UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
COMMISSION FILE NUMBER 0-22706
GREENWICH AIR SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-1758941
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. BOX 522187, MIAMI, FLORIDA 33152
4590 NW 36TH STREET, MIAMI, FLORIDA 33122
(Address of principal executive offices) (Zip Code)
(305) 526-7000
(Registrant's telephone number, including area code)
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 outstanding of each class of the issuer's Common Stock as
of August 5, 1996 were:
Class A common stock, $0.01 par value (NASDAQ: GASIA) - 6,530,381 shares
Class B common stock, $0.01 par value (NASDAQ: GASIB) - 9,772,889 shares.
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GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION: PAGE NO.
Consolidated Balance Sheets as of June 30, 1996
(unaudited) and September 30, 1995 .................................3
Consolidated Statements of Income for the three
months and nine months ended June 30, 1996 and
1995 (unaudited).....................................................4
Consolidated Statements of Cash Flows for the
nine months ended June 30, 1996 and 1995
(unaudited)..........................................................5
Notes to Consolidated Financial Statements
(unaudited)..........................................................6
Management's Discussion and Analysis of Financial
Condition and Results of Operations ................................11
PART II OTHER INFORMATION:
Item 5. Other Information........................................ 14
Item 6. Exhibits and Reports on Form 8-K..........................14
2
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PART I. FINANCIAL INFORMATION
-----------------------------
GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND SEPTEMBER 30, 1995
AMOUNTS IN THOUSANDS JUNE 30,
1996 SEPTEMBER 30,
ASSETS (UNAUDITED) 1995
----------- ------------
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Current Assets:
Cash $ 837 $ 180
Accounts and notes receivable, less allowance of $4,120 in
June 1996 and $874 in September 1995 158,322 35,176
Inventories 266,130 120,933
Prepaid expenses and other current assets 7,656 1,267
Total current assets 432,945 157,556
--------- ---------
Property, plant and equipment 142,106 32,947
Less accumulated depreciation (9,710) (7,289)
--------- ---------
Property, plant and equipment, net 132,396 25,658
Deferred financing costs, net 11,234 1,717
Other assets 991 689
--------- ---------
TOTAL ASSETS $ 577,566 $ 185,620
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 85,459 $ 37,683
Accrued expenses and current portion of long term liabilities 30,354 16,103
Customer deposits and deferred revenue 17,562 15,675
Income taxes payable 5,575 266
Other, including current portion of other liabilities 26,905 0
--------- ---------
Total current liabilities 165,855 69,727
--------- ---------
Deferred income taxes payable 14,374 4,840
Other liabilities 23,382 9,822
Long term debt 74,814 48,782
Long term debt - WAL 1,262 1,604
Senior notes 160,000 0
Convertible subordinated debentures 2,566 14,057
Stockholders' Equity:
Common stock 163 53
Capital in excess of par value 104,233 12,697
Retained earnings 31,004 24,049
Treasury stock, at cost (87) (11)
--------- ---------
Total stockholders' equity 135,313 36,788
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 577,566 $ 185,620
========= =========
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SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3
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GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
THREE AND NINE MONTHS ENDED JUNE 30, 1996 AND 1995
AMOUNTS IN THOUSANDS, THREE MONTHS ENDED JUNE 30, NINE MONTHS ENDED JUNE 30,
------------------------------- -----------------------------
EXCEPT PER SHARE AMOUNTS 1996 1995 1996 1995
------------- -------------- ------------- -------------
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Net sales $ 99,601 $ 50,936 $ 218,226 $ 134,083
Cost of sales 86,923 42,774 186,844 112,692
----------- ------------ ----------- -----------
Gross profit 12,678 8,162 31,382 21,391
Selling, general and administrative
expense 5,414 3,220 13,156 8,692
----------- ------------ ----------- -----------
