<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 333-88593
For the transition period from to
------- --------
WORLDWIDE FLIGHT SERVICES, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-1932711
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS 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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No .
--- ---
The number of shares of the registrant's Common Stock outstanding as of November
14, 2000 was 1,000 shares. There is no public trading market for the shares of
the registrant's common stock.
<PAGE> 2
CO-REGISTRANTS
<TABLE>
<CAPTION>
EXACT NAME OF CO-REGISTRANT AS STATE OR OTHER JURISDICTION OF PRIMARY STANDARD INDUSTRIAL
SPECIFIED IN ITS CHARTER INCORPORATION OR ORGANIZATION CLASSIFICATION CODE NUMBER
<S> <C> <C>
Worldwide Flight Finance Company Delaware 4581
Worldwide Flight Security Service Delaware 4581
Corporation
Miami International Airport Cargo Florida 4581
Facilities & Services, Inc.
International Enterprises Group, Inc. Florida 4581
Miami Aircraft Support, Inc. Delaware 4581
Aerolink International, Inc. Pennsylvania 4581
Aerolink Maintenance, Inc. Pennsylvania 4581
Aerolink Management, Inc. Pennsylvania 4581
Aerolink International, L.P. Pennsylvania 4581
Oxford Electronics, Inc. Delaware 4581
</TABLE>
i
<PAGE> 3
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Part I. Financial Information
Item 1 Unaudited Financial Statements
Consolidated Unaudited Statements of Operations for 2
the three and nine months ended September 30, 2000, the six months ended
September 30, 1999 and the three months ended March 31, 1999
Consolidated Unaudited Balance Sheets as of 3
September 30, 2000 and December 31, 1999
Consolidated Unaudited Statements of Cash Flows for the 4
nine months ended September 30, 2000, the six
months ended September 30, 1999, and the three
months ended March 31, 1999
Notes to Consolidated Condensed Financial Statements 5
Item 2 Management's Discussion and Analysis of Financial Condition and Results of 8
Operations
Item 3 Quantitative and Qualitative Disclosures about Market Risk 12
Part II. Other Information
Item 6 Exhibits and Reports on Form 8-K 13
</TABLE>
<PAGE> 4
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly 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 or other costs and/or shortage of an
adequate base of employees;
o loss of significant customers through bankruptcy or industry
consolidation or other factors;
o inability to obtain additional capital due to covenant
restrictions or other factors, and/or increases in debt
levels beyond our ability to support repayment;
o conditions in the securities or other financing markets are
less favorable than expected;
o costs or difficulties relating to the integration of
businesses that we acquire are greater than expected;
o expected cost savings or revenues from our acquisitions or
expected cost savings from our restructuring plan are not
fully realized or are not realized within the expected time
frame;
o competitive pressures in the industry increase; and
o general economic conditions or conditions affecting the
airline industry or other industries that ship cargo by air,
whether internationally, nationally or in the states in
which we do business, 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.
1
<PAGE> 5
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Worldwide Worldwide Worldwide Worldwide Predecessor
Three Months Three Months Nine Months Six Months Three Months
ended ended ended ended ended
September 30, September 30, September 30, September 30, March 31,
2000 1999 2000 1999 1999
------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
External customers $ 86,288 $ 71,702 $ 257,314 $ 131,579 $ 38,640
Affiliates 22,835
------------ ------------ ------------ ------------ ------------
Total revenues 86,288 71,702 257,314 131,579 61,475
Expenses:
Salaries, wages and benefits 57,123 46,121 170,444 85,803 39,679
Materials, supplies and services 8,938 8,845 27,774 15,971 7,744
Equipment and facilities rental 5,287 4,798 15,398 8,491 3,641
Depreciation and amortization 4,556 2,503 13,047 4,476 1,627
Other miscellaneous expenses 7,042 6,330 23,195 10,781 4,784
Allocated general and
Administrative Expenses -- -- -- -- 2,269
Restructuring Charge -- 7,673 -- --
------------ ------------ ------------ ------------ ------------
Total operating expenses 82,946 68,597 257,531 125,522 59,744
Income from continuing operations 3,342 3,105 (217) 6,057 1,731
Interest expense 5,538 3,527 16,112 5,083 --
Interest income 63 236 440
Other income (expense), net (121) 128 (339) (142) (552)
------------ ------------ ------------ ------------ ------------
Income (loss) from continuing
