 $3,602
===== ====== ====== =======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred income taxes are as follows:
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
---------------- ----------------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 41 $ 10
Accrued vacation and bonuses 142 65
Accrued as related to economic performance 228 --
Damage claims and other insurance liabilities 16 55
Amortization of deferred finance costs 107 34
Other 3 11
Net operating loss carry-forwards 6,727 2,056
---------------- ----------------
Deferred tax assets 7,264 2,231
Less: valuation allowance (5,021) (1,786)
---------------- ----------------
Total deferred tax assets, net 2,243 445
Deferred tax liabilities:
Tax depreciation in excess of book depreciation (1,826) (123)
Tax goodwill amortization in excess of book goodwill amortization (414) (285)
Other (3) (37)
---------------- ----------------
Total deferred tax liabilities (2,243) (445)
---------------- ----------------
Total net deferred taxes $ -- $ --
================ ================
</TABLE>
SFAS No. 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all evidence, both positive and negative, management has
determined that a $5,021 valuation allowance at March 31, 2000 is necessary to
reduce the deferred tax assets to the amount that will more likely than not be
realized. The change in the valuation allowance for the current year is $3,235.
At March 31, 2000, the Company has available U.S. net operating loss
carry-forwards of $17,409 which expire beginning in 2019.
A reconciliation of income taxes to the U.S. statutory rate of 34% is as
follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
-------------- -------------
Three months
Year ended Year ended ended Year ended
March 31, March 31, March 31, December 31,
2000 1999 1998 1997
-------------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Income taxes (benefit) at U.S.
Statutory rate $ (3,139) $ (1,607) $ 367 $ 3,276
State income taxes (344) (113) 50 306
Permanent items 139 34 14 43
Change in valuation allowance 3,235 1,786 -- --
Effect of non-U.S. operations 109 (50) (84) (23)
-------------- ------------- ----------- --------------
$ -- $ 50 $ 347 $ 3,602
============== ============= =========== ==============
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. NOTES PAYABLE
SENIOR CREDIT FACILITY
------------------------
On April 2, 1998, the Company entered into a revolving credit facility with Key
Corporate Capital (the "Senior Credit Facility"). The Senior Credit Facility
allows for borrowings in the aggregate of up to the lesser of $10 million or a
borrowing base, equal to 85% of eligible accounts receivable, as defined. The
revolving loans under the Senior Credit Facility mature on August 31, 2002 or
sooner as provided in the Senior Credit Facility.
Indebtedness of the Company under the Senior Credit Facility is guaranteed by
each of the Company's domestic subsidiaries and will generally be secured by:
(i) all of the Company's cash equivalents, accounts receivable, contract rights,
general intangibles, instruments and chattel paper relating thereto; (ii) all of
the Company's inventory; (iii) amounts (if any) held in a commercial deposit
account with the lending bank, and (iv) all proceeds from (i) to (iii)
inclusive.
The Company's borrowings under the Senior Credit Facility bear interest at a
floating rate and may be maintained as Prime Rate Loans or LIBOR loans.
Borrowings made pursuant to the Prime Rate Loans bear interest rates equal to
the prime rate plus the Applicable Margin (as defined in the Senior Credit
Facility) and borrowings made pursuant to the LIBOR Loans bear interest rates
equal to the LIBOR rate plus the Applicable Margin. The Applicable Margin for
Prime Rate Loans will range from 0% to 0.50% based on the Company's Leverage
Ratio (as defined in the Senior Credit Facility). The Applicable Margin for
LIBOR Loans will range from 1.25% to 2.25% based on the Company's Leverage
Ratio.
The Senior Credit Facility requires the Company to meet certain financial tests,
including, a minimum yearly earning before interest, taxes, depreciation and
amortization "EBITDA", as defined test and maximum leverage ratios. The Senior
Credit Facility also contains certain covenants, which among other things, will
limit the incurrence of additional indebtedness, the making of loans or
investments, the declaration of dividends, transactions with affiliates, asset
sales, acquisitions, mergers and consolidations, the incurrence of liens and
encumbrances and other matters customarily restricted in such agreements. There
was $5,930 and approximately $2,927 outstanding under the Senior Credit Facility
as of March 31, 2000 and 1999, respectively. The amounts outstanding under the
Senior Credit Facility bear interest at 8.75%. As of March 31, 2000 and 1999
respectively, there was $3,805 and $6,808 of available credit under the Senior
Credit Facility.
TERM LOAN AND OTHER
----------------------
On May 20, 1999, the Senior Credit Facility was amended to add a $5 million Term
Loan (the "Term Loan"). The proceeds of the Term Loan were used as part of the
purchase price for the assets of Elsinore, L.P. (See Note 1). The Term Loan is
payable in quarterly installments in arrears at varying amounts over its
five-year life. The Company's borrowings under the Term Loan will bear interest
in a manner identical to the Senior Credit Facility except that the Applicable
Margin for Prime Rate Loans will range from 0% to 1.25% based on the Company's
Leverage Ratio and the Applicable Margin for LIBOR Loans will range from 2% to
3% based on the Company's Leverage Ratio. Furthermore, the requirement to meet a
minimum interest coverage test is no longer applicable as of April 1, 1999.
Rather, the Company must meet a minimum EBITDA test. The Term Loan is secured by
all of the Company's equipment. As of March 31, 2000, $4,625 was outstanding
under the Term Loan. The following is a summary of the scheduled maturities of
the Term Loan as of March 31, 2000:
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. NOTES PAYABLE (CONTINUED)
TERM LOAN AND OTHER (CONTINUED)
-------------------
<TABLE>
<CAPTION>
<S> <C>
2000 $ 500
2001 688
2002 750
2003 1,012
2004 1,325
Thereafter 350
------
Total $4,625
======
</TABLE>
Included in Term Loan and Other are other notes payable totaling $559, which
includes the amount due under the note payable issued in connection with the
Elsinore acquisition as discussed in Note 1.