Income from operations 7,264 4,942 18,226 12,699
----------- ------------ ----------- -----------
Non-operating (income) expense:
Interest expense 2,781 2,108 6,416 5,573
Other (income) expense 25 (242) 24 63
----------- ------------ ----------- -----------
Total non-operating expense 2,806 1,866 6,440 5,636
----------- ------------ ----------- -----------
Income before provision for income
taxes 4,458 3,076 11,786 7,063
Provision for income taxes 1,739 1,261 4,647 2,890
----------- ------------ ----------- -----------
Net Income $ 2,719 $ 1,815 $ 7,139 $ 4,173
=========== ============ =========== ===========
Earnings per share:
Primary $ 0.20 $ 0.18 $ 0.56 $ 0.41
Fully diluted $ 0.19 $ 0.16 $ 0.54 $ 0.36
Weighted average number of common shares
and common share equivalents:
Primary 13,912,023 10,231,966 12,743,561 10,201,366
Fully diluted 14,431,775 13,167,250 13,330,165 13,168,178
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SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
NINE MONTHS ENDED JUNE 30, 1996 AND 1995
AMOUNTS IN THOUSANDS NINE MONTHS ENDED JUNE 30,
---------------------------
1996 1995
------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
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Net Income $ 7,138 $ 4,174
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,763 1,667
Changes in assets and liabilities:
Accounts and notes receivable (29,433) 1,505
Inventories 13,749 (49,496)
Prepaid expenses and other current assets (603) (303)
Other assets (302) (12)
Accounts payable (10,736) 10,103
Accrued expenses, customer deposits and
deferred revenue 7,823 16,123
Income taxes payable 1,330 779
Other current liabilities (5,256) 0
Deferred income taxes (1,493) (254)
Other non-current liabilities (1,000) 9,928
--------- --------
NET CASH USED BY OPERATING ACTIVITIES (16,020) (5,786)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,472) (1,796)
Cash paid for Aviall Acquisition (226,937) 0
--------- --------
NET CASH USED BY INVESTING ACTIVITIES (229,409) (1,796)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net changes in revolving credit facility 28,037 10,432
Repayments of long term debt (11,993) (2,697)
Proceeds from sale of treasury shares 452 0
Purchase of treasury shares (703) (84)
Proceeds from sale of stock, net 80,701 0
Proceeds from sale of senior notes 160,000 0
Exercise of options and warrants 432 0
GCL merger 7 0
Cash dividends paid (120) 0
Financing costs paid (10,727) 0
--------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 246,086 7,651
--------- --------
NET INCREASE IN CASH 657 69
Cash, beginning of periods 180 470
--------- --------
Cash, end of periods $ 837 $ 539
--------- --------
SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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5
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GREENWICH AIR SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
JUNE 30, 1996
1. STATEMENT OF INFORMATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore
do not include all information and footnotes normally included in annual
financial statements and should be read in conjunction with the
consolidated financial statements and notes thereto included in (i) the
Company's latest Annual Report on Form 10-K for the year ended September
30, 1995, and (ii) the Company's Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on April 26, 1996. In the
opinion of management, the unaudited consolidated financial statements
contain all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the balance sheets and statements of
income and of cash flows for such interim periods presented. The results
of operations for the three and nine months ended June 30, 1996 are not
necessarily indicative of the results which may be expected for the
entire fiscal year. The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
ORGANIZATION
Greenwich Air Services, Inc. ("GASI") and its subsidiaries (collectively,
the "Company") overhauls, repairs, and refurbishes gas turbine engines
and components used in aviation, marine and industrial applications. The
Company also manages government and military service and maintenance
programs, and provides management services for the sale, refurbishment
and installation of complete gas turbine power plants.
