<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
CURRENT REPORT
ON
FORM 8-K/A
PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------------
June 14, 2000 (March 31, 2000)
Date of Report (Date of earliest event reported):
----------------------
WORLDWIDE FLIGHT SERVICES, INC.
(Exact Name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 333-88593 75-1932711
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
1001 West Euless Boulevard
Suite 320
Euless, Texas 76040
(Address of principal
executive offices)
Registrant's telephone number, including area code: (817) 665-3200
<PAGE> 2
The undersigned hereby amends the following items, financial statements,
exhibits or other portions of its Current Report on Form 8-K filed April 17,
2000, as set forth in the pages attached hereto:
Item 7(a). Amended to include audited financial statements of Oxford
Electronics, Inc.
Item 7(b). Amended to include unaudited pro forma condensed financial
statements.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WORLDWIDE FLIGHT SERVICES, INC.
Date: June 14, 2000 By: /s/ David F. Chavenson
----------------------------------------
David F. Chavenson
Executive Vice President and Chief
Financial Officer
(principal financial officer)
<PAGE> 3
ITEM 7(a)
FINANCIAL STATEMENTS
Oxford Electronics, Inc.
Year ended October 31, 1999
<PAGE> 4
Oxford Electronics, Inc.
Financial Statements
Year ended October 31, 1999
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditor............................................... 1
Audited Financial Statements
Balance Sheet............................................................... 2
Statement of Income and Comprehensive Income................................ 3
Statement of Stockholder's Equity........................................... 4
Statement of Cash Flows..................................................... 5
Notes to Financial Statements............................................... 6
</TABLE>
<PAGE> 5
Report of Independent Auditors
Board of Directors and Stockholder
Oxford Electronics, Inc.
We have audited the accompanying balance sheet of Oxford Electronics, Inc. as of
October 31, 1999, and the related statements of income and comprehensive income,
stockholder's equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Oxford Electronics, Inc. at
October 31, 1999, and the results of its operations and its cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States.
ERNST & YOUNG LLP
Dallas, Texas
March 15, 2000, except for
the second paragraph of
Note 1, as to which the date is
April 5, 2000
1
<PAGE> 6
Oxford Electronics, Inc.
Balance Sheet
October 31, 1999
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 513,120
Accounts receivable, less allowance for doubtful accounts of $50,000 2,476,227
Investments 1,031,429
Prepaid expenses and other current assets 231,761
----------
Total current assets 4,252,537
Property and equipment at cost, net 105,483
Other assets 182,214
----------
Total assets $4,540,234
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accrued expenses and other current liabilities $ 910,943
Accounts payable 380,111
Current maturities of long-term debt 71,088
Distribution payable to stockholder 258,365
----------
Total current liabilities 1,620,507
Long-term liabilities:
Long-term debt, less current maturities 49,282
Advances from stockholder 50,814
----------
100,096
Stockholder's equity:
Common stock - no par value; 200 shares
authorized; 100 shares issued and outstanding 100
Additional paid-in capital 44,504
Retained earnings 2,488,718
Accumulated comprehensive income 286,309
----------
Total stockholder's equity 2,819,631
----------
Total liabilities and stockholder's equity $4,540,234
==========
</TABLE>
See accompanying notes.
2
<PAGE> 7
Oxford Electronics, Inc.
Statement of Income and Comprehensive Income
Year ended October 31, 1999
<TABLE>
<S> <C>
Net revenue $ 9,582,890
Cost of revenue earned 5,737,869
------------
Gross profit 3,845,021
Operating expenses:
Salaries, wages, and benefits 1,278,043
Depreciation and amortization 57,634
Other miscellaneous expenses 1,160,559
------------
2,496,236
------------
Income from operations 1,348,785
Other income (expense):
Interest expense, net (8,886)
Miscellaneous income 15,809
------------
Total other income 6,923
------------
Income before provision for income taxes 1,355,708
State income taxes 45,731
------------
Net income 1,309,977
Other comprehensive income:
Unrealized holding gains during the period 286,309
------------
Total other comprehensive income 286,309
------------
Total comprehensive income $ 1,596,286
============
</TABLE>
See accompanying notes.