As of March 31, 2000 and 1999, the Company had $265 letters of credit
outstanding.
8. SENIOR NOTES
On April 2, 1998, the Company issued $75 million of notes (the "Senior
Increasing Rate Notes"). The proceeds from the Senior Increasing Rate Notes were
used to consummate the Acquisition. On August 18, 1998, the Company issued $80
million of notes (the "Old Notes"). The proceeds from the Old Notes were used to
repay the Senior Increasing Rate Notes. On February 12, 1999, the Company
exchanged the Old Notes for substantially identical Series B 11% Senior Notes
(the "Notes"). The Notes mature in August 2005, and bear interest at 11%,
payable semiannually on each February 15 and August 15, commencing February 15,
1999. The Notes are redeemable at the option of the Company, at any time on or
after August 15, 2003, at a premium of 105.5% in 2003 and at 100% of the
principal amount in 2004 and thereafter. In addition, the Company may redeem at
its option up to 33 1/3% of the original principal amount of the Notes at any
time on or prior to August 15, 2001, at a redemption price equal to 111% of the
principal amount being redeemed, with the net proceeds of one or more public
offerings, provided that at least $53.3 million aggregate principal amount of
the Notes remain outstanding after any such redemption and that any such
redemption occurs within 90 days following the closing of such public offering.
Upon the occurrence of a Change in Control (as defined in the Indenture covering
the Notes), each holder of the Notes is entitled to require the Company to
repurchase such Notes at a premium of 101%. The Notes are fully and
unconditionally guaranteed, on an unsecured basis, by the Company's domestic
subsidiaries (see Note 18).
The Notes contain certain covenants, which among other things limit the ability
of the Company to incur additional indebtedness, issue common and preferred
stock of its subsidiaries, pay dividends, transfer and sell assets and enter
into transactions with affiliates.
In fiscal 1999, the Company wrote-off $213 of unamortized deferred financing
costs previously incurred in connection with the Senior Increasing Rate Notes
that were repaid with the net proceeds of the issuance of the Old Notes. This
write-off was accounted for as an extraordinary loss on the early extinguishment
of debt.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. STOCK OPTIONS
During 1999, Ranger adopted the 1999 Stock Option Plan (the "Plan") which
provides for the granting of stock options to purchase shares of Ranger's common
stock to executives and other key employees of the Company. At March 31, 1999,
Ranger reserved 1,000,000 shares of its common stock for issuance under the
Plan. The vesting period and the terms of the stock options granted are
established by a committee appointed by Ranger's Board of Directors (the
"Committee"). The stock options expire no later than ten years from the date of
grant. Ranger has granted options to Company employees to purchase 14,431 shares
of Ranger's Class B common stock. Of the 14,431 options granted, 1,883 vest
ratably over time and 3,767 vest upon the attainment of certain performance
goals as determined by the Committee. The remaining 3,190 vest upon the Company
satisfying certain market value and liquidity requirements in connection with a
sale of Ranger or the Company. All unvested options granted under the plan will
automatically vest on January 28, 2007. The exercise price of these stock
options is $100 per share, which was determined by the Committee to be the fair
value of Ranger's common stock at the date of grant. As a result, no
compensation cost has been recognized under the provisions of APB Opinion No.
25. All of the options issued by Ranger were issued to employees of the Company
and accordingly such options are reflected below.
Changes to the Plan for the years ending March 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Year Ended March 31, Year Ended March 31,
2000 1999
----- ----
Weighted Weighted
Average Average
Exercise Price Exercise Price
Ranger Shares Per Share Ranger Shares Per Share
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 13,710 $ 100 -- $ --
Granted. . . . . . . . . . . . . 636 100 13,795 100
Exercised. . . . . . . . . . . . -- --
Cancelled. . . . . . . . . . . . (574) 100 (85) 100
-------------- -------------
Outstanding at end of the year . 13,772 $ 100 13,710 $ 100
============== ==============
</TABLE>
The following table summarizes information about the stock options outstanding
at March 31, 2000 and 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------- --------------------
Weighted Weighted
Number Average Remaining Number Average Exercise
Exercise Price Outstanding at Contractual Life Exercisable Price Per Share
--------------- ----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
March 31, 2000 $ 100 13,772 8 5,342 $ 100
March 31, 1999 $ 100 13,710 9 1,130 $ 100
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. STOCK OPTIONS (CONTINUED)
The weighted average per share fair value of options granted under Ranger's
stock option plan during 2000 and 1999 based on the Black-Scholes option
valuation model, was $42.88 and $41.72 per share under option, respectively. For
purposes of pro forma disclosures required by SFAS No. 123, the estimated fair
value of the options is amortized over the options' vesting period. The
Company's pro forma information for the year ended March 31, 2000 and 1999
follows:
<TABLE>
<CAPTION>
Year ended Year ended
March 31, 2000 March 31, 1999
---------------- ----------------
<S> <C> <C>
Net loss $ (9,451) $ (4,952)
================ ================
Net loss per share $ (94,510) $ (49,520)
================ ================
</TABLE>
The following weighted average assumptions were used as of March 31, 2000:
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
-------------- ---------------
<S> <C> <C> <C>
Expected life 8 years 9 years
Interest rate 6.00% 6.00%
Volatility -- --
Dividend yield -- --
</TABLE>
The Black-Scholes options valuation model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
Ranger's stock options have characteristics significantly different from traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, the existing models, in management's opinion, do
not necessarily provide a reliable single measure of the fair value of Ranger's
stock options.