On June 10, 1996, the Company, through its newly-formed, wholly-owned
subsidiary GASI Engine Services Corporation, purchased (a) substantially
all of the assets and business of the commercial engine services
divisions (the "CES Divisions") of Aviall, Inc. ("Aviall"), and (b) all
of the issued and outstanding shares of Aviall Limited, a subsidiary of
Aviall (collectively, the "Former Aviall Operations"). The CES Divisions
included (i) all of the engine repair and overhaul operations of Aviall
located in Dallas and Fort Worth, Texas and (ii) the components and parts
repair business of Aviall located in McAllen, Texas. Aviall Limited,
which has been renamed Greenwich Caledonian Limited ("Greenwich
Caledonian") operated an engine repair and overhaul facility in
Prestwick, Scotland. (See Note 6.)
FOREIGN EXCHANGE
Greenwich Caledonian utilizes the U.S. dollar as its functional currency.
Translation gains and losses are included in its earnings.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF ("SFAS No. 121"). SFAS No. 121 establishes accounting standards for
the impairment of long-lived assets, certain identifiable intangibles,
and goodwill related to those assets to be held and used and for
long-lived assets and certain identifiable intangibles to be disposed of.
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. SFAS No. 121 will apply to the
Company as of the fiscal year ended September 30, 1997. The Company has
not assessed the impact of adopting this pronouncement.
6
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In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION (SFAS No.
123). SFAS No. 123 does not rescind or interpret existing accounting
rules for employee stock-based arrangements. Under SFAS No. 123, the
Company may continue to follow existing rules to recognize and measure
compensation, but they will now be required to disclose the pro forma
amounts of net income and earnings per share that would have to be
reported had the Company elected to follow the "fair value" recognition
provisions of SFAS No. 123. SFAS No. 123 will apply to the Company for
the year ending September 30, 1997. The Company has not determined
whether it will elect to recognize and measure compensation expense under
SFAS No. 123 and has not yet determined its effect on the Company's
financial position or results of operations.
2. INVENTORIES
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Inventories are comprised of the following: June 30, September 30,
Amounts in thousands 1996 1995
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---- ----
Parts $148,597 $ 48,297
Engines 26,110 11,624
Work in process 84,366 46,663
Inventories substantially applicable to long-term programs 7,057 14,349
-------- --------
TOTAL $266,130 $120,933
======== ========
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3 EARNINGS PER SHARE
Primary earnings per share are based on the weighted average number of
common shares and common share equivalents outstanding. Common share
equivalents include dilutive stock options and stock warrants using the
treasury stock method.
Fully diluted earnings per share assumes, in addition to the above, (a)
that convertible debentures and debenture warrants were converted at the
beginning of each period with earnings being increased for interest
expense, net of taxes, that would not have been incurred had conversion
taken place and (b) the additional dilutive effect of stock options.
4. CAPITAL STOCK AND STOCKHOLDERS' EQUITY
The Company is authorized to issue 25,000,000 shares of Class A common
stock, $.01 par value; 25,000,000 shares of Class B non-voting common
stock, $.01 par value; and 2,500,000 shares of preferred stock, $.01 par
value.
During the nine months ended June 30, 1996, $11,491,000 of the Company's
8% Convertible Subordinated Debentures due 2000 (the "Debentures") were
converted into 1,024,318 shares of Class A common stock. Also during the
nine months ended June 30, 1996 warrants for the purchase of stock and
Debentures were exercised and converted into 130,579 shares of Class A
and 30,742 shares of Class B common stock. Stock options exercised during
the nine months ended June 30, 1996 resulted in the issue of 35,875
shares of Class A and 20,000 shares of Class B common stock.
On May 8, 1996, the Company paid a dividend of one share of the Company's
Class B common stock to holders of record of each share of Class A common
stock on April 18, 1996. Retained earnings was charged $63,221 during the
nine months ended June 30, 1996 as a result of the issuance of 6,322,147
shares of Class B common stock. All income per share, dividend per share,
common shares outstanding, and price per share information has been
retroactively restated to reflect this stock dividend.