operations before income taxes (2,254) (294) (16,432) 832 1,619
Provision (benefit) for income taxes (315) (2,300) 587 644
------------ ------------ ------------ ------------ ------------
Income (loss) from continuing
operations before extraordinary loss (1,939) (294) (14,132) 245 975
Extraordinary loss on early (1,197) (1,197)
extinguishments of debt, net of
tax benefit of $762
Loss from discontinued operations,
net of tax benefit of $139 (210)
------------ ------------ ------------ ------------ ------------
Net income (loss) $ (1,939) $ (1,491) $ (14,132) $ (952) $ 765
============ ============ ============ ============ ============
</TABLE>
See accompanying notes
2
<PAGE> 6
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
CONSOLIDATED UNAUDITED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 375 $ 1,775
Restricted cash equivalent 750 750
Accounts receivable, less allowance for
doubtful accounts 58,335 73,144
Deferred income taxes 5,462 4,305
Prepaid and other current assets 8,831 7,413
-------------- --------------
TOTAL CURRENT ASSETS 73,753 87,387
EQUIPMENT AND PROPERTY:
Equipment and property, at cost 52,004 45,915
Less accumulated depreciation (10,045) (3,185)
-------------- --------------
41,959 42,730
Intangible assets including Goodwill, net 115,070 105,559
Other long-term assets 10,684 10,465
-------------- --------------
TOTAL ASSETS $ 241,466 $ 246,141
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 20,640 $ 23,350
Accrued salaries, wages and benefits 9,732 13,308
Other accrued liabilities 22,401 21,404
Current portion of long-term debt 2,145 2,876
-------------- --------------
TOTAL CURRENT LIABILITIES 54,918 60,938
DEFERRED INCOME TAXES 11,680 14,233
LONG TERM DEBT, LESS CURRENT PORTION 152,777 137,081
STOCKHOLDER'S EQUITY:
Common stock -- --
Additional paid-in-capital 40,861 38,918
Accumulated deficit (17,329) (3,197)
Accumulated other comprehensive loss (1,441) (1,832)
-------------- --------------
TOTAL STOCKHOLDER'S EQUITY 22,091 33,889
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 241,466 $ 246,141
============== ==============
</TABLE>
See accompanying notes
3
<PAGE> 7
WORLDWIDE FLIGHT SERVICES, INC.
(FORMERLY AMR SERVICES CORPORATION)
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Worldwide Worldwide Predecessor
Nine Months Six Months Three Months
ended ended ended
September 30, September 30, March 31,
2000 1999 1999
------------- ------------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (14,132) $ (952) $ 765
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 13,047 4,476 1,627
Deferred income taxes (3,551) (1,916) 1,584
Extraordinary loss 1,959
Other 494
Change in assets and liabilities:
Accounts receivable 16,411 (22,937) (4,190)
Accounts payable and accrued liabilities (9,776) 15,821 (7,117)
Other, net 233 (1,023) 183
------------- ------------- ------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 2,232 (4,078) (7,148)
------------- ------------- ------------
INVESTING ACTIVITIES:
Capital expenditures (6,936) (4,606) (1,688)
Acquisitions, net of cash (13,548) (149,833) --
Other -- 26
------------- ------------- ------------
NET CASH USED BY INVESTING ACTIVITIES (20,484) (154,439) (1,662)
------------- ------------- ------------
FINANCING ACTIVITIES:
Proceeds from sale of senior notes 126,793
Issue costs on long term debt (10,204)
Proceeds from long term debt 16,000 85,748 --
Payments on long term debt (1091) (70,866) --
Proceeds from sale of stock -- 28,250 --
Equity contribution by parent and officers 1,943 10,425 --
Dividend to parent -- -- (5,390)
------------- ------------- ------------
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES 16,852 170,146 (5,390)
------------- ------------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,400) 11,629 (14,200)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,775 -- 14,200
------------- ------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 375 $ 11,629 $ --
============= ============= ============
</TABLE>
See accompanying notes
4
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Introduction and Basis of Presentation
On March 31, 1999, MR Services 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" or "Company"). Worldwide is owned by WFS Holdings,
Inc. The initial purchase price was $75.0 million plus subsequent possible
adjustments. 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 transaction
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. As more fully discussed in Note 2 below, the
Company completed its acquisition of Oxford Electronics, Inc. ("Oxford") during
the second quarter of 2000. The operations of MAS, Aerolink and Oxford are
included in the operations of Worldwide since the respective dates of
acquisition.