10. COMMITMENTS
The Company leases operating facilities and office space pursuant to various
operating leases. The aggregate minimal rental payments under all operating
leases with initial terms of one year or more at March 31, 2000 are as follows:
<TABLE>
<CAPTION>
<S> <C>
2001 $2,174
2002 2,156
2003 1,991
2004 1,868
2005 1,781
Thereafter 3,706
------
13,676
===========
</TABLE>
Total rent expense for all operating leases amounted to $3,981, $2,947, and
$2,491 for the years ended March 31, 2000, 1999, and December 31, 1997,
respectively, and $754 for the three months ended March 31 1998.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. EMPLOYEE BENEFIT PLANS
The Company sponsors a non-contributory defined benefit pension plan, which
covers certain union employees at its Miami station. The plan provides benefits
based on the employees' years of service and qualifying final average
compensation. The Company's funding policy is to contribute amounts sufficient
to meet the minimum funding requirements of the Employee Retirement Income
Security Act of 1974, as amended, or such additional amounts as determined
appropriate to assure that assets of the plan would be adequate to provide
benefits.
During the three months ended March 31, 1998 and the year ended December 31,
1997, the Predecessor sponsored two other non-contributory defined benefit
pension plans. These plans covered management, supervisory, administrative and
non-union hourly employees. These plans provided benefits based on the
employees' tenure and qualifying average compensation. The plans were funded by
Viad and were assumed by Viad subsequent to March 31, 1998 under terms set forth
in the April 1, 1998 purchase agreement.
The assumptions used in the calculation of the actuarial present value of the
projected benefit obligation and expected long-term return on plan assets for
the Company's defined benefit pension plan consisted of the following:
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
--------------- ---------------
<S> <C> <C>
Weighted average discount rate. . . . . 6.75% 8.0%
Rate of increase in compensation levels 3.75% 5.0%
Expected long-term return on assets . . 9.5% 9.5%
</TABLE>
<TABLE>
<CAPTION>
The following table sets forth a reconciliation of benefit obligations, plan
assets and funded status for the Company's defined benefit pension plan as of
and for the years ended March 31, 2000 and 1999.
March 31, 2000 March 31, 1999
-------------- --------------
CHANGES IN BENEFIT OBLIGATION:
<S> <C> <C>
Benefit obligation at the beginning of the period $1,337 $1,122
Service cost 114 82
Interest cost 90 83
Actuarial loss (176) 50
------- -------
Benefit obligation at end of period $1,365 $1,337
======= =======
CHANGES IN PLAN ASSETS:
Fair value of plan assets at beginning of period $1,153 $1,006
Actual return on plan assets 83 98
Employer contribution 57 49
------- -------
Fair value of plan assets at end of period $1,293 $1,153
======= =======
RECONCILIATION:
Funded status $ 71 $ 184
Unrecognized net (loss) gain 130 (337)
------- -------
Accrued benefit cost $ 201 $ (153)
======= =======
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the net periodic pension costs of the defined
benefit pension plans:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------
Year ended
Year ended Year ended Three months ended December 31,
March 31, 2000 March 31, 1999 March 31, 1998 1997
--------------- -------------- --------------- ------
<S> <C> <C> <C> <C>
Service cost-benefits earned during the period $ 114 $ 82 $ 215 $ 715
Interest cost on projected benefit obligation. 90 83 213 815
Return on assets . . . . . . . . . . . . . . . (127) (140) (233) (1,765)
Net amortization and deferral. . . . . . . . . 31 58 16 1,119
----------- ----------- -------- -------
Net periodic pension expense . . . . . . . . . $ 108 $ 83 $ 211 $ 884
============ ============ ======== =======
</TABLE>
The Company also sponsors a defined contribution plan pursuant to Section 401(K)
of the Internal Revenue code. Subject to certain dollar limits, employees may
contribute a percentage of their salaries to the plan and the Company will match
a portion of each employee's contribution. This plan is in effect for U.S.
based employees only. The expense pertaining to this plan was approximately $715
and $638 for the years ended March 31, 2000 and 1999. The expense incurred by
the Predecessor pertaining to this plan was approximately $123 for the
three-month period ended March 31, 1998 and $331 for the year ended December 31,
1997.
The Predecessor provided contributory health care benefits to the retirees and
their dependents of two of its entities. The Predecessor recorded a liability
equal to the unfunded accumulated benefit obligation for these benefits as
required by the provision of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions" (SFAS No. 106).
SFAS NO. 106 requires that the cost of these benefits, which are primarily for
health care and life insurance, be recognized in the financial statements
throughout the employees' active working careers.
The components of net periodic post-retirement benefit cost consisted of the
following:
<TABLE>
<CAPTION>
PREDECESSOR
-----------
Three months ended Year ended December 31,
March 31, 1998 1997
------------------- -----------------------
<S> <C> <C>
Service cost-benefits earned during the period. $ 8 $30
Interest cost on accumulated benefit obligation 8 33
Net amortization and deferral . . . . . . . . . (1) (3)
------ ----
Net periodic post-retirement expense. . . . . . $ 15 $60
====== ====
</TABLE>
12. CONTINGENCIES
The Company is engaged in litigation arising in the normal course of business.
Management believes that the outcome of such litigation will not have a material
adverse effect on the Company's financial position or its results of operations.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
12. CONTINGENCIES (CONTINUED)
The Company is subject to compliance obligations and liabilities imposed
pursuant to federal, state, local and foreign environmental and workplace health
and safety requirements, including CERCLA. In particular, the Company's aviation
fueling services are subject to liabilities and obligations relating to the
above ground and underground storage of, and the release and cleanup of,
petroleum products. Although the Company believes it is in material compliance
with environmental, health and safety requirements, the possibility exists that
noncompliance could occur or be identified in the future, and the penalties or
costs of corrective action associated therewith could have a material adverse
effect on the Company's business, operating results and financial condition. In
addition, requirements are complex, change frequently and have tended to become
more stringent over time, and there can be no assurance that these requirements
will not change in the future in a manner that could materially and adversely
affect the Company.