3
<PAGE> 8
Oxford Electronics, Inc.
Statement of Stockholder's Equity
<TABLE>
<CAPTION>
OTHER TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE STOCKHOLDER'S
STOCK CAPITAL EARNINGS INCOME EQUITY
----------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at October 31, 1998 $ 100 $ 44,504 $ 1,561,673 $ -- $ 1,606,277
Net income -- -- 1,309,977 -- 1,309,977
Distribution to stockholder -- -- (124,567) -- (124,567)
Distribution payable to stockholder -- -- (258,365) -- (258,365)
Other comprehensive income -- -- -- 286,309 286,309
----------- ----------- ----------- ------------- -------------
Balance at October 31, 1999 $ 100 $ 44,504 $ 2,488,718 $ 286,309 $ 2,819,631
=========== =========== =========== ============= =============
</TABLE>
See accompanying notes.
4
<PAGE> 9
Oxford Electronics, Inc.
Statement of Cash Flows
Year ended October 31, 1999
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net earnings $ 1,309,977
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization 57,634
Provision for bad debts 25,000
Changes in assets and liabilities:
Accounts receivable (1,161,875)
Other assets (184,635)
Accounts payable and accrued liabilities 35,318
-----------
Net cash provided by operating activities 81,419
INVESTING ACTIVITIES
Capital expenditures (19,689)
Purchase of investments (363,696)
Proceeds from sale of investments 87,510
-----------
Net cash used in investing activities (295,875)
FINANCING ACTIVITIES
Payments on long-term debt (183,987)
Distribution to stockholder (124,567)
Other 26,494
-----------
Net cash used in financing activities (282,060)
-----------
Net decrease in cash and cash equivalents (496,516)
Cash and cash equivalents at beginning of year 1,009,636
-----------
Cash and cash equivalents at end of year $ 513,120
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 19,818
===========
Cash paid for state income taxes $ 32,000
===========
</TABLE>
See accompanying notes.
5
<PAGE> 10
Oxford Electronics, Inc.
Notes to Financial Statements
October 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND BUSINESS ACTIVITY
Oxford Electronics, Inc. (the Company) provides airport technical services,
including the repair and maintenance of passenger boarding bridges, conveyor
systems, and baggage and cargo systems. The Company maintains its principal
offices in Elmont, New York, and provides services at several international
airports located throughout the East Coast of the United States. The majority of
the Company's revenue is derived from services rendered at airports located in
New York and New Jersey.
On March 31, 2000, the stockholder of the Company signed a definitive agreement
and subsequently closed the sale of the Company to Worldwide Flight Services,
Inc. (Worldwide) on April 5, 2000. The financial statements do not include any
adjustments to the value of assets and liabilities that might result from the
sale to Worldwide. The historical financial statements have been adjusted to
exclude certain transactions with Oxford Engineering (Engineering), which is
under common control. Engineering previously subcontracted certain engineering
services that were part of the Company contracts with its customers. Engineering
has no other significant business activities, except to provide certain
engineering services to Oxford. As part of the sale to Worldwide, Oxford will
exclusively perform services previously performed by Engineering. The
elimination of these transactions results in an increase in the Company's
revenues, costs and net earnings. This elimination more accurately reflects the
historical results of Oxford, on the basis that they will occur after the
acquisition by Worldwide. The net effect of this elimination has been reflected
as a distribution payable to the stockholder.
CASH EQUIVALENTS
The Company considers securities with maturities of three months or less, when
purchased, to be cash equivalents.
CREDIT RISKS
Financial instruments that potentially subject the Company to credit risk
include investments in certificates of deposits and equity securities. Future
changes in economic conditions may make the investments less valuable.
6
<PAGE> 11
Oxford Electronics, Inc.
Notes to Financial Statements (continued)
October 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CREDIT RISKS (CONTINUED)
In addition, financial instruments that potentially subject the Company to
credit risk include accounts receivable. Accounts receivable resulting from
service sales are not collateralized. During 1999, the Company derived
approximately 80% of its sales from seven customers, whose significance ranges
from 7% to 13%.