The accompanying unaudited consolidated financial statements included herein
have been prepared by the Company pursuant to generally accepted accounting
principles for interim financial information, and in accordance with the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles for complete financial
statements have been excluded. The Company believes that the disclosures are
adequate to make the information presented not misleading. These consolidated
condensed financial statements should be read in conjunction with the financial
statements and the notes to consolidated financial statements included in the
Annual Report, Form 10-K for the nine-month period ended December 31, 1999.
In the opinion of the Company, all adjustments that are normal and recurring in
nature have been included that were necessary to present fairly the financial
position of Worldwide and subsidiaries as of September 30, 2000 and the results
of operations and cash flows for the three and nine months ended September 30,
2000 and September 30, 1999, respectively. Operating results for the three and
nine month periods ended September 30, 2000 are not necessarily indicative of
the results that may be expected for the year ending December 31, 2000.
5
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - Acquisitions
Oxford Electronics, Inc.
On April 5, 2000, the Company completed the acquisition of Oxford, a provider of
airport technical services, for a cash purchase price at closing of $9.6 million
and up to $2.5 million in deferred payments to be determined based on earnings
for Oxford's fiscal 2000. The purchase price was funded with borrowings under
the existing senior secured credit facility and a $1.0 million capital
contribution from the Company's parent. The acquisition was accounted for under
the purchase method of accounting.
NOTE 3 - Comprehensive Income
The components of comprehensive income (loss) for the Company include net income
(loss), and changes in the cumulative foreign currency translation. Total
comprehensive income (loss) for the three month periods ended September 30, 2000
and September 30, 1999 were ($1.4) million and ($2.4) million, respectively.
Total comprehensive income (loss) for the nine month period ended September 30,
2000 was ($13.7) million.
NOTE 4 - Capital Contributions
Capital contributions from parent included $1.0 million for the funding of the
Oxford acquisition (discussed above) and for $ 0.9 million of cash received from
employees for stock purchases.
NOTE 5 - Restructuring Charges
In June 2000, Worldwide's management approved a restructuring plan to realign
the Company's organization, reduce overhead costs and eliminate excess and
duplicative facilities. The Company recorded a restructuring charge of $7.7
million in June 2000. The restructuring consists primarily of two parts: (1) the
merging and integration of operations of Worldwide with MAS and Aerolink, and
(2) other headquarters cost reduction measures.
In connection with the acquisitions of MAS and Aerolink, management initiated
plans to consolidate and integrate the operations of these two companies into
Worldwide through workforce reductions and the closure of duplicative
facilities. As a result of the integration plan, WFS will close 10 facilities
and lay-off approximately 100 employees. Amounts contained within the
restructuring charge include severance (both statutory and contractual) of $1.7
million, and estimated holding costs and associated contract termination
penalties for vacated facilities of $3.7 million. Other exit costs of $0.8
million relate primarily to professional fees and incidentals.
6
<PAGE> 10
The remaining $1.5 million in charges represents severance payments related to
the approximate 20% staff level reduction at the Company's headquarters located
in Euless, Texas.
The aforementioned charges are reflected in the accompanying consolidated
statements of operations under the caption "Restructuring Charges". The Company
estimates that actions it has already taken will generate significant cost
savings as a result of its restructuring plan, and expects additional cost
savings to result from further planned cost reduction actions.
Management expects to complete all parts of the restructuring plan by the end of
2000, with the majority of the cash expenditures to occur during 2001. Given the
nature of the costs reflected herein, increases or decreases may be necessary
throughout the tenure of the Company's restructuring plan. Any such changes
will be reflected in the statement of operations as incurred, and classified in
the manner discussed above.
NOTE 6 - Senior Secured Credit Facility and Senior Notes
The Company maintains a senior secured credit facility with a group of lenders
that provides up to $75.0 million for purposes of funding working capital
requirements and future acquisitions. As of November 6, 2000, the Company had
drawn $33.0 million under the credit facility with an additional $2.8 million
allocated to issued letters of credit. Of this amount, approximately $8.6
million was drawn to fund the purchase of Oxford in April 2000.