The Company is currently conducting or funding, or expects to conduct or
fund, environmental investigations, monitoring and cleanups at certain of its
previously or currently operated facilities. Also, from time to time, the
Company receives notices of potential liability for cleanup costs associated
with offsite waste recycling or disposal facilities at which wastes associated
with its operations allegedly have come to be located. In addition, airport
authorities are coming under increasing pressure to clean up previous
contamination at their facilities and are seeking financial contribution from
airport tenants and companies which operate at their airports. Although the
Company has taken steps to mitigate or remove the foregoing liabilities, the
Company could bear direct liability for the foregoing matters and such liability
could have a material adverse effect on the Company's business, operating
results and financial condition.
Approximately 56.2% of the Company's employees are represented by labor
unions. There are currently approximately 33 collective bargaining contracts
(among 7 separate union entities) in place, almost all of which have terms of
three years. Contract expirations are staggered with approximately one-third
coming up for renewal each year. The Company believes that it has had good
relations with the several unions representing its employees.
Tioga, an investor in Ranger, will receive a bonus of $1,350,000 if the
Company satisfies certain market value and liquidity requirements in connection
with a sale of the business of Ranger or the Company or a public offering of
equity securities of Ranger.
13. SIGNIFICANT CUSTOMERS AND SERVICES
One of the Company's customers accounted for 20.3% of the Company's overall
revenues for the year ended March 31, 2000. This customer also accounted for
15.0% of revenues for the year ended March 31, 1999, 15.2% of the Predecessor's
revenue for the three months ended March 31, 1998 and 17.5% of revenues for the
year ended December 31, 1997.
Another customer accounted for 4.9% of the Company's revenue for the year ended
March 31, 2000. This customer also accounted for 13.0% of the Company's revenue
for the year ended March 31, 1999, 13.3% of the Predecessor's revenue for the
three months ended March 31, 1998 and 14.1% of revenues for the year ended
December 31, 1997.
The Company operates two primary lines of business -- Fueling and Ground
Handling. Revenue for the Fueling line of business was responsible for 64.0%
and 60.7% of the Company's total revenue for fiscal 2000 and fiscal 1999,
respectively. Revenue for the Ground Handling line of business was responsible
for 32.8% and 15.3% of the Company's total revenue for fiscal 2000 and fiscal
1999, respectively.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
14. GEOGRAPHIC AREA INFORMATION
The following table includes selected financial information pertaining to the
Company's and Predecessor's geographic operations:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
------------ ------------
Year ended Year ended Three months ended Year ended
March 31, March 31, March 31, December 31,
2000 1999 1998 1997
------------ ------------ ------------------- -------------
<S> <C> <C> <C> <C>
Revenues:
United States . $ 126,279 $ 102,883 $ 24,967 $ 98,853
Europe. . . . . 11,789 17,835 4,487 16,792
Bahamas . . . . 2,976 2,723 702 3,680
------------ ------------ ----------------- -------------
$ 141,044 $ 123,441 $ 30,156 $ 119,325
============ ============ =================== =============
Operating income (loss):
United States . $ 1,150 $ 5,205 $ 632 $ 8,307
Europe. . . . . (347) 1,132 454 1,527
Bahamas . . . . 331 483 147 190
------------ ------------ ------------------- -------------
$ 1,134 $ 6,820 $ 1,233 $ 10,024
============ ============ =================== =============
</TABLE>
<TABLE>
<CAPTION>
MARCH 31 MARCH 31
2000 1999
--------- ---------
<S> <C> <C>
Identifiable assets:
United States. . . $ 125,116 $ 118,322
Europe . . . . . . 5,697 4,065
Bahamas. . . . . . 1,519 1,367
--------- ---------
$ 132,332 $ 123,754
========= =========
</TABLE>
15. ABANDONED ACQUISITION COSTS AND SPECIAL MANAGEMENT BONUS
During the fourth quarter of fiscal 2000, there were two notable costs that
decreased earnings. First, the Board of Directors granted an off-plan special
bonus pool of $312 to a number of managers for individual accomplishments.
Second, the Company pursued several acquisitions of airline service companies
that were not consummated and incurred costs related to the collection of the
Viad Receivable, which resulted in $3,449 of costs charged against earnings.
These two charges aggregated $3,761, and are included in selling, general and
administrative on the statement of operations for the year ended March 31, 2000.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
16. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING/COMBINING FINANCIAL
STATEMENTS
In connection with the acquisition as discussed in Note 8, the Company offered
$80 million in aggregate principal amount of Series B 11% Senior Notes due 2005
(the "Notes"). The Notes are fully and unconditionally guaranteed on a senior
unsecured basis, jointly and severally, by the Company's domestic subsidiaries
(the "Guarantors"). The Guarantors include Aircraft Services International,
Inc., ASIG Miami Inc. (formerly known as Dispatch Services, Inc.), ASIG Fueling
Miami, Inc. (formerly known as Florida Aviation Fueling Co.), and Elsinore
Acquisition Corporation. The condensed consolidating/combining financial
statements of the Guarantors should be read in connection with the
consolidated/combined financial statements of the Company. Separate financial
statements of the Guarantors are not presented because the Company believes such
information is not material and that the condensed consolidating/combining
financial statements presented are more meaningful in understanding the
financial position and results of operations of the Guarantors. Those
supplemental guarantor condensed combining financial statements that do not
contain a column for elimination entries and/or a column for ASIG, Inc. (or the
Predecessor) do so because all amounts that would appear in the column are zero.