The Company maintains deposits with financial institutions in excess of amounts
insured by the FDIC.
REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE
The Company provides continuous technical services to its clients under service
contracts and bills for such services generally on a bi-weekly basis, usually
based on a fixed rate for such service. Revenue is recorded as the service is
provided.
INVESTMENTS
The Company's investment securities primarily consist of marketable equity
securities, which are considered available for sale.
Realized gains and losses on dispositions of investment securities are based on
the net proceeds and the value of the securities sold, using the specific
identification method. Unrealized gains and losses on investment securities
available for sale are based on the difference between cost and fair value of
each security, usually determined based on quoted market prices.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. The costs of additions and
betterment's are capitalized and expenditures for repairs and maintenance are
expensed in the period incurred. When items of property and equipment are sold
or retired, the related costs and accumulated depreciation are removed from the
accounts and any gain or loss is included in income.
7
<PAGE> 12
Oxford Electronics, Inc.
Notes to Financial Statements (continued)
October 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT (CONTINUED)
Depreciation and amortization of property and equipment is provided utilizing
both the straight-line and declining balance methods over the estimated useful
lives of the respective assets as follows:
<TABLE>
<S> <C>
Transportation equipment 5 years
Machinery and equipment 5 years
Furniture and fixtures 5 to 10 years
Computer equipment 5 years
</TABLE>
Leasehold improvements are amortized over the shorter of the remaining term of
the lease or the useful life of the improvement utilizing the straight-line
method.
INCOME TAXES
Effective November 1, 1996, the Company elected, by consent of its stockholder,
to be taxed under the provisions of Subchapter S of the Internal Revenue Code
with respect to federal and New York State taxes. Under those provisions, the
Company does not pay federal or New York State corporate income taxes on its
taxable income. Instead, the stockholder is individually liable for federal and
New York State income taxes on the Company's taxable income.
In other states in which the Company has operations, it is taxed as a regular
corporation, and accounts for such income taxes utilizing the liability method
of accounting for income taxes. The liability method provides that deferred tax
assets and liabilities are recorded based on the difference between the tax
basis of assets and liabilities and their carrying amounts for reporting
purposes, referred to as "temporary differences."
8
<PAGE> 13
Oxford Electronics, Inc.
Notes to Financial Statements (continued)
October 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PENSION AND PROFIT SHARING PLANS
The Company maintains an integrated 401(k) and profit sharing plan (Plan 1) for
all eligible employees with a minimum of one year of service. Employer
contributions are determined by an annual resolution of the Board of Directors
and cannot exceed 15% of eligible compensation. Voluntary employee contributions
are limited to 15% of compensation. The employer matches 25% of such
contributions up to 6% of each contributing participant's compensation.
In addition, the Company maintains a second noncontributory profit sharing plan
covering all employees not eligible under Plan 1. The Company makes annual
contributions to the plan equal to the amounts accrued as expense. However, the
Company elected to make no contribution in 1999 and, as a result, no expense is
included.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements, and revenues and
expenses during the reporting period. In these financial statements assets,
liabilities, and earnings involve extensive reliance on management's estimates.
Actual results could differ from those estimates.
2. INVESTMENTS
At October 31, 1999, investments consisted of stock mutual funds and equity
securities. Cost and fair value of these investments are as follows:
<TABLE>
<CAPTION>
GROSS
AMORTIZED UNREALIZED FAIR
COST GAINS VALUE
---------- ---------- ----------
<S> <C> <C> <C>
Trading securities:
Equity securities $ 550,147 $ 221,753 $ 771,900
Equity funds 194,973 64,556 259,529
---------- ---------- ----------
$ 745,120 $ 286,309 $1,031,429
========== ========== ==========
</TABLE>
9
<PAGE> 14
Oxford Electronics, Inc.