Future additional availability under the senior secured credit facility may be
less than the total remaining commitment amount and will depend on the borrowing
base ($43.4 million as of September 30, 2000 under the modified senior secured
credit facility discussed below) and the ability of the Company to meet the
applicable leverage and coverage ratios and other customary conditions. While
the Company believes that current availability under the credit facility and
other potential sources allowed under the facility are adequate to manage its
liquidity, future liquidity needs could change.
On August 14, 2000 the Company agreed with its lenders to modify certain
provisions of the senior secured credit facility. Specifically, the Company and
its banks agreed to increase availability under its borrowing base through the
inclusion of certain non-US dollar denominated accounts receivable, as well as
clarify certain definitions related to the leverage ratio, coverage ratio and
capital expenditure threshold. Notwithstanding the aforementioned, the liquidity
could be severely limited if the improved cash flow from the Company's cost
reduction program does not materialize. If the Company defaults under the credit
facility due to the failure to maintain financial ratios or meet other
covenants, it may not be able to make additional borrowings under the facility
if the bank refuses to allow additional advances and the Company is unable to
obtain additional capital from other sources.
On September 30, 2000 the Company complied with all debt covenants. On November
6, 2000 the Company had approximately $3.5 million in cash and cash equivalents
and committed and discretionary unused lines of credit aggregating an additional
$7.6 million.
7
<PAGE> 11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overall Summary
Revenues, operating income (loss), and income (loss) from continuing operations
for the nine months ended September 30, 2000 were $257.3 million, ($0.2)
million, and ($14.1) million, respectively compared to $193.1 million, $7.8
million, and $1.2 million, respectively for the nine months ended September 30,
1999. The 2000 results include a restructuring charge of $7.7 million recorded
in the second quarter. The results also include contributions from MAS and
Aerolink for the nine months ended September 30, 2000 and include Oxford for the
six months ended September 30, 2000. Revenues, operating income, and income
(loss) from continuing operations for the three months ended September 30, 2000
were $86.3 million, $3.3 million, and ($1.9) million, respectively compared to
$71.7 million, $3.1 million, and ($0.3) million, respectively for the three
months ended September 30, 1999.
As a result of the acquisition of Worldwide effective March 31, 1999, results
for the nine months ended September 30, 2000 are not comparable to results in
the comparable period of the prior year. Financial information for the period
ended March 31, 1999 is that of the Predecessor, and as such is presented on a
different basis of accounting. However, for information purposes results of
operations for the three and nine months ended September 30, 1999 have been
included in this analysis. The Predecessor reported revenue, operating income,
and income from continuing operations for the three months ended March 31, 1999
of $61.5 million, $1.7 million, and $1.0 million, respectively.
Revenues
For the nine months ended September 30, 2000 total revenues of $257.3 million
increased by $64.2 million, or 33.3% from $193.1 million in the prior year. The
acquisitions of MAS and Aerolink in August 1999 and Oxford in April 2000
accounted for $56.4 million of the increase. The remaining increase of $7.8
million, or 4.0% is due to new contracts and price increases on existing
contracts. For the three month period ended September 30, 2000 total revenues of
$86.3 million increased $14.6 million, or 20.3% from $71.7 million in the prior
year. MAS, Aerolink and Oxford contributed $13.5 million of the increase and
$1.1 million, or 1.5%, was primarily due to new contracts.
Since the acquisition of AMRS, we have identified revenue information for the
cargo handling, ramp services, passenger services and technical services
categories. Prior to the acquisition, AMRS did not identify revenues in similar
categories. The following table contains, for the current year only, revenues by
cargo handling, ramp services, passenger services and technical services
categories (in thousands).
8
<PAGE> 12
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------- -------------------
<S> <C> <C>
Cargo handling $ 119,487 $ 38,669
Ramp services 59,440 19,611
Passenger services 47,307 16,454
Technical services 31,080 11,555
------------------- -------------------
Total $ 257,314 $ 86,289
</TABLE>
Salaries, wages and benefits
For the nine months ended September 30, 2000 salaries, wages and benefits of
$170.4 million increased $44.9 million, or 35.8% from $125.5 million in 1999.
MAS, Aerolink and Oxford contributed $34.7 million of the increase. The
remaining increase of $10.2 million is the result of costs associated with
increased sales volume over the prior year of approximately $4.8 million,
general and administrative salaries of $3.5 million for headquarters support
which had previously been allocated by AMR, and $1.9 million or 1.6% related to
higher labor costs. For the three months ended September 30, 2000 salaries,
wages and benefits of $57.1 million increased $11.0 million, or 23.9% from $46.1
million in 1999. MAS, Aerolink and Oxford account for $8.2 million of the
increase in the quarter. The remaining increase of $2.8 million is the result of
costs associated with higher sales volume over the prior year of approximately
$0.7 million and $2.1 million or 4.6% related to higher labor costs and general
and administrative salaries.