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
16. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING/COMBINING FINANCIAL
STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
NON-
GUARANTOR GUARANTOR CONSOLIDATED
ASIG, INC. SUBSIDIARIES SUBSIDIARIES TOTAL
------------ -------------- -------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents . . . . . . . . . . . . $ 111 $ (14) $ 324 $ 421
Accounts receivable, net . . . . . . . . . . -- 21,953 2,075 24,028
Prepaid expenses . . . . . . . . . . . . . . 27 1,159 508 1,694
Spare parts and supplies . . . . . . . . . . -- 2,394 34 2,428
------------ -------------- -------------- ---------
Total current assets . . . . . . . . . . . . 138 25,492 2,941 28,571
Property, plant and equipment, net. . . . . . 77 45,176 2,909 48,162
Due from affiliates . . . . . . . . . . . . . 112 (112) -- --
Goodwill, net . . . . . . . . . . . . . . . . -- 49,006 565 49,571
Deferred financing costs, net . . . . . . . . 2,736 -- -- 2,736
Investments in and advances in joint venture. -- 1 358 359
Receivable from Viad . . . . . . . . . . . . 2,125 -- - 2,125
Other assets. . . . . . . . . . . . . . . . . 4 798 6 808
------------ -------------- -------------- ---------
Total assets. . . . . . . . . . . . . . . . . $ 5,192 $ 120,361 $ 6,779 $132,332
============ ============== ============== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . $ -- $ 6,049 $ 338 $ 6,387
Due to (from) affiliates . . . . . . . . . . (82,754) 89,102 (6,348) --
Notes payable to affiliates. . . . . . . . . (12,193) -- 12,193 --
Accrued expenses . . . . . . . . . . . . . . 1,271 15,134 1,095 17,500
Customer deposits. . . . . . . . . . . . . . -- 3,519 126 3,645
Current portion of notes payable and term loan
and other. . . . . . . . 500 491 48 1,039
------------ -------------- -------------- ---------
Total current liabilities. . . . . . . . . . (93,176) 114,295 7,452 28,571
Notes payable . . . . . . . . . . . . . . . . 10,055 -- 20 10,075
Senior Notes . . . . . . . . . . . . . . . . 80,000 -- -- 80,000
------------ -------------- -------------- ---------
Total liabilities. . . . . . . . . . . . . . 90,055 -- 20 90,075
Stockholder's Equity:
Common stock . . . . . . . . . . . . . . . . -- -- -- --
Paid-in capital. . . . . . . . . . . . . . . 27,800 -- -- 27,800
Retained earnings (accumulated deficit). . . (19,487) 6,066 (674) (14,095)
Accumulated other comprehensive income -- -- (19) (19)
------------ ------------- -------------- ---------
Total stockholder's equity . . . . . . . . . 8,313 6,066 (693) 13,686
------------ -------------- -------------- ---------
Total liabilities and stockholder's equity . $ 5,192 $ 120,361 $ 6,779 $132,332
============ ============== ============== =========
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
16. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING/COMBINING FINANCIAL
STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
ASIG, INC. SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ -------------- ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 124 $ 2,216 $ 971 $ - $ 3,311
Accounts receivable, net - 15,261 1,160 - 16,421
Prepaid expenses 18 602 30 - 650
Spare parts and supplies - 2,067 28 - 2,095
------------ -------------- ------------- -------------- ---------
Total current assets 142 20,146 2,189 - 22,477
Property, plant and equipment, net 78 44,186 2,625 - 46,889
Due from affiliates 90,120 - 21,565 (111,685) -
Notes receivable from affiliates 11,018 - - (11,018) -
Goodwill, net - 48,249 419 - 48,668
Deferred financing costs, net 3,205 - - - 3,205
Investment in consolidated subsidiaries 445 1,170 - (1,615) -
Investments in and advances in joint venture - - 224 - 224
Receivable from Viad 2,125 - - - 2,125
Other assets 4 156 6 - 166
------------ -------------- ------------- -------------- ---------
Total assets $ 107,137 $ 113,907 $ 27,028 $ (124,318) $123,754
============ ============== ============= ============== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ - $ 4,602 $ 480 $ - $ 5,082
Due from affiliates 9,099 91,933 10,653 (111,685) -
Notes payable to affiliates - - 11,018 (11,018) -
Accrued expenses 1,319 8,257 3,274 - 12,850
Customer deposits - 3,398 90 - 3,488
Current portion notes payable - - 57 - 57
------------ -------------- ------------- -------------- ---------
Total current liabilities 10,418 108,190 25,572 (122,703) 21,477
Notes payable 2,927 - - - 2,927
Senior notes 80,000 - - - 80,000
------------ -------------- ------------- -------------- ---------
Total liabilities 93,345 108,190 25,572 (122,703) 104,404
Stockholder's equity:
Common stock - 4 26 (30) -
Paid-in capital 24,100 441 1,144 (1,585) 24,100
Retained earnings (accumulated deficit) (10,308) 5,272 266 - (4,770)
------------ -------------- ------------- -------------- ---------
Accumulated other comprehensive income - - 20 - 20
Total stockholder's equity 13,792 5,717 1,456 (1,615) 19,350
------------ -------------- ------------- -------------- ---------
Total liabilities and stockholder's equity $ 107,137 $ 113,907 $ 27,028 $ (124,318) $123,754
============ ============== ============= ============== =========
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
16. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING/COMBINING FINANCIAL
STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
(SUCCESSOR)
YEAR ENDED MARCH 31, 2000
--------------------------------------
NON-
GUARANTOR GUARANTOR CONSOLIDATED
ASIG, INC. SUBSIDIARIES SUBSIDIARIES TOTAL
-------------------------------------- -------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . $ $ 126,280 $ 14,764 $141,044
Costs and expenses::
Operating expenses . . . . . . . . . . . . 16 103,727 12,666 116,409
Selling, general and administrative. . . . 10 11,755 1,501 13,266
Amortization . . . . . . . . . . . . . . . 18 6,899 591 7,508
Depreciation . . . . . . . . . . . . . . . -- 2,706 21 2,727
------------- -------------- -------------- ---------