Notes to Financial Statements (continued)
October 31, 1999
2. INVESTMENTS (CONTINUED)
Included in other comprehensive income are unrealized gains from marketable
securities amounting to $286,309 for the year ending October 31, 1999.
3. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
<TABLE>
<S> <C>
Transportation equipment $ 416,710
Machinery and equipment 72,049
Furniture and fixtures 35,383
Computer equipment 108,795
Leasehold improvements 14,227
---------
647,164
Less accumulated depreciation and amortization 541,681
---------
$ 105,483
=========
</TABLE>
Depreciation and amortization expense related to property and equipment amounted
to $57,634 for the year ended October 31, 1999. The amount charged to cost of
revenue earned as a component of warehouse expense amounted to $3,772 for the
year ended October 31, 1999.
4. CASH SURRENDER VALUE OF OFFICER'S LIFE INSURANCE
The Company maintains a key-man life insurance policy on its stockholder. Under
key-man insurance, the Company receives the cash surrender value if the policy
is terminated and, upon death of the insured, receives all benefits payable. At
October 31, 1999, the cash surrender value of the life insurance policy was
$112,856 and is included in other assets.
5. RELATED PARTY TRANSACTIONS
The Company rents an office and two warehouse facilities from the Company's
stockholder. Rent payments for these facilities aggregated $373,300 for the year
ended October 31, 1999. The amount, included as a component of cost of revenue
earned, totaled $176,800 for the year ended October 31, 1999, and the remainder
was included in general and administrative expense.
10
<PAGE> 15
Oxford Electronics, Inc.
Notes to Financial Statements (continued)
October 31, 1999
5. RELATED PARTY TRANSACTIONS (CONTINUED)
At October 31, 1999, the Company has been advanced funds from the stockholder
aggregating $50,814. During the year ended October 31, 1999, the Company repaid
the stockholder $4,843.
6. NOTE PAYABLE - BANK
Pursuant to an agreement with a lending institution, the Company may borrow up
to $1,000,000 under a renewable line of credit. The borrowing arrangement is
secured by substantially all assets of the Company and the personal guarantee of
the stockholder. At October 31, 1999, the Company had no outstanding borrowings.
Interest is payable monthly at 1% above the bank's prime rate per annum. The
credit line expires April 30, 2000.
7. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<S> <C>
Installment loan payable - in monthly installments of $337, including interest
at 4.90% through March 2002, secured by related transportation equipment. $ 9,759
Installment loan payable - in monthly installments of $314, including interest
at 9.50% through December 2000, secured by related transportation equipment. 4,396
Installment loan payable - in monthly installments of $954, including interest
at 3.90% through March 2002, secured by related transportation equipment. 27,666
Installment loan payable - in monthly installments of $3,333 plus interest at
8.69% through May 2001, secured by substantially all of the Company's assets. 66,667
Installment loan payable - in monthly installments of $544, including interest
at 9.74% through February 2000, secured by related transportation equipment. 2,176
</TABLE>
11
<PAGE> 16
Oxford Electronics, Inc.
Notes to Financial Statements (continued)
October 31, 1999
7. LONG-TERM DEBT (CONTINUED)
<TABLE>
<S> <C>
Installment loan payable - in monthly installments of $443, including interest
at 10.17% through March 2000, secured by related transportation equipment. $ 2,215
Installment loan payable - in monthly installments of $774, including interest
at 3.90% through February 2000, secured by related transportation equipment. 3,096
Installment loan payable - in monthly installments of $522, including interest
at 8.25% through December 2000, secured by related transportation equipment. 7,308
--------
123,283
Less unamortized discount 2,913
--------
120,370
Less current maturities 71,088
--------
Long-term debt $ 49,282
========
</TABLE>
Aggregate maturities of long-term debt are as follows:
<TABLE>
<S> <C>
2000 $ 71,088
2001 42,899
2002 9,296
---------
$ 123,283
=========
</TABLE>
8. PROVISION FOR INCOME TAXES
The provision for income taxes for the year ended October 31, 1999, is
summarized as follows:
<TABLE>
<S> <C>
Current:
State and local $ 45,731
=========
</TABLE>
No significant deferred tax assets or liabilities existed at October 31, 1999.