On June 4, 1996, the Company sold 3,400,000 shares of Class B common
stock through a public offering (the
7
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"Class B Offering") that generated proceeds of approximately $80.7
million, (net of $4.3 million in related expenses). Proceeds from this
offering were used primarily to fund the Aviall Acquisition (see Note 6).
5. DEBT
SENIOR NOTES
On June 4, 1996, the Company sold $160 million principal amount of 10
1/2% Senior Notes due 2006 (the "Senior Notes" or the "Notes") through a
public offering. Proceeds from this offering, net of underwriting
discounts and expenses approximating $5.0 million, were used primarily to
fund the Aviall Acquisition (see Note 6). The Notes are senior unsecured
obligations of the Company, which rank PARI PASSU with all unsubordinated
unsecured indebtedness of the Company, and rank senior in right of
payment to all existing and future subordinated indebtedness of the
Company. The Notes are also guaranteed on a senior unsecured basis by
each of the Company's domestic subsidiaries (the "Guarantor
Subsidiaries") and are secured by a pledge of 65% of the capital stock of
Greenwich Caledonian (the "Collateral Subsidiary"). (See Note 9.)
LONG TERM DEBT
Concurrently with the consummation of the Class B Offering and the sale
of the Senior Notes, the Company refinanced certain existing indebtedness
through the "New Credit Facility", comprised of two senior secured
revolving credit facilities in the aggregate amount of $175 million,
secured by the Company's accounts receivable, inventories and contract
rights. Advances under the New Credit Facility are based upon percentages
of outstanding eligible accounts receivable and inventories, and are
borrowed at either (i) the lender's prime rate plus 0.875% or (ii) the
London Interbank Offering Rate ("LIBOR") plus 2.375%. Expenses related to
the refinancing of the New Credit Facility aggregated $2.8 million, and
were recorded as deferred financing costs.
In addition, Greenwich Caledonian has borrowings directly from a
financial institution in the United Kingdom. Greenwich Caledonian's
credit facility consists of a /pound sterling/ 4.0 million ($6.2 million
as of June 30, 1996) unsecured overdraft facility payable on demand (the
"Overdraft Facility"). Borrowings under the Overdraft Facility bear
interest at the LIBOR rate plus 1.625%.
6. ACQUISITION OF NET ASSETS (THE "AVIALL ACQUISITION")
On June 10, 1996, the Company, through its newly-formed, wholly-owned
subsidiary GASI Engine Services Corporation, purchased the Former Aviall
Operations.
For purposes of closing, the purchase price (paid in cash) was estimated
at $226.9 million (based upon the book value of the acquired assets, net
of assumed liabilities). The final purchase price will be determined
based upon the audited balance sheets as of June 10, 1996, subject to the
terms detailed in the purchase agreement.
The funds used for the acquisition were provided by the Class B Offering
(see Note 4), the sale of the Senior Notes (see Note 5), and borrowings
under the New Credit Facility (see Note 5). The acquisition has been
accounted for using the purchase method of accounting and therefore the
accompanying financial statements include the accounts of GASI Engine
Services Corporation since June 10, 1996. Prior to June 10, 1996, GASI
Engine Services Corporation had no operations.
The allocation of the estimated purchase price to the net assets acquired
and to the individual subsidiaries is based on currently available
information and estimates as of the date of the financial statements.
Adjustments to the purchase price and to its allocation to the net assets
acquired may occur for a period of up to twelve months from the date of
purchase as management obtains the information necessary (such as the
audited June 10, 1996 balance sheet described above and appraisals of the
net assets acquired) to finalize this allocation.
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There is a possibility of significant future adjustments to the purchase
price and its allocation.