Total cost and expenses. . . . . . . . . . . 44 125,087 14,779 139,910
------------- --------------- ------------ --------
Operating income (loss). . . . . . . . . . . (44) 1,193 (15) 1,134
Other income (expense), net. . . . . . . . . -- (144) 168 24
Interest income. . . . . . . . . . . . . . . 7 84 9 100
Interest and other financial expense . . . . (9,163) (318) (1,102) (10,583)
------------- ------------ ----------- --------
Income (loss) before income taxes. . . . . . (9,200) 815 (940) (9,325)
Income taxes . . . . . . . . . . . . . . . . -- -- -- --
------------- ----------- ----------- ---------
Net income (loss) before extraordinary item. $ (9,200) $ 815 $ (940) $ (9,325)
============ ============== ============== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
16. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING/COMBINING FINANCIAL
STATEMENTS (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS
(SUCCESSOR)
YEAR ENDED MARCH 31, 1999
--------------------------------------
GUARANTOR NON-GUARANTOR CONSOLIDATED
ASIG, INC. SUBSIDIARIES SUBSIDIARIES TOTAL
---------------------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
Revenues $ - $ 102,883 $ 20,558 $ 123,441
Cost and expenses:
Operating expenses - 81,878 17,157 99,035
Selling, general and administrative - 7,657 1,208 8,865
Amortization - 2,545 - 2,545
Depreciation 9 5,589 578 6,176
Total cost and expenses 9 97,669 18,943 116,621
-------- -------- -------- --------
Operating income (loss) (9) 5,214 1,615 6,820
Other income (expense), net (5) 15 (263) (253)
Interest income 21 129 57 207
Interest and other financial expense (10,102) (86) (1,093) (11,281)
---------- --------- -------- --------
Income (loss) before income taxes (10,095) 5,272 316 (4,507)
Income taxes - - 50 50
----------- --------- --------- -------
Net income (loss) before extraordinary item (10,095) 5,272 266 (4,557)
Extraordinary loss on early
extinguishment of debt (213) - - (213)
----------- --------- --------- -------
Net income (loss) $ (10,308) $ 5,272 $ 266 $ (4,770)
============= =============== ============== =========
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
16. SUPPLEMENTAL GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMBINED STATEMENT OF INCOME
(PREDECESSOR)
THREE MONTHS ENDED MARCH 31, 1998
-----------------------------------
NON-
GUARANTOR GUARANTOR CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES TOTAL
--------------------- -------------- --------------
<S> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . $ 24,967 $ 5,189 $ 30,156
Costs and expenses:
Operating expenses. . . . . . . . . 21,855 4,131 25,986
Selling, general and administrative 1,561 257 1,818
Amortization. . . . . . . . . . . . 16 6 22
Depreciation. . . . . . . . . . . . 903 194 1,097
---------------- ----------- -----------
Total cost and expenses . . . . . . . 24,335 4,588 28,923
---------------- ------------ ------------
Operating income. . . . . . . . . . . 632 601 1,233
Other income (expense), net . . . . . (5) (52) (57)
Interest income . . . . . . . . . . . 47 26 73
Interest and other financial expense. (170) -- (170)
---------------- ---------- ------------
Income (loss) before income taxes . . 504 575 1,079
Income taxes. . . . . . . . . . . . . 214 133 347
------------------------------ ----------- -------------
Net income. . . . . . . . . . . . . . $ 290 $ 442 $ 732
================== ============== ==============
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
16. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING/COMBINING FINANCIAL
STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMBINED STATEMENT OF INCOME
(PREDECESSOR)
YEAR ENDED DECEMBER 31, 1997
--------------------------------------
NON-
GUARANTOR GUARANTOR CONSOLIDATED
SUBSIDIARIES SUBSIDIARIES TOTAL
-------------------------------------- -------------- --------------
<S> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . $ 98,853 $ 20,472 $ 119,325
Costs and expenses::
Operating expenses. . . . . . . . . 81,058 16,058 97,116
Selling, general and administrative 5,464 2,117 7,581
Amortization. . . . . . . . . . . . 68 35 103
Depreciation. . . . . . . . . . . . 3,956 545 4,501
--------------- ---------- -----------
Total cost and expenses . . . . . . . 90,546 18,755 109,301
---------------- ---------- -----------
Operating income. . . . . . . . . . . 8,307 1,717 10,024
Other income (expense), net . . . . . 56 (127) (71)
Interest income . . . . . . . . . . . 216 134 350
Interest and other financial expense. (669) -- (669)
--------------- ----------- -----------
Income (loss) before income taxes . . 7,910 1,724 9,634
Income taxes. . . . . . . . . . . . . 3,081 521 3,602
-------------------------- ----------- ------------
Net income. . . . . . . . . . . . . . $ 4,829 $ 1,203 $ 6,032
================== ============== ==============
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
16. SUPPLEMENTAL GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(SUCCESSOR)
YEAR ENDED MARCH 31, 2000
-------------------------
GUARANTOR NON-GUARANTOR CONSOLIDATED
ASIG, INC. SUBSIDIARIES SUBSIDIARIES TOTAL
---------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (loss) $ (9,179) $ 793 $ (939) $ (9,325)
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Amortization of intangible assets -- 2,705 22 2,727
Depreciation 18 6,898 592 7,508
Amortization of deferred financing costs 552 -- -- 552
(Gain)/Loss on sale of Fixed Assets -- 187 9 196
Provision for bad debt -- -- -- --
Equity loss in joint venture -- (464) 329 (135)
Changes in operating assets and liabilities,
net of acquisition:
Accounts receivable (113) (4,744) (954) (5,811)
Due from (to) affiliates -- (2,723) 2,723 --
Prepaid expenses ( 9) (537) (478) (1,024)
Spare parts and supplies -- (328) ( 5) (333)
Other assets 130 (503) (139) (512)
Accounts payable (153) 1,447 (142) 1,152
Accrued expenses (1,409) 5,714 (235) 4,070
Customer deposits -- 122 35 157
------------ -------------- -------------- ---------