12
<PAGE> 17
Oxford Electronics, Inc.
Notes to Financial Statements (continued)
October 31, 1999
9. COMMITMENTS
The Company leases its office headquarters and warehouse from the stockholder
under a noncancellable lease requiring future minimum rentals as follows:
<TABLE>
<CAPTION>
YEAR ENDING OCTOBER 31
----------------------
<S> <C>
2000 $ 371,200
=========
</TABLE>
The Company leases office facilities at certain airports on a month-to-month
basis. Rent expense for these airport facilities amounted to $68,829 for the
year ended October 31, 1999.
In addition, during 1999, the Company leased a storage facility on a
month-to-month basis. For the year ended October 31, 1999, rent expense for this
facility amounted to $12,333.
13
<PAGE> 18
ITEM 7(b)
UNAUDITED PRO FORMA CONDENSED FINANCIAL DATA
The unaudited pro forma condensed consolidated statement of operations for
the three months ended March 31, 2000 and the unaudited pro forma condensed
consolidated balance sheet as of March 31, 2000 are based on the historical
consolidated financial statements of Worldwide Flight Services, Inc. (Worldwide)
and the historical financial statements of Oxford Electronics, Inc. (Oxford) on
the assumptions and adjustments described in the notes to the unaudited pro
forma financial data, including assumptions relating to the allocation of the
consideration paid for Oxford to the assets and liabilities, based on
preliminary estimates of their respective fair values. Oxford's fiscal year end
is October 31, and as such their results have been included in the pro forma
financial statements based on their first fiscal quarter of 2000, or the three
months ended January 31, 2000. Worldwide's management does not expect the final
allocation of this consideration to significantly differ from that reflected in
the unaudited pro forma combined consolidated financial data.
This unaudited pro forma financial data has been presented as if the
acquisition of Oxford, the additional borrowings under the senior secured credit
facility to finance the Oxford acquisition and the $1 million equity
contribution by WFS Holdings, Inc., our parent, to us had occurred as of January
1, 1999.
The unaudited pro forma condensed statement of operations for the year
ended December 31, 1999 is based on the historical audited consolidated
financial statements of Worldwide and its predecessor AMR Services Corporation
(AMRS), the historical consolidated financial statements of Miami Aircraft
Support (MAS or Miami Aircraft Support) and Aerolink International, Inc.
(Aerolink) for the appropriate period in 1999 prior to their acquisition by
Worldwide, and the historical financial statements of Oxford for its fiscal year
ended October 31, 1999, on the assumptions and adjustments described in the
notes to the unaudited pro forma financial data.
The acquisition of Oxford was completed effective March 31, 2000.
We recorded an extraordinary loss of approximately $2.0 million in
connection with the refinancing of Worldwide's existing indebtedness upon the
acquisition of Miami Aircraft Support.
Our unaudited pro forma combined consolidated financial data does not
purport to represent what our financial position and results of operations would
have been if the transactions listed above had actually been completed as of the
dates indicated and are not intended to project our financial position or
results of operations for any future period.