Materials, supplies and services
Materials, supplies and services of $27.8 million for the current nine months
increased $4.1 million from $23.7 million in 1999. The increase is primarily due
to the acquisitions of MAS, Aerolink and Oxford. For the three months ended
September 30, 2000 materials, supplies and services of $8.9 million increased
$0.1 million from $8.8 million in 1999.
Equipment and facilities rental
For the nine months, equipment and facilities rental of $15.4 million increased
$3.3 million from $12.1 million in the prior year. The increase is primarily due
to the acquisitions of MAS and Aerolink in August 1999 and Oxford in April 2000.
For the third quarter, equipment and facilities rental of $5.3 million increased
$0.5 million from $4.8 million in 1999, primarily due to the acquisitions of MAS
and Aerolink in the third quarter of 1999.
Depreciation and amortization
Depreciation and amortization of $13.0 million for the first nine months of 2000
increased $6.9 million from $6.1 million in 1999. Approximately $3.0 million of
the increase is due the amortization of intangibles, including goodwill on the
acquisitions of AMRS, MAS, Aerolink and Oxford. In addition, $2.5 million is
related to depreciation expense from the acquisitions of MAS, Aerolink and
Oxford. The remaining $1.4 million increase is additional depreciation expense
on new equipment purchases.
For the three months, depreciation and amortization of $4.6 million increased
$2.1 million from $2.5 million. The increase is due to the acquisitions of MAS
and Aerolink in August 1999 and Oxford in April 2000.
9
<PAGE> 13
Other miscellaneous expenses
For the nine months ended September 30, 2000 other miscellaneous expenses of
$23.2 million increased $7.6 million from $15.6 million in the prior year.
Approximately $4.7 million of the increase is due to operating expenses from
MAS, Aerolink and Oxford. The remaining increase of $2.9 million is primarily
due to operating costs associated with new contracts. For the third quarter,
other miscellaneous expenses of $7.0 million increased $0.7 million from $6.3
million in 1999. MAS, Aerolink and Oxford accounted for this increase.
General and administrative allocated expenses
Predecessor was allocated $2.3 million of general and administrative expense in
the three months ended March 31, 1999 for staff functions including finance,
human resources, legal, planning and executive management. There are no
allocated expenses from AMR in the current year. To replace the functions
previously allocated by AMR, the Company has incurred direct expenses for
personnel and other costs.
Income from continuing operations (excluding restructuring charges)
As a result of the factors described above, income from continuing operations of
$7.5 million decreased $0.3 million from $7.8 million in 1999 for the nine
months ended September 30, 2000. The acquisitions of MAS, Aerolink and Oxford
contributed $8.5 million of operating income (excluding depreciation) offset by
increased goodwill amortization of $3.0, higher depreciation expense of $3.9
million, and higher labor costs of $1.9 million.
Restructuring charges
In June 2000, Worldwide's management approved a restructuring plan to realign
the Company's organization, reduce overhead costs and eliminate excess and
duplicative facilities. The Company recorded a restructuring charge of $7.7
million in June 2000. The restructuring consists primarily of two parts: (1) the
merging and integration of operations of Worldwide with MAS and Aerolink, and
(2) other headquarters cost reduction measures.
In connection with the acquisitions of MAS and Aerolink, management initiated
plans to consolidate and integrate the operations of the two acquired companies
with Worldwide through workforce reductions and the closure of duplicative
facilities. As a result of the integration plan, Worldwide will close 10
facilities and lay-off approximately 100 employees. Amounts contained within the
restructuring charge include severance (both statutory and contractual) of $1.7
million, and estimated holding costs and associated contract termination
penalties for vacated facilities of $3.7 million. Other exit costs of $0.8
million primarily related to professional fees and incidentals.
The remaining $1.5 million in charges represents severance payments related to
the approximate 20% staff level reduction at the Company's headquarters, located
in Euless, Texas.
The aforementioned charges are reflected in the accompanying consolidated
statements of operations under the caption "Restructuring Charges". The Company
estimates that actions it
10
<PAGE> 14
has already taken will generate annualized cost savings of approximately $5.0
million as a result of its restructuring plan, and expects additional cost
savings to result from further planned actions.
