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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL PERIOD ENDED DECEMBER 31, 1999
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-
WORLDWIDE FLIGHT SERVICES, INC.
(Exact Name of Registrant as specified in its charter)
DELAWARE 75-1932711
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1001 West Euless Boulevard
Suite 320
Euless, Texas 76040
(Address of principal executive offices)
Registrant's telephone number, including area code: (817) 665-3200
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] or No [x]. The Registrant became
subject to reporting requirements under the Securities Exchange Act of 1934 on
February 4, 2000, the date its S-4 Registration Statement was declared effective
by the SEC, and as such was not subject to any reporting requirements under the
Securities Exchange Act of 1934 prior to this filing.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10K or any
amendment to this Form 10-K. [X]
1,000 shares of common stock, par value $.01 per share ("Common Stock")
of the registrant is held by affiliates. No shares of Common Stock are held by
non-affiliates.
As of December 31, 1999, the Registrant had outstanding 1,000 shares of
voting Common Stock and no shares of non-voting Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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CO-REGISTRANTS
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EXACT NAME OF STATE OR OTHER PRIMARY STANDARD
CO-REGISTRANT AS JURISDICTION OF INDUSTRIAL
SPECIFIED IN ITS INCORPORATION OR CLASSIFICATION CODE I.R.S. EMPLOYER
CHARTER ORGANIZATION NUMBER IDENTIFICATION NUMBER
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Worldwide Flight Finance Delaware 4581 75-2533058
Company
Worldwide Flight Security Delaware 4581 75-2276559
Service Corporation
Miami International Florida 4581 59-2550848
Airport Cargo Facilities &
Services, Inc.
International Enterprises Florida 4581 65-0117574
Group, Inc.
Miami Aircraft Support, Delaware 4581 59-2096579
Inc.
Aerolink International, Inc. Pennsylvania 4581 25-1559013
Aerolink Maintenance, Inc. Pennsylvania 4581 25-1579442
Aerolink Management, Inc. Pennsylvania 4581 25-1824429
Aerolink International, L.P. Pennsylvania 4581 25-6449621
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TABLE OF CONTENTS
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ITEM 1. BUSINESS....................................................................... 2
ITEM 2. PROPERTIES..................................................................... 13
ITEM 3. LEGAL PROCEEDINGS.............................................................. 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................ 14
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS............................................................ 14
ITEM 6. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA................................ 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ..................................................... 17
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK........................................................................... 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................... 27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE............................................ 27
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS............................................... 28
ITEM 11. EXECUTIVE COMPENSATION......................................................... 31
ITEM 12. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT......................... 35
ITEM 13. RELATED PARTY TRANSACTIONS..................................................... 37
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 10-K...................................................................... 38
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934. The words
"believe," "estimate," "anticipate," "project," "intend," "expect" and similar
expressions are intended to identify forward-looking statements. All
forward-looking statements involve some risks and uncertainties. In light of
these risks and uncertainties, the forward-looking events discussed in this
report might not occur. Factors that may cause actual results or events to
differ materially from those contemplated by the forward-looking statements
include, among other things, the following possibilities:
o future revenues are lower than expected;
o increase in payroll costs and/or shortage of an adequate base
of employees;
o loss of significant customers through bankruptcy;
o increase in debt levels beyond our ability to support
repayment;
o costs or difficulties relating to the integration of
businesses that we acquire are greater than expected;
o expected cost savings from our acquisitions are not fully
realized or realized within the expected time frame;
o competitive pressures in the industry increase;
o general economic conditions or conditions affecting the
airline industry, whether internationally, nationally or in
the states in which we do business, are less favorable than
expected;
o changes in the interest rate environment generally; and o
conditions in the securities markets are less favorable than
expected.
You are cautioned not to place undue reliance on forward-looking
statements contained in this report as these speak only as of its date. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
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ITEM 1. BUSINESS
Unless the context otherwise indicates:
o "We," "our," "us" refer to Worldwide Flight Services, Inc. and
its subsidiaries on a pro forma combined basis after giving
effect to the acquisitions of Miami Aircraft Support, Inc. and
its subsidiaries, which are collectively referred to in this
report as "Miami Aircraft Support," and Aerolink
International, Inc. and its affiliates, which are collectively
referred to in this report as "Aerolink"; and
o "Worldwide" refers to Worldwide Flight Services, Inc. and its
subsidiaries without giving effect to the acquisitions of
Miami Aircraft Support and Aerolink.
Worldwide Flight Services, Inc., a Delaware corporation, was
incorporated on December 12, 1983 as AMR Services Corporation, a subsidiary of
AMR Corporation. Prior to its incorporation, it was a division of AMR Global
Services group. Since its inception, Worldwide has provided ground services to
air cargo and passenger airlines.
On March 31, 1999, our parent, WFS Holdings, Inc., which is owned by
Castle Harlan Partners III, L.P., its affiliates and some members of Worldwide's
management, acquired Worldwide from AMR Corporation. After our acquisition, we
changed our name from AMR Services Corporation to Worldwide Flight Services,
Inc.
On August 12, 1999, we privately issued $130.0 million of 12 1/4%
senior notes due 2007, Series A and subsequently exchanged those notes for
$130.0 million of 12 1/4% senior notes due 2007, Series B, which we registered
with the SEC. We completed the exchange of those notes on March 9, 2000.
On August 12, 1999, with a portion of the funds raised in the note
offering, we purchased all of the stock of Miami Aircraft Support for
approximately $63.0 million. On August 23, 1999, we purchased all of the stock
of Aerolink for approximately $5.9 million plus an earn-out of a maximum of $1.0
million.
We are one of the world's leading independent providers of aviation
services to air cargo and passenger airlines. Our services include cargo
handling and ramp, passenger and technical services. We provide services for
over 300 customers, including American Airlines, British Airways, Cathay
Pacific, Continental Airlines, Delta Air Lines, DHL, Emery Worldwide, Korean Air
Lines, Nippon Cargo Airlines and UPS. We currently service our customers at 89
airports, including 25 of the 30 busiest U.S. airports and five of the 10
busiest European airports, each based on 1998 annual arrivals and departures. We
employ approximately 10,400 employees in North America, the Caribbean, Europe
and Hong Kong.
We have experienced steady revenue growth by providing dependable and
cost effective service in the commercial aviation market that has experienced
nearly uninterrupted growth in annual departures, revenue passenger miles and
air cargo ton miles. Worldwide's revenues grew
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from $72.0 million in 1989 to $229.7 million in 1998, representing a compounded
annual growth rate of 13.8%. On August 12, 1999, Worldwide purchased all of the
stock of Miami Aircraft Support, one of the largest independent providers of
express air cargo handling services in the United States. Miami Aircraft
Support's revenues grew from $24.8 million in 1994 to $56.4 million in 1998,
representing a compounded annual growth rate of 22.7%. On August 23, 1999,
Worldwide purchased all of the stock of Aerolink International, Inc., a provider
of cargo warehousing services for commercial air carriers. Aerolink revenues
grew from $5.8 million in 1994 to $11.8 million in 1998, representing a
compounded annual growth rate of 19.6%.
On a pro forma basis for the twelve months ended December 31, 1999, we
generated revenues and EBITDA of $322.9 million and $25.2 million, respectively.
EBITDA for any period is calculated as the sum of net income (loss), adjusted
for the following to the extent deducted in calculating net income (loss): (1)
interest expense (income), (2) income tax expense, (3) depreciation expense and
(4) amortization expense. We consider EBITDA to be a widely accepted financial
indicator of a company's ability to service debt, fund capital expenditures and
expand its business; however, EBITDA is not calculated in the same way by all
companies and is neither a measurement required, nor represents cash flow from
operations as defined, by generally accepted accounting principles. EBITDA
should not be considered by you as an alternative to net income (loss), as an
indicator of operating performance or as an alternative to cash flow as a
measure of liquidity.
SERVICES
Our ground services consist of:
o cargo handling;
o ramp services;
o passenger services; and
o technical services.
Cargo Handling. Cargo handling is our largest line of business. We
generate much of our cargo handling revenue by charging fees to load and unload
cargo onto and from cargo aircraft. Through the acquisition of Miami Aircraft
Support, we are one of the largest providers of services for express air cargo
carriers that deliver time sensitive parcels, mail and other cargo. We also
handle various types of cargo items, including perishables, electronic
equipment, valuable or fragile merchandise and bulk items for other air carrier
customers.
For selected customers, we also manage warehouse facilities. For
inbound flights, we transport freight to a warehouse, remove it from the pallet
or container and process the shipment and delivery orders. For outbound flights,
we handle cargo shipment receiving, processing and aircraft loading.
We provide cargo handling services at approximately 50 U.S. airports.
We principally provide these services in the United States at John F. Kennedy
International Airport in
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New York, Dallas-Fort Worth International Airport and Miami International
Airport. In France, we are a leading provider of cargo handling services, with
operations at six airports. We also provide cargo handling services at four
other European markets.
We believe that we are one of the few ground service providers that has
brought its services to a new standard of quality by obtaining ISO 9002
certification at John F. Kennedy airport in New York and Charles de Gaulle and
Orly airports in Paris, which are key domestic and international airports. ISO
9002 certification is important to our customers because it demonstrates formal
recognition of our quality control procedures. Currently we intend to pursue
this certification in additional locations.
Ramp Services. Ramp services include the following services for
passenger airlines:
o guiding the aircraft to and from the gate;
o loading and unloading baggage and freight;
o cabin cleaning; and
o providing heating, air conditioning, lavatory and water
services.
Ramp services are critical to every airline. This is because airlines
only have a short period of time between arrival and departure to prepare an
aircraft for new passengers. Without experienced ramp crews and well-maintained
equipment, a flight may be delayed and customers may become dissatisfied. An
experienced ramp crew helps ensure that an aircraft departs on schedule.
Passenger Services. Passenger services, which are provided to passenger
airlines, include the following:
o checking passengers' baggage at curbside;
o providing ticket counter service, which includes helping
passengers to check baggage, receive boarding passes, purchase
tickets, check documentation and receive flight-related
information;
o staffing airline lounges;
o providing departure gate services and managing the
ticket-taking process;
o assisting with passengers' baggage-related problems such as
damage, theft or mishandled bags; and
o providing wheelchair assistance.
We customize passenger services to meet the particular needs of an
airline. For example, at the airports where we provide passenger services to
American Airlines, our employees who
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provide these services wear the same uniforms as American Airlines employees and
are trained to their standards. For our foreign airline customers, we frequently
provide employees who are fluent in the language of the airline's home country.
Passenger services customers provide individualized specifications regarding the
number of employees who must be available for the handling of a given flight.
Our approximately 77 customers for these services include American
Airlines, for which we provide passenger services at approximately 50 airports,
foreign airlines such as Korean Air Lines and Japan Airlines, and smaller and
start-up airlines, such as Westjet and Spirit Airlines.
Technical Services. Technical services include the following:
o preventive maintenance and mechanical support for jet bridges
and ground equipment;
o freight management, including brokering freight for both
airline and non-airline customers;
o aircraft fueling and managing airport fuel storage facilities;
and
o aircraft de-icing.
Because we already have a presence at 89 airports and our equipment and
personnel are already in place, we believe that we are able to provide these
additional services for customers at these airports upon short notice and in an
efficient manner.
Pricing of our Services. We do not have a single price structure for
our services. We price our services based on the following:
o the specific services requested by the customer;
o the projected volume of services requested;
o the location where these services are to be performed; and
o the costs associated with providing these services, including
the cost of labor.
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AIRPORT LOCATIONS
We provide services at the airports indicated below.
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UNITED STATES Los Angeles, CA Tucson, AZ
Atlanta, GA Louisville, KY Vail, CO
Baltimore, MD Mather AFB, CA Washington(Dulles), DC
Boston, MA Maui, HI Washington(National), DC
Bradley, CT Memphis, TN West Palm Beach, FL
Buffalo, NY Miami, FL White Plains, NY
Burbank, CA Newburgh, NY
Charlotte, NC New York(JFK), NY CANADA
Chicago, IL New York(LaGuardia), NY Halifax, Nova Scotia
Cincinnati, OH Newark, NJ Montreal,(Dorval), Quebec
Cleveland, OH Norfolk, VA Montreal,(Mirabel), Quebec
Colorado Springs, CO Oakland, CA Toronto, Ontario
Columbus, OH Oklahoma City, OK
Dallas/Ft. Worth, TX Omaha, NB
Dayton, OH Ontario, CA CARIBBEAN
Denver, CO Orange County, CA Kingston, Jamaica
Detroit, MI Philadelphia, PA Montego Bay, Jamaica
Ft. Lauderdale, FL Pittsburgh, PA St. Croix, Virgin Islands
Ft. Myers, FL Portsmouth, NH St. Thomas, Virgin Islands
Greensboro, NC Providence, RI
Greenville/Spartanburg, SC Raleigh/Durham, NC EUROPE
Gunnison, CO Reno, NV Brussels, Belgium
Harrisburg, PA Richmond, VA Frankfurt, Germany
Hayden, CO Sacramento, CA Lille, France
Honolulu, HI Salt Lake City, UT London(Heathrow), England
Houston, TX San Antonio, TX Lyon, France
Islip, NY San Francisco, CA Madrid, Spain
Jackson Hole, WY San Jose, CA Marseilles, France
Jackson, MS San Juan, Puerto Rico Paris(Charles de Gaulle), France
Jacksonville, FL Seattle, WA Paris(Orly), France
Kona, HI Spokane, WA Toulouse, France
Las Vegas, NV St. Petersburg, FL
Lihue, HI ASIA
Hong Kong, China
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CUSTOMERS
We have over 300 customers, including approximately 210 airline
customers, approximately 30 air cargo carrier customers and approximately 10
airport customers. Our remaining customers include, among others, freight
forwarders and non-airline customers for which we provide a variety of services.
Our airline customers include American Airlines and its
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affiliates, British Airways, Continental Airlines, Korean Air Lines, Nippon
Cargo Airlines and Saudi Arabian Airlines. Air cargo carrier customers include
UPS, DHL, Emery and BAX Global. Significant airport customers include the Port
Authority of New York and New Jersey, the Houston Intercontinental Airport, the
State of Hawaii and the Madrid airport. Our top ten customers, including
American Airlines and its affiliates, accounted for approximately 54% of total
revenues for the twelve months ended December 31, 1999. Other than American
Airlines, which accounted for approximately 28% of pro forma revenues for the
twelve months ended December 31, 1999, no single customer accounted for more
than 10% of our pro forma revenues.
We generally have service contracts with our customers and, at December
31, 1999 we had over 800 service contracts. These contracts are typically based
on standard industry forms that are customized to fit the desired contractual
arrangement. Many of our service contracts are effective for a specified term
and allow our customers to terminate their contract on ninety days notice or
sooner for continuing performance breaches. After their initial term, our
contracts typically automatically continue but become terminable by either party
on 60 days' notice or less for any reason. Our contracts usually contain price
escalation clauses that are linked to the consumer price index. Under these
clauses, if the consumer price index increases, we are permitted to increase our
prices by the consumer price index or a percentage of it.
SALES AND MARKETING
We employ eight sales and four marketing professionals on a full-time
basis. They have been with our company for an average of approximately nine
years.
Our sales force performs a combination of functions, including the
servicing of existing accounts and generating new business. Each salesperson is
assigned accounts that they manage on a national and local basis. Our sales
force formally markets our services through customer visits, membership in trade
organizations and annual customer events. Our sales force also conducts market
and competitive research to identify new business opportunities. Emphasis is
placed on determining where a current or potential customer is currently
outsourcing ground services and on who is providing the services. The research
conducted by our sales force on market conditions and competition enables us to
concentrate on our strengths at an individual location. Local managers also
informally market our services on a daily basis through their interaction with
customers. Instead of paying commissions to our sales professionals, we allow
them to participate in our incentive compensation plan, which we believe alters
their focus from short-term growth to establishing and maintaining profitable
long-term customer relationships.
The primary function of our five person marketing group is to create
and enhance our brand and image through advertising and sales promotion
activities. The marketing group also prepares customer and industry
presentations and prepares and reviews contracts.
COMPETITION
The ground services industry consists of a large number of domestic and
international service providers. Many of these provide service at more than one
airport, although only a small number of them provide services nationally or
internationally. In the United States, our principal
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competitors are national ground service providers such as DynAir Services,
Hudson General Corporation and Ogden Aviation Corporation, as well as smaller
companies that operate regionally or at individual locations. Internationally,
we compete principally with international ground service providers such as Cargo
Service Centers, Globe Ground, Servisair and Swissport. We also indirectly
compete against airlines, since airlines continue to perform a large portion of
their ground services in-house.
The principal competitive factors in our industry are:
o price;
o reputation for quality;
o breadth of services offered; and
o experience in a particular market or geographic region.
We believe that we compare favorably to our competition with respect to
all of these factors.
EMPLOYEES
As of December 31, 1999, we had approximately 10,400 employees, of whom
approximately 1,125 were management and approximately 9,300 were non-management
personnel. Approximately 4,400, or 42%, of our employees work part-time.
Approximately 2,400 of our U.S. employees are represented by collective
bargaining agreements. These employees consist primarily of cargo handling and
ramp services workers. The Transport Workers Union, or TWU, represents
approximately 2,350 of our U.S.-based employees. Our current agreement with the
TWU is effective until June 2001. The Teamsters Union also represents
approximately 75 Philadelphia employees. The current contract with the Teamsters
Union expired February 2000, and we are currently negotiating with the union on
a new contract. We are not anticipating any problems with completing these
negotiations during the second quarter of 2000. In Canada, approximately 280 of
our employees are represented by the Canadian Auto Workers Union. This agreement
expired in November 1998. We continue to operate under the agreement, and we
intend to renegotiate the agreement in the near future. In some of the other
countries where we operate, we are subject to industry-wide collective
bargaining agreements, as well as local labor laws.
We have not experienced any material business interruption as a result
of labor disputes and believe that we have a good relationship with our
employees.
REGULATORY COMPLIANCE
FAA and Other Related Operational Regulations. Our business must comply
with FAA airport security regulations regarding the screening of passengers and
cargo on behalf of air carriers. While companies that screen passengers and
cargo are not currently required to be
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certificated by the FAA, the FAA published a notice of proposed rulemaking on
January 5, 2000 that, if finalized, would require the certification of companies
that screen passengers or cargo, such as ours. The certification, once granted,
would need to be renewed every five years. The notice also proposes other
requirements to improve screening, such as new performance measurements for
screening companies, new training, testing requirements and new qualification
criteria for employees who screen passengers and cargo. If the rules proposed in
the notice are implemented by the FAA, we will be required to become
certificated to continue screening passengers and cargo. We also may experience
increased costs as a result of installing performance testing equipment and
complying with increased administrative burdens. In addition, we would be
directly regulated by the FAA and could be subject to enforcement actions, such
as suspension or revocation of our certification or civil penalties, if we did
not adequately comply with those regulations.
Because we accept hazardous material on behalf of our customers and
perform services regarding the transportation of hazardous materials by both air
and ground transport, we must comply with DOT regulations governing the
handling, packaging, marking, labeling and transportation of hazardous
materials. Our employees who directly affect hazardous materials transportation
safety must comply with DOT regulations, including among other things, receiving
specialized training. If we fail to properly handle, package, mark, label or
transport hazardous materials or to properly train employees who directly affect
hazardous materials transportation safety, it could result in substantial civil
penalties. Additionally, because of the types of materials that we carry for
ground transport on behalf of our customers, such as explosives and toxic
materials, we are required to register with the DOT annually as a hazardous
materials carrier.
While we do not hold an FAA-issued repair station certificate, and do
not hold ourselves out as an FAA-certificated repair station, we employ
certificated and rated mechanics who perform maintenance and preventive
maintenance on aircraft. These mechanics must perform their duties in accordance
with the Federal Aviation Regulations in order to approve and return to service
aircraft upon which any maintenance has been performed. Their failure to comply
with these regulations could result in civil penalties, as well as the
suspension or revocation of their individual mechanic's certificates, which
could adversely affect that portion of our business.
We currently have an FAA approved program regarding drug and alcohol
use, which covers our certificated mechanics, our employees who perform
passenger and cargo screening and our other employees who perform safety
sensitive functions. If we or our employees fail to comply with the FAA drug and
alcohol use regulations, we could be fined by the FAA or restricted by our
airline customers from performing these services in the future, which could
adversely affect that portion of our business.
Environmental. We must comply with a variety of international, federal
and state laws and regulations relating to environmental protection, including
laws and regulations relating to the handling, storage, disposal and remediation
of petroleum-based products used in the airline industry. These operations are
regulated by the Resource Conservation and Recovery Act, or RCRA, and its state
and local counterparts. RCRA regulates our hazardous waste generator status, the
disposal of solid wastes from our operations and our storage of petroleum
products.
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We are also required to file Spill Prevention Control and Countermeasure Plans
with the regulatory authorities where we have bulk storage of petroleum. Also,
at some of our locations, we are required to register with regulatory
authorities as either permittee or co-permittee for discharges of wastewater and
stormwater.
These laws and regulations and any international laws and regulations
may affect the cost of operating our business because we operate fueling depots
in a small number of locations, maintain equipment for our cargo and ramp
operations and store and dispose of petroleum products used in these operations.
We believe that our operations are in material compliance with these
environmental laws and regulations. We do not expect future costs associated
with compliance with these laws and regulations to materially harm our business,
financial condition or future results. In addition, in connection with the sale
of Worldwide to our parent, we obtained environmental indemnities from AMR
Corporation which provide that AMR Corporation will indemnify us, subject to
deductibles, for all environmental liabilities that relate to periods prior to
the closing of the sale. We also received environmental indemnities from the
sellers of Miami Aircraft Support and Aerolink. We also maintain environmental
impairment insurance.
RISK FACTORS
IF WE DO NOT SATISFY FINANCIAL RATIOS AND TESTS OR OTHER COVENANT RESTRICTIONS
CONTAINED WITHIN OUR INDEBTEDNESS AGREEMENTS, THEN WE MAY BE LIMITED IN OUR
ABILITY TO OPERATE OUR BUSINESS
The senior secured credit facility and the indenture contain, and our
other indebtedness agreements may contain, covenants that restrict our ability
to make distributions or other payments to our investors and creditors unless
financial tests or other criteria are satisfied. We must also comply with
specified financial ratios and tests. If we do not comply with these or other
covenants and restrictions contained in the senior secured credit facility or
the indenture, we could default under those agreements and the indebtedness,
together with accrued interest, could then be declared immediately due and
payable. Our ability to comply with these provisions of the senior secured
credit facility and the indenture may be affected by changes in economic or
business conditions or other events beyond our control.
The senior secured credit facility contains, and our other indebtedness
agreements may contain, additional affirmative and negative covenants, including
limitations on our ability to incur additional indebtedness and to make
acquisitions and capital expenditures, which could affect our ability to operate
our business. The indenture restricts, among other things, our ability to incur
additional debt, sell assets, create liens or other encumbrances, make dividend
and other payments to third parties or merge or consolidate, all of which could
affect our ability to operate our business and may limit our ability to take
advantage of potential business opportunities as they arise.