<PAGE> 19
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
WORLDWIDE OXFORD PRO FORMA
MARCH 31, JANUARY 31, PRO FORMA COMBINED MARCH
2000 2000 ADJUSTMENTS 31, 2000
--------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 5,920 $ 249 $ (1,000)(a) $ 5,169
Restricted cash equivalent 750 -- -- 750
Accounts receivable, net 55,484 2,328 -- 57,812
Deferred income taxes 5,462 -- -- 5,462
Prepaids and other
current assets 8,228 1,396 -- 9,624
--------- ----------- ----------- --------------
Total current assets 75,844 3,973 (1,000) 78,817
Other assets
Equipment and property,
net 42,946 137 -- 43,083
Intangible assets including
goodwill, net 106,026 -- 7,236 (a) 113,262
Other long-term assets 9,615 189 (113)(b) 9,691
--------- ----------- ----------- --------------
Total assets $ 234,431 $ 4,299 $ 6,123 $ 244,853
========= =========== =========== ==============
Current liabilities
Accounts Payable $ 27,754 $ 347 $ -- $ 28,101
Accrued Liabilities 24,287 1,045 -- 25,332
Current portion of
long-term debt 2,132 62 -- 2,194
--------- ----------- ----------- --------------
Total current liabilities 54,173 1,454 -- 55,627
Long term debt 133,057 34 8,891 (a) 141,982
Other long term liabilities 14,233 43 -- 14,276
Equity
Common Stock --
Additional paid-in-capital 40,714 45 (45)(c) 40,714
Retained earnings
(deficit) (6,422) 2,248 (2,248)(c) (6,422)
Accumulated other
comprehensive loss (1,324) 475 (475)(c) (1,324)
--------- ----------- ----------- --------------
Total equity 32,968 2,768 (2,768) 32,968
Total liabilities and equity $ 234,431 $ 4,299 $ 6,123 $ 244,853
========= =========== =========== ==============
</TABLE>
<PAGE> 20
NOTES TO THE UNAUDITED PRO FORMA BALANCE SHEET
(a) Represents the excess of the purchase price over estimated fair value of
net assets acquired under the terms of the Oxford acquisition agreement as
follows (in thousands):
<TABLE>
<S> <C>
COMPONENTS OF PURCHASE PRICE:
Cash paid $ 9,600
Estimated transaction costs 291
---------
Total purchase price 9,891
Less:
Cash 249
Accounts receivable, net 2,328
Prepaid expenses and other current assets 1,396
Plant, property & equipment 137
Other long-term assets 76
Plus:
Liabilities assumed 1,531
---------
Net assets assumed 2,655
---------
Intangible assets, including goodwill $ 7,236
=========
</TABLE>
Cash paid was funded by approximately $8.9 million of borrowings under
the Company's existing credit facility and $1 million capital contribution from
the Company's parent, which had been received prior to March 31, and is included
in cash and cash equivalents.
(b) Represents certain assets that were retained by the selling shareholder of
Oxford pursuant to the stock purchase agreement.
(c) Represents the elimination of Oxford historical equity balances.
<PAGE> 21
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
AMRS WORLDWIDE MAS AEROLINK
----------- --------- ---------- -----------
PERIOD
THREE NINE FROM PERIOD FROM
MONTHS MONTHS JANUARY 1, JANUARY 1,
ENDED ENDED 1999 TO 1999 TO
MARCH 31, DECEMBER AUGUST 12, AUGUST 23, PRO FORMA
1999 31, 1999 1999 1999 ADJUSTMENTS
--------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 61,475 $ 216,870 $ 36,516 $ 8,009 --
Salaries, wages, and benefits 39,679 141,161 20,499 4,527 (437)(b)
Depreciation and amortization 1,627 9,112 2,116 231 2,528 (a)
Other operating expenses 18,438 58,970 11,553 2,868 (595)(e)(f)(g)
--------- --------- ---------- ----------- -----------
Operating income from continuing
operations 1,731 7,627 2,348 383 (1,496)
Interest income 440 -- 73 7 (440)(h)
Interest expense -- (9,950) (316) (33) (9,672)(c)
Other income (expense), net (552) (337) -- 5 --
--------- --------- ---------- ----------- -----------
Income (loss) from continuing
operations before income
taxes and extraordinary loss 1,619 (2,660) 2,105 362 (11,608)
Provision (benefit) for
income taxes 644 (660) 747 -- (3,908)(d)
--------- --------- ---------- ----------- -----------
Income (loss) from continuing
operations before extraordinary loss $ 975 $ (2,000) $ 1,358 $ 362 $ (7,700)
========= ========= ========== =========== ===========
<CAPTION>
PRO FORMA PRO FORMA
COMBINED OXFORD COMBINED
--------------------------- ----------
TWELVE TWELVE