Management expects to complete all parts of the restructuring plans by the end
of 2000, with the majority of the cash expenditures to occur during 2001. As of
September 30, 2000 the Company had paid $0.9 million for restructuring costs.
Given the nature of the costs reflected herein, increases or decreases may be
necessary throughout the tenure of the Company's restructuring plans. Any such
changes will be reflected in the statement of operations as incurred, and
classified in the manner discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $1.1 million (including restricted cash) at
September 30, 2000, a decrease of $1.4 million from $2.5 million at December 31,
1999. Net cash provided by operating activities was $2.2 million for the nine
month period ended September 30, 2000, reflecting the contribution from
operating earnings plus improved working capital management, primarily related
to improved collections of accounts receivable, offset by interest payments to
the bondholders.
The Company increased its investment in working capital (excluding cash and
restructuring accruals) by $1.2 million for the nine months. The increase is
primarily due to reductions in accounts payable and accrued liabilities of $17.4
million including $7.0 million paid to AMR Corporation for prior year
liabilities and payments (net of accruals) of interest on the Senior Notes. The
amount is partially offset by improved collection efforts, which decreased
accounts receivable by $16.4 million. The Company recognizes that accounts
receivable and payable fluctuate in part due to normal seasonality of the
business along with changes in spending patterns and payments under the
restructuring plan.
The next interest payment of $8.1 million on the Senior Notes is due on February
15, 2001. The Company plans to fund the next interest payment through a
combination of borrowings under its senior secured credit facility and
utilization of cash balances.
As of September 30, 2000 the Company owed AMR approximately $2.3 million
classified as accounts payable on which the payment terms had been extended.
This amount is due in periodic installments prior to December 31, 2000.
Net cash used in investing activities for capital spending was $6.9 million,
$4.6 million and $1.7 million for the nine months ended September 30, 2000, the
six months ended September 30, 1999 and the three months ended March 31, 1999,
respectively. Capital expenditures during the
11
<PAGE> 15
period were primarily associated with new equipment and software purchases. The
Company expects its capital spending for 2000 to be about $10 million.
Net cash provided by (used in) financing activities was $16.9 million, $170.1
million, and ($5.4) million for the nine months ended September 30, 2000, the
six months ended September 30, 1999 and the three months ended March 31, 1999,
respectively. During the first nine months of 2000, the Company received an
equity contribution of $1.9 million from its parent and made net borrowings of
$15.0 million, both primarily to fund the Oxford acquisition. At September 30,
2000, the Company had total debt of $154.9 million.
The Company maintains a senior secured credit facility with a group of lenders
that provides up to $75.0 million for purposes of funding working capital
requirements and future acquisitions. As of November 6, 2000, the Company had
drawn $33.0 million under the credit facility with an additional $2.8 million
allocated to issued letters of credit.
Future additional availability under the senior secured credit facility may be
less than the total remaining commitment amount and will depend on the borrowing
base ($43.4 million as of September 30, 2000 under the senior secured credit
facility) and the ability of the Company to meet the applicable leverage and
coverage ratios and other customary conditions. While the Company believes that
current availability under the credit facility and other potential sources
allowed under the facility are adequate to manage its liquidity, future
liquidity needs could change.
Notwithstanding the aforementioned, the Company's liquidity could be limited if
the improved cash flow from the Company's cost reduction program does not
materialize. If the Company defaults under the credit facility due to the
failure to maintain financial ratios or meet other covenants, it may not be able
to make additional borrowings under the facility if the bank refuses to allow
additional advances and the Company is unable to obtain additional capital from
other sources.
On September 30, 2000 the Company complied with all debt covenants. On November
6, 2000 the Company had approximately $3.5 million in cash and cash equivalents
and committed and discretionary unused lines of credit aggregating an additional
$7.6 million.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company will adopt Securities and Exchange Commission Staff Accounting
Bulletin "Revenue Recognition in Financial Statements" (SAB 101) in the fourth
quarter of 2000. The Company does not believe the adoption of SAB 101 will have
a material effect on our results of operations, financial position or cash
flows.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information about market risks for the nine months ended September 30, 2000 does
not differ materially from that discussed under Item 7A of the Company's Annual
Report on Form 10-K for the year ended December 31, 1999.