The following is a summary of the computation of the estimated net
purchase price and the estimated allocation of that price to the assets
and liabilities acquired as of June 10, 1996, taking into consideration
other direct costs of the acquisition:
Amounts in thousands
PURCHASE PRICE DETERMINATION:
Gross purchase price $330,000
Less contractual purchase price adjustments for:
Current assets (16,512)
Assumed liabilities (86,551)
---------
Net purchase price $226,937
=========
PURCHASE PRICE ALLOCATION:
Current assets $258,450
Property, plant and equipment 106,687
Accounts payable and accrued expenses (71,132)
Deferred taxes (11,027)
Assumed indebtedness (9,319)
Liabilities for fair value adjustments of certain
long-term engine maintenance contracts, and liabilities
related to engine product line relocation costs,
customer or supplier transfer approvals or
accommodations, licenses and other liabilities
(recorded as other liabilities, includes current portion of
$32,161). (46,722)
---------
Net purchase price $226,937
=========
The pro forma results listed below are unaudited and reflect purchase price
accounting adjustments assuming the acquisition occurred at the beginning
of each period presented. These results have been prepared for comparative
purposes only and do not purport to be indicative of what would have
occurred had the acquisitions been made at the beginning of the periods
presented, or of the results which may occur in the future.
Amounts in thousands, NINE MONTHS ENDED
except per share amounts JUNE 30,
--------------------------
1996 1995
------------ -------------
Net sales $623,777 $508,834
Income from operations $ 34,681 $ 45,095
Net income $ 9,193 $ 15,979
Fully diluted earnings per share $ 0.69 $ 1.21
9
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7. OTHER STATEMENT OF CASH FLOWS INFORMATION
Cash paid for interest was $5,604,000 and $4,914,000 for the nine months
ended June 30, 1996 and 1995, respectively. Cash paid for income taxes was
$6,356,000 and $2,460,000 for the nine months ended June 30, 1996 and 1995,
respectively.
During the nine months ended June 30, 1996, $11,491,000 of the Company's 8%
Convertible Subordinated Debentures due 2000 were converted into 1,024,318
shares of Common Stock. Unamortized deferred issue costs of $872,915
applicable to the Debentures converted were charged to additional paid in
capital. The unamortized deferred issue costs are determined at the date of
conversion.
During the nine months ended June 30, 1996, 124,721 shares of the Company's
common stock were issued in connection with the cashless exercise of
warrants to purchase debentures and shares of common stock.
Non-cash assets and liabilities obtained in the Aviall Acquisition
described in Note 6 were:
Amounts in thousands
Current assets $258,450
Property, plant and equipment $106,687
Current liabilities $103,293
Non-current liabilities $34,907
8. RELATED PARTY TRANSACTIONS
During the nine months ended June 30, 1996, the Company purchased engine
parts totaling $8,000 from a company affiliated through common ownership.
Also during the nine months ended June 30, 1996, the Company performed
engine repair services totaling $18,500 for this same affiliate, and
$150,000 for another company affilliated through common ownership.
In May, 1996, the Company completed the servicing of an engine partly owned
by a company affiliated through common ownership, which services aggregated
to $639,500. This affiliate is a passive investor with a minority interest
in, and no management control of the engine serviced.
The terms of the above transactions are believed by the Company's
management to have been on a market basis not materially different from
those which would have prevailed in a transaction on an arms-length basis
with an unrelated person.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 1996 AND 1995
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1995
Net sales for the third quarter of fiscal 1996 increased $48.7 million to $99.6
million from third quarter 1995 sales of $50.9 million. The increase in net
sales was due to the inclusion of Aviall's commercial engine service operations
in Texas and Scotland since their acquisition by the Company on June 10, 1996,
as well as a 16% increase in revenues from the Company's existing operations.
Gross profit for the third quarter of fiscal 1996 increased to $12.7 million, or
12.7% of net sales, from $8.2 million, or 16.0% of net sales, for the same
period last year, primarily as a result of the increase in net sales for the
period. The decline in gross profit as a percentage of sales is principally the
result of sales generated by the Former Aviall Operations in the twenty days
since their acquisition, which have historically returned lower margins.