MONTHS MONTHS YEAR
ENDED ENDED ENDED ENDED
DECEMBER OCTOBER PRO FORMA DECEMBER
31, 1999 31, 1999 ADJUSTMENTS 31, 1999
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $ 322,870 $ 9,583 $ 332,453
Salaries, wages, and benefits 205,429 5,130 210,559
Depreciation and amortization 15,614 58 362 (i) 16,034
Other operating expenses 91,234 3,046 94,280
---------- ------------- ----------- ----------
Operating income from continuing 10,593 1,349 (362) 11,580
operations
Interest income 80 -- 80
Interest expense (19,971) (9) (791)(j) (20,771)
Other income (expense), net (884) 16 (868)
---------- ------------- ----------- ----------
Income (loss) from continuing
operations before income
taxes and extraordinary loss (10,182) 1,356 (1,153) (9,979)
Provision (benefit) for
income taxes (3,177) 46 (36)(d) (3,167)
---------- ------------- ----------- ----------
Income (loss) from
continuing
operations before
extraordinary loss $ (7,005) $ 1,310 $ (1,117) $ (6,812)
========== ============= =========== ==========
</TABLE>
<PAGE> 22
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE FIRST QUARTER OF FISCAL 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
WORLDWIDE OXFORD PRO FORMA COMBINED
------------------- -------------------- -------------------------
FIRST QUARTER FIRST QUARTER FIRST QUARTER
ENDED ENDED PRO FORMA OF
MARCH 31, 2000 JANUARY 31, 2000 ADJUSTMENTS FISCAL 2000
------------------- -------------------- -------------- -------------------------
<S> <C> <C> <C> <C>
Revenues $ 85,195 $ 2,960 $ -- $ 88,155
Salaries, wages, and benefits 57,466 1,476 -- 58,942
Depreciation and amortization 3,921 12 90(i) 4,023
Other operating expenses 22,665 1,074 -- 23,739
------------------- -------------------- -------------- -------------------------
Operating income from
continuing operations 1,143 398 (90) 1,451
Interest income 120 -- -- 120
Interest expense (5,004) (3) (211)(j) (5,218)
Other income (expense), net (12) 67 -- 55
------------------- -------------------- -------------- -------------------------
Income (loss) from
continuing operations before
income taxes (3,753) 462 (301) (3,592)
Provision (benefit) for
income taxes (528) 16 9(d) (503)
------------------- -------------------- -------------- -------------------------
Income (loss) from continuing
operations $ (3,225) $ 446 $ (310) $ (3,089)
=================== ==================== ============== =========================
</TABLE>
<PAGE> 23
NOTES TO UNAUDITED PRO FORMA CONDENSED
STATEMENT OF OPERATIONS
(a) Represents the increase in amortization expense for the excess of the AMRS,
Miami Aircraft Support, and Aerolink purchase price over estimated fair
value of the net tangible assets acquired under the terms of the respective
acquisition agreements. In connection with the acquisition of AMRS, Miami
Aircraft Support, and Aerolink, Worldwide recorded approximately $107.0
million of intangibles, including goodwill which is being amortized over 20
years. The pro forma adjustment reflects additional amortization expense
assuming each of the acquisitions had occurred as of January 1, 1999.
(b) Represents the elimination of payments to employee shareholders previously
incurred by Miami Aircraft Support and Aerolink that are no longer incurred
by Worldwide. In connection with the acquisition agreements of Miami
Aircraft Support and Aerolink, previous arrangements with employee
shareholders were terminated. These employee shareholders were not actively
involved in the operations of Miami Aircraft Support or Aerolink prior to
the acquisition and, as a result, such costs have been eliminated and not
replaced.
(c) Represents the additional interest expense resulting from completion of our
acquisition of Miami Aircraft Support and Aerolink, the placement of the
Senior Notes due 2007 (12.25%), and our entering into the senior secured
credit facility (8.93%)and the refinancing of our indebtedness. A 1/8%
change in interest rates applicable to the senior secured credit facility
borrowings used to finance the Miami Aircraft Support and Aerolink
acquisitions would cause interest expense to increase or decrease by
approximately $20,000 per annum as compared to the amounts set forth above.