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IF WE FAIL TO MAINTAIN OUR RELATIONSHIPS WITH AMERICAN AIRLINES AND OTHER
SIGNIFICANT CUSTOMERS, IT COULD ADVERSELY AFFECT OUR BUSINESS
We derived approximately 28% of our pro forma revenues from American
Airlines and its affiliates for the twelve months ended December 31, 1999. Our
top ten customers accounted for approximately 54% of our pro forma revenues for
the twelve months ended December 31, 1999. If we experience a significant
reduction in business from American Airlines or its affiliates before we grow
our business, it could adversely affect our business. We cannot assure you that
we will be able to service our significant customers at current or increased
levels. Revenues from our customers could decrease either because they choose to
use other third party ground services providers or because they choose to
perform these services using their own personnel. Many of our customers,
including American Airlines, currently provide a significant portion of their
own ground services.
OUR CUSTOMERS MAY TERMINATE THEIR CONTRACTS WITH US ON SHORT NOTICE, WHICH COULD
ADVERSE AFFECT OUR BUSINESS
Many of our service contracts allow customers to terminate their
contract on 90 days notice or sooner for performance breaches. However, many of
our contracts have passed the term specified in the contract, and therefore,
under their terms, generally have become terminable by either party on 60 days
notice or less for any reason. While we believe these terms are typical in the
industry, we can provide no assurance that customers will not terminate their
contracts. The termination of a large portion of our contracts could adversely
affect our business.
OUR RIGHTS TO OPERATE AT AIRPORTS COULD BE TERMINATED BY LOCAL AIRPORT
AUTHORITIES, WHICH COULD ADVERSELY AFFECT OUR BUSINESS
In order to provide our services at an airport, we usually must have
permission from the local airport authority. This permission generally can be
terminated by the local airport authority at will and without cause. The loss of
one or more of our permits, licenses or consents to operate could affect our
ability to operate at these airports, which in turn could adversely affect our
business.
THE OCCURRENCE OF SIGNIFICANT ADVERSE EVENTS AFFECTING THE AIRLINE INDUSTRY
COULD ADVERSELY AFFECT OUR BUSINESS
Because we provide most of our services to air cargo and passenger
airlines, we are likely to be affected by significant events that affect those
businesses. All of these events will be outside of our control and any of them
could adverse affect our business. These events could include the following:
o an economic downturn in one or more of the geographic markets
where we do business;
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o a prolonged increase in fuel costs to the airline industry and
future possible bankruptcies of our customers, each of which
could result in slow payments on customer accounts;
o route changes by airlines;
o strikes by unions; and
o a substantial reduction in air traffic or financial problems
incurred by air cargo or passenger airlines.
IF WE DO NOT COMPETE EFFECTIVELY WITH OTHER GROUND SERVICE PROVIDERS, WE COULD
LOSE CUSTOMERS, WHICH IN TURN COULD ADVERSELY AFFECT OUR BUSINESS
The ground services business is highly competitive. If we do not
compete effectively with other service providers, we could lose customers and
our revenues could be reduced. Either of these could adversely affect our
business.
Service quality and price are particularly important competitive
factors in our industry. In addition to competition for customers, we compete
against other service providers for airport permits, which are in some cities
only issued to a small number of service providers. In addition to competing
with other service providers, we indirectly compete for portions of our business
with airlines that do not outsource some or all of their ground services and
businesses that provide other forms of transportation, including businesses that
transport cargo by trucks. Although we believe that trends and projections in
our industry are favorable for third party providers of ground services, this
may not prove to be the case as a result of factors outside of our control such
as changes in economic conditions or a change in outsourcing strategies by
airlines. In addition, some of our competitors are larger than us and have
significant financial and other resources.
IF WE FAIL TO MANAGE OUR GROWTH THROUGH ACQUISITIONS, THEN WE MAY NOT REALIZE
THE ANTICIPATED BENEFITS FROM THE ACQUISITIONS
As part of our business strategy, we intend to grow through
acquisitions, as well as through internal growth. On August 12, 1999 Worldwide
acquired Miami Aircraft Support, and on August 23, 1999 Worldwide acquired
Aerolink. We intend to pursue additional acquisitions, including a smaller
acquisition for which we have signed a non-binding letter of intent.
Acquisitions present various risks, including the following:
o difficulties assimilating and integrating the operations of
the combined companies and retaining key personnel;
o difficulties integrating the acquired company's financial,
computer, payroll and other systems into our own;
o difficulties implementing additional controls and information
systems appropriate to a larger company;
-12-
<PAGE> 17
o distractions to management, which could result in a disruption
of our business;
o unanticipated liabilities or contingencies relating to the
acquired company; and
o reduced earnings due to increased goodwill amortization,
increased interest costs and costs related to integration.
In addition, suitable acquisition candidates may not be available. If
we fail to manage our growth effectively, we may not realize the anticipated
benefits from the acquisitions.
FLUCTUATIONS IN FOREIGN CURRENCY MAY ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE
A substantial portion of our revenues are denominated in non-U.S.
currencies, consisting principally of French francs, Canadian dollars, Hong Kong
dollars, British pounds and the Euro. However, most of our expenses, including
interest and principal on our indebtedness, are denominated in U.S. dollars.
This exposes us to fluctuations in the rate of exchange between foreign
currencies and the U.S. dollar. Significant exchange rate fluctuations could
result in exchange rate losses, which in turn could adversely affect our
business. We currently do not engage in foreign currency hedging, although we
may do so in the future.
IF WE DO NOT COMPLY WITH SIGNIFICANT ENVIRONMENTAL REGULATION, WE COULD FACE
FINES OR RESTRICTIONS ON OUR OPERATIONS, WHICH IN TURN COULD ADVERSELY AFFECT
OUR BUSINESS
We must comply with a variety of international, federal, state and
local governmental regulations relating to the use, storage, discharge, emission
and disposal of hazardous substances and wastes, remediation of contamination
associated with the releases of hazardous substances and worker health and
safety.
We maintain fueling operations at four locations. In connection with
these fueling operations, we stock jet fuel in large above-ground storage tanks
and operate sub-surface fuel lines that may give rise to unknown releases. We
are not aware of the occurrence of any releases that are expected to result in
fines or restrictions on our operations, which in turn could adversely affect
our business. However, future events, such as the discovery of unknown
contamination, future spills and releases, compliance with more stringent
regulations, more vigorous enforcement policies by regulatory agencies or
stricter or different interpretations of existing regulations could cause us
operating constraints or require us to make material expenditures for cleaning
up contamination or complying with evolving environmental regulations. These or
other events relating to compliance with environmental regulations could
materially adversely affect our business.
ITEM 2. PROPERTIES
Our headquarters are located in Euless, Texas, where we lease
approximately 18,700 square feet of office space. This lease expires on August
15, 2004. We also lease more than 2,350,000 square feet of other space at
approximately 50 different airports domestically and internationally. Many of
these leases are on a month-to-month basis. We do not own any facilities.
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<PAGE> 18
Often, the cargo facilities that we use are owned or leased by airline
customers, rather than leased by us.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any legal proceedings, other than ordinary
routine litigation incidental to our business, that we believe are material to
our business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of Worldwide's shareholders during
the fourth quarter of the fiscal year covered by this report.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
There is no public trading market for our common stock. We recently
filed a registration statement on Form S-4 to register our new notes. See "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources." As of December 31, 1999, all of our
outstanding shares of common stock were held by WFS Holdings, Inc., our parent.
See "Item 12. Security Ownership of Beneficial Owners and Management." We did
not pay dividends on our common stock during 1999 and do not intend to pay any
dividends on our common stock for the foreseeable future. The senior secured
credit facility and the indenture pertaining to the new notes contain
significant limitations on our ability to pay dividends, the foregoing
instruments generally limiting dividends to a portion of net income.
-14-
<PAGE> 19
ITEM 6. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
You should read the selected historical consolidated financial data set
forth below in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the consolidated financial
statements and the notes thereto, and the pro forma and other financial
information included herein.
WORLDWIDE AND AMRS FINANCIAL INFORMATION
The selected consolidated financial data for the years ended December
31, 1995 and December 31, 1996 have been derived from Worldwide's and AMRS's
unaudited consolidated financial statements and, in the opinion of our
management, include all adjustments, consisting of only normal recurring
adjustments, necessary for a fair presentation of its results of operations for
these periods and financial condition as at the dates presented. The selected
historical consolidated financial data for the fiscal years ended December 31,
1997, December 31, 1998 and the three months ended March 31, 1999 have been
derived from AMRS's audited consolidated financial statements. The selected
historical consolidated financial data for the nine months ended December 31,
1999 have been derived from Worldwide's audited consolidated financial
statements.
<TABLE>
<CAPTION>
AMRS HISTORICAL WORLDWIDE
---------------------------------------------------------- ------------
COMBINED
YEARS ENDED DECEMBER 31, TWELVE
---------------------------------------------- THREE MONTHS
MONTHS NINE MONTHS ENDED
ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31, 31
1995 1996 1997 1998 1999 1999 1999(a)
--------- --------- --------- --------- --------- ------------ ---------
(Unaudited) (In Thousands) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues .......................... $ 156,262 $ 193,189 $ 223,090 $ 229,742 $ 61,475 $ 216,870 $ 278,345
Salaries, wages, and
benefits .......................... 96,662 124,543 144,422 154,706 39,679 141,161 180,840
Depreciation and
amortization ...................... 5,650 5,938 5,643 5,908 1,627 9,112 10,739
Other operating
expenses .......................... 50,609 56,598 66,167 61,074 18,438 58,970 77,408
--------- --------- --------- --------- --------- --------- ---------
Operating
income ............................ 3,341 6,110 6,858 8,054 1,731 7,627 9,358
Interest
income ............................ 1,460 1,052 1,421 2,160 440 -- (a)
Interest
expense ........................... -- -- -- -- -- 9,950 (a)
Other income
(expense) ......................... 585 288 (584) 580 (552) (337) (a)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from
continuing
operations before
income taxes and
extraordinary
loss .............................. 5,386 7,450 7,695 10,794 1,619 (2,660) (a)
</TABLE>
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<PAGE> 20
<TABLE>
<CAPTION>
AMRS HISTORICAL WORLDWIDE
---------------------------------------------------------- ------------
COMBINED
YEARS ENDED DECEMBER 31, TWELVE
---------------------------------------------- THREE MONTHS
MONTHS NINE MONTHS ENDED
ENDED ENDED DECEMBER
MARCH 31, DECEMBER 31, 31
1995 1996 1997 1998 1999 1999 1999(a)
--------- --------- --------- --------- --------- ------------ ---------
(Unaudited) (In Thousands) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Provision (benefit) for income
taxes 2,316 3,162 3,309 4,490 644 (660) (a)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from
continuing
operations before
extraordinary loss
...................................... 3,070 4,288 4,386 6,304 975 (2,000) (a)
Extraordinary loss
on early
extinguishment of debt, net of tax ... -- -- -- -- -- (1,197) (a)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from
continuing operation
...................................... 3,070 4,288 4,386 6,304 975 (3,197) (a)
Loss from
discontinued
operations ........................... -- -- -- 552 210 -- (a)
--------- --------- --------- --------- --------- --------- ---------
Net Income (loss) .................... $ 3,070 $ 4,288 $ 4,386 $ 5,752 $ 765 $ (3,197) (a)
OTHER DATA:
Capital Expenditures
...................................... $ 6,253 $ 9,182 $ 12,662 $ 7,219 $ 1,688 $ 6,439 $ 8,127
Ratio of earnings to
fixed charges ........................ 2.5 x 2.6 x 3.1 x 3.4 x 2.3 x (c) (a)
ADDITIONAL DATA:
EBITDA(b) ............................ $ 9,576 $ 12,336 $ 11,917 $ 14,542 $ 2,806 $ 16,402 (a)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data: (Unaudited) (In Thousands)
Cash and cash
equivalents ........ $ 3,922 $ 20,396 $ 20,544 $ 14,200 $ 1,775
Working Capital .... 14,448 23,707 24,083 25,747 26,449
Total assets ....... 79,937 79,205 85,418 88,696 246,141
Long-term debt
(excluding current
portion) ........... -- -- -- -- 137,081
Stockholders' equity $ 48,451 $ 52,773 $ 56,756 $ 62,365 $ 33,889
</TABLE>
- ----------------------
(a) The twelve months ended December 31, 1999 represents a combination of
two interim periods, one for AMRS for the three month period prior to
the consummation of the acquisition ended March 31, 1999, and one for
Worldwide for the nine month period ended December 31, 1999. Revenue
and operating expense data for the two periods have been combined to
present a combined twelve month period ended December 31, 1999. No
combined information is presented below the operating income from
continued operations line item, as Worldwide and AMRS had dramatically
different capital structures and a combination of such data is not
meaningful.
(b) EBITDA for any period is calculated as the sum of net income (loss),
adjusted for the following to the extent deducted in calculating net
income (loss): (1) interest expense (income), (2) income tax expense,
(3) depreciation expense,
-16-
<PAGE> 21
(4) amortization expense and (5) extraordinary gains or losses. We
consider EBITDA to be a widely accepted financial indicator of a
company's ability to service debt, fund capital expenditures and expand
its business; however, EBITDA is not calculated in the same way by all
companies and is neither a measurement required, nor represents cash
flow from operations as defined, by generally accepted accounting
principles. EBITDA should not be considered by you as an alternative to
net income (loss), as an indicator of operating performance or as an
alternative to cash flow as a measure of liquidity. The calculation of
EBITDA in this annual report is calculated differently than for
purposes of the covenants under the indenture and the senior secured
credit facility. See "Description of Senior Secured Credit Facility"
and "Description of New Notes" for how these instruments calculate
EBITDA.
(c) Ratio of earnings to fixed charges is computed assuming that 1/3 of
rental expense is representative of the interest factor. Earnings were
insufficient to cover fixed charges by $2,660,000.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements, and the notes thereto, included elsewhere in
this report. This discussion should also be read in conjunction with the
Unaudited Pro Forma Combined Consolidated Financial Statements included
elsewhere in this report.
OUR COMPANY
OVERVIEW
Worldwide Acquisition; AMRS. Our parent, WFS Holdings, Inc., which is
owned by Castle Harlan Partners III, L.P., its affiliates and some members of
Worldwide's management, acquired Worldwide from AMR Corporation on March 31,
1999. Prior to the acquisition, Worldwide was known as AMR Services Corporation.
Worldwide's business was not operated by AMR Corporation as a single entity, but
instead operated through a number of companies that were part of the AMR Global
Services group. Prior to the date the acquisition was closed, some of these
operations were sold or were merged directly into AMR Corporation. The financial
statements and financial information included in this annual report for AMR
Services Corporation represent the entity purchased, and not the distinct AMR
Services Corporation legal entity that existed prior to the acquisition. The AMR
Services Corporation entity purchased is sometimes referred to in this annual
report as AMRS.
Acquisition of Miami Aircraft Support. We completed the acquisition of
Miami Aircraft Support on August 12, 1999, the same time as the sale of the
original notes. The purchase price for Miami Aircraft Support was approximately
$63.0 million. The acquisition was accounted for under the purchase method of
accounting. Worldwide recorded approximately $66.0 million of intangibles,
including goodwill which is being amortized over 20 years.
Acquisition of Aerolink. We completed the acquisition of Aerolink on
August 23, 1999. The purchase price was approximately $5.9 million plus an
earn-out of a maximum of $1.0 million, of which we currently expect to pay the
majority of this amount. As part of the purchase price, we repaid $0.6 million
of debt of Aerolink. The acquisition was accounted for under the purchase method
of accounting. Worldwide recorded approximately $4.0 million of intangibles,
including goodwill which is being amortized over 20 years.
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<PAGE> 22
Acquisition Intangibles. Upon completion of the acquisition of Miami
Aircraft Support and Aerolink, we had total intangibles, including goodwill, of
approximately $110.0 million as of December 31, 1999. The amortization of these
amounts over their estimated useful life of 20 years will reduce earnings by
approximately $5.5 million on an annual basis.
Interest and Taxes. The Company's interest expense was significant,
$9.9 million for the nine months ended December 31, 1999. This results primarily
from the issuance of the Senior Notes to refinance Worldwide's acquisition debt
and to finance the majority of the acquisition costs of Miami Aircraft Support.
The Company recorded a total income tax benefit of $1.4 million for the nine
months ended December 31, 1999, which resulted from $2.6 million in foreign tax
expense, reduced by a book tax benefit from operating losses of $4.0 million,
which has been used to reduce existing deferred tax liabilities
Integration and Expansion Strategy. Historically, under AMR
Corporation's ownership, we pursued an aggressive geographic expansion strategy,
spending a significant amount of capital to open new locations. In the future,
we plan to focus on building market share at existing locations and spending
capital primarily on equipment to service new contracts at existing locations.
Limited capital spending on new locations is anticipated, as we intend to
acquire other companies to gain access to new locations rather than incurring
significant start-up costs.
Allocated Corporate Expenses. Prior to the sale of Worldwide to our
parent, AMR Corporation provided us with various corporate services, including
executive oversight and corporate planning, cash management, tax planning, risk
management, insurance, payroll, legal, corporate administrative and other
services. Allocated expenses for these services amounted to $2.3 million, $5.8
million, $5.9 million and $5.9 million for the three month period ended March
31, 1999 and for the years ended December 31, 1998, 1997 and 1996, respectively.
These expenses have been reflected in our operating income for these periods.
Charges for these corporate services were based on a general allocation
methodology used by AMR Corporation to allocate all corporate overhead expenses
to its operating divisions. These costs were not necessarily allocated on a
basis that approximated Worldwide's estimated usage of services or the costs
Worldwide would have incurred if it had provided these services using its own
personnel. AMR Corporation's corporate allocations ceased at the time the
acquisition was closed, and have subsequently been replaced with either internal
expense to perform the services or outsourced services provided by a third party
provider. To date it has been our experience that although we may have lost some
of the leverage available to us from our former parent in obtaining third party
services, we have gained the ability to procure the services that best meet our
specific needs. As a result, we believe that on an overall basis, our service
costs going forward should be equal to or slightly lower than the costs
previously allocated by AMR for the equivalent services.
Discontinued Business. In July 1998, AMRS acquired a license to operate
and began to fund the operations of Cyclone Surface Cleaning, Inc., which was
engaged in developing a technology to clean airport runways. We decided that
Cyclone does not fit with our core businesses and to discontinue its operations.
Results of operations for 1998 and the three months ended March 31, 1999 have
been adjusted to reflect Cyclone as a discontinued operation. On August 31,
1999, we assigned our license and a stock option that we also had acquired and
paid approximately $0.6 million to the owners of Cyclone to settle our
obligations due under a promissory note.
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<PAGE> 23
RESULTS OF OPERATIONS
Revenues, operating income, and loss from continuing operations before
extraordinary loss for the nine months ended as of December 31, 1999 were $216.9
million, $7.6 million, and $3.4 million, respectively. As a result of the
acquisition of Worldwide effective March 31, 1999 these amounts are not
comparable to those items in the financial statements in the comparable periods
of the prior year. Financial information for periods subsequent to March 31,
1999 are presented using different bases of accounting. However, for information
purposes results of operations for the twelve months ended December 31, 1999
have been included and represent an adjusted combination of two interim periods:
one for AMRS for the three month period prior to the consummation of the
acquisition until March 31, 1999, and one for Worldwide for the nine month
period following the consummation of the acquisition through December 31, 1999.
No combined historical financial information is presented below the operating
income line item because Worldwide and AMR Services Corporation had different
capital structures, and we believe that a combination of this information is not
meaningful. In addition, no adjustment has been made to include Miami Aircraft
Support or Aerolink for periods prior to their acquisitions.
Revenues. Revenues are generated by providing cargo handling and ramp,
passenger and technical services for air cargo and passenger airlines. Cargo
services are generally billed based on the number of man-hours needed to provide
the services, the number of pounds of cargo handled or, in some cases, a
combination of the two. Most of our other services are billed based on the
number of man-hours used to provide the services, although some ramp services
are billed on a per aircraft basis. Technical services are generally billed
based on time and materials.
Since the acquisition of AMRS, we have identified revenue information
for the cargo handling, ramp service, passenger service or technical service
categories. Prior to the acquisition, AMRS did not identify revenues in similar
categories. The following table contains, for the period since our acquisition
from AMR Corporation, revenues by cargo handling, ramp service, passenger
service and technical service categories.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31, 1999
--------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cargo handling .......... $ 98,766 46%
Ramp service ............ 49,495 23%
Passenger service ....... 46,262 21%
Technical service ....... 22,348 10%
--------- -----
Total ............... $ 216,870 100.0%
</TABLE>
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<PAGE> 24
Expenses. Expenses incurred to generate revenues consist primarily of
salaries, wages and benefits. Our other significant expenditures are:
o materials, supplies and services, which includes operating
supplies such as fuel, glycol for de-icing, outsourced
services, cost of sales for freight management services and
office supplies;
o equipment and facilities rentals;
o depreciation and amortization;
o interest expense; and
o other operating expenses, which include data processing and
information systems, telecommunications, accounting, human
resources, office supplies, travel and general corporate
administration.
As indicated above, AMRS was responsible for paying significant
overhead allocations from AMR Corporation in addition to the overhead required
to run the daily operations of AMRS. For example, AMRS had its own executive
group, finance and accounting, legal and human resources departments. AMR
Corporation's corporate allocations ceased at the time the acquisition of
Worldwide by our parent was closed. In connection with our establishment of an
administrative structure, we have hired, and intend to continue to hire,
additional personnel at our Euless corporate office.
TWELVE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1999
The following table contains, for the periods indicated, revenues and
categories of expenses in dollars and as a percentage of sales.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
------------------------------------------
1998 % 1999(a) %
-------- ----- -------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues ............................... $229,742 100.0% $278,345 100.0%
Salaries, wages and benefits ........... 154,706 67.3 180,840 65.0
Materials, supplies and services ....... 28,047 12.2 33,022 11.9
Equipment and facilities rental ........ 13,597 5.9 17,170 6.2
Depreciation and amortization .......... 5,908 2.6 10,739 3.8
Other operating expenses ............... 13,632 6.0 24,947 8.9
General and administrative
allocated expenses ................ 5,798 2.5 2,269 0.8
-------- ----- -------- -----
Operating income from
continuing operations ............. $ 8,054 3.5% $ 9,358 3.4%
======== ===== ======== =====
</TABLE>
- -------------
(a) Represents two interim periods consisting of one for AMRS for the three
month period prior to the consummation of the acquisition from January
1, 1999 through March 31, 1999, and one for Worldwide for the nine
month period following the consummation of the acquisition from April
1, 1999 through December 31, 1999.
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<PAGE> 25
Revenues. Total revenues increased $48.6 million, or 21.2%, from $229.7
million in 1998 to $278.3 million in 1999. The acquisitions of Miami Aircraft
Support and Aerolink in August 1999 accounted for approximately $31.6 million of
this increase. Revenues increased $2.9 million, or 1.3 %, in 1999 as a result of
the addition of a new location in Hong Kong, which opened in July 1998. We also
experienced revenue growth in our cargo handling operations, especially at our
location in Paris which had a $7.2 million increase, and in our freight
management business which increased $3.8 million over the 1998 period.