Operating margins for the Former Aviall Operations are expected to improve in
the future as the Company executes its integration plan, consisting, in part, of
consolidation and integration of support functions and management systems, and
the elimination of certain duplicative corporate overhead charges. Among other
things, this plan is intended to reduce costs and improve operating
efficiencies, including the reduction of engine turnaround times and related
contractual penalties
Selling, general and administrative expenses for the third quarter of fiscal
1996 increased to $5.4 million, or 5.4% of net sales, from $3.2 million, or 6.3%
of net sales for the third quarter of fiscal 1995. The increase is primarily
attributed to the inclusion of the Former Aviall Operations.
Interest expense for the third quarter of fiscal 1996 increased to $2.8 million,
or 2.8% of net sales, from $2.1 million or 4.1% of net sales for the third
quarter of fiscal 1995, primarily due to the increase in outstanding borrowings
related to the New Credit Facility and the issuance of the Senior Notes.
Partially offsetting this increase was a $13.9 million decrease in the average
outstanding balance of the Debentures as compared to the third quarter of 1995.
Income taxes for the third quarter of fiscal 1996 increased to $1.7 million, or
1.7% of net sales, from $1.3 million, or 2.5% of net sales for the third quarter
of fiscal 1995, primarily due to an increase in income before taxes.
As a result of the above factors, net income increased almost 50% to $2.7
million, or 2.7% of net sales for the third quarter of fiscal 1996, from $1.8
million, or 3.6% of net sales for the third quarter of fiscal 1995. Third
quarter fiscal 1996 primary and fully diluted earnings per share increased to
$0.20 and $0.19 per share, respectively, from $0.18 and $0.16 per share,
respectively, for the third quarter of fiscal 1995, even after giving effect to
increases in the number shares outstanding of 36% and 10%, respectively.
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NINE MONTHS ENDED JUNE 30, 1996 COMPARED WITH NINE MONTHS ENDED JUNE 30, 1995
Net sales for the first nine months of fiscal 1996 increased $84.1 million or
62.8% to $218.2 million from net sales of $134.1million for the first nine
months of fiscal 1995. The increase in net sales was attributable to the
inclusion of the Former Aviall Operations as well as a 32% increase in revenues
at the Company's existing operations.
Gross profit for the first nine months of fiscal 1996 increased to $31.4
million, or 14.4% of net sales, from $21.4 million, or 16.0% of net sales, for
the first nine months of fiscal 1995, primarily as a result of the increase in
net sales for the period. The decline in gross profit as a percentage of sales
is principally the result of sales generated by the Former Aviall Operations,
which have historically returned lower margins.
Selling, general and administrative expenses for the first nine months of fiscal
1996 increased to $13.2 million, or 6.0% of net sales, from $8.7 million, or
6.5% of net sales for the first nine months of fiscal 1995. The increase is
primarily attributable to the inclusion of the Former Aviall Operations.
Interest expense for the first nine months of fiscal 1996 increased to $6.4
million, or 2.9% of net sales, from $5.6 million or 4.2% of net sales for the
first nine months of fiscal 1995, primarily due to the increase in outstanding
borrowings related to the New Credit Facility and the issuance of the Senior
Notes. Partially offsetting this increase was a $8.7 million decrease in the
average outstanding balance of the Debentures as compared to the first nine
months of fiscal 1995.
Income taxes for the first nine months of fiscal 1996 increased to $4.6 million,
or 2.1% of net sales, from $2.9 million, or 2.2% of net sales for the first nine
months of fiscal 1995, primarily due to an increase in income before taxes.
As a result of the above factors, net income increased to $7.1 million, or 3.3%
of net sales for the first nine months of fiscal 1996, from $4.2 million, or
3.1% of net sales for the first nine months of fiscal 1995. Nine month fiscal
1996 primary and fully diluted earnings per share increased to $0.56 and $0.54
per share, respectively, from $0.41 and $0.36 per share, respectively, for the
first nine months of fiscal 1995.