Net cash provided by (used in) by operating
Activities (10,163) 8,567 818 (778)
INVESTING ACTIVITIES
Purchases of property, plant and equipment (16) (7,096) (915) (8,027)
Purchase of Elsinore business 23 (5,695) -- (5,672)
Investment in ACS -- -- (160) (160)
Changes in Goodwill from ASIG Purchase -- 7 ( 7) --
Advances to joint venture -- 326 (326) --
------------ -------------- -------------- ---------
Net cash used in investing activities 7 (12,458) (1,408) (13,859)
FINANCING ACTIVITIES
Issuance of common stock -- -- -- --
Borrowings, net 10,226 1,585 19 11,830
Deferred financing costs (83) -- -- (83)
------------ -------------- -------------- ---------
Net Cash provided by financing activities 10,143 1,585 19 11,747
------------ -------------- -------------- ---------
Net increase in cash (13) (2,306) (571) (2,890)
Cash at the beginning of the period 124 2,216 971 3,311
------------ -------------- -------------- ---------
Cash at the end of the period $ 111 $ (90) $ 400 $ 421
============ ============== ============== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 9.654 $ 234 $ -- $ 9,888
============ ============== ============== =========
Taxes paid $ -- $ 57 $ 458 $ 515
============ ============== ============== =========
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
16. SUPPLEMENTAL GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(SUCCESSOR)
YEAR ENDED MARCH 31, 1999
-----------------------------------------------------------
GUARANTOR NON-GUARANTOR CONSOLIDATED
ASIG, INC. SUBSIDIARIES SUBSIDIARIES TOTAL
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (loss). . . . . . . . . . . . . . . . . $ (10,308) $ 5,272 $ 266 $ (4,770)
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Amortization of intangible assets . . . . . . . . -- 2,545 -- 2,545
Depreciation. . . . . . . . . . . . . . . . . . . 9 5,589 578 6,176
Amortization of deferred financing costs. . . . . 2,888 -- -- 2,888
Provision for bad debt. . . . . . . . . . . . . . -- 36 -- 36
Equity loss in joint venture. . . . . . . . . . . -- -- 157 157
Changes in operating assets and liabilities,
net of acquisition:
Accounts receivable . . . . . . . . . . . . . . . -- (843) (226) (1,069)
Due from (to) affiliates. . . . . . . . . . . . . (4,410) 3,763 647 --
Prepaid expenses. . . . . . . . . . . . . . . . . (18) (504) (1) (523)
Spare parts and supplies. . . . . . . . . . . . . -- (350) 13 (337)
Other assets. . . . . . . . . . . . . . . . . . . (4) 317 6 319
Accounts payable. . . . . . . . . . . . . . . . . -- 431 31 462
Accrued expenses. . . . . . . . . . . . . . . . . 1,319 (1,656) 43 (294)
Customer deposits . . . . . . . . . . . . . . . . -- 965 90 1,055
------------ -------------- -------------- ----------
Net cash provided by (used in) by operating
activities. . . . . . . . . . . . . . . . . . . . (10,524) 15,565 1,604 6,645
INVESTING ACTIVITIES
Purchases of property, plant and equipment . . . . (87) (13,349) 5 (13,431)
Purchase of ASIG business. . . . . . . . . . . . . (88,487) -- -- (88,487)
Purchase of GAH business . . . . . . . . . . . . . -- -- (438) (438)
Advances to joint venture. . . . . . . . . . . . . -- -- (200) (200)
------------ -------------- -------------- ----------
Net cash used in investing activities. . . . . . . (88,574) (13,349) (633) (102,556)
FINANCING ACTIVITIES
Issuance of common stock . . . . . . . . . . . . . 24,100 -- -- 24,100
Borrowings, net. . . . . . . . . . . . . . . . . . 80,630 -- -- 80,630
Deferred financing costs . . . . . . . . . . . . . (5,508) -- -- (5,508)
------------ -------------- -------------- ----------
Net Cash provided by financing activities. . . . . 99,222 -- -- 99,222
------------ -------------- -------------- ----------
Net increase in cash . . . . . . . . . . . . . . . 124 2,216 971 3,311
Cash at the beginning of the period. . . . . . . . -- -- -- --
------------ -------------- -------------- ----------
Cash at the end of the period. . . . . . . . . . . $ 124 $ 2,216 $ 971 $ 3,311
============ ============== ============== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid. . . . . . . . . . . . . . . . . . . $ 4,345 $ 47 $ -- $ 4,392
============ ============== ============== ==========
Taxes paid . . . . . . . . . . . . . . . . . . . . $ -- $ 21 $ 380 $ 4,414
============ ============== ============== ==========
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
Receipt of fixed assets in satisfaction of a
receivable. . . . . . . . . . . . . . . . . . . . $ -- $ 4,414 $ -- $ --
============ ============== ============== ==========
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
16. SUPPLEMENTAL GUARANTOR CONDENSED COMBINING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
COMBINED STATEMENT OF CASH FLOWS
(PREDECESSOR)
THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------------------------
COMBINATION
NON-GUARANTOR AND ELIMINATION COMBINED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
-------------- -------------- --------- --------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . $ 290 $ 442 $ -- $ 732
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Amortization of intangible assets. . . . . . 16 6 -- 22
Depreciation . . . . . . . . . . . . . . . . 903 194 -- 1,097
Deferred income taxes. . . . . . . . . . . . (226) (19) -- (245)
Equity loss in joint venture . . . . . . . . -- 54 -- 54
Changes in operating assets and liabilities:
Accounts receivable. . . . . . . . . . . . . 2,221 429 -- 2,650
Due from (to) affiliates . . . . . . . . . . 1,064 (581) (483) --
Prepaid expense. . . . . . . . . . . . . . . 264 31 -- 295
Spare parts and supplies . . . . . . . . . . (11) (7) -- (18)
Other assets . . . . . . . . . . . . . . . . (179) 5 (26) (200)
Accounts payable . . . . . . . . . . . . . . 34 (173) 550 411
Accrued expenses . . . . . . . . . . . . . . 1,119 17 -- 1,136
Customer deposits. . . . . . . . . . . . . . (385) (554) -- (939)
-------------- -------------- --------- --------