Salaries, wages and benefits. Salaries, wages and benefits increased
$26.1 million, or 16.9%, from $154.7 million in 1998 to $180.8 million in 1999.
The primary reason for the increase was an increase in the number of employees
required to support the additional new business during 1999, including $19.4
million additional salaries expense as a result of the Miami Aircraft Support
and Aerolink acquisitions. Also, an increase of $1.5 million occurred at our new
location in Hong Kong, which was not in operation during most of the same period
in 1998. Additionally, wage rates increased to compensate somewhat for the loss
of flight benefits for our field and administrative employees and, to some
extent, wage rates increased in order to increase our retention of qualified
employees.
Materials, supplies and services. Materials, supplies and services
increased $5.0 million, or 17.7 %, from $28.0 million in 1998 to $33.0 million
in 1999. This increase was primarily due to an increase in freight management
cost of sales of $3.0 million resulting from additional freight management
business and the purchase of Miami Aircraft Support and Aerolink, which added
$2.3 million.
Equipment and facilities rental. Equipment and facilities rental
increased $3.6 million, or 26.3%, from $13.6 million in 1998 to $17.2 million in
1999. Additional facilities rental expense attributed to the acquisitions of
Miami Aircraft Support and Aerolink is approximately $2.5 million. Rental
expense in Europe and in New York increased approximately $2.0 million for
facilities required to service our increased cargo operations in those
locations. These increases were partially offset by station closures and other
reductions.
Depreciation and amortization. Depreciation and amortization increased
$4.8 million, or 81.8 %, from $5.9 million in 1998 to $10.7 million in 1999. The
primary reason for the increase in 1999 was additional goodwill amortization as
a result of the acquisitions of AMRS, Miami Aircraft Support and Aerolink.
Other operating expenses. Other operating expenses increased $11.3
million, or 83.0%, from $13.6 million in 1998 to $24.9 million in 1999. The
acquisitions of Miami Aircraft Support and Aerolink increased other operating
expenses by approximately $1.9 million. Increased expenses as a result of the
higher levels of activity at existing locations include the growth in freight
related expenses of approximately $3.4 million in the European Cargo operations
and $1.2 million for subcontracted services at Islip, New York. The amount
provided in 1999 for bad debts increased $1.1 million compared to 1998. Other
factors contributing to the increase include costs at the new Hong Kong
location, foreign currency exchange losses and increased insurance costs, which
in the aggregate account for approximately $1.5 million. The remaining increase
is considered primarily due to generally higher levels of business activity
which was partially offset by a decrease in general and administrative allocated
expenses as indicated below.
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<PAGE> 26
General and administrative allocated expenses. General and
administrative allocated expenses decreased $3.5 million, or 60.9%, from $5.8
million in 1998 to $2.3 million in 1999. The reason for the decrease was the
elimination of the corporate overhead charge allocated to AMRS from AMR
Corporation. This allocation was included in the twelve month period of 1998 and
the quarter ended March 31, 1999, but was eliminated at the time of the
acquisition of Worldwide from AMR Corporation. AMR Corporation increased the
allocation in the quarter ended March 31, 1999, which resulted in this decrease
being lower than if the allocation had remained constant with amounts from prior
years.
Operating income from continuing operations. As a result of the factors
discussed above, operating income from continuing operations increased $1.3
million, or 16.2%, from $8.1 million in 1998 to $9.4 million in 1999. As a
percentage of revenues, operating income for 1999 was basically unchanged from
1998. The dollar increase resulted primarily from the acquisition of Miami
Aircraft Support and Aerolink offset by certain cost increases discussed in the
preceding paragraphs. Other factors that further offset the operating income
were costs associated with our being an independent company, such as accounting,
legal and consulting expenses associated with outside independent contractors,
logo changes on uniforms and recruiting costs for corporate executives. Further
reductions occurred due to the change from AMR's payroll system to a new
outsourced system, the unfavorable impact of escalating health insurance costs
and increased bad debt reserves.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998
The following table contains, for the periods indicated, revenues and
categories of expenses in dollars and as a percentage of sales.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1997 % 1998 %
--------- ----- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues $ 223,090 100.0% $ 229,742 100.0%
Expenses:
Salaries, wages and benefits 144,422 64.7 154,706 67.3
Materials, supplies and services 33,384 15.0 28,047 12.2
Equipment and facilities rental 11,059 5.0 13,597 5.9
Depreciation and amortization 5,643 2.5 5,908 2.6
Other operating expenses 15,847 7.1 13,632 6.0
General and administrative
allocated expenses 5,877 2.6 5,798 2.5
--------- ---------
Operating income from continuing 6,858 3.1 8,054 3.5
operations
Interest income 1,421 0.6 2,160 0.9
Other income (expense), net (584) 0.3 580 0.3
--------- ---------
Income before taxes 7,695 3.4 10,794 4.7
Taxes 3,309 1.5 4,490 2.0
--------- ---------
Income from continuing operations 4,386 2.0 6,304 2.7
--------- ---------
Loss from discontinued operations
net of applicable income taxes -- -- (552) .2
--------- ---------
Net income $ 4,386 2.0 $ 5,752 2.5
========= =========
</TABLE>
Revenues. Total revenues increased $6.6 million, or 3.0%, from $223.1
million in 1997 to $229.7 million in 1998. This increase had a number of
components, including:
o revenue from providing technical and passenger services at our
new Hong Kong location, which accounted for $3.9 million of
the increase;
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<PAGE> 27
o an expansion of cargo handling and passenger services
operations at Boston, which accounted for $2.0 million; and
o additional revenues from our New York cargo operations, which
increased by $2.2 million.
However, these were largely offset by a $7.6 million loss of revenue in the
freight management business due to a major customer in that business ceasing
operations in late 1997.
Salaries, wages and benefits. Salaries, wages and benefits increased
$10.3 million, or 7.1%, from $144.4 million in 1997 to $154.7 million in 1998.
Increases in salaries and wages track closely with increases in revenues in our
Hong Kong, Boston and New York locations discussed above. The decrease in the
freight management business during 1998 did not significantly decrease salaries
and wages as fulfillment in our freight management business is exclusively
provided by common carriers, and not our employees.
Materials, supplies and services. Materials, supplies and services
decreased $5.3 million, or 16.0%, from $33.4 million in 1997 to $28.0 million in
1998. The primary reason for the decrease was the reduction in volume in the
freight management business, which accounted for $6.3 million, due to the major
customer loss discussed above. This decrease was partially offset by normal
growth in our other business lines, as discussed above.
Equipment and facilities rental. Equipment and facilities rental
increased $2.5 million, or 22.9%, from $11.1 million in 1997 to $13.6 million in
1998. The primary reason for the increase was the increase in the cargo handling
operations at our New York location, which were lower in 1997 due to rental
credit received.
Depreciation and amortization. Depreciation and amortization remained
relatively flat increasing only $0.3 million, or 4.7%, from $5.6 million in 1997
to $5.9 million in 1998. This increase was primarily related to our new location
in Hong Kong.
Other operating expenses. Other operating expenses decreased $2.2
million, or 14.0%, from $15.8 million in 1997 to $13.6 million in 1998. The
primary reason for the decrease was the decrease in freight management business,
including a $1.0 million bad debt write-off occurring in 1997 relating to a
major customer ceasing operations.
General and administrative allocated expenses. Allocations included in
the financial statements for 1997 and 1998 were at AMR Corporation's discretion
and were comparable.
Operating income from continuing operations. Operating income from
continuing operations increased $1.2 million, or 17.4%, from $6.9 million in
1997 to $8.1 million in 1998. As a percent of sales, operating income remained
relatively flat increasing by only 0.5% in 1998.
Interest income. Interest income increased $0.7 million, or 52.0%, from
$1.4 million in 1997 to $2.2 million in 1998. This increase reflected an
increase in the accumulated undistributed cash balances at AMRS, which were held
on its behalf by AMR Corporation.
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<PAGE> 28
Income tax expense. Income tax expense increased from $3.3 million in
1997 to $4.5 million in 1998. AMRS's effective income tax rate remained
relatively flat at approximately 43.0% in 1997 and 41.6% in 1998.
Loss from discontinued operations net of applicable income taxes. Loss
from discontinued operations net of applicable income taxes was $0.6 million in
1998. It was due to the operations of Cyclone, which was purchased in July 1998.
As discussed above, we intend to dispose of Cyclone.
Net income. Net income increased $1.4 million, or 31.1%, from $4.4
million in 1997 to $5.8 million in 1998. The increase in net income was due to
increases in operating income and interest income in 1998
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash flows from operations and
borrowings under the senior secured credit facility, which is discussed below.
In the nine months ended December 31, 1999, $3.5 million of net cash used in
operations was financed by borrowings under our senior secured credit facility
to fund an expansion in working capital and $6.4 million in capital
expenditures. At December 31, 1999, we had $2.5 million in cash and cash
equivalents (including restricted cash), 96% of which is held by our operations
in France and Hong Kong.
The $12.4 million increase in net working capital resulted primarily
from increased accounts receivables some of which relate to American Airlines
and its affiliates, which in the prior year were paid through intercompany
accounts and in the current year are carried as true arms length receivables. In
addition, the acquisitions of Miami Aircraft Support and Aerolink during August
1999 further contributed to the increase in accounts receivable. The increase in
receivables was offset by increased terms of payment to our vendors from 30 days
to 45 days, longer terms of payment to American Airlines for payroll processed
and paid by American Airlines and increased accruals for normal expenses such as
interest expense which were not necessary when we were a subsidiary of AMR
Corporation.
As of December 31, 1999, we had long-term debt of $139.9 million of
which $2.9 million represents the current portion due within one year. The
majority of the long-term debt is made up of $130.0 million of 12.25% senior
notes, due in 2007, discounted to a carrying value of $127.0 million. Interest
is accrued and payable semi-annually on the notes on February 15 and August 15.
Our annual interest payments on the senior notes are approximately $15.9
million. Our annual interest payment requirements on borrowings under the senior
secured credit facility depend on the level of our borrowings.
On August 12, 1999, we entered into the senior secured credit facility
with a new group of lenders that provides us with up to $75.0 million for
purposes of funding working capital requirements and funding financing needs for
future acquisitions. At December 31, 1999, we had borrowed approximately $8.0
million under the senior secured credit facility of the $36.7 million available.
Borrowings under the senior secured credit facility accrue interest at LIBOR
plus 3% which has averaged approximately 9.0% for the period. However, our
future additional
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<PAGE> 29
availability may be less than the total remaining commitment amount and will
depend on the borrowing base and us being able to meet the applicable leverage
and coverage ratios and other customary conditions. If we are in default under
the senior secured credit facility, which may occur if we fail to maintain
financial ratios and meet other covenants, we may not be able to make these
additional borrowings under that facility.
We also carry $4.9 million of capitalized leases which were part of the
acquisitions of Miami Aircraft Support and Aerolink.
We use derivative financial instruments to reduce interest rate risks.
We do not hold or issue derivative financial instruments for trading purposes.
Effective March 31, 1999, we purchased two interest rate swaps to limit our
exposure to increases in levels of variable interest rates. We currently borrow
funds according to the senior credit agreement based on LIBOR plus 3%. The
interest rate cap agreements are for a total notional amount of $50.0 million,
both at 6.5%, with $20.0 million expiring on March 31, 2002 and $30 million
expiring on March 31, 2003. We have $8.0 million of borrowings currently
outstanding under variable rate debt instruments, but we have selected to
maintain the interest rate caps in their full $50.0 million notional amount, in
the anticipation of incurring additional borrowings from variable-rate
instruments in the future to fund various activities, including possible
acquisitions.
In addition to our debt service obligations, our principal liquidity
needs are for working capital and capital expenditures. During 1998, AMRS spent
$7.2 million on capital projects, and for the nine months ended December 31,
1999, Worldwide spent $6.4 million on capital projects. Of this amount,
approximately $4.2 million was incurred in connection with the establishment of
our new corporate administrative facility, principally for computer software and
hardware, as well as for furniture, fixtures and office equipment. The other
capital expenditures were budgeted for the replacement and refurbishment of
equipment and for new equipment to support existing and new business including
the implementation of a new business enterprise system which is expected to be
completed on or about March 31, 2000.
The purchase price for Miami Aircraft Support, which was acquired on
August 12, 1999, was $63.0 million. In addition, we retained approximately $5.2
million of Miami Aircraft Support indebtedness. These amounts were funded out of
the proceeds of the offering of the Original Notes and an equity contribution of
$10.4 million to Worldwide by our parent which occurred simultaneously.
The purchase price of Aerolink was approximately $5.9 million, plus
possible additional consideration of up to a maximum of $1.0 million based on
various conditions being satisfied, including conditions relating to calendar
1999 earnings, of which the Company currently expects to pay the majority of
this amount. We repaid $0.6 million of Aerolink indebtedness. These amounts were
funded in part with borrowings under the senior secured credit facility.
We are also pursuing additional acquisitions, including an acquisition
for which we have signed a non-binding letter of intent. Any acquisitions, if
completed, are expected to be funded primarily through borrowings under the
senior secured credit facility.
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<PAGE> 30
The acquisition price for Worldwide has an adjustment provision that
requires a price adjustment depending on a calculation based on working capital
and capital spending. This issue has been resolved with AMR and is not expected
to result in any significant adjustment. The acquisition agreement also contains
provisions by which Worldwide may pay, after 10 years, up to an additional $10.0
million in consideration based on the growth rate of revenues as measured
against certain revenue growth benchmarks. As of December 31, 1999, the Company
does not believe any amounts will be owed under this contingent purchase payment
based on recent trends.
We intend to satisfy our working capital requirements, capital
expenditures and scheduled debt service requirements for at least the next
twelve months through a combination of cash flows generated from operations and
funds available under the senior secured credit facility.
EFFECTS OF INFLATION
Inflation has not had a significant effect on our operations. However,
in the event of increases in inflation, particularly in employment costs, we
could experience sudden and significant increases in operating costs. Over the
short-term, we may be unable to completely pass wage increases on to our
customers. Management believes that, over longer periods of time, we generally
will be able to pass on inflationary increases to our customers.
SEASONALITY
Historically, our revenues and operating income have not been
significantly seasonal due to our geographic dispersion and business line
diversity. We experience a moderate seasonal peak during the fourth quarter due
to December holiday season cargo activity.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires all derivatives to be
measured at fair value and recognized as either assets or liabilities on the
balance sheet. Changes in such fair value are required to be recognized
immediately in net income (loss) to the extent the derivatives are not effective
as hedges. SFAS No. 133 is effective for fiscal years beginning after June 15,
2000 and is effective for interim periods in the initial year of adoption. At
the present time, we do not feel the adoption of SFAS No. 133 will have a
material effect on our results of operations, financial position or cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The risk inherent in our market risk sensitive instruments and
positions is the potential loss arising from adverse changes in foreign currency
exchange rates and interest rates. The sensitivity analyses presented do not
consider the effects that those adverse changes may have on overall economic
activity, nor do they consider additional actions we may take to mitigate our
exposure to those changes. Actual results may differ.
Foreign currency. We are exposed to the effect of foreign exchange rate
fluctuations between the U.S. dollar and the currencies related to our foreign
operations. Our largest exposure comes from the French franc. The operations in
France are substantially self-contained in that the majority of the revenues and
related expenses are incurred in French francs. However, we are exposed to
currency fluctuations with respect to finance costs which are currently all
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<PAGE> 31
incurred in the United States in U.S. dollars, and to the extent there are
investments and profits denominated in French francs that need to be
repatriated. During 1997, foreign currency losses amounted to $584,000, during
1998, foreign currency gains amounted to $440,000, for the three months ended
March 31, 1999, losses amounted to $552,000, mainly as a result of French franc
fluctuations.
Worldwide has concluded that certain of its intercompany notes
receivable from its foreign subsidiaries represent permanent investments in
those operations and as a result have classified approximately $362,000 in
devaluation losses on these notes as a component of the cumulative translation
adjustment.
Interest. Our earnings are also affected by changes in interest rates
due to the impact those changes have on our interest expense from variable-rate
debt instruments. A 1/4% change in interest rates under the senior secured
credit facility would cause interest expense to increase or decrease by
approximately $20,000. We purchased an interest rate cap to limit our exposure
to increases in levels of variable interest rates. The interest rate cap
agreements are for a notional amount of $50.0 million. We have $8.0 million of
borrowing currently outstanding under variable-rate debt instruments, but have
elected to maintain the interest rate caps in their full $50.0 million notional
amount, in the anticipation of incurring additional borrowings from
variable-rate debt instruments in the future to fund various activities,
including possible acquisitions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 of Part II is incorporated herein
by reference to the Consolidated Financial Statements filed with this report;
See Item 14 of Part IV.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
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<PAGE> 32
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS
The following table contains the name, age and position of each person
who is an executive officer or director of our company. Each director also
serves as a director of our parent.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- ------- -----------------------------------------------
<S> <C> <C>
Peter A. Pappas 62 Chairman and Chief Executive Officer
Mark Dunkerley 36 Chief Operating Officer, President and Director
H. Douglas Pinckney 35 Senior Vice President, Sales and Marketing
Olivier Bijaoui 42 Senior Vice President, Europe
Jonathan S. Weaver 35 Senior Vice President, Planning
Albert V. Casey 79 Director
Marcel Fournier 44 Director
Leonard M. Harlan 63 Director
Lieut. General Thomas G.
McInerney (Retired) 62 Director
Bradley G. Stanius 53 Director
Gilbert A. Yanuck 59 Director
</TABLE>
We currently have eight authorized directors, each of whom will serve
until a successor is elected or until any of them resigns or is removed. On
January 27, 2000, A. Scott Letier, our former Chief Financial Officer, ceased to
be employed by Worldwide. We are currently searching for his replacement.
Peter A. Pappas joined Worldwide in October 1998 and serves as Chairman
and Chief Executive Officer. From October 1998 to July 1999, Mr. Pappas served
as Worldwide's President and Chief Executive Officer. Mr. Pappas has
approximately 30 years of aviation industry experience. Prior to joining
Worldwide, Mr. Pappas served as Senior Vice President of Marketing, Planning and
Sales at American Eagle, a position he held since November 1995. From January
1992 to October 1995, Mr. Pappas served as President of the AMR Consulting Group
and its successor, AMR Training and Consulting Group. From March 1989 to
November 1991, Mr. Pappas served as Vice President of Strategic Planning at Pan
American World Airways. Prior to March 1989, Mr. Pappas held various executive
positions with American Airlines, Pan American World Airways and Eastern
Airlines.
Mark Dunkerley joined Worldwide in July 1999 and serves as Chief
Operating Officer and President and as a director. Prior to joining Worldwide,
Mr. Dunkerley served as the Senior Vice President in charge of the Latin America
and Caribbean Division for British Airways from April 1997 to July 1999 and also
served as Manager in British Airways' Eastern Europe division from October 1995
until April 1997. Mr. Dunkerley also served as a Vice President and Manager of
British Airways from August 1989 to October 1995 in various capacities and was
responsible for Commercial and Government Affairs for North America and Investor
Relations for North America. Prior to joining British Airways, Mr. Dunkerley
served as the Assistant to the Chief Executive Officer of the Miami
International Airport from August 1985 to August 1989.
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<PAGE> 33
H. Douglas Pinckney joined Worldwide in December 1999 as Senior Vice
President of Sales and Marketing. From April 1999 to December 1999, Mr. Pinckney
served as General Manager, Customer Service for North America with Sea-Land
Service, Inc. From July 1986 to April 1999, Mr. Pinckney served in various sales
and management positions with Sea-Land Service, Inc.
Olivier Bijaoui joined Worldwide in January 1996 and has served as
Senior Vice President for Europe since May 1996. From January 1993 to May 1996,
Mr. Bijaoui served as President of SFS, a cargo handling company operated at
Orly and Charles de Gaulle airports in Paris which had been built by Mr. Bijaoui
and his father and was acquired by Worldwide in 1993. From 1980 until his
promotion to President, Mr. Bijaoui served as managing director of SFS.
Jonathan S. Weaver joined Worldwide in September 1988 and has served as
Senior Vice President of Planning since February 1999. From August 1998 to
February 1999, Mr. Weaver served as Vice President of Field Resources of
Worldwide. From May 1997 to August 1998, he acted as Assistant Vice President of
Field Resources. From March 1995 to May 1997, Mr. Weaver served as Director of
Field Resources. Prior to March 1995, Mr. Weaver held various other management
positions at Worldwide.
Albert V. Casey has served as a director of Worldwide since March 1999.
Mr. Casey rejoined the Edwin L. Cox School of Business at Southern Methodist
University during July 1993 after having served as the school's Ann Cox
Distinguished Professor of Business Policy from August 1986 to May 1988. Prior
to rejoining the Business School, Mr. Casey was the President and Chief
Executive Officer of the Resolution Trust Corporation from October 1991 to March
1993. Mr. Casey was the Chief Executive Officer of AMR Corp. and American
Airlines from February 1974 until the retirement in February 1985. In 1986, Mr.
Casey served as Postmaster General of the United States.
Marcel Fournier has served as a director of Worldwide since March 1999.
Mr. Fournier has served as a Managing Director of Castle Harlan, Inc. since
December 1995. Prior to joining Castle Harlan, Inc., Mr. Fournier held various
positions, including Managing Director, at the investment banking group of
Lepercq, de Neuflize & Co., Inc. from November 1981 to November 1995. From June
1979 to November 1981, Mr. Fournier was Assistant Director of the United States
office of the agency of the French Prime Minister.
Leonard M. Harlan has served as a director of Worldwide since March
1999. Mr. Harlan is the President of Castle Harlan, Inc., which he co-founded in
1987, Castle Harlan Partners II GP, Inc. and Castle Harlan Partners III GP, Inc.
Prior to founding Castle Harlan, from 1969 to 1995, Mr. Harlan was Chairman and
Chief Executive Officer of the Harlan Company, a real estate investment banking
and advisory firm. Mr. Harlan was also a member of the Executive Committee of
the Harvard Business School Alumni Association, is currently a Trustee of the
New York City Citizens Budget Commission and is on the Advisory Board of the
Journal of Private Equity.
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<PAGE> 34
Lieut. General Thomas G. McInerney (Retired) has served as a director
of Worldwide since March 1999. General McInerney has served as the Chief
Executive Officer and President of Business Executives for National Security
(BENS) since March 1996. Prior to joining BENS, General McInerney was Vice
President of Command and Control for Loral Defense Systems-Eagan, which was
formerly Unisys, Electronic Systems Division, from November 1994 to March 1996.
Prior to 1994, General McInerney served in numerous key U.S. Air Force
assignments and had extensive military command, including Assistant Vice Chief
of Staff of the Air Force, Director of the Defense Performance Review, Vice
Commander in Chief-United States Air Forces in Europe and Commander-Alaskan Air
Command. General McInerney is also a member of the board of directors of Signal
Technology Corporation.
Bradley G. Stanius has served as a director of Worldwide since March
1999. Mr. Stanius has served as the Chief Executive Officer of Smarte Carte
since December 1997, which he joined in 1992. Prior to joining Smarte Carte in
1992, Mr. Stanius served as the Chairman and Chief Executive Officer of
Pharmaceutical Services, Inc. Mr. Stanius is also a former member of the
Minnesota House of Representatives, served as the Republican caucus whip and is
a former Mayor of White Bear Lake, Minnesota.