FINANCIAL POSITION
Total assets at June 30, 1996 were $577.6 million, a $392.0 million net increase
from the September 30, 1995 total of $185.6 million. The major components of
this net increase were (a) the addition of $365.1 in assets as a result of the
Aviall Acquisition (see Note 6 of the notes to unaudited consolidated financial
statements); (b) a $29.4 million increase in accounts receivable balances, and
(c) a $9.5 million net increase in deferred financing costs as a result of the
debt issue costs associated with both the Senior Notes and the New Credit
Facility. These increases were partially offset by a net decrease in inventories
of $13.7 million, which was primarily attributable to the $11.4 million bulk
sale of inventories previously acquired from Continental Airlines, Inc. (The
"CAL Inventory"). The increase in accounts receivable was primarily attributable
to higher sales late in the quarter coupled with the timing of customer
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collections after June 30th, and the remaining balance of the sales price of the
CAL Inventory, which is due in monthly installments through December 31, 1996.
Total liabilities at June 30, 1996 were $442.2 million, a $293.4 million net
increase from the September 30, 1995 total of $148.8 million. The major
components of this net increase were (a) the assumption of $138.2 million in
liabilities as a result of the Aviall Acquisition; (b) the issuance of $160
million in Senior Notes; (c) a $28.0 million increase in borrowings under the
Company's New Credit Facility; and (d) a $7.8 million increase in accrued
expenses, customer deposits and deferred revenue, primarily the result of
advance payments received under a certain government program; offset by (e) a
$11.5 million reduction in the outstanding balance of the Company's Debentures,
resulting from the conversion of these debentures into approximately 1,024,000
shares of the Company's Class A common stock; and (f) the retirement of vendor
obligations resulting in a decrease in accounts payable of $10.7 million.
Total stockholders' equity at June 30, 1996 was $135.3 million, a $98.5 million
increase from the September 30, 1995 total of $36.8 million. This increase was
primarily due to (a) net proceeds of approximately $80.7 million from the Class
B Offering and (b) the conversion of $11.5 million of the Company's Debentures
into Class A common stock since September 30, 1995, along with net income of
more than $7.1 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of liquidity was cash generated from the Class B
Offering and the sale of the Senior Notes. In addition, other sources of
liquidity have been cash flows generated by continuing operations, borrowings
from commercial lenders, the bulk sale of inventories, and customer advances and
progress payments. Working capital was $267.1 million at June 30, 1996, as
compared with $87.8 million at September 30, 1995.
As of June 30, 1996 there was approximately $68.5 million outstanding under the
Company's $175 million New Credit Facility, which matures in June 2001. The
Company may be required to borrow additional amounts under the New Credit
Facility through the end of calendar 1996 in order to meet changes in its
working capital requirements.
Based upon current and anticipated levels of operations and plans for
integrating the Former Aviall Operations, the Company believes that its cash
flow from operations, combined with borrowings available under the New Credit
Facility, will be sufficient to enable the Company to meet its cash operating
requirements, including scheduled interest and principal payments, capital
expenditures and working capital needs.
The Company believes that the integration of its existing operations with those
of the Former Aviall Operations will result in opportunities to improve cash
flows by capitalizing on the cost savings resulting from the elimination of
duplicative functions in the areas of administration, sales, marketing,
purchasing, technical and field services, and management information systems.
The Company anticipates, however, that it will incur expenditures of
approximately $8.5 million related to this integration, which is expected to be
completed during the third quarter of fiscal 1997. Such non-recurring
expenditures include
13
<PAGE>
amounts related to integration of management information systems and other costs
of consolidation. These non-recurring expenditures initially will be funded
through cash flow from operations and borrowings under the New Credit Facility.