(d) Represents an adjustment to estimated tax expense related to tax benefits
recorded primarily for interest reductions plus, with respect to Oxford to
include an additional income tax provision, to reflect the elimination of
their Subchapter S status after their acquisition by Worldwide.
(e) Represents the elimination of the corporate overhead allocated from AMR
Corporation and included in the historical financial statements of AMRS.
Prior to the acquisition of AMRS, AMR Corporation allocated significant
overhead expenses to AMRS. In connection with the acquisition some of these
expenses will no longer be incurred by Worldwide. These expenses primarily
relate to benefit plans, including stock compensation plans and employee
personal travel plans that will no longer be continued nor replaced by
Worldwide, and allocation of the AMR Corporation senior executive salaries
for which there will be no equivalent at Worldwide. The following is a
listing of expenses that will no longer be incurred by Worldwide:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, 1999
--------------
(IN THOUSANDS)
<S> <C>
Allocation of AMR Corporation senior executives............. $ 349
Personal travel benefits............................. 79
Variable stock based compensation plans allocated by
AMR Corporation................................... 80
-----
Total........................................ $ 508
</TABLE>
(f) Represents the additional overhead expense that was allocated by AMR
Corporation during the three month period ended March 31, 1999. During the
three months ended March 31, 1999 AMRS received a monthly allocation of
approximately $640,000 of overhead expense, excluding items removed above,
from AMR Corporation as compared to an average monthly allocation of
$407,000 of overhead expense, excluding items removed above, during fiscal
1998. This increase resulted exclusively from the sale during the quarter
of AMR Corporation's other operations in this segment. Upon their sale,
corporate overhead allocated to AMRS was increased with no increase in
services. As a result, a pro forma adjustment has been included for
$699,000 to reduce the AMR Corporation overhead allocation to reflect
historical levels.
(g) As a consequence of the Original Notes offering, Castle Harlan, Inc. and
ourselves amended the management agreement on August 12, 1999 as described
in the "Related Party Transactions." The term of the amended management
agreement is from March 31, 1999 through December 31, 2005, which
represents approximately 6.375 years. The amended management agreement
provides that no management fees are payable until July 1, 2000 at which
time management fees will be payable at an annual rate of $1.25 million
through December 31, 2002 with an increase to the annual rate of $2.0
million for the period January 1, 2003 through December 31, 2005. The total
management fees to be paid in connection with the amended management fee
agreement are $9.4 million. The annual average of amended management fees
on a straight line basis over the term of the amended management agreement
would be approximately $1.5 million. Our
<PAGE> 24
historical financial statements for the nine months ended December 31, 1999
included management fee expense of $862,000. Thus, we have included an
adjustment to increase management fee expense by $612,000 for the twelve
months ended December 31, 1999.
(h) Represents the elimination of interest income from AMR Corporation related
to accumulated undistributed cash of ARS, held by AMR Corporation, and
included in the historical financial statements. These amounts were paid by
dividend to AMR Corporation prior to the sale of AMRS.
(i) Represents the increase in amortization expense for the excess of the
Oxford purchase price over estimated fair value of the net assets acquired
under the terms of the acquisition agreement. In connection with the
acquisition of Oxford, Worldwide recorded approximately $7.2 million of
intangibles, including goodwill which is being amortized over 20 years. The
purchase price allocation is preliminary, and still subject to adjustments.
However, Worldwide's management does not expect the final allocation to
significantly differ from that reflected in the unaudited pro forma
combined consolidated data. The pro forma adjustment reflects additional
amortization expense assuming the acquisition had occurred as of January 1,
1999.
(j) To record additional interest expense related to $8.9 million of borrowings
under the senior secured credit facility at approximately 8.9% for the year
ended December 31, 1999 and 9.5% for the first quarter of fiscal 2000 to
finance the Oxford acquisition. A 1/8% change in interest rates applicable
to the senior secured credit facility borrowing of $8.9 million used to
finance the Oxford acquisition would cause interest expense to increase or
decrease by approximately $11,000 per annum as compared to the amounts set
forth above.