Gilbert A. Yanuck has served as a director of Worldwide since March
1999. From 1971 through March 1999, Mr. Yanuck has held various positions with
MAG Aerospace Industries, Inc., including President and Chief Executive Officer
prior to retiring in March, 1999. Mr. Yanuck has also served and continues to
serve as a consultant and a director of MAG Aerospace Industries, Inc.
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<PAGE> 35
ITEM 11. EXECUTIVE COMPENSATION
The following table indicates the 1999 contractual compensation of our
Chief Executive Officer and our four other most highly compensated officers
under their employment agreements. The table does not include discretionary
bonuses, as none were accrued or paid in 1999. The compensation committee of the
board of directors may, in the future, in its discretion increase the salary or
bonus of any of these employees. Selected terms of their employment agreements
are summarized below.
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
NAME TITLE SALARY BONUS(5) COMPENSATION COMPENSATION
- ----------------------- ------------------ ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Peter A. Pappas Chairman and $ 270,000 $ 50,000 $ 19,000(6) --
Chief Executive
Officer
Mark Dunkerley(1) President and 235,000 62,500 (7) --
Chief Operating
Officer
A. Scott Letier(2) Chief Financial 165,000 -- -- --
Officer
Olivier Bijaoui Senior Vice 184,000(3) 55,200 -- --
President, Europe
H. Douglas Pinckney(4) Senior Vice 175,000 20,000 (8) --
President, Sales
and Marketing
</TABLE>
- ---------------
(1) Hired on July 12, 1999.
(2) Hired on March 31, 1999. On January 27, 2000, Mr. Letier ceased to be
employed by Worldwide.
(3) Payable in French francs.
(4) Hired on December 2, 1999.
(5) Some of our executive officers received signing bonuses when they
entered into their employment agreements or upon the closing of the
acquisition of Worldwide by our parent. These signing bonuses are
described in the summaries of their employment agreements below.
(6) Consists of (a) $13,000 country club membership entrance fee, (b)
$6,000 country club membership fees and (c) other perquisites not
exceeding 25% of the total perquisites reported.
(7) Consists of an apartment in Dallas, Texas not to exceed a monthly
rental of $2,500 and travel from Miami, Florida to and from Dallas,
Texas not to exceed $3,500 per month.
(8) Consists of a maximum one time initiation fee of $18,000 for a country
club membership and annual dues of $2,700.
1999 STOCK OPTION PLAN
Our parent has established a stock option plan which provides for the
granting of incentive stock options and non-qualified stock options to key
employees, consultants and directors of our parent, our company and our
subsidiaries to acquire shares of non-voting common stock of our parent. The
granting of these options is made in the discretion of the compensation
committee of the board of directors of our parent and each grantee will receive
options over a period of five years. The exercise price of each option will be
the fair market value of the stock on the date that the option is granted.
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<PAGE> 36
Options vest and become exercisable based on the achievement of
performance targets. The compensation committee of our parent will review
performance targets annually or upon the sale of a majority of the stock of
either our parent or the sale of all or substantially all of the assets of our
parent, to determine what portion, if any, of the options will vest and become
exercisable. If the grantee's employment is terminated for any reason, all
options not yet exercisable as of the date of termination will expire.
We have reserved 100,000 shares of non-voting common stock for issuance
under the option plan. As of December 31, 1999, no options had been granted.
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS
PETER A. PAPPAS. We have an employment agreement with Peter A. Pappas
for him to serve as our Chief Executive Officer. Mr. Pappas is to be paid an
annual base salary of $270,000 per year and compensation committee of the board
of directors, with a guaranteed minimum bonus of $50,000. The term of his
agreement extends to September 30, 2001. Mr. Pappas's employment agreement
provides that if he dies, becomes disabled, terminates his employment with good
reason or if Worldwide terminates his employment without cause, he will be
entitled to receive a severance payment, equal to his base salary for the
remainder of his employment term and a termination bonus. If Mr. Pappas'
employment is terminated other than for the reasons listed above, he will not
receive any severance payment. If Mr. Pappas continues his employment until
September 30, 2001 and the fair market value of the stock in our parent granted
to him is less than the aggregate amount of bonuses paid to him throughout his
employment term, Mr. Pappas will be entitled to receive an additional payment
equal to the difference between his total bonuses and the fair market value of
his stock in our parent.
MARK DUNKERLEY. We have an employment agreement with Mark Dunkerley
under which he serves as our Chief Operating Officer and President. This
agreement extends to July 12, 2002. Mr. Dunkerley is to be paid an annual base
salary of $235,000 per year and a discretionary annual cash bonus up to a
maximum of 50% of his base salary, as determined by the compensation committee
of Worldwide. Mr. Dunkerley was paid a signing bonus of $30,000 on July 12, 1999
and an additional signing bonus of $32,500 on October 12, 1999. Mr. Dunkerley's
employment agreement also provides that if he terminates his employment with
good reason or if Worldwide terminates his employment for any reason other than
cause, he will be entitled to receive a severance payment equal to his base
salary for the greater of 18 months and the remainder of his employment term. If
there is a sale of a majority of the stock of our parent or the sale of all or
substantially all of the assets of our parent, Mr. Dunkerley will have the right
to terminate his employment and receive a lump sum severance payment equal to
nine months of his base salary. If Mr. Dunkerley's employment is terminated for
reasons other than those listed above, he will not receive any severance
payment.
A. SCOTT LETIER. On January 27, 2000, A. Scott Letier ceased to be
employed by Worldwide. We had entered into an employment agreement with A. Scott
Letier for him to serve as our Chief Financial Officer. In lieu of severance
payments under his employment agreement, Worldwide and Mr. Letier reached a
mutually agreeable severance package, the amount of which is not material to
Worldwide.
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<PAGE> 37
H. DOUGLAS PINCKNEY. We have an employment agreement with H. Douglas
Pinckney for him to serve as our Senior Vice President, Sales and Marketing.
This agreement extends to December 2, 2002. Mr. Pinckney is to be paid an annual
base salary of $175,000 and a discretionary annual cash bonus up to 50% of his
base salary, as determined by the compensation committee of Worldwide. Mr.
Pinckney was paid a signing bonus of $20,000 on December 2, 1999 and will
receive an additional signing bonus of $20,000 in April, 2000. If Worldwide
terminates Mr. Pinckney's employment without cause, he shall receive severance
payments equal to his base salary for the remainder of the employment term. If
Mr. Pinckney's employment is terminated for any reason other than without cause,
he will not receive any severance payment.
OLIVIER BIJAOUI. We have an employment agreement with Olivier Bijaoui
for him to serve as our Senior Vice President, Europe. The agreement took effect
as of December 7, 1998 and extends until March 31, 2001. He is to be paid an
annual base salary of 972,825 French francs. Mr. Bijaoui is also guaranteed an
annual bonus of 30% of his base salary. Mr. Bijaoui also was paid a
stay-in-place bonus equal to eight months of his base salary upon the closing of
the acquisition of Worldwide by our parent. This agreement provides that if Mr.
Bijaoui becomes disabled, terminates his employment with good reason, or if
Worldwide terminates his employment without cause, he will be entitled to
receive a severance payment equal to his base salary and bonus until the end of
the term of his employment agreement. If Mr. Bijaoui's employment is terminated
for reasons other than those listed above, he will not receive any severance
payment.
All of the employment agreements described above provide that each of
the executives will receive life, disability and health insurance benefits for
the period of time that they receive payments from Worldwide after their
termination of employment, except for Mr. Pappas who will only receive these
benefits until the end of his agreement's term if his employment terminates as a
result of a disability.
In addition, our parent and Worldwide have entered into non-competition
and confidentiality agreements with each of Mr. Dunkerley and Mr. Pinckney that
prohibit these executives from competing with or soliciting employees or
customers of our parent, Worldwide or any of our subsidiaries. These limitations
last for three years from the termination of employment if the executive leaves
Worldwide without good reason or if he is terminated for cause. If the executive
leaves our employment with good reason or is terminated without cause, the
limitations on competition and solicitation will last for the remaining term of
the employment agreement or eighteen months from the time of termination,
whichever is longer. In addition, Mr. Dunkerley is currently prohibited from
disclosing confidential information obtained while working for us.
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<PAGE> 38
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors presently has two committees, a compensation
committee and an audit committee. The compensation committee is comprised of
Messrs. Fournier, Harlan, Stanius and Yanuck and the audit committee is
comprised of Mr. Casey, General McInerney and Mr. Fournier. The compensation
committee establishes remuneration levels for some of our officers and performs
other functions as may be delegated to it under our various benefit and
executive compensation programs. The audit committee selects and engages the
independent public accountants to audit our annual financial statements. The
audit committee also reviews and approves the planned scope of the annual audit.
The board of directors may from time to time establish other committees
to facilitate our management.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is a former or current officer
or employee of the Worldwide or any of its subsidiaries. In addition, except as
set forth below, there are no relationships among Worldwide's executive
officers, members of the Compensation Committee or entities whose executives
serve on the Board of Directors or the Compensation Committee that require
disclosure under applicable Securities and Exchange Commission regulations.
During fiscal 1999, we entered into a management agreement with Castle
Harlan, Inc., as manager, under which the manager will provide us with business
and organizational strategy, financial, investment management, advisory and
merchant and investment banking services. Castle Harlan, Inc. is an affiliate of
our parent, which owns all of our outstanding stock. In connection with our
acquisition of Miami Aircraft Support, our entering into the senior secured
credit facility, the $10.0 million equity contribution by our parent to us and
the refinancing of our indebtedness, the management agreement was amended to
provide an annual charge for services to be rendered of $1.25 million starting
July 1, 2000 until December 31, 2002 and increasing to $2.0 million starting
January 1, 2003 until December 31, 2005. The expenses for such services will be
recorded ratably on a straight-line basis over the term of the agreement. Under
the terms of the management agreement, $862,000 has been expensed for the nine
months ended December 31, 1999. After December 31, 2005 the agreement will
automatically renew each year unless canceled by either party. In connection
with the acquisition of Worldwide from AMR Corporation, we paid $2.0 million to
Castle Harlan, Inc. for reimbursement of expenses related thereto. Concurrent
with the closing of the offering of the Original Notes and the senior secured
credit facility, fees of $2.5 million were paid to Castle Harlan. Leonard M.
Harlan and Marcel Fournier are both employed by Castle Harlan, Inc.
COMPENSATION OF DIRECTORS
Messrs. Casey, McInerney, Stanius and Yanuck, as directors who are not
otherwise associated with Worldwide or its affiliates, are paid $25,000 per
year, payable quarterly. Mr. Harlan and Mr. Fournier, employees of Castle
Harlan, Inc., and Mr. Pappas and Mr. Dunkerley, who are executive officers of
Worldwide, do not receive compensation for serving as directors.
-34-
<PAGE> 39
LIMITATIONS ON OFFICERS' AND DIRECTORS' LIABILITY
Our Certificate of Incorporation indemnifies our officers and directors
to the fullest extent permitted by the Delaware General Corporation Law, which
is referred to in this report as the DGCL. Under Section 145 of the DGCL, a
corporation may indemnify its directors, officers, employees and agents and its
former directors, officers, employees and agents and those who serve, at the
corporation's request, in such capacities with another enterprise, against
expenses, including attorneys' fees, as well as judgments, fines and settlements
in nonderivative lawsuits, actually and reasonably incurred in connection with
the defense of any action, suit or proceeding in which they or any of them were
or are made parties or are threatened to be made parties by reason of their
serving or having served in that capacity. The DGCL provides, however, that the
person must have acted in good faith and in a manner that he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
in the case of a criminal action, he or she must have had no reasonable cause to
believe his or her conduct was unlawful. In addition, the DGCL does not permit
indemnification in an action or suit by or in the right of the corporation where
he or she has been adjudged liable to the corporation, unless, and only to the
extent that, a court determines that he or she fairly and reasonably is entitled
to indemnity for costs the court deems proper in light of liability
adjudication. Indemnification is mandatory to the extent a claim, issue or
matter has been successfully defended. The Certificate of Incorporation and the
DGCL also prohibit limitations on officer or director liability for acts or
omissions which resulted in a violation of a statute prohibiting dividend
declarations, payments to stockholders after dissolution and particular types of
loans. The effect of these provisions is to eliminate the rights of our company
and our stockholders, through stockholders' derivative suits on behalf of our
company, to recover monetary damages against an officer or director for breach
of a fiduciary duty as an officer or director, except in the situations
described above.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors or officers of our company pursuant to the
foregoing provisions, we have been informed that, in the opinion of the SEC,
this indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
ITEM 12. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
As a wholly-owned subsidiary of our parent, all of our issued and
outstanding capital stock is held by our parent. As of December 31, 1999, our
parent had outstanding 1,397,240 shares of voting common stock, $.01 par value
per share, and 3,493,101 shares of Series A preferred stock, $.01 par value per
share. Each share of voting common stock carries one vote while the shares of
the Series A preferred stock are non-voting shares.
The following table contains information with respect to the beneficial
ownership of the voting common stock and Series A preferred stock of our parent
as of February 29, 2000 by (1) any person or group who beneficially owns more
than five percent of our parent's voting
-35-
<PAGE> 40
VERSION A
common stock or Series A preferred stock, (2) each of our directors and
executive officers and (3) all of our directors and officers as a group. The
following table, however, does not give effect to the issuance of warrants to
purchase 74,750 shares of the voting common stock of our parent issued in
connection with the original notes. All information with respect to beneficial
ownership has been furnished to us by the respective stockholders of our parent.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
SHARES OF OF TOTAL SHARES OF OF TOTAL
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON COMMON PREFERRED PREFERRED
OWNER(1) STOCK STOCK STOCK STOCK
- ------------------------------------ --------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Castle Harlan Partners III,
L.P.(2)(3)(5) 1,353,982 96.9% 3,384,956 96.9%
Leonard M. Harlan(3)(4)(5) 65,431 4.7 10,565 *
Peter A. Pappas 10,000 * 25,000 *
Mark Dunkerley 10,100 * 25,250 *
H. Douglas Pinckney 3,540 * 8,850 *
Olivier Bijaoui(6) 4,000 * 10,000 *
Jonathan S. Weaver 2,654 * 6,635 *
Albert V. Casey(5) 3,540 * 8,850 *
Marcel Fournier(5)(7) 1,770 * 4,425 *
Thomas G. McInerney(5) 1,770 * 4,425 *
Bradley G. Stanius(5) 1,770 * 4,425 *
Gilbert A. Yanuck(5) 1,770 * 4,425 *
All directors and officers as a group 65,431 4.7 112,850 3.2
(11 persons)
</TABLE>
- ----------------
* Less than 1%.
(1) Beneficial ownership includes shares of voting common stock and Series A
preferred stock to be outstanding upon our parent's equity contribution
and shares of voting common stock and Series A preferred stock that any
person has the right to acquire within 60 days after February 29, 2000.
Shares of voting common stock and Series A preferred stock not
outstanding but deemed beneficially owned because a person or group has
the right to acquire them within 60 days are treated as outstanding only
for purposes of determining the percentage owned by that person or
group. For purposes of this table, all fractional shares have been
rounded to the nearest whole share. Except as indicated in the footnotes
to this table and pursuant to applicable community property laws, the
persons named in the table have sole investment power with respect to
the voting common stock and the Series A preferred stock, but (1) all of
the shares of the voting common stock, except those held by Castle
Harlan Partners III, L.P. and its affiliates, are restricted by a voting
trust agreement under which Mr. Harlan acts as voting trustee and (2)
all of the shares of Series A preferred stock are non-voting shares.
Except as otherwise indicated in the footnotes to this table, the
address for each person in the table is c/o Worldwide Flight Services,
Inc., 1001 West Euless Boulevard, Suite 320, Euless, Texas 76040.
-36-
<PAGE> 41
(2) Includes 77,726 shares of voting common stock and 194,316 shares of
Series A preferred stock held by related entities and persons, all of
which may be deemed to be beneficially owned by Castle Harlan Partners
III, L.P. Castle Harlan Partners III, L.P. disclaims beneficial
ownership of these shares.
(3) John K. Castle and Leonard M. Harlan are the controlling stockholders of
Castle Harlan Partners III G.P., Inc., the general partner of the
general partner of Castle Harlan Partners III, L.P., and as such, each
of them may be deemed to be a beneficial owner of the shares owned by
Castle Harlan Partners III, L.P. Both Mr. Castle and Mr. Harlan disclaim
beneficial ownership of the shares in excess of their respective pro
rata partnership interests in Castle Harlan Partners III, L.P. and its
affiliates.
(4) Includes 65,431 shares of voting common stock of entities and persons
related to Castle Harlan Partners III, L.P. and some of our officers or
directors, the voting of which Leonard M. Harlan may direct pursuant to
a voting trust agreement under which Mr. Harlan acts as voting trustee.
Mr. Harlan disclaims beneficial ownership of the shares subject to the
voting trust agreement, other than 4,226 shares of voting common stock
owned by him subject to the voting trust. The term of the voting trust
is the maximum period allowed under Delaware law.
(5) The address for this person is c/o Castle Harlan, Inc., 150 East 58th
Street, New York, New York 10155.
(6) The address for this person is c/o Societe de Fret et de Services, Zone
Roissy-Tech, 5, Rue du cercle - Batiment 3312, Roissy CDG 96703, France.
(7) All shares are held in Marcel Fournier's individual retirement account
of which Mr. Fournier is the sole beneficiary. These shares may be
deemed to be beneficially owned by Mr. Fournier. Mr. Fournier disclaims
beneficial ownership of these shares.
ITEM 13. RELATED PARTY TRANSACTIONS
We entered into a management agreement with Castle Harlan, Inc., as
manager, under which the manager will provide us with business and
organizational strategy, financial, investment management, advisory and merchant
and investment banking services. Castle Harlan, Inc. is an affiliate of our
parent, which owns all of our outstanding stock. In connection with our
acquisition of Miami Aircraft Support, our entering into the senior secured
credit facility, the $10.0 million equity contribution by our parent to us and
the refinancing of our indebtedness, the management agreement was amended to
provide an annual charge for services to be rendered of $1.25 million starting
July 1, 2000 until December 31, 2002 and increasing to $2.0 million starting
January 1, 2003 until December 31, 2005. The expenses for such services are
being recorded ratably on a straight-line basis over the term of the agreement.
Under the terms of the management agreement, $862,000 has been expensed for the
nine months ended December 31, 1999. After December 31, 2005 the agreement will
automatically renew each year unless canceled by either party.
In connection with the acquisition of Worldwide from AMR Corporation,
we paid $2.0 million to Castle Harlan, Inc. for reimbursement of expenses
related thereto. Concurrent with the closing of the offering of the Original
Notes and the senior secured credit facility, fees of $2.5 million were paid to
Castle Harlan.
-37-
<PAGE> 42
For a discussion of AMRS's transactions with its affiliates, see note 5
to the Worldwide's financial statements.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
10-K.
(a) (1) and (2) Financial Statements. See Index to Consolidated
Financial Statements and Schedule which appears on F-1 herein.
(a) (3) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------
<S> <C>
3.1 Certificate of Incorporation of Worldwide Flight
Services, Inc. with all amendments (formerly known
as AMR Services Corporation and AMR Airline Services
Corporation)*
3.2 Amended and Restated By-Laws of Worldwide Flight
Services, Inc. (formerly known as AMR Services
Corporation and AMR Airline Services Corporation)*
3.3 Certificate of Incorporation of Worldwide Flight
Finance Company with all amendments (formerly known
as AMRS Holding Corporation and AMRS Finance
Company)*
3.4 By-Laws of Worldwide Flight Finance Company
(formerly known as AMRS Holding Corporation and AMRS
Finance Company)*
3.5 Certificate of Incorporation of Worldwide Flight
Security Service Corporation with all amendments
(formerly known as AMR Services Security Service
Corporation)*
3.6 By-Laws of Worldwide Flight Security Service
Corporation (formerly known as AMR Services Security
Service Corporation)*
3.7 Certificate of Incorporation of Aerolink
International, Inc. with all amendments*
3.8 By-Laws of Aerolink International, Inc.*
3.9 Certificate of Incorporation of Aerolink
Maintenance, Inc. with all amendments*
3.10 By-Laws of Aerolink Maintenance, Inc.*
</TABLE>
-38-
<PAGE> 43
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------
<S> <C>
3.11 Certificate of Incorporation of Aerolink Management,
Inc. with all amendments*
3.12 By-Laws of Aerolink Management, Inc.*
3.13 Certificate of Limited Partnership of Aerolink
International, L.P.*
3.14 Agreement of Limited Partnership of Aerolink
International, L.P.*
3.15 Amended and Restated Articles of Incorporation of
Miami International Airport Cargo Facilities &
Services, Inc. (formerly known as Miami
International Container Freight Station Inc.)*
3.16 Amended and Restated By-Laws of Miami International
Airport Cargo Facilities & Services, Inc.*
3.17 Certificate of Incorporation of International
Enterprises Group, Inc. with all amendments*
3.18 Amended and Restated By-Laws of International
Enterprises Group, Inc.*
3.19 Certificate of Incorporation of Miami Aircraft
Support, Inc. with all amendments*
3.20 Amended and Restated By-Laws of Miami Aircraft
Support, Inc.*
4.1 Indenture, dated as of August 12, 1999, among
Worldwide Flight Services, Inc., The Bank of New
York as Trustee and Guarantors*
4.2 Form of 12 1/4 Senior Note due 2007, Series B
(included in exhibit 4.1)*
4.3 A/B Exchange Registration Rights Agreement, dated
August 12, 1999, by and among Worldwide Flight
Services, Inc., Guarantors and Initial Purchasers*
4.4 Form of Senior Guarantee (included in exhibit 4.1)*
4.5 Supplemental Indenture, dated as of September 7,
1999, by and among Worldwide Flight Services, Inc.,
The Bank of New York, as Trustee and Guarantors***
</TABLE>
-39-
<PAGE> 44
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------
<S> <C>
9.1 Form of Voting Trust Agreement, among WFS Holdings,
Inc., Stockholders and Leonard M. Harlan*
10.1 Purchase Agreement, dated August 5, 1999 by and
among the Registrant, WFS Holdings, Inc., the
initial Guarantors and the Initial Purchasers*
10.2 Stock Purchase Agreement, dated May 28, 1999, among
Miami Aircraft Support, Worldwide Holding
Corporation, Anthony Romeo and Charles Micale*
10.3 WFS Holdings, Inc. 1999 Stock Option Plan*
10.4 Employment Agreement, effective October 1, 1998,
between Peter A. Pappas and Worldwide Flight
Services, Inc. (formerly known as AMR Services
Corporation)*
10.5 Executive Employment Agreement dated May 30, 1999,
between Worldwide Flight Services, Inc. and Mark
Dunkerley*
10.6 Executive Employment Agreement, dated March 29,
1999, between Worldwide Flight Services, Inc.
(formerly known as AMR Services Corporation) and
Scott Letier*
10.7 Employment Agreement, dated December 7, 1998,
between Worldwide Flight Services, Inc. (formerly
known as AMR Services Corporation) and Olivier
Bijaoui*
10.8 Employment Agreement, dated December 2, 1999,
between Worldwide Flight Services, Inc. and H.