There are no legal or political restrictions on the Company's ability to
transfer funds from its foreign subsidiary.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
THE AVIALL ACQUISITION
On June 10, 1996, the Company, through its newly-formed, wholly-owned
subsidiary GASI Engine Services Corporation, purchased the Former Aviall
Operations. For purposes of closing, the purchase price (paid in cash) was
estimated at $226.9 million (based upon the book value of the acquired
assets, net of assumed liabilities). The final purchase price will be
determined based upon the audited balance sheets as of June 10, 1996,
subject to the terms detailed in the purchase agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Computation of Earnings per Share.
(b) Exhibit 27 - Financial Data Schedule.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREENWICH AIR SERVICES, INC.
----------------------------
(Registrant)
AUGUST 13, 1996 s/b ROBERT J. VANARIA
- --------------- ----------------------
(Date) Robert J. Vanaria
Senior Vice President of Administration and
Chief Financial Officer
EXHIBIT 11
<TABLE>
<CAPTION>
GREENWICH AIR SERVICES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS ENDED JUNE 30,
1996 1995
----------------------- --------------------------
Fully Fully
Primary Diluted Primary Diluted
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Weighted average number of common shares
outstanding 13,609,692 13,609,692 10,148,858 10,148,858
Additional shares assuming the conversion of:
Options and warrants 302,331 383,451 83,108 112,580
Subordinated debentures 438,632 2,905,812
----------- ----------- ----------- -----------
Weighted average number of common shares
outstanding, as adjusted 13,912,023 14,431,775 10,231,966 13,167,250
=========== =========== =========== ===========
Net income applicable to common stock $ 2,719,322 $ 2,719,322 $ 1,814,643 $ 1,814,643
After-tax interest savings from conversion of
subordinated debentures 30,792 203,988
----------- ----------- ----------- -----------
Net income, as adjusted $ 2,719,322 $ 2,750,114 $ 1,814,643 $ 2,018,631
Earnings per common share $ 0.20 $ 0.19 $ 0.18 $ 0.16
=========== =========== =========== ===========
NINE MONTHS ENDED JUNE 30,
1996 1995
--------------------------- ----------------------------
Fully Fully
Primary Diluted Primary Diluted
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Weighted average number of common shares
outstanding 12,475,740 12,475,740 10,153,620 10,153,620
Additional shares assuming the conversion of:
Options and warrants 267,821 415,793 47,746 108,746
Subordinated debentures 438,632 2,905,812
----------- ----------- ----------- -----------
Weighted average number of common shares
outstanding, as adjusted 12,743,561 13,330,165 10,201,366 13,168,178
=========== =========== =========== ===========
Net income applicable to common stock $ 7,137,666 $ 7,137,666 $ 4,173,969 $ 4,173,969
After-tax interest savings from conversion of
subordinated debentures 92,376 611,964
----------- ----------- ----------- -----------
Net income, as adjusted $ 7,137,666 $ 7,230,042 $ 4,173,969 $ 4,785,933
Earnings per common share $ 0.56 $ 0.54 $ 0.41 $ 0.36
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> SEP-30-1995
<PERIOD-END> JUN-30-1996
<CASH> 837
<SECURITIES> 0
<RECEIVABLES> 162,442
<ALLOWANCES> 4,120
<INVENTORY> 266,130
<CURRENT-ASSETS> 432,945
<PP&E> 142,106
<DEPRECIATION> (9,710)
<TOTAL-ASSETS> 577,566
<CURRENT-LIABILITIES> 165,855
<BONDS> 162,566
0
0
<COMMON> 163
<OTHER-SE> 135,150
<TOTAL-LIABILITY-AND-EQUITY> 577,566
<SALES> 218,226
<TOTAL-REVENUES> 218,226
<CGS> 186,844
<TOTAL-COSTS> 200,000
<OTHER-EXPENSES> 24
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,416
<INCOME-PRETAX> 11,786
<INCOME-TAX> 4,647
<INCOME-CONTINUING> 7,139
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,139
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.54
</TABLE>