Net cash provided by (used in) by operating
activities . . . . . . . . . . . . . . . . . 5,110 (156) 41 4,995
INVESTING ACTIVITIES
Purchases of property, plant and equipment. . (2,228) (438) -- (2,666)
-------------- -------------- --------- --------
Net cash used in investing activities . . . . (2,228) (438) -- (2,666)
FINANCING ACTIVITIES
Advances from (to) Parent, net. . . . . . . . (2,869) 553 -- (2,316)
Dividends . . . . . . . . . . . . . . . . . . (13) -- -- (13)
-------------- -------------- --------- --------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . (2,882) 553 -- (2,329)
-------------- -------------- --------- --------
Net increase (decrease) in cash . . . . . . . -- (41) 41 --
Cash at beginning of period . . . . . . . . . -- 550 (550) --
-------------- -------------- --------- --------
Cash at end of period . . . . . . . . . . . . $ -- $ 509 $ (509) $ --
============== ============== ========= ========
</TABLE>
<PAGE>
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
16. SUPPLEMENTAL GUARANTOR CONDENSED COMBINING FINANCIAL STATEMENTS
(CONTINUED)
<TABLE>
<CAPTION>
COMBINED STATEMENT OF CASH FLOWS
(PREDECESSOR)
YEAR ENDED DECEMBER 31, 1997
COMBINATION
GUARANTOR NON-GUARANTOR AND ELIMINATION COMBINED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
-------------- -------------- --------- ---------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . $ 4,829 $ 1,203 $ -- $ 6,032
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization. . . . . . . . 4,005 599 -- 4,604
Deferred income taxes. . . . . . . . . . . . (135) (1) -- (136)
Equity loss in joint venture . . . . . . . . -- 133 -- 133
Changes in operating assets and liabilities:
Accounts receivable. . . . . . . . . . . . . 2,163 (96) -- 2,067
Due from (to) affiliates . . . . . . . . . . (644) 644 -- --
Prepaid expense. . . . . . . . . . . . . . . 191 (30) -- 161
Spare parts and supplies . . . . . . . . . . (69) (2) -- (71)
Other assets . . . . . . . . . . . . . . . . 55 8 -- 63
Accounts payable . . . . . . . . . . . . . . 695 259 433 1,387
Accrued expenses . . . . . . . . . . . . . . 1,772 666 -- 2,438
Customer deposits. . . . . . . . . . . . . . (41) 502 -- 461
-------------- -------------- --------- ---------
Net cash provided by operating activities . . 12,821 3,885 433 17,139
INVESTING ACTIVITIES
Purchases of property, plant and equipment. . (2,877) (1,070) -- (3,947)
Advances to joint venture . . . . . . . . . . -- (353) -- (353)
-------------- -------------- --------- ---------
Net cash used in investing activities . . . . (2,877) (1,423) -- (4,300)
FINANCING ACTIVITIES
Payments on notes payable . . . . . . . . . . (82) -- -- (82)
Advances from (to) Parent, net. . . . . . . . (4,689) (1,378) -- (6,067)
Dividends . . . . . . . . . . . . . . . . . . (5,173) (1,708) -- (6,881)
-------------- -------------- --------- ---------
Net cash used in financing activities . . . . (9,944) (3,086) -- (13,030)
-------------- -------------- --------- ---------
Net increase (decrease) in cash . . . . . . . -- (624) 433 (191)
Cash at beginning of year . . . . . . . . . . -- 1,174 (983) 191
-------------- -------------- --------- ---------
Cash at end of year . . . . . . . . . . . . . $ -- $ 550 $ (550) $ --
============== ============== ========= =========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholder
Aircraft Service International Group, Inc.
We have audited the consolidated financial statements of Aircraft Service
International Group, Inc. and subsidiaries as of March 31, 2000 and 1999, and
for each of the two years in the period ended March 31, 2000, and have issued
our report thereon dated June 9, 2000 (included elsewhere in this Form 10-K).
Our audits also included the financial statement schedule listed in Item 14 (a)
of this Form 10-K. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the schedule based on
our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Miami, Florida
June 9, 2000
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders
Aircraft Service International Group
We have audited the combined statements of income, changes in combined equity
and cash flows of Aircraft Service International Group, a combined group of
companies affiliated by common ownership, for the three months ended March 31,
1998 and for the year ended December 31, 1997, and have issued our report
thereon dated June 9, 2000 (included elsewhere in this Form 10-K). Our audits
also included the financial statement schedule listed in Item 14(a) of this Form
10-K. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the schedule based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Miami, Florida
June 9, 2000
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
MARCH 31, 2000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS (1) PERIOD
----------------------------------------------- ----------- ----------- --------------- -------
<S> <C> <C> <C> <C>
Year Ended December 31, 1997 (Predecessor)
Deducted from asset accounts
Allowance for doubtful accounts $ 1,276 $ 245 $ 899 $ 622
=========== =========== =============== =======
Three Months Ended March 31, 1998 (Predecessor)
Deducted from asset accounts
Allowance for doubtful accounts $ 622 $ -- $ 77 $ 546
=========== =========== =============== =======
Year Ended March 31, 1999 (Successor)
Deducted from asset accounts
Allowance for doubtful accounts $ 546 $ 36 $ (15) $ 567
Deferred tax asset valuation -- 1,786 -- 1,786
----------- ----------- --------------- -------
Total $ 546 $ 1,822 $ (15) $ 2,353
=========== =========== =============== =======
Year Ended March 31, 2000 (Successor)
Deducted from asset accounts
Allowance for doubtful accounts $ 567 $ 83 $ (5) $ 645
Deferred tax asset valuation 1,786 3,235 -- 5,021
----------- ----------- --------------- -------
Total $ 2,353 $ 3,318 $ (5) $ 5,666
=========== =========== =============== =======
<FN>
(1) Uncollectible accounts written off, net of recoveries.
</TABLE>
<PAGE>