Douglas Pinckney ****
10.9 Credit Agreement dated as of August 12, 1999, among
WFS Holdings, Inc., Worldwide Flight Services, Inc.,
the Lenders party thereto, The Chase Manhattan Bank,
as Administrative Agent, and DLJ Capital Funding,
Inc., as Syndication Agent*
</TABLE>
-40-
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------
<S> <C>
10.10 Security Agreement dated as of August 12, 1999,
among Worldwide Flight Services, Inc., each
subsidiary of WFS Holdings, Inc. listed on Schedule
I thereto and The Chase Manhattan Bank, a New York
banking corporation, as administrative agent for the
Secured Parties*
10.11 Indemnity, Subrogation and Contribution Agreement
dated as of August 12, 1999, among Worldwide Flight
Services, Inc., each subsidiary of WFS Holdings,
Inc. listed on Schedule I thereto and The Chase
Manhattan Bank, a New York banking corporation, as
administrative agent for the Secured Parties*
10.12 Guarantee Agreement dated as of August 12, 1999,
among WFS Holdings, Inc., each subsidiary of our
parent listed on Schedule I thereto and The Chase
Manhattan Bank, a New York banking corporation, as
administrative agent for the Secured Parties*
10.13 Pledge Agreement dated as of August 12, 1999, among
Worldwide Flight Services, Inc., WFS Holdings, Inc.,
each subsidiary of WFS Holdings, Inc. listed on
Schedule I thereto and The Chase Manhattan Bank, a
New York banking corporation, as administrative
agent for the Secured Parties*
10.14 Amended and Restated Stock Purchase Agreement dated
as of December 23, 1998 among MR Services
Acquisition Corporation, AMR Services Holding
Corporation and AMR Corporation**
12.1 Statement regarding Computation of Ratio of Earnings
to Fixed Charges of Worldwide Flight Services,
Inc.****
21 Subsidiaries of Worldwide Flight Services, Inc.*
27 Financial Data Schedule****
99.1 Proforma Financial Indenture Data****
</TABLE>
- ---------------
* Previously filed in Registration Statement No. 333-88593 on October 7,
1999
** Previously filed in Amendment No. 1 to Registration Statement No.
333-88593 on November 24, 1999
*** Previously filed in Amendment No. 3 to Registration Statement No.
333-88593 on January 26, 2000
**** Filed herewith
-41-
<PAGE> 46
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Worldwide Flight Services, Inc. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Euless, State of Texas on the 30th day of March, 2000.
WORLDWIDE FLIGHT SERVICES, INC.
By: /s/ Peter A. Pappas
------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
/s/ Peter A. Pappas Chairman of the Board of Directors, March 30, 2000
- -------------------------------------------- Chief Executive Officer and
Peter A. Pappas Director (principal executive
officer)
/s/ Mark Dunkerley President, Chief Operating Officer and March 30, 2000
- -------------------------------------------- Director
Mark Dunkerley
/s/ Abel Palacios Controller (principal financial and March 30, 2000
- -------------------------------------------- accounting officer)
Abel Palacios
/s/ Leonard M. Harlan Director March 30, 2000
- --------------------------------------------
Leonard M. Harlan
/s/ Marcel Fournier Director March 30, 2000
- --------------------------------------------
Marcel Fournier
/s/ Albert V. Casey Director March 30, 2000
- --------------------------------------------
Albert V. Casey
/s/ Thomas G. McInerney Director March 30, 2000
- --------------------------------------------
Lieut. General Thomas G. McInerney
/s/ Bradley G. Stanius Director March 30, 2000
- --------------------------------------------
Bradley G. Stanius
/s/ Gilbert A. Yanuck Director March 30, 2000
- --------------------------------------------
Gilbert A. Yanuck
</TABLE>
-42-
<PAGE> 47
EXHIBIT 10.8
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Worldwide Flight Finance Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Euless, State of Texas on the 30th day of March, 2000.
WORLDWIDE FLIGHT FINANCE
COMPANY
By: /s/ Peter A. Pappas
------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
/s/ Peter A. Pappas Chairman of the Board of Directors, March 30, 2000
- -------------------------------------------- President and Director (principal
Peter A. Pappas executive officer)
/s/ Abel Palacios Controller (principal financial and March 30, 2000
- -------------------------------------------- accounting officer)
Abel Palacios
/s/ Gary Burtzlaff Vice President and Director March 30, 2000
- --------------------------------------------
Gary Burtzlaff
/s/ James Enright Vice President and Secretary March 30, 2000
- -------------------------------------------- and Director
James Enright
</TABLE>
-43-
<PAGE> 48
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Worldwide Flight Finance Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Euless, State of Texas on the 30th day of March, 2000.
WORLDWIDE FLIGHT SECURITY
SERVICE CORPORATION
By: /s/ Peter A. Pappas
------------------------
Name: Peter A. Pappas
Title: President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
/s/ Peter A. Pappas President and Director (principal March 30, 2000
- -------------------------------------------- executive officer)
Peter A. Pappas
/s/ Abel Palacios Controller (principal financial and March 30, 2000
- -------------------------------------------- accounting officer)
Abel Palacios
/s/ Gary Burtzlaff Vice President and Director March 30, 2000
- --------------------------------------------
Gary Burtzlaff
/s/ Patricia Kearney Assistant Vice President and Director March 30, 2000
- --------------------------------------------
Patricia Kearney
</TABLE>
-44-
<PAGE> 49
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Worldwide Flight Finance Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Euless, State of Texas on the 30th day of March, 2000.
MIAMI INTERNATIONAL AIRPORT
CARGO FACILITIES & SERVICES, INC.
By: /s/ Peter A. Pappas
------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
/s/ Peter A. Pappas Chairman of the Board of Directors, March 30, 2000
- -------------------------------------------- Chief Executive Officer and Director
Peter A. Pappas (principal executive officer)
/s/ Abel Palacios Controller (principal financial and March 30, 2000
- -------------------------------------------- accounting officer)
Abel Palacios
/s/ James Enright Vice President and Secretary March 30, 2000
- -------------------------------------------- and Director
James Enright
/s/ Gary Burtzlaff Vice President and Director March 30, 2000
- --------------------------------------------
Gary Burtzlaff
</TABLE>
-45-
<PAGE> 50
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Worldwide Flight Finance Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Euless, State of Texas on the 30th day of March, 2000.
INTERNATIONAL ENTERPRISES
GROUP, INC.
By: /s/ Peter A. Pappas
-------------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
/s/ Peter A. Pappas Chairman of the Board of Directors, March 30, 2000
- -------------------------------------------- Chief Executive Officer and Director
Peter A. Pappas (principal executive officer)
/s/ Mark Dunkerley President, Chief Operating Officer and March 30, 2000
- -------------------------------------------- Director
Mark Dunkerley
/s/ Abel Palacios Controller (principal financial March 30, 2000
- --------------------------------------------
Abel Palacios and accounting officer)
</TABLE>
-46-
<PAGE> 51
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Worldwide Flight Finance Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Euless, State of Texas on the 30th day of March, 2000.
MIAMI AIRCRAFT SUPPORT, INC.
By: /s/ Peter A. Pappas
------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
/s/ Peter A. Pappas Chairman of the Board of Directors, March 30, 2000
- -------------------------------------------- Chief Executive Officer and Director
Peter A. Pappas (principal executive officer)
/s/ Mark Dunkerley Vice Chairman of the Board of March 30, 2000
- -------------------------------------------- Directors, Chief Operating Officer and
Mark Dunkerley Director
/s/ Abel Palacios Controller (principal financial March 30, 2000
- -------------------------------------------- and accounting officer)
Abel Palacios
</TABLE>
-47-
<PAGE> 52
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Worldwide Flight Finance Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Euless, State of Texas on the 30th day of March, 2000.
AEROLINK INTERNATIONAL, INC.
By: /s/ Peter A. Pappas
------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
/s/ Peter A. Pappas Chairman of the Board of Directors, March 30, 2000
- -------------------------------------------- Chief Executive Officer and Director
Peter A. Pappas (principal executive officer)
/s/ Mark Dunkerley Vice Chairman of the Board of March 30, 2000
- -------------------------------------------- Directors, Chief Operating Officer and
Mark Dunkerley Director
/s/ Abel Palacios Controller (principal financial March 30, 2000
- -------------------------------------------- and accounting officer)
Abel Palacios
</TABLE>
-48-
<PAGE> 53
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Worldwide Flight Finance Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Euless, State of Texas on the 30th day of March, 2000.
AEROLINK MAINTENANCE, INC.
By: /s/ Peter A. Pappas
------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
/s/ Peter A. Pappas Chairman of the Board of Directors, March 30, 2000
- -------------------------------------------- Chief Executive Officer and Director
Peter A. Pappas (principal executive officer)
/s/ Mark Dunkerley Vice Chairman of the Board of March 30, 2000
- -------------------------------------------- Directors, Chief Operating Officer and
Mark Dunkerley Director
/s/ Abel Palacios Controller (principal financial March 30, 2000
- -------------------------------------------- and accounting officer)
Abel Palacios
</TABLE>
-49-
<PAGE> 54
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Worldwide Flight Finance Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Euless, State of Texas on the 30th day of March, 2000.
AEROLINK MANAGEMENT, INC.
By: /s/ Peter A. Pappas
------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
/s/ Peter A. Pappas Chairman of the Board of Directors, March 30, 2000
- -------------------------------------------- Chief Executive Officer and Director
Peter A. Pappas (principal executive officer)
/s/ Mark Dunkerley Vice Chairman of the Board of March 30, 2000
- -------------------------------------------- Directors, Chief Operating Officer and
Mark Dunkerley Director
/s/ Abel Palacios Controller (principal financial March 30, 2000
- -------------------------------------------- and accounting officer)
Abel Palacios
</TABLE>
-50-
<PAGE> 55
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Worldwide Flight Finance Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Euless, State of Texas on the 30th day of March, 2000.
AEROLINK INTERNATIONAL, L.P.
By: AEROLINK MANAGEMENT, INC.
Its general partner
/s/ Peter A. Pappas
--------------------------------------
Name: Peter A. Pappas
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLES DATE
<S> <C> <C>
/s/ Peter A. Pappas Chairman of the Board of Directors, March 30, 2000
- -------------------------------------------- Chief Executive Officer and Director
Peter A. Pappas (principal executive officer)
/s/ Mark Dunkerley Vice Chairman of the Board of March 30, 2000
- -------------------------------------------- Directors, Chief Operating Officer and
Mark Dunkerley Director
/s/ Abel Palacios Controller (principal financial March 30, 2000
- -------------------------------------------- and accounting officer)
Abel Palacios
</TABLE>
-51-
<PAGE> 56
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Financial Statements of Worldwide Flight
Services, Inc. (and Predecessor AMR Services Corporation)
Report of Ernst & Young LLP, Independent Auditors...........................................................F-2
Consolidated Balance Sheets-As of December 31, 1998 and December 31, 1999...................................F-3
Consolidated Statements of Operations-Years ended
December 31, 1997 and 1998, the three months ended
March 31, 1999 and nine months ended December 31, 1999......................................................F-4
Consolidated Statements of Stockholders' Equity-Years
ended December 31, 1997 and 1998, the three months
ended March 31, 1999 and nine months ended December 31, 1999................................................F-5
Consolidated Statements of Cash Flows-Years
ended December 31, 1997 and 1998, the three months ended
March 31, 1999 and nine months ended December 31, 1999.................................................F-6
Notes to Consolidated Financial Statements..................................................................F-7
</TABLE>
F-1
<PAGE> 57
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholder of
Worldwide Flight Services, Inc.
We have audited the accompanying consolidated balance sheets of AMR
Services Corporation (the "Predecessor"), as of December 31, 1998 and Worldwide
Flight Services as of December 31, 1999, and the related consolidated statements
of operations, stockholder's equity, and cash flows for the years ended December
31, 1997 and December 31, 1998 and for the three months ended March 31, 1999, of
AMR Services Corporation and the consolidated statements of operations,
stockholder's equity, and cash flows for the nine months ended December 31, 1999
of Worldwide Flight Services. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our 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 provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of AMR
Services Corporation at December 31, 1998 and the consolidated financial
position of Worldwide Flight Services as of December 31, 1999 and the
consolidated results of operations and cash flows for the years ended December
31, 1997 and 1998 and for the three months ended March 31, 1999 of AMR Services
Corporation and the consolidated results of operations and cash flows for the
nine months ended December 31, 1999 of Worldwide Flight Services in conformity
with accounting principles generally accepted in the United States.
/s/ ERNST & YOUNG LLP
Dallas, Texas
March 14, 2000
F-2
<PAGE> 58
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
Predecessor
AMRS Worldwide
--------------- ---------------
December 31, December 31,
1998 1999
<S> <C> <C>
Current Assets:
Cash and cash equivalents .......................................... $ 14,200 $ 1,775
Restricted cash equivalent ......................................... -- 750
Accounts receivable, less allowance for doubtful
accounts of $449, and $1,428, respectively ...................... 31,255 73,144
Deferred income taxes .............................................. 2,445 4,305
Prepaid and other current assets ................................... 3,340 7,413
--------------- ---------------
Total current assets ............................................ 51,240 87,387
Equipment and property:
Equipment and property, at cost .................................... 68,050 45,915
Less accumulated depreciation ...................................... 39,276 3,185
--------------- ---------------
28,774 42,730
Intangible assets including Goodwill, net ............................ 6,512 105,559
Other long-term assets ............................................... 2,170 10,465
--------------- ---------------
Total assets .................................................... $ 88,696 $ 246,141
=============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable ................................................... $ 10,543 $ 23,350
Accrued salaries, wages, and benefits .............................. 10,317 13,308
Other accrued liabilities .......................................... 3,681 21,404
Current portion of long-term debt .................................. 952 2,876
--------------- ---------------
Total current liabilities ....................................... 25,493 60,938
Deferred income taxes .............................................. 838 14,233
Long-term debt, less current portion ............................... -- 137,081
Stockholder's equity:
Common stock .................................................... 1 --
Additional paid-in capital ...................................... 15,000 38,918
Retained earnings (deficit) ..................................... 48,394 (3,197)
Accumulated other comprehensive loss ............................ (1,030) (1,832)
--------------- ---------------
Total stockholder's equity ................................ 62,365 33,889
--------------- ---------------
Total liabilities and stockholder's equity ................ $ 88,696 $ 246,141
=============== ===============
</TABLE>
See accompanying notes
F-3
<PAGE> 59
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
AMRS WORLDWIDE
---------------------------------------------------- ------------
THREE NINE
YEAR ENDED MONTHS MONTHS
DECEMBER 31, ENDED ENDED
------------ MARCH 31, DECEMBER 31,
1997 1998 1999 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
External customers .................. $ 147,841 $ 155,443 $ 38,640 $ 216,870
Affiliates .......................... 75,249 74,299 22,835 --
------------ ------------ ------------ ------------
Total operating
revenues ......................... 223,090 229,742 61,475 216,870
Expenses
Salaries, wages, and
benefits ........................ 144,422 154,706 39,679 141,161
Material, supplies, and
services ........................ 33,384 28,047 7,744 25,278
Equipment and facilities
rental .......................... 11,059 13,597 3,641 13,529
Depreciation and
amortization .................... 5,643 5,908 1,627 9,112
Other miscellaneous
expenses ........................ 15,847 13,632 4,784 20,163
General and administrative
allocated expenses .............. 5,887 5,798 2,269 --
------------ ------------ ------------ ------------
Total operating
expenses ............................ $ 216,232 $ 221,688 $ 59,744 $ 209,243
------------ ------------ ------------ ------------
Operating income from
continuing operations .................. 6,858 8,054 1,731 7,627
Interest expense, net .................. -- -- -- (9,950)
Interest income ........................ 1,421 2,160 440 --
Other income (expense), net ............ (584) 580 (552) (337)
------------ ------------ ------------ ------------
Income (loss) from continuing
operations before income taxes
and extraordinary loss ................. 7,695 10,794 1,619 (2,660)
Provision (benefit) for
income taxes ........................... 3,309 4,490 644 (660)
------------ ------------ ------------ ------------
Income (loss) from continuing
operations before extraordinary
loss ................................... 4,386 6,304 975 (2,000)
Extraordinary loss on early
extinguishment of debt, net of tax
benefit of $762 ........................ -- -- -- (1,197)
Loss from discontinued
operations, net of tax benefits of
$395 and $139, respectively ............ -- (552) (210) --
------------ ------------ ------------ ------------
Net income (loss) ...................... $ 4,386 $ 5,752 $ 765 $ (3,197)
============ ============ ============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE> 60
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR AMRS
----------------------------------------------------------------------------------------
ACCUMULATED
OTHER
RETAINED COMPREHENSIVE TOTAL
COMMON PAID IN EARNINGS INCOME STOCKHOLDER'S
STOCK CAPITAL (DEFICIT) (LOSS) EQUITY
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 ........... $ 1 $ 15,000 $ 42,642 $ (887) $ 56,756
Net income .......................... -- -- 5,752 -- 5,752
Foreign currency translation (loss).. -- -- -- (143) (143)
------------
Total comprehensive income ........ 5,609
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 ........... 1 15,000 48,394 (1,030) 62,365
Net Income .......................... -- -- 765 -- 765
Foreign currency translation (loss).. -- -- -- 223 223
------------
Total comprehensive income ........ 988
------------ ------------ ------------ ------------ ------------
Balance at March 31, 1999 .............. 1 15,000 49,159 (807) 63,353
Sale of AMRS ........................ (1) (15,000) (49,159) 807 (63,353)
WORLDWIDE
----------------------------------------------------------------------------------------
Sale of stock to parent ............. -- $ 28,250 -- -- $ 28,250
Equity contribution by parent ....... -- 10,668 -- -- 10,668
Net loss ............................ -- -- (3,197) -- (3,197)
Foreign currency translation
(loss) .............................. -- -- -- (1,832) (1,832)
------------ ------------ ------------ ------------ ------------
Total comprehensive loss (5,029)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999 ........... -- $ 38,918 $ (3,197) $ (1,832) $ 33,889
============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
F-5
<PAGE> 61
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
AMRS WORLDWIDE
---------------------------------------------------- ------------
THREE NINE
YEAR ENDED MONTHS MONTHS
DECEMBER 31, ENDED ENDED
-------------------------------- MARCH 31, DECEMBER 31,
1997 1998 1999 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Operating Activities:
Net income (loss) ................................ $ 4,386 $ 5,752 $ 765 $ (3,197)
Adjustments to reconcile net earnings to net...
cash provided by operating activities:
Depreciation and amortization ................. 5,643 6,333 1,627 9,112
Deferred income taxes ......................... (292) 933 1,584 (4,226)
Extraordinary loss ............................ -- -- -- 1,959
Other ......................................... -- -- -- 494
Change in assets and liabilities:
Accounts receivable ........................... 3,969 (5,630) (4,190) (29,983)
Other assets .................................. (357) (506) 183 (4,605)
Accounts payable and accrued liabilities ...... (658) (4,008) (7,117) 26,941
------------ ------------ ------------ ------------
Net cash provided by (used in ) operating
activities ....................................... 12,691 2,874 (7,148) (3,505)
Investing Activities:
Capital expenditures .......................... (12,662) (7,219) (1,688) (6,439)
Acquisitions, net of cash ..................... -- (1,500) -- (149,833)
Other ......................................... 119 (499) 26 (750)
------------ ------------ ------------ ------------
Net cash used in investing activities ............ (12,543) (9,218) (1,662) (157,022)
Financing Activities:
Proceeds from sale of senior notes ............ -- -- -- 126,793
Issue costs on long term debt ................. -- -- -- (10,204)
Proceeds from long-term debt .................. -- -- -- 85,997
Payments on long-term debt .................... -- -- -- (78,959)
Proceeds from sale of stock ................... -- -- -- 28,250
Equity contribution by parent ................. -- -- -- 10,425
Dividend to parent ............................ -- -- (5,390) --
------------ ------------ ------------ ------------
Net cash provided by (used in) financing
activities ....................................... -- -- (5,390) 162,302
Net increase (decrease) in cash and cash
equivalents ...................................... 148 (6,344) (14,200) 1,775
Cash and cash equivalents at beginning of
period ........................................... 20,396 20,544 14,200 --
Cash and cash equivalents at end of period ....... $ 20,544 $ 14,200 $ -- $ 1,775
============ ============ ============ ============
Supplemental Disclosures of Cash Flow
Information:
Cash paid (refunded) for income taxes ............ $ 3,017 $ 3,162 (1,079) 1,303
Cash paid for interest ........................... -- -- -- 3,406
Non-cash transactions:
Note payable for acquisition .................. -- $ 914 -- --
Value of warrants issued by parent ............ 242
</TABLE>
See accompanying notes.
F-6
<PAGE> 62
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND BASIS OF PRESENTATION
On March 31, 1999, MR Services Acquisition Corporation completed the
acquisition of all of the outstanding stock of AMR Services Corporation
("Predecessor"), a wholly owned subsidiary of AMR Services Holding Corporation,
which was a wholly owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc. ("American"). MR Services Acquisition Corporation was
immediately merged with and into AMRS, and AMRS, the surviving corporation was
renamed Worldwide Flight Services, Inc. ("Worldwide"). Worldwide is owned by WFS
Holdings, Inc. ("Holdings" or "Parent"). The acquisition was funded by an
initial capital contribution by the parent of $28.3 million and borrowings under
a term debt facility and revolving credit facility (see Note 3). The initial
purchase price was $75.0 million plus subsequent adjustments for working capital
and capital spending, all of which is described in more detail in Note 3. The
acquisition as of March 31, 1999 has resulted in a new entity as well as a
change in the basis of accounting and as a result, financial information at any
point or for any period subsequent to March 31, 1999 is not comparable to
financial information at any point or for any period prior to the acquisition.
Prior to the acquisition, some subsidiaries, divisions and branches of
AMRS were sold or transferred to AMR Corporation. As a result, the accompanying
consolidated historical financial statements of the Predecessor have been
adjusted to exclude certain subsidiaries, divisions, or branches, in order to
achieve a consistent presentation of the entities included in the acquisition as
discussed above. The excluded subsidiaries, divisions, or branches include AMR
Combs, Inc.; the logistics division (consisting of the CP19 warehouse, McKesson,
Southland, and Airbourne branches); Dalfort Aviation Services, LP; the Warsaw
operations branch; and the ground services branch in Spain servicing American
contracts. As a result, the financial statements presented herein do not
represent the legal entity AMR Services Corporation as it existed during 1997 or
1998 or at December 31, 1998 or March 31, 1999, but rather represent the entity
to be sold. The accompanying financial statements were prepared from the
historical accounting records of AMR Corporation. These financial statements
included all revenues of the Predecessor and all items of expense directly
incurred by it and expenses charged or allocated to it by AMR Corporation in the
normal course of business.