12
<PAGE> 16
PART II
OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None
13
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant 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 14th day of November, 2000.
WORLDWIDE FLIGHT SERVICES, INC.
By: /s/ David F. Chavenson
-------------------------------
Name: David F. Chavenson
Title: Senior Vice President and
Chief Financial Officer
By: /s/ Donna Reeves
-------------------------------
Name: Donna Reeves
Title: Vice President and
Controller (principal accounting
officer)
<PAGE> 18
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant 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 14th day of November, 2000.
WORLDWIDE FLIGHT FINANCE COMPANY
By: /s/ David F. Chavenson
-------------------------------
Name: David F. Chavenson
Title: Chief Financial Officer
By: /s/ Donna Reeves
-------------------------------
Name: Donna Reeves
Title: Vice President and
Controller (principal accounting
officer)
<PAGE> 19
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant 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 14th day of November, 2000.
WORLDWIDE FLIGHT SECURITY
SERVICE CORPORATION
By: /s/ David F. Chavenson
-------------------------------
Name: David F. Chavenson
Title: Chief Financial Officer
By: /s/ Donna Reeves
-------------------------------
Name: Donna Reeves
Title: Vice President and
Controller (principal
accounting officer)
<PAGE> 20
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant 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 14th day of November, 2000.
MIAMI INTERNATIONAL AIRPORT
CARGO FACILITIES & SERVICES, INC.
By: /s/ David F. Chavenson
-------------------------------
Name: David F. Chavenson
Title: Chief Financial Officer
By: /s/ Donna Reeves
-------------------------------
Name: Donna Reeves
Title: Vice President and
Controller (principal
accounting officer)
<PAGE> 21
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant 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 14th day of November, 2000.
INTERNATIONAL ENTERPRISES
GROUP, INC.
By: /s/ David F. Chavenson
-------------------------------
Name: David F. Chavenson
Title: Chief Financial Officer
By: /s/ Donna Reeves
-------------------------------
Name: Donna Reeves
Title: Controller (principal
accounting officer)
<PAGE> 22
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant 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 14th day of November, 2000.
MIAMI AIRCRAFT SUPPORT, INC.
By: /s/ David F. Chavenson
-------------------------------
Name: David F. Chavenson
Title: Chief Financial Officer
By: /s/ Donna Reeves
-------------------------------
Name: Donna Reeves
Title: Vice President and
Controller (principal accounting
officer)
<PAGE> 23
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant 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 14th day of November, 2000.
AEROLINK INTERNATIONAL, INC.
By: /s/ David F. Chavenson
-------------------------------
Name: David F. Chavenson
Title: Chief Financial Officer
By: /s/ Donna Reeves
-------------------------------
Name: Donna Reeves
Title: Vice President and
Controller (principal accounting
officer)
<PAGE> 24
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant 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 14th day of November, 2000.
AEROLINK MAINTENANCE, INC.
By: /s/ David F. Chavenson
-------------------------------
Name: David F. Chavenson
Title: Chief Financial Officer
By: /s/ Donna Reeves
-------------------------------
Name: Donna Reeves
Title: Vice President and
Controller (principal accounting
officer)
<PAGE> 25
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant 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 14th day of November, 2000.
AEROLINK MANAGEMENT, INC.
By: /s/ David F. Chavenson
-------------------------------
Name: David F. Chavenson
Title: Chief Financial Officer
By: /s/ Donna Reeves
-------------------------------
Name: Donna Reeves
Title: Vice President and
Controller (principal accounting
officer)
<PAGE> 26
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant 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 14th day of November, 2000.
AEROLINK INTERNATIONAL, L.P.
By: AEROLINK MANAGEMENT, INC.
Its general partner
/s/ David F. Chavenson
----------------------------------
Name: David F. Chavenson
Title: Chief Financial Officer
By: /s/ Donna Reeves
-------------------------------
Name: Donna Reeves
Title: Vice President and
Controller (principal accounting
officer)
<PAGE> 27
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this Registrant 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 14th day of November, 2000.
OXFORD ELECTRONICS, INC.
By: /s/ David F. Chavenson
-------------------------------
Name: David F. Chavenson
Title: Chief Financial Officer
By: /s/ Donna Reeves
-------------------------------
Name: Donna Reeves
Title: Vice President and
Controller (principal accounting
officer)
<PAGE> 28
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