On August 12, 1999, Worldwide purchased all of the stock of Miami
Aircraft Services, Inc. ("MAS"), an independent provider of express air cargo
handling services in the United States, for $63.0 million plus transactions
costs. Also, on August 23, 1999, Worldwide completed the acquisition of Aerolink
International, Inc. and affiliates ("Aerolink"), a provider of ground services,
located in Pittsburgh, Pennsylvania for a purchase price of $5.9 million plus
possible additional consideration. The operations of MAS and Aerolink are
included in the operations of Worldwide since the date of acquisition. (see Note
3)
F-7
<PAGE> 63
Worldwide is an independent provider of ground services which operates
in four separate areas: cargo handling and ramp, passenger and technical
services. Cargo handling activities includes the loading and unloading of cargo
aircraft, the build-up and break-down of cargo and other services. Ramp services
include loading and unloading, aircraft marshaling, aircraft push-back, cabin
cleaning, and providing heating, air-conditioning, lavatory and water services.
Passenger services include passenger ticketing, curbside and ticket counter
check-in boarding services, baggage claim and other services for passengers.
Technical services include jet bridge and ground equipment maintenance, aircraft
de-icing, freight management, aircraft fueling and other services.
Worldwide operates in airports around the world, after completion of
the acquisitions described in Note 3, with primary operations in New York City,
New York; Dallas, Texas; Miami, Florida; Pittsburgh, Pennsylvania, Paris,
France; and Hong Kong, China. International operations are generally organized
as either foreign branches or separately incorporated subsidiaries.
All material intercompany balances and transactions for the entity have
been eliminated in consolidation.
The financial statements of Worldwide's foreign subsidiaries and
branches are translated as if the local currency were the functional currency.
Accordingly, assets and liabilities of the foreign subsidiaries and branches are
translated at end-of-period rates. Operations are translated at average exchange
rates in effect during the period. Included in other income/(expense) net are
foreign exchange gains (losses) resulting from foreign currency transactions of
$(584,000), $440,000 and $(552,000) for the years ended December 31, 1997 and
1998 and the three months ended March 31, 1999, respectively. Worldwide has
concluded that certain of its intercompany notes receivable from its foreign
subsidiaries represent permanent investments in those operations and as a
result have classified approximately $362,000 in devaluation losses on these
notes as a component of the cumulative translation adjustment.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Worldwide recognizes fees from its services contracts as service is
provided. The terms of the service contracts are generally cancellable by either
party on 60 days' notice or less for any reason, except contracts with American
and its affiliates which were extended to a term of five years from the
acquisition date. Worldwide provides services to a significant number of
airlines around the world with typical payment terms of 30-60 days. Worldwide
routinely analyzes the credit worthiness of its customers and generally does not
require collateral.
Business and Concentrations of Credit Risk
For the nine months ended December 31, 1999, Worldwide derived
approximately 28% of its revenues from one customer and its affiliates. As of
December 31, 1999, the Company had
F-8
<PAGE> 64
outstanding receivables from this customer and its affiliates of $18.4 million,
which amount is partially offset by certain payables to that customer of
approximately $8.0 million (classified in accounts payable) on which payment
terms have been extended for six to nine months. If Worldwide experiences a
significant reduction in business from its significant customer, it could result
in material harm to its business, financial condition and future results.
Revenues from this significant customer could decrease either because they
choose to use other third party ground service providers or because they choose
to perform these services using their own personnel.
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 consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and short-term, highly liquid
investments with maturities of 90 days or less when purchased. As of December
31, 1999, approximately $750,000 of cash equivalents are restricted by the
Company's commercial banking arrangement.
Long-lived Assets
The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
the asset to undiscounted future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets held for sale are reported at the
lower of the carrying amount or fair value less costs to sell.
Intangibles (Predecessor)
Intangibles result primarily from the acquisition discussed in Note 10
(the Cyclone Acquisition) and certain prior acquisitions of freight handling
companies in Miami, Florida, and Paris, France. Intangibles are amortized on a
straight-line basis over 30 years. Worldwide continually evaluates intangible
assets to determine whether current events and circumstances warrant adjustment
of the carrying value or amortization periods. See Note 3 for a description of
the Worldwide acquisition and the related intangible.
Intangible assets consist of goodwill of $6,760,000 at December 31,
1998 (net of accumulated amortization of $1,678,000) and other intangibles of
$1,922,000 at December 31, 1998, (net of accumulated amortization of $492,000).
Intangibles (Worldwide Flight Services)
Intangible assets of $105,559,000 at December 31, 1999 (net of
accumulated amortization of $3,038,000) consist primarily of values assigned to
customer relationships and goodwill from
F-9
<PAGE> 65
the acquisitions of AMR Services, MAS and Aerolink. Included in intangible
assets are customer lists of approximately $32,000,000 (net of accumulated
amortization of $1,200,000). Intangibles and goodwill are both being amortized
over 20 years. (See Note 3)
Financial Instruments
Worldwide purchases interest rate cap agreements to hedge interest on
variable-rate debt instruments. To the extent Worldwide has borrowings
outstanding on variable-rate debt instruments, interest rate cap agreements are
deferred and recognized as an adjustment to interest expense on the variable
rate debt. Notional amounts in excess of variable-rate debt outstanding are
marked to market with the resulting gain or loss being included in interest
expense.
Income Taxes
The Predecessor was included in AMR Corporation's consolidated United
States federal income tax return and state income tax returns in unitary states.
Under the terms of AMR Corporation's tax sharing policy, income taxes are
allocated to AMR Corporation subsidiaries as if the subsidiaries were separate
taxable entities. The Predecessor computes its provision for deferred federal
income taxes using the liability method as if it were a separate taxpayer. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates. As part of the provisions of the
acquisition agreement with AMR Corporation, income, franchise, ad valorem, and
other tax liabilities for periods prior to March 31, 1999 remain the liability
of by AMR Corporation.
Worldwide will be included in Holdings' consolidated United States
federal income tax return and state income tax returns in unitary states. Under
the terms of Holdings' tax sharing policy, income taxes will be allocated to
Holdings' subsidiaries as if the subsidiaries were separate taxable entities.
Worldwide computes its provision for deferred federal income taxes using the
liability method as if it were a separate taxpayer. Under this method, deferred
tax assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates.
Common Stock and Stock Options
The Predecessor had 1000 shares of issued, authorized, and outstanding
$1.00 par value common stock at December 31, 1998. Worldwide has 1,000 shares of
issued, authorized, and outstanding $.01 par value common stock at December 31,
1999. Certain Worldwide employees are covered by a stock option plan which will
grant shares of its Parent's nonvoting common stock. Such grants will vest over
various periods of time (generally five years), subject to certain conditions.
As of March 14, 2000, there have been no shares granted under the stock option
plan. Stock options that will be granted to employees and outside directors will
be accounted for using the intrinsic value of the options granted.
F-10
<PAGE> 66
In connection with the placement of $130,000,000 in Senior Notes (see
Note 4) in a private placement, Holdings issued 130,000 warrants which will
entitle the holders to purchase an aggregate of 74,750 shares of its non-voting
common stock. The warrants represent approximately 5% of the common stock of
Holdings at an exercise price of $.01 per share. The warrants cannot be
exercised until a public offering of Holdings is consummated, a class of common
stock is listed on a national securities exchange, or certain other exercise
events occur.
Segments
Worldwide reports financial information and evaluates its operations by
location and not by its four different services areas. The Company does not have
discrete financial information to evaluate the operating results for each of the
four ground service categories. Although revenue can be identified for these
service categories, management can not and does not identify expenses,
profitability or other financial information for these service categories. As a
result, management, including the chief operating decision makers, reviews
operating results solely by location and thus the Company has determined that it
operates under one reportable segment. Worldwide determined it operates under
one reportable segment.
Accounts Receivable
The following summarizes the activity in the allowance for doubtful
accounts for the following periods (in thousands):
<TABLE>
<CAPTION>
Balance Balance
at Bad Acquisition of
Period Beginning Debt of MAS and Write- End of
of Period Expense Aerolink Offs Period
- ---------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended
December 31, 1997 ...................... $ 1,350 $ 1,076 $ -- $ (815) $ 1,611
Year ended
December 31, 1998 ...................... 1,611 189 -- (1,351) 449
Period ended
March 31, 1999 ......................... 449 446 -- -- 915
---------- ---------- ---------- ---------- ----------
Period ended
December 31, 1999 ...................... 915 880 250 (617) 1,428
- ---------------------------------------- ---------- ---------- ---------- ---------- ----------
</TABLE>
New Accounting Pronouncements
As of January 1, 1998, the Predecessor adopted Financial Accounting
Standards Board Statement No. 130, Reporting Comprehensive Income ("FAS 130"),
which establishes rules for the reporting and display of comprehensive income
and its components. The Statement of Shareholders' Equity presents comprehensive
income for the year ended December 31, 1998 and the period ended December 31,
1999. Comprehensive income has been presented for all periods.
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS
133"), as amended, which is required to be adopted in years beginning after June
15, 2000. FAS 133 requires all derivatives to be measured at fair value and
recognized as either assets or liabilities on the
F-11
<PAGE> 67
balance sheet. Changes in such fair value are required to be recognized
immediately in net income (loss) to the extent the derivatives are not effective
as hedges. At present time, Worldwide does not feel the adoption of FAS 133 will
have a material effect on its financial position, results of operations or cash
flows.
3. ACQUISITIONS
On March 31, 1999, the Predecessor was acquired from AMR Corporation
for $75.0 million plus transaction costs estimated at approximately $3.2
million. The acquisition was financed by a $28.3 million sale of stock to the
Parent and proceeds from the issuance of $50.0 million in term debt (see Note
4). The acquisition of the Predecessor was accounted for as a purchase. The
stock purchase agreement also contains provisions by which AMR Corporation may
receive up to an additional $10.0 million in purchase price based on the growth
rate of revenues received from AMR Corporation and its affiliates as measured
against certain revenue growth benchmarks. As of December 31, 1999, the Company
does not believe any amounts will be owed under this contingent purchase payment
based on recent negative trends in revenue from AMR.
Finally, the stock purchase agreement has provisions for purchase
adjustments based on working capital and capital spending at closing. These
provisions are not expected to result in significant adjustments to the purchase
price.
The purchase price allocation resulted in approximately $39.6 million
of intangible assets, including goodwill which is being amortized over 20 years.
On August 12, 1999, Worldwide acquired the business of Miami Aircraft
Support, Inc. (MAS), a provider of ground services to airlines, for $63.0
million plus transaction costs. Worldwide paid for the capital stock of MAS
which was financed primarily from proceeds from a Senior Note offering described
in Note 4. The acquisition of MAS was accounted for as a purchase and resulted
in goodwill and intangibles of approximately $65.2 million which is being
amortized on a straight-line basis over 20 years. The operations of MAS are
included in Worldwide's operations from the date of acquisition.
On August 23, Worldwide completed the acquisition of Aerolink, a
provider of ground services to airlines. The purchase price was $5.9 million
plus possible additional consideration of $1.0 million based on the actual
results for 1999. The Company currently estimates that the majority of the $1.0
million will be payable to the seller during the second calendar quarter of
2000. As part of the purchase price, Worldwide repaid $0.6 million of debt of
Aerolink. The acquisition was accounted under the purchase method of accounting.
Worldwide recorded approximately $3.5 million of goodwill and intangibles which
is being amortized on a straight-line basis over 20 years. The operations of
Aerolink are included in Worldwide's operations from the date of acquisition.
The acquisition was financed with borrowings under the senior secured credit
facility.
F-12
<PAGE> 68
Combined Purchase Price Allocation (in thousands)
<TABLE>
<S> <C>
Current assets ................................... $ 45,978
Property, plant and equipment .................... 42,240
Goodwill and other intangible assets ............. 105,559
Other assets ..................................... 2,142
Total liabilities, including deferred tax ........ (41,759)
------------
$ 154,160
============
</TABLE>
These purchase price allocations are preliminary, and still subject to
adjustment.
If the acquisitions of AMRS, MAS, and Aerolink had occurred at the
beginning of the year ended December 31, 1998 and 1999, total revenues and net
loss would have been as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Total Revenue..... $ 297,938 $ 322,870
Total Net Loss.... ( 8,561) (7,154)
</TABLE>
4. SENIOR SECURED CREDIT FACILITY AND SENIOR NOTES:
<TABLE>
<CAPTION>
1999
------------
<S> <C>
Long-term debt consists of the following (in thousands):
12 1/4% Senior Notes due August 2007; interest
payable semiannually beginning on February
2000 less discount of $3,305 .......................... $ 126,695
Borrowing under a $75,000 senior secured credit
facility with a bank; revolving commitment due
March 2005 with minimum interest payable
monthly ............................................... 8,000
Other notes payable ...................................... 5,262
------------
139,957
Less current maturities .................................... 2,876
------------
Long term debt ............................................. $ 137,081
============
</TABLE>
In July, 1999, Worldwide entered into a series of transactions to
provide financing for the MAS acquisition (see Note 3) and refinance its
existing borrowings. Such transaction included the placement of $130 million in
Senior Notes (the "offering") due 2007 in a private transaction along with the
issuance of certain warrants (as described in Note 2). Subsequent to the private
transaction, the Senior Notes were registered through a public exchange offer.
In addition, Worldwide entered into a new long-term secured revolving credit
agreement with a syndicate of banks, totaling $75 million. The facility provides
for the availability of both term borrowings and revolving credit. These
transactions closed on August 12 1999.
In connection with the acquisition of the Predecessor on March 31,
1999, Worldwide entered into a series of revolving credit and term loan
agreements with a syndicate of banks. As a result of the transactions described
above, Worldwide retired its existing indebtedness under
F-13
<PAGE> 69
these agreements and recorded an extraordinary loss of $2.0 million from the
early extinguishment of this debt.
Worldwide's obligation under the senior secured facility are secured by
a first priority pledge of, and security interest in, the stock of all present
and future domestic subsidiaries, and 65% of the stock of all our present and
future foreign subsidiaries, and substantially all of our assets and the assets
of our domestic subsidiaries. Worldwide's obligation under the 12 1/4% Senior
Notes is unconditionally guaranteed by its domestic subsidiaries.
At Worldwide's option the interest rate on the senior secured credit
facility will be either (1) the London Interbank Offering Rate (LIBOR) plus
3.00% or (2) 2.00% plus the greater of The Chase Manhattan Bank's prime rate,
the federal funds effective rate plus 1/2% and the base CD rate published by The
Chase Manhattan Bank plus 1%. The interest rate is subject to step-downs based
on Worldwide's financial performance. At December 31, 1999, Worldwide's weighted
average borrowing rate on these facilities was 9.5%. Worldwide also pays a
quarterly fee equal to 0.5% of the unused commitments under the senior secured
credit facility.
Worldwide is subject to various covenants associated with the $75
million senior secured facility such as certain leverage and coverage ratios and
other customary conditions. In addition, Worldwide has certain restrictions on
its ability to incur debt, make capital expenditures, pay dividends, conduct
asset sales, issue equity securities, engage in acquisitions and other
restrictions. The maximum amount Worldwide may borrow at any time is limited by
a borrowing base formula which consists of a percentage of some of its accounts
receivable and a percentage of the value of some of its equipment which may have
the effect of limiting the credit available to Worldwide under the facility to
an amount less than the $75 million. At December 31, 1999, Worldwide was in
compliance with all debt covenants. At December 31, 1999, based on the borrowing
base calculation, Worldwide has $36.7 million available under its $75 million
facility. However, if the Company completes additional acquisitions, the
borrowing base would rise based on the acquired company's available collateral.
However, our future additional availability may be less than the total remaining
commitment amount and will depend on the borrowing base and us being able to
meet the applicable leverage and coverage ratios and other customary conditions.
The scheduled maturities on long-term debt for the next five fiscal years are as
follows (in thousands):
<TABLE>
<S> <C>
2000.................. $ 2,876
2001.................. 1,194
2002.................. 831
2003.................. 526
2004 and thereafter... $ 137,737
</TABLE>
The senior secured credit facility requires Worldwide to enter into one
or more interest rate protection agreements such that the interest cost with
respect to at least 50% of Worldwide's indebtedness will be fixed, hedged or
capped. (See Note 8)
Based on current rates available to Worldwide for debt with similar
terms, there is not a significant difference between the carrying amounts of
long term debt and their fair values.
F-14
<PAGE> 70
5. RELATED PARTY TRANSACTIONS
Predecessor
Cash and cash equivalents consisted of cash held at the operations and
cash held for the Predecessor by American. American invests this cash or
alternatively provides financing for the operations of its other affiliates. As
of December 31, 1998, the cash held for Worldwide by American was $11.2 million,
respectively; these amounts were immediately available for use by the
Predecessor. The balances were immediately charged or credited upon recording
certain transactions with AMR Corporation or its affiliates. The Predecessor
received interest at the average rate earned by American's portfolio of short-
term marketable securities. The aforementioned arrangement resulted in interest
income that may not be representative of what AMRS would have received if it
were not affiliated with AMR Corporation. Interest income related to this
arrangement was approximately $1.1 million and $1.9 million for the years ended
December 31, 1997 and 1998, respectively. The interest rate, which is reset
monthly, was 5.9% and 5.4% as of December 31, 1997 and 1998, respectively. The
average interest rate during 1997 and 1998 was 5.9% and 5.8%, respectively.
The Predecessor's transactions with AMR Services Holding Corporation,
American, and American Eagle Inc., a wholly owned subsidiary of AMR Corporation,
have been recorded on a basis determined by the parties which may not be
representative of the terms the Predecessor might have negotiated with third
parties.
The Company recognized revenue from affiliates primarily related to
freight handling and ramp services. General and administrative expenses
allocated and transfer priced from AMR Services Holding Corporation and AMR
Corporation and its affiliates to Worldwide, including legal, accounting,
personnel, employee benefits (including post-employment benefits), marketing,
and other administrative costs, aggregated $6.3 million, and $6.0 million for
the years ended December 31, 1997 and 1998 and $2.3 million for the three month
period ended March 31, 1999, respectively. In addition, AMR Corporation and
affiliates allocated approximately $3.8 million, and $3.4 million of other
operating expenses, primarily travel expenses, computer related charges, and
facilities rent for the years ended December 31, 1997 and 1998, respectively and
$0.6 million for the three months ended March 31, 1999, respectively.
Expenses allocated to the Predecessor by AMR Corporation were primarily
based on an allocation cost method. The method for allocated costs was generally
based on a specific measurement such as the number of transactions processed,
employee head count, square footage, etc. Management believes that allocated
costs were reasonable under the circumstances and such costs would not
materially differ from amounts that would have been incurred if the Predecessor
operated on a stand alone basis.
Certain eligible members of management participated in a defined
benefit plan sponsored by American. Worldwide was jointly and severally liable
with AMR Corporation and other members of AMR Corporation's consolidated group
for applicable funding and termination liabilities, if any, of the plan. The
accompanying financial statements do not reflect the portion
F-15
<PAGE> 71
of the net obligation of the defined benefit plan sponsored by American
attributable to the employees of the Company.
Worldwide
Worldwide entered into a management agreement with Castle Harlan, Inc.,
as manager, under which the manager will provide us with business and
organizational strategy, financial, investment management, advisory and merchant
and investment banking services. Castle Harlan, Inc. is an affiliate of
Holdings, which owns all of our outstanding stock. On August 12, 1999, the
management agreement with Castle Harlan, Inc. was amended to provide an annual
charge for services to be rendered of $1.25 million starting July 1, 2000 until
December 31, 2002 and increasing to $2.0 million starting January 1, 2003 until
December 31, 2005. The expenses for such services are being recorded ratably on
a straight-line basis over the term of the agreement. Under the terms of the
management agreement, $862,000 has been expensed for the nine months ended
December 31, 1999 and $550,000 is accrued and included in accounts payable.
After December 31, 2005 the agreement will automatically renew each year unless
canceled by either party.
In connection with the acquisition of the Predecessor, Worldwide paid
$2.0 million to Castle Harlan, Inc., primarily as reimbursement of expenses that
Castle Harlan, Inc. incurred in connection with the acquisition. Also,
concurrent with the closing of the offering (see Note 4) and the senior secured
credit facility, Worldwide paid fees of $2.5 million to Castle Harlan, Inc.
6. EQUIPMENT AND PROPERTY
Equipment and property are carried at cost and are depreciated using
the straight-line method over the estimated lives indicated in the table below.
A summary of equipment and property at December 31, 1998 of the Predecessor and
at December 31, 1999 of Worldwide follows (in thousands):
<TABLE>
<CAPTION>
DEPRECIABLE
LIFE 1998 1999
----------- --------- ---------
<S> <C> <C> <C>
Building and improvement..... 25-30 years $ 17,191 $ 11,472
Ground equipment............. 5-8 years 46,888 26,959
Other equipment.............. 3-10 years 3,971 7,484
-------- --------
Equipment and property, at
cost...................... $ 68,050 $ 45,915
======== ========
</TABLE>
Depreciation expense totaled $5,332,000, $5,420,000 and $1,579,000 for the years
ended December 31, 1997 and 1998 and the three months ended March 31, 1999 of
the Predecessor and $5,961,000 for the nine months ended December 31, 1999 of
Worldwide.
F-16
<PAGE> 72
7. INCOME TAXES
Income before income taxes for years ended December 31, 1997, 1998 and
the three month period ended March 31, 1999 of the Predecessor was $3,160,000,
$5,879,000 and $479,000, respectively, for U.S. operations and was $4,535,000,
$3,968,000, and $1,140,000 for foreign operations, respectively. Income (loss)
before income taxes for the nine month period ended December 31, 1999 of
Worldwide was $(11,265,000) for US operations and was $6,646,000 for foreign
operations. These amounts include the amounts allocated to discontinued
operations, all of which occurred in U.S. operations.
The components of the income tax provision for the years ended December
31, 1997, 1998 and the three month period ended March 31, 1999 of the
Predecessor and for the nine month period ended December 31, 1999 of Worldwide
are as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1998 1999 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Current
Federal ............... $ 1,083 $ 1,265 $ (1,194) $ --
Foreign ............... 1,905 1,136 180 2,646
State ................. 613 761 (65) 158
---------- ---------- ---------- ----------
3,601 3,162 (1,079) 2,804
Deferred ................ (292) 933 1,584 (4,226)
---------- ---------- ---------- ----------
Total income tax
provision (benefit). $ 3,309 $ 4,095 $ 505 $ (1,422)
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1998 1999 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Statutory income provision ........ $ 2,693 $ 3,445 $ 445 $ (1,617)
State income tax provision,
net................................
399 492 39 (143)
Foreign taxes, rate differential... -- -- 180 --
Other ............................. 217 158 (159) 338
---------- ---------- ---------- ----------
Income tax
provision (benefit)........ $ 3,309 $ 4,095 $ 505 $ (1,422)
========== ========== ========== ==========
</TABLE>
F-17
<PAGE> 73
7. INCOME TAXES (CONTINUED)
The components of deferred income taxes for the year ended December 31,
1998 of the Predecessor and December 31, 1999 of Worldwide are as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
Deferred tax assets:
Expenses deductible for tax in a different
period than books .......................... $ 2,445 $ 4,053
Foreign tax credit ............................. 998 1,776
Net operating loss carryforward ................ -- 451
Other .......................................... 253 303
---------- ----------
Total deferred tax assets ................... 3,696 6,583
---------- ----------
Valuation allowance ......................... -- (451)
---------- ----------
Net deferred tax asset ...................... $ 3,696 $ 6,132
========== ==========
Deferred tax liabilities:
Undistributed earnings of foreign
subsidiaries ..................................... $ 1,368 $ 880
Identified intangibles ........................... -- 12,077
Accelerated depreciation ......................... 126 2,024
Other ............................................ 595 1,079
---------- ----------
Total deferred tax liabilities .............. 2,089 16,060
---------- ----------
Net deferred tax asset (liability) ............... $ 1,607 $ (9,928)
========== ==========
</TABLE>
Worldwide has approximately $451,000 of net operating loss
carryforwards at December 31, 1999, which were acquired from Miami Aircraft
Services and will expire in the years 2010 and 2013. At December 31, 1999, a
valuation allowance exists to fully offset the net operating loss carryforward.
8. FINANCIAL INSTRUMENTS
In connection with the initial term loan agreements, Worldwide acquired
interest rate caps in order to manage risks related to changes in variable
interest rates and to comply with the provisions under the initial term loan
agreements. With the extinguishment of the initial term loan agreement on August
12, 1999, the fair value of the interest rate cap was recognized as a component
of the extraordinary loss. Worldwide elected not to terminate these cap
agreements as similar hedging instruments will be required as borrowings are
made under the $75,000,000 senior secured credit facility. Worldwide's interest
rate caps limit its exposure to floating interest rates to a maximum LIBOR of
6.5% (at December 31, 1999, LIBOR is 5.82%). The interest rate caps have a
notional amount of $50 million and expire in varying amounts through March,
2003. However, as the notional amount of the interest rate caps currently exceed
the borrowings outstanding of the senior secured credit facility, a portion of
the interest rate caps has been marked to market as a component of interest
expense of approximately $58,000 for the nine months ended December 31, 1999.
The fair value of the interest rate cap agreements at December 31, 1999 was
approximately $620,000.
F-18
<PAGE> 74
9. COMMITMENTS AND CONTINGENCIES
Future minimum lease payments under operating leases with initial and
remaining noncancelable lease terms in excess of one year for the remainders of
1999 and the five following years, are as follows (in thousands):
<TABLE>
<S> <C>
2000.................... $ 6,256
2001.................... 6,073
2002.................... 3,903
2003.................... 2,123
2004 and thereafter..... 1,959
--------
$ 20,314
========
</TABLE>
All major airport facilities and office spaces are leased under
operating leases which include options to renew the leases and, escalation
clauses. Rent expense totaled $11,058,000, $13,596,000 and $3,642,000 for the
years ended December 31, 1997 and 1998 and the three months ended March 31, 1999
of the Predecessor and $13,379,000 for the nine months ended December 31, 1999.
Collective Bargaining Agreements
Approximately 23% of Worldwide's United States employees are
represented by collective bargaining agreements. The employees consists
primarily of cargo handling and ramp services workers. The Transport Workers
Union, or TWU represents approximately 2,200 of U.S. based employees.
Worldwide's current agreement with TWU is effective until June 2001. The
Teamsters Union also represents approximately 100 Philadelphia employees and the
contract is effective until February 2000. In Canada, approximately 300 of
employees are represented by the Canadian Auto Workers Union. This agreement
expired in November 1998. Worldwide continues to operate under the agreement and
intends to renegotiate the agreement in the near future.
Worldwide has not experienced any material business interruption as a
result of labor disputes and believes that it has a good relationship with its
employees.
10. DISCONTINUED OPERATIONS - CYCLONE
In July 1998, the Predecessor acquired all of the stock of Cyclone
Surface Cleaning, Inc. (Cyclone) and began to fund its operations which was
engaged in developing a technology to clean airport runaways. Assets acquired
consisted primarily of intangibles, including $565,000 of goodwill and was
accounted for as a purchase.
Worldwide elected to discontinue the Cyclone business since it did not
fit with Worldwide's core businesses. Accordingly the results of operations for
1998 and the three month period ended March 31, 1999 have been restated to
reflect the Cyclone business as discontinued operations. On August 31, 1999,
Worldwide terminated its relationship with the former owners of Cyclone and
settled all obligations due under a promissory note. No other costs are expected
to be incurred under this transaction.
F-19
<PAGE> 75
11. FOREIGN OPERATIONS
Worldwide operates as an independent ground services provider to air
cargo and passenger airlines in North America, Europe, and Asia. The Company,
however, operated in a single business segment, as a provider of ground services
to the aviation industry. Inter-area sales are not material. Net assets by
geographic area are those assets and liabilities which are used in Worldwide's
operations in each area. Corporate level assets and liabilities are included as
a component of North and South America.
Information about Worldwide's operations in these geographic areas is
as follows (in thousands):
<TABLE>
<CAPTION>
NORTH AND SOUTH
PERIOD AMERICA EUROPE ASIA
------------------ ---------------- --------- --------
<S> <C> <C> <C> <C>
Total Revenue......... December 31, 1997 $ 194,703 $ 28,387 $ --
December 31, 1998 193,242 32,596 3,904
Three months ended
March 31, 1999 50,849 8,662 1,964
------------------ --------- --------- --------
Nine months ended
December 31, 1999 180,273 31,779 4,818
Long-lived assets..... December 31, 1998 $ 22,169 $ 9,809 $ 4,458
------------------ --------- --------- --------
December 31, 1999 136,301 7,981 4,007
</TABLE>
12. SUMMARIZED FINANCIAL INFORMATION
Worldwide and its subsidiaries have operations in various countries
around the world. Domestic and international operations are either organized as
branches or separate corporate subsidiaries. The Senior Notes discussed in Note
4 result in debt securities that are unconditionally guaranteed by current
domestic subsidiaries, while all foreign subsidiaries do not guarantee the
securities. The following tables present the financial positions, results of
operations, and cash flows for the years ended December 31, 1997 and 1998 and
for the three months ended March 31, 1999 and the nine months ended December 31,
1999 combined into three categories: 1) the operations of Worldwide, the legal
entity, and its international branches, 2) domestic subsidiaries, and 3) foreign
subsidiaries (in thousands):
F-20
<PAGE> 76
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GUARANTOR
COMBINED NON-GUARANTOR
GUARANTOR DOMESTIC COMBINED FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues .......................... $ 187,947 $ 11,539 $ 23,604 $ -- $ 223,090
Operating expenses ................ 185,181 10,084 20,967 -- 216,232
------------ ------------ ------------ ------------ ------------
Operating income .................. 2,766 1,455 2,637 -- 6,858
Other income (expense) ............ (497) 250 (337) -- (584)
Interest income (expense) ......... 1,559 635 (773) -- 1,421
Equity in earnings of
subsidiaries ...................... 3,867 -- -- (3,867) --
------------ ------------ ------------ ------------ ------------
Income before income taxes ........ 7,695 2,340 1,527 (3,867) 7,695
Provision for income taxes ........ 3,309 767 722 (1,489) 3,309
------------ ------------ ------------ ------------ ------------
Net Income ........................ $ 4,386 $ 1,573 $ 805 $ (2,378) $ 4,386
============ ============ ============ ============ ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
GUARANTOR
COMBINED NON-GUARANTOR
GUARANTOR DOMESTIC COMBINED FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
operating activities .............. $ 10,391 $ 2,654 $ (894) $ -- $ 12,691
Cash used in investing
activities ........................ (10,110) (2,326) (107) -- (12,543)
Cash provided by (used in)
financing activities .............. (2,891) 1,563 1,328 -- --
------------ ------------ ------------ ------------ ------------
Change in Cash .................... $ (2,070) $ 1,891 $ 327 $ -- $ 148
============ ============ ============ ============ ============
</TABLE>
F-21
<PAGE> 77
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
GUARANTOR
COMBINED NON-GUARANTOR
GUARANTOR DOMESTIC COMBINED FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current Assets .................. $ 36,947 $ 3,678 $ 10,615 $ -- $ 51,240
Intercompany receivables ........ 11,058 8,737 -- (19,795) --
Non-current assets .............. 21,557 2,821 13,078 -- 37,456
Investments in affiliates ....... 12,062 -- -- (12,062) --
------------ ------------ ------------ ------------ ------------
Total assets .................... $ 81,624 $ 15,236 $ 23,693 $ (32,239) $ 88,696
============ ============ ============ ============ ============
Liabilities ..................... $ 19,259 $ 1,595 $ 5,477 $ -- $ 26,331
Intercompany payables ........... -- -- 19,795 (19,795) --
Stockholder's equity ............ 62,365 13,641 (1,579) (12,062) 62,365
------------ ------------ ------------ ------------ ------------
Total liabilities and
stockholder's equity ............ $ 81,624 $ 15,236 $ 23,693 $ (32,239) $ 88,696
============ ============ ============ ============ ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GUARANTOR
COMBINED NON-GUARANTOR
GUARANTOR DOMESTIC COMBINED FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues .......................... $ 182,262 $ 13,292 $ 30,188 $ -- $ 229,742
Operating expenses ................ 182,959 11,275 27,454 -- 221,688
------------ ------------ ------------ ------------ ------------
Operating income .................. 3,303 2,017 2,734 -- 8,054
Interest income (expense) ......... 3,239 (440) (639) -- 2,160
Other income (expense) ............ 557 609 (586) 580
Equity in earnings of
subsidiaries ...................... 3,695 -- -- (3,695) --
------------ ------------ ------------ ------------ ------------
Income before income taxes ........ 10,794 2,186 1,509 (3,695) 10,794
Provision for income taxes ........ 4,490 1,275 640 (1,915) 4,490
------------ ------------ ------------ ------------ ------------
Income from continuing
operations ........................ 6,304 911 869 (1,780) 6,304
Loss from discontinued
operations ........................ 552 -- -- -- 552
------------ ------------ ------------ ------------ ------------
Net Income ........................ $ 5,752 $ 911 $ 869 $ (1,780) $ 5,752
============ ============ ============ ============ ============
</TABLE>
F-22
<PAGE> 78
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
GUARANTOR
COMBINED NON-GUARANTOR
GUARANTOR DOMESTIC COMBINED FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
Operating activities .............. $ 2,369 $ 37 $ 468 $ -- $ 2,874
Cash used in investing
activities ...................... (2,367) (364) (6,487) -- (9,218)
Cash provided by (used in)
intercompany financing
activities ...................... (5,828) (472) 6,300 -- --
------------ ------------ ------------ ------------ ------------
Change in cash .................... $ (5,826) $ (799) $ 281 $ -- $ (6,344)
============ ============ ============ ============ ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
GUARANTOR
COMBINED NON-GUARANTOR
GUARANTOR DOMESTIC COMBINED FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues .......................... $ 49,645 $ 2,524 $ 9,306 $ -- $ 61,475
Operating expenses ................ 49,460 1,955 8,329 -- 59,744
------------ ------------ ------------ ------------ ------------
Operating income .................. 185 569 977 -- 1,731
Interest income (expense) ......... 385 170 (115) -- 440
Other income (expense) ............ -- (552) -- (552)
Equity in earnings of
subsidiaries .................... 1,049 -- -- (1,049) --
------------ ------------ ------------ ------------ ------------
Income before income taxes ........ 1,619 187 862 (1,049) 1,619
Provision for income taxes ........ 644 77 275 (352) 644
------------ ------------ ------------ ------------ ------------
Income from continuing
operations ...................... 975 110 587 (697) 975
Loss from discontinued
operations ...................... 210 -- -- -- 210
------------ ------------ ------------ ------------ ------------
Net Income ........................ $ 765 $ 110 $ 587 $ (697) $ 765
============ ============ ============ ============ ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
GUARANTOR
COMBINED NON-GUARANTOR
GUARANTOR DOMESTIC COMBINED FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
Operating activities ......... $ (8,392) $ 877 $ 367 $ -- $ (7,148)
Cash used in investing
activities ................. (1,467) (127) (68) -- (1,662)
Cash provided by (used in)
intercompany financing
activities ................. (3,908) 141 (1,623) -- (5,390)
------------ ------------ ------------ ------------ ------------
Change in cash ............... $ (13,767) $ 891 $ (1,324) $ -- $ (14,200)
============ ============ ============ ============ ============
</TABLE>
F-23
<PAGE> 79
CONDENSED CONSOLIDATING BALANCED SHEETS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
GUARANTOR
COMBINED NON-GUARANTOR
GUARANTOR DOMESTIC COMBINED FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets ............... $ 57,097 $ 16,168 $ 14,122 $ -- $ 87,387
Intercompany receivable ...... 6,979 9,736 -- (16,715) --
Non-current assets ........... 62,574 84,439 11,741 -- 158,754
Investments in affiliates .... 100,230 -- -- (100,230) --
------------ ------------ ------------ ------------ ------------
Total assets ............. $ 226,880 $ 110,343 $ 25,863 $ (116,945) $ 246,141
============ ============ ============ ============ ============
Liabilities .................. $ 53,034 $ 9,733 $ 9,528 -- $ 72,295
Intercompany payable ......... -- -- 16,715 (16,715) --
Long-term debt ............... 139,957 -- -- -- 139,957
Stockholder's equity ......... 33,889 100,610 (380) (100,230) 33,889
------------ ------------ ------------ ------------ ------------
Total liabilities and
stockholder's equity ....... $ 226,880 $ 110,343 $ 25,863 $ (116,945) $ 246,141
============ ============ ============ ============ ============
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
NINE MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
GUARANTOR
COMBINED NON-GUARANTOR
GUARANTOR DOMESTIC COMBINED FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues .......................... $ 145,770 $ 39,190 $ 31,910 $ -- $ 216,870
Operating expenses ................ 146,550 35,155 27,538 -- 209,243
------------ ------------ ------------ ------------ ------------
Operating income .................. (780) 4,035 4,372 -- 7,627
Other income (expense) ............ (337) -- -- -- (337)
Interest income (expense) ......... (9,766) 234 (418) -- (9,950)
Equity in earnings of
subsidiaries .................... 8,223 -- -- (8,223) --
------------ ------------ ------------ ------------ ------------
Income (loss) before income
taxes ........................... (2,660) 4,269 3,954 (8,223) (2,660)
Provision for income taxes
(benefit) ....................... (660) 1,660 1,564 (3,224) (660)
------------ ------------ ------------ ------------ ------------
Income before extraordinary
loss ............................ (2,000) 2,609 2,390 (4,999) (2,000)
Loss from early extinguishment
of debt ......................... (1,197) -- -- -- (1,197)
------------ ------------ ------------ ------------ ------------
Net Income (loss).................. $ (3,197) $ 2,609 $ 2,390 $ (4,999) $ (3,197)
============ ============ ============ ============ ============
</TABLE>
F-24
<PAGE> 80
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
GUARANTOR
COMBINED NON-GUARANTOR
GUARANTOR DOMESTIC COMBINED FOREIGN
WORLDWIDE SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash provided by (used in)
Operating activities ........ $ (1,852) $ (3,743) $ 2,090 $ -- $ (3,505)
Cash used in investing
activities ................. (75,063) (82,148) 189 -- (157,022)
Cash provided by (used in)
financing ................. 164,104 (1,140) (662) -- 162,302
------------ ------------ ------------ ------------ ------------
Change in cash ............... $ 87,189 $ (87,031) $ 1,617 $ -- $ 1,775
============ ============ ============ ============ ============
</TABLE>
13. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
PREDECESSOR QUARTER QUARTER QUARTER QUARTER
----------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Total operating revenues........................... $ 56,748 $ 54,156 $ 58,292 $ 60,546
Operating Income................................... 2,160 1,152 2,601 2,141
Income from continuing operations.................. 1,590 982 1,984 1,748
Net income ........................................ 1,590 982 1,719 1,461
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR WORLDWIDE
----------- -------------------------------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Total operating revenues .......................... 61,475 59,877 71,702 85,291
Operating income .................................. 1,731 2,952 3,105 1,570
Income (loss) from continuing operations before
extraordinary loss ............................. 975 539 (294) (2,245)
Net income (loss) ................................. 765 539 (1,491) (2,245)
</TABLE>
The net income for the third and fourth quarter of 1998 includes a loss
on discontinued operations of $265,000 and $287,000, respectively, related to
Cyclone (see Note 10). The income tax provision for the third quarter has been
restated to eliminate a valuation allowance that was inappropriately recorded,
given the availability of deferred tax liabilities which should have been
considered prior to the establishment of the allowance. As a result, the loss
from continuing operations before extraordinary loss and net loss have been
reduced from the amounts previously reported by $1,115,000 and 1,877,000,
respectively.
F-25
<PAGE> 81
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------
<S> <C>
3.1 Certificate of Incorporation of Worldwide Flight
Services, Inc. with all amendments (formerly known
as AMR Services Corporation and AMR Airline Services
Corporation)*
3.2 Amended and Restated By-Laws of Worldwide Flight
Services, Inc. (formerly known as AMR Services
Corporation and AMR Airline Services Corporation)*
3.3 Certificate of Incorporation of Worldwide Flight
Finance Company with all amendments (formerly known
as AMRS Holding Corporation and AMRS Finance
Company)*
3.4 By-Laws of Worldwide Flight Finance Company
(formerly known as AMRS Holding Corporation and AMRS
Finance Company)*
3.5 Certificate of Incorporation of Worldwide Flight
Security Service Corporation with all amendments
(formerly known as AMR Services Security Service
Corporation)*
3.6 By-Laws of Worldwide Flight Security Service
Corporation (formerly known as AMR Services Security
Service Corporation)*
3.7 Certificate of Incorporation of Aerolink
International, Inc. with all amendments*
3.8 By-Laws of Aerolink International, Inc.*
3.9 Certificate of Incorporation of Aerolink
Maintenance, Inc. with all amendments*
3.10 By-Laws of Aerolink Maintenance, Inc.*
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------
<S> <C>
3.11 Certificate of Incorporation of Aerolink Management,
Inc. with all amendments*
3.12 By-Laws of Aerolink Management, Inc.*
3.13 Certificate of Limited Partnership of Aerolink
International, L.P.*
3.14 Agreement of Limited Partnership of Aerolink
International, L.P.*
3.15 Amended and Restated Articles of Incorporation of
Miami International Airport Cargo Facilities &
Services, Inc. (formerly known as Miami
International Container Freight Station Inc.)*
3.16 Amended and Restated By-Laws of Miami International
Airport Cargo Facilities & Services, Inc.*
3.17 Certificate of Incorporation of International
Enterprises Group, Inc. with all amendments*
3.18 Amended and Restated By-Laws of International
Enterprises Group, Inc.*
3.19 Certificate of Incorporation of Miami Aircraft
Support, Inc. with all amendments*
3.20 Amended and Restated By-Laws of Miami Aircraft
Support, Inc.*
4.1 Indenture, dated as of August 12, 1999, among
Worldwide Flight Services, Inc., The Bank of New
York as Trustee and Guarantors*
4.2 Form of 12 1/4 Senior Note due 2007, Series B
(included in exhibit 4.1)*
4.3 A/B Exchange Registration Rights Agreement, dated
August 12, 1999, by and among Worldwide Flight
Services, Inc., Guarantors and Initial Purchasers*
4.4 Form of Senior Guarantee (included in exhibit 4.1)*
4.5 Supplemental Indenture, dated as of September 7,
1999, by and among Worldwide Flight Services, Inc.,
The Bank of New York, as Trustee and Guarantors***
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------
<S> <C>
9.1 Form of Voting Trust Agreement, among WFS Holdings,
Inc., Stockholders and Leonard M. Harlan*
10.1 Purchase Agreement, dated August 5, 1999 by and
among the Registrant, WFS Holdings, Inc., the
initial Guarantors and the Initial Purchasers*
10.2 Stock Purchase Agreement, dated May 28, 1999, among
Miami Aircraft Support, Worldwide Holding
Corporation, Anthony Romeo and Charles Micale*
10.3 WFS Holdings, Inc. 1999 Stock Option Plan*
10.4 Employment Agreement, effective October 1, 1998,
between Peter A. Pappas and Worldwide Flight
Services, Inc. (formerly known as AMR Services
Corporation)*
10.5 Executive Employment Agreement dated May 30, 1999,
between Worldwide Flight Services, Inc. and Mark
Dunkerley*
10.6 Executive Employment Agreement, dated March 29,
1999, between Worldwide Flight Services, Inc.
(formerly known as AMR Services Corporation) and
Scott Letier*
10.7 Employment Agreement, dated December 7, 1998,
between Worldwide Flight Services, Inc. (formerly
known as AMR Services Corporation) and Olivier
Bijaoui*
10.8 Employment Agreement, dated December 2, 1999,
between Worldwide Flight Services, Inc. and H.
Douglas Pinckney ****
10.9 Credit Agreement dated as of August 12, 1999, among
WFS Holdings, Inc., Worldwide Flight Services, Inc.,
the Lenders party thereto, The Chase Manhattan Bank,
as Administrative Agent, and DLJ Capital Funding,
Inc., as Syndication Agent*
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------
<S> <C>
10.10 Security Agreement dated as of August 12, 1999,
among Worldwide Flight Services, Inc., each
subsidiary of WFS Holdings, Inc. listed on Schedule
I thereto and The Chase Manhattan Bank, a New York
banking corporation, as administrative agent for the
Secured Parties*
10.11 Indemnity, Subrogation and Contribution Agreement
dated as of August 12, 1999, among Worldwide Flight
Services, Inc., each subsidiary of WFS Holdings,
Inc. listed on Schedule I thereto and The Chase
Manhattan Bank, a New York banking corporation, as
administrative agent for the Secured Parties*
10.12 Guarantee Agreement dated as of August 12, 1999,
among WFS Holdings, Inc., each subsidiary of our
parent listed on Schedule I thereto and The Chase
Manhattan Bank, a New York banking corporation, as
administrative agent for the Secured Parties*
10.13 Pledge Agreement dated as of August 12, 1999, among
Worldwide Flight Services, Inc., WFS Holdings, Inc.,
each subsidiary of WFS Holdings, Inc. listed on
Schedule I thereto and The Chase Manhattan Bank, a
New York banking corporation, as administrative
agent for the Secured Parties*
10.14 Amended and Restated Stock Purchase Agreement dated
as of December 23, 1998 among MR Services
Acquisition Corporation, AMR Services Holding
Corporation and AMR Corporation**
12.1 Statement regarding Computation of Ratio of Earnings
to Fixed Charges of Worldwide Flight Services,
Inc.****
21 Subsidiaries of Worldwide Flight Services, Inc.*
27 Financial Data Schedule****
99.1 Proforma Financial Indenture Data****
</TABLE>
- ---------------
* Previously filed in Registration Statement No. 333-88593 on October 7,
1999
** Previously filed in Amendment No. 1 to Registration Statement No.
333-88593 on November 24, 1999
*** Previously filed in Amendment No. 3 to Registration Statement No.
333-88593 on January 26, 2000
**** Filed herewith
<PAGE> 1
EXHIBIT 10.8
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of December 2, 1999 between
Worldwide Flight Services, Inc., a Delaware corporation, together with its
subsidiaries (the "Company") and Doug Pinckney (the "Executive").
WHEREAS, the parties wish to establish the terms of Executive's future
employment with the Company.
Accordingly, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company shall employ
the Executive effective as of the first day he reports to work at the Company as
agreed upon by the Company and the Executive (the "Effective Date") (which date
shall not be later than December 6, 1999) to render exclusive and full-time
services to the Company. The Executive will serve in the capacity of Senior Vice
President, Sales and Marketing of the Company and shall report to the President
and Chief Operating Officer of the Company. The Executive will perform such
duties as are imposed on the holder of that office by the By-laws of the Company
and such other duties as are customarily performed by one holding such positions
in the same or similar businesses or enterprises as those of the Company,
including, but not limited to, the responsibilities outlined in the "Position
and Candidate Specifications" attached hereto. The Executive will perform such
other duties as may be assigned to him from time to time by the President and
Chief Operating Officer, the Chief Executive Officer or the Board of Directors
of the Company. The Executive will devote all his full working-time and
attention to the performance of such duties and to the promotion of the business
and interests of the Company. This provision, however, will not prevent the
Executive from investing his funds or assets in any form or manner, or from
acting as a member of the board of directors of any companies, businesses, or
charitable organizations, so long as such actions do not violate the provisions
of Section 5 of this Agreement.
1.2 Location. The Executive's principal place of
employment shall be the Company's headquarters located in the Dallas/Fort Worth,
Texas area, subject to any travel required in connection with providing services
under this Agreement.
1.3 Acceptance of Employment by the Executive. The
Executive accepts such employment and shall render the services described above.
2. Duration of Employment.
This Agreement and the employment relationship hereunder will
continue in effect for three (3) years from the Effective Date (the "Term"). At
a time at least nine (9) months prior to the expiration of the Term, the Company
and the Executive shall discuss whether the Agreement should be renewed upon
mutual written agreement. In the event of the Executive's termination of
employment during the Term, the Company's obligation to continue to
<PAGE> 2
pay all base salary, bonus and other benefits then accrued shall terminate
except as may be provided for in Section 4 of this Agreement.
3. Compensation by the Company.
3.1 Base Salary. As compensation for all services
rendered pursuant to this Agreement, the Company will pay to the Executive an
annual base salary of One Hundred Seventy-Five Thousand Dollars ($175,000),
subject to an upward adjustment by the Board of Directors of the Company, in its
sole discretion, and payable in accordance with the payroll practices of the
Company ("Base Salary").
3.2 Bonuses. The Executive shall be entitled to receive
from the Company an annual cash bonus in an amount determined by the
Compensation Committee of the Board of Directors of the Company, up to a maximum
amount of fifty percent (50%) of Base Salary.
3.3 Signing Bonus. The Company shall pay to the Executive
a one-time bonus of Forty Thousand Dollars ($40,000) as follows: (i) Twenty
Thousand Dollars ($20,000) on the Effective Date and (ii) Twenty Thousand
Dollars ($20,000) on the three month anniversary of the Effective Date, with
respect to the foregone value of unpaid retention bonuses payable by Sea-Land.
3.4 Participation in Employee Benefit Plans. The
Executive shall be permitted, during the Term, if and to the extent eligible, to
participate in any group life, hospitalization or disability insurance plan,
health program, pension plan or similar benefit plan of the Company, which may
be available to other executives of the Company generally, on the same terms as
such other executives.
3.5 Stock Options. Over a period of time of not less than
three (3) years and provided the Executive remains employed by the Company, the
Executive shall be granted options under the WFS Holdings, Inc. 1999 Stock
Option Plan (the "Stock Option Plan") for the purchase of up to 5,000 shares of
non-voting common stock of WFS Holdings, Inc. ("Holdings"). All terms and
conditions applicable to such stock options shall be governed by the provisions
of the Stock Option Plan and any stock option agreements thereunder, as approved
by the Compensation Committee of the Board of Directors of Holdings.
3.6 Purchase of Stock. For a period of one (1) month from
the Effective Date, the Executive shall be provided with the opportunity to
purchase additional equity in Holdings in the form of units ("Units"), up to a
number of Units as agreed with the Compensation Committee of the Board of
Directors of Holdings. Each Unit shall consist of one share of voting common
stock of Holdings, priced at $3.25, and 2.5 shares of preferred stock of
Holdings, priced at $10.00 per share, yielding a Unit price of $28.25. The
purchase of the Units shall be subject to the Management Subscription Agreement
and the Stock Buy Back Agreement between Holdings and the Executive. The Company
and Executive may agree to have the Company finance, with full recourse, up to
fifty percent (50%) of the purchase price of such Units.
-2-
<PAGE> 3
3.7 Car Allowance. The Executive shall be entitled to a
monthly car allowance equal to Four Hundred Dollars ($400).
3.8 Club Membership. The Company shall pay the cost of a
corporate membership for the use of the Executive for a Dallas/Fort Worth, Texas
area club membership, up to a maximum one time initiation fee of Twenty-Five
Thousand Dollars ($25,000) and pay the ongoing annual dues of such club, during
the Term, up to a maximum of Two Thousand Five Hundred Dollars ($2,500) per
annum.
3.9 Vacation. The Executive shall be entitled to twenty
(20) days of vacation per year.
3.10 Expense Reimbursement. During the Term, the Executive
shall be entitled to receive prompt reimbursement of all reasonable
out-of-pocket expenses properly incurred by him in connection with his duties
under this Agreement, including reasonable expenses of entertainment and travel,
provided that such expenses are properly approved, documented and reported in
accordance with the policies and procedures of the Company applicable at the
time the expenses are incurred.
3.11 Relocation Package. The Company shall offer to the
Executive a comprehensive relocation package designed to cover or reimburse the
Executive for all reasonable expenses associated with the Executive's move from
Atlanta, Georgia to the Dallas/Fort Worth, Texas area in accordance with the
provisions of the Sea-Land relocation policy attached hereto.
4. Termination.
4.1 Termination Upon Death. If the Executive dies during
the Term, the Executive's legal representatives shall be entitled to receive the
Executive's Base Salary and accrued bonus for the period ending on the last day
of the month in which the death of the Executive occurs.
4.2 Termination Upon Disability. If during the Term the
Executive meets the requirements for physical or mental disability under the
Company's long-term disability plan and is eligible to receive benefits
thereunder, the Company may at any time prior to the Executive's recovery but
after the last day of the sixth consecutive month of such disability, by written
notice to the Executive, terminate the Executive's employment hereunder.
Additionally, in such event, the Executive (or his legal
representatives) shall be entitled to receive the Executive's Base Salary and
accrued bonus for the period ending on the date such termination occurred.
Nothing in this Section 4.2 shall be deemed to in any way affect the Executive's
right to participate in any disability plan maintained by the Company and for
which the Executive is otherwise eligible.
4.3 Termination for Cause. The Executive's employment
hereunder may be terminated by the Company for "Cause" (as herein defined) at
any time. "Cause" shall mean with respect to the Executive, (a) the Executive's
willful and continued failure to substantially
-3-
<PAGE> 4
perform the Executive's duties, (b) repeated acts of insubordination, or willful
failure to execute Company plans and/or strategies, (c) acts of dishonesty
resulting or intending to result in personal gain or enrichment at the expense
of the Company, (d) conviction of, or pleading guilty or no contest to, a
felony, all as determined by the Board of Directors of the Company in its
reasonable judgment; (e) reasonable evidence presented in writing to the
Executive that the Executive engaged in a criminal act involving moral turpitude
or willful misconduct or (f) conduct not conforming to standards of good
citizenship or good moral character, or which is potentially detrimental to the
Company's business, reputation, character or standing, provided that, in the
case of clauses (a) and (b), the Executive shall be entitled to written notice
from the Company and twenty (20) days to cure such deficiency. Breach of this
Agreement and to the extent that an Executive is subject to a non-competition
and confidentiality agreement, breach of such non-competition and
confidentiality agreement, shall constitute Cause under this Agreement.
Upon termination for Cause hereunder, the Executive shall be
entitled to receive the Executive's Base Salary through the date of termination.
4.4 Voluntary Termination. The Executive may upon at
least ninety (90) days prior written notice to the Company terminate employment
hereunder. Upon a voluntary termination the Executive shall be entitled to
receive the Executive's Base Salary through the date of termination.
4.5 Termination by the Company Other Than For Cause.
(a) If, prior to the expiration of this
Agreement, the Company terminates the Executive's employment for any reason
other than Cause, in lieu of additional salary payments to the Executive for
periods subsequent to the date of such termination, the Company shall pay to the
Executive his Base Salary for the remaining duration of the Term.
(b) For the length of the period for which
severance benefits are provided after any termination pursuant to this Section
4.5, the Company shall arrange to provide the Executive with life, disability,
accident and group health insurance benefits substantially similar to those
which the Executive was receiving immediately prior to the notice of
termination. Benefits otherwise receivable by the Executive pursuant to this
paragraph (b) shall be reduced to the extent comparable benefits are actually
received by the Executive during the period following the Executive's
termination, and any such benefits actually received by the Executive shall be
reported to the Company.
(c) Nothing contained in this Section 4.5 shall
prevent the Executive from receiving any and all benefits payable under any
severance benefit plan or program maintained by the Company to which the
Executive is entitled.
5 Restrictions and Obligations of the Executive.
5.1 Confidentiality. (a) During the course of the
Executive's employment by the Company, the Executive will have access to certain
trade secrets and confidential information relating to the Company which is not
readily available from sources
-4-
<PAGE> 5
outside the Company. The confidential and proprietary information and, in any
material respect, trade secrets of the Company are among its most valuable
assets, including but not limited to, its customer and vendor lists, database,
engineering, computer programs, frameworks, models, its marketing programs, its
sales, financial, marketing, training and technical information, and any other
information, whether communicated orally, electronically, in writing or in other
tangible forms concerning how the Company creates, develops, acquires or
maintains its products and marketing plans, targets its potential customers and
operates its retail and other businesses. The Company invested, and continues to
invest, considerable amounts of time and money in its process, technology,
know-how, obtaining and developing the goodwill of its customers, its other
external relationships, its data systems and data bases, and all the information
described above (hereinafter collectively referred to as "Confidential
Information"), and any misappropriation or unauthorized disclosure of
Confidential Information in any form would irreparably harm the Company. The
Executive acknowledges that such Confidential Information constitutes valuable,
highly confidential, special and unique property of the Company. The Executive
shall hold in a fiduciary capacity for the benefit of the Company all
Confidential Information relating to the Company and its business, which shall
have been obtained by the Executive during the Executive's employment by the
Company and which shall not be or become public knowledge (other than by acts by
the Executive or representatives of the Executive in violation of this
Agreement). Except as required by law or an order of a court or governmental
agency with jurisdiction, the Executive shall not, during the period the
Executive is employed by the Company or at any time thereafter, disclose any
Confidential Information, directly or indirectly, to any person or entity for
any reason or purpose whatsoever, nor shall the Executive use it in any way,
except as necessary in the course of the Executive's employment with the
Company. The Executive shall take all reasonable steps to safeguard the
Confidential Information and to protect it against disclosure, misuse,
espionage, loss and theft. The Executive understands and agrees that the
Executive shall acquire no rights to any such Confidential Information.
(b) All files, records, documents, drawings,
specifications, data, computer programs, evaluation mechanisms and analytics and
similar items relating thereto or to the Business (for the purposes of this
Agreement, "Business" shall be as defined in any non-competition and
confidentiality agreement that may be established between the Executive and the
Company and/or Holdings), as well as all customer lists, specific customer
information, compilations of product research and marketing techniques of the
Company, whether prepared by the Executive or otherwise coming into the
Executive's possession, shall remain the exclusive property of the Company, and
the Executive shall not remove any such items from the premises of the Company,
except in furtherance of the Executive's duties under any employment agreement.
(c) It is understood that while employed by the
Company the Executive will promptly disclose to it, and assign to it the
Executive's interest in any invention, improvement or discovery made or
conceived by the Executive, either alone or jointly with others, which arises
out of the Executive's employment. At the Company's request and expense, the
Executive will assist the Company during the period of the Executive's
employment by the Company and thereafter in connection with any controversy or
legal proceeding relating to such invention, improvement or discovery and in
obtaining domestic and foreign patent or other protection covering the same.
-5-
<PAGE> 6
(d) As requested by the Company from time to time and
upon the termination of the Executive's employment with the Company for any
reason, the Executive will promptly deliver to the Company all copies and
embodiments, in whatever form, of all Confidential Information in the
Executive's possession or within his control (including, but not limited to,
memoranda, records, notes, plans, photographs, manuals, notebooks,
documentation, program listings, flow charts, magnetic media, disks, diskettes,
tapes and all other materials containing any Confidential Information)
irrespective of the location or form of such material. If requested by the
Company, the Executive will provide the Company with written confirmation that
all such materials have been delivered to the Company as provided herein.
5.2 Non-Solicitation or Hire. During the Term and for a
three (3) year period following the termination of the Executive's employment
for any reason, the Executive shall not, (a) solicit, directly or indirectly,
any party who is a customer of the Company or its subsidiaries, or who was a
customer of the Company or its subsidiaries at any time during the twelve (12)
month period immediately prior to the relevant date, for the purpose of
marketing, selling or providing to any party any services or products offered by
or available from the Company or its subsidiaries and relating to the Business
(provided that if the Executive intends to solicit any such party for any other
purpose, it shall notify the Company of such intention) or (b) employ or
solicit, directly or indirectly, for employment any person who is an employee of
the Company or any of its subsidiaries or who was an employee of the Company or
any of its subsidiaries at any time during the twelve (12) month period
immediately prior to any such solicitation or employment.
5.3 Non-Competition. The Executive shall be bound by the
terms of any non-competition and confidentiality agreement that may be
established between the Executive and the Company and/or Holdings.
5.4 The Executive agrees not to engage in any act that is
intended, or may reasonably by expected to harm the reputation, business,
prospects or operations of the Company, its officers, directors, stockholders or
employees. The Company further agrees that it will engage in no act which is
intended, or may reasonably be expected to harm the reputation, business or
prospects of the Executive.
5.5 Property. The Executive acknowledges that all
originals and copies of materials, records and documents generated by him or
coming into his possession during his employment by the Company are the sole
property of the Company ("Company Property"). During the Term, and at all times
thereafter, the Executive shall not remove, or cause to be removed, from the
premises of the Company, copies of any record, file, memorandum, document,
computer related information or equipment, or any other item relating to the
business of the Company, or any affiliate, except in furtherance of his duties
under the Agreement. When the Executive terminates his employment with the
Company, or upon request of the Company at any time, the Executive shall
promptly deliver to the Company all copies of Company Property in his possession
or control.
5.6 Work Product. The Executive agrees that all
inventions, discoveries, systems, interfaces, protocols, concepts, formats,
creations, developments, designs,
-6-
<PAGE> 7
programs, products, processes, investment strategies, materials, computer
programs or software, data bases, improvements, or other properties related to
the business of the Company or any of its affiliates, conceived, made or
developed during the term of his employment with the Company, whether conceived
by the Executive alone or working with others, and whether patentable or not
(the "Work Product"), shall be owned by and belong exclusively to the Company.
The Executive hereby assigns to the Company his entire rights to the Work
Product and agrees to execute any documents and take any action reasonably
requested by the Company to protect the rights of the Company in any Work
Product. The Executive acknowledges that any copyrightable subject matter
created by the Executive within the scope of his employment, whether containing
or involving Confidential Information or not, is deemed a work-made-for-hire
under Chapter 17 of the United States Code, entitled "Copyrights," as amended,
and the Company shall be deemed the sole author and owner thereof for any
purposes whatsoever. In the event of any unauthorized publication of any
Confidential Information, the Company shall automatically own the copyright in
such publication. Further, the Company shall automatically hold all patents
and/or trademarks, if any, with respect to any Work Product.
5.7 Tax Withholding. The Company or other payor is
authorized to withhold, from any benefit provided or payment due hereunder, the
amount of withholding taxes due any federal, state or local authority in respect
of such benefit or payment and to take such other action as may be necessary in
the opinion of the Board of Directors of the Company to satisfy all obligations
for the payment of such withholding taxes.
6. Other Provisions.
6.1 Notices. Any notice or other communication required
or which may be given hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission or sent by
certified, registered or express mail, postage prepaid, and shall be deemed
given when so delivered personally, telegraphed, telexed, or sent by facsimile
transmission or, if mailed, four (4) days after the date of mailing, as follows:
(a) If the Company, to:
Worldwide Flight Services, Inc.
1001 West Euless Boulevard
Suite 320
Euless, Texas 76040
Attention: Mark Dunkerley
Telephone: (817) 665-3228
Fax: (817) 665-3270
-7-
<PAGE> 8
With a copy to:
WFS Holdings, Inc.
c/o Castle Harlan Partners III, L.P.
150 E. 58th Street
New York, NY 10155
Attention: Marcel Fournier
Telephone: (212) 644-8600
Fax: (212) 207-8042
And a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, NY 10022
Attention: Marc Weingarten, Esq.
Telephone: (212) 756-2000
Fax: (212) 593-5955
(b) If the Executive, to his home address set
forth in the records of the Company.
6.2 Entire Agreement. Except as provided in
Sections 3.5, 3.6 and 5.3 hereof, this Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, written or oral, with respect thereto.
6.3 Representations and Warranties by Executive.
The Executive represents and warrants that he is not a party to or subject to
any restrictive covenants, legal restrictions or other agreements in favor of
any entity or person which would in any way preclude, inhibit, impair or limit
the Executive's ability to perform his obligations under this Agreement,
including, but not limited to, non-competition agreements, non-solicitation
agreements or confidentiality agreements.
6.4 Waiver and Amendments. This Agreement may be
amended, modified, superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay
on the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any
right, power or privilege hereunder, nor any single or partial exercise of any
right, power or privilege hereunder, preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
6.5 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State of New York.
6.6 Assignability. This Agreement, and the
Executive's rights and obligations hereunder, may not be assigned by the
Executive. The Company may assign this
-8-
<PAGE> 9
Agreement and its rights, together with its obligations, to any other entity
which will substantially carry on the business of the Company.
6.7 Counterparts. This Agreement may be executed
in two (2) or more counterparts, each of which shall be deemed an original but
all of which shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
6.8 Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein.
6.9 Remedies; Specific Performance. The parties
hereto hereby acknowledge that the provisions of Section 5 are reasonable and
necessary for the protection of the Company. In addition, the Executive further
acknowledges that the Company will be irrevocably damaged if such covenants are
not specifically enforced. Accordingly, the Executive agrees that, in addition
to any other relief to which the Company may be entitled, the Company will be
entitled to seek and obtain injunctive relief (without the requirement of any
bond) from a court of competent jurisdiction for the purposes of restraining the
Executive from any actual or threatened breach of such covenants. In addition,
without limiting the Company's remedies for any breach of any restriction on the
Executive set forth in Section 5, except as required by law, the Executive shall
not be entitled to any payments set forth in Section 4 hereof if the Executive
breaches any of the covenants applicable to the Executive contained in Section
5, the Executive will immediately return to the Company any such payments
previously received under Section 4.5 upon such a breach, and, in the event of
such breach, the Company will have no obligation to pay any of the amounts that
remain payable by the Company under Section 4.
6.10 Severability. If any term, provision,
covenant or restriction of this Agreement, or any part thereof, is held by a
court of competent jurisdiction of any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected or impaired or invalidated. The Executive acknowledges that the
restrictive covenants contained in Section 5 are a condition of this Agreement
and are reasonable and valid in geographical and temporal scope and in all other
respects.
6.11 Judicial Modification. If any court or
arbitrator determines that any of the covenants in Section 5, or any part of any
of them, is invalid or unenforceable, the remainder of such covenants and parts
thereof shall not thereby be affected and shall be given full effect, without
regard to the invalid portion. If any court or arbitrator determines that any of
such covenants, or any part thereof, is invalid or unenforceable because of the
geographic or temporal scope of such provision, such court or arbitrator shall
reduce such scope to the minimum extent necessary to make such covenants valid
and enforceable.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have executed this Agreement as of the day and year first
above mentioned.
EXECUTIVE
/s/ Doug Pinckney
--------------------------------------------------
Doug Pinckney
WORLDWIDE FLIGHT SERVICES, INC.
By: /s/ Mark Dunkerley
-----------------------------------------------
Name: Mark Dunkerley
Title: President and Chief Operating Officer
-10-
<PAGE> 1
EXHIBIT 12.1
WORLDWIDE FLIGHT SERVICES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE NINE
MONTHS MONTHS
ENDED ENDED
MARCH 31, DECEMBER 31,
---------- ---------- ---------- ---------- ---------- ------------
1995 1996 1997 1998 1999 1999
(IN THOUSANDS EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Earnings (loss) from continuing $ 6,209 $ 7,450 $ 7,695 $ 10,794 $ 1,619 $ (2,660)
operations before income
taxes and extraordinary loss
Add: Total fixed charges 4,010 4,550 3,686 4,532 1,214 14,550
Less: Interest capitalized 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total earnings $ 10,219 $ 12,000 $ 11,381 $ 15,326 $ 2,833 $ 11,890
========== ========== ========== ========== ========== ==========
Fixed charges:
Interest: $ 0 $ 0 $ 0 $ 0 $ 0 $ 9,438
Portion of rental expense 4,010 4,550 3,686 4,532 1,214 4,600
representative of the
interest factor
Amortization of debt expense 0 0 0 0 0 512
---------- ---------- ---------- ---------- ---------- ----------
Total fixed charges $ 4,010 $ 4,550 $ 3,686 $ 4,532 $ 1,214 $ 14,550
========== ========== ========== ========== ========== ==========
Ratio of earnings to fixed charges 2.5x 2.6x 3.1x 3.4x 2.3x (a)
========== ========== ========== ========== ========== ==========
</TABLE>
(a) The ratio of earnings to fixed charges is computed assuming that 1/3 of
rental expense is representative of the interest factor. Earnings were
insufficient to cover fixed charges by $2,660,000.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001095855
<NAME> WORLDWIDE FLIGHT SERVICES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,525
<SECURITIES> 0
<RECEIVABLES> 74,572
<ALLOWANCES> 1,428
<INVENTORY> 341
<CURRENT-ASSETS> 87,387
<PP&E> 45,915
<DEPRECIATION> 3,185
<TOTAL-ASSETS> 246,141
<CURRENT-LIABILITIES> 60,938
<BONDS> 58,062
139,957
0
<COMMON> 0
<OTHER-SE> 33,889
<TOTAL-LIABILITY-AND-EQUITY> 246,141
<SALES> 216,870
<TOTAL-REVENUES> 216,870
<CGS> 189,080
<TOTAL-COSTS> 189,080
<OTHER-EXPENSES> 20,163
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,950
<INCOME-PRETAX> (2,660)
<INCOME-TAX> (660)
<INCOME-CONTINUING> (2,000)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,197)
<CHANGES> 0
<NET-INCOME> (3,197)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
WORLDWIDE FLIGHT SERVICES, INC.
PROFORMA FINANCIAL INDENTURE DATA
<TABLE>
<CAPTION>
PROFORMA
COMBINED
TWELVE
MONTHS
ENDED
DECEMBER 31,
1999
(UNAUDITED)
--------------
(in thousands)
<S> <C>
Revenue................................. $322,870
Operating income........................ 10,443
Interest expense........................ 19,891
Depreciation and Amortization........... 15,614
Capital expenditures.................... 8,127
</TABLE>
